Political Risk Analysis - Another Missed Election: Key Scenarios - JUNE 2017
BMI View : The declining likelihood of a presidential election in 2017 has greatly increased the risk of a significant deterioration in the Democratic Republic of Congo's security environment. Although President Kabila is most likely to step down in 2018 as levels of instability escalate, the country's violent history means that risks lie firmly to the downside.
The Democratic Republic of Congo (DRC) is unlikely to hold a presidential election in 2017 as stipulated in the December 31, 2016 agreement between the government and opposition.
The resulting withdrawal of foreign support for the DRC, and increasing social unrest in the country, will eventually force President Joseph Kabila to resign, likely in 2018, leading to elections and tempering some of the immediate risk of unrest.
That said, the risks are skewed to the downside given elevated tensions and deep historical cleavages in DRC. We cannot rule out a military coup or even a return to civil war.
The DRC faces a period of heightened political instability over the coming 18 months, following growing signals that the planned presidential election will not occur. After the country failed to hold its scheduled presidential election in October 2016, the government and opposition parties agreed in December 2016 to form a transitional council and hold an election in 2017. This accord included provisional promises by President Kabila to step down from office, after having served the two five-year terms allowed by the country's constitution. At the time we noted that the likelihood of the deal falling through was significant ( see ' Challenges To Stability Will Persist Despite Political Deal ' , January 0 5 , 2017). Recent government warnings of limited resources and the death of opposition leader, Etienne Tshisekedi, further underpin our expectation that the Kabila administration will attempt to cling to power, at least over the near term ( see ' Opposition Leader's Death Increase Threats To Stability ' , February 15, 2017).
While a democratic power transition is unlikely to occur this year, increasing instability in the short term, our core view remains that President Kabila will not remain in office for a prolonged period of time. Any attempt by Kabila to push back the election is likely to spur widespread popular protests and could result in a cut off of bilateral and multilateral aid, making it increasingly difficult for the president to maintain control over the country and put down increasingly prevalent militant activity in the largely lawless eastern provinces. In the face of rising social instability and a faltering security environment, we expect Kabila will reluctantly step aside allowing elections to take place. This will head off a more prolonged deterioration in the country's political risk profile. That said, the risks to our view are skewed to the downside. Give the deep social, ethnic and historical divisions, and highly unstable political situation, we cannot rule out a number of far more damaging scenarios ranging from a military coup to a return to civil war.
In this article, we explore four scenarios that could follow the government's failure to hold an election in 2017:
|Kabila Steps Down||55||Elections held, but with little legitimacy. New government struggles to resume state-building momentum.|
|Hard Coup||15||Temporary military government concedes power to elected civilian leader, which struggles to resume state-building momentum.|
|Status Quo Continues||20||Foreign/commercial support allows government to contain insecurity. Tensions persist amongst wider population as Kabila remains in office.|
|Return To Civil War||10||Foreign intervention sees an escalation in violence and conflict, centred around pro and anti-government forces.|
Scenario One - Kabila Steps Down After Violence Escalates, Election Held (55% Probability)
In our core scenario support from the UN and foreign donors is removed causing a dramatic increase in the prevalence of armed groups and public unrest throughout 2017 . Realising his position is unsustainable, we expect Kabila will step down in H118.
How Could It Happen: After the DRC fails to hold a scheduled election in 2017 for the second year running, donors are likely to begin to withdraw funding. The Congolese government is highly reliant on foreign aid which accounts for 20.0% of total government revenues. While donors are yet to announce any plans to withhold aid we do not believe they would continue to offer assistance were Kabila's administration to once again renege on democratic commitments.
|Humanitarian Crisis Would Follow Donors Withdrawal|
|Congo (DRC) - Humanitarian Aid Donors, USDmn|
|Source: UN OCHA Financial Tracking Service, BMI|
Without continued budgetary assistance, we do not believe President Kabila would have the resources needed to maintain control over the vast Congolese territory. The limited capacity of the Congolese state has allowed for a proliferation of insurgent groups across the country, particularly in the volatile eastern provinces. Recent progress in improving security and expanding the state's presence in the DRC is highly tentative and due in large part to the role played by a United Nations peacekeeping mission (MONUSCO). The fractious Congolese army (FARDC) is notoriously underfunded and would likely begin to disintegrate if government support declined and wages went unpaid. Furthermore, we believe that should we see bilateral foreign aid withdrawn, MONUSCO would soon follow suit. UN support has always hinged on close co-operation with the government and FARDC. Should the FARDC become an unreliable partner due to a lack of funding, we believe the UN would draw down its mission. MONUSCO ran a budget of USD1.3bn in 2016, making it the UN's most expensive peacekeeping project, and with President Trump threatening to cut US funding to the organisation, there is little likelihood of continued commitment to the DRC as local government and military support falters.
|Limited Revenues Will Leave Government With Few Options If Donors Leave|
|Congo (DRC) - Government Spending And Revenue|
|e/f = BMI estimate/forecast. Source: National Sources/BMI|
With unrest in urban areas high and the state's de facto authority receding to Kinshasa and the surrounding area, we believe Kabila would likely step down from office rather than risk a coup d'etat or prolonged bout of nationwide instability. The likelihood of such a scenario would increase significantly should we see some form of guarantee from opposition that the president would not be held to account for allegations of corruption that have been made against him.
What Next: Following a decision by Kabila to step down, we expect elections will likely follow. While they would help to stem some of the immediate deterioration in the security environment, they would be no panacea for the long-term structural obstacles to political stability DRC that come from governing over such a large and diverse country ( see 'Prospects For State-Building Slim Amongst Structural Headwinds', November 29, 2016). Moreover, there is some risk they could be perceived as lacking legitimacy due to insufficient funding and vulnerability to vote rigging. Obvious front-runners include the now-exiled former governor of Katanga, Moise Katumbi, and Felix Tshisekedi (son of the late opposition leader, Etienne Tshisekedi), but any victor would still struggle to build the political coalition required to effectively govern a country the size of the DRC.
This scenario probably marks the most optimistic outlook for the country's macroeconomic future. Following the election of a new government, donors will likely resume their contributions to the government budget. Similarly, the election of a candidate with a more business-friendly reputation would be a boon for investor sentiment. However, even with a relatively smooth transferral of power, the economy will continue to struggle against the structural headwinds that have prevented meaningful development.
Scenario Two - Military Coup Followed By Civilian Election (15% Probability)
In this scenario, members of the Congolese military would depose Kabila in a coup d ' etat after a significant increase in public unrest and insurrectionary violence. While we cannot rule out the takeover of the government by a military strong man, a ny form of military rule would more likely be as part of a transitional government before the country held a presidential election.
How It Could Happen: Much as we expect in our core view, a military coup would be predicated on a dramatic increase in public unrest and violence carried out by localised armed groups. State authority would retreat in most of the country, particularly the volatile hinterlands in the east and centre of its vast territory. The key difference in this scenario is that it would see President Kabila thrown out by elements within the Congolese military before he was able to step down from office voluntarily.
Coups have been a fairly regular feature of Congolese history, with the country having had three failed attempts since 2004. The risks of a coup would increase rapidly after foreign support was withdrawn, as lower fiscal revenues would likely result in delayed salaries and perceptions that the president's refusal to step down was contributing to greater instability. Even the Republican Guard, a unit loyal to the president himself, could begin to question their loyalties if they stopped receiving wages and found themselves in an unsustainable position in the face of widespread public protest and rebellion. Even so, it is more likely that Kabila would simply step down when faced with the prospect of being deposed. Successful coup attempts have become relatively rare incidents in the region's recent history, and there have been very few signals that frustrations with Kabila are building within the FARDC or Republican Guard.
What Next: Although a coup in Sub-Saharan Africa's (SSA) would grab international headlines, we believe its consequences would look largely similar to those in our core view. Extended periods of military rule are relatively rare in the region and it is unlikely that any coup leaders would look to install themselves as a long-term solution to the country's political crisis given the limited public, political, and international support it would receive. While we would expect the military's influence to play a bigger role in Congolese politics over the coming years, we believe an election would return the country to civilian control by year-end 2017.
Scenario Three - Kabila Clings On, Status Quo Continues (20% Probability)
In this scenario, Kabila would continu e to enjoy sufficient support from foreign donors or mining companies to remain in power and retain the support of the country's military. While tensions amongst the wider population remain high after the president's failure to hold an election, this is limited to period ic public unrest rather than an existential threat to the Congolese government.
How It Could Happen: This scenario would be largely dependent on either the government's capacity to maintain the support of foreign firms or strike some kind of deal with the opposition, both of which are unlikely but not impossible. In addition to a global aid network, Kabila's administration reportedly receives both official and unofficial support from the mining industry. According to such allegations, the Kabila family has profited enormously by offering concessions to various mining companies, and if true, we cannot rule out that this network will continue to support his government should the December 31 agreement fall apart. The same could be said of a foreign government, most likely the Chinese, whose substantial mining and financial interests in the DRC could see support for the government continue if it helped secure stability. Alternatively, if Kabila were able to come to an agreement with some elements within the opposition - this could muddy the waters sufficiently that bilateral and multilateral donors are convinced not to cut off funding.
|Irregular Growth In Mining Sector Could Continue On Elevated Political Instability|
|Congo (DRC) - Mining Sector|
|e/f = BMI estimate/forecast. Source: BMI Calculation/World Bank|
With support from the mining industry and some degree of national security maintained, we do not believe Kabila would step down from office, particularly if the majority of the opposition refused to incorporate some kind of post-succession immunity for the incumbent president.
What Next: With the state positioned to continue funding the FARDC, the national army would be better placed to contain any significant outbreaks of violence from militant groups. However, there would be some deterioration in the political environment. Tensions would continue to simmer across the country as the population voiced its discontent with Kabila's disregard for the democratic process. Moreover, it is unlikely the UN would continue its mission. In addition to its exorbitant costs, we believe the UN would look to distance itself for the Kabila administration for fear of fuelling allegations that MONUSCO 's role was indirectly undermining the democratic process. A UN withdrawal would see progress in the country's state-building effort slow to a standstill, with the Congolese government's authority limited, but not facing an existential threat.
In terms of the macroeconomic outlook, we would expect a slightly slower trajectory for real GDP growth. In the absence of UN support, the greater emphasis that would have to be placed on defence spending to maintain a basic level of stability would see the contribution to growth made by government spending trend lower while Kabila remained in office.
Scenario Four - Return To War (10% Probability)
In this scenario, foreign support for Kabila's armed opponents would see them coalesce into a relatively unified rebel movement, similar to that which led to continuous civil wars b etween 1996 and 2003. Such a conflict could potentially descend into a drawn-out erosion of state control across large areas of the country, leading to economic contraction as investment collapses and foreign businesses shutter their operations .
How It Could Happen: This would be the most damaging scenario for the DRC, both economically and politically, would be a return to longer-term conflict between two or more evenly matched sides. There is precedent for such a scenario, seen in both the first and second Congo wars that gripped the country between 1996 and 2003. It would be largely dependent on both sides' ability to access resources and troops. In the government's case, these could come in the form of support from mining companies and the Republican Guard, while opposition groups would have to rely on foreign support. In a bid to secure their own interests along the border, neighbouring Rwanda has previously played a large role in supporting combatant groups that have declared their opposition to the government in Kinshasa during bouts of large-scale civil conflict. However, the international community has become increasingly critical of Rwandan intervention in the region (the UK's withheld aid in 2012 on these grounds), making this scenario relatively unlikely.
|DRC's Sheer Size Means Risks Threaten Much Of SSA|
|SSA - Short-Term Political Risk Index, Scores Out Of 100|
What Next: A return to civil war would be incredibly damaging to the DRC's macroeconomic prospects and increase region-wide instability. The economy contracted for six consecutive years between 1996 and 2001, during the height of fighting. Mining companies have a history of operating in isolation from political volatility, but a serious increase in violence would see firms begin to shutter operations. Past precedent suggests that the regional impact would be substantial, as displaced groups cross porous borders as refugees. This would exacerbate already high levels of political risk in neighbouring states like South Sudan, the Central African Republic, and Burundi where existing inter-communal tensions will likely be added to by the arrival of these new groups.