The River Congo separates the Democratic Republic of the Congo and the Republic of the Congo, but both countries struggle to elevate Central Africa when it comes to FDI attraction. (Photo by Gianluigi Guercia/AFP via Getty Images)
Central Africa is a region rich in natural resources with many countries reliant on this sector. Its GDP grew consistently during the early 2000s before falling in 2009 due to the fallout from the global financial crisis and reduced demand for commodities such as gold, nickel and copper. The economy slowly recovered in the following years before contracting again in 2015 following a record plunge in oil prices. GDP had been on the rise between 2017 and 2019 before the Covid-19 pandemic left the region vulnerable once again.
As of 2020, Central Africa’s largest economies are Democratic Republic of the Congo (DRC) and Cameroon, which together accounted for 63% of GDP in the region. Overall Central Africa contributed just 6% to total African GDP in 2020.
Which Central African economies are on the rise?
The DRC is the largest economy in Central Africa, accounting for 35% of the subregion’s total GDP in 2020. Despite this, it is not a major player across the wider continent, contributing only 2.1% to Africa’s overall GDP in the same year.
The DRC is the largest country by land mass in sub-Saharan Africa, with a surface area around the size of western Europe. Following the official end of its long-running Civil War in 2003, its GDP grew at a compound annual growth rate (CAGR) of 10% between 2003 and 2020.
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The DRC is widely considered to be one of the world's richest countries when it comes to natural resources with an abundant supply of cobalt, diamonds and copper. In spite of this, it has the third-largest population of poor citizens globally and one of the lowest GDPs per capita in the world at $556.8 in 2020.
The country’s GDP contracted by 1.1% between 2019 and 2020 due to Covid-19 lockdown restrictions, weaker trade and increased government spending. Subsequently, the DRC received emergency support from the IMF and the African Development Bank. Both its external public debt and domestic debt soared in 2020 to an estimated 15.9% and 8.9% of GDP, respectively.
The DRC is home to more than 89.5 million people and has one of the highest population growth rates in Central Africa; at 3.14% in 2020, it is second only to Equatorial Guinea. This growth can be attributed to the DRC having one of the highest fertility rates in the world (5.8 children per woman in 2019).
In an effort to lessen the country’s reliance on the primary sector, the DRC government introduced the National Strategic Development Plan in 2019. It aims to diversify the economy by developing buildings and construction materials, tourism and financial services as well as its traditional focus on agriculture, forestry and mining.
Cameroon is the second-largest Central African economy, representing 27.9% of the subregion’s GDP in 2020. It occupies a strategic position between West and Central Africa and has a population of more than 26 million.
Cameroon is a member of the Central African Economic and Monetary Community (Cemac) alongside Gabon, the Central African Republic, Chad, the Republic of the Congo and Equatorial Guinea. The community aims to promote regional economic cooperation.
Cameroon is rich in natural resources including oil and gas, minerals and timber as well as agricultural products such as coffee, cocoa and cassava. The country’s GDP dropped by 11.6% between 2014 and 2015 due to a dramatic dive in oil prices. Since then, GDP has steadily increased.
Despite the Covid-19 pandemic, Cameroon’s GDP grew by 2% between 2019 and 2020. According to the National Institute of Statistics, this increase was prompted by the growth in the secondary sector, particularly in the building and public works segment, agri-food industries, and crude oil and gas extraction.
In September 2021, the World Bank approved the Acceleration of the Digital Transformation of Cameroon, a $100m project to accelerate digital transformation and smart agriculture.
Equatorial Guinea has the highest GDP per capita of all Central African countries at $7,143 in 2020. It also recorded the highest population growth at 3.41%.
Equatorial Guinea was once one of Africa’s fastest-growing economies and sub-Saharan Africa’s third-largest oil producer after Nigeria and Angola. The country was one of the hardest hit in the fallout of the Cemac crisis, which started in 2014. Equatorial Guinea’s GDP fell by 39.4% between 2014 and 2015 due to its large dependence on oil exports. Since then, the country has struggled to adjust to lower oil prices and its 2020 GDP is still less than half of what it was in 2014.
The National Economic Development Plan: Horizon 2020 was launched in 2007 and aims to reduce poverty as well as diversifying Equatorial Guinea’s economy into strategic new sectors such as fisheries, agriculture, tourism and finance. In May 2017, the country became a member of the Organisation of the Petroleum Exporting Countries, which could encourage foreign investment and facilitate technology transfers from other member countries, especially from the Gulf.
Gabon has the second-highest GDP per capita of all Central African countries analysed, at $7,006 in 2020. It is sparsely populated, with a population of 2.2 million and forests covering 85% of its territory.
Gabon is extremely reliant on the primary sector. The country’s GDP was on the rise between 2017 and 2019 driven by its production of oil, manganese and rubber.
According to the World Bank, Gabon’s oil sector represented on average 80% of exports, 45% of GDP, and 60% of fiscal revenue over the past five years.
The country’s economy was heavily impacted by Covid-19. Its GDP dropped by 7.6% between 2019 and 2020 due to further decline in oil prices, exports and foreign direct investment (FDI).
Rwanda has achieved impressive economic growth since the early 2000s. Its GDP grew at a CAGR of 9.1% between 2001 and 2019. It aims to attain middle-income country status by 2035 and high-income country status by 2050. To achieve this, its government has implemented the National Strategy for Transformation (NST), which is underpinned by the UN’s Sustainable Development Goals. GDP grew by 7.4% between 2018 and 2019, driven by large public investments as part of the NST.
The country’s economic growth was restricted in 2020, with GDP falling by 0.2% from 2019 due to the Covid-19 pandemic’s disruption of international trade, exports and tourism. In addition, inflation in Rwanda rose to 9.9% in 2020, up from 3.3% in 2019. This is the highest rate of all Central African countries analysed and is thought to be largely down to supply-side constraints.
Rwanda is Central Africa’s leading FDI destination
Rwanda is Central Africa’s top destination for FDI by project numbers. It attracted 173 FDI projects between 2003 and 2020, equating to total investment of $9.5bn. According to Rwanda Development Board’s 2020 Annual Report, China, the US and the UK are its main investing countries. Key sectors include mining, construction, real estate, infrastructure and ICT.
FDI inflows have risen in recent years due to Rwanda's increased political stability and measures taken to improve its business climate. In 2015, the government launched a new investment law that brought in tax breaks and other incentives for investors. The country’s large methane reserves and growing mining potential also make it an attractive location.
Nevertheless, Rwanda’s investment landscape is still vulnerable. In light of Covid-19, FDI projects dropped from 20 in 2019 to four in 2020 and capital investment fell from $1.2bn to $233m. To counteract this, the government amended its investment code in 2021. Incentives were introduced to reduce operating costs, attract talent and promote innovation and diversification of investing companies.
The DRC recorded more than $20bn in foreign investment between 2003 and 2020, the largest amount out of all Central African countries analysed. It also attracted the highest number of FDI projects in 2020, with 12 investments.
The DRC was the only country in Central Africa to see an increase in FDI project numbers between 2019 and 2020. This can be attributed to rising demand for cobalt for use in smartphones and electric car batteries.
However, cobalt production in DRC raises major ethical concerns. It is estimated that 20% of the country’s mines are small scale and use mostly child workers forced to work in hazardous conditions.
There are also fears of foreign exploitation of the mining sector. In September 2021, the DRC government began reviewing a $6.2bn minerals-for-infrastructure deal with Chinese investors, claiming the Chinese companies involved had delivered less than one-third of their promised projects after signing the deal in 2008.
Cameroon recorded the second-highest level of inward investment in Central Africa between 2003 and 2020. The country attracted $1.9bn across 23 FDI projects in 2019 but faced a sharp decline to $206m from 11 projects in 2020. France and Germany are Cameroon’s leading investing countries, and mining is its key sector.
The country has also witnessed a rise in Chinese investment in large infrastructure projects. In June 2021, Cameroon signed a deal with two China-linked companies to construct a railway from the coast to the disputed Mbalam-Nabeba iron ore project.
São Tomé and Príncipe has struggled to attract FDI for the best part of a decade, with no FDI projects recorded since 2014. The small island country has a surface area of 1,001km2 and a population of 219,000.
São Tomé and Príncipe is extremely vulnerable to economic shocks. Its small population and workforce limit its ability to produce goods and services for the local and export market. The remoteness of the two-island nation also drives up export costs and prevents it from diversifying its economy.
Where in Central Africa is best for doing business?
As of 2019, more than 90% of Gabon’s population had access to electricity, the highest share of all Central African countries analysed. The country also had the highest share of residents with access to the internet (50.3% in 2017), with São Tomé and Príncipe following with 29.9%. Gabon’s business climate is still in need of improvement, particularly regarding its labour force, transparency and infrastructure.
The government has implemented measures to make Gabon more business friendly, including the establishment of a public-private partnership framework and new codes for hydrocarbons and mining to promote oil sector investment.
In Rwanda it takes just four days on average to start a business, a substantial reduction from 18 days in 2003. Access to electricity, the internet and fixed broadband subscriptions have been gradually improving in the country. It is also the only Central African country with a score of more than 50 on the Corruption Perception Index. Rwanda has achieved significant progress following the end of its Civil War in 1994 in terms of greater government transparency. Institutions are in place to fight corruption, including the Rwanda Public Procurement Authority, the Office of the Auditor General and the Ombudsman’s Office.
However, non-governmental organisations such as Amnesty International and Human Rights Watch still have concerns over practices within Rwanda, particularly regarding the country’s human rights record and lack of press freedom.
With a Corruption Perception Index score of only 16, Equatorial Guinea is considered one of the most corrupt countries in the world. The country’s president Teodoro Obiang Nguema Mbasogo has been in power since 1979, making him the world’s current longest-serving leader. In July 2021, Equatorial Guinea announced it was closing its embassy in London after the UK imposed sanctions against Teodorin Nguema Obiang, the vice-president and son of the Equatorial Guinea president, over for allegedly misappropriating more than $500m in state funds.
In the Republic of the Congo, it takes 49.5 days on average to start a business – one of the longest wait times in the world. Just 8.7% of the population has access to the internet. The country’s Corruption Perception Index score has also worsened, falling by seven points between 2012 and 2020.
Liveability in Central Africa
At 0.8%, Burundi had the lowest unemployment rate in Central Africa in 2020. This had been decreasing gradually from 1.89% in 2003. This extremely low unemployment figure is largely driven by the country’s heavy reliance on agriculture, which is labour intensive but seasonal. According to the World Bank, 80% of Burundi’s population is employed in the agriculture sector.
It should also be noted that the underemployed are included in employment figures, i.e. workers that are underused because the only jobs available do not suit their skill set, are part-time, or leave them idle.
On the reverse, Gabon had the highest unemployment rate in Central Africa in 2020 at 20.5%. The rate in the country has hovered around 20% for past ten years.
Despite strong economic growth in Gabon led by oil exports, a consistently high unemployment rate ensures that the wider population is not seeing these benefits. This has resulted in ever-worsening inequality. One-third of Gabon’s population is living in poverty while one-third of its GDP goes to the top 10% of the population.
The Central African Republic has the lowest life expectancy of all Central African countries examined at 53.3 years, due principally to high levels of malnutrition. The country also has the lowest literacy rate at 37.4%. This can be attributed to poor primary-level education and the lack of secondary school education for girls. Poverty is widespread across the country and the World Bank predicts that more than half of its population will need humanitarian assistance in 2021. As such, its government and the Office for the Coordination of Human Affairs officially launched the $444.7m Humanitarian Response Plan in March 2021.
São Tomé and Príncipe has the highest life expectancy at 70.4 years as well as a literacy rate of more than 92%. Some 84% of the population also has access to water. Although São Tomé and Príncipe performs better than other countries across the region, it is estimated that one-third of its population lives below the international poverty line.
How green are Central African countries?
More than 80% of electricity generated in Central Africa in 2018 was derived from renewable energy sources.
Hydroelectric power accounted for more than 98% of the DRC’s electricity generation in 2018. The country has an electrification rate of just 19.1% and less than 2% of its electricity is derived from fossil fuels. The DRC has the largest hydropower potential in Africa at approximately 100,000 megawatts.
In June 2021, the government selected Australia-based Fortescue Metals Group to develop the Grand Inga hydroelectric power project. The estimated $80bn project would involve the expansion of six dams and could become the world's largest hydroelectric project.
Rwanda has an electrification rate of 37.8%. It is Central Africa’s largest producer of solar energy with 44.2 gigawatt-hours in 2018. Solar power represented 69.4% of its overall electricity generation in the same year. According to Rwanda Energy Group, Rwanda has approximately five peak sun hours daily, giving it the potential to generate 4.5 kilowatt-hours of solar energy per square metre per day.
Cameroon was responsible for one-third of Central Africa’s carbon dioxide (CO2) emissions in 2018. Conversely, São Tomé and Príncipe produced the lowest amount of CO2 emissions in the region, although this figure has been on the rise since the early 1990s.
The Republic of the Congo’s average temperature increased by 0.87°C between 1960 and 2020 to 25.5°C, the biggest jump of all Central African countries analysed. A rise in temperature poses significant environmental risks for the Republic of the Congo, including increased risk of flooding and drought.
The world’s second-largest tropical forest, the Congo Basin, spans six Central African countries: Cameroon, the Central African Republic, the DRC, the Republic of the Congo, Equatorial Guinea and Gabon. Its rich ecosystem supports millions of indigenous people and endangered wildlife. The rainforest operates as a huge carbon sink, storing vast amounts of carbon that would otherwise be emitted into the atmosphere.
The DRC is currently finalising a new strategy that will end a 20-year suspension on new industrial logging permits in the basin. The move has been widely criticised by environmental groups. In September 2021, a global alliance of more than 40 non-governmental organisations including Greenpeace Africa, Global Witness and local indigenous groups wrote to donor countries urging them to make any new funding conditional on a re-establishment of the ban.
Given its abundance of natural resources, Central Africa should be a leading destination for FDI globally. However, in practice, the region’s economic potential is hampered by widespread corruption, conflict and poverty. The implementation of business-friendly measures in more politically stable countries such as Rwanda and Gabon could help buck this trend.
Investment Monitor's investor guides split Africa into five regions to assess their attractiveness for FDI: