J.3 Voice of the Private Sector in DRC Report.pdf

VOICE OF THE PRIVATE SECTOR IN THE

DEMOCRATIC REPUBLIC OF CONGO

USAID/DRC August 2020

This publication was produced for review by the United States Agency for International Development. It was prepared by Resonance under the USAID Center for Transformational Partnerships (CTP) Promoting Excellence in Private Sector Engagement (PEPSE) program.

CONTENTS

ACRONYM LIST 2

I. EXECUTIVE SUMMARY 4

1.I PSLA BACKGROUND 4

1.II PRIVATE SECTOR CONTEXT 5

I.III APPROACH & METHODOLOGY 5

I.IV CROSS-CUTTING PSE STRATEGIES AND ROLES 6

I.V CROSS-CUTTING CHALLENGES 7

I.VI STRATEGIC ENGAGEMENT OPPORTUNITIES BY SECTOR 8

I. INTRODUCTION 14

1.1 CONTEXT AND BACKGROUND 14

2. INTERNAL MISSION ALIGNMENT 15

2.1 MISSION ALIGNMENT 15

2.2 ENGAGEMENT WITH THE PRIVATE SECTOR BY USAID 16

2.3 PROCESSES/MECHANISMS 17

2.4 INSTITUTIONAL ROLE 18

2.5 COORDINATION 18

2.6 SUSTAINABILITY 18

2.7 IMPLICATIONS FOR USAID/DRC 18

3. PRIVATE SECTOR PERSPECTIVES 19

3.1 CROSS-CUTTING CHALLENGES 19

3.2 GENDER & INCLUSION 23

4. PRIVATE SECTOR PRIORITIES AND STRATEGIC OPPORTUNITIES FOR

ENGAGEMENT 25

4.1 ENERGY 25

4.2 HEALTH 28

4.3 MINING 34

4.4 FOOD / AGRICULTURE 40

4.5 ECONOMIC GROWTH / ENTREPRENEURSHIP 45

4.6 SMALL-SCALE ENTREPRENEURSHIP SUPPORT AND THE INCENTIVES OF ARMED / ILLICIT

GROUPS / ACTORS 49

4.7 EDUCATION 52

4.8 WORKFORCE DEVELOPMENT 55

4.9 FINANCE 59

5. RECOMMENDATIONS 63

5.1 INTERNATIONAL AND REGIONAL PSE OPPORTUNITIES 63

5.2 LOCAL PSE OPPORTUNITIES 64

5.3 FOSTER BLENDED FINANCE WITH FINANCIAL INSTITUTIONS 65

5.4 BUSINESS CLIMATE REFORM OPPORTUNITIES 65

ANN EXES 67

ACRONYM LIST

ACRONYM NAME

3TG Conflict Minerals (Tungsten, Tantalum, Tin, and Gold)

ACERD Association Congolaise Pour Les Énergies Renouvelables et Décentralisées AfDB African Development Bank AGOA African Growth and Opportunity Act ALP Accelerated Learning Program AmCham American Chamber of Commerce ANSER National Rural Electrification Agency ARE Autonomous Regulatory Agency ASM Artisanal and Small-Scale Mining ASOP Action Sociale et d'Organization BAA Broad Agency Approach BDS Business Development Services CAADP Comprehensive Africa Agriculture Development Programme CAP Centres d'Apprentissage Professionnel CDCS Country Development Cooperation Strategy CDR Centres de Développement Ruraux CLA Collaboration, Learning, and Adaptation CO Contracting Officer CRS Catholic Relief Services CSR Corporate Social Responsibility DCA Development Credit Authority DFC Development Finance Corporation DFI Development Finance Institution DFID Department for International Development DFSA Development Food Security Activity DRC Democratic Republic of Congo DRG Democracy, Rights and Governance ECD Education and Curriculum Development EG Economic Growth FBO Faith-Based Organization FDI Foreign Direct Investment FEC Federation of Private Enterprises in Congo FSD Financial Sector Deepening FTF Feed the Future GBV Gender-Based Violence GDA Global Development Alliance GE General Electric GRDC Government of DRC HRH Human Resources for Health INERA National Agricultural Study and Research Institute

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IP Implementing Partner IPP Independent Power Producer IPSE Institution of Independent Professional and Self-Employed IYDA Integrated Youth Development Activity J2SR Journey to Self-Reliance KII Key Informant Interview LMA Labor Market Assessment MBIO Missions, Bureaus, and Independent Offices MCC Millennium Challenge Corporation MCH Maternal and Child Health MEL Monitoring Evaluation and Learning MNC Multinational Corporation MOU Memorandum of Understanding MSME/SME Micro, Small, and Medium Enterprises NGO Non-Governmental Organization OAA Office of Acquisition and Assistance PAOP Power Africa Off-Grid Project PEPFAR President's Emergency Plan for AIDs Relief PEPSE Promoting Excellence in Private Sector Engagement PMI The President's Malaria Initiative PNLT Pudendal Nerve Latency Test PPA Public-Private Alliance for Responsible Minerals Trade PPP Public-Private Partnership PSE Private Sector Engagement PYD Positive Youth Development RMT Responsible Minerals Trade SHS Social and Human Services SNEL Société Nationale d'Electricité STEM Science, Technology, Engineering, and Mathematics SVC Strengthening Value Chains TVET Technical and Vocational Education and Training USAID United States Agency for International Development VAT Value-Added Tax WFD Workforce Development WFP World Food Program WHO World Health Organization YCC Yes Youth Can

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I. EXECUTIVE SUMMARY

1.I PSLA BACKGROUND

USAID is undertaking a cultural and operational transformation to expand engagement with the private sector and to achieve outcomes of shared interest and value. The Private Sector Engagement (PSE) Policy is an Agency-wide call to action. The Policy is a mandate to work with the private sector to design and deliver development and humanitarian programs across all sectors and to harness resources to open markets and opportunities for U.S. businesses. The policy signals an intentional shift to pursue market-based approaches and investment as a means to accelerate countries’ progress on their Journey to Self-Reliance (J2SR).

USAID/DRC has facilitated significant investments into the DRC as well as forging partnerships between local Congolese businesses and major multinational and regional businesses in the agriculture, mining and energy sectors. To build on this momentum, the Mission is interested in deepening its engagement with the private sector and has a pivotal role to play in helping the DRC to accelerate inclusive growth and productivity through deepening collaboration with the private sector to overcome critical development challenges and support its Journey to Self-Reliance.

Annex I includes the PSE Methodology. Annex II includes Mission Private Sector Engagement to date.

Annex III includes a Stakeholder List for those Stakeholders PEPSE interviewed. Annex IV provides Company Profiles. Annex V provides a List of Opportunities for consideration by USAID. Annex VI includes Ways We Engage the Private Sector, and Annex VII includes Notes from interviews with USAID and the private sector.

1.II PRIVATE SECTOR CONTEXT

The Democratic Republic of Congo (DRC) is known to many as one of the richest countries in the world in terms of mineral resources, with 1,100 minerals and precious metals. Foreign Direct

Investment (FDI) flows into the Democratic Republic of Congo increased by 11%, reaching USD 1.5 billio n in 2018. Despite bearing the impacts of protracted major armed conflicts and ongoing humanitarian crises, the DRC has the potential to install hydropower capacity to power most of the African continent and 80 million hectares of arable land for agricultural development.

Although the 2019 peaceful political transition increased investor interest in the country , the Congolese business climate is often described as one of the worst in the world. Access to finance, high taxes, corruption and infrastructure are among the top challenges faced by businesses operating in the DRC.

I.III APPROACH & METHODOLOGY

USAID/DRC requested support from the Private Sector Engagement Hub (PSE Hub) (formerly the U.S.

Global Development Lab’s Center for Transformational Partnerships) and Promoting Excellence in Private Sector Engagement Program (PEPSE) to provide support in determining areas of aligned interest, 1 https://www.state.gov/reports/2018-investment-climate-statements/congo-democratic-republic-of-the/ 2 UNCTAD 2019 World Investment Report.

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https://www.state.gov/reports/2018-investment-climate-statements/congo-democratic-republic-of-the/ and to build upon the Mission’s PSE Plan to inform its five-year Country Development Cooperation Strategy (CDCS).

In April and May 2020, a four-person assessment team (“the PEPSE team”) conducted 47 private sector stakeholder Key Informant Interviews (KIIs) across seven sectors to respond to three main Lines of Inquiry for USAID/DRC. These sectors are Energy , Health, Food/Agriculture, Education, Workforce Development, Economic Growth/Entrepreneurship, Mining, and Finance.

In early April 2020, USAID and the PEPSE team revised the scope of work in response to COVID-19 travel restrictions, adapting the Mission Support Activity to a remote model for USAID and private sector consultations. This Activity pursued three Lines of Inquiry:

1. Given relevant programming/CDCS priorities in “ X” sector, what areas for strategic engagement can be identified as of mutual value to the PS and their business interests and USAID’s development goals?

2. In “ X ” sectors, 1) which private sector actors are compatible with USAID’s development goals (based on USAID’s perceptions); and 2) what current private sector work/projects and/or private sector interest could contribute to shared value solutions and/or could lead to PSE opportunities?

3. Can examples of small-scale entrepreneurship support be identified which are providing incentives that could compete with those of armed/illicit groups?

This DRC Mission Support Activity found ample, diverse opportunities to engage a range of private sector actors including local Congolese businesses; foster the growth of high-growth value chains;

leverage corporate resources to drive sustainable development; facilitate enterprise-led development and to support innovative, market-based solutions to development challenges. The success of these opportunities is dependent on improving the business enabling environment and effectively promoting social capital and human development.

The sections below outline salient cross-cutting as well as sector-specific findings including engagement opportunities that resulted from analysis of USAID’s CDCS priorities in the target sectors and how these overlapped with areas for strategic engagement that were identified after interviews with the private sector and may lead shared value solutions and/or PSE opportunities.

I.IV CROSS-CUTTING PSE STRATEGIES AND ROLES

In order to engage the private sector in a way that promotes enterprise-led development and long-lasting solutions, USAID/DRC must operationalize the Mission PSE Strategy and PSE Working Group so that PSE Planning is strategic by coordinating at the Mission level as well as expanding and deepening engagement through cross-sectoral and sector specific engagements.

An improved approach to PSE will move the DRC forward on its Journey to Self-Reliance. The private sector aims to pursue opportunities that align with business objectives, instead of specific sectoral targets. USAID/DRC should adopt a similar mindset by avoiding siloed, transactional conversations that focus on specific sectors in the Mission and by instead developing relationships with the private sector

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around shared interests. Strategies to help the Mission better leverage the full range of assets it can bring to long-term, strategic partnerships with the private sector can be considered in both internal and external contexts:

Internal External

● Institutionalize relationships with the private sector

● Measure PSE impact and build on what works

● Structure and coordinate relationship-building efforts

● Leverage existing platforms and networks

● Foster public-private dialogue

● Connect the dots between stakeholders

● Facilitate access to finance and mitigate investment risk

● Promote inclusive business practices and social responsibility

● Leverage and coordinate philanthropic and CSR investments

I.V CROSS-CUTTING CHALLENGES

Key Informant Interviews (KIIs) identified the following cross-cutting challenges:

ENABLING ENVIRONMENT : The most-cited challenge interviewees noted as a key impediment to doing business is the business enabling environment in the DRC. Legislation, taxes, governance, and corruption are critical constraints. Some respondents indicated that the negative enabling environment impedes business operations. Other challenges were expressed at the country-level, including high poverty which makes it a challenge for citizens to afford goods and services.

ACCESS TO FINANCE : KIIs identified demand and supply side access to finance challenges. On the demand side, organizations struggle to gain access to finance. On the supply side, financial institutions expressed that they do not have the capacity to provide the technical support, including financial literacy training and business development services needed to decrease the risk associated with lending to small companies.

SKILLS/WORKFORCE DEVELOPMENT : Difficulty hiring skilled staff was noted as a key impediment for companies. 65% of the Congolese population is under the age of 24. The youth underemployment rate is estimated at 56.1%. Larger companies provide training to staff and identify talent from leading local universities, however of 9,000 youth leaving Congolese universities each year, less than 100 find jobs. Moreover, technical and vocational education in the DRC does not provide quality education that provides easy integration into professional life.

INFRASTRUCTURE : Most respondents cited infrastructure, transportation and logistics as major constraints their companies face. The DRC currently has only 3,000 km of paved roads and needs an additional 145,000 km. Some 5,033 km of railroad networks need complete rehabilitation; a maritime, river, and lake network of 16,238 km needs development; and 270 airport platforms need to be

3 https://www.state.gov/reports/2019-investment-climate-statements/congo-democratic-republic-of-the/ 4http://documents.worldbank.org/curated/en/688761571934946384/pdf/Doing-Business-2020-Comparing-Business-Regulation-in -190-Economies.pdf 5 https://www.ilo.org/gateway/faces/home/ctryHome?locale=EN&countryCode=COD&_adf.ctrl-state=11l0joejoj_9

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https://www.state.gov/reports/2019-investment-climate-statements/congo-democratic-republic-of-the/ http://documents.worldbank.org/curated/en/688761571934946384/pdf/Doing-Business-2020-Comparing-Business-Regulation-in-190-Economies.pdf http://documents.worldbank.org/curated/en/688761571934946384/pdf/Doing-Business-2020-Comparing-Business-Regulation-in-190-Economies.pdf https://www.ilo.org/gateway/faces/home/ctryHome?locale=EN&countryCode=COD&_adf.ctrl-state=11l0joejoj_9 reconstructed and two maritime ports need to be modernized. Bad roads and limited rail networks make it difficult to move goods across the country and increase operating costs.

ENERGY : Insufficient energy coverage and distribution is an overarching issue mentioned by KIIs in every sector. DRC’s electrification rate is around 9%. This poses a barrier for the operating costs of hospitals and vocational institutions, deters industrialization and limits innovation or digitization, and restricts the true penetration of mobile coverage to consumers.

CONFLICT : Conflict, natural disasters and political instability cause businesses to close or fail. While insecurity undermines economic growth and peace, PSE can be a mechanism to help reinforce growth and sustainability. Businesses operating in Eastern DRC cited the negative impact of conflict on their operations. Rebel attacks and looting during conflicts have caused many businesses to fail and endanger entrepreneurs who venture out when it is not safe to provide their products or services.

I.VI STRATEGIC ENGAGEMENT OPPORTUNITIES BY SECTOR

The best potential for alignment between USAID and the private sector typically exists where USAID development objectives align with the private sector business case around a given challenge. In this report, each sector includes a complete list of opportunities for strategic engagement by sector at the end of each sector description. As of May 2020, standout potential overlap with current DRC Mission priorities include:

I.VI.I ENERGY

Energy sector stakeholders were interested in working with USAID to receive training, work together to improve the business environment and to ensure access to finance for the sector.

IMPROVED BUSINESS-ENABLING ENVIRONMENT : Work with the Association Congolaise pour 8 les Énergies Renouvelables et Décentralisées (ACERD) to lobby and support Government of DRC (GDRC) legislation and business climate reform aimed at facilitating access to off-grid energy and put in place a joint donor subsidiary fund enabling to offset the cost of electricity and enable access to more people.

ACCESS TO FINANCE: For grid connections, work with the Ministry of Finance to design financial instruments and government guarantees that enable companies to raise funds in global financial markets (key to unlock major investments in the sector). USAID can also work with financial institutions to identify approaches to support lending to Off-Grid providers or put in place a subsidy program to ensure more Congolese have access to off-grid electricity.

6 https://www.ambardcusa.org/invest-in-the-drc/industries/infrastructure/ 7 https://www.usaid.gov/powerafrica/democratic-republic-congo 8 Market Links defines “Business-Enabling Environment” as follows: “The business enabling environment (BEE) includes norms, and customs, laws, regulations, policies, international trade agreements and public infrastructure that either facilitate or hinder the movement of a product or service along its value chain.

https://www.marketlinks.org/good-practice-center/value-chain-wiki/business-enabling-environment-overview#:~:text=Related%2 0Content-,What%20is%20the%20Business%20Enabling%20Environment%3F,service%20along%20its%20value%20chain.

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https://www.ambardcusa.org/invest-in-the-drc/industries/infrastructure/ https://www.usaid.gov/powerafrica/democratic-republic-congo https://www.marketlinks.org/good-practice-center/value-chain-wiki/business-enabling-environment-overview#:~:text=Related%20Content-,What%20is%20the%20Business%20Enabling%20Environment%3F,service%20along%20its%20value%20chain.

https://www.marketlinks.org/good-practice-center/value-chain-wiki/business-enabling-environment-overview#:~:text=Related%20Content-,What%20is%20the%20Business%20Enabling%20Environment%3F,service%20along%20its%20value%20chain.

I.VI.II HEALTH

KIIs indicated that USAID can engage companies to promote access to quality health services, improving health services delivery and identifying innovative ways to address Human Resources for Health (HRH).

IMPROVED BUSINESS-ENABLING ENVIRONMENT : Strengthen the business enabling environment in order to reinforce private providers’ ability to participate in USAID initiatives.

ACCESS TO QUALITY HEALTH SERVICES FOR FRAGILE POPULATIONS : Co-invest in equipping clinics and basic laboratories to support diagnoses, supply appropriate medical technologies, support performance measurement and support Maternal and Child Health (MCH) services through health partnerships, especially in hard to reach areas where the value add of partnerships may be higher.

PHARMACEUTICALS: Work with the Contracting Officer (CO)/Office of Acquisition and Assistance (OAA) to explore pursuit of quality locally-produced pharmaceutical products (including Malaria products) and potential companies that could provide these products.

EXPANDED DELIVERY OF CITIZEN-PRIORITIZED SERVICES : Serve as relationship broker between solar energy companies for low-cost solar energy technology and health providers to deploy in expanding high-quality health services (especially in underserved rural areas).

ENHANCED SOCIAL CAPITAL AND HUMAN DEVELOPMENT ESPECIALLY AMONG FRAGILE

POPULATIONS : Work with the GDRC and implementers to foster incentive schemes to allow the redeployment of Health and HRH in rural and hard to reach areas. Identify private sector engagement opportunities to develop HRH/education development solutions based on urgent skill needs.

HEALTH INFORMATION: Explore engagement with telecommunications companies to improve awareness and understanding of health emergencies, products, and services as well as continuous learning pathways for health practitioners. Foster data analytics capacity by engaging a specialized partner while building capacity of local partner/s.

I.VI.III MINING

Stakeholders in the mining sector expressed an interest in potentially engaging with USAID to improve the business enabling environment with an emphasis on taxes and commodity price. KIIs were interested in promoting Corporate Social Responsibility (CSR) and in working through cooperative structures.

IMPROVED BUSINESS-ENABLING ENVIRONMENT: Engage financial services providers in increasing access to finance instruments for exporters by considering a loan guarantee facility or scheme, especially as it pertains to cooperatives and pre-financing needed by exporters. For example, consider co-creating a package with technical assistance, market development and links to markets through USAID implementing partners that can align with other business development services (BDS).

ENHANCED SOCIAL CAPITAL AND HUMAN DEVELOPMENT ESPECIALLY AMONG FRAGILE

POPULATIONS: Work with the private sector, including industrial mining firms, to identify democracy and governance, agriculture and other projects to more impactfully invest CSR budgets including

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through community development plans, fostering commitment to human rights issues in their supply chains.

PUBLIC-PRIVATE ALLIANCE FOR RESPONSIBLE MINERALS TRADE (PPA) : Continue to leverage interests in conflict-free supply chains by members of the PPA to increase direct support of democracy and governance, alternative livelihoods, and other projects benefiting communities and miners and reinforcing peace and security.

COMMUNITY EMPOWERMENT: RESOLVING COMMUNITY EMPOWERMENT , PROMOTING

HUMAN RIGHTS AND ADDRESSING NEEDS: Identify cooperatives to pro-actively promote income diversification strategies including in high-growth sectors.

I.VI.IV FOOD & AGRICULTURE

Stakeholders in the food and agriculture sector expressed interest in potentially engaging with USAID to increase food security including through access to finance for farmers, transforming crops through training, and supporting financial literacy in the sector.

INCREASED FOOD SECURITY FOR FRAGILE POPULATIONS: Work with large producer organizations such as Nespresso to develop models to determine and map living income, and co-create mechanisms (potentially with financial service providers) such as small loan guarantees to make sure farmers have the finance they need.

IMPROVED PRIVATE SECTOR, RURAL ENTERPRISE, AND AGRICULTURAL

TRANSFORMATION: Serve as a thought partner and convener to develop agricultural technical training on new and transformed crops by partnering with organizations who would become the buyer of those products.

IMPROVED BUSINESS-ENABLING ENVIRONMENT : Support a financial literacy program at the household level that graduates into micro-financing for new agribusiness entrepreneurial activities. For example, Higher Grounds Coffee has a program in financial training, which is geared towards women and includes a microfinancing component tied to bread making.

I.VI.V ECONOMIC GROWTH / ENTREPRENEURSHIP

Stakeholders in the economic growth/entrepreneurship sector expressed an interest in potentially engaging with USAID to increase access to finance, expand business development services, support value chain development, and improve the enabling environment.

IMPROVED BUSINESS-ENABLING ENVIRONMENT: Partner with venture capital funds (US- or Africa-focused) to design innovative financing instruments and provide capital to high potential local women and youth entrepreneurs. Verdant Capital, Sycamore Ventures, Equity Bank, and Financial Sector

9 Transformed crops are defined as crops that are processed beyond their raw, post-harvest form into a value-added product.

Examples include cocoa butter, flours ( maize, cocoa, cassava, etc.) and their respective breads, fruit jams or jellies, kwanga/chikwangue/bâton de manioc, and more.

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Deepening (FSD) Africa/Department for International Development (DFID) all have programs targeting youth and start-ups.

ENHANCED SOCIAL CAPITAL AND HUMAN DEVELOPMENT ESPECIALLY AMONG FRAGILE

POPULATIONS: Training is needed to improve the management capacity of entrepreneurs to meet the requirements of financial institutions. Information-sharing facilities are necessary to reduce the information asymmetry between entrepreneurs and the financiers. Convene potential BDS and financial services providers to develop programs to train entrepreneurs.

IMPROVED PRIVATE SECTOR, RURAL ENTERPRISE, AND AGRICULTURAL

TRANSFORMATION: Partner with lead firms to create opportunities for job creation and business support services through their supply chains. Nespresso, Heineken, Jambo Juice, and others supporting MSMEs that are part of their supply chain and would benefit from technical support provided by BDS, potentially with USAID serving as a convener and thought partner USAID.

I.VI.VI EDUCATION

Stakeholders in the education sector expressed an interest in potentially engaging with USAID to strengthen the legal position of private schools and help them increase access to finance as well as expanding access to education through technology.

IMPROVED BUSINESS-ENABLING ENVIRONMENT : Leverage USAID’s convening power to help private schools gain protection under the law as service providers, potentially as part of a coalition of donors.

ACCESS TO EDUCATION FOR FRAGILE POPULATIONS : Harness private sector expertise and innovation to involve local MSMEs and entrepreneurs in reaching the poorest of the poor, leveraging learning from the CATALYZE mechanism regarding loan mechanisms to schools and families, especially in light of support to the GDRC/free education policy and system demand.

TECHNOLOGY AND EDUCATION: Convene Vodacom, Orange or other mobile network operators to outline the intersection of education/workforce and mobile operator’s business objectives, identify mobile operator/tech providers’ interests and leverage their strategies and priorities.

I.VI.VII WORKFORCE DEVELOPMENT

Stakeholders in the workforce development sector expressed an interest in potentially engaging with USAID to explore high growth value chains and the skills these require and opportunities they hold as well as to explore finance to the vocational training sector and consider skill building co-investment collaboration.

ENHANCED SOCIAL CAPITAL AND HUMAN DEVELOPMENT, ESPECIALLY AMONG FRAGILE

POPULATIONS

Entrepreneurship : Support USAID Integrated Youth Development Activity (IYDA) to engage with value chain actors (i.e., buyers) to co-create and co-invest in simple courses for youth who are involved or want to engage in these kinds of activities to help them master the necessary technical skills. For

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example, courses identified by the IYDA Labor Market Assessment (LMA) include animal husbandry in chickens, juice production, hairstyling, or basic sewing skills.

Job Opportunities : Convene or co-convene the list of potential business partners that have expressed interest in a potential partnership with IYDA/openings suitable for IYDA youth who have gone through rigorous training on customer service and professional behavior.

Skill Requirements & Private Sector’s Capacity to Assess Skills: Consider engaging a trade association/organization to co-invest in strengthening a subset of companies in a high-growth sector/s to strengthen ability to assess youth skills, i.e. how to match what they need in employees with whom they hire, for example in the agriculture sector, in an effort to strengthen the private sector locally.

I.VI.VIII FINANCE

Stakeholders in the finance sector expressed an interest in potentially engaging with USAID to design customized finance products to serve various sectors and engage and serve vulnerable groups. In addition, commercial banks were interested in receiving support from USAID to develop financial technology and management training.

BLENDED AND INNOVATIVE FINANCE: Design innovative financial products targeting the agriculture, energy, health and other sectors with banks and other donors. Banks seemed interested in offering specialized banking products if provided the training and support to design these new products.

Consider working with BDS providers to help develop and deliver training support.

FINTECH: Engage Fintech service providers and serve as a convener to assist with digitizing banking procedures and supporting staff and clients to ensure they are able to adopt new tools.

VULNERABLE GROUPS: Work with financial institutions to understand business objectives and identify ways to see vulnerable groups through an asset-building/client lens and help to reduce risks through access to markets, guarantees, financial literacy programs and business development services will help extend financial services to vulnerable groups.

The table on the following page reflects private sector engagement to date by the USAID DRC Mission as well as interest by the private sector and potential opportunities as identified by the PEPSE DRC Mission Support Team.

10 USAID Democratic Republic of Congo: Integrated Youth Development Activity (IYDA) Labor Market Assessment (February 2020) 11 Idem.

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Table I: Cross-Collaboration Opportunities between USAID Offices Sectors and Opportunities for Cross-Coordination between USAID Offices

RMT/Mining

Engage with industrial mining companies around support to health services in and outside of mining areas.

Final report recommendation that mining companies come together and collectively dedicate non-financial resources to opening pathways to opportunities including education.

Engage with industrial mining companies to spend CSR budgets for impact so they become beneficiaries in DG projects and spend royalties through communities to come up with development plans.

Engage those industrial mining companies interested in supporting livelihoods in agriculture.

For communities/municipalities obtaining royalties from the mining sector, establish/strengthen a process so that resources will be used to improve the quality of public service delivery.

Engage with an industrial mining company interested in supporting the USAID GBV project on income and training and explore support of alternative income generation to spur sub-national economic development.

Food Security

Larger agriculture and donor organizations expressed interest in fostering a holistic approach to support farming communities at the community level across sectors.

Engage logistics and infrastructure for production. Farmers don’t have the storage capacity or transportation capacity they need to facilitate the value chain functioning.

Provide support to agroindustry focused SMEs within the Virunga industrial zones and across DRC through access to energy and financing.

Energy

Explore expanding delivery of quality, citizen-prioritized health services by addressing health infrastructure and equipment constraints.

Invest in increasing access to energy in primary schools, secondary schools and universities across the DRC.

Explore solar mini grid development in Eastern Congo, as well as alternative gas to reduce charcoal use and solar home systems.

Support local energy sector SMEs and help provide affordable clean energy to agroindustry players and other local entrepreneurs.

GE is planning to invest $300 million to $500M to revitalize secondary care / District hospital and GE Power are prepared to invest at least $1 billion over three years.

Engage General Electric MOU with GDRC.

Access to Finance

Provide access to finance to private health facilities and engage with the private sector to develop and improve health insurance products.

Provide access to finance to entrepreneurs and engage with a finance institution to improve and implement education loan

Aim to provide artisanal miners with bank accounts. Exporters in this sector further need access to capital.

Support access to finance by coffee producers (under SVC).

Engage with the private sector to develop blended finance instruments targeting SMEs in their supply chain.

Support access to finance by the poorest of the poor. Conside r increasing the amount of the DCA, expanding financial partners and regions.

Education

Provide access to finance to entrepreneurs and engage with a finance institution to improve and implement education loan

Develop Mobile Education Learning Products.

Telecommunications

Strengthen health services and health communication using digital devices to increase access.

Increase access to information and mobile technology to train health workers.

Develop FinTech and mobile payment products to increase access and improve governance

Interested in Mobile Learning.

Key (Sectors & Offices)

Health Education DRG Peace and Security EG EG/RMT EG/FTF EG/FFP EG/PSE EG / Energy Telecom

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I. INTRODUCTION

1.1 CONTEXT AND BACKGROUND

The Democratic Republic of Congo (DRC) is known as one of the richest countries in the world in terms of mineral resources, with 1,100 minerals and precious metals. Foreign Direct Investment (FDI) flows into the Democratic Republic of Congo increased by 11%, reaching USD 1.5 billio n in 2018 .

The Congolese business climate is often described as one of the worst in the world. According to the 2020 World Bank Doing Business report, the DRC is ranked 183 out of the 190 countries assessed.

Access to finance, high taxes, corruption, and infrastructure are among the top challenges faced by businesses operating in the DRC. Despite these challenges, many international and regional companies are interested in doing business in the DRC given its immense potential. The December 2019 peaceful political transition has led to increased interest in foreign direct investment. This presents an opportunity to engage the Congolese private sector, foster value chain development, leverage corporate resources to drive sustainable development and support market- based solutions to development challenges.

USAID/DRC has facilitated significant investments into the DRC as well as forging partnerships between local Congolese businesses and major multinational and regional businesses in the agriculture, mining, and energy sectors. To build on this momentum, the Mission is interested in deepening its engagement with the private sector. USAID has a pivotal role to play in helping the DRC to accelerate inclusive growth and productivity to overcome critical development challenges and support the country’s Journey to Self-Reliance (J2SR).

This role will involve a new approach to Private Sector Engagement (PSE): engaging private-sector companies as long-term strategic partners with assets, resources, and knowledge to contribute, and not just financial resources. By shifting its approach, USAID/DRC will be better positioned to maximize its impact as a convener, thought leader or expert, market shaper, and risk mitigator. This will require changes in how the Mission approaches program design, grants, technical assistance, and interactions with the private sector. It will also require significant investments in relationship management as PSE evolves beyond transactional interactions toward long-term strategic relationships.

USAID/DRC is currently engaging with important private sector actors and multinational companies interested in doing business in DRC in agriculture, energy and mining. These engagements are fostering the creation of local businesses that are able to be part of international value chains, providing jobs to local populations, unlocking access to finance through purchase agreements and contributing to the DRC’s development through Corporate Social Responsibility (CSR) and community engagement.

USAID/DRC has an opportunity to be a facilitator of major investments into the DRC and a connector between international businesses interested in operating in the DRC and local Congolese businesses, who have the potential to be part of international business value chains.

USAID/DRC is developing a Country Development Cooperation Strategy (CDCS) that prioritizes PSE, assessing opportunities for private sector engagement, and putting in place a PSE Working Group.

Having a better understanding of the interests and challenges of relevant private-sector stakeholders will help the Mission determine where interests overlap and how engaging the private sector around shared

12 https://cd.usembassy.gov/2019-investment-climate-statements-congo-democratic-republic-of-the/ 13 UNCTAD 2019 World Investment Report.

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interests could help achieve development objectives. This assessment aims to help USAID in this process, focusing especially on market-based approaches and investments to accelerate DRC’s progress on its Journey to Self-Reliance.

Although the Mission’s PSE Strategy will cut across its entire portfolio, USAID/DRC is particularly interested in better understanding PSE opportunities for USAID in the Food/Agriculture, Health, Energy, Education/Workforce Development, Economic Growth/Entrepreneurship, Mining, and Finance Sectors.

Stakeholder interviews may have gauged opportunities across more than one sector. This report aims to support USAID/DRC’s intelligence gathering in these priority areas and, in so doing, inform its CDCS and the implementation of its PSE Strategy.

2. INTERNAL MISSION ALIGNMENT

2.1 MISSION ALIGNMENT

PEPSE asked respondents whether they believe that USAID’s goals intersect with some of their priorities/areas of interests and whether they could see future (additional) areas of collaboration with USAID. Actors that had worked with USAID in the past included companies in the education, health, agriculture, and transportation sector as well as financial service providers. Of the 47 interviews conducted, 45% of respondents indicated having collaborated with USAID in the past, whether this was through USAID funded projects, co-creation mechanisms, or as implementing partners. Of the 47 interviews conducted, the vast majority indicated they are open to further engaging with USAID. For purposes of analysis, we present the private sector’s perceptions in four broad categories:

● Engagement with the private sector by USAID (27%): perception of the ways USAID has engaged with the private sector

● USAID’s Processes/Mechanisms (25%) : perception of processes and procurement conducted by USAID

● USAID’s Institutional Role (17%): perception of how USAID uses its role as an institution

● Coordination (15%): perception of the way in which USAID interacts/does business

● Sustainability (15%): perceptions of sustainability as it relates to USAID

The table below presents this data. Where overlap existed in responses, responses have been bolded.

14 Sectors of interest were determined by the USAID Mission, the technology/mobile sector was not included but is reflected in consultations and findings and recommendations.

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Table II: Respondents’ Perspectives on USAID Engagement with the PS by USAID

Processes / Mechanisms Institutional Role Coordination Sustainability

More local partners funded by USAID, focus more on local solutions, and follow up on partnerships

Provide clear timeframes to manage private sector expectations

Tax/corruption issue: USAID can apply pressure to

GDRC including at the provincial levels

USAID is not easy to connect with

Have USAID conducted an evaluation of the portfolio in DRC?

Local partners need to feel that what they propose will stand

USAID timelines and private sector timelines have different horizons

Absolutely critical partner

Coordination that comes from DC and from Kinshasa is challenging

Fund activities that have a direct impact on farmers, rather than long-term

USAID has done a much better job of PSE than other donors

Engage in stakeholder consultation when projects stop/ modify.

Wouldn’t be here without USAID support

There have been requests for information USAID should have

Projects need longer timelines to be impactful

Donors have a very humanitarian perspective, not so much private sector development--don’t feel comfortable or know what to do

Involve a local partner joining a project mid-stream at the same level as from beginning.

The market-driven approach and USAID's approach are very complementary

USAID staff turnover is an issue, this means you must rebuild relationships each time

Donors have ‘checklists’, need to do deep work to achieve a goal/results

Never thought that USAID would have a structure that is interested in engaging the private sector

Extensive co-design process requires heavy resource investment

Impressed with coffee revitalization, provides a good business model

–fair for Congolese people, and coffee buyers abroad

USAID is in Kinshasa-the country is more complex than Kinshasa

Budget levels should match sector needs

Partner and USAID can seek out what is mutually beneficial

Bring people in at the design phase, the BAA is an opportunity, groups should be smaller

Let IP direct you to where the market demand is

Partner communication and co-design are best practices to address gaps

We have good experience, the regularity of funding is impeccable, the support is good

Be careful of the brand; are large companies taking advantage of USAID?

Ensure that humanitarian focused assistance does not compete unfavorably with market-based approaches

To improve livelihoods of rural populations, have a different way of looking at it, different angles

Have a clear vision and objectives for engagement

Can USAID procure quality pharmaceuticals locally in DRC?

International donors and NGOs 'crowd out' local partners

Partnerships that are really touted have some cash element to them

The PPA are well positioned and should sit alongside the data, and have transparency of that data

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2.2 ENGAGEMENT WITH THE PRIVATE SECTOR BY USAID

Private sector respondents provided substantial commentary on how USAID engages with the private sector in the DRC. KIIs note that USAID needs to focus more on local partnerships. A private hospital in Eastern Congo indicates that the absence of local structures/actors is a major challenge in the identification of problems that donors can find and discuss solutions for jointly. KIIs cite wanting to be involved in planning to understand the real needs of the beneficiaries. To foster local partners, one stakeholder suggests that USAID should consider offering a quota to local producers under Food for Peace as other donors do.

Firms are interested in engaging with USAID. One respondent indicated USAID has done a much better job of engaging with the private sector than other bi-lateral donors. KIIs state however, that donors bring a humanitarian perspective but often do not feel comfortable or know how to pursue PSE.

A number of mining KIIs were concerned that the Public-Private Alliance for Responsible Minerals Trade ( PPA) is not doing enough to develop the mining value chain. An impact investment firm was also concerned about potential for using the PPA for greenwashing. This respondent noted USAID should be careful of its reputation and brand as an important consideration when it comes to PSE in some sectors, such as the conflict minerals sector. While it is clear to some interviewees that USAID is moving towards an interest around engaging in intangible resources that the private sector can offer (i.e. human resources, knowledge), partnerships are still touted by USAID which seem to ‘involve cash elements’.

She notes that the various ways to engage a partner should be further developed by USAID. A multinational member of the PPA indicated with regard to this engagement, the importance of ensuring data is transparent and is also being shared with other organizations.

2.3 PROCESSES/MECHANISMS

PEPSE captured private sector perspectives on processes in working with USAID as well as procurement mechanisms. Respondents noted the importance of clear timeframes to manage private sector expectations. Long timelines on projects, for example a project “to be launched in five years”, means USAID cannot align to the private sector’s timeline. One company started a co-creation process in 2018, but due to unclear timelines, would not invest additional time before receiving clarity from USAID in the future. In another instance, a USAID project which ended abruptly without consultation or consensus left a ‘bitter taste’ from the engagement.

Interviewees believe USAID needs to assess and improve how to co-create, perhaps bi-laterally or working with companies who bring relationships with established non-governmental organizations (NGOs). Extensive co-design processes require heavy up-front resource investment. One KII indicated USAID ‘puts lip service to this new way of working (co-creation)’ but works in the same traditional ways. After participating in a BAA process, one interviewee thought there were too many people at the table early in the process, and that there were too many procurement hoops. Due-diligence was also a challenge. USAID recommended the implementer not conduct due-diligence going into co-creation with partners. As a result, this implementer ended up losing partners down the road.

A GDA-supported social enterprise model using a community-run business approach, notes that USAID needs to ensure that humanitarian focused assistance does not compete unfavorably with market-based approaches. This model is successful in the zones it is working in because it has been able to deliver quality services using a business model and has been able to collect fees. This particular partner is nervous that it may not be able to work in more conventional procurement mechanisms. (The GDA model has allowed this private sector group flexibility through capital funds it has raised, which it says

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would not be accessible under other mechanisms.) USAID should utilize challenge mechanisms to foster models like this one, allowing it to replicate solid market-driven approaches.

2.4 INSTITUTIONAL ROLE

Private sector respondents spoke of USAID’s institutional role and diverse perceptions emerged. While there has been progress on regulatory reform in taxes/corruption, KIIs indicated that USAID has been too slow, in part due to alignment between US Agencies. Technical focus is also an area of interest for KIIs. One national company commented on rural livelihood development, that if USAID wants to improve the livelihoods of rural populations, it has to have a different way of looking at how to do that, assessing different facets that can contribute to that end. An organization building business models around a number of sectors in DRC commented that USAID’s development driven institutional role is very complementary to their market-driven approach. For a stakeholder based in Goma and Eastern Congo, USAID and international donors/NGOs have a tendency to 'crowd out' local organizations.

2.5 COORDINATION

The private sector offered a number of perceptions in relation to coordination with USAID. One respondent noted they did not find USAID to be collaborative, indicating USAID’s PSE unit had never proactively reached out to him. A large international company that has not yet worked with USAID noted that while friendly, USAID is not easy to catch and “may refer you to someone in Washington”.

Another respondent noted that coordination is challenging for him because guidance comes from Washington, DC as well as from Kinshasa. Staff turnover was “normal” but is challenging, as it requires the rebuilding of relationships each time. A respondent inferred distance as a challenge, indicating, “USAID is in Kinshasa, the country is more complex than Kinshasa”. Finally, a stakeholder who is at the start of engagement with USAID indicates partner communication and co-design will be best practices in the relationship he manages.

2.6 SUSTAINABILITY

The private sector in DRC provided a number of insights in regard to how they perceived USAID factored sustainability into their work. Two respondents commented on the role of Monitoring Evaluation and Learning (MEL). One respondent asked whether USAID had ever conducted an evaluation of their portfolio in DRC. A second respondent from the pharmaceutical sector asked whether an evaluation had ever been conducted of the delivery of medicines to ascertain the effectiveness. Another stakeholder noted that donors often fund activities that have long-term results, for example, advocacy, which takes time to impact production at the grassroots level. Nevertheless, the farmer at the grassroots level would like to be supported with access to quality seeds or access to finance, much more immediate needs. A stakeholder noted projects need longer timelines to be impactful and the legacy of short term activities as an issue.

One company noted that donors like USAID have ‘checklists’ but don’t always do deep work to also achieve their goals/results. Another interviewee noted the importance of budget levels matching sector needs while another private sector stakeholder noted USAID needed to carve out money in their portfolio, “it didn’t make sense to do a new program when we had something ongoing”. A leading private hospital has received USAID support notes having good experiences with USAID including valuable, consistent funding.

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2.7 IMPLICATIONS FOR USAID/DRC

This anecdotal data demonstrates that the private sector in DRC has mixed perceptions of and experiences with USAID, many of which are reflective of common areas of interest seen more broadly across USAID Missions globally. There continues to be an interest in engaging with USAID for financial support, but the private sector is much more nuanced than that and sees the non-financial value USAID can bring.