There’s a new platform to promote investment in DR Congo from the United States, as well as import and export between the two countries. The platform is called Easy Commerce USA-RDC (website (still being built); facebook), and is run by the Association of D.R.C. Entrepreneurs, which has the objective of entrepreneurial promotion and development. One part of the platform is called Easy Profile, which was described by Ted Mvutu, the Association’s president, in a recent radio interview:
“We have planned the program called Easy Profile, which creates a virtual professional profile of a Congolese entrepreneur who is going to attract foreign investors who come to invest in the D.R.C.
“The investors who are coming to the D.R.C. have to find a platform of entrepreneurs organised so that they contact directly operators corresponding to their projects. In this profile, we put the identity, the sector of entrepreneurial activities, and we are going to connect these factors to the U.S. Department of Commerce to facilitate the task of American investors who want to come to the D.R.C.”
(Ted Mvutu. The text is my translation from the French)
A business directory of “Easy Profiles” could bring in two types of investors. One type of investor could bring foreign direct investment (where a business is established in the D.R.C. and (at least partially) owned and run by the U.S. company), while the other type of investors could bring finance investment (where a business run by Congolese entrepreneurs is financed by U.S. money). The encouragement of each type of investment would require a different emphasis on information provided by Easy Profile, and I hope that the Association specifies their own plans in more detail prior to starting the activities. As the President of the Association says that U.S. investors can contact local entrepreneurs, instead of being contacted, it seems more likely that they will be bringing foreign direct investment rather than finance investment.
Foreign direct investment could benefit from the Easy Profile business directory in at least two stages: the search for new business ideas, and the acquisition of resources to realise an idea. When considering whether to set up a new business, an entrepreneur will typically search for business opportunities from numerous sources, and show some flexibility in the opportunities that they will pursue. Under foreign direct investment, the flexibility will typically be reduced, as the investor will be likely to have clearly identified production aims coordinated with other companies owned by the investor. However, it is possible that local ideas and expertise may influence the details of the investment, for example if resources used in other countries are not readily available in the D.R.C., or if the best human resource management practices differ in the country. Within a directory format, it may be helpful to include a section where each company could write freely about anything it considers important. For example, it could describe the products it offers, or why it could offer something unusual, or any ideas it has for new products and services. It could also give opinions on current Congolese business conditions and markets. Easy Profile could translate into English.
The Easy Profile business directory could also benefit foreign direct investment by aiding the acquisition of resources to realise an idea. The D.R.C. is unfamiliar for most potential U.S. investors, and they will want to find local companies which help them to realise their aims, by providing relevant and suitable goods and services. Easy Profile could help them to find such partners, suppliers, and subcontractors. The presentation and ease of access would be important – I would copy the design of leading websites in the area, and allow data to be sorted, collected, and extracted easily. The website should be in English and French, so that it can be used by both U.S. and D.R.C. entrepreneurs.
To help investors to identify opportunities and D.R.C. companies, it would be helpful if the Easy Profiles contained the following information:
Further information would help to build the trust between investors and local companies. Trust can be a major issue in any business relationship, and during investment in a foreign country it is of particular importance. Helpful information may include:
There is speculation among the press and aid agencies that DR Congo may be close to returning to widespread conflict. I've written before that earlier war in the country was an economic disaster. To recap, a war can lead to incomes which are lower by around US$1000 per person per year than they would have been. Over ten years, that's $10,000. For a population of 80 million, that's $800 billion.
One of the reasons that war is economically disastrous is that business operations are badly hit. With a very few exceptions, such as arms smugglers, it is hard for business to prosper during war time. Of course, there are wider economic consequences to consumers and government, and effects in the long term through changes in labour, education, and investment, but let's stay on business for the moment.
War can affect business operations by interfering with a firm's ability to identify new opportunities. Familiarity with, and knowledge of, an environment is an important way for business people to find such opportunities. When an environment changes radically under war, then business people's ability to identify opportunities is diminished. Any search procedures to identify opportunities - for example, by touring local markets, or surveys - may become dangerous or impossible. Further, the number of opportunities is likely to fall as well, as markets are disrupted. While the changing environment due to conflict will bring some new opportunities, the disruption of markets established over a much longer period seems almost certain to lead to large net loss of opportunities.
Additionally, formerly attractive opportunities may not be worth the risk after conflict starts. Capital is likely to be in short supply during wartime, driving up its cost. Extra risk, such as that brought by war, is usually compensated by higher returns as well. If an opportunity's expected return is the same or lower when conflict starts as before, then it may no longer meet the required investor return, and so not happen.
Another reason for war's effect on business operations is that it interferes with the ability of businesses to plan. War brings increased uncertainty about the future - the actions of the combatants are unknown, and future events that were previously likely may be disrupted. A planner would have to guess about the future to a greater extent, and additionally have to include the actions of the combatants. The number of future events the planner would have to consider would be much wider, and costlier to examine in full if that is even possible.
The ability to find solutions to any opportunities is also hampered by conflict. Earlier ways of formulating ideas may no longer be readily possible or suitable. For example, a company which previously examined the practices of other companies may find that those practices are no longer as visible, or the practices are no longer applicable in the wartime economy. If solutions are proposed, then testing their viability may be difficult, with methods such as surveys or limited launches likely to be more expensive during war.
What's more, war can interfere with a company's ability to implement any proposed solutions. Finance may be not accessible even if required returns can be met, and the available workforce is likely to smaller. Fixed capital stock would be a target for looting. Networks of potential business collaborators may be reduced in size.
Overall, then: war is bad news for business operations.