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Legal analysis of the promulgation modifying the mining code in the DRC

Legal analysis of the promulgation modifying the mining code in the DRC

 

The Democratic Republic of Congo is full of mining potential, which responsible exploitation brings economic development and reduction of poverty across the country. In spite of tremendous matters experienced by mining sector, the sector remains a cornerstone of development with more than 11000 spectrum mineral substances worth estimated at 3700 billion dollars. The mining sector accounts for 95 percent of export earnings for a contribution of 10 percent to the gross domestic product (GDP), which makes it a pivotal of national economy. DRC’s mineral wealth is widespread in all provinces including copper, coltan, cobalt, diamond, cassiterite, zinc, wolframite, gold, manganese, gas, etc. The statistics reveals that the country is the largest cobalt producer with about 48 percent of the world’s reserves, and 73.940 tons were produced in 2017. The existence of mineral wealth continues to attract countless mining companies operating in the sector. According to the indicators it turns out that the DRC will record an average growth rate of 17 percent during the year 2018, overlooking other mining markets. It is very relevant to mention that the mining sector is peppered with several economic, environmental and social issues, which led the lawmakers to elaborate the mining code of 2002, in order to regulating mining extractive operations and especially to foot an incitative mining law with procedures for granting objective, fast and transparent quarries rights in which tax, customs and exchange. However, stability clauses recommend that mining code of 2002 must be revised after ten years of its application. It is in this purpose that two chambers of parliament revised the mining code as well as adopted a new mining code. In constitutional deadline the bill has been transmitted to the President of the Republic for promulgation. However, the new mining code is not promulgated.

Key words: fiscal system, royalty rate, legal basis, constitutional deadlines, promulgation effect.

                  By Gaby Kabue Kayombo, Managing Partner of RightsEmpower

 

 

 

Introduction

 The promulgation of the new law revising the Mining Code of 2002 is a topical issue on which all gazes are focused with backdrop. The mining sector is governed by Law No. 007/2002 of 11 July 2002 and Decree No. 038/2003 of 26 March 2003. Moreover, it exists several regulations established on mining sector. In particular, the mining code includes 344 articles divided into 17 titles. The mining code of 2002 is an incentive mining legislation with procedures of granting the objective mineral rights, fast and transparent in which are structured the tax, customs and foreign exchange.

In fact, after a decade of its application the mining code was obligated to be revised in order to identify its strengths and weaknesses and ultimately bring improvement.

Established in 2002, the mining code has realized ten years of applicability in 2012. During this year all stakeholders including the government, civil society and private sector were intensively involved in the revision work, which allowed them to make proposals for amendments to the topics such as the persistent legal dualism; social responsibilities of mining companies; deterioration and degradation of the environment; claims of local communities regarding access to mineral ownership; expropriation, compensation, relocation and implementation of sustainable development plans aimed improving the economic and social well-being of the communities affected by mining projects during and after exploiting, compensation for communities in case of relocation; public consultation during the preparation of the environmental and social impact assessment to enable the active participation of local communities affected by mining or quarry projects; implementation of the mitigation and rehabilitation plans provided for the current environmental plan or the cessation of mining research or mining activities; the presence of children in artisanal mines;  insufficiency of geological data; non-existence of the investment promotion policy; the lack of objective conditions for the execution and monitoring of exploration and exploitation projects; the inadequacy of tax collection systems; the lack of transparency and the involvement of politico-military authorities in the exploitation and trade of minerals; the question of stability of the provisions relating to tax and customs systems, etc.

Ultimately, the most stakeholders’ opinion converges and arguing that the mining legislation of 2002 did not contribute to the socio-economic development of the country. The favorable tax system has only attracted mining investors; however this did not maximize the State’s coffer in order to eradicate poverty and fight against the economic crisis that the country faces every single day. The Congolese authorities believe that the mining reform initiated will contribute to improving the lives of Congolese. However, mining operators argue that the new mining code does not target corruption, a cancer that is plaguing the mining sector.

Reform of tax system as priority of the new mining code

The meticulous reading of the new mining code shows that the tax system is a priority axis of mining reform.

Indeed, mining investments generally expose mining companies to huge tax burdens. However, in most cases the mining investors require the host countries, flexible tax regimes that allow a good return on their investments. In order to attract investment in the mining sector, the States are obligated to establish tax standards applicable to mining investments and which are generally incentives and derogate from ordinary tax system. It is in this approach that the mining code of 2002 established the tax system that is more profitable to mining investors.

As long as there is strong presence of mining investors and especially the high prices of minerals extracted in the DRC, the Congolese government ultimately would like to seize the opportunity of the mining reform to review up its tax system.

Increasing of mining royalty rate

Currently, the mining royalty rate as fixed in new code devised the congolese government and the mining operators. Before analyzing the provisions related to mining royalty rate it is essential to comprehend the background of mining royalty according to the mining code of 2002.

  • Legal approach related to Mining code of 2002

According to article 220 of the Mining Code, “the holder of the mining exploitation title is liable to mining royalty which base is calculated on the basis of the value of the realized sales, diminished to the transport fees, to the fees of analysis relating to the quality control of the product for sale, insurance fees and commercialization fees“.

Establishing of the mining royalty is an effort undertaken by the Congolese State to allow the holder of mining title to enjoy a tax regime that can contribute to the profitability of investments in the mining sector.

The mining code of 2002 sets the rate of the mining royalty according to the following products:

  • Iron or ferrous metals 0.5%
  • Non-ferrous metals 2%
  • Precious metals 2.5%
  • Precious stones 4%
  • Industrial minerals, solid hydrocarbons and other substances not mentioned 1%
  • Building materials of common uses 0%

The rate of royalty changes according to the nature of the mineral substances. The mining royalty is paid by the holder of the mining title of exploitation to the Public Treasury. The Public Treasury is responsible for distributing revenue from the mining royalty according to the following distribution key: 60 percent will remain acquired by the Central Government; 25 percent is paid into an account designated by the Administration of the Province where the project is located and 15 percent into an account designated by the City or Territory in whose jurisdiction the operation is being carried out.

  • Approach of the new mining code to promulgate

The new mining law submitted to promulgation sets royalty on “strategic metals” at the rate of 10 percent. A measure totally found unacceptable by the majority of mining investors. They believe that such a measure ruins the country’s reputation and leads the country to freeze investment in the sector.

The reasons of the review of the mining tax system are justified by rise of prices on the minerals extracted in the Democratic Republic of Congo. The statistics displays that the price of copper whose Katanga subsoil abounds, reached 14.5 percent in 2016, then its production in 2017 is 1.092 million tons (+ 6.9 percent). Diamonds potentially found in Kasai, rose by 9 percent between 2013 and 2016, its production in 2017 reached 18.9 million carats (+28.1 percent). Zinc, the production of 2017 is 7833 tons (-32.8 percent). Gold, very present in South Kivu, gained 13% in 2017 after a good of 8.6% in 2016, its production in 2017 is 23.3 tons (+2.7). Zinc, the production of 2017 is 7833 tons (-32.8%). Coltan used for the manufacture of smartphones, particularly concentrated in Kivu, its course breaks the ceiling of + 59 percent in 2017. However, the Cobalt, currently aimed for manufacture of batteries of electric vehicles to replace gasoline and diesel, this mineral potentially concentrated in Katanga with about half of the world market is 66000 tons out of 123000 tons comes from the DRC. The country holds 2/3 of known world reserves, the production of Cobalt in 2017 reached 73940 tons (+ 15.5%).

In fact, Cobalt’s strong demand for economic needs in the international market is revolting the State to classify Cobalt as “strategic metals“, whose royalty rate is set at 10%. Compared to the 2002 Mining Code approach, the royalty rate for Cobalt goes from 2 percent to 10 percent. A measure fiercely fought by the mining investors who threaten to go to international arbitration if the Congolese State can not reduce this rate. However, the decision to invest in a country depends in particular on the tax system.

Constitutional provisions relating to the promulgation of the new mining code

The mining code is the domain of the law. It is therefore subject to the rules established by the constitution.

  • Principle

Without prejudice to the other provisions of the constitution, the law determines the fundamental principles concerning the mining regime (article 123 paragraph 3 Constitution of 18 February 2006).

Article 9 of the aforementioned Constitution says: “The State exercises permanent sovereignty over the soil, subsoil, water and forests, over the airspace, fluvial, lacustrine and Congolese maritime as well as on the Congolese territorial sea and on the continental shelf “.

According to this constitutional provision it can deduce the enumeration of the terms “subsoil” which have a direct link with the concept of mines because generally the mineral substances are in the subsoil. The Constitution makes the mining domain a part of the Congolese State. And it’s in this perspective that the lawmakers elaborating the laws in the field of mines in the DRC.

Background of promulgation of the new mining code

 As in all democratic States, the final adoption of law or legislative proposal closes, in principle, the parliamentary phase of the legislative procedure, which normally conducts to the promulgation of the law. The promulgation is the legal act by which the President of the Republic authenticates the existence and the regularity of the law and gives the order to conform to the prescriptions of this law. It is logical that the law revising the mining code was passed in parliament and then transmitted to the President of the Republic.

 Legal basis

 The promulgation of laws is found in the constitution of the State

  • Promulgation effects

The effects of promulgation of laws consist, firstly attesting the existence of the law, giving the regularity of the legislative procedure. Secondly, confiding the text voted the authentic character; authenticates the law. Thirdly ordering public authorities to observe the law and to enforce it; the text is made enforceable.

  • Competency

The power to promulgate laws is the responsibility of the President of the Republic. The President of the Republic is the guarantor of the nation.

  • Extent of the power

The President of the Republic has a wide power in matters of promulgation namely:

Power of Promulgation: The President of the Republic has the power to promulgate the law within fifteen days of its transmission. The constitution does not provide delegation of power in this area (Article 140 of the Constitution of 18 February 2006).

Power to request a new deliberation: Article 137 of the Constitution says, “Within fifteen days of the transmission, the President of the Republic may request the National Assembly or the Senate a new deliberation of the law or some of its articles. This new deliberation can not be refused”.

  • Constitutional deadlines

The prerogative of promulgation laws acknowledged to the President of the Republic required the respect to the constitutional deadlines. According to article 140 “the President of the Republic promulgates the law within fifteen days of its transmission after the expiry of the time …”. The constitutional deadline of 15 days can not be derogated.

  • Failure to promulgate within the deadline

The prerogative of the President of the Republic to promulgate the law is bound to the respect of constitutional deadline. In case of absence of the promulgation law by the President of the Republic within the constitutional deadline, the promulgation is supposed done (article 140 paragraph 2 of the Constitution). In other words, whether the President should not promulgated as required according to the constitutional deadline, the law is supposed promulgated and the text is definitively enforceable.

In the context of the law revising the mining code of 2002, needless to say that the acts of two chambers of the Parliament would have been completed on February 27th 2018. From this adoption date, the objective presumption enables to say that the adopted law was transmitted to the President of the Republic within the constitutional deadline, either 6th  of February mathematically the deadline ran 06th of February 2018. And the President had 15 days to promulgate, mathematically the promulgation should occur on February of 20th, 2017. However, the silence of the promulgation still persists.

 Suspensive effects of promulgation

The Constitutional Court control the compliance of laws of assembly’ acts according to the Constitution which says: “The Constitutional Court is in charge of the control of the constitutionality of laws and acts with the force of law“.

Where a law to be promulgated is found to be unconstitutional, the Constitutional Court may be referral on appeal (Article 139 of the Constitution).

In case the law to be promulgated is found unconstitutional, the Constitutional Court might be referral on appeal (Article 139 of the Constitution).

In such assumption, four scenarios emerge:

1) The President of the Republic within fifteen days following the transmission to him of the law finally adopted;

2) The Prime Minister within fifteen days after the transmission to him of the law finally adopted;

3)  The President of the National Assembly or the President of the Senate within fifteen days of its final adoption;

4) A number of deputies or senators at least equal to one-tenth of the members of each House, within fifteen days of its final adoption.

It so relevant to mention that the referral of  the Constitutional Court for unconstitutionality of law constitute a suspensive effect on the promulgation law.

While this article is writing, the Constitutional Court does not referral an appeal of unconstitutionality of the law revising the mining code submitted to the President of the Republic for promulgation. The referral to the constitutional court for the unconstitutionality of the law could have a suspensive effect on the promulgation of the law revising the mining code.

 Conclusion

 Since 2012, the Mining Code of 2002 has realized ten years of its implementation. At the end of this period, this one is revised to assess the strength and weakness points. It is in this logic that the DRC government has initiated the mining reform, which has made other stakeholders including the private sector, civil society involved in the work of the proposals amendments on the revision of the Code Mining. Remaining in practice, the government through the Ministry of Mines has written the bill on the Revision of the Mining code revising which have been submitted to the parliament institution with a particular focus on the reform of tax system. The tax reform is justified by the rise of mineral prices extracted in the DRC, and the Congolese State has seized the opportunity to revise upwards its tax system, and particularly classify some ores as “strategic metals” with a royalty rate set at 10% contrary to the rate 2 % under the Mining Code of 2002. This rate is fiercely controversial by economic operators operating in the sector. At the end of the acts of the Parliament in margin of the revision of the mining code of 2002, the new mining was transmitted (in constitutional deadline) to the President of the Republic with a view to be promulgated within fifteen days. However, the new mining code is beneficiate signature (promulgtation); the constitution says black on white that the failure to promulgate the law within constitutional deadline, the promulgation is supposed done (Article 140 of the constitution). The most objective legal analysis of the constitutional provisions on the promulgation of laws as the prerogative of the President of the Republic, enable to confirm that the new mining code was transmitted within the constitutional deadlines, and it not exist any constitutional suspensive effect, in this case the new mining code is supposed promulgated under article 140 of the Constitution.

Bibliography

 Legal texts

  • Constitution of February 18th , 2006
  • Act No. 007/2002 of July 11th , 2002 on the Mining Code
  • Organic Law No. 13/026 of 15th October 2013 on the organization and functioning of the Constitutional Court
  • Decree No. 038/2003 of 26 March 2003 on mining regulations
  • Bill to revise the mining code

 Books

  • Muhigirwa Rusembuka Ferdinand: “Towards Good Governance in the Mining Sector of the Democratic Republic of Congo”
  • World Bank Report on “Good Governance in the Mining Sector as a Growth Factor”, May 2008
  • Commodity TopNews, the cobalt of the rdc: “potentialities, risks and importance in the global cobalt market”, 2017
  • Annual Report of the Central Bank of Congo, 2016
  • Bmi research In 2018: “the DRC will be the fastest growing mining market in the world”
  • Proposals amendments on the Review of the Mining Code: Report of Civil Society Involved in Natural Resources Issues, 2012
  • Bertrand Laporte, Céline De Quatrebarbes and Yannick Bouterige “Mining Taxation in Africa”: a review of the gold sector in 14 countries »from 1980 to 2015
  • Horizon Mines Magazine, “Professor Dona Kampata justifies the revision of the Mining Code” 2018
  • Jeune Afrique, Mines: “The new mining code worries the congolese industry”, March 02, 2018
  • Jeune Afrique: Mines: “The storm on the Congolese sector”, February n ° 2981 of February 25, March 03, 2018
  • Analysis of the Congolese Mining Tax System and Proposal reform “, Southern Africa Resource Watch, Media Edition Paul, Kinshasa, 2015
  • Emile Lambert Mende OWENGA ODINGA, Mining Law Volume I “General Mining Regime for Mines and Quarries”, July 2014
  • Georges Bokundu and Claude Kapemba, Southern Africa Resource Watch “Crossing Borders: Natural Resources Conflicts in the Democratic Republic of Congo and its Neighbors: Angola and Uganda”, 2015
  • Law-Net Course: Promulgation and Publication: Conditions of Law Enforcement
  • Dieudonné KALUBA DIBWA, “Constitutional Justice in the Democratic Republic of Congo”, Editions Academia-Harmattan s.a
  • (1) Law-Net Course: Promulgation and Publication: Conditions of Law Enforcement

LEGAL IMPACT OF THE NEW MANUAL EXCHANGE REGULATION IN THE DRC

In the Democratic Republic of Congo, the manual exchange sector is an old activity most used by individuals, who are engaged in the transactions of buying and selling foreign currencies against the national currency and vice versa. Currency trading is a widespread phenomenon that comes from the monetary instability experienced by the country in 1993. It should be noted that this situation was accentuated by the political upheavals in 1990 which led to the tremendous consequences on the economies and more particularly on banking systems. In other words called “Changers”, these individuals’ purchases and sales foreign currencies against the national currency and buy and sell in cash foreign currencies against other national currencies other share. For several decades, this growing activity has been carried out in the absence of any specific applicable regulation likely to eradicate the legal and operational risks denounced several times by the banking institutions, the consumers, the public authorities and other actors evolved in this market. The Central Bank of Congo, according to its missions especially to elaborate the regulations concerning operations on foreign currencies; has established a specific regulation that governs all manual exchange activities in the relationship between manual money changers, consumers and the control authority.

In the Democratic Republic of Congo, the manual exchange sector is an old activity most used by individuals, who are engaged in the transactions of buying and selling foreign currencies against the national currency and vice versa. Currency trading is a widespread phenomenon that comes from the monetary instability experienced by the country in 1993. It should be noted that this situation was accentuated by the political upheavals in 1990 which led to the tremendous consequences on the economies and more particularly on banking systems. In other words called “Changers”, these individuals’ purchases and sales foreign currencies against the national currency and buy and sell in cash foreign currencies against other national currencies other share. For several decades, this growing activity has been carried out in the absence of any specific applicable regulation likely to eradicate the legal and operational risks denounced several times by the banking institutions, the consumers, the public authorities and other actors evolved in this market. The Central Bank of Congo, according to its missions especially to elaborate the regulations concerning operations on foreign currencies; has established a specific regulation that governs all manual exchange activities in the relationship between manual money changers, consumers and the control authority.

Key words: manual exchange, regulation, prudential rules, operational risks, changers.

By Gaby Kabue Kayombo, Managing Partner of RightsEmpower

Introduction

The manual foreign exchange market is a very popular activity that has evolved several decades without regulations in order to determine the obligations and relationship between operators, consumers and the control authority involved in this business. It is so quiet to mention that the lack of prudential rules applicable to the manual exchange, has made operators, commonly called “Changers” to operate the activity according to their subjective rules which led most of them to act malicious, for instance, grant of loans to individuals with high interest rate, organize the fund deposits on behalf of their customers, carry out transfer fund abroad, importing and exporting bank notes, making large-scale currency exchange transactions per day, etc. It should be noted that the manual money changer’s behavior are considered as an encroaching on the activities of the commercial banks, and in other hand, the wrongdoing cause economic and financial difficulties to the financial institutions.

Effectively, sort out the multiple legal and operational issues caused in the manual exchange sector, as well as ensured the good functioning of manual exchange operations between the stakeholders involved in matter, the Central Bank of Congo, established the administrative instruction n ° 007 for regulating the manual exchange activity.

The purpose of this article consists to identify the key general and specific provisions that organize operating of manual foreign exchange activities on the national territory.

In this approach it will be a question of examining the relevant points addressed by the new regulation, in particular: (1) the legal status of manual money changers; (2) the scope of the foreign exchange activity; (3) the classification of manual money changers; (4) the rules for creating Bureau de Change or manual changer; (5) restrictive activities; (6) the obligations of  Bureau de Change and manual changers; etc.

Scope of the activities of the manual money changers

The manual money changers are authorized to buy and sell foreign currency in cash against the national currency (Congolese francs) and to buy and sell foreign currency in cash against other foreign currencies (art 3).

Legal status of manual money changers

The manual money changers are individuals or corporates congolese, other than credit institutions that carry out, as their usual profession, manual exchange transactions. With regard to this administrative provision, we can bring out three legal attributes, cumulative recognized to manual money changers:

■ be an individual or corporate under congolese law

■ practice the profession in usual way

■ do a manual exchange transaction

The new regulations related to manual foreign exchange activities set up the requirements before operating an exchange activity. Firstly, manual money changers must be the individuals or commercial enterprises legally registered under OHADA law. Secondly, individuals or companies must operate the business without interruption. Thistly the operation must be a manual exchange transaction, in other words they must make manual exchange a unique activity.

Categorization of manual changers

Administration instruction No. 007 subdivides three types of manual changers. They can subscribe to practice their profession as:

  • Bureau de Change of the first category or national level which enable to operate the profession of manual exchange throughout the national territory.
  • Bureau de Change of the second type or provincial level which enable to operate the profession of manual exchange within the limits of province.
  • Manual changers carry out their activities within the limits of their province of domiciliation regardless of the category of Exchange Offices to which they are affiliated.
Constitution of Bureau de Change or manual changer

The regulation of Central Bank of Congo imposes the requirement for manual money changers, to be constituted in Bureau de Change or manual changer, and these must be affiliated to the Bureau de Change.

Bureau de Change

In this option the Bureau de Change operates as:

Corporate

As a corporate, the Bureau de Change must fulfill the following conditions:

  1. Register as a limited liability company

Manual Changers which would like to open the Bureau de Change must constitute under the form of a Limited Liability Company (LLC), in accordance with the OHADA law related to commercial companies. This is to comply with the conditions of substance and form.

Bureau de Change must obtain an operating license (RCCM), the National Identification Number, the Tax Number, the INPP, the INSS, show notarial statutes, demonstrate the proof of the existence account in national currency and / or in foreign currencies opened with the financial institutions approved in the name of the applicant; etc.

2. Approval obtaining

Regulation specifies that the first and second type of the Bureau de Change must address the letter of application for approval of the central bank of Congo.

This letter will be accompanied by the following evidence:

  • copy of original of notarial statutes;
  • proof of deposit statutes at the clerk’s office of the Commercial Court
  • certified copy of license
  • certified copy of the National Identification Certificate;
  • proof of accounts in national currency and / or in foreign currencies open with financial institutions;
  • CVs and criminal records at least three months old from the promoters and persons in charge of the administration and management of the Bureau de Change.

Applicant for obtaining approval is required to pay 3% of the deposit for file review.

Once application for approval received, the Authority has 90 days to examine. Whether the deadline expired, it supposed that the authority has approved the application. (art 11).

3. Payment of the deposit

In case the Central Bank of Congo gives a favorable opinion on the application for approval, the applicant is required to pay the deposit and approval fees as follows:

For the deposit:

  • 2500 USD for first type or national level of Bureau de Change.
  • 1500 USD for second type or provincial level of Bureau de Change.
  • 150 USD for Manual changers

For the manual fees:

  • 20% of the deposit of each type.

However, the deposit paid to the Central Bank of Congo is not remunerated. The Central Bank of Congo might reimburse the deposit in currency in case of ceasing of activities. In addition the supervisory body will deduct any sums due to Treasury. But, the regulation does not demonstrate the elements that will be taken into account to make this deduction.

It should be noted that the opening of branches allows to the payment of deposit fees (3%).

Manual changer

In this category the manual changer carries out the activity as:

Individual

As an individual, the Manual changer is required to fulfill the following conditions:

  1. Approval obtaining

In this type, the applicant must send the letter of application for approval to the Governor of the Central Bank of Congo.

The letter must be accompanied by the following elements:

  • proof of the authorizations of the competent authorities for the operating of commercial activity (declaration of activity at the Registry of the Commercial Court, subject to the license);
  • proof of accounts in national currency and / or in foreign currencies opens with financial institutions;
  • CV and criminal records less than three months old from the applicants.
  • proof of affiliation to the Bureau de Change by the transmission of the affiliation agreement.

Bureau de Change and Manual changer are not allowed:

  1. carry out the operations of buying and selling in cash the foreign currencies against the national currency, either buying and selling in cash the foreign currencies against other foreign currencies for an amount exceeding 10.000 USD or the equivalent in another foreign currency by person per day;
  2. make deposits for the accounts of their customers;
  3. make transfers abroad;
  4. import or export banknotes;
  5. grant loans to their customers;
  6. manual currency traders individuals are not allowed to affiliate to more than one Bureau de change.
Obligations of Bureau de change and manual changer

The Bureau de Change, as a corporate are bound by certain obligations in foreign exchange transactions, such as:

  1. immediately seize the National Financial Intelligence Unit and the Central Bank of Congo through its Financial Intermediaries Department for any transaction deemed suspicious;
  2. collecting and photocopy the identities (address, photo) of the customers carrying out the exchange operations;
  3. keeping proper accounts that can present the summary statements in accordance with the Congolese General Chart of Accounts;
  4. prepare daily statements of exchange transactions according to the predefined models;
  5. transmit to the Central Bank of Congo, not later than the 7th day of the following month, a consolidated monthly statement by currency of the sales and purchases of the currencies made;
  6. reporting to the Central Bank of the Congo the cases of non-transmission of the unconsolidated monthly statements by currency of sales and purchases of currencies made by their affiliates;
  7. seizing against discharge and transmit to the Central Bank of Congo by a circumstantial note any false currency presented;
  8. displaying the legalized copies of the deed of approval and opening authorization of the Bureau de Change and its branches in the premises where the exchange activities take place;
  9. reproducing on each document or correspondence of the Bureau de Change the approval and authorization numbers for opening the branches our teller;
  10. organizing as a professional corporation;
  11. submitting the statutes of the corporation for the approval of the Central Bank of Congo.

Manual changers are bound to the following obligations:

  1. sending to their respective Affiliation Exchange Offices, not later than the 2nd day of the following month, the consolidated monthly statements by currency of the sales and purchases of currencies made;
  2. affiliating with Bureau de Change;
  3. organizing as a professional corporation;
  4. submitting the statutes of the corporation to the approval of the Central Bank of Congo.
Conclusion

Manual change regulation is cornerstone legal tool that governs manual change trading activities between changers and consumers involved in the manual exchange market across the country. Prudential regulatory measures help to fight against money laundering and the financing of terrorism. This regulation defines the obligations of manual money changers vis-a-vis the supervisory authority and gives a large clarification related to the restrictive activities which they can’t afford in operating of their manual exchange activities.

banking_online

THE REVOLUTION OF ELECTRONIC BANKING AND LEGAL RISKS IN THE DRC

The banking industry has undergone exponential technological effects that have revolutionized the business and changed consumer habits in the Democratic Republic of Congo as well as in the world. The emergence of e-banking, otherwise known as online banking, has brought countless benefits to consumers by offering faster and cheaper transactions. However, it poses legal problems that require speedy regulation of technology to solve the problems that arise in financial transactions between consumers and banks.

By Gaby Kabue Kayombo, Managing Partner de RightsEmpower

 

Introduction

Certainly, at actual time a digital revolution that results in the powerful breakthrough of the Internet is experienced in the relationship between banking institutions and consumers. Studies on the digital revolution show that the banking sector occupies the 2nd position, or 32%, after High Technology in the digital transformation. Banks were among the first to adopt new technologies, however a number of major innovations, for example online payment services, mobile money and electronic money came from non-banking institutions including telecommunication and internet companies (2016 World Bank World Development Report “Abridged Digital Dividend”). In addition, the 2014 Global Findex database report reveals that between 2011 and 2014, 700 million people opened an account with a bank, a financial institution or a banking service provider from their mobile phones. These statistics amply prove the positive consequences of the innovations that contributed to the development of the sector and the proliferation of banks around the world.

The electronic banking service offers fast, easy and permanent access to remote financial services, including checking the balance, bill payments, transfer of funds, application or individual blocking of cards in case of loss and possibly changing your password, downloading bank statements, printing bank statements, loading multi-beneficiary files, communicating securely with your manager from the mailbox[1], placing an order for online checkbooks and transfer order books, online application for the payment of a check, consultation of your outstanding loans, your deposits and your portfolio of domiciled bills of exchange, consultation of exchange rates and interest, currency converter etc. And access to these services is done without the client necessarily having to resort to face-to-face or physical contact with bank staff. It has enabled bank customers to save waiting time and travel to the counters to reserve them only for cash transactions. It should be noted that e-banking offers more efficient services and at a much better price, for example, a transaction costing about $1 in a traditional agency, or $0.60 on the telephone, costs only $0.02 online[2].

In the context of the DRC, the banking sector has become a competitive market with more than fifteen commercial banks operating there, and technological progress is one of the factors of the market revolution.

Trend of the electronic bank in DRC

Indeed, the electronic banking in other words “remote banking or Internet banking” continues to impact the financial market in the DRC like in other countries around the world. As a competitive sector, no bank is exempted from the online banking service; they intensify their services through the creation of websites, the establishment of electronic counters: ATM (Automated Teller Machine) in shopping centers, petrol stations, university institutions, bank headquarters, etc. Other banks are mobilizing computer infrastructures such as laptops on the desks in their offices to offer electronic self-service to customers. The creation of mobile applications is another explosive technological process of the digital age that has revolutionized the business of banks, the proliferation of bank cards (MasterCard, VisaCard, prepaid cards, etc.) offering services such as payments, withdrawals and credits and also allowing cardholders to securely conduct online transactions. Each bank or network of banks holds its own card labels. Banks attach considerable importance to the expansion of Internet service in their services that present an ambitious and innovative future of their economic and financial activities.

By way of example, the Commercial Bank of Congo, one of the former reference banks in the Democratic Republic of Congo since 1909, set up an IT and telecommunication department with the mission of making available to the bank the computing in its entirety and also to put in place medium-term strategies and directly to daily operationality. In order to meet the standard of the technological era, BCDC plans to optimize its continuity in digitalization with desktop publishing software and a very advanced e-learning software.

This is also the case of RawBank, which has in its structure an IT and Digital Banking Department which is a strategic support for the bank[3]. For the latter, the majority of products and services are accessible on the mobile and customers can consult anywhere. The evolution of e-banking is a real challenge for banks to target and attract customers by offering them an easy-to-use, affordable and accessible service.

In a survey conducted by RightsEmpower Law Firm & Consultancy, particularly by its Online Banking department, from commercial banks operating in the Democratic Republic of Congo, a bank agent who remained anonymous told us that customer attendance at branch offices has dropped drastically by 36% in recent years. However, in most cases, agencies counters remain an essential security route for obtaining cash and salaries for state officials. And banking is today the way by which the State does pay the agents of the political institutions, the Public Administration, the Police, the Army, the Security Services, the teachers, the Doctors, the Magistrates, etc[4].

The evolution is also seen in the electronic payment of certain bills of service providers such as electricity, water, airtimes, etc. But, it is obvious to say that this way of payment is not yet intensively used in the DRC compared to the growing countries in ICT (South Africa, Kenya, Nigeria, etc.).

Legal issues of the emergence of electronic banking in DRC

In spite of innumerable innovations in the banking sector, we should note that technological progress has also given rise to new legal challenges, which both the regulatory authorities and the legislature need to monitor and ensure control.

  1. Challenge of virtual banks

The boom of Internet has allowed all organizations in the world to deliver services across borders. E-banking uses technology that, by its very nature, is designed to extend the virtual geographic reach of banking activities without the need for a similar physical presence of institutions. Such expansion of banking markets across national boundaries is already a major prudential issue for enhancing cross-border cooperation between supervisors[5].

It is in this perspective that banks’ services are of great economic and financial importance, use the Internet to offer remote services to consumers. In any case, this issue is an important legal challenge that is currently being posed for the digital transformation.

In the Democratic Republic of Congo, banks are one of five categories to which the regulation on credit institutions applies. Under the law on credit institutions in Congo, before a bank engages in activities on the national territory, it must first obtain the approval of the Central Bank[6]. In addition, it must be incorporated as a commercial company for the purpose of carrying out deemed commercial acts in accordance with the texts relating to commercial companies (OHADA).

However, nowadays, several banks are using the Internet device to evade the established regulatory and control conditions. They can simply and easily contract via the Internet and offer services in any discretion. And the big legal question that arises is how the Central Bank as a supervisory body, can force those banks that offer their services remotely over the Internet outside Congolese territory to obtain the accreditation and incorporation into commercial companies in Congo? Existing banking regulations do not provide an explicit answer to this question. In other words, the existing laws are not adapted to the innovations of Technology that the banking industry is exponentially experimenting in order to regulate and control the services provided by it. Paradoxically, existing laws are insufficient to trace the origins of electronic services that are provided. The supervisory body of the banking sector must imperatively reflect and make necessary recommendations for new laws that can be adopted to address aspects of virtual banks.

  1. Challenge of unauthorized payment transactions

Internet banking services have generated innumerable risks of unauthorized payment transactions and fraud in the daily lives of consumers, which requires special vigilance of the supervisory and control body. The consumers of the electronic services of the banks daily experiment these risks, for which sometimes the internal legal texts are silent and limited to overcome them. In practice with these Internet banking services, it can be seen that the consumer can complain to a bank that has made unauthorized payments.

The problem of unauthorized payment transactions is frequent and very experienced by consumers. It is generally considered as the consequence of a technical malfunction of the bank or the negligence of the user who has stolen the credit card. In fact, in all cases of the stated figures, the consumer suffers enormous damage that requires establishing the responsibilities of the consumer and those of the bank.

However, the existing banking legislation should expressly define the responsibilities between the two parties (consumer and bank) when one of the parties is the victim of misappropriation of electronic instruments. Some Western legislation have already extensively reserved legal solutions arguing that in the event of unauthorized payment, a sharing of responsibility is required, generally favorable to the consumer whose payment instrument was diverted. This implies that he can get the refund of the misappropriated sum, under deduction[7]. But the case law is severe with consumers, it argues that the cardholders require the intervention of the bank, however the bank refuses to compensate them, believing that they would have committed serious negligence by leaving the card to be stolen. In this same approach, Nicole L’Heureux and Louise Langevin in their book entitled “Payment Cards: Legal Aspects” assert that in a lawsuit involving the responsibility of a consumer following an unauthorized transfer, the financial institution is presumed responsible unless it proves that the electronic transfer of funds was authorized[8].

Despite the internal procedures established by some commercial banks on unauthorized payment transactions, the supervisory and control authority (Central Bank of Congo) will have to establish a regulatory framework that establishes the challenge mechanisms for a payment transaction unauthorized or poorly executed.

The rules deriving from such an instrument would be a good directive with the objective of establishing a common legal framework enabling the establishment of a genuine single market for payment services applicable to all banks and capable of dealing with the relations between service providers and their customers[9]. In addition, such a measure would be a device for the legal protection of consumers against bank risks incurred in financial transactions.

  1. Theft of confidential information through electronic banking

The security of confidential information relating to online banking is a keystone for access to the electronic banking service of a consumer. It is an element that determines the relationship of trust between the customer and the bank. It is for this reason that banks provide security measures for the security of their customers’ confidential data in order to protect them against theft. However, despite the degree of security provided by banks for the protection of confidential information, nothing reassures the absolute protection of the identity of consumers[10].

The phishing rate (phishing is a term used initially to describe attacks using an email and designed to steal your credentials from your online banking account[11]) is very high worldwide. A study shows that banks rank first, a rate of 25.76% of cases, whose customers were victims of phishing attacks around the world in 2016[12]. Far from plunging into the legal debate that divides the doctrinaires about alleged theft as a fraudulent subtraction of a material good and information theft theory as immaterial good[13]. It is important to consider the fact that caused harm (theft) to the consumer.

In those days, the DRC does not have abundant case law on unauthorized payment transactions, as the subject of ICTs has not yet undergone legislation adapted to technological progress that the world is experimenting with.

  1. Challenge of money laundering

Money laundering is a very old illicit practice endangering economic and financial systems, the negative consequences of which have forced states to set up legal mechanisms to combat the global scourge.

However, it should be noted that money laundering has intensified with the expansion of e-banking. Electronic banking preserves anonymity; once an account has been opened, the bank cannot determine whether the nominal holder is carrying out an operation, nor where the operation is taking place[14]. Banking regulations in the DRC require credit institutions to verify the identity and address of their customers before opening an account or booklet, to warn of securities or warrants before granting a safe or to establish any other business relationship[15].

Of course, the country has put in place a favorable legal framework to combat money laundering, but given the rapid technological progress, it is appropriate that a reform of the law on money laundering be initiated with a view to integrating new legal mechanisms adapted to technological progress that exacerbate money laundering activities.

Recommendations

The e-banking revolution poses new challenges for regulators and supervisors in the banking sector. And to meet these challenges, they must draw on the five pillars below.

Reform: The speed of technological progress and its scale in the banking sector is growing so much that existing and applicable banking laws are becoming more and more obsolete to deal with the multiple issues and operational risks posed by the expansion of the electronic banking. Currently, the traditional banking laws in the DRC are those applicable to electronic banking. And these laws can’t absolutely overcome the problems that arise. To remedy this, the legal texts of the banking sector must undergo a reform to try to make disappear or minimize the risks brought by the electronic bank. At this stage, a new reform must be undertaken by the authorities to improve the framework of the exercise of the activity of the electronic bank. Today, the legal framework of e-banking is governed by Law No. 003/2002 of 02 February 2002 on the activity and supervision of credit institutions, and Instruction No. 24 on the issuance of electronic money and electronic money institutions. A legal text that does not include aspects of e-banking. Hence the imperative need to initiate the strategy of legal and regulatory reform in this sector to have a law adapted to technological developments in the banking industry in DRC. It should be noted that a new law that incorporates e-progress aspects can manage the legal risks that would arise from the relationship between the bank and consumers of e-services.

Legalization: The emergence of the internet has led to the use of new processes, instruments and service providers whose legal nature is not yet defined in most legal texts in the DRC. This is the case of the “electronic signature”. It is an effect of the electronic age and an inescapable legal process in the activities of electronic banks. Existing laws applicable to banking activities in the DRC do not define the electronic signature, its recognition, its effects and its legal conditions. However, the legal scope of the electronic signature has been progressed in other countries such as Belgium since its laws of 20 October 2000 and 9 July 2001[16]. In the same perspective, the legal nature of the concept of “electronic banking” in the DRC should be given.

Integration: The Central Bank of Congo, as the supervisory and control body for banks in the DRC, must have a policy that integrates technology, information and communication into the assessment of operational risks in order to assess the level of security issues on confidential data. However, supervisors can examine how a bank’s management has developed its business plan for e-banking. It is essential that the banking regulators set up a compliance plan for the electronic banks to which they must comply.

Adaptability: The technological progress experienced in the banks cannot leave the Central Bank unaware of its role as bank supervisory authority, to ensure that its employees have the technological skills required to monitor and assess the evolution of risks in the sphere of electronic banking. The BCC will have to make training and capacity building of these agents mandatory to upgrade. However, an investment in computer hardware and software must be taken into account.

Harmonization: E-banking is a question of globalization, economic and financial liberalization that all nations are experimenting with. The Central Bank must make the harmonization of legal and regulatory texts applicable to electronic banking a priority. It must make this issue a keystone for intensifying cooperation with the regulatory and supervisory authorities of banks at the international and regional levels in order to take inspiration from the legal advances initiated in the electronic banking activities in other horizons. 

Conclusion

E-banking is a lever for important economic and financial development of the digital age. The innumerable technological innovations made have contributed to the improvement of the quality of the services of the banking industry. However, e-banking carries new potential legal and operational risks that require a vigilant eye of the public authorities. These risks constitute a major legal challenge for the regulatory authorities to adapt, reform and harmonize the legal and regulatory texts relating to them, with a view to minimizing the risks of electronic banking to consumers and also protecting the state against virtual banking practices.

Bibliography

  • Article 8 of Law No. 04/016 of 19 July 2004 on the fight against money laundering and the financing of terrorism, DRC.
  • Article number 10 of the Law n° 003/2002 of 02 February 2002 related to the activity and control of credit institutions in DRC.
  • 2016 Annual Report BCDC (Commercial Bank of Congo).
  • 2016 RawBank Annual Report.
  • Saleh M Nsouli and Andrea Schaechter,”The challenges of” electronic banking “, 2012.
  • Kombo Ngbuka « Problematic of banking the payroll of the agents and civil servants of the State in Bas-Uele ».
  • Michel Alglieta (professor at the University of Paris X) and Laurence Scialom (professor at the University of Lille II) “Risks of electronic money”,
  • Hervé Jacquemin: Security breaches for online banking: What does the consumer risk?,
  • Nicole L’Heureux et Louise Langevin“Payment Cards: Legal Aspects “, The Presses of the University of Laval, Sainte-Foy, 1991.
  • The new rules for the operation of Payment Services: Mini-guide-banks, 2009.
  • P. Morgan, “Protecting against & recovering from identity theft”.
  • Pieter Danhieux, The monthly newsletter for user awareness “Phishing Attack”, February 2003.
  • https://fr.statista.com/statistiques/688959/phishing-organisation-attaque-victimes-monde/
  • Mohamed CHAWKI: Theft of information: what legal framework today? Right-Tic, July, 2006.
  • Laurent GUINOTTE, Lawyer and assistant at U.LG. “Journal of the Courts“, December 14, 2002.

Legal Notice: This publication is not to be construed as a legal opinion of a lawyer or firm. Readers are encouraged to consult with our lawyers for appropriate legal advice on the law relating to their business

         © RightsEmpower 2018. All rights reserved

[1] 2016 Annual Report BCDC (Commercial Bank of Congo)

[2] Saleh M Nsouli and Andrea Schaechter,”The challenges of” electronic banking “, 2012.

[3] 2016 RawBank Annual Report

[4] Kombo Ngbuka « Problematic of banking the payroll of the agents and civil servants of the State in Bas-Uele ».

[5] Michel Alglieta (professor at the University of Paris X) and Laurence Scialom (professor at the University of Lille II) “Risks of electronic money”, 2002.

[6] Article number 10 of the Law n° 003/2002 of 02 February 2002 related to the activity and control of credit institutions in DRC.

[7] Hervé Jacquemin: Security breaches for online banking: What does the consumer risk?, 2015.

[8] Nicole L’Heureux et Louise Langevin “Payment Cards: Legal Aspects “, The Presses of the University of Laval, Sainte-Foy, 1991.

[9] The new rules for the operation of Payment Services: Mini-guide-banks, 2009.

[10] J.P. Morgan, “Protecting against & recovering from identity theft”.

[11] Pieter Danhieux, The monthly newsletter for user awareness “Phishing Attack”, February 2003.

[12] https://fr.statista.com/statistiques/688959/phishing-organisation-attaque-victimes-monde/

[13] Mohamed CHAWKI: Theft of information: what legal framework today? Right-Tic, July, 2006.

[14] Saleh M Nsouli et Andrea Schaechter, idem.

[15] Article 8 of Law No. 04/016 of 19 July 2004 on the fight against money laundering and the financing of terrorism, DRC.

[16] Laurent GUINOTTE, Lawyer and assistant at U.LG. “Journal of the Courts“, December 14, 2002.

 

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Telecom operators facing Technology evolution

Telecom operators facing Technology evolution: Challenge of new regulatory requirements in DRC

The telecommunication industry is moving with a breakneck speed and unparalleled in its history across the planet. It continually touches all aspects of social, economic and financial life. Many households in developing countries have a mobile phone, though without access to electricity or water, and nearly 70% of the population in developing countries has a cell phone. In the DRC, nearly 49% of population have a telephone. Certainly, telecommunication has affected the way of doing business, and has imposed a new ecosystem of building the experience of humanity. Prestigious innovations exacerbate the needs of consumers, which strongly encourages mobile and Internet operators to invest in a competitive path and play their pivotal role in the development of new digital markets. The rapid technological progress in the telecommunication sector in DRC is a real challenge for the public power, which is being asked to adopt a new regulation adapted to the unlimited innovations of the digital era in the DRC.

 By Gaby Kabue Kayombo, Managing Partner de RightsEmpower

Introduction

The progress of digitization has completely transformed the telecommunication sector, whereby we can notice that the relationship between different technologies is becoming closer and closer. The digital economy is expanding in the Democratic Republic of Congo. With nearly 30 million mobile subscribers, there are many business opportunities. New Information and Communication Technologies (NICTs) have thus become an engine of economic growth and jobs, a key element in the evolution towards emerging market status of the DRC. Beyond the mineral resources traditionally recognized as a powerful vector of the country’s economy, there is no doubt about the shadow and several statistics show that the telecommunication and ICT sector has also become one of the most profitable and a lever for economic growth whose contribution to GDP amounted to 15% in 2016.

In the DRC, we count four mobile operators: Vodacom Congo, a subsidiary of Vodacom South Africa and a subsidiary of Vodafone with 33% market share. Then Orange DRC, second operator in the market with 30% of share; Airtel DRC represents 23% of the market share and Africell DRC, a subsidiary of the Lebanese group Lintel Holding, with 13% of the market share. In addition to mobile operators, there is also an increased number of Internet service providers such as Iburst, Comax, Afrinet, Global Broadband Solutions, Microcom, Inet, Africanus SPRL, etc. These also experience technological, organizational and commercial innovations of services and business models.

For most of these telecom operators, innovations also bring significant operational and organizational disruption but above all, those innovations encourage “competition” they are now engaged in for the unique purpose of maintaining and increasing the base of their customers by offering rate discounts for Internet or national and international calls, interconnection costs or rather offering several other offers (per-second rate, introduction of instant messengers, etc.). Telecom companies have leveraged their strong customer portfolio to position themselves at the heart of new digital services, such as homeland security, transportation, entertainment and financial services.

What are the innovations of the telecom sector?

Before addressing the legal issues raised by the innovations that operators are experiencing, we start by identifying the key innovations that have revolutionized telecom services in the DRC.

  1. Mobile money service

The mobile money service is a lightning innovation that has inevitably marked the experience of telecom operators. A concept (innovation) well designed and adapted to the needs of consumers to offer concrete solutions to the daily problems of consumers. It is an innovation that has grown rapidly in financial transactions and offers enormous potential for economic growth in developing countries. The e-money service continues to gain ground not only in DRC but also in most of Central and Eastern African countries. The benefits of this innovation are demonstrated even in other parts of the world as it allows the use of mobile phones in commercial transactions for wider access to financial services for instance electronic money transfer, and even to a fringe of unbanked populations living in the most remote areas of regions.

In Africa, the concept was tested for the first time in Kenya through the mobile operator Safaricom, under the M-Pesa label. Launched in 2007, the service only provided money transfer; and in 2009 the service already offered the payment of certain domestic services (“kenya power” electricity). In 2011, there was progress with international money transfer operations. Then in 2012, investment and lending services were introduced (M-Shwari). In 2013, M-Pesa innovates with the merchandise payment service (Lipa M-Pesa). Later in 2017, a digital application was launched.

In the DRC, M-Pesa was launched in 2012 by the mobile operator Vodacom Congo. In 2016, M-Pesa has more than 2 million subscribers across the country. Very well received by the Congolese, this concept knows an expansion for financial transactions through the mobile phone to the unbanked people residing in the remote regions of the country where the financial institutions are almost non-existent due to the problems of basic infrastructures. Innovation has not only been about solving the financial transaction challenge, but it has also led to other economic markets such as the creation of small and medium-sized enterprises (SMEs), the solutions offered by the mobile phone facilitating the payment of bills from domestic service providers including electricity, prepaid cards, salary, gratuities, television subscription cards (Canal +), and even the possibility of paying for products in some supermarkets.

The mobile money service has spread to other telecoms companies operating in the DRC, such as Airtel, which offers this service under the Airtel Money label and Orange under Orange Money.

However, financial transactions for bill payments and product purchases in supermarkets are still very limited. It would be beneficial for this mechanism to extend it to other companies such as Régideso, Sonas, etc. And this would avoid consumers going to the traditional ticket offices to pay their bills.

Despite the innumerable benefits of innovation, the mobile money service presents operational risks that will be demonstrated in following points.

2. Cloud computing service

Cloud computing is a sophisticated innovation in the 21st century digital age. In simpler terms, cloud computing is the access via a telecommunication network, on demand and self-service, to configurable shared computing resources. This is a relocation of the IT infrastructure. It provides services that individuals and communities can exploit at will from anywhere in the world.

The Cloud Computing Service offers a simplified IT model that enables governments, international organizations, private institutions and businesses around the world to no longer need to invest heavily in computing resources and infrastructure that are necessarily limited and require internal heavy and expensive management. Today they have the choice to migrate to a Cloud Computing model where they can buy or rent online resources. This model saves them the costs of internal management since IT resources are managed at the level of the cloud provider.

The cloud computing service has characteristics that offer it a different scope to other technologies namely: first, cloud users do not own the computer resources they use. The servers they use are hosted in external data centers. Secondly, services are provided according to the pay-per-use or subscription model. Tertio, the services that are provided to the customers are virtual and shared by several users and finally, the services are provided via internet.

However, the cloud computing service presents innumerable legal risks that will be pinned in this study.

a) Big data

Big data or mega data (massive data), is a very favorable technological innovation for telecom operators. It refers to a very large set of data that no conventional database management or information management tool can really contain.

Indeed, every day the world generates about 2.5 trillion bytes of data. This could be information from everywhere: messages that we send, videos we publish, weather information, GPS signals from mobile phones, messages on social media sites, digital images and videos posted online, transactional records online and many more. The giants of the Web, first and foremost Yahoo, but also Facebook and Google were the first to deploy this type of technology.

Big data has emerged as one of the important issues related to the development of new technologies within companies. It is considered as the engine of innovation, customer satisfaction and achieving greater profit margins.

Big data is based on four pillars of the solution: mass storage, information exploitation, research and visualization, and the exploitation of information on the fly. Big data technology enables telco operators to process, use and exploit a real-time data flow that flows through their networks, with the aim of gaining a better understanding of the consumption patterns of their customers, allowing them to offer more personalized packages and offers. In addition, they value their data by selling to third parties on data markets.

Telco operators are among companies that store and deliver very large volumes of data. So big data is a technology that allows them to improve the efficiency and performance of their activities.

b) Mobile applications

By Mobile applications (Apps), we mean downloadable and executable programs from an operating system of a mobile phone or tablet. A mobile application can have a marketing (service/advertising) or commercial (e-commerce) vocation.

The exponential outbreak of mobile applications has not only created considerable opportunities in the mobile network operators’ economic market but also disruptions.

The development of applications on smartphones (Android, Apple or Windows) is now essential for telecommunication companies to conquer new markets and maintain their visibility. These operators do realize smartphone and iPhone / iPad applications to present their company, their products and services by offering to their subscribers tailor-made offers such as: streaming (music and videos), video calls, photo sharing, online shopping, online banking, etc.

Google, Amazon, Uber, Airbnb, Facebook and Whatsapp are currently world-famous mobile apps that have revolutionized the business market.

Mobile applications give autonomy to their users, they are currently making mobile phones real gates to access the online world. A new wave of Smartphone applications stimulated by broadband networks is bringing social networks into action. And innovation allows mobile phones to transform people’s living ecosystems in both developed and developing countries. Apps did not only empower individuals, but also spurred growth, entrepreneurship (start-up), and productivity across the entire economy. Mobile apps have become a digital indicator of business performance and competitiveness. Apps enable accessibility and SEO of a company.

We should note that mobile applications have created problems that still fall outside the existing telecommunication legislation, especially in DRC.

c) Digital marketing

Digital marketing is an irrefutable step forward in the current digital age that mobile network operators and consumers are experimenting to the limit. It aims to use all interactive digital tools to promote products and services in the context of personalized and direct relationships with consumers. It concerns all points of digital contact: Internet, smartphones, tablet. It is a technological process that has changed the deal on how to advertise products and services. It is no longer a question of necessarily relying on traditional media such as radio, television, billboards, leaflets… But thanks to mobile telephony, thousands of advertisements are broadcast digitally. Digital marketing is faster, cheaper, participatory, engaging and interactive with consumers through the use of the Internet.

Operational risks and legal issues of technological innovations in DRC

  1. Electronic theft of funds.

The mobile money service has generated a wide range of operational risks for consumers. The typical case is that of M-Pesa, Airtel money or Orange money service with a number of subscribers currently estimated at nearly 5 million across the country. There is a systematic electronic theft of funds that is done through these electronic money services in the DRC. We met some victims who revealed to us that there are indeed networks of electronic thieves operating on behalf of mobile operators. How do they carry out these thieves? They start by giving a call to the subscriber, to inform him that he has won a bonus. In this scheme, they then ask the consumer (uninformed) to provide the digital data of his M-Pesa, Orange or Airtel money and once these codes are delivered, the electronic funds theft is operated.

The legal questions that can be asked are: How can the existing legal framework on telecommunications solve the case of digital theft of funds? How to establish criminal responsibilities? Admittedly, the existing laws applicable to the telecommunications sector are almost out of date and obsolete to respond to such risks as a result of technological evolution.

  1. Insecurity, fraud, loss and theft of personal data

While Cloud Computing and Big Data have advantages as demonstrated above, however, these two innovative technologies that have revolutionized the IT ecosystem of companies also present legal risks, including insecurity, fraud, loss and theft of personal data. These two processes present risks that are increasing in the pooling of servers and the relocation of these. And access to the service requires a secure connection and user authentication; there may be a management problem of identifiers and that of responsibilities (unauthorized access, loss or theft of identifiers). The risks highlighted can not necessarily find the legal answer in the existing telecommunication laws. The loss of control by the customer over the data they have given to a third party in a cloud computing environment may give rise to specific problems because of the geographic dispersion of data across multiple processing centers. This new context requires Congolese lawyers to make provisions to best protect the interests of one another.

  1. Violation of intellectual property rights

The rise of new technologies, and in particular mobile applications, has inflamed the problems of legal uncertainty generally experienced in the intellectual property law. This is the tangible case of mobile applications where consumers engage in the use of personal data for various purposes that violate copyright. However, the use of a mobile application and the processing of personal data of the users possibly collected by the download is not to be taken lightly. Many times users of mobile applications, seizing not only confidential information or business secrets, but also personal data of the author. The financial loss caused by these violations, in terms of loss of income and compensation to the wronged perpetrator, is often considerable, amounting to tens of millions or even billions. Paradoxically, the existing Congolese law on intellectual property is not adapted to answer digital legal questions including the publication of an idea (mobile application) on an online store and for example the transfer of copyright on the code of this application.

  1. Fraud, incompatibility and disloyalty of digital advertising

Nowadays, most online advertisements are fraudulent, incompatible and unfair. In a Google study, in partnership with Facebook and other players in the web and online advertising, new policies are announced to fight against the click fraud, these advertising impressions artificially generated by robots that distort the traffic estimations. Especially in e-commerce, the majority of merchandise advertised online does not reflect the goods as presented. It goes without saying that incompatibilities of online advertising are much reported regarding good lives and morals. These online advertisements escape the norms of conformity even national and international.

Today in DRC, the Ordinance-Law No. 41-63 of February 24, 1950 on Competition and Ordinance No. 97-327 of October 15, 1955 on Advertising are over and obsolete to regulate the legal issues of digital advertising as well as the competition that reigns there.

Conclusion

Like other African countries, in the DRC, the telecommunications and ICT sector is booming, so that mobile operators are experimenting unprecedented technological developments in the market. The impressive growth of the mobile phone network has led to rapid technological progress, which challenges the decision-makers and regulatory authorities to endow the country with new regulations in the telecommunications and ICT field. Technological constraints recommend that they adopt as soon as possible a new regulatory approach that takes into account the new context of digital technology in order to protect consumers against operational risks such as electronic theft, loss, theft and fraud on confidential data generated by new technologies. Existing telecommunications laws are inadequate and outdated to ensure security, confidentiality of data and protection of personal data. The new law adapted to the challenges of the digital age could contribute to and anticipate the new governance requirements of new services such as Cloud computing and Big data, provided that they are already regulated and operational in most markets in African countries. In the same perspective, the new regulation will have to be attractive and incentive for the foreign and national investments to the contribution of the economic growth.

Bibliography

  • Framework Law No. 013-2002 of 16 October 2002 on Telecommunications in the DRC.
  • Law No. 82-001 of 7 January 1982 on Intellectual Property3.
  • Legislative Decree 97-327 of October 15, 1955 on outdoor advertising.
  • Legislative Decree 41-63 of February 24, 1950_Competition.
  • Legislative Decree No. 86-033 of 5 April 1986 on the Protection of Copyright and Neighboring Rights.
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  • Mariam Abdullahi, « Télécoms « les opérateurs à l’épreuve de l’innovation »,
  • Myriam Karoui, Grégoire Davauchelle et Aurélie Dudezert, « Big Data : Mise en perspective et enjeux pour les entreprises ».
  • Hervé Reynaud : « Le Big data : Quels enjeux pour les opérateurs ? ».
  • Banque Mondiale, « Exploiter au maximum la téléphonie mobile Abrégé « Information et communications au service du développement », 2012.
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  • Enerst & Young « La propriété intellectuelle à l’ère du numérique » : Défis et opportunités pour le secteur Médias et Divertissement, 2011.
  • Louis Adam, « Pub en ligne : Google s’élève contre la fraude au clic », 2015.
  • Banque mondiale « Dividende numérique abrégé »,2016.

Legal Notice: This publication is not to be construed as a legal opinion of a lawyer or firm. Readers are encouraged to consult with our lawyers for appropriate legal advice on the law relating to their business.

© RightsEmpower 2018. All rights reserved

 

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