Assessing Geopolitical Risks in Central Africa: Implications for Commodity and Infrastructure Investments

The Democratic Republic of the Congo (DRC) remains a paradox in global investment circles. A nation endowed with 70% of the world's cobalt reserves and critical copper deposits, it is also a cauldron of geopolitical instability fueled by Islamist-linked rebel groups like the Allied Democratic Forces (ADF). Over the past year, ADF-related violence has escalated, exacerbating a humanitarian crisis and disrupting supply chains for minerals central to the global green energy transition. For investors, the DRC's strategic importance is inextricably tied to its volatility, creating a high-stakes environment where resource wealth and risk collide.

The ADF's Shadow: Security and Investor Sentiment

The ADF, an Ugandan Islamist group operating in the DRC's eastern provinces, has intensified attacks on civilians and infrastructure, displacing over 7 million people since 2023. These disruptions have not only destabilized communities but also eroded investor confidence in the region. Foreign direct investment (FDI) in 2024 reached $3.11 billion, a 21% annual increase, driven by mining and energy projects. However, this growth masks underlying fragility. The ADF's presence has forced mining companies to divert resources to security measures, raising operational costs and deterring long-term capital. For example, U.S.-owned Africell faced over 25 arbitrary taxes and passport seizures during tax disputes, illustrating the unpredictability of doing business in the DRC.

The mining sector, particularly cobalt and copper, is especially vulnerable. Artisanal and small-scale mining (ASM), which accounts for 30% of cobalt production, has been severely disrupted by ADF-related displacement. While ASM remains more agile than industrial operations, its reliance on local labor and informal networks makes it a prime target for exploitation by armed groups. Meanwhile, industrial miners like Glencore face logistical bottlenecks as roads and transport hubs in conflict zones become increasingly unsafe.

Commodity Supply Chains Under Strain

The ADF's instability has created cascading effects on global supply chains. Cobalt, a key component in lithium-ion batteries, saw prices surge by 40% in early 2025 following the DRC's four-month export ban. This volatility underscores the DRC's outsized influence on the market. However, the ban also highlighted the government's limited capacity to enforce policy. Smuggling through neighboring countries like Uganda and Rwanda has surged, with over 90% of DRC gold now leaving through unofficial channels. Similar patterns are emerging for cobalt, undermining formal supply chains and government revenues.

The situation is further complicated by China's dominance in the DRC's mining sector. Chinese firms control 70% of industrial cobalt mines, and their operations are often shielded from the full impact of ADF-related disruptions. This creates a fragmented market where Chinese players maintain stability while local and Western firms bear the brunt of volatility. For investors, the risk premium on DRC-related commodities has widened, with cobalt futures trading at a 15% premium to spot prices in 2025—a reflection of both supply constraints and geopolitical uncertainty.

Emerging Market Risk Premiums: A Double-Edged Sword

The DRC's instability has elevated risk premiums across Central Africa. Emerging market bonds from the region now trade with spreads of 8–10% over U.S. Treasuries, compared to 5–6% in 2023. This reflects not only the DRC's own challenges but also spillover effects from regional conflicts, including the resurgence of the M23 rebel group. Investors in infrastructure projects, such as power plants and roads, face compounding risks: political instability, currency depreciation, and the potential for conflict to disrupt construction timelines.

The DRC's Central Bank has attempted to stabilize the economy by maintaining a 25% policy rate, the highest in sub-Saharan Africa, and enforcing a de-dollarization strategy. While inflation has eased from 24.89% in late 2023 to 10.5% in early 2025, these measures have not quelled investor skepticism. Sovereign debt from the DRC carries a speculative-grade rating, with a “B-/B” outlook from international agencies. For portfolio managers, the trade-off between high yields and elevated geopolitical risk requires careful hedging.

Strategic Recommendations for Investors

Navigating the DRC's risks demands a nuanced approach. Here are three key strategies:

1. Diversify Supply Chain Exposure: Investors in electric vehicle (EV) and renewable energy sectors should prioritize cobalt and copper suppliers with diversified sourcing. For example, companies like Tesla and Glencore have begun sourcing from Indonesia and Australia to mitigate DRC-specific risks.

2. Leverage Political Risk Insurance: Multilateral institutions like the World Bank's MIGA and private insurers offer coverage for expropriation, political violence, and currency inconvertibility. For infrastructure projects in the DRC, securing such insurance is critical to managing ADF-related disruptions.

3. Engage in Long-Term Diplomacy: Investors should advocate for regional stability initiatives. The U.S. and European governments have proposed minerals-for-security frameworks to counter ADF threats, but their success depends on sustained diplomatic engagement. Supporting peacebuilding efforts in the DRC's eastern provinces could yield both geopolitical and financial returns.

Conclusion

The DRC's resource wealth and instability present a unique challenge for global investors. While the country's cobalt and copper reserves are indispensable to the green energy transition, ADF-related violence and governance weaknesses create a volatile backdrop. For those willing to navigate these risks, the DRC offers high-reward opportunities—but only for those who approach it with caution, diversification, and a long-term perspective. As the world races to decarbonize, the DRC's role in global supply chains will only grow, making its stability a critical factor for both commodity markets and regional security.