DRC: New Law on Subcontracting in the Private Sector Is Not Without Problems

July 19, 2017

The Democratic Republic of Congo adopted Law No. 17/001 on 8 February 2017, regulating subcontracting in the private sector. It entered into force on 17 March 2017, with a one-year transitional period.

In adopting these “rules applicable to subcontracting between natural or legal persons governed by private law,” the Congolese government seeks to “promote small and medium-sized enterprises (SMEs) with Congolese capital, to protect the national labor force” (article 1).

The new legislation defines subcontracting as “a service contract, consensual, onerous and written.” In civil law, a service contract is an agreement entered into by the contractor and the contractor’s client to perform an agreed service, in return for remuneration.

The law establishes incompletely — and sometimes oddly — certain rules for subcontracting activities in the private sector and restricts, with limited exceptions, subcontracting to Congolese enterprises. According to the law and the motives included in the draft law adopted by the Congolese National Assembly, the legislation’s purpose is, most notably, to promote SMEs with Congolese capital and to promote Congolese employment. However, the law very likely would create real issues, damaging the investment climate and the business climate in general, and consequently, have a negative impact on the country’s growth and development.

Subcontracting of more than 40 percent of the overall value of a contract is now prohibited. This actually may result in less subcontracting, producing a negative commercial effect on the small and medium-sized enterprises the law aims to promote. Contractors may be less inclined to tender for larger projects, as they will not be able to subcontract much of the work and may end up with too many projects and not enough resources to complete them effectively. As a result, this law may encourage cartels of subcontractors, which is, of course, illegal.

Further, certain provision of the law could deprive contractors from an efficient recourse against subcontractors for reasons of defects or bad workmanship.

Because of the law, Congolese SMEs may view subcontracting as too complex and formal a process and decide not to participate, which again would render the law ineffective.