By Jonny Hogg

KINSHASA, March 12 (Reuters) – Democratic Republic of Congo’s future remains uncertain following contested elections last November which were marred by violence and widespread fraud.

Official results gave incumbent leader Joseph Kabila victory in the presidential poll on Nov. 28, after which he vowed to focus on improving the country’s infrastructure following decades of corruption and successive wars which ended in 2003.

International observers said the results “lack credibility” and the influential Catholic Church accused the government of “treachery, lies and terror”, potentially undermining Kabila’s new term.

His PPRD party lost more than 40 percent of its seats and after more than three months no new government has been appointed.

The death of Kabila’s closest advisor Augustin Katumba Mwanke has deepened the sense of uncertainty amongst the country’s political class.

Here are some factors to watch:

POLITICS

President Joseph Kabila came to power after his father was assassinated in 2001, and comfortably won November’s single round elections with 49 percent of the vote.

His PPRD party won 63 of the 500 seats in the 500-seat National Assembly, down from 111 in the 2006 vote, meaning he will have to cobble together a coalition from a plethora of other parties.

The death of Katumba Mwanke in a plane crash earlier this year has deprived Kabila of his closest advisor and a key dealmaker with the various factions within his political movement.

Chief rival Etienne Tshisekedi’s UDPS party came second with 41 seats. The veteran opposition leader rejected the poll, declared himself president and called for a boycott of parliament.

The elections have been widely criticized by international observers, citing evidence of irregularities and fraud.

The country’s performance under Kabila has been lacklustre: it lies at the bottom of the U.N. Human Development Index and investors say it is one of the world’s most challenging for business.

What to watch:

– Security crackdown. The disputed polls sparked a strong response from security forces, with Human Rights Watch saying at least 24 people were killed by police and military after the results were announced. The authorities faced fresh criticism after using tear gas to disperse a march organised by the influential Catholic Church. Analysts warn of a more repressive government as Kabila tries to stamp out dissent.

– Tshisekedi? Under heavy guard in his Kinshasa residence, he seems unable to mobilise the population or rally international support for his cause. There are suggestions of talks between the opposition and government but it remains unclear if either side will compromise.

– Forming a government may prove tricky and time-consuming with so many different actors jockeying for position. Meanwhile, there are growing fears of a power vacuum.

– Cracks may appear in the coalition without Katumba Mwanke’s presence, although some believe his death could give Kabila an opportunity to assert himself.

– International ties. Kabila’s relations with Western donors have been strained by his controversial victory, although regional partners including South Africa have backed his re-election and China may increase its influence.

– The security forces will be crucial to Kabila’s political survival and remain largely loyal, although the UN warned in a report in December of divisions following a controversial restructuring in the east.

THE ECONOMY

Despite achieving 7 percent growth in 2011, Congo’s economy remains fragile and heavily reliant on outside help. After securing debt relief in 2010, the country’s external loan commitments fell to $2.9 billion. The government has been praised for its efforts to stabilise the economy and is hoping to receive the latest payments in a $550 million IMF loan deal after belatedly publishing mining contracts as part of an internationally-backed transparency programme.

The official leading interest rate sits at 20 percent whilst annualized inflation is 16.06 percent, although the rate jumped sharply at the beginning of 2012 after a chaotic implementation of a new value-added tax pushed market prices up.

Sustained economic growth is vital to a country where 80 percent of Congo’s 67 million people live on less than $2 a day, and 75 percent of the working population is unemployed, according to the World Bank.

What to watch:

– Global markets. Congo is aiming for 6.6 percent economic growth in 2012, with Finance Minister Matata Ponyo saying this could be revised up after a strong start to the year.

– Congo is hoping to access the latest tranche of the IMF loan having finally published mining contracts as part of a deal to improve governance of natural resources. However contracts from the forestry and oil sectors have yet to be made available, undermining claims of improved transparency.

– Donors disappointed with elections may take a tougher line with the government before disbursing funds.

INVESTMENT CLIMATE

Congo is the sixth worst place to do business out of 183 countries ranked by the World Bank, and analysts say that political uncertainty could further unnerve investors.

What to watch:

– The country has so far avoided serious electoral violence but investors are waiting to see what Kabila’s new government will look like.

– Audit of Gecamines contracts. State-run miner Gecamines says it plans to fund a near-$1 billion expansion in part by auditing its joint-venture partners to ensure it is “getting all its dues”. The plan could put Gecamines, a former mining heavyweight created by authoritarian leader Mobutu Sese Seko after independence in 1960, on a collision course with joint-venture partners like Freeport McMoRan and Glencore-owned Katanga Mining.

– Asset sales. A number of Congolese mining assets have been sold to fund the Gecamines revamp but the firm has said no more will be put on the block, despite still needing cash.

– Efforts to trace “conflict minerals”. Trade is down and smuggling up in eastern Congo, the United Nations has said, amid confusion over the details of U.S. legislation aimed at increasing traceability. Due diligence programmes have been successfully implemented in some areas.

– Congo’s nascent oil sector. French Oil giant Total has taken a share in another eastern oil block near Virunga. After buying into a block in the west, Italian major Eni would also like oil blocks in the east.

– Analysts have warned of “semi-nationalisation” of the agriculture sector after the government passed a law in December saying all agri-business must be majority Congolese owned.

SIMMERING CONFLICTS

Thousands of people have fled across the border into Uganda because of fresh fighting in the east, where rebel groups continue to roam. The U.N. has warned a controversial re-structuring of the army which favoured some ex-rebels in return for electoral support, could lead to splits and increased support for armed groups.

Despite numbering only an estimated 2,500 fighters, the Rwandan Hutu FDLR rebels continue to target civilians, with at least 45 people, mainly women and children, killed since the beginning of the year. Several other rebel groups including the former pro-government Mai Mai militia, LRA and Islamic ADF-NALU fighters still operate in Congo’s eastern provinces.

Attempts to break links between the Congolese army and illegal mining have only been partially successful, with several key figures, including former CNDP rebel Bosco Ntaganda, implicated in smuggling.

What to watch:

– Restructuring of regiments in the east of the country has favoured those close to Ntaganda according to some, and has led to desertions and insecurity.

– U.N. peacekeepers. The world body renewed its mandate in June and U.N. Secretary-General Ban Ki-Moon has been quoted as saying that significant peace-building challenges remain. But following his victory, Kabila may push for withdrawal.

– LRA threat. The United States has agreed to send 100 troops to the region to help tackle the rebels, leading to hopes of improved security. A massive internet campaign by NGO Invisible Children could increase pressure to capture LRA leader Kony, although poor relations between regional countries including Uganda continue to hamper efforts.

– Ethnic tensions. The elections rekindled historic tensions between ethnic groups in the Kivu provinces and also Katanga, Kabila’s heartland and the neighbouring Kasai provinces who back Tshisekedi. – Intervention from neighbours. Relations with neighbouring Uganda and Rwanda have warmed but remain fragile. Meanwhile analysts say latent tensions with Angola remain due to a row over ownership of oil rights. (Editing by Karolina Tagaris)
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