ECONOMIC REPORT - AUG 28 THROUGH SEPT 3

UNCLAS SECTION 01 OF 02 KINSHASA 001669

SIPDIS

E.O. 12958: N/A
TAGS: EAID ECIN ECON EFIN EIND EINV EMIN ENRG ETRD CG
SUBJECT: ECONOMIC REPORT - AUG 28 THROUGH SEPT 3



1. Summary. Prices are stable with the exception of
food items, which registered a 7 percent increase.
Exchange rates remain stable. Adastra Minerals is
seeking to become a major metals producer in the
region. Bindura Nickel Corporation (BNC) and Gecamines
are in advanced negotiations for a joint nickel
production venture. The GDRC signed memoranda of
understanding with the governments of both Zimbabwe and
South Africa. The ICRC provided new pumps to Regideso
in Kisangani to ensure a supply of running water for
the city. The World Bank has approved the release of
USD 60 million for infrastructure and socio-economic
capacity building projects throughout the DRC.

MONETARY AND PRICE UPDATE


2. Prices remain stable aside from a significant
increase in food costs, which rose 7 percent for the
week ending on August 27. The cost increase may be due
to merchant price gouging in attempts to cover school
fees for the upcoming academic year. School fees
typically strain the budget of the average Congolese
household.


3. Exchange rates remain stable with bank rates
hovering at over FC 390 to 1 USD. Parallel market
rates remain within an FC 5 band above or below the
official rate. Rates in the eastern provinces remain
slightly elevated.

MINING

ADASTRA SEEKS TO EXPAND OPERATIONS, SIGNS WITH UMICORE


4. International press reported Adastra Minerals (aka
America Mineral Fields) COO Bernard Pryor as stating
that the company is seeking to become a major metals
producer in the region. The company has already signed
a joint venture agreement with Gecamines for a
copper/cobalt tailings project at Kolwezi, and recently
awarded the contract for the project feasibility study.
Adastra also reported that it has signed a long-term
supply agreement under which Umicore will purchase
cobalt to be produced from the Kolwezi project.
Additionally, Adastra is involved in a joint venture
with Gecamines to resume activity at the DRC's Kipushi
zinc mine, which has been closed for a decade but could
be operational again by 2006. Adastra intends to
extract zinc from Kipushi for processing in South
Africa.

BNC AND GECAMINES IN ADVANCED NEGOTIATIONS


5. International press reported that Bindura Nickel
Corporation (BNC) chairman Kalaa Mpinga said his firm
is finalizing a joint venture agreement with Gecamines
for a nickel production project in the DRC. BNC was
acquired last year by Mwana Africa Holdings and is
listed on the Zimbabwe Stock Exchange.

FOREIGN INVESTMENT

ZIMTRADE ABANDONS WAREHOUSE PROJECT


6. Local press reported that Zimtrade, Zimbabwe's
struggling parastatal trade promotion body, has
abandoned its plans to construct warehousing facilities
for Zimbabwean companies in the DRC. Several
Zimbabwean business ventures will reportedly be
jeopardized by the project's cancellation.

ECONOMIC COOPERATION

DRC AND ZIMBABWE SIGN MEMORANDA OF UNDERSTANDING


7. International press reported that the DRC and Zambia
have signed several memoranda of understanding relating
to commerce, energy, and mining. DRC Minister of
Regional Cooperation Mbusa Nyamwisi signed the
agreements with Zimbabwean Foreign Minister Stan
Mudenge. Specifically, the memoranda are intended to
improve road transportation between the two countries,
harmonize their mineral exploration operations, and
resolve a dispute over electrical power sold to
Zimbabwe by DRC energy parastatal SNEL.

DRC AND SOUTH AFRICA TO INCREASE COOPERATION


8. As part of South African President Thabo Mbeki's
attempts to safeguard the transition process in the
DRC, delegates from the two countries met during
Mbeki's recent DRC visit to discuss matters of economic
cooperation. Press reported that the meetings resulted
in the signing of an agreement on health matters, a
memorandum of understanding on economic cooperation,
and an agreement for the reciprocal protection and
promotion of investment.

INFRASTRUCTURE
ICRC PROVIDES PUMPS TO REGIDESO IN KISANGANI

9. The ICRC has delivered ten pump units to Regideso in
Kisangani to replace failing pumps installed in 1982.
The pumps will be used to filter and chemically treat
Kisangani's water supply. Installation of the pumps
will boost Regideso capacity and allow it to supply
nearly all of Kisangani's 600,000 residents with
running water.
AID

WORLD BANK APPROVES USD 60 MILLION GRANT


10. The World Bank approved the release of USD 60
million to aid demobilization, social capital building,
and infrastructure-related projects in the DRC. The
money will be distributed to provincial and local
government agencies and NGOs.


11. INFLATION BY CATEGORY (IN PERCENT)

WEEK ENDING 8/6 8/13 8/20 8/27
FOOD -1 -2 0 7
BEVERAGE 0 0 0 0
NON-FOOD 0 0 -1 0
CLOTHING 0 0 0 0
RENT 0 0 0 0
TRANSPORT 0 0 0 0
SCHOOL COSTS 0 0 0 0
UTILITIES 0 0 0 0
COMBINED FIGURES
WEEKLY INFLATION -0.2 -0.6 0.0 2.6
MONTHLY INFLATION -0.2 -0.8 -0.8 1.7


12. EXCHANGE RATE DEVELOPMENTS

8/6 8/13 8/20 8/27
CENTRAL BANK RATE 389.115 390.175 390.594 392.045
PARALLEL MARKET
-KINSHASA 385-390 385-390 385-390 390-395
-LUBUMBASHI 380-385 380-385 380-390 380-390
-MBUJI MAYI 380-385 385-390 385-390 385-395
-KISANGANI 375-385 375-385 380-390 380-390
-GOMA 400-410 400-410 400-410 400-410
-BUKAVU 400-410 400-410 400-410 400-410

MEECE