DRC JULY MONTHLY ECONOMIC REVIEW

UNCLAS SECTION 01 OF 02 KINSHASA 001261 SIPDIS SIPDIS DEPT FOR DRL/IL-LHOST AND AF/RSA-MHARPOLE E.O. 12958:N/A TAGS: ECON EFIN ENRG ELAB EAIR EMIN ETRD PGOV CG SUBJECT: DRC JULY MONTHLY ECONOMIC REVIEW Summary -------------- ¶1. (U) Summary. - The DRC banking sector is slowly increasing services, with the first ATM, Master Card and mobile phone banking capabilities becoming available in July. - The Energy Vice Minister ordered an audit of Cohydro, the DRC's petroleum parastatal. - National railway employees are on strike to demand payment of nearly two years' salary arrears. - Interest in the Katangan mining sector continues to increase. South African Kumba Resources is in discussions with Gecamines, the Congolese mining parastatal, to relaunch a zinc/lead/silver mine. An Israeli-owned company, Nikanor, has raised millions of dollars of capital to develop its copper and cobalt mining projects. - The IMF announced the launched of its informal Staff Monitored Program (SMP) with the DRC. - The GDRC submitted its Poverty Reduction Strategy Plan to the IMF and World Bank and produced a revised 2006 budget, which contains a deficit. - According to Post's market basket survey, June consumer prices increased by 2 percent. End summary. Aviation -------------- ¶2. (U) July 31, the Director of the DRC's Civil Aviation Authority granted Northwest Airlines a code-share with Air France flights between Kinshasa and Paris, effective in September. BANKING -------------- ¶3. (U) The ProCredit Bank, a German-run financial institution that operates in the DRC and in 18 other developing markets, has installed the first ATM machine in Kinshasa at its bank here. ¶4. (U) In Kinshasa, Rawbank, a Congo-based commercial bank, launched a Master Card for its clients' use. Rawbank is the first financial institution in the DRC to offer this service; however, few merchants accept payment via credit card in the DRC. ¶5. (U) Cellular service provider Vodacom launched a new service called TOP-UP in cooperation with Celpay, a company which Celtel, Vodacom's chief competitor in the DRC, spun off in 2005. This service allows users with Internet access, a 64K SIM card and a bank account, to pay bills and withdraw cash from participating businesses. Celpay currently has agreements to extend this service to the clients of three commercial banks in the DRC. Energy -------------- ¶6. (U) The Vice Minister of Energy (member of the political opposition party FCI) requested that the Cour des Comptes, the DRC's audit body, examine Cohydro, the DRC's petroleum parastatal. The audit is allegedly in response to mismanagement by Cohydro's management, including its CEO who is a member of another political faction, MLC. Labor -------------- ¶7. (U) SNCC (the DRC's national railroad company) employees at Ilebo Port on the Kasai River in Western Kasai went on strike to claim 22 months of salary arrears, and subsequently all SNCC employees followed suit. Ilebo is a key transit point in the interior for food and consumer goods; the strike has therefore resulted in increased consumer prices because of reduced supplies. Mining -------------- ¶8. (U) According to contacts in the mining sector, Gecamines (a Congolese mining parastatal) is negotiating with Kumba Resources to relaunch joint-venture operations at Kipushi, a zinc/lead/silver mine in Katanga province. Anglo American, a British-South African KINSHASA 00001261 002 OF 002 diversified mining company, is Kumba's majority shareholder. The project's other partner, First Quantum, is listed on the Toronto Stock Exchange and on London's AIM. ¶9. (U) Nikanor, Israeli investor Dan Gertler's holding company, has raised several hundred million dollars following its public tender on the London Stock Exchange's Alternative Investment Market (AIM). Media reports say that this tender is AIM's largest to date. Nikanor says that it will use the capital to develop its copper/cobalt mining projects in Katanga in joint-venture with Gecamines. Public Finance and Taxation -------------- ¶10. (U) The International Monetary Fund (IMF) confirmed the establishment of an informal "Staff Monitored Program" (SMP) with the DRC following the March 31 lapse of the formal IMF Poverty Reduction and Growth Facility (PRGF) program. The SMP will run at least through the end of 2006, requiring of the DRC the same conditions of structural reform and macroeconomic stability as under the PRGF. The IMF expects to send a team to the DRC to evaluate progress under the SMP in October and again at year's end or in early 2007. ¶11. (U) The Congolese Minister of Planning, Delly Sesanga, announced in mid-July the GDRC's approval and adoption of its Poverty Reduction Strategy Paper (PRSP),following an extended round of consultations with donor country, civil society, and multilateral lending institution representatives. The GDRC presented the document to the IMF and World Bank as the DRC's social and economic development roadmap for 2007-2011. ¶12. (U) The Ministries of Finance and Budget recently unveiled the DRC's revised 2006 budget. The new budget reflects a deficit of USD 70 million. This is due primary to the loss of an estimated USD 40 million of Central Bank foreign exchange reserves' support and USD 180 million of foreign budget assistance, as the result of the unsuccessful conclusion of the IMF PRGF program. The GDRC trimmed the overall budget by some $30 million (from $2.1 billion to $2.07 billion),increased estimated government revenues from 43% to 47% of the overall budget and decreased projected government spending. All external debt payments have been slashed from the budget, despite the fact that Paris Club members suspended debt forgiveness following the collapse of the IMF program. The Ministries of Budget (www.minsteredubudget.cd) and Finance (www.minfinrdc.cd) have begun posting budget information on their websites. CONSUMER INFLATION RATE -------------- ¶13. (U) Post's market-basket survey indicates an inflation rate of 2 percent in July, due primarily to increases in the cost of maize and manioc, the staple foods of the DRC. Exchange Rates -------------- ¶14. (U) Week ending 7/07 7/14 7/21 7/27 CENTRAL BANK RATES: 449 456 458 458 PARALLEL MARKETS: KINSHASA 455 465 479 470 LUBUMBASHI 450 450 450 450 MBUJIMAYI 455 460 460 465 KISANGANI 450 460 460 N/A MATADI/BOMA 450 460 460 N/A GOMA/BUKAVU 460 465 470 N/A