UNCLAS SECTION 01 OF 03 KINSHASA 000890

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 MAY MONTHLY ECONOMIC REVIEW


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1. (U) Summary
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- IMF team visits DRC to put a Staff Monitored Program (SMP)
in place and to assess situation since the end of the PRGF
program.

- DRC public hospital physicians launch a general strike
while some government enterprises face possible strikes.

- DRC Minister of labor and head of the DRC's main trade
union attend the ILO meeting in Geneva.

- UK/SA company buys 20 percent of DRC state diamond mining
company; First Quantum International opens Katanga
affiliate.

- GDRC Council of Ministers approves a degree to create a
public agency for copyright protection.

- SEP-Congo denounces damage to and robbery of petroleum
products from its fuel pipeline.

- Asea, Brown, and Bovery (ABB) Group wins contract to bring
electricity to the Kasai provinces.

- City of Kinshasa launches a public transport company.

- DRC Airport Authority introduces the Global Navigation
System (GNSS) in Kinshasa and Lubumbashi.

- The Congolese franc depreciates slightly, and the
inflation rate rises.

- Central Bank takes action to counter depreciation and
inflation trends.

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IMF Staff Monitored Program
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2. (U) The IMF's Poverty Reduction and Growth Facility
(PRGF) for the DRC lapsed on March 31, 2006. An IMF team
from Washington was in Kinshasa May 27 to June 1 to work out
with Congolese authorities final details on the
establishment of an IMF Staff Monitored Program (SMP).
Discussions about the creation of an SMP began during the
recent spring IMF/WB meetings in Washington. The SMP, which
will remain in place for a minimum of six months, gives the
DRC the opportunity to continue to receive IMF technical

support as it seeks to show progress in macroeconomic
stability and structural reform sufficient to negotiate a
new formal IMF program, ideally before the end of 2006.

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Labor: Strike Threats Abound
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3. (U) Congolese physicians launched a general strike in
Kinshasa's public hospitals on May 8, and were providing
only minimum and emergency services. The doctors have
demanded a wage increase and the payment of salary arrears.
On May 29, SYNAMED, the doctors' union, raised the strike to
the next level by reducing provision of minimum services to
two of eleven hospitals in the capital on a rotating daily
basis. Patients who entered the eleven hospitals before the
strike began will continue to be treated. SYNAMED says that
the next step, possibly as early as the week of June 5, will
be to further reduce minimal care. The union has threatened
drastic action if no resolution is reached within two or
three weeks, and speculation is that this would be a
complete work stoppage.


4. (U) On May 8, the employees of ONATRA, the state river
and railroad transport company, threatened a 48-hour strike
unless they were paid their salaries for the months of March
and April 2006. On May 30, 12,000 thousand employees
nationwide, represented by 25 unions, obtained a salary
increase of USD 20 per month. The action union said that
the increase was insufficient and threatened to call for
another strike.


5. (U) On May 10 and 11, employees of the Ministries of
Finance and Budget threatened to strike for a wage increase

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claimed since January 19, 2006 by the six unions
representing the workers.


6. (U) On May 11, the employees of the Independent Electoral
Commission offices in Mbandaka, Gemena, and Gbadolite
demonstrated and then sacked their offices to claim payment
of their salary arrears.


7. (U) On 12 May, former employees of the state mining
company GECAMINES, terminated 13 years ago and expelled to
their native provinces of Kasai, demonstrated in Mbuji-Mayi,
to claim payment of their severance pay.


8. (U) On May 22, employees of the DRC state electricity
company SNEL in Kisangani threatened a strike to obtain
payment of two months of salary arrears.


9. (U) Mr. Balamage Nkolo, DRC Minister of Transport and Mr.
Symphorien Dunia, the President of the Confederation
Syndicale du Congo (CSC), the leading trade union, are
attending the International Labor Organization (ILO)
conference from May 31 to June 16 in Geneva. The GDRC did
not fund participation in the conference by delegates from
three other leading unions due to lack of resources. The
CSC was funded for this conference by its Belgian partners.

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Mining
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10. (U) Mwana Africa, a mining company registered in the
U.K. with a branch in South Africa, bought the 20 percent of
shares of MIBA held by SIBEKA, a Belgian company. MIBA is
the Congolese state diamond mining company based in Mbuji-
Mayi.


11. (U) First Quantum International, a Canadian mining
group, opened a new affiliate, Frontier Mining, in Sakania,
Katanga province, near the DRC - Zambia border.

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Intellectual Property
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12. (U) At the Council of Ministers meeting of May 22-23,
the GDRC approved a draft decree to create a public agency
for copyright protection. The agency will be called the
National Office for Copyright Management, (ONADA). It is
expected that this agency will replace the current SONECA.
The SONECA chief told Econ FSN that further discussions will
be held at the Ministry of Culture and Art prior to
finalizing this decree.

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Energy
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13. (U) SEP-Congo, a state enterprise that specializes in
the storage and transport of petroleum products, has
denounced the looting of petroleum products from its fuel
pipeline between Matadi and Kinshasa.


14. (U) The Asea, Brown, and Bovery (ABB) Group has won a
contract to transmit electricity from the Inga-Shaba power
line for distribution in the two Kasai provinces of central
DRC. Despite their large populations and location along the
power line that links the hydroelectric plants of Inga with
the copper industry in Katanga, East and West Kasai
provinces have drawn no electricity from the line in the
past. Total project costs are estimated at USD 140 million.

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Public Transport
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15. (U) The Kinshasa Mayor's Office, with funding provided
from the central government, is acquiring more buses for
public transport. Meanwhile, the GDRC is starting up a new
public transport company, called the Urban Transport Company
of Kinshasa (STUK), using buses donated by the Indian
government. Beginning with about 200 buses, one company
official estimated that the city needs at least 2000 buses
to adequately serve its population.

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Aviation
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16. (U) The DRC Airport Authority (RVA) has launched a
Global Navigation System for air traffic control. The
system will first be used at the country's two largest
airports, in Kinshasa and Lubumbashi.

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Inflation Up Slightly
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17. (U) Post's market-basket survey indicates an inflation
rate of 2.6 percent for the month of May. The year-to-date
inflation now stands at 3.0 percent. This latest jump in
inflation is due primarily to increases in transportation
costs. Gasoline costs rose recently from 441 Congolese
francs per liter (USD 3.75 per gallon) to 460 Congolese
francs per liter (USD 3.90 per gallon) and, despite GDRC
price controls on the cost of bus trips, drivers have
shortened their routes, making passengers transfer more
often and pay multiple fares.

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Congo Franc Depreciates
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18. (U) The Congolese franc depreciated by 2.5 percent
during the last weeks of May 2006, partly due to the
resumption of high levels of public finance expenditures in
April. (Public expenditures and salary payments, now made
preferentially in Congolese francs, were at low levels
during the first quarter of 2006 while the 2006 budget was
still being finalized and promulgated.)


19. (U) In response to the depreciation of the Congolese
franc and higher inflation for the month of May, the Central
Bank of the Congo (BCC) injected USD 6 million from its
reserves onto the exchange market and it increased the
interest rates on the credit market from 25 percent to 28.5
percent. Bank Governor Masangu said that he hoped that
these actions would reduce the amount of Congolese currency
in circulation and calm in the exchange market.

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Exchange Rates
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20. (U) Week ending 4/29 5/5 5/19 5/31

CENTRAL BANK RATES: 439 440 450 446
PARALLEL MARKETS:
KINSHASA 435 440 450 450
LUBUMBASHI 440 445 445 425
MBUJIMAYI 440 440 445 445
KISANGANI 440 440 440 440
GOMA 440 450 450 450
BUKAVU 440 450 450 450