DRC MAY MONTHLY ECONOMIC REVIEW

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 -------------- ¶1. (U) Summary -------------- - 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. -------------- IMF Staff Monitored Program -------------- ¶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. -------------- Labor: Strike Threats Abound -------------- ¶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 KINSHASA 00000890 002 OF 003 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. -------------- Mining -------------- ¶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. -------------- Intellectual Property -------------- ¶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. -------------- Energy -------------- ¶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. -------------- Public Transport -------------- ¶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. -------------- KINSHASA 00000890 003 OF 003 Aviation -------------- ¶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. -------------- Inflation Up Slightly -------------- ¶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. -------------- Congo Franc Depreciates -------------- ¶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. -------------- Exchange Rates -------------- ¶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