DRC SEPTEMBER ECONOMIC REVIEW

UNCLAS SECTION 01 OF 03 KINSHASA 001168 SIPDIS SIPDIS E.O. 12958: N/A TAGS: ECON EFIN EMIN ELAB EAIR PGOV CG SUBJECT: DRC SEPTEMBER ECONOMIC REVIEW ¶1. (U) Summary - New GDRC Aviation Commission Created - IMF and World Bank Teams in Kinshasa - IMF and World Bank Check on PRSP, HIPC Progress - Extractives Industries Transparency Initiative (EITI) - Lower Electricity Rates for Large Consumers - Ebola Epidemic Continues in Kasai Occidental - More Shooting, Deaths on Lake Albert - Ranks of Child Soldiers Swell - China and DRC Sign USD 5 Billion Agreement - Teacher's Strike Continues into Fourth Week - GDRC Employment and Vocational Training Strategy - GDRC Mining Commission Review of Contracts - Parliament Okays DRC-Angola Petroleum Agreement - Inflation and Exchange Rates Aviation -------------- ¶2. (U) New GDRC Aviation Commission Created Transport Minister Remy Katanga created a new Aviation Commission and directed it to put a system in place to control airlines, including licensing for employees of the aviation industry, within 60 days. On September 4 airlines using Soviet-era Antonov aircraft met with Katanga to request that they be allowed to continue using Antonov planes during the 60-day period. (Note: In the past 30 days there have been two crashes in DRC, both Antonov aircraft. End note.) IMF and World Bank -------------- ¶3. (U) IMF and World Bank Teams in Kinshasa International Monetary Fund (IMF) and the World Bank (WB) teams are in Kinshasa from September 18 to October 3 looking at the DRC macroeconomic and financial situation. The IMF team is preparing the way for possible negotiations in November to renew a formal economic program with the DRC, which would allow for much-needed debt forgiveness through the Heavily Indebted Poor Countries (HIPC) program. The GDRC has external debts totaling USD 11.5 billion as of end 2006, USD 4.6 billion to the multilateral lenders and over USD 6 billion to the Paris Club countries. The IMF team will deliver an end of mission report of their preliminary findings early the week of October 1. ¶4. (U) IMF and World Bank Check on PRSP, HIPC Progress One year ago, the IMF and WB approved the DRC Poverty Reduction Strategy Paper (PRSP). They are now assessing the implementation of the strategy, key to the eventual achievement of Heavily Indebted Poor Country (HIPC) completion point and debt relief. The IMF met with Planning Minister Kamitatu, Finance Minister Matenda, and Budget Minister Muzito to gain their perspectives on DRC macroeconomic status, growth, reforms, and investments during the period July 2006 through July 2007. The World Bank, which has some USD 1.7 billion in development funds in the pipeline for the DRC, has slowed the disbursement of these funds since the end of 2006 because of poor DRC structural reform performance and lack of adherence to pro-poor spending levels. Cooperation -------------- ¶5. (U) Extractive Industries Transparency Initiative On September 3, President Joseph Kabila signed a decree to modify and complete the DRC National Extractive Industries Transparency Initiative (EITI) Committee. Kinshasa's Civil Society Commission denounced the fact that the Presidency and the Ministry of Plan did not consult with them and suggested a meeting between the three entities. Electricity -------------- ¶6. (U) Preferential Electrical Rates for Large Consumers DRC Economy Minister Sylvain Tshamwala decreed preferential electricity rates for six large consumers, including two cement factories and two breweries, after canceling preferential rates for 40 other companies. The latter had apparently received preferential rates from the national electricity company, SNEL, without GDRC authorization. SNEL employees have long argued that preferential rates are detrimental to the parastatal and its workers and bad for the GDRC overall. SNEL workers held a work stoppage on September 14 to protest the practice. Energy Minister Salomon Banamuhere was not consulted in this decision by the Economy Minister and the matter has been turned over to a GDRC committee in charge of water and electricity pricing, which also includes a representative from the Ministry of Trade. ESTH Issues -------------- ¶7. (U) Ebola Epidemic Continues in Kasai Occidental The Ebola hemorrhagic fever epidemic, which began in April and was not acted upon until mid-August, continues to claim victims in the KINSHASA 00001168 002 OF 003 Kasai Occidental province of south-central DRC. CDC, WHO, Ministry of Health, and Medecins Sans Frontieres (MSF) personnel are on the scene between the towns of Mweka and Luebo and have set up a laboratory, isolation wards, and care/treatment centers near the village epicenter of the epidemic. Tons of materials, including personal protective gear and equipment to allow quick identification of the Ebola virus, have been flown to the area. Samples from suspected cases in southern Kasai Occidental, near the border with Angola, and in neighboring Kasai Oriental province are being analyzed and results should be available shortly. Epidemiologists hope to contain the spread of the highly lethal disease through a combination of testing, tracking, isolation, and public service announcements. Embassy Kinshasa has issued a disaster declaration and requested emergency funding for the USG response, which could last for months until there are no more new cases or fatalities. Humanitarian -------------- ¶8. (U) More Shooting, Deaths on Lake Albert Reports indicate that six civilians were killed when Ugandan soldiers opened fire on a Congolese passenger boat in the middle of Lake Albert, northeast DRC. Reports from Uganda say that two soldiers, one from each country, were killed in a dispute involving an oil exploration vessel on the lake. Lake Albert, along the DRC-Uganda border, has recently become the scene of petroleum exploration. UN peacekeepers verified that on September 24 they intercepted a Heritage Oil vessel that had strayed into Congolese waters, possibly leading to the later incident. (Note: See Kinshasa 1150 and Kampala 1490 for more information.) ¶9. (U) Ranks of Child Soldiers Swell The Christian Science Monitor reported on September 19 that recent fighting between ethnic militias, Rwandan rebels, and the DRC army has involved hundreds, perhaps thousands, of young boys and girls. Ethnic divisions and control of natural resources (cassiterite, gold, coltan, etc.) seem to be the driving factors behind this recent surge. Many of the children are being used to carry weapons and food for the soldiers. Investment -------------- ¶10. (U) China and DRC sign a USD 5 Billion Agreement DRC Public Works Minister Pierre Lumbi signed an agreement September 17 with Chinese Embassy officials that will reportedly provide USD 5 billion to the DRC for infrastructure (USD three billion for road, railway, health and housing) and mining sector joint ventures (USD two billion). No details of the agreement, including loan term and repayment requirements, have been released, but the loan would continue a pattern established during the Mobutu years, when large, high visibility projects such as Kinshasa's main stadium and the Parliament building were financed and constructed by the Chinese. Lumbi stressed that in addition to improved infrastructure the projects would create employment and business opportunities for the Congolese people. (Kinshasa 1133) Labor -------------- ¶11. (U) Teacher's Strike Continues into Fourth Week Public school teachers' unions SYSCO and SYNECAT met on September 22 and voted to continue their strike, begun September 3, until September 28, to give President Kabila the opportunity to accede to their wage demands. The teachers are demanding a minimum salary of USD 69/month, up to USD 690/month for the highest Ministry of Education civil servant position. Other DRC civil servants are now also threatening to strike for salary increases. (Kinshasa 1123) ¶12. (U) GDRC Employment and Vocational Training Strategy Prime Minister Gizenga opened an employment forum on September 18 as part of the DRC government's strategy to battle poverty and achieve sustainable development. He vowed to set up a new employment policy and new strategies for vocational training. Labor Minister Marie-Ange Lukiana said that only 4 percent (880,000) of the 22 million working-age people in the DRC are employed in the formal economy. The GDRC is taking this initiative in league with the International Labor Organization and the UN. Mining -------------- ¶13. (U) GDRC Mining Commission Review of Contracts The GDRC Mining Commission for the Review of Mining Contracts, established in June 2007, will not complete its investigation by the end of September as planned and may continue deliberations until year's end. DRC Mines Minister Martin Kabuelulu claims that the commission is functioning properly. The Catholic Church has announced that it may also sponsor a mining contracts review, reflecting the Congolese public's high expectations and desire for concrete benefits from the 60-70 contracts. Petroleum -------------- ¶14. (U) Parliament Okays DRC-Angola Petroleum Agreement KINSHASA 00001168 003 OF 003 The National Assembly passed a law ratifying the July 30, 2007 agreement between the DRC and Angola to jointly develop off-shore petroleum projects in the 10-kilometer-wide DRC zone between Angola proper and its enclave of Cabinda. Inflation and Exchange Rates -------------- ¶15. (U) The DRC economy continues with a slight inflationary trend. Post market survey shows an inflation rate of 1.4 percent for the month of September. The year-to-date inflation now stands at 19 percent. The inflation is likely due to scarcity of imported food in different cities. This is a consequence of the engorgement of Matadi port and low goods clearance procedures. Also, the beverage sector costs increased in anticipation of the exchange rate increase. Week ending: 8/3 8/31 9/25 Central Bank Rates: 495 495 498 Parallel Markets: Kinshasa 490 490 495 Lubumbashi 490 490 495 Mbuji-Mayi 495 500 505 Kisangani 495 500 505 Goma 495 500 500 Bukavu 495 500 500