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Cablegate: Economic Report - Aug 20 Through Aug 27

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 03 KINSHASA 001631

SIPDIS

E.O. 12958: N/A
TAGS: EAID ECON EFIN EINV ELAB ELTN EMIN ENRG EPET ETRD EWWT PGOV PREL CG
SUBJECT: ECONOMIC REPORT - AUG 20 THROUGH AUG 27

1. (U) Summary. Both exchange rates and prices remain
stable. Gravity Diamonds of Australia is planning a
joint venture with BHP Billiton for diamond exploration
in the Kasais. CHEMAF has resumed production at a Mine
de l'Etoile concession abandoned by Gecamines. The DRC
became a member of the African Trade Insurance Agency,
which provides import/export credit and investment
insurance. Perenco has purchased the DRC's offshore
oil concessions from Chevron-Texaco. Celtel launched
international roaming service in Europe, West Africa,
Asia, and the Middle East. Rehabilitation of two key
bridges linking Kinshasa to Bandundu province via
National Route No. 1 will begin before the end of 2004.
Matadi port workers threatened to strike due to rumors
of ONATRA cooperation in a DRC-Brazzaville bridge
proposal. End Summary.

MONETARY AND PRICE UPDATE

2. (U) Prices remain fairly stable, with only a slight
decrease noted in fuel prices. Agricultural items are
in plentiful supply on the Kinshasa market, with
commerce steady from Bandundu over the recently
repaired Mai-Ndombe bridge.

3. (U) Exchange rates remain stable, with bank rates
hovering around FC 390 to USD 1. Parallel market rates
are generally within FC 5 of the bank rate. Rates in
eastern provinces remain slightly elevated due to
continuing tensions.

MINING

GRAVITY DIAMONDS IN JOINT VENTURE WITH BHP BILLITON

4. (U) The Australian firm Gravity Diamonds plans to
explore the Kasai region of the DRC alongside BHP
Billiton. Gravity Diamonds has raised 10.8 million
Australian dollars (AD) from BHP Billiton and European
investors, and intends to raise another AD 9 million by
listing on Australia's Alternative Investment Market.
After the fundraising, BHP Billiton will own 9.6
percent of the company and outside investors will own
58 percent. Gravity Diamonds' parent company, Gravity
Capital, is listed on the Australian Stock Exchange.

CHEMAF BEGINS PRODUCTION AT MINE DE L'ETOILE

5. (U) Chemical of Africa (CHEMAF) has begun commercial
heterogenite mining operations on the Kalukuluku
concession, which was abandoned by Gecamines in July
2003. The concession is situated on the Mine de
l'Etoile near Lubumbashi, and is estimated to hold 15
million tons of ore. Current heterogenite production
is rated at 50-70 tons per day, but CHEMAF plans to
increase production to 350 tons per day. Local
artisanal miners had occupied the concession since
Gecamines' departure. (Note. VP Bemba was moving to
annul the contract signed by Gecamines, the Ministry of
Mines, and CHEMAF. However, no official annulation
decree has yet been issued. End Note.)

TRADE AND INVESTMENT

DRC JOINS AFRICAN TRADE INSURANCE AGENCY

6. (U) The DRC has become the eleventh member state of
the African Trade Insurance Agency (ATI). ATI was
established by the Common Market for Eastern and
Southern Africa (COMESA) in May 2000, and is the
continent's only multilateral import/export credit and
political risk insurance agency. Member states are
required to commit funds to ATI to compensate investors
who suffer losses as a result of political or economic
upheaval. ATI syndicates its covered risks among major
international insurance agencies.

PETROLEUM

PERENCO TAKES OVER DRC OFFSHORE DRILLING

7. (SBU) The French oil company Perenco has acquired
Chevron-Texaco's offshore drilling concessions in the
DRC. The deal requires GDRC approval before the
transfer of the title can be completed, but Chevron-
Texaco is no longer operating the concessions. Perenco
has been present in the DRC since 2000, and has already
acquired onshore concessions in East Banana, Mibale,
and Liawenda-Kinkasi. Chevron-Texaco will maintain its
presence in the DRC through its Kinshasa representative
office.

INFRASTRUCTURE

INGA PRIVATIZATION CONTROVERSY

8. (U) DRC Vice-Minister of Foreign Affairs Mbwinga
Bila was quoted in the press as stating that
electricity parastatal SNEL was "surprised" and
"unhappy" to hear that the South African firm Eskom had
formed a consortium with the Industrial Development
Corporation and SNC Lavalin of Canada to bid on the
repair and expansion of the hydroelectric facilities at
Inga I and Inga II. Bila also stated that SNEL's
unhappiness "is justified by the fact that they are not
a part of the consortium." SNEL reportedly has an
existing partnership with Eskom, though not one that
would preclude Eskom from pursuing development projects
in the DRC with other companies.

CELTEL LAUNCHES INTERNATIONAL ROAMING SERVICE

9. (U) Celtel, the second largest cellular operator in
the DRC, has launched a new international roaming
service after signing bilateral agreements with
numerous foreign service providers. Celtel customers
will now have access to cellular networks in much of
Europe, West Africa, Asia, and the Middle East.

TRANSPORTATION

BRIDGE REHABILITIATION TO BEGIN BY YEAR'S END

10. (U) Public Works Minister Jose Endundu announced
that complete rehabilitations of the Mai-Ndombe and
Kwango bridges on National Route No. 1 from Bandundu
province to Kinshasa will begin by the end of 2004.
The EU has agreed to finance the projects at a cost of
900,000 Euros. (Note. Commercial traffic is currently
using the recently repaired temporary Mai-Ndombe
bridge, installed after the original bridge was
destroyed during the civil war. Upcoming work will
rehabilitate the original bridge. End Note.)

LABOR

MATADI PORT WORKERS THREATEN STRIKE

11. (U) Local press reports that workers at the Port of
Matadi are threatening to strike due to rumors that
ONATRA (port authority) aims to build a road and rail
bridge over the Congo River linking the DRC with Congo-
Brazzaville. The Port of Matadi has recently
experienced a reduction in commerce due to low water
levels on the Congo River. Many ships have been
diverted to Pointe-Noire, Congo-Brazzaville. Port
workers are demanding that money be allocated for
proper dredging and channel marking along the river.
(Comment. Port workers are rightly worried that their
jobs are in danger. Operations at the port have been
seriously encumbered by a lack of dredging in river
channels over recent years. However, construction of a
bridge linking the DRC to Congo-Brazzaville would be
fiscally impractical and would carry significant
political baggage. End Comment.)

12. (U) INFLATION BY CATEGORY (IN PERCENT)

WEEK ENDING 7/30 8/6 8/13 8/20
FOOD 2 -1 -2 0
BEVERAGE 0 0 0 0
NON-FOOD 0 0 0 -1
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 0.9 -0.2 -0.6 0.0
MONTHLY INFLATION 1.2 -0.2 -0.8 -0.8

13. (U) EXCHANGE RATE DEVELOPMENTS

7/30 8/6 8/13 8/20
CENTRAL BANK RATE 389.109 389.115 390.175 390.594
PARALLEL MARKET
-KINSHASA 385-390 385-390 385-390 385-390
-LUBUMBASHI 380-385 380-385 380-385 380-390
-MBUJI MAYI 380-385 380-385 385-390 385-390
-KISANGANI 400-410 375-385 375-385 380-390
-GOMA 400-410 400-410 400-410 400-410
-BUKAVU 400-410 400-410 400-410 400-410

MEECE

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