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Cablegate: Drc July Monthly Economic Review

VZCZCXRO4961
RR RUEHBZ RUEHDU RUEHGI RUEHJO RUEHMR RUEHRN
DE RUEHKI #0951/01 2201624
ZNR UUUUU ZZH
R 081624Z AUG 07
FM AMEMBASSY KINSHASA
TO RUEHC/SECSTATE WASHDC 6680
INFO RUEHXR/RWANDA COLLECTIVE
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHMFISS/HQ USEUCOM VAIHINGEN GE
RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 04 KINSHASA 000951

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ECON EFIN EMIN ELAB EAIR PGOV CG
SUBJECT: DRC JULY MONTHLY ECONOMIC REVIEW

-------
Summary
-------

1. (U)
- Hundreds of MIBA (DRC diamond mining parastatal) employees
requested summer leaves of absence following nine months without
pay.

- Kinshasa's civil servants are demanding the implementation of the
GDRC's "Strategic Document of the Organization of Congolese Civil
Service."

- A July 30 memorandum of understanding between the DRC and Angola
may lead to the exploration and production of petroleum products in
areas around their shared offshore and onshore borders.

- The Belgian Government donated Euros 730,000 (USD 540,200) to
rehabilitate the N'Sanga hydroelectric plant in Bas-Congo province.


-------
Mining
-------

2. (U) The Mining Registry of the Ministry of Mines acquired new
software to track income from the granting of mining concessions.
Mining concessions are currently under moratorium awaiting the
results of the GDRC's Mining Commission review of past mining
contracts.

3. (U) Katanga Mining Company (KMC) has extracted 33,000 tons of
copper ore since April 2007 and projects 40,000 tons per month by
August. The KMC concentrator in Kamoto is online and copper ore
concentrate is now being delivered. A production line to process
copper oxide will be commissioned in August. The KMC Luilu
metallurgical plant goes online in September.

4. (U) A delegation from British firm Brinkley Mining came to the
DRC to finalize an agreement with the Congolese Atomic Energy
Commission (CNEA). Gerard Holden, Brinkley Chairman, discussed
uranium mining, currently outlawed in the DRC, with Minister of
Mines Mr. Martin Kabwelulu. The previous head of the Regional
Center for Nuclear Studies in Kinshasa (CREN-K) was fired over
allegations of trading in uranium contracts. Following the Brinkley
agreement announcement the Minister of Scientific Research in charge
of CREN-K was also fired.

-----
Labor
-----

5. (U) Employees of the tax collection and customs services (OFIDA,
DGRAD and DGI) struck for eleven days countrywide to demand payment
of salary in arrears and performance bonuses. The strike disrupted
clearance operations at the Kasumbalesa land border crossing into
Zambia and at the Port of Matadi, which cost the DRC an estimated 15
billion CF (USD 30 million).

6. (U) Prime Minister Gizenga met with the National Committee of
Unions (Intersyndical) members to discuss labor concerns.
Intersyndical head Symphorien Dunia told the PM that union members
(mainly teachers and civil servants) want transportation and lodging
concessions by next September, revisions in mining and forestry
concession contracts, participation of the Intersyndical in public
enterprise restructuring (currently being overseen by the Ministry
of Portfolio), and a review of teachers' contracts.

7. (U) Employees of the Congolese-Chinese Telecommunications Company
(CCT) went on strike in June to demand salary increases and
compliance with the DRC Labor Code. Arbitration by the Labor
Minister on July 18 resulted in a commitment by CCT to increase the
total CCT monthly payroll by USD 5,000.

8. (U) A civil servant protest march was averted on July 26th
whenPrime Minister Gizenga set up a consultation mechanism with the
GDRC before granting the approval to march. (Note: Labor unrest is
likely again in September as the school year begins and Parliament
comes back into session. End note.)

9. (U) Hundreds of MIBA (DRC diamond mining parastatal) employees
requested summer leaves of absence following nine months of salary
arrears and no progress on making badly-needed upgrades of MIBA
equipment.

10. (U) Congolese security officers arrested four journalists/union

KINSHASA 00000951 002 OF 004


members who were demanding payment of ten months arrears related to
performance bonuses. The CEO of Congolese Television and Radio
(RTNC) accused the journalists, employees of RTNC, of insulting
President Kabila. Following their arrest they were transferred from
the special security services to the police.

11. (U) On July 23, Congolese Airways Authority (RVA) employees
demonstrated in front of the Ministry of Portfolio against
privatization of the RVA, a public enterprise, and demanded payment
of three months salary arrears.

12. (U) Congolese employees of expatriate shops (Indian, Lebanese,
etc) demonstrated on July 2 to demand lunch breaks and respect for
legal work schedules. This is the second time in as many years that
shop workers have expressed their discontent with working conditions
and salaries in what is a non-union setting.

13. (U) The Minister of Education for Primary and Secondary Schools
declared that so-called "motivation fees" paid by parents to
teachers at Congolese public schools will be banned in the coming
school year. The GDRC, however, has not made any provisions to
increase teachers' salaries. Teachers are already threatening to
strike when school starts in September.

14. (U) Kinshasa's civil servants are demanding the implementation
of the GDRC's "Strategic Document of the Organization of Congolese
Civil Service." The document, which covers 2007 through 2011, was
amended earlier in the year by experts of the Ministry of Civil
Service who are in charge of monitoring civil service reforms.

---------------
River Transport
---------------

15. (U) Lack of signaling on the Congo River between Mbandaka and
Kisangani (upriver from Kinshasa) has given local fishermen a means
of earning between USD 10 to 20 per day. The fishermen are helping
public and privately owned boats find the channels necessary to
navigate the ever-changing waterways.

------
Energy
------

16. (U) Sam O'Brien Kumi, the World Bank head of electricity market
projects, was in the DRC July 29 to 30. At a press conference on
July 30, Mr. Kumi said that he was here to restart suspended DRC
projects, including a USD 178 million program that had been
suspended due to recent political instability. Kumi said that
project will restart in November 2007 and will increase electricity
production of the Inga I hydroelectric plant from 300 MW to 500 MW.
This power plant feeds a power line from Inga (Bas-Congo) to
Kasumbalesa (Katanga province), some 1500 kilometers away on the
Zambian border in the "copper belt." The project will increase
electricity sales to the regional electricity market in SADC
countries while helping the DRC respond to the mining industry needs
for energy in Katanga. (Note: Copper processing, expected to
increase greatly over the coming years, requires large amounts of
electricity. End note.)

--------------
Public Finance
--------------

17. (U) President Kabila signed the DRC's 2007 budget into law on
July 7. This "balanced" budget is for nearly USD 2.5 billion, up
from just under USD 2.0 billion in 2006. Based upon the DRC's
Poverty Reduction Strategy Paper (PRSP) the budget projects a GDP
growth rate of 12 percent, an inflation rate of 8.8 percent, and an
average exchange rate of 560 CF/USD. GDP was estimated to amount to
USD 5 billion, or less than USD 100 per capita.

18. (U) The Ministry of Budget has implemented new software designed
to facilitate salary payments to civil servants and reduce
opportunities for corruption. The software, funded by France and
the European Union, will cover most of the 47,761 government
employees working in Kinshasa.

19. (U) African Development Bank President (ADB), Donald Kaberuka, a
Rwandan, came to Kinshasa to inaugurate the regional ADB office for
the Democratic Republic of Congo and Congo Brazzavilee. Kaberuka
said that the new office demonstrates ADB's willingness to work with
client states and project beneficiaries, and to harmonize its
actions with development partners.

20. (U) The Congolese Central Bank (BCC) has issued a tender to hire

KINSHASA 00000951 003 OF 004


an auditor to review its financial statements from 2007 to 2009.
Meanwhile, the BCC has decreased its interest rates for short-term
money market loans from 30 percent to 22.5 percent. (Note: BCC
statistics indicate that current foreign exchange reserves are still
quite low, at the equivalent of three weeks of foreign exchange
spending. End note.)

21. (U) The GRDC has made available a USD 30 monthly scholarship.
Starting July 9 the scholarship will be available to 50,000
Congolese students who are in their last year of public university.
Only those students who are up-to-date on tuition will benefit from
this support.

---------
Petroleum
---------

22. (U) The Minister of Economy announced a gasoline price decrease
for Kinshasa on July 12, from 550 CF/liter (USD 4.18/gallon) down to
535 CF/liter (USD 4.07/gallon).

23. (U) A July 30 memorandum of understanding between the DRC and
Angola may lead to the exploration and production of petroleum
products in areas around their shared offshore and onshore borders.
Revenues would be divided equally between the two countries.

--------
Aviation
--------

24. (U) The Minister of Economy reduced the cost of jet fuel from
578 CF/liter (USD 4.39/gallon) to 483 CF/liter (USD 3.67/gallon)
(West) from 749 CF/liter (USD 8.53/gallon) to 626 CF/liter (USD
4.76/gallon) (East); and from 800CF/liter (USD 6.08/gallon) to 668
CF/liter (USD 5.08/gallon.

25. (U) The DRC organized its High Council for Civil Aviation on
July 25. The meeting and organization was designed to find
solutions to the currently unsafe and insecure condition of
Congolese airspace. Other issues included the reduction of
technical risks, the lack of training for those maintaining Russian
made aircraft, the anarchic granting of operating licenses, the
irregular importation of aircraft, the unauthorized construction of
flight infrastructure, and the lack of qualifications for some civil
aeronautics personnel.

-----------
Cooperation
-----------

26. (U) The President of the African Development Bank (ADB) and the
Congolese Minister of Finance signed two project agreements. The
first, for USD 105 million, will provide safe water in Kasangulu,
Lisala, and Tshikapa. The second provides USD 127 million for the
social reintegration of Congolese combatants.

27. (U) The World Bank has given Euros 1.2 million (USD 892,000) to
the Congolese River Transport Authority (RVF) to rehabilitate the
"Congo," a dredging boat.

28. (U) The Government of Belgium donated Euros 730,000 (USD
540,200) to rehabilitate the N'Sanga hydroelectric plant in
Bas-Congo province. At full capacity the dam will produce 45,000 MW
of electricity. Currently only 6.5 percent of DRC families have
electricity at home.


-------------------------
Telecommunications Sector
-------------------------

29. (U) During a recent trip to China, the Minister of
Telecommunications signed a partnership contract with the China
International Telecommunication Construction Corporation (CITCC),
Alcatel, Shangai Bell, Huawei, and ZTE. These companies will now be
able to partner with the Congolese Telecommunications Authority.

------------------------------
Public Enterprises Restructure
------------------------------

30. (U) The Ministry of Portfolio has launched the hiring process
for new heads of state enterprises through the World Bank-funded
Committee for the Reform of State Enterprises (COPIREP). An
applicant pool of over 5000 has been reduced to approximately 250
candidates for 78 available positions available (three top jobs at

KINSHASA 00000951 004 OF 004


the 26 Congolese parastatals.)

--------------
Inflation Rate
--------------

31. (U) The Congolese economy continued its deflationary trend.
Post's market basket survey indicates a deflation rate of -1.2 for
the month of July. The year-to-date inflation now stands at 16
percent. The deflation is likely due to the stable exchange rate
and money mass in circulation. GDRC overspending and consequent
reliance on bank financing has been brought under control by the new
government, i.e., the Ministers of Finance, Budget and the BCC
Governor.

Exchange Rates:

Week ending 6/28 7/12 7/31

CENTRAL BANK RATES 492 496 493

PARALLEL MARKETS:
KINSHASA 490 490 490
LUBUMBASHI 490 490 490
MBUJIMAYI 495 490 485
KISANGANI 495 495 490
GOMA 500 500 495
BUKAVU 500 500 495


MEECE

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