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Cablegate: Drc September Economic Review

VZCZCXRO4124
RR RUEHBZ RUEHDU RUEHGI RUEHJO RUEHMR RUEHRN
DE RUEHKI #1168/01 2750941
ZNR UUUUU ZZH
R 020941Z OCT 07
FM AMEMBASSY KINSHASA
TO RUEHC/SECSTATE WASHDC 6969
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 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

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