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Cablegate: Drc October Economic Review

DE RUEHKI #1250/01 3091236
R 051236Z NOV 07




E.O. 12958: N/A

(U) 1. Summary

- Minister of Transportation Fired
- SN Brussels Joins with Hewa Bora to Create New Airline
- Fire Extinguishers for Airport Authority
- IMF Team in Kinshasa
- Central Bank of DRC Sells Off Property
- Cement Shortage Continues
- Problems at Inga Dams
- USTDA and SNEL Sign Grant Agreement for Hydroelectric Plant
Pre-Feasibility Study
- BHP Billiton Funds Construction of Inga III Dam
- Transmission Cables Purchased for Kinshasa and Bas-Congo
- Ebola Outbreak Appears to Have Ended
- Teacher's Strike Ends
- Gcamines Employees Demonstrate
- Civil Servants Threaten to Strike
- Civil Servants Demonstrate in Kasai-Oriental
- Civil Servants Demonstrate in Lubumbashi
- Mining Review Lacks Transparency
- Civil Society Request Review of Mining Contract
- Diamond Industry Faces Challenges
- De Beers to Spend USD 31 million in DRC
- Banro Congo Opens Offices in South Kivu and Maniema
- Minister of Mines Vows to Help Investors
- Pygmy Groups Complain About Harm to DRC Forests
- European Development Fund Keeps Water Clean
- Portfolio Minister Defends Public Enterprise Laws
- Monthly Inflation Rate

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(U) Minister of Transportation Fired

The GDRC Minister of Transportation, Remy Henri Kuseyo Gatanga, was
fired following the crash of an Antonov 26 during take off in
Kinshasa on October 4. Kuseyo tried in September to ground all
Antonov aircraft operating in the DRC, but withdrew a proposed
blanket ban after State Minister Nkulu Kilombo intervened on behalf
of the Presidency. Nkulu survived an attempt by opposition members
of Parliament to turn him out of office following the crash.

(U) SN Brussels Joins with Hewa Bora to Create New Airline.

SN Brussels airline has changed its name to "Brussels Airlines" and
will offer daily non-stop flights between Kinshasa and Brussels.
The airline has also joined with the DRC airline Hewa Bora (HBA) to
create a new airline, AirDC. HBA has a 51% stake in AirDC, and the
new airline has a fleet of 6 aircraft: four British Aerospace (BAE)
146s and two Boeing 737-800s. The BAE 146s, like the widely used
Antonovs, are adept at landing on the short, rough runways found in
the DRC. The 737-800s will offer regional flights to Angola,
Nigeria, South Africa, Kenya, Rwanda, and Burundi.

(U) Fire Extinguishers for Airport Authority

The Rgie des Voies Ariennes (RVA), DRC's Airport Authority,
provided USD 6,500 for five mobile fire extinguisher materials at
the Goma airport. Two will be powered by electricity, two will be
foam-based, and one will use carbon gas. According to Thomas Oleko,
an engineer who works for RVA, the new acquisitions are adequate for
only half of the typical accidents. Larger incidents require trucks
and other equipment that the Goma airport does not have.

Budget and Finance

(U) IMF Team in Kinshasa

An IMF team from Washington, led by Africa Regional Office Director
Brian Ames, was in Kinshasa for two weeks to meet with GDRC
officials, international partners and donor countries. They
evaluated the state of the Congolese economy and its financial
situation. The team predicted an increase in DRC's growth rate from
5% to 6%, but cautioned the GDRC against the macroeconomic effects
of China's USD 5 billion investment.

(U) Central Bank of DRC Sells Off Property

The Central Bank of the DRC (Banque Centrale du Congo - BCC) will
sell off approximately 50 residential and commercial properties.
This follows the announcement of its Strategic Development Plan and
National Financial System published on July 15, 2006. A contact at

KINSHASA 00001250 002 OF 004

BCC reported that this move follows recommendations made by the


(U) Cement Shortage Continues

Due to a severe shortage, the GDRC has agreed to ease restrictions
on importing gray cement. Two companies in the Kinshasa/Bas-Congo
region produce approximately 520 thousand tons of gray cement per
year, well below the demand of three million tons.


U) Problems at Inga Hydroelectric Dams

Yengo Massampu, head of DRC's Socit Nationale d'Electricit
(SNEL), warned of potential blackouts in Kinshasa due to problems at
the Inga hydroelectric dams. Only one of six turbines at Inga I and
two of eight at Inga II are currently operating. Due to demand on
the system, the working turbines are in danger of failure. A World
Bank-funded company working to rehabilitate Inga I recently
suspended operations. Kinshasa has been experiencing extended
outages and, according to Yengo, there will be more power failures
if nothing is done to improve the situation.

(U) USTDA and SNEL Sign Grant Agreement for Hydroelectric Plant
Pre-Feasibility Study

USTDA and SNEL signed a $553,534 grant agreement on September 28 to
fund a feasibility study of Nzilo II, a new hydroelectric power
plant near Kolwezi in Katanga province's copper belt. The study
will be conducted by a U.S. contractor chosen by the GDRC/SNEL, and
will hopefully lead to the eventual financing and completion of the
Nzilo II project, located on the Lualaba River between the existing
power plants of Nseke and Nzilo 1, and will provide electricity to
mining companies operating in the area.

(U) BHP Billiton Funds Construction of Inga III Dam

(U) Mining company BHP Billiton signed a USD 20 million agreement
with the DRC to fund construction of the Inga III dam in the
Bas-Congo province. BHP Billiton has also agreed to investigate the
feasibility of developing an aluminum smelter using energy from the
dam. Estimated to cost USD 3 billion, the smelter would produce
800,000 tons of aluminum annually and would require 2,000 MW of

(U) Transmission Cables Purchased for Kinshasa and Bas-Congo

(U) The SNEL (Socit Nationale d'Electricit) recently purchased
electrical transmission cable for use in Kinshasa and three other
cities of the Bas-Congo province. Two companies, Montreal and
Ficthtner, provided the cables through the "Bureau de Coordination
des Marches des Infrastructures"(BCMI), a part of the World Bank.
The total cost is estimated at USD 14 million.


(U) Ebola Outbreak Appears to Have Ended

Mdecins Sans Frontihres (MSF) reports that the Ebola outbreak in
the Western Kasai province appears to have ended. A total of 25
Ebola cases have been recorded since September 11th, but no new
cases have been reported for over 21 days (the usual incubation
period of Ebola). MSF said the official end to the outbreak could
not be declared until a second period of 21 days (through
mid-November) passes without any new cases.


(U) Teacher's Strike Ends

Teacher's unions' SYNECAT and SYECO announced that the nationwide
public school teachers' strike is over. The government has agreed to
give all civil servants, including teachers, a 26 percent salary
increase. This would bring teachers starting salaries up to
approximately USD 88 per month. At the same time, the government
agreed to pay teachers the same salaries across the country. Union
managements said they believe that the salary increase will be

KINSHASA 00001250 003 OF 004

accepted by members.

(U) Gcamines Employees Demonstrate

Employees of Gcamines, the state copper and cobalt company,
demonstrated in Kolwezi, Katanga Province, to demand a salary
increase. The employees have asked Gcamines' joint venture
partners to grant Gcamines a loan against future dividends to help
pay for the increased salaries.

(U) Civil Servants Threaten to Strike

Congolese civil servants are threatening to strike by November 5 if
they are not given a salary increase. In July 2007, over FC 5
billion ($10 million) was added to the payroll for salary increases,
but the civil servants' union has requested that the GDRC add
another FC 5 billion to the payroll to meet the interim salary
schedule promised by the government. (Note: The salary for
Congolese civil servants ranges from FC 35,000/month (USD 70) to FC
91,000/month (USD 182) for the highest level civil servant in each

(U) Civil Servants Demonstrate in Kasai-Oriental

Civil servants in Mbuji-Mayi demonstrated on October 8 to demand
payment for September salaries. The Minister of Finance recently
asked the Central Bank to freeze payments, and the civil servants
have threatened to go on strike in response.

(U) Civil Servants Demonstrate in Lubumbashi

Civil servants in Lubumbashi also demonstrated on October 9 to
demand payment of September salaries. Martin Kabwelulu, the
Minister of Mines, ordered payments to be suspended prior to the
arrival of the Mining Review Commission from Kinshasa. Moise
Katumbi, the Governor of Katanga province, calmed the situation by
authorizing the payment of salaries.


(U) Mining Review Lacks Transparency

According to international NGO Global Witness (GW), the GDRC Mining
Commission contract review process lacks transparency. GW says that
civil society is poorly represented and that the process appears to
be subject to interference by the GDRC. GW believes the Mining
Commission's recommendations may not adequately reflect the impact
on social, environmental and human rights.

U) Civil Society Request Review of Mining Contract

The civil society in Ituri published a memorandum requesting a
review by the GDRC of AngloGold Ashanti Kilo's (AGK) mining
contract. The civil society accused the AGK of ignoring a clause in
the contract that stipulates building a dam in Budana.

(U) Diamond Industry Faces Challenges

The DRC 2007 Annual Review estimates 700,000 diggers earning between
USD 30 to 50 per week in the artisanal diamond mining sector. In
2006, the DRC officially exported 30.2 million carats (valued at USD
679 million), 90% of which came from artisanal mines. A new NGO
report claims that most of the production from the Orientale and
Equateur provinces is smuggled out of the country via Uganda and the
Central African Republic. Illegal smugglers avoid the 3.75% DRC tax
that is desperately needed to build the country's schools,
hospitals, and infrastructure.

(U) De Beers to Spend USD 31 million in DRC

De Beers plans to spend USD 31.4 million to explore new mining areas
in the DRC. They have spent over USD 57 million since 1974, mainly
on projects in the Kasai provinces. Most projects involve option
agreements with Congolese exploration companies, including the state
diamond mining company, MIBA (Minieres Bakwanga).

(U) Banro Congo Opens Offices in South Kivu and Maniema

Banro Congo Mining, a subsidiary of Canadian Banro Corporation,
finished its gold exploration phase in the provinces of South Kivu
and Maniema. The company is now engaged in the exploitation phase
and has opened offices in Twangiza, Lugushwa (South Kivu), and
Namoya (Maniema).

KINSHASA 00001250 004 OF 004

(U) Minister of Mines Vows to Help Investors

The DRC Minister of Mines, Martin Kabwelulu, announced at the Mining
Forum (FOR MINES) that in order to help investors he will meet with
the heads of mining companies on the last Saturday of each month.
The Minister also announced that he will meet with the DRC
Parliament once a month to talk about problems in the mining

Natural Resources

(U) Pygmy Groups Complain About Harm to DRC Forests

An internal investigation by senior bank staff and outside experts
claims that the World Bank misled DRC about the value of its
tropical forests, and encouraged foreign logging of the world's
second largest forest. The investigation follows complaints in 2002
by an alliance of 12 Pygmy groups who claimed that irreversible
damage has been done to the DRC forests, putting them in potential

(U) European Development Fund Keeps Water Clean

For the next ten months the European Development Fund (EDF) will
donate chemicals and equipment to purify drinking water in the DRC.
Equipment will include pumps and spare parts necessary to keep the
existing distribution system operating. The total donation is
estimated at Euros 137 million.

Public Enterprises

(U) Portfolio Minister Defends Public Enterprise Laws

The Minister of Portfolio, Jeanine Mabunda, successfully defended
draft laws to restructure the public enterprise system. Introduced
to Parliament in August 2007, the laws intend to open doors to
privatization and to disengage the GDRC from work in the public

Inflation and Exchange Rates

(U) Monthly Inflation Rate Increase

The DRC economy continues an inflationary trend. Post market survey
shows an inflation rate of 3.9 percent for the month of October.
The year-to-date inflation now stands at 24 percent. The inflation
is likely due to an increase of education fees and scarcity of
non-food items, such as charcoal and firewood, which are hard to
find during the ongoing rainy season.

Week ending: 8/31 9/25 10/30

Central Bank Rates: 495 498 498

Parallel Markets:

Kinshasa 490 495 500

Lubumbashi 490 495 495

Mbujimayi 500 505 505

Kisangani 500 505 505

Goma 500 500 500

Bukavu 500 500 500

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