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Cablegate: (Sbu) Brazzaville in Brief: December 31, 2009: Budget,

VZCZCXRO8877
PP RUEHDU RUEHGI RUEHJO RUEHMA RUEHMR RUEHPA RUEHRN RUEHTRO
DE RUEHBZ #0368/01 3651123
ZNR UUUUU ZZH
P R 311123Z DEC 09
FM AMEMBASSY BRAZZAVILLE
TO RUEHC/SECSTATE WASHDC PRIORITY 1664
INFO RUEHZO/AFRICAN UNION COLLECTIVE
RHMFISS/AFRICOM
RUEHFR/AMEMBASSY PARIS 0525
RUEHBS/AMEMBASSY BRUSSELS 0072
RUEHBS/USEU BRUSSELS 0054
RUEHBJ/AMEMBASSY BEIJING 0029
RUEHRL/AMEMBASSY BERLIN 0024
RUEHRO/AMEMBASSY ROME 0069
RUEHBZ/AMEMBASSY BRAZZAVILLE 2084

UNCLAS SECTION 01 OF 03 BRAZZAVILLE 000368

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PGOV EFIN PREL CF CH ELAB PINS
SUBJECT: (SBU) BRAZZAVILLE IN BRIEF: DECEMBER 31, 2009: BUDGET,
EITI, "POOL" SECURITY, LABOR TROUBLE, CHINA GRANT

BRAZZAVILL 00000368 001.2 OF 003


1.(U) Following is the last Brazzaville in Brief for 2009:
Index/Topics
----------------
--Congo Doubles Its Budget
--Congo Unlikely to Comply with EITI Validation Deadline
--Ex-Rebel Takes Government Job
--Labor troubles Loom
--China Offers $7.6 Million to Congolese Hospitals
--Congolese Statue of Liberty Unveiled
2.(SBU) Congo Doubles Its Budget
-----------------------------------------
The Congo legislature has adopted a calendar/fiscal year 2009
budget projecting revenue 2,815 billion CFA (approximately
$6.25 billion at an exchange rate of 450 CFA to the dollar),
doubling last year's budget of 1,412 billion CFA ($3.1 billion).
Fully 78% of the budget will be financed by oil revenue, based
on an expected 124% increase in oil revenue in 2010 compared to
2009. (Note: The revenue projection is based on a relatively
conservative price assumption of USD 60/barrel during the coming
year and the fact that several new oil production streams will
come online in 2010.) The budget posits an overall growth rate
of over 12 percent in 2010, with a slight augmentation of
inflation as well.
On the expenditure side, government spending is divided into
three broad categories:
Current Operating Charges:
793 billion CFA francs (1.72 Billion USD) (28 pct ofrevenue)
Investments:
661 billion CFA francs (1.47 billion USD) (24 pct of revenue)
Budgetary savings:
1,361 billion CFA francs (3.02 billion USD) (48 pct of revenue)

Line items:
Within the Current Operating Charges category, the three largest
line items (descending order by amount) are:
Financial management, economic monitoring, and governance
- 308 billion CFA francs, or 38 percent of total
expenditure.
Social sector (education, health, employment and culture)
- 196 billion CFA francs, or 24 percent of government
expenditure.
National Defense
- 137 billion CFA francs, or around 17 percent of
expenditure.
The second broad category, investment, is allocated 661 billion
CFA. This includes large infrastructure projects, which fall
under President Sassou's "Road to the Future" campaign to
modernize and rebuild the country.
With respect to the third category, savings, over half of the
budget will be allocated to "savings" to be invested for later
use, and thus does not fall within the rubric of government
spending. This category was described to the Ambassador by the
Minister of Finance as a "future fund" against the day when
petroleum revenues begin to decline. It represents fully 48
percent of the Congo's expected total government revenue for
2010; government expenditure for current operations and
investment is just 52 percent of expected income.
Comment: Despite the enormous budget increases, one of the
major problems plaguing the Congolese government has been its
inability to spend money and to spend it wisely. One of the
reforms being put in place under the HIPC initiative is
procurement reform, designed to make the system more transparent
and to reduce opportunities for corruption. We are seeing signs
that uncertainty and a learning curve on the new bureaucracy to
review procurement and issue "no objection certificates"
(designed by consultants engaged by the World Bank) is beginning
to add additional hurdles to government spending, on top of
procurement mechanisms already known to be slow, inefficient,
and (formerly) corrupt, resulting in unfinished infrastructure
projects and hospitals and health clinics without any medicines.
End comment.
3.(U) Labor troubles Loom
--------------------------------
As the budget and the revenue and spending increases therein
were debated over the past two months, multiple trade unions
have threatened to strike over salary and other issues. We
believe this increased labor activism is related to several
factors: 1) the rapid growth of economic activity in the urban
areas of the Congo (where most of the population lives); 2) as
mentioned above, the vast amounts of money expected to be
available to the government in 2010 from increased revenues, and
3) the expected (now ongoing) review of the "truce" agreed
between the government and the unions several years ago, to
limit the wage bill during the quest for HIPC debt relief.

BRAZZAVILL 00000368 002.2 OF 003


A general strike was threatened and called off in early December
by civil service unions (over a temporary transport subsidy for
government employees that expires today, December 31). The
national railway union also threatened but did not call a strike
not only over wages but also security issues along the rail line
(see below). The latest union to threaten a strike is the union
representing the workers of the national civil aviation agency
(ANAC, by its French acronym), which is responsible for
operating the airports in Congo in addition to its regulatory
role. The ANAC union leadership is upset that the Government
signed a 25-year concession deal with a Lufthansa subsidiary to
manage the airports at Brazzaville, Pointe-Noire and Ollombo.
The union issued a statement this week calling for a one-week
strike to begin on Monday, December 4, and expressed its
annoyance at being invited to attend a ceremony announcing the
concession to the private firms without having been informed or
consulted about this action. (Comment: Our expectation is that
the government will hold the line on salary increases until
spring, by which time it will have achieved debt relief and will
be less constrained by the Fund/Bank requirements for fiscal
discipline. At that point, the door will be open at least
slightly for government concessions to union demands. End
comment.) With respect to the ANAC strike threatened, we will
advise its implications for our operations; if it is not called
off over the weekend, arrivals and departures are likely to be
disrupted next week, since ANAC controls all aspects of the
operations of the two international airports.
4.(SBU)Congo Unlikely to Comply with EITI Validation Deadline
--------------------------------------------- --------------
----------------
An impeccable source involved in the preparations for the
Extractive Industries Transparency Initiative (EITI) has told us
that Congo is "unlikely to comply with the March 9, 2010
deadline" for EITI validation. There are several factors causing
this delay, including the requirement to undertake a
communication campaign to educate the public about EITI, as well
as to select a "validator" to come to Congo to conduct the
review. The validator may arrive in January to begin
consultations, but the information campaign has not yet been
planned and, more importantly, the second report on EITI
progress which is due December 31, 2009 (today) has not been
submitted.
Comment: Congo's focus has been on the related matter of debt
relief under HIPC, which seems likely to occur in January, 2010
with "completion point." The EITI process is closely related,
in that the completion point conditionality included a large
component of petroleum revenue transparency and reform. It
would be embarrassing for the IMF and the World Bank to
recommend to their boards in January that Congo reach completion
point based on the nascent reforms, only to fail with EITI
validation two months later. From the Congolese point of view,
beginning the process was the important part, to demonstrate to
the IMF and World Bank that the government has good intentions
with regard to transparency, and we note that EITI participation
is not a condition under the Bank/Fund HIPC effort. End
Comment.
5.(SBU) Ex-Rebel Takes Government Job
--------------------------------------------- ----
The head of Congo's "Ninja" rebels, Frederic Bintsamou (aka
Pasteur Ntoumi) has finally arrived in Brazzaville to assume his
role as senior official in the national peace building office.
For over a decade, Ntoumi had remained in the "Pool" region
south of Brazzaville while various fitful negotiations to disarm
and reintegrate the Ninjas took place; he was named nearly three
years ago to his senior position and allocated an office and a
residence, but refused to come to Brazzaville out of concern for
his security, demanding a large force of loyalist guards
accompany him, which the government refused. In the past six
months, there has been a resurgence in banditry and violence.
Former Ninjas, some of whom were not under Ntoumi's control, had
been stopping cars along the road between Pointe Noire and
Brazzaville to demand bribes. On several occasions they stopped
Brazzaville-Pointe Noire trains to steal cargo, extort money,
and commit violence against passengers. In the face of this
increasing lawlessness, President Sassou appointed pool-origin
former "Prime Minister" Isidore Mvouba to head a committee to
resolve the situation of the Ninjas. Persuading Ntoumi to
come, finally, to Brazzaville (with a smaller-than-demanded
guard force) is the most high profile action thus far in the
plan to quell violence in the Pool. (Comment: It may be that
Ntoumi no longer controls the armed groups and individuals who
are these days contributing to the insecurity of the pool;
indeed, he told a press conference this week that since he has
come to Brazzaville, no one can accuse him of responsibility for

BRAZZAVILL 00000368 003.2 OF 003


the banditry in the Pool. To finish the job of pacifying the
Ninjas will require a large amount of money, for law enforcement
and restoration of government in the region, to buy back
weapons, and provide subsidies for the reintegration of the
large number of youth who have taken up "ninja" banditry since
the war. End Comment.)
6.(U) China Offers $7.6 Million for Congolese Hospitals
--------------------------------------------- --------------
-------
In its latest high profile infrastructure project, China and the
Congo signed a $7.6 million deal to build hospitals in
Brazzaville and Pointe Noire. According to press accounts, this
is a grant, not/not a loan as part of the existing
infrastructure credit, and has been linked by the Chinese
government to the implementation of the announced aid grants
from the recent China-Africa summit. Nevertheless, we expect
that the actual construction will be done by one of the many
Chinese construction firms represented in Congo.
7.(U) Congolese Statue of Liberty Unveiled
--------------------------------------------- -------
President Sassou Nguesso presided over the unveiling of several
new statues in central Brazzaville this week. The statues,
representing first president Fulbert Youlou, early Vice
President Jacques Opangault, and "Liberty," were fabricated in
South Korea at a cost of $1.5 million. They had been veiled on
their plinths in the center of major roundabouts downtown for
several months. The largest statue is "Liberty," a 2.5 meter
female African figure with right arm raised, on the spot where
the first Congolese workers unions organized their strikes
during the "trois glorieuses" in August, 1963. (Comment: That
particular labor unrest, ironically, led to a military coup and
jail for Fulbert Youlou and the rest of his government, and set
the stage for the emergence of a long period of Marxist
repression in this country. End comment)
EASTHAM

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