Air Zimbabwe signed a contract with the Congolese airline, Lignes Ariennes Congolaises, to fly from Kinshasa to both Dubai and Brussels in April 2008.
Air Zimbabwe was to provide the aircraft while LAC would provide rights to DRC airspace.
Air Zimbabwe was also to operate some DRC domestic flights with LAC.
LAC signed a Memorandum of Understanding with the Arcane Group for DRC airport management.
Viewing cable 08KINSHASA329, DRC FEBRUARY/MARCH ECONOMIC REVIEW
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FM AMEMBASSY KINSHASA
TO RUEHC/SECSTATE WASHDC 7836
INFO RUEHXR/RWANDA COLLECTIVE
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHMFISS/HQ USEUCOM VAIHINGEN GE
RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK
UNCLAS SECTION 01 OF 08 KINSHASA 000329
E.O. 12958: N/A
SUBJECT: DRC FEBRUARY/MARCH ECONOMIC REVIEW
Â¶1. (U) Summary
– MONUC Owes Government of Uganda USD 10 Million in Aviation Fees
– Royal Air Maroc Service to Casablanca and Europe
– Air Zimbabwe Offers Flights from Kinshasa to Dubai and Brussels
– Low Rate of Bank Account Ownership in DRC
– Official Central Bank Interest Rate is 24 Percent
– Positive Foreign Exchange Balance
– Money Supply Increases by 15 Percent
– Congolese Central Bank Announces New Treasury Bill Issue and
– Belgium to Help Modernize DRC Customs Agency
– New Partnership Enhances Expertise in Accounting Practices
– Cosmetic Producers Resist Ban on Products
– GDRC Standardizing Bidding Procedures
– DRC and South Africa Join to Fight Corruption
– World Energy Council Announces Grand Inga Project
– WB Director: SNEL Needs USD 20B to Rehab Inga Dam
– SNEL Seeks Proposals for Generator Rehab
– World Bank Reviews its Forestry Activities in DRC
– GDRC Defends Timber Export Legality
– Commission: USD 2B Missing from Treasury
– Malnutrition in Katanga Province Increasing
– World Bank Funds USD 50 Million in Road Projects
– MONUC Head Promotes Contracts with Local Businesses
– National Labor Council Meets
– Association Sets Up Work Plan 2008 to 2012
– DRC National Microfinance Strategy Published
– Proposal for Statistics Law delivered to Plan Ministry
– VM Mines: All Mining Contracts to be Renegotiated
– MIBA Needs USD 50 Million to Improve Production
– China to Exploit Two GECAMINES Concessions
– Mining Contract Review Commission Contacts 61 Companies
– Mining Conference On 2002 Mining Code and EITI Practices
– CAMEC and Prairie Complete Joint Venture and Restart Operations at
– Police Expel Artisanal Miners from Mining Concessions
– UNICEF and GDRC Work to Enhance Education
– DOE/DOS Delegation Negotiates with GDRC to Defuel Nuclear
KINSHASA 00000329 002 OF 008
– Senator: 2008 Budget Does Not Share Oil Revenues
– SACOIL Gains Oil Concession; Tullow Loses One
– French Petroleum Company Invests in Bas-Congo
– Brazilian Investors Launch Petroleum Drilling
– New Manager of SONAS Launches Operation Insurance
– Union Protests Against Water Company Reforms
– SNCC Management Contract Awarded to Belgian Firm
– USD 8 Million to Revitalize ONATRA and SNCC
– Office des Routes Celebrates 37 Years, then Complains
– GDRC Struggling to Meet Key IMF Requirements
– GDRC Cites Causes of Poor 4th Quarter Performance
– The GDRC Committed to Retrocede Revenues to Provinces
– Cigarette Smuggling in Bunia
– Deputies Debate GDRC Support to Provinces
– State Revenues Reach 162 Million
– Foreign Exchange Reserves Decrease
– GDRC Ministries Get Connected
– Public Transportation Shortage in Kinshasa
– STUC Increases Buses in Circulation
– GDRC to Auction Matadi Cargo Containers
Â¶2. (U) MONUC (the United Nations Mission in the DRC) owes USD 10
million to the Ugandan Civil Aviation Authority for landing fees,
air navigation, airport passenger service, and change facilities.
The debt accrued from March 2002 through January 2008. On August 8,
2003, the UN and Ugandan Government signed an agreement allowing
MONUC to use Entebbe as their base for flying in and out of DRC, but
the agreement did not stipulate how the fees would be paid.
Â¶3. (U) Royal Air Maroc (RAM) airline inaugurated flights from
Kinshasa to Europe and Africa via Casablanca on March 29. The
company will fly on Fridays and Sundays and will operate Boeing
737-800 aircraft with economy and business class sections.
Â¶4. (U) The Congolese airline, Lignes Ariennes Congolaises (LAC),
signed a contract with Air Zimbabwe for joint operations of flights
from Kinshasa to both Dubai and Brussels. Air Zimbabwe will provide
aircraft while LAC will provide rights to DRC airspace. Air
Zimbabwe will also operate some DRC domestic flights with LAC. LAC
has also signed a Memorandum of Understanding with the Arcane Group
for DRC airport management.
Â¶5. (U) According to the Deputy General Secretary of COMESA, DRC
still has one of lowest levels of bank account ownership on the
continent. Of the 60 million Congolese only 100,000 have accounts
in the DRC banking system. This situation impedes commercial
development in eastern and southern African regions.
Â¶6. (U) The official Congolese Central Bank (BCC) interest rate is 24
percent. This rate was decided by BCC in early January 2008.
Â¶7. (U) According to the Central Bank, the year-to-date total of
purchased foreign currencies reached USD 120 million while sold
foreign currencies was USD 126 million. This means that some USD 6
million worth of Congolese francs (FC 3 billion) were removed from
circulation during the period January 1 through March 10.
Â¶8. (U) Money supply has increased by nearly 15 percent since the end
of December 2007. (Note: This is not a surprise considering the
sharp depreciation of the Congolese franc, nearly ten percent, since
December. Exchange rate fluctuations tend to reflect changes in
money supply very closely and quickly in the DRC. End note.)
KINSHASA 00000329 003 OF 008
Â¶9. (U) In an effort to reduce the amount of Congolese francs in
circulation, the Central Bank (BCC) has announced a new process for
issuance and redemption of Treasury Bills. Offers by those wishing
to purchase the new T-bills will be submitted thru merchant banks
and include the buyer’s suggested interest rate and the amount to be
purchased (in FC 1,000,000 units, about USD 1,700 each). The BCC
will then analyze all the offers and sell the T-bills at the lowest
interest until all the bills are sold.
Â¶10. (U) According to an existing accord signed between DRC and
Belgium, both countries are committed to fight against smuggling at
the international level. After a visit in DRC, the General
Inspector of the Belgian Customs Agency declared that Belgium would
help DRC to promulgate its new customs code. The new code should be
published in June.
Â¶11. (U) A new partnership between the Belgian Royal Institute of
Auditors and both the Congolese Institute of Auditors and the
Congolese Permanent Council of Accountancy aims at enhancing the
level of expertise of DRC auditors and promoting sound accounting
practices for the annual control of public accounts.
Â¶12. (U) The Ministry of Industry has started to enforce a ban on
hydroquinone by regulating the stocks of certain cosmetics.
Cosmetics producers are reluctant to comply with the ban, arguing
that their plants would need adjustments. Cosmetics with
hydroquinone, used primarily to lighten skin, are in high demand in
Kinshasa, and producers may be trying to maintain a profitable
Â¶13. (U) COMESA, the Common Market for Eastern and Southern Africa,
has urged the DRC to harmonize its bidding procedures with COMESA
standards. A new DRC bidding procedure is ready to be sent to the
National Assembly according to the Vice Minister of Finance.
Â¶14. (U) The DRC and South Africa signed an agreement to fight
corruption through their civil service ministries. South Africa
will also fund some anti-corruption related activities in DRC.
Â¶15. (U) The World Energy Council launched a new project called
“Grand Inga” that is intended to provide electricity to sub-Saharan
African countries through the South African Power Pool. The project
would supply the DRC with 52 generators of 750 megawatts (MW) each
for a total of 39,000 MW. The electricity companies involved in the
Grand Inga project met most recently in Gaborone, Botswana on March
16 -17, 2008, where they concluded that electricity is crucial for
economic growth and poverty reduction. The Grand Inga project
includes both dams, Inga I (inaugurated in 1972 with a potential of
380 MW) and Inga II (inaugurated in 1982 with a 1,440 MW potential).
Â¶16. (U) According to the World Bank, the DRC Treasury receives only
35 percent of electricity revenues generated by SNEL. Marie
Frangoise Marie-Nelly, Director of the World Bank in Kinshasa, said
SNEL needs USD 20 billion to rehabilitate Inga dam, expand
hydroelectric capacity, and improve transmission lines. She also
said SNEL should use the available funds of USD 200 million to
restore turbines and to construct a second power transmission line
Â¶17. (U) SNEL published a tender for rehabilitation of turbines 7 and
8 at INGA 2. This rehabilitation will fill the current energy
deficit by responding to the needs of the population, the mining
industry in Katanga, and supporting energy pools in Sub-Saharan
Africa. The deadline for submission is May 22. Proposals will be
opened the same day.
KINSHASA 00000329 004 OF 008
Â¶18. (U) Since early 2002, the World Bank (WB) has helped the DRC to
approve 48 million hectares of forest concessions. Problems with
exploitation have made the GDRC review some of these contracts, with
25 million hectares recuperated. The WB in Kinshasa is preparing
three reform projects: 1) capacity building for forestry agencies,
2) capacity building for ICCN (Congolese Institute for Nature
Conservation) staff, and 3) a multi-donor project to review forestry
policy with the participation of civil society.
Â¶19. (U) The GDRC has reacted to Greenpeace accusations of illegal
exports against two timber companies operating in the DRC. The
government says that recent shipments to France were legal and
covered by the required procedures and documents.
Â¶20. (U) An audit commissioned by Prime Minister Gizenga reports that
USD 2 billion went missing from the DRC treasury during the past 18
months. The commission audited nine public enterprises and the
three main revenue collecting agencies (Customs, Taxes, and
Revenues). Ministries that oversee public enterprises were said to
have misappropriated USD 786,819; illegal advantages totaling USD
1,170,794 were granted to managers, and USD 18,081,738 in losses
were still to be justified. “Unconscionable bargains” reached USD
9,578,420 and interior debt of USD 1,467,826,233 went unpaid. The
customs (OFIDA), tax (DGI) and revenue (DGRAD) agencies were said to
have lost USD 59,980,543, USD 56,600,955 and USD 1,705,015,941 in
Â¶21. (U) Cases of malnutrition in and around mining cities in Katanga
are increasing due to the reduction of agricultural activities by
the population in formerly agricultural areas. The province now
imports eighty percent of the cereal it consumes, most of this from
South Africa. Governor Katumbi has decreed that all mining
companies will cultivate at least 500 hectares (over 1000 acres).
Â¶22. (U) A USD 50 million high-priority World Bank road project
(Pro-Routes) will re-pave sections that are currently impassable.
The roads targeted are Kisangani-Buta-Bondo-Bunduki (620 km, about
450 miles) in Province Orientale, with connections to Equateur
Province; and Uvira – Kasomeno (1,180 km, about 800 miles)
connecting Sud Kivu and Katanga provinces. This project will serve
highly populated areas and connect to a network of about 7,000 km
(almost 5,000 miles) of high-priority roads funded by other donors
including the International Development Association (IDA). The WB
project also includes a comprehensive social and environmental
Â¶23. (U) Alan Doss, the new SRSG to the DRC, plans to promote the use
of DRC SMEs for MONUC contracts. Doss committed to initiating
workshops that will help local businesses understand MONUC’s
Â¶24. (U) The National Labor Council began on March 25, 2008 with
delegates from the Ministry of Labor, private companies, and the
labor unions. Council delegates will review resolutions from the
First National Labor Council; adoption of the Labor Code and jobs
that foreigners are prohibited to hold; and the guaranteed minimum
salary for professionals.
Â¶25. (U) RIFIDEC (Regroupement des Institutions de Micro Finance du
Systhme Dcentralis du Congo), a platform of micro financial
institutions, has set up its 2008 – 2012 work plan. This work plan
targets modernization and outreach. RIFIDEC includes 26
institutions authorized by the Central Bank in eight provinces, and
helps some 120 cooperatives and microfinance institutions to
formalize their operations.
Â¶26. (U) The National Microfinance Strategy document provides
information on the current situation, the national policy/strategy,
and an action plan for 2008-2012. Approximately 60,000 accounts
exist in 75 microfinance institutions authorized by the Congolese
Central Bank. Private banking products and services in the DRC are
KINSHASA 00000329 005 OF 008
still poor in general, while the need for banking and credit
services are high and increasing.
Â¶27. (U) A committee will present the Ministry of Plan a proposal for
new laws regulating the collection and organization of statistics.
The draft proposal suggests standardizing the statistical methods
used by various GDRC organizations. Statistics are currently
collected by the National Council of Statistics, the National
Institute of Statistics, and various provincial-level agencies. The
Ministry of Plan hopes to improve the reliability and availability
of statistics in the DRC.
Â¶28. (U) The Vice Minister of Mines, Victor Kasongo Shomari,
announced in February that all of the DRC mining contracts reviewed
needed to be renegotiated. Kasongo, leading a delegation to the
Indaba mining conference in South Africa, said the review process
turned out to require “multiple major surgeries” rather than the
minor corrections initially envisioned. The GDRC will start
negotiations with the mining companies, who will then have the
opportunity to appeal any decision within 30 days.
Â¶29. (U) MIBA is looking for USD 50 million in funding to improve
production. The diamond parastatal announced that it will use 90
percent of the funding for new investments and 10 percent for
operations. MIBA is in the process of reducing expenses by 25
Â¶30. (U) Forrest Group International has signed an agreement to
retrocede two concessions, Mashamba West and Dikulwe in Katanga
province, to GECAMINES for USD 825 million. The concessions
belonged to Katanga Mining, a 24.5 percent shareholder in Forrest
Group, and will not be exploited before 2020. Chinese companies
will reportedly exploit the mineral reserves in Mashamba West and
Dikulwe in exchange for road construction and other
Â¶31. (U) The Ministry of Mines announced on February 18, 2008 that
the DRC had completed the review of 60 mining contracts and has made
the results available to respective companies. The Commission
recommended cancellation of 16 contracts, including joint ventures
between GECAMINES and Swanepoel/Exaco, MIBA and SENGAMINES, and
OKIMO and Amani Gold. A GDRC panel will determine which
recommendations to accept, and the next step in the process will be
renegotiations with a GDRC Task Force. (Ref Kinshasa 294)
Â¶32. (U) The Mining Days Conference took place in Kinshasa from March
12 to 14, during which the Ministry of Mines planned to make quick
decisions to implement the mining code. Martin Kabwelulu, the
Minister of Mines, said the objective for the conference was to
evaluate the implementation of the 2002 Mining Code and to introduce
good governance principles through the Extractive Industries
Transparency Initiative (EITI) practices. Delegates from
international organizations, decentralized administrative entities,
organizations of artisanal mining exploiters, tax collection
services, government experts, and Chambers of Commerce participated
in the event.
Â¶33. (U) Central African Mining & Exploration Company (CAMEC)
completed its joint venture with Prairie International,
majority-owned by the Gertler family, after negotiations with
GECAMINES. CAMEC and Prairie have since restarted operations on
Mukondo Mountain. CAMEC announced that the new deal with GECAMINES
clears the company from further review of its mining licenses.
CAMEC also raised USD 87.27 million (72.5 million new shares at USD
1.21 per share) to develop its Luila copper cobalt facility,
estimating a possible 100,000-ton copper cathode production capacity
Â¶34. (U) GECAMINES expelled artisanal miners from its Kamatana
concession, 3 km from Likasi in the Katanga province, on March 6.
Police killed one miner after fighting broke out with artisanal
miners that would not leave. Police also forced artisanal miners
off of an Anvil Mining concession near Kolwezi on March 31, firing
teargas into the air. Artisanal miners burned tires and threw
Molotov cocktails in protest in Kolwezi and nearby Luilu.
Â¶35. (U) In an effort to enhance the level of education in DRC, the
GDRC and UNICEF estimate the need in the education sector at USD 93
million from 2008 to 2012. Part of this projected expenditure will
KINSHASA 00000329 006 OF 008
be taken from the DRC budget while the rest should be raised from
outside sources. This plan targets reforms in education as well as
increasing the number of children in schools.
Â¶36. (U) A Department of Energy/Department of State delegation met
with the GDRC Office of the Presidency, the Ministry of Higher
Education and Scientific Research, and officials from CREN-K
(Regional Center for Nuclear Studies – Kinshasa) during the week of
March 17. The DOE/DOS team is working toward eventually defueling
the two nuclear reactors located at the University of Kinshasa and
repatriating all U.S.-origin nuclear elements currently in CREN-K
facilities. While DRC government officials were opposed to
defueling one of the reactors, key members of the Ministry and
CREN-K agreed to meet for technical meetings in the near future.
Â¶37. (U) Senator Lunda Bululu, former PM under Mobutu, says the 2008
budget is unconstitutional. He says that it does not include the
required petroleum revenue sharing among provinces based upon their
population size. (Note: the DRC is only producing about 25K barrels
of oil per day, compared to nearly 200M barrels per day in
neighboring Angola. End note.)
Â¶38. (U) A geologist from the Ministry of Mines announced that
significant petroleum reserves exist in eastern Ituri, Orientale
Province. The geologist said a South African company, South Africa
Congo Oil (SACOIL), negotiated a contract with the GDRC to share
production from Block 3, located south of Lake Albert in Ituri. The
Ministry of Hydrocarbons also announced Block 1 would be assigned to
SACOIL after Tullow Oil (UK) and its partner, Heritage Oil (Canada),
had relinquished the concession (a claim Tullow Oil denies).
Â¶39. (U) PERENCO, a French petroleum company specializing in on- and
off-shore oil exploitation in the DRC is planning to invest USD 50
million to double production. Currently, the company produces 25
thousand barrels per day and exports 350 thousand barrels per month.
At the moment PERENCO has a 6 MW hydroelectric dam equipped with
gas compression facilities, a water injection system, electricity
generators, a petroleum storage vessel, and a 300 kilometer pipeline
(210 miles). The GDRC has a 20 percent share in PERENCO.
Â¶40. (U) Brazilian investors from High Resolution Technical Petroleum
(HRTP) visited the DRC on March 26 and met with Prime Minister
Gizenga. HRTP said that they will launch their first petroleum
drilling at Maindombe Lake, Bandundu next year. Dr. Keith Millheim,
President of Global Drilling (a U.S. company) is a partner with the
Brazilian investors. HRTP is investing USD 100 million of which USD
20 million was used on feasibility studies.
Â¶41. (U) Aiming to increase receipts, the new manager of SONAS (the
National Insurance Company) launched a promotion campaign providing
for a free replacement of car insurance stamps. In a close
partnership with the traffic police the brake – block (Denver Boot)
will be used to immobilize cars that do not have current insurance
Â¶42. (U) Union employees of the DRC National Water Company (REGIDESO)
are protesting against possible World Bank-funded reforms as part of
the public enterprise reform process. Employees feel that improved
efficiency and competitiveness should not translate to layoffs.
Â¶43. (U) The Pilot Committee for the Reform of State Enterprises
(COPIREP) has confirmed the awarding of the State Rail Company
(SNCC) management contract to Vectoris, a Belgian firm. Management
of SNCC will now be mixed Congolese and Belgian. The Ministry of
Portfolio, which oversees COPIREP, hopes that this move will
contribute to the eventual return of SNCC to profitability.
Â¶44. (U) Recently-signed management contracts for GDRC river
transport parastatal ONATRA and rail transport parastatal SNCC will
cost a total of USD 8 million. Belgian firm Vectoris and
Spanish/French firm PROGOSA will provide expertise that it is hoped
will turn the unprofitable and under-equipped transportation
parastatals around. ONATRA personnel, meanwhile, are reportedly
more worried about the lack of new equipment (e.g. locomotives and
riverboats). (Comment: While rolling/floating stock for the two
companies is in abysmal condition and short supply, no sane investor
KINSHASA 00000329 007 OF 008
is going to pour millions of dollars into poorly managed companies.
Â¶45. (U) The newly-installed CEO of the Congolese Office des Routes
used the 37th anniversary of the agency to deplore its lack of
financial resources to cover operational costs and investment. He
also denounced what he saw as the marginalization of his agency by
funding and implementation of projects by outside entities.
Â¶46. (U) The GDRC is struggling to meet the key macroeconomic targets
required for eventual reestablishment of the formal IMF country
program. The GDRC is hoping to conclude a new program by March in
order to achieve Highly Indebted Poor Country (HIPC) completion
point before the end of 2008. The challenge lies with maintaining
GDRC expenditures within revenues.
Â¶47. (U) The GDRC’s Technical and Economic Commission presented its
annual report to the Council of Ministers on February 12. According
to the Commission, the poor economic performance during the 4th
quarter of 2007 was due to slow processing in the ports of Matadi
and Boma; backlogs of merchandise at the Kasumbalesa border;
reluctance of economic operators to BIVAC (customs) inspections;
OCC’s refusal to adopt the “guichet unique” (one-stop service for
import/export clearance); and many other border issues. These
problems led to a decreased supply of goods, higher prices in the
interior, and lower DRC customs revenue.
Â¶48. (U) Budget Minister Adolph Muzito says that the GDRC has begun
retrocession of state revenues to the eleven provinces. This is
happening before actual adoption of the decentralization law by the
National Assembly. Muzito stated that the GDRC would make sure that
this money reaches the commune (the smallest administrative entity)
level. USD 6 million has reportedly been given to Kinshasa province
for the period January/February 2008.
Â¶49. (U) Tons of foreign-produced cigarettes are reportedly entering
the DRC via Bunia, Province Orientale, in eastern Congo near the
border with Uganda, without paying required customs and duty fees.
Smuggling from Uganda is thought to be the cause.
Â¶50. (U) Speaker of the National Assembly Vital Kamerhe urged GDRC
officials to allocate required budget support to provinces in
anticipation of a vote on the so-called equalization law, as part of
the overall decentralization process. This would allow provincial
governments to address their emergency needs.
Â¶51. (U) According to the BCC, annual state revenues reached FC 162
billion (USD 324 million) and expenditures FC 161 billion (USD 322
million) through March 10, for a net positive balance of about USD 2
Â¶52. (U) DRC foreign exchange reserves decreased by USD 4.38 million,
down to a total of USD 170 million, which represents one week of
imports. (Note: BCC Governor Masangu told Ambassador Garvelink on
March 26 that this low level of reserves was “not a problem” because
of the ease with which dollars can be obtained from the many in DRC
circulation. End note.)
Â¶53. (U) In an agreement signed by the Republic of South Korea and
DRC, South Korea will connect GDRC institutions via intranet
starting with the ministries of Foreign Affairs, Justice, Plan,
Budget, Finance, PTT, and Public Works.
Â¶54. (U) Public transportation in Kinshasa has become even more
difficult over recent months. The number of buses in circulation is
considered insufficient, and people now rely more on taxis. Because
the taxis are shortening their travel distances to maximize profits,
the waiting-time for transportation is often more than an hour.
Â¶55. (U) The Kinshasa Urban Transport Company (STUC, an apt acronym),
has launched a program to increase the number of buses in
circulation. STUC’s CEO announced that at least 50 buses will be
put back into circulation due to a significant acquisition of spare
parts. STUC also held an awards ceremony to congratulate Congolese
mechanics that were trained by Tata Motors (the Indian supplier of
most buses in the DRC).
KINSHASA 00000329 008 OF 008
Â¶56. (U) At a meeting in Matadi, the GDRC decided that at the end of
the month they will auction containers that are piling up at
ONATRA’s port. This should ease congestion and allow normal
operations to resume.
Monthly Inflation and Exchange Rates
Â¶57. (U) The monthly inflation rate for March was 5.6 percent. The