Cablegate: Increasing Economic Problems in the Kasais

VZCZCXRO1194
RR RUEHDU RUEHGI RUEHJO RUEHMR RUEHRN
DE RUEHKI #1373 2421405
ZNR UUUUU ZZH
R 301405Z AUG 06
FM AMEMBASSY KINSHASA
TO RUEHC/SECSTATE WASHDC 4702
INFO RUEHXR/RWANDA COLLECTIVE
RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEAIIA/CIA WASHDC
RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK
RHMFISS/HQ USEUCOM VAIHINGEN GE
RUEHC/DEPT OF LABOR WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS KINSHASA 001373

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ECON EMIN ELTN PGOV ELAB CG
SUBJECT: INCREASING ECONOMIC PROBLEMS IN THE KASAIS

REF: KINSHASA 1261

1. (U) Summary. Eastern and Western Kasai have been experiencing
increasing economic difficulties, seemingly due primarily to labor
strife, the diamond parastatal's ongoing problems, and seasonal
effects. Both Kasais have experienced shortages of produce, goods
and petroleum products, with consequent sharp price increases. End
summary.

2. (U) Dry season price increases are usual in the Kasais, when
agricultural output, and therefore supply, decreases. However, the
SNCC (DRC's national railway service) strike, which began in July,
has exacerbated the shortage because the railway carries petroleum
and essential goods to the Kasais from Lubumbashi, Katanga province
(reftel). According to the president of the FEC chapter in
Mbuji-Mayi, some products are even sitting unloaded at train
stations because of the SNCC strike. (Note: The president of the
Chamber of Commerce (FEC) chapter in Mbuji-Mayi said that the SNCC
strike is causing the same problems in Maniema province and the
northern part of Katanga province. End note.)

3. (U) The prices of some food items and other basics, including
manioc, maize and cement, have tripled and even quadrupled.
Petroleum prices have doubled, although Mbuji-Mayi is reportedly
harder hit, because it is more reliant on other towns, including
Mwene-Ditu, Ngandajika and Kananga, for food products and other
consumer goods. Petrol for vehicles is 1000 Congolese Francs (CF)
per liter in Kananga, Western Kasai, and 1200 CF per liter in
Mbuji-Mayi, Eastern Kasai, while the fixed national price is 490 CF
per liter.

4. (U) In addition, the region's largest single employer appears to
be having increasing financial difficulties that may be impacting
the overall economic situation, an analysis with which the Congolese
Central Bank (BCC) director in Kananga agrees. MIBA, the DRC's
diamond mining parastatal, has not paid its 6000 employees for
nearly five months. Further, MIBA's official 2006 production and
export has decreased over 2005 levels. The CEEC (the DRC's diamond
evaluating and export authority), reported that MIBA produced
572,876 carats (industrial and gem quality), at an average per carat
value of USD 13.34, versus June 2005 730,162 carats at USD 15.05 per
carat. More importantly, MIBA's export quantity appears to have
decreased over 2005 levels. The Econ Section has received reports
that artisanal diamond mining has also decreased around Mbuji-Mayi.
(Note: The BCC director in Kananga told EconOff that despite
sustained production in Tshikapa, a major alluvial diamond mining
center in Western Kasai, its economy is tied almost solely to
Kinshasa and has little impact on the province. End note.)

5. (U) Although until now the exchange rate in the Kasais has
generally remained in step with national averages, it is showing
slight signs of greater devaluation in Eastern Kasai. On August 29,
the Congolese Central Bank's exchange rate was 467 CF/USD, while in
Mbuji-Mayi it was USD 478. However, the Kananga BCC director said
that exchange rates in the Kasais have been increasingly in line
with national averages and have reacted less to local factors.

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