Cablegate: Drc August Economic Review

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DE RUEHKI #1069/01 2491017
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R 061017Z SEP 07
FM AMEMBASSY KINSHASA
TO RUEHC/SECSTATE WASHDC 6826
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
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UNCLAS SECTION 01 OF 04 KINSHASA 001069

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ECON EFIN EMIN ELAB EAIR PGOV CG
SUBJECT: DRC AUGUST ECONOMIC REVIEW

Summary
-------
1. (U)
- New aviation regulations.
- No resolution on retrocession for 2007.
- Country assistance framework in the planning.
- Teachers' union gives ultimatum to GDRC.
- Catholic school teachers suspend opening day.
- Electricity upgrade projects scheduled.
- Wiring DRC and ROC.
- "Pendulum displacement" in the Kivus.
- Cement export banned.
- Chinese delegation visits DRC.
- Audit to examine petroleum sector income.
- Two dead in Lake Albert shootout.
- Potential new oilfields.
- Opening the Kamoto Copper Mines.
- Minerals being flown out of the DRC.
- GDRC revokes mining licenses.
- Congo-Tex files for bankruptcy.
- Potential South African construction projects.
- Kasai Occidental: Mystery Illness
- Media promotes AIDS and HIV education.
- Inflation and Exchange Rates

Aviation
--------
2. (U) New aviation regulations.
On July 28 Vice Minister of Transportation, Laure Marie Kawanda
Kayena, declared that the GDRC is in strict compliance with
international aviation regulations. The Minister also gave a
six-month deadline for all airlines to cease using Antonov aircraft.
Meanwhile, on August 27 an Antonov plane crash killed 13 and
seriously injured two others. Following the accident the Minister of
Transportation suspended the Director of Civil Aviation and the
Director of Kongolo Airport for not enforcing aviation rules against
transporting passengers and minerals (as cargo) together.

Budget
------

3. (U) No resolution on retrocession for 2007.
Ministry of Budget Muzitu, experts and provincial authorities met
from 11-24 August, but did not reach consensus on how and when to
implement the 40 percent retrocession of central government revenues
to the provinces, as is called for in the 2006 Constitution. Muzitu
said that implementation should be delayed until at least January
2008 and this was later confirmed by President Kabila on August 28.

Cooperation
-----------

4. (U) Country assistance framework in the planning.
The World Bank, IMF, African Development Bank and the GDRC met in
Kinshasa August 27 to decide how to apply the Country Assistance
Framework (CAF). This plan, designed as a three-year roadmap for DRC
development, is supposed to begin being implemented this year.

Education
---------

5. (U) Teachers' union gives ultimatum to GDRC.
The national public school teachers' union (SYECO) rejected a GDRC
salary increase proposal; SYECO claims its members need further
benefits. SYECO demanded these increases by end August, before
school restarts. The union called another general assembly meeting
for September 1 to decide whether to return to classrooms on
September 3. (Note: See SepTel about back to school labor issues.
End note)

6. (U) Catholic school teachers suspend opening day.
The Catholic Schools Teachers' Union (SYNECAT) decided not to go
back to school as scheduled by the GDRC. The decision was reached
because the government has refused to meet with teachers' salary
demands.

Electricity
-----------

7. (U) Electricity upgrade projects scheduled.
South African firm ABB (Asea, Brown, and Bouveri) Holding has
provided USD 200 million for two electricity projects in the DRC.
The first project will bring the Kimwenza station in Kinshasa back
up to 75 Mw from its current 12 Mw output for Kinshasa and
Brazzaville. The second will double the electricity output of the

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Zongo hydroelectric plant in Bas Congo to 150 Mw. The additional
power will be used in Gombe and Ngaliema, two neighborhoods in
Kinshasa. ABB will also facilitate the electrification of western
Kasai by creating a branch transmission line from the existing
Inga-Katanga power line.

8. (U) Wiring DRC and ROC.
Experts from Angola, Congo-Brazzaville, and DRC met with the Central
Africa Energy Pool (PEAC) to discuss connecting the DRC Inga Dam
with Pointe Noire in the ROC. Approximately 370 kilometers long, the
cost of this project in unknown and would require the construction
of transmission lines through the Cabinda enclave of Angola.

Humanitarian
------------

9. (U) "Pendulum displacement" in the Kivus.
Thousands of internally displaced persons (IDPs) in the Kivus leave
their villages and fields at night to sleep in safer areas, closer
to UN peacekeepers. "Pendulum displacement" makes it difficult for
aid workers to determine the numbers of IDPs, and where and how to
deliver aid to them. During the latest displacement in South Kivu,
aid workers could not access remote areas.

Trade
-----

10. (U) Cement export banned.
The Minister of Economy issued a decree on August 7 prohibiting the
export of locally produced grey cement. In an effort to control the
rising cost of cement, the price of a 50 kilo (110 pound) sack was
set at 10 USD. Sacks of cement, however, are currently selling for
up to 20 USD in Kinshasa and 40 USD in the provinces. CILU and
CINAT, the two companies who manufacture grey cement, have requested
permission to sell directly to distributors, thereby avoiding the
middlemen.

Investment
----------

11. (U) Chinese delegation visits DRC.
On August 5th the China-Africa office in Kinshasa sponsored a
delegation of Chinese investors. The visit was guided by the deputy
Secretary General of China-Africa, M. Etienne Mabele Bwansa. The

SIPDIS
investors met with the Director of President Kabila's Cabinet and
with the ministries of Health, Education, Energy, Labor,
Environment, National Economy and External Commerce. (Comment:
Interestingly, the delegation did not apparently meet with
representatives of the Ministry of Mines, or if they did it was not
reported in the press. End comment.)

Petroleum
---------

12. (U) Audit to examine petroleum sector income.
The Senate and Parliament have launched an audit to examine the low
contribution of the petroleum sector to GDRC revenues. They plan to
look at production volume, which is much lower than in DRC's
neighboring countries. (Note: DRC output is only about 20K
barrels/day; Angola produces about 1.7 million barrels/day, up 30K
barrels/day since July. End note)

13. (U) Two dead in Lake Albert shootout.
A Congolese soldier and an expatriate British employee of British
company Heritage Oil were killed in a shootout on Lake Albert, part
of the border between the DRC and Uganda. Heritage is preparing to
begin exploitation of high grade crude it has located beneath the
Ugandan side of the lake. Heritage also has concessions on the
Congolese side of the lake, but has yet to begin exploration
activities there. Ugandan President Museveni and DRC President
Kabila are scheduled to meet on September 8 in Arusha, Tanzania, to
discuss working together to exploit potential petroleum reserves in
Lake Albert.

14. (U) Potential new oilfields.
According to local sources, foreign investors are interested in
exploring for oil near Dekese, Kasai Occidental province. It is
known that test holes were drilled throughout the "Central Basin" of
the DRC during colonial days and that some of these wells showed
promise but were never exploited.

Mining
------

15. (U) Opening the Kamoto Copper Mines.
The Central Mining and Exploration Company (CAMEC) and another

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company, Nikanor, are competing for control of Katanga Mining
Limited (KML). Both are interested in reopening the former
Gecamines-run Kamoto Mine, which suffered a major collapse of the
central portion of the mine in 1990. Since then, production has
stopped.

16. (U) Minerals being flown out of the DRC.
The President of the Congolese National Assembly, Vital Kamerhe,
claimed that there are twelve flights daily from Walikale (North
Kivu) to Rwanda, Burundi, and Uganda that deliver gold, diamonds,
and coltan.

17. (U) GDRC revokes mining licenses.
The GDRC has revoked copper and cobalt licenses held by CAMEC and
Savannah Mining in Katanga province. This action was taken in
connection with a GDRC review of roughly 60 mining contracts to
determine whether they are legal and fair. CAMEC claims the
revocation was designed to block its recent all-share bid for
Katanga Mining.

Textiles
--------

18. (U) Congo-Tex files for bankruptcy.
Congo-Tex, one of two large textile companies in the DRC, has filed
for bankruptcy. Congo-Tex was a joint venture between CHA (Chinese)
and Texaf (Belgian) groups.

Water
-----

19. (U) Potential South African construction projects.
As follow-up to the bilateral commission that met in Kinshasa, South
Africa is looking at several Congolese infrastructure projects for
possible financing, including the construction of a deep water port
in Banana, rehabilitation of the Matadi-Kinshasa Road, construction
of a new railway connecting Ilebo and Kinshasa, construction of a
deep water port in Banana, rehabilitation of the Matadi-Kinshasa
Road, and construction of a new railway connecting Ilebo and
Kinshasa.

ESTH Issues
-----------

20. (SBU) Kasai Occidental: Mystery Illness
Numerous press accounts indicate over 100 people have died over the
last two weeks from an unidentified illness in northern Kasai
Occidental province following the mysterious death of two chiefs in
June. Early reports said the disease seemed similar to typhoid
fever, a bacterial illness transmitted by contaminated food or
water. The GDRC has sent a team to the zone to investigate, and CDC
Kinshasa is monitoring the situation. The Congolese researchers
report that there were unexplained deaths of birds and animals in
the same area in April and May.

21. (U) Media promotes AIDS and HIV education.
Media Contre Sida (Media Against AIDS -- MCS) says that Congolese
newspapers should dedicate more space to HIV/AIDS awareness. MCS
says about eight percent of all news is AIDS-related, but that this
isn't enough and that the DRC should contribute more to HIV/AIDS
prevention efforts. MCS said that the media must educate Congolese
youth to prevent the spread of AIDS.

Inflation and Exchange Rates
----------------------------

22. (U) Post's market survey measured an inflation rate of 1.7
percent for the month of August. The year-to-date inflation now
stands at 18 percent. This inflation is mostly due to shortages of
some basic food items at the end of the dry season and to clothing
sector costs as students prepare to return to classes in early
September. Exchange rates remained very stable throughout the
country, varying on the order of one to two percent, between 490 to
500 FC to the USD.

Exchange Rates (Congolese francs per 1 USD):

Week ending 7/31 8/3 8/31

CENTRAL BANK RATES 493 495 495

PARALLEL MARKETS:
KINSHASA 490 490 490
LUBUMBASHI 490 490 490
MBUJIMAYI 485 495 500
KISANGANI 490 495 500

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GOMA 495 495 500
BUKAVU 495 495 500

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