This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 05 KINSHASA 001140 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EAID EAIR ECON ECPS EFIN EINV ELTN EMIN EPET ETRD PGOV PREL CG
SUBJECT: ECONOMIC REPORT - MARCH THROUGH JUNE 2004 
 
¶1. SUMMARY. Prices and the exchange rate remain stable even 
through political difficulties. The mining sector has been 
extremely active. Mining company America Mineral Fields 
(Amfi) wins approval and signature of its USD 300 million 
contract and then changes its name to Adastra Minerals. The 
UK government has exonerated De Beers of accusations of OECD 
violations made by the UN Panel on Resource Exploitation. 
The Central Bank is liquidating the Bank of Commerce and 
Development. The local market is demanding pay by the second 
telecommunications charges. Truckers protested the high 
level of insecurity on the Matadi Road. Commercial flights 
between the DRC and Uganda are scheduled to resume. 
Zimbabwean investors bought the Hotel Karavia in Lubumbashi 
END SUMMARY. 
 
MONETARY AND PRICE UPDATE 
 
¶2. Prices have remained largely stable throughout the recent 
political crises. Only a slight increase was registered in 
the past two weeks. Inflation, year-to-date, is at zero (0) 
percent. Currently, food stocks are high, keeping prices 
stable. However, the amount of rainfall north of Mbandaka in 
Equateur province has been abnormally low - as evidenced by 
the extremely low level of the Congo River at present - and 
if this affects food supplies, food prices would be likely 
to increase. On the contrary, the dry weather helps firewood 
and charcoal supplies - the other major daily consumables in 
the local economy. 
 
¶3. The Congolese Franc (FC) has not fluctuated greatly over 
the past 2-3 months. The informal market rate hovers at FC 
385-395 to the USD. A slight increase (FC 5 band trending 
up) was noted in Goma and Bukavu over the past two weeks. 
This may be due to the relative lack of economic activity 
and access to cash resulting from the ongoing instability. 
(Note. The exchange rate tends to be slightly higher - 
approx FC 400 to USD 1 - in the Kivus and Kisangani. It had 
only converged with the Kinshasa, Lubumbashi and Mbuji Mayi 
rates three weeks before the hostilities began. End Note.) 
 
MINING 
 
AMFI WINS INTERMINISTERIAL APPROVAL, CHANGES NAME 
 
¶4. On Mar 12, America Mineral Fields (Amfi) won inter- 
ministerial approval from the GDRC cabinet for its joint 
venture with Gecamines for the Kolwezi Tailings project. 
Formal signing ceremonies took place on March 23 in 
Kinshasa. Amfi representatives in Kinshasa stated that the 
final hurdle to gaining approval was to convince the 
Presidency that no bribes had been paid in the course of 
negotiating the contract. The hurdle as explained to post 
was that the Presidency was so exceptionally surprised that 
AMFI got past Gecamines and the Mining Ministry that it was 
thought that a bribe must have been paid. IFC and IDC 
financing was held out as evidence of the inability of Amfi 
to resort to under-the-table deals. (Comment. Amfi did end 
up conceding to USD 15 million in lump sum payments to 
Gecamines, which could have expedited the deal seeing as the 
current senior management of Gecamines is scheduled to be 
fired in the near future. Bceco, one of the executing 
agencies of the World Bank in the DRC, recently posted in 
"l'Intelligent" a public offer of employment for the soon to 
be vacant senior management positions in Gecamines. End 
Comment.) Amfi also recently changed its name to Adastra 
Mineral and hired Rothschild as the primary financial 
advisor for the Kolwezi Tailing project. 
 
SENGAMINES BATTLES WITH GDRC 
 
¶5. During March, the National Assembly of the GDRC and the 
Minister of Mines called on Sengamines to come into full 
compliance with Congolese law, according to Minister of 
Mines Diomi Ndongala. The specific requests are for the 
delivery of a feasibility study of the entire project and 
the inclusion of a member of Miba on Sengamines' governing 
board. (Note. Miba is a 20 percent shareholder in 
Sengamines. End Note.) Sengamines is currently resisting the 
addition of a Miba member to its governing board and as of 
yet has not presented a feasibility study. 
 
AFRICAN GOLD PLC ENTERING DRC 
 
¶6. African Gold, PLC plans to form a joint venture with 
Tangold, Sprl of the DRC. Greendale Universal Holdings 
Limited is a shareholder. The preliminary agreement signed 
between Greendale and African Gold holds that African Gold 
has 90 days to conduct due diligence on the Tangold and the 
license agreement. African Gold must also complete a 
preliminary exploration program of the concerned concession 
(Portion 3 of Concession 38) and must also make a lump sum 
payment of USD 250,000. 
 
CADASTRE MINIER CHANGES MANAGEMENT 
 
¶7. Cadastre Minier (Cami) had shut its doors indefinitely in 
protest of a declaration by Minister of Mines Diomi halting 
the processing of any further new mining concession 
applications. This dispute ended in the suspension of 
Director General Ambroise Mbaka, who argued that the 
Minister neither had the authority to halt its work nor had 
given sufficient justification for the action. Diomi has 
technical oversight of Cami and cited an unfavorable World 
Bank report on Cami for stopping the reception of new 
concession applications. Cami has not been accused of any 
improprieties and has been cited by several mining companies 
as being the most professional of all the services 
associated with the mining sector. Nevertheless, Mbaka is 
out, and the deputy director, Joseph Ngoma di Nzau is now 
interim director and has pledged to improve Cami's 
performance. 
 
METOREX TAKES SCANDAL PLAGUED MINE DE L'ETOILE 
 
¶8. In May, South African mining junior Metorex recently 
signed a deal with the GDRC for the development of Mine de 
l'Etoile and Ruashi. Etoile was originally sold the Chemaf 
Sprl under suspicious circumstances. The contract - signed 
by Chemaf with Gecamines and the Mining Ministry - was 
annulled by Vice President Bemba. Metorex estimates that the 
mine could produce 42,500 tons of copper and 3,500 tons of 
cobalt per year with a life of 30 years. It holds a 52 
percent stake while the GDRC reserves 20 percent and 
Sentinelle (a local firm) takes the remaining 28 percent. 
Estimated investment is approximately USD 200 million with a 
first tranche of USD 18-20 million to come in June. Metorex 
plans to raise the second and final tranche of USD 150-180 
million in the next 18 months. 
 
KGHM PLANNING TO RETURN TO DRC 
 
¶9. KGHM Polska Miedz is considering returning to the DRC to 
develop a copper/cobalt processing plant near Kimpe. The 
total cost of the project is approximately USD 10 million. 
Equipment is scheduled to be purchased from a Canadian 
supplier. 
 
MINING - DE BEERS EXONERATED BY UK AGENCY 
 
¶10. In May, the UK Department of Trade and Industry 
determined that the allegations raised against De Beers by 
the UN Panel on Exploitation of Natural Resources in the DRC 
were unsubstantiated. The 2002 Panel report accused De Beers 
of violating OECD guidelines for multinational companies. 
 
MINING - GEOLOGICAL SURVEY OF KABINDA REGION PLANNED 
 
¶11. Belgian mining consultants Bugeco is undertaking a USD 3 
million geological/mineralogical survey of the Kabinda 
region of the DRC (East of Mbuji Mayi - Kasai Oriental). 
Bugeco also advises the GDRC on mining policy. 
 
MINING - 21 MINERS DIE NEAR TSHIKAPA 
 
¶12. In early May, 21 artisanal diamond miners died near 
Tshikapa, Kasai Occidental, when a mudslide caused the walls 
 
SIPDIS 
of the pit in which they were digging to collapse. (Comment. 
This is not an infrequent occurrence. Pits are often dug too 
close together on unstable ground and are rarely reinforced 
rendering them vulnerable to collapse. End Comment.) 
 
BANKING - FORCED LIQUIDATION OF BCD 
 
¶13. The Congolese Central Bank (BCC) recently began the 
forced liquidation of the Bank of Commerce and Development 
(BCD). This was a small national bank with offices in 
Kinshasa, Lubumbashi and the Kivus. The BCC estimates that 
the total cost to liquidate the bank and pay the severance 
packages of the workers should not total more than USD 5 
million (less than USD 100,000 will be dedicated to 
severance pay). Priority for account reimbursement is 
focused on small account holders (e.g. less than USD 20,000 
or FC 500,000). Only accounts and employees in Kinshasa and 
Lubumbashi will benefit from the liquidation. The GDRC has 
made the decision that since the BCC did not have control of 
the bank branches in the Kivus either during the war or 
currently, the account holders and employees in those 
branches will be left outside of the package. USD 2.5 
million will be disbursed in June with the remaining USD 2.5 
million being disbursed from July to December. 
 
TELECOMMUNICATIONS - FEE STRUCTURE ISSUES 
 
¶14. The Union of Telecommunication Services Consumers (UCST) 
has filed a formal protest to the Ministry of Post, 
Telephones and Telegraph against the current fee structure 
utilized by cellular telecommunications providers in the 
DRC. Almost all providers have a pay by the minute system, 
rather than pay by the second. This increases costs to the 
consumer. (Comment. It is interesting that the market does 
not seem to have the power to influence the 
telecommunications providers through choice as in the US 
market where pay by the second fee structures have won 
through plan choice. End Comment.) 
 
INFRASTRUCTURE - NEW WATER SYSTEM FOR MUDUSA 
 
¶15. The ICRC opened a new water provision system in Mudusa, 
South Kivu province on Mar 16. The system was developed in 
concert with the local NGO Initiatives et Actions pour le 
Developpement Local and will service the villages of 
Lwanvuhye, Cirhagabwa, Cirhundu and Lugusha - a population 
totaling approx 6,000 people. The project took four months 
to complete and involved the use of two springs in 
Musheweshwe, the rehabilitation of one reservoir and 
construction of another, and the installation of 18 water 
taps supplied by 6.5 km of piping. 
 
HEALTH - SLEEPING SICKNESS OUTBREAK IN WEST KASAI 
 
¶16. In the Katende health zone of Kasai Occidental province 
an outbreak of sleeping sickness has occurred according to 
the director of the Congolese national program to fight 
trypanosomiasis, Dr. Victor Kande. More than a dozen cases 
have been reported. However, a greater number of people 
could easily be affected without GDRC knowledge due to the 
remoteness of many villages and the lack of adequate 
understanding of the disease by the local population. 
 
TRANSPORTATION - TRUCKER STRIKE ON MATADI ROAD 
 
¶17. In March, truckers initiated a strike to protest the 
high level of insecurity on the Matadi Road (National Route 
No.1). Truckers attempted to increase security on their own 
by traveling in convoys. However, the loading delays at the 
Port of Matadi while waiting for enough trucks to form a 
convoy was not cost-effective for the shipping companies. 
Truckers asked for increased protection from the government. 
The Minister of Interior has increased military patrols on 
the road and a curfew of 18:00L for travel to improve 
security. Traffic is flowing more normally on the Matadi 
Road at present. 
 
CIVIL AVIATION - FLIGHTS FROM DRC TO UGANDA TO RESUME 
 
¶18. The GDRC has reopened its airspace to commercial flights 
from Uganda. A memorandum of understanding between their 
respective civil aviation authorities provides the 
groundwork for the decision. However, a bilateral air 
agreement is still under review. 
 
HIV/AIDS AGREEMENT BETWEEN GDRC AND UNC 
 
¶19. UN OCHA press reported that the GDRC has authorized the 
University of North Carolina to establish an office at the 
Kinshasa Referral Hospital to help improve the fight against 
HIV/AIDS. UNC will also train health personnel. 
 
INTERNET AND INFOTECH 
 
¶20. Three companies, two of which are German (Keysystems and 
Nic.cd), are in a legal battle to gain control of the ".cd" 
top level domain registry for the DRC. The Ministry of Post, 
Telephone and Telegraph may have given control over the 
registry to the third company, Congo Internet Management. 
 
AID - WORLD BANK GRANT FOR DDR 
¶21. In late May the World Bank approved a USD 100 million 
grant earmarked for the GDRC's Emergency DDR Plan. The 
program will support reinsertion of 150,000 demobilized 
troops and permit reallocation of government spending from 
the military to social and economic sectors. 
 
REAL ESTATE/TOURISM - PURCHASE OF HOTEL KARAVIA 
 
¶22. Zimbabwean press reports that the Rainbow Tourism Group 
(RTG) has purchased the Hotel Karavia (250 rooms) in 
Lubumbashi. RTG intends to remodel and rename the hotel the 
Caribbean; it is the largest in Lubumbashi. The total cost 
is estimated at USD 1.8 million. (Note. RTG also manages the 
Sheraton Harare and either owns or manages the Rainbow 
Mercure Hotels, Touch the Wild Lodges and Safaris, and 
Tourism Services Zimbabwe. End Note.) 
¶23.  INFLATION BY CATEGORY  (IN PERCENT) 
 
WEEK ENDING         03/12     03/19     03/26     04/02 
FOOD               -1        -2        -1         2 
BEVERAGES           0         0         0         0 
NON-FOOD           -10        0         1        -2 
CLOTHING            0         0         0         0 
RENT                0         0         0         1 
TRANSPORTATION      0         0         0         0 
SCHOOL COSTS        0         0         0         0 
UTILITIES           0         0         0         0 
COMBINED FIGURES 
WEEKLY             -8.0      -0.8      -0.3       0.8 
MONTH TO DATE      -0.5      -1.3      -1.6      -0.8 
 
WEEK ENDING         04/09     04/16     04/23     04/30 
FOOD               -1         1         0         0 
BEVERAGES           0         0         0         0 
NON-FOOD            0         0         0         0 
CLOTHING            0         0         0         0 
RENT                0         0         0         0 
TRANSPORTATION      0         0         0         0 
SCHOOL COSTS        0         0         0         0 
UTILITIES           0         0         0         0 
COMBINED FIGURES 
WEEKLY             -0.3       0.4      -0.2      -0.1 
MONTH TO DATE      -0.3       0.0      -0.1      -0.2 
 
WEEK ENDING         05/07     05/14     05/21     05/28 
FOOD                0         0         0         0 
BEVERAGES           0         0         0         0 
NON-FOOD            4         0        -4         0 
CLOTHING            0         0         0         0 
RENT                0         0         0         0 
TRANSPORTATION      0         0         0         0 
SCHOOL COSTS        0         0         0         0 
UTILITIES           0         0         0         0 
COMBINED FIGURES 
WEEKLY              0.2       0.0      -0.1       0.1 
MONTH TO DATE       0.2       0.2       0.1       0.2 
 
February 2004 inflation: 0.0 percent 
March 2004 inflation: -1.4 percent 
April 2004 inflation: -0.2 percent 
May 2004 inflation: 0.2 percent 
Year to date: 0 percent 
Last 12 months inflation: -0.2 percent 
2002 Inflation: 22 percent 
2003 Inflation:  7 percent 
 
EXCHANGE RATE DEVELOPMENTS 
 
¶25.  Exchange rates in Congolese francs per US dollar 
 
                    03/12     03/19     03/26     04/02 
CENTRAL BANK RATE   380.4057  381.9240  382.8745  383.7484 
PARALLEL MARKET 
-KINSHASA           380-385   380-385   385-390   380-385 
-LUBUMBASHI         380-390   380-390   380-390   380-390 
-MBUJI MAYI         375-380   380-385   380-385   375-380 
-KISANGANI          390-400   390-400   400-410   400-410 
-GOMA               400-420   400-420   400-410   400-410 
-BUKAVU             400-420   400-420   400-410   400-410 
 
                    04/09     04/16     04/23     04/30 
CENTRAL BANK RATE   382.7635  384.3099  385.1090  385.2552 
PARALLEL MARKET 
-KINSHASA           380-385   380-385   380-385   385-390 
-LUBUMBASHI         377-385   377-385   377-385   380-390 
-MBUJI MAYI         375-380   375-380   375-380   380-385 
-KISANGANI          400-410   390-400   390-400   390-400 
-GOMA               400-410   400-410   400-410   395-405 
-BUKAVU             400-410   400-410   400-410   395-405 
 
                    05/07     05/14     05/21     05/28 
CENTRAL BANK RATE   385.6318  386.8274  385.8868  385.8236 
PARALLEL MARKET 
-KINSHASA           380-385   385-390   385-390   380-385 
-LUBUMBASHI         380-390   380-390   380-390   380-385 
-MBUJI MAYI         380-385   380-385   380-385   375-380 
-KISANGANI          385-395   385-395   385-395   380-390 
-GOMA               385-395   385-395   385-395   395-405 
-BUKAVU             385-395   385-395   385-395   395-405 
HOOKS