VZCZCXRO3708
RR RUEHDU RUEHGI RUEHJO RUEHMR
DE RUEHKI #0404/01 0681606
ZNR UUUUU ZZH
R 091606Z MAR 06
FM AMEMBASSY KINSHASA
TO RUEHC/SECSTATE WASHDC 3369
INFO RUEHXR/RWANDA COLLECTIVE
RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEAIIA/CIA WASHDC
RHMFISS/HQ USEUCOM VAIHINGEN GE
RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHRC/DEPT OF AGRICULTURE WASHDC
RUEHC/DEPT OF LABOR WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 05 KINSHASA 000404 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT PASS TO USTR (WJACKSON) 
 
E.O. 12958: N/A 
TAGS: ENRG ECON EMIN ELAB EAGR CG
SUBJECT: KASAIAN ECONOMY LACKS ENERGY 
 
REF: KINSHASA 380 
 
¶1. (U) Summary. The two Kasai provinces offer a clear example 
of the economic tragedy of the Congo, with fertile, 
diamond-studded soil juxtaposed with an impoverished 
population unable to pull themselves out of their economic 
despair.  Western Kasai seems slightly more prosperous than 
Eastern Kasai, but both provinces lack reliable electricity, 
adequate infrastructure, credit and initiative.  These 
elements, as well as transparent, accountable government, 
must be in place before the diamond and agricultural sectors, 
the best hopes for the region, can bring prosperity and 
increased standards of living to the population. End Summary. 
 
Western Kasai - The Lights Are Still Out 
---------------------------------------- 
 
¶2. (U) EconOff and PolOff visited Kananga, the capital of 
Western Kasai province, February 21 through 23 (reftel). 
Administration is the main business of Kananga, a city with 
an estimated population of 600,000 people, in addition to the 
plethora of goats that roam the town. As in much of the DRC, 
extreme shortages of three key elements severely limit 
economic progress: electrical power, transport, and access to 
credit. Little if any industry exists and, as evidence of its 
economic isolation, limited commercial flight service is 
available. Emboffs arrived via a MONUC flight, and even that 
service is erratic.  The town has the bones of either past or 
hoped-for economic prosperity, with its handful of broad, 
well-laid-out commercial district boulevards and a few 
sizable residences.  However, infrastructure is in serious 
disrepair, passable roads are few outside of town, and even 
within Kananga itself, some neighborhoods are inaccessible by 
vehicle because roads have been washed away by runoff and 
poor upkeep. Very few work in the formal sector, which 
consists of MONUC, the GDRC, a few state enterprises and a 
handful of businesses. 
 
¶3. (U) Kananga suffers most from the lack of an effective 
electrical power supply.  Its only electricity comes from two 
gas-powered generators, making the town captive to rising 
fuel prices.  SNEL, the Congolese electricity parastatal, 
usually provides power daily from 7 pm to 11 pm, via its two 
1000 KW diesel generators at a facility that EconOff visited. 
However, the SNEL director in Kananga told EconOff that only 
about 1 percent of Kanangans have access to this power supply 
and that SNEL had been out of fuel for a week.  SNCC (DRC's 
railway parastatal) and REGIDESO (the state water supply 
company) also have generators that some local businesses and 
residents pay to use. 
 
¶4. (SBU) Two possibilities exist for providing Kananga access 
to power: hydroelectric dam construction and a tie-in to the 
trans-DRC Inga-Katanga line.  The Katende Dam, 79 kilometers 
from Kananga on the Kasai River, is under construction via a 
contract with Clackson Power, a South African company. The 
SNEL director said the dam has the potential to generate 32 
MW of electricity. (Note: SNEL will not own or manage this 
hydroelectric plant. End note.)  The project is proceeding 
slowly, although the GDRC released USD 2.5 million in funding 
following the Minister of Energy's February visit to the dam. 
The director told EconOff that it is possible that the plant 
will begin supplying power within 18 months, and the MONUC 
Head of Office in Kananga optimistically said that start-up 
within a year may even be possible, based on his visits to 
the dam and discussion with employees on site.  However, the 
provincial Central Bank representative told EconOff that he 
believes that Clackson Power is essentially defrauding the 
GDRC and that it has no serious intentions to complete the 
dam and power plant.  The SNEL director told EconOff that 
SNEL wants to continue plans to complete a second dam closer 
to Katanga that could generate 15 MW of electricity.  Several 
years ago private citizens and businesses raised USD 4 to 5 
million to construct the second dam, but the SNEL director 
estimated that only USD 1.2 million remain and that 
administrative fees and taxes allegedly consumed the rest. 
 
¶5. (U) The Western Kasai Vice Governor for Economy and 
Finance spoke very enthusiastically about the idea of tapping 
into the Inga-Katanga power line, which brings several 
hundred megawatts of power from the Inga Dam through the 
 
KINSHASA 00000404  002 OF 005 
 
 
Kasais to Katanga province. The line does not currently 
supply power to the Kasais.  Political enthusiasm abounds for 
the project, but no funding.  According to the MONUC Head of 
Office, it is not clear if such a project is even technically 
feasible. 
 
And It's Hard to Get Around 
--------------------------- 
 
¶6. (U) The lack of reliable transport also hampers economic 
growth in Western Kasai, hamstringing the agricultural 
industry and making consumer goods expensive and difficult to 
obtain.  According to a market survey that EmbOffs conducted 
in Kananga, the average market basket of food costs USD 113, 
versus USD 130 in Kinshasa, although Kananga's prices appear 
more volatile as a result of its dependence on a less 
reliable supply. (Note: Market basket quantities and products 
vary among cities. End note.)  The province must import most 
of its goods, and the Vice Governor estimated as much as 80 
percent of its imports come via Katanga, primarily via the 
rail line.  However, the poor condition of the rail line, 
engines and other equipment, theft enroute, and tax payments 
in Katanga mean that goods arrive slowly (seven to eight 
months in transit) and at a high cost.  Most primary and 
secondary roads are highly degraded; transporting cargo takes 
about three weeks between Katanga and Mbuji-Mayi, Eastern 
Kasai's capital.  As evidence of the extent to which Kananga 
is captive to external supply, media reports indicate that 
Zambia's recent decision to stop maize meal exports to the 
DRC resulted in a 35 percent price increase (from 7,000 to 
9,500 CF per unit). 
 
¶7. (SBU) Little access to credit may also significantly 
hamper development. During EconOff's meeting with the local 
chamber of commerce (FEC), many businesspersons complained 
about their inability to get business loans. (Note: They also 
said that the multiplicity and unpredictability of taxes also 
harm business, as is the case throughout the DRC. End note.) 
However, the FEC Vice President said that many 
businesspersons do not even try to obtain credit; this is 
likely a result of both high interest rates and a pervasive 
lack of confidence in the banking system.  The main 
commercial bank, BCDC, charges 35 percent annual interest and 
for usually no more than a six-month term.  The BCDC branch 
manager said his loan portfolio is around USD 100,000 and 
claims that despite the high interest rates, businesspersons 
can and do make profits.  Since the early 1990s, confidence 
in the banking system has been low, and the government had 
done little to change this perception. For example, the 
Congolese Central Bank (BCC) representative in Kananga said 
that although deposit insurance regulations exist, the BCC in 
Kinshasa has not disseminated information on how to implement 
the insurance. 
 
Initiative Is Lacking 
--------------------- 
 
¶8. (SBU) Personal initiative seems to be a resource that 
Kasaians also lack, particularly in the business community, 
though the lack is evident in government leadership as well. 
The Vice Governor said the provincial government has no power 
under the transitional government, and has only limited 
control over its own budget.  Several FEC members complained 
bitterly that the international community does not adequately 
invest in or support economic growth in Western Kasai, and 
that IMF policies actually harm the economy, although they 
could offer no specific examples.  In response to EconOff's 
inquiry, however, FEC members admitted that they had not 
attempted to work together to form credit cooperatives, 
address the energy shortage, fight overtaxation, or take any 
other steps to rectify perceived problems. They were also 
unable to offer EconOff any specific examples of how the 
international community might support economic growth in the 
Kasais.  The BCC Director shared EconOff's impression that 
the business community lacks inventiveness or 
entrepreneurism. 
 
¶9. (SBU) Local workers seem to possess only slightly more 
initiative. The president of Western Kasai's leading union, 
CSC, told EconOff that it holds weekly workers' rights 
advocacy training for its members to help them lobby for 
 
KINSHASA 00000404  003 OF 005 
 
 
improved working conditions. However, he too seemed unable to 
articulate ideas for economic development. For example, 
EconOff spoke with a women's sewing cooperative.  Members 
said that the cooperative is barely sustainable because it 
lacks an adequate client base.  Although the group asked for 
external support, it had no clear idea of what help it 
needed.  CSC's president also complained about the GDRC's 
decision to pay teachers and civil servants in Kinshasa more 
than in the provinces.  Continuing teacher and civil servant 
strikes in the Kasais have not provoked any national policy 
change, however. 
 
Western Kasai's Prospects 
------------------------- 
 
¶10. (SBU) The diamond (septel) and agricultural sectors hold 
the greatest promise for economic growth in the Kasais. The 
Congo's alluvial diamond mining center is in Tshikapa, which 
is 300 kms southwest of Kananga. The DRC's first diamond 
cutting and polishing factory opened in Kananga last year, 
and several international diamond companies, including De 
Beers and BHP Billiton, have new five-year exploration 
concessions. De Beers is already aggressively exploring its 
concessions (septel).  The BCDC director in Mbuji-Mayi did 
note some increase in overall economic activity in the last 
year. 
 
¶11. (SBU) The province currently captures little revenue from 
mining operations, however, since there is little government 
monitoring or oversight, and hemce few diamonds enter 
official channels. The Vice Governor complained repeatedly 
that the province has no control over granting mining 
concessions and receives no benefit from the mining sector. 
Tshikapa is exemplary of the extent to which revenue outflows 
 
SIPDIS 
fail to return.  Western Kasai Head of Office Jean Victor 
Nkolo said that the conditions of Tshikapa, which has as many 
as 3 million inhabitants, are "unimaginable", with virtually 
no roads or access to electricity or potable water. (Note: He 
said that these abysmal conditions have resulted in 
increasing violence and thus sees the town as a potential 
flashpoint. End note.) 
 
¶12. (SBU) Tilling the soil for food crops rather than digging 
for diamonds may be a better long-term development prospect 
for the general population, at least if nothing more than to 
provide basic subsistence.  Many Congolese, particularly in 
the Tshikapa region, have abandoned agriculture (and often 
educational opportunities) in search of the illusory promise 
of getting rich by digging diamonds.  Although estimates on 
remaining reserves vary, artisanal alluvial mining sources 
will not be viable in the long term, particularly if the DRC 
continues to replace individual diggers in favor of 
corporate-controlled industrial and semi-industrial 
concessions.  The Vice Governor and BCC representative 
stressed the importance of reviving the agricultural 
industry.  In fact, the BCC representative himself recently 
purchased farm equipment and is experimenting with 
agricultural approaches. He complained, however, that the 
World Bank's method of supporting agricultural cooperatives 
is counterproductive, and that funds used to pay overhead and 
"technocrats" would be better used to provide employment for 
the local population. 
 
Eastern Kasai - Economic Doldrums 
--------------------------------- 
 
¶13. (U) The lack of adequate infrastructure, economic 
diversity, and vision make Eastern Kasai's economic outlook 
perhaps even bleaker than that of Western Kasai.  Mbuji-Mayi, 
the provincial capital and diamond center, continues to 
epitomize the paradox of abundant natural resource wealth 
contributing very little to the local population. 
 
¶14. (SBU) Eastern Kasai's economy is unquestionably bound to 
the fortunes of its diamond industry, which MIBA, the DRC 
diamond mining parastatal, dominates (septel).  MIBA is so 
linked to the economy that it is a 70 percent owner of a 
local soft drink bottler, one of the main non-diamond 
industries in the province.  The bottling company's director 
is on the MIBA board.  A decrease in diamond production in 
late 2005 impacted the local economy, although EconOff did 
 
KINSHASA 00000404  004 OF 005 
 
 
not see any striking examples of economic downturn compared 
to an August 2005 visit. (Comment: Most of Mbuji-Mayi is so 
impoverished that a decline would be hard to discern. End 
comment.)  The BCDC branch manager said that deposits 
declined by about 50 percent last year compared to 2004.  He 
said that he does not think the province approached the 2005 
estimated national 6.6 percent GDP growth rate. 
 
Problems Beget Problems 
----------------------- 
 
¶15. (SBU) The lack of adequate infrastructure exacerbates the 
poverty in Western Kasai.  MIBA is Mbuji-Mayi's only 
significant electrical power generator, via its dam and 
hydro-plant, but it consumes most of the production. MIBA's 
CEO, Gustave Luabeya Tshitala, told EmbOffs that the MIBA 
plant is generating 11.5 MW but planned to increase output to 
16 MW in March.  (Note: In August 2005, MIBA executives told 
EconOff that its plant had a 30 MW hydro-electric capacity 
and that five of six turbines were already operating. End 
note.)  The provincial SNEL director told EconOff that MIBA 
accords no more 1.5 MW to SNEL for general distribution, and 
that often MIBA does not even provide that amount.  The SNEL 
director also claims that MIBA tries to charge many customers 
a USD 2500 "study fee" to discourage electricity purchase. 
Outside of Mbuji-Mayi electricity is even more scarce, with 
about 600 KW in the town of Mwene Ditu, 100 kms south of 
Mbuji-Mayi, and no electricity at all in Kabinda, 100 kms 
east.  The lack of electricity means that an adequate supply 
of clean water is unavailable. 
 
¶16. (U) The transport system in Mbuji-Mayi is even more 
degraded than Kananga's, with few paved roads and rail 
service about once per week. (Note: BCDC's director said that 
SNCC employees' salaries are more than a year in arrears and 
that strikes are frequent. End note.)  Just as in Western 
Kasai, the combination of inadequate infrastructure and the 
lure of diamonds discourages manufacturing or agricultural 
production, leading to the additional problem of a high cost 
of living.  Nearly all goods must be imported, at a 
significant cost.  The average market basket in Mbuji-Mayi 
costs USD 145, more than in Kinshasa, where wages are 
generally higher. 
 
Complaints, but no Solutions 
---------------------------- 
 
¶17. (SBU) As in Eastern Kasai, complaints abound, but 
proposed solutions are scarce.  Governor Dominique Kanku 
echoed the Western Kasaian Vice Governor's comment that he 
has little budget control, stating that Eastern Kasai does 
not receive the proceeds it should from GDRC diamond 
revenues.  (Note: Conversely, MIBA's Luabeya estimates that 
USD 70 to 120 million is retroceded monthly to the province, 
through this seem unlikely. End note.)  Nearly every other 
government official, politician and businessperson with whom 
EmbOffs met lacked suggestions, no less solutions, to the 
province's economic woes, beyond asking for generic donor 
support. 
 
But Change Is on the Horizon 
---------------------------- 
 
¶18. (U) The only emerging change in the Eastern Kasaian 
diamond sector is the relaunching of large-scale diamond 
exploration by De Beers and other recent concession grantees 
(septel).  If the region remains secure, these ventures are 
likely to yield significant additional revenues for the DRC, 
not only through tax income but also new jobs and downstream 
income in support sectors.  MIBA is also interested in 
expanding its mining operations, but it remains unclear if it 
can obtain the outside investment necessary to do so. 
 
Comment 
------- 
 
¶19. (SBU) Electrification of the two Kasai provinces is a 
priority need, but this alone cannot lift the provinces out 
of their economic doldrums if neither begin to develop social 
support programs and alternate economic bases, such as 
agriculture.  Kasaians should also obtain their fair share of 
 
KINSHASA 00000404  005 OF 005 
 
 
proceeds from the diamond sector.  Claiming the central 
government in Kinshasa is aligned against them, Kasaians 
remain unwilling or incapable of improving social and 
economic conditions themselves. The upcoming elections offer 
an opportunity for Kasaians to select new, accountable 
national and local representatives who may better advocate on 
their behalf - if they choose to vote. End comment. 
MEECE