VZCZCXRO1783
RR RUEHBZ RUEHDU RUEHGI RUEHJO RUEHMR RUEHRN
DE RUEHKI #0135/01 0381306
ZNR UUUUU ZZH
R 071306Z FEB 08
FM AMEMBASSY KINSHASA
TO RUEHC/SECSTATE WASHDC 7491
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
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 05 KINSHASA 000135 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EMIN ELAB EAIR PGOV CG
SUBJECT: DRC DECEMBER ECONOMIC REVIEW 
 
¶1. (U) Summary 
 
Agriculture 
----------- 
- GDRC sets up Forests' National Consultative Council 
 
Aviation 
-------- 
- A South African Aircraft Crash Lands 
 
Cooperation 
----------- 
- African Bank for Development Acquires Shares of Advans Bank Congo 
 
- World Bank Approves 82 Loans and Credits for the DRC 
- Angola and DRC Sign Partnership Agreement 
- Great Britain Allocates USD 100 Million for DRC Forests 
- Holland Donates USD 24 Million to DRC 
- Japan Allocates USD 11 Million to DRC 
 
Energy 
------ 
- Fuel Shortages in Kasai Oriental Province 
- High Performance of COBIL for Last Five Years 
- DRC and ROC Examine Oil Reserves in Congo River Basin 
 
Environment 
----------- 
- Climate Change Guidelines Established for DRC 
 
Infrastructure 
-------------- 
- Ministry of Economy/Trade Lowers Cement Price 
- Governor of Chinese Exim Bank Visits Kinshasa 
- World Bank Supports DRC Transportation Sector 
 
Investment 
---------- 
- DRC and China Sign Two Agreements for Total USD 34.38 Million in 
Loans 
 
Mining 
------ 
- Moto Gold Project a World-Class Gold Camp 
- Cobalt Price Up Due to High Demand and Conflict 
- DRC and China Form Joint Mining Ventures 
 
Miscellaneous 
------------- 
- Senate Considers Two Laws On State Enterprises 
- EITI President Attends Kinshasa Conference 
- Kinshasa Public Transportation Company Making Changes 
- Inspection of Imported Goods Reinforced in January 
- New Managers Named for Public Enterprises 
 
Public Finance 
-------------- 
- GDRC Launches Fund Raising Campaign 
- Congolese Central Bank Raises Prime Interest Rate 
- DRC Ends 2007 with 7.2 Percent GDP Growth 
- 2008 Budget Adopted by the National Assembly 
- Minister of Finance Raises Cigarette Tax 
- National Assembly Raises Corporate Income Tax Rate 
- Money Supply up at USD 552 Million 
- Central Bank Acts to Halt Depreciation 
- January Budget Deficit of USD 24.5 Million 
- PEFA Stakeholders Analyze Partnership between DRC and Donors 
- ANAPI: "Five Pillars" will be Investment Incentive in 2008 
 
Monthly Inflation and Exchange Rates 
------------------------------------ 
- Congolese Franc Depreciation 
- Monthly Inflation 2.5 Percent 
- Exchange Rate Increases as Money Supply Expands 
 
 
Agriculture 
----------- 
 
¶1. (U) The GDRC has set up a National Consultative Council for its 
forests.  This Council is supposed to make the management of the 
forests transparent through the participation of Civil Society.  The 
new council will follow up on the application of the new forestry 
code and the implementation of forestry projects countrywide. 
 
 
 
KINSHASA 00000135  002 OF 005 
 
 
Aviation 
-------- 
 
¶2. (U) A South African aircraft operated by King Services crash 
landed on January 8 at Luano airport in Lubumbashi, Katanga.   The 
plane carried only crew and cargo.   No one died in the accident. 
 
 
Cooperation 
----------- 
 
¶3. (U) The African Bank for Development (AfDB) acquired 20 percent 
of Advans Bank Congo's shares.  Advans Bank Congo (ABC) specializes 
in micro-finance.  AfDB reported that EUR 650,000 worth of technical 
assistance will be given to ABC.  ABC is one of the banks waiting 
for a presidential decree in order to operate in the DRC. 
 
¶4. (U) According to Marie Francoise Marie-Nelly, the new Director of 
the World Bank (WB) for the DRC and ROC, the WB has approved a total 
of 82 loans and credits for the DRC for a total amount of USD 3.6 
billion.  Ongoing financed operations total approximately USD 1.9 
billion.  Nine active operations will impact the following sectors: 
agriculture, fisheries and forestry, education, health and other 
social services, transportation, law and public administration, 
energy and mining, water, sanitation and flood protection, and 
finance. 
 
¶5. (U) Angola and the DRC have signed a partnership agreement in the 
sectors of public works and reconstruction.   This agreement targets 
exploration, establishment of scientific and technical cooperation 
in the civil construction sector, and public works.  The agreement 
states that its implementation depends on international community 
support, since there is currently no funding for joint projects. 
 
¶6. (U) Great Britain allocated USD 100 million to the DRC for the 
sustainable management of its forests.  Nearly sixty percent of all 
African tropical forests are located in the DRC. 
 
¶7. (U) Holland donated USD 24 million to DRC to support peace and 
development in the Kivus. 
 
¶8. (U) The government of Japan donated USD 4.7 million to DRC to 
fight against poverty and also gave a no-interest loan of USD 6.3 
million. 
 
 
Energy 
------ 
 
¶9. (U) Nearly 60 businessmen of Kasai Oriental province met recently 
to find a way to fight fuel shortages in their province.  Currently 
Kasai Oriental is supplied by the state railway SNCC with gasoline 
coming from Katanga in neighboring Kasai Occidental.  Businesses 
would like to be supplied instead though Luebo via Ilebo (the Kasai 
River port).  The businessmen are also demanding the restoration of 
the road connecting provincial capitals Mbuji Mayi and Kananga, as 
well as the Bena Dibela port on the Sankuru River in Kasai 
Oriental. 
 
¶10. (U) Congolese petroleum company, COBIL, involved in gasoline 
distribution and production of engine oil, performed well during the 
last five months of 2007. During the last five years, according to 
the Ministry of Portfolio, the GDRC has received total revenues of 
USD 650,000 on an investment of USD 1.3 million.  This enterprise 
annually pays an estimated USD 14 million in taxes. 
 
¶11. (U) Experts from the DRC and from the Republic of Congo 
(Brazzaville) are preparing to establish a commission in March for 
the common exploration and production of petroleum reserves in the 
Congo River Basin.  The area covered begins with the basin at 
Kin-Malebo and extends into the Equateur province.  The commission 
will consist of experts in geologic studies, mining, contraband, and 
fraud. 
 
 
Environment 
----------- 
 
¶12. (U) A workshop that gathered some environmental specialists and 
representatives of local NGOs set up guidelines to discuss climate 
change issues in DRC. 
 
 
Infrastructure 
-------------- 
 
 
KINSHASA 00000135  003 OF 005 
 
 
¶13. (U) After a meeting with cement vendors, the Ministry of 
Trade/Economy decided to lower the price of a sack of cement.  A 
single sack will be sold to wholesalers at FC 6300 (USD 12.5) and to 
retailers at FC 6900 (USD 13.8).  The Ministry also noted the 
artificial scarcity that is created by some local sellers. 
 
¶14. (U) The Governor of the Chinese Exim Bank came to Kinshasa to 
sign two agreements and launch infrastructure projects.  The first 
agreement allocated USD 35 million to the Congolese Post and 
Telecommunication Agency (OCPT) for modernization.  The second one 
financed the DRC mining project SINO HYDRO.  These joint 
infrastructure projects will begin in Kinshasa and Lubumbashi.  DRC 
companies are believed to be involved in the joint ventures as 
well. 
 
¶15. (U) A World Bank specialist is working locally on a project 
designed to set up innovative methods and new policies for the DRC 
transportation sector.  This "multi-modal" project has a strong 
focus on the sector's profitability. 
 
 
Investment 
---------- 
 
¶16. (U) The Chinese Government allocated USD 3.75 million to the 
GDRC as an interest-free loan and a preferential-rate loan of USD 
30.62 million.  Both loans are expected to contribute to the 
rebuilding of the DRC. 
 
 
Mining 
------ 
 
¶17. (U) DRC's Moto Gold Project in northeastern DRC has developed 
into a world-class "gold camp" with historic gold production of 3.9 
million ounces/year and a reserve and resource base of 19.1 million 
ounces.  The company increased its stake in the project to 70 
percent by acquiring joint-venture partner Orgaman's 10 percent for 
USD 34.5 million.  Moto's management has acquired key African 
development and project finance expertise to realize its goal of 
unlocking the project's value. 
 
¶18. (U) The current high demand for batteries for cell phones and 
hybrid cars has increased the price of cobalt. Some observers say 
that the shortage of cobalt is due to ongoing conflict in the DRC, 
since the DRC holds half of the world's known reserves of cobalt. 
 
¶19. (U) Gcamines formed a joint venture with Sicomines, a Chinese 
consortium (Eximbank, Hydro Corp, and Railway Engineering) that will 
exploit the Mashamba and Dikuluwe mining concessions.  Together, the 
Mashamba and Dikuluwe mines are estimated to contain 10 million tons 
of copper and 2 million tons of cobalt.  Martin Kabwelulu, the 
Minister of Mines, said Chinese investment would be repaid with 
revenues generated by the joint venture.  Sicomines will reimburse 
both the funds received for new infrastructure and the loans 
received to open the mines. 
 
 
Miscellaneous 
------------- 
 
¶20. (U) The Senate is considering two laws concerning the GDRC's 
management of parastatals.  Some state enterprises may simply be 
dissolved due to their inability to pay debts or become profitable. 
After promulgation, the Prime Minister will have three months to 
publish the list of concerned enterprises. 
 
¶21. (U) Mr. Peter Eigen, the EITI (Extractive Industries 
Transparency Initiative) international president, attended an EITI 
conference in Kinshasa on 8-9 January.  The principal theme for the 
conference was "Transparency in the Management of Incomes Generated 
by the Mining, Forestry, and Petroleum Industries." The objective 
for the conference was to reinforce strategies aimed at helping the 
DRC to meet EITI norms.  Workshops were organized to facilitate the 
short, medium, and long term objectives for the EITI in the DRC. 
 
¶22. (U) The aptly-named Kinshasa public transportation company, 
STUC, has fewer buses in circulation as part of a strategy to reduce 
seats during the low month of January.  STUC says that current 
revenues are stable even with fewer buses on the road due to cost 
savings.  STUC, which has approximately 230 buses, will run more 
buses starting in February. 
 
¶23. (U) BIVAC, the international partner used by OCC (Office of 
Congolese Control) and OFIDA (Office of Customs and Duties) for 
pre-inspection of imported goods, has reinforced its controls since 
 
KINSHASA 00000135  004 OF 005 
 
 
early January.  As a consequence, many economic operators were not 
prepared to load their goods abroad without the BIVAC certificate. 
Many provincial operators are asking the FEC (The Congolese Chamber 
of Commerce) to negotiate a delay in application of the new 
measures. 
 
¶24. (U) The GDRC, by presidential decree, announced the new managers 
and board members of 37 Congolese public enterprises on January 12. 
In addition to the management appointments (most of whom were men), 
130 women were included as members of the parastatal boards. 
 
 
Public Finance 
-------------- 
 
¶25. (U) The GDRC, thru the President and the Prime Minister, 
launched a fund-raising campaign to support peace in eastern Congo. 
The Ministries of Budget and Finance created accounts in three local 
banks for those wishing to contribute. 
 
¶26. (U) The Congolese Central Bank (BCC) raised its prime interest 
rate from 19 percent to 21 percent.  This decision by the BCC 
Governor seeks to mitigate negative impacts of the current high 
demand of foreign currency and a recent inflationary trend.  Few 
Congolese have savings accounts in commercial banks. 
 
¶27. (U) The GDP growth rate for the DRC in 2007 was 7.2 percent. 
However, this growth did not necessarily translate into better 
living standards for the bulk of the population of 60 million plus, 
because growth is concentrated mainly in the mining and telecom 
sectors. 
 
¶28. (U) The FY 2008 budget was adopted by the National Assembly 
after the Bilateral Senate - National Assembly Commission harmonized 
versions created by both chambers.  Receipts and expenditures were 
reduced by FC 100 billion (USD 200 million).  The budget now stands 
at USD 3.6 billion.  Some ministers reduced projected revenues after 
the initial National Assembly debate.  Ministers were urged to issue 
exploitation licenses only after an approved bidding process. 
 
¶29. (U) In order to increase DRC revenue, the Ministry of Finance 
raised taxes on locally produced and imported cigarettes.  The new 
decree states that USD 0.30, USD 0.28, and USD 0.16 per pack will be 
levied on first, second, and third categories of cigarettes compared 
to USD 0.30, USD 0.15, and 0.104 in the 2003 decree. 
 
¶30. (U) The National Assembly voted to increase the corporate income 
tax from 13 to 15 percent.  This decision will allow OFIDA 
(Congolese Customs Office) and DGI (Congolese Tax Authority) to meet 
the additional receipts of USD 25 million projected in the 2008 
budget. Goods for equipment, agriculture, and veterinary usage are 
not affected by this decision. 
 
¶31. (U) The end-of-month money supply was FC 276 billion (USD 552 
million).  This amount has been steadily increasing and includes 
money both in circulation and in commercial banks. 
 
¶32. (U) To address the recent depreciation of the Congolese franc, 
the Central Bank is using its monetary policy instruments. 
Mandatory reserves were raised from 4 to 5 percent, interest rates 
for treasury bills rose from 15.5 percent to 17 percent for 7 days 
treasury bills, 17.5 percent to 19 percent for 14 days treasure 
bills, and 19.5 to 21 percent for 28 days treasury bills.  As a key 
result, FC 25.52 billion (about USD 50 million) was removed from 
circulation. 
 
¶33. (U) 2008 DRC budget monitoring showed a deficit of USD 24.5 
million for the second week in January.  This was reportedly due to 
an increase in the level of civil servant, teacher, and military 
salary payments, which passed from FC 19.23 billion (about USD 40 
million), to FC 44.3 billion (nearly USD 90 million) per month. 
 
¶34. (U) Stakeholders of PEFA, Public Expenditure and Financial 
Accountability, met recently to analyze the final report of 
partnerships between the DRC and its donor partners.  The 
partnerships may be the basis for informing and monitoring ongoing 
public finance reforms. In the long term, it may lead to further 
discussion about strategies and support for DRC public finances. 
 
¶35. (U) The ANAPI General Manager (National Agency for Promotion of 
Investment) announced last week that the agency worked on 100 
projects for a total value of USD 1.22 billion in 2007.  He said 
that President Kabila's so-called "Five Pillars" (Infrastructure, 
Employment, Electricity and Water, Health and Education, and 
Housing) should be a tremendous incentive for investment in 2008. 
 
 
KINSHASA 00000135  005 OF 005 
 
 
 
Monthly Inflation and Exchange Rates 
------------------------------------ 
 
¶36. (U) The recent depreciation of the Congolese franc (FC) is 
mainly due to increased printing of new bank notes by the Congolese 
Central Bank.  This introduction of new Congolese francs for the 
purpose of paying civil servants' salaries raised the quantity of FC 
in circulation, while creating a scarcity of foreign currency, 
mostly dollars.  The Congolese Central Bank continues to use its 
instruments of monetary policy in order to absorb more Congolese 
francs. 
 
¶37. (U) The inflation rate was 2.5 percent in January.  The 
year-to-date inflation rate (annualized from January 2007) stands at 
39 percent.  This inflation is likely due to the on-going 
depreciation of the Congolese franc that pushes economic operators 
to raise prices. 
 
¶38. (U) The exchange rate increased during January as higher salary 
payments put more money into circulation.  Payment of civil 
servants, soldiers and the participation of many DRC officials in 
the National Peace Conference in Goma led to 8.6 percent 
depreciation during the month. 
 
 
 11/30/07 12/28/2008 1/29/2008 
 
Central Bank Rates: 498 520 542 
 
Parallel Markets: 
 
Kinshasa 495 520 560 
 
Lubumbashi 495 500 550 
 
Mbuji Mayi 495 505 550 
 
Kisangani 500 510 550 
 
Goma 500 515 560 
 
Bukavu 500 515 550 
 
 
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