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DE RUEHKI #0326/01 0941537
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FM AMEMBASSY KINSHASA
TO RUEHC/SECSTATE WASHDC 7766
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 24 KINSHASA 000326 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EMIN ELAB EAIR PGOV CG
SUBJECT: DRC FEBRUARY/MARCH ECONOMIC REVIEW 
 
¶1. (U) Summary 
 
Aviation 
-------- 
- MONUC Owes Government of Uganda USD 10 Million in Aviation Fees 
-  Royal Air Maroc Service to Casablanca and Europe 
-  Air Zimbabwe Offers Flights from Kinshasa to Dubai and Brussels 
 
Banking Sector 
-------------- 
- Low Rate of Bank Account Ownership in DRC 
- Official Central Bank Interest Rate is 24 Percent 
- Positive Foreign Exchange Balance 
- Money Supply Increases by 15 Percent 
- Congolese Central Bank Announces New Treasury Bill Issue and 
Process 
 
Bilateral Cooperation 
--------------------- 
- Belgium to Help Modernize DRC Customs Agency 
- New Partnership Enhances Expertise in Accounting Practices 
 
Commercial 
---------- 
- Cosmetic Producers Resist Ban on Products 
 
Cooperation 
----------- 
- GDRC Standardizing Bidding Procedures 
 
Corruption 
---------- 
- DRC and South Africa Join to Fight Corruption 
 
Energy 
------ 
- World Energy Council Announces Grand Inga Project 
- WB Director: SNEL Needs USD 20B to Rehab Inga Dam 
- SNEL Seeks Proposals for Generator Rehab 
 
Forestry 
-------- 
-  World Bank Reviews its Forestry Activities in DRC 
- GDRC Defends Timber Export Legality 
 
Governance 
----------- 
- Commission: USD 2B Missing from Treasury 
 
Health 
------ 
- Malnutrition in Katanga Province Increasing 
 
Infrastructure 
-------------- 
- World Bank Funds USD 50 Million in Road Projects 
 
Labor 
----- 
- MONUC Head Promotes Contracts with Local Businesses 
- National Labor Council Meets 
 
Microfinance 
------------ 
- Association Sets Up Work Plan 2008 to 2012 
- DRC National Microfinance Strategy Published 
- Proposal for Statistics Law delivered to Plan Ministry 
 
Mining 
------ 
- VM Mines: All Mining Contracts to be Renegotiated 
- MIBA Needs USD 50 Million to Improve Production 
- China to Exploit Two GECAMINES Concessions 
- Mining Contract Review Commission Contacts 61 Companies 
- Mining Conference On 2002 Mining Code and EITI Practices 
- CAMEC and Prairie Complete Joint Venture and Restart Operations at 
Mukondo 
- Police Expel Artisanal Miners from Mining Concessions 
 
Multilateral Cooperation 
------------------------ 
- UNICEF and GDRC Work to Enhance Education 
 
Nuclear 
------- 
- DOE/DOS Delegation Negotiates with GDRC to Defuel Nuclear 
 
KINSHASA 00000326  002 OF 024 
 
 
Reactors 
 
Petroleum 
--------- 
- Senator: 2008 Budget Does Not Share Oil Revenues 
- SACOIL Gains Oil Concession; Tullow Loses One 
- French Petroleum Company Invests in Bas-Congo 
- Brazilian Investors Launch Petroleum Drilling 
 
Public Enterprises 
------------------ 
- New Manager of SONAS Launches Operation Insurance 
- Union Protests Against Water Company Reforms 
- SNCC Management Contract Awarded to Belgian Firm 
- USD 8 Million to Revitalize ONATRA and SNCC 
- Office des Routes Celebrates 37 Years, then Complains 
 
Public Finance 
-------------- 
- GDRC Struggling to Meet Key IMF Requirements 
- GDRC Cites Causes of Poor 4th Quarter Performance 
- The GDRC Committed to Retrocede Revenues to Provinces 
- Cigarette Smuggling in Bunia 
- Deputies Debate GDRC Support to Provinces 
- State Revenues Reach 162 Million 
- Foreign Exchange Reserves Decrease 
 
Telecom 
------- 
- GDRC Ministries Get Connected 
 
Transportation 
-------------- 
- Public Transportation Shortage in Kinshasa 
- STUC Increases Buses in Circulation 
- GDRC to Auction Matadi Cargo Containers 
 
End Summary. 
 
Aviation 
-------- 
 
¶2. (U) MONUC (the United Nations Mission in the DRC) owes USD 10 
million to the Ugandan Civil Aviation Authority for landing fees, 
air navigation, airport passenger service, and change facilities. 
The debt accrued from March 2002 through January 2008.  On August 8, 
2003, the UN and Ugandan Government signed an agreement allowing 
MONUC to use Entebbe as their base for flying in and out of DRC, but 
the agreement did not stipulate how the fees would be paid. 
 
¶3. (U) Royal Air Maroc (RAM) airline inaugurated flights from 
Kinshasa to Europe and Africa via Casablanca on March 29.  The 
company will fly on Fridays and Sundays and will operate Boeing 
737-800 aircraft with economy and business class sections. 
 
¶4. (U) The Congolese airline, Lignes Ariennes Congolaises (LAC), 
signed a contract with Air Zimbabwe for joint operations of flights 
from Kinshasa to both Dubai and Brussels.  Air Zimbabwe will provide 
aircraft while LAC will provide rights to DRC airspace.  Air 
Zimbabwe will also operate some DRC domestic flights with LAC.  LAC 
has also signed a Memorandum of Understanding with the Arcane Group 
for DRC airport management. 
 
Banking Sector 
-------------- 
 
¶5. (U) According to the Deputy General Secretary of COMESA, DRC 
still has one of lowest levels of bank account ownership on the 
continent.  Of the 60 million Congolese only 100,000 have accounts 
in the DRC banking system.  This situation impedes commercial 
development in eastern and southern African regions. 
 
¶6. (U) The official Congolese Central Bank (BCC) interest rate is 24 
percent. This rate was decided by BCC in early January 2008. 
 
¶7. (U) According to the Central Bank, the year-to-date total of 
purchased foreign currencies reached USD 120 million while sold 
foreign currencies was USD 126 million. This means that some USD 6 
million worth of Congolese francs (FC 3 billion) were removed from 
circulation during the period January 1 through March 10. 
 
¶8. (U) Money supply has increased by nearly 15 percent since the end 
of December 2007.  (Note: This is not a surprise considering the 
sharp depreciation of the Congolese franc, nearly ten percent, since 
December.  Exchange rate fluctuations tend to reflect changes in 
money supply very closely and quickly in the DRC.  End note.) 
 
KINSHASA 00000326  003 OF 024 
 
 
 
¶9. (U) In an effort to reduce the amount of Congolese francs in 
circulation, the Central Bank (BCC) has announced a new process for 
issuance and redemption of Treasury Bills.  Offers by those wishing 
to purchase the new T-bills will be submitted thru merchant banks 
and include the buyer's suggested interest rate and the amount to be 
purchased (in FC 1,000,000 units, about USD 1,700 each).  The BCC 
will then analyze all the offers and sell the T-bills at the lowest 
interest until all the bills are sold. 
 
Bilateral Cooperation 
--------------------- 
 
¶10. (U) According to an existing accord signed between DRC and 
Belgium, both countries are committed to fight against smuggling at 
the international level.  After a visit in DRC, the General 
Inspector of the Belgian Customs Agency declared that Belgium would 
help DRC to promulgate its new customs code.  The new code should be 
published in June. 
 
¶11. (U) A new partnership between the Belgian Royal Institute of 
Auditors and both the Congolese Institute of Auditors and the 
Congolese Permanent Council of Accountancy aims at enhancing the 
level of expertise of DRC auditors and promoting sound accounting 
practices for the annual control of public accounts. 
 
Commercial 
---------- 
 
¶12. (U) The Ministry of Industry has started to enforce a ban on 
hydroquinone by regulating the stocks of certain cosmetics. 
Cosmetics producers are reluctant to comply with the ban, arguing 
that their plants would need adjustments.  Cosmetics with 
hydroquinone, used primarily to lighten skin, are in high demand in 
Kinshasa, and producers may be trying to maintain a profitable 
line. 
 
Cooperation 
----------- 
 
¶13. (U) COMESA, the Common Market for Eastern and Southern Africa, 
has urged the DRC to harmonize its bidding procedures with COMESA 
standards.  A new DRC bidding procedure is ready to be sent to the 
National Assembly according to the Vice Minister of Finance. 
 
Corruption 
---------- 
 
¶14. (U) The DRC and South Africa signed an agreement to fight 
corruption through their civil service ministries.  South Africa 
will also fund some anti-corruption related activities in DRC. 
 
Energy 
------ 
 
¶15. (U) The World Energy Council launched a new project called 
"Grand Inga" that is intended to provide electricity to sub-Saharan 
African countries through the South African Power Pool.  The project 
would supply the DRC with 52 generators of 750 megawatts (MW) each 
for a total of 39,000 MW.  The electricity companies involved in the 
Grand Inga project met most recently in Gaborone, Botswana on March 
16 -17, 2008, where they concluded that electricity is crucial for 
economic growth and poverty reduction.  The Grand Inga project 
includes both dams, Inga I (inaugurated in 1972 with a potential of 
380 MW) and Inga II (inaugurated in 1982 with a 1,440 MW potential). 
 
 
¶16. (U) According to the World Bank, the DRC Treasury receives only 
35 percent of electricity revenues generated by SNEL.  Marie 
Frangoise Marie-Nelly, Director of the World Bank in Kinshasa, said 
SNEL needs USD 20 billion to rehabilitate Inga dam, expand 
hydroelectric capacity, and improve transmission lines.  She also 
said SNEL should use the available funds of USD 200 million to 
restore turbines and to construct a second power transmission line 
from Inga. 
 
¶17. (U) SNEL published a tender for rehabilitation of turbines 7 and 
8 at INGA 2.  This rehabilitation will fill the current energy 
deficit by responding to the needs of the population, the mining 
industry in Katanga, and supporting energy pools in Sub-Saharan 
Africa.  The deadline for submission is May 22.  Proposals will be 
opened the same day. 
 
Forestry 
-------- 
 
 
KINSHASA 00000326  004 OF 024 
 
 
¶18. (U) Since early 2002, the World Bank (WB) has helped the DRC to 
approve 48 million hectares of forest concessions.  Problems with 
exploitation have made the GDRC review some of these contracts, with 
25 million hectares recuperated.  The WB in Kinshasa is preparing 
three reform projects: 1) capacity building for forestry agencies, 
2) capacity building for ICCN (Congolese Institute for Nature 
Conservation) staff, and 3) a multi-donor project to review forestry 
policy with the participation of civil society. 
 
¶19. (U) The GDRC has reacted to Greenpeace accusations of illegal 
exports against two timber companies operating in the DRC.  The 
government says that recent shipments to France were legal and 
covered by the required procedures and documents. 
 
Governance 
----------- 
 
¶20. (U) An audit commissioned by Prime Minister Gizenga reports that 
USD 2 billion went missing from the DRC treasury during the past 18 
months.  The commission audited nine public enterprises and the 
three main revenue collecting agencies (Customs, Taxes, and 
Revenues).  Ministries that oversee public enterprises were said to 
have misappropriated USD 786,819; illegal advantages totaling USD 
1,170,794 were granted to managers, and USD 18,081,738 in losses 
were still to be justified.  "Unconscionable bargains" reached USD 
9,578,420 and interior debt of USD 1,467,826,233 went unpaid.  The 
customs (OFIDA), tax (DGI) and revenue (DGRAD) agencies were said to 
have lost USD 59,980,543, USD 56,600,955 and USD 1,705,015,941 in 
income, respectively. 
 
Health 
------ 
 
¶21. (U) Cases of malnutrition in and around mining cities in Katanga 
are increasing due to the reduction of agricultural activities by 
the population in formerly agricultural areas.  The province now 
imports eighty percent of the cereal it consumes, most of this from 
South Africa.  Governor Katumbi has decreed that all mining 
companies will cultivate at least 500 hectares (over 1000 acres). 
 
Infrastructure 
-------------- 
 
¶22. (U) A USD 50 million high-priority World Bank road project 
(Pro-Routes) will re-pave sections that are currently impassable. 
The roads targeted are Kisangani-Buta-Bondo-Bunduki (620 km, about 
450 miles) in Province Orientale, with connections to Equateur 
Province; and Uvira - Kasomeno (1,180 km, about 800 miles) 
connecting Sud Kivu and Katanga provinces.  This project will serve 
highly populated areas and connect to a network of about 7,000 km 
(almost 5,000 miles) of high-priority roads funded by other donors 
including the International Development Association (IDA).  The WB 
project also includes a comprehensive social and environmental 
program. 
 
Labor 
----- 
 
¶23. (U) Alan Doss, the new SRSG to the DRC, plans to promote the use 
of DRC SMEs for MONUC contracts.  Doss committed to initiating 
workshops that will help local businesses understand MONUC's 
procurement process. 
 
¶24. (U) The National Labor Council began on March 25, 2008 with 
delegates from the Ministry of Labor, private companies, and the 
labor unions.  Council delegates will review resolutions from the 
First National Labor Council; adoption of the Labor Code and jobs 
that foreigners are prohibited to hold; and the guaranteed minimum 
salary for professionals. 
 
Microfinance 
------------ 
 
¶25. (U) RIFIDEC (Regroupement des Institutions de Micro Finance du 
Systhme Dcentralis du Congo), a platform of micro financial 
institutions, has set up its 2008 - 2012 work plan.  This work plan 
targets modernization and outreach.  RIFIDEC includes 26 
institutions authorized by the Central Bank in eight provinces, and 
helps some 120 cooperatives and microfinance institutions to 
formalize their operations. 
 
¶26. (U) The National Microfinance Strategy document provides 
information on the current situation, the national policy/strategy, 
and an action plan for 2008-2012.  Approximately 60,000 accounts 
exist in 75 microfinance institutions authorized by the Congolese 
Central Bank.  Private banking products and services in the DRC are 
 
KINSHASA 00000326  005 OF 024 
 
 
still poor in general, while the need for banking and credit 
services are high and increasing. 
 
 
¶27. (U) A committee will present the Ministry of Plan a proposal for 
new laws regulating the collection and organization of statistics. 
The draft proposal suggests standardizing the statistical methods 
used by various GDRC organizations.  Statistics are currently 
collected by the National Council of Statistics, the National 
Institute of Statistics, and various provincial-level agencies.  The 
Ministry of Plan hopes to improve the reliability and availability 
of statistics in the DRC. 
 
Mining 
------ 
 
¶28. (U) The Vice Minister of Mines, Victor Kasongo Shomari, 
announced in February that all of the DRC mining contracts reviewed 
needed to be renegotiated.  Kasongo, leading a delegation to the 
Indaba mining conference in South Africa, said the review process 
turned out to require "multiple major surgeries" rather than the 
minor corrections initially envisioned.  The GDRC will start 
negotiations with the mining companies, who will then have the 
opportunity to appeal any decision within 30 days. 
 
¶29. (U) MIBA is looking for USD 50 million in funding to improve 
production.  The diamond parastatal announced that it will use 90 
percent of the funding for new investments and 10 percent for 
operations.  MIBA is in the process of reducing expenses by 25 
percent. 
 
¶30. (U) Forrest Group International has signed an agreement to 
retrocede two concessions, Mashamba West and Dikulwe in Katanga 
province, to GECAMINES for USD 825 million.  The concessions 
belonged to Katanga Mining, a 24.5 percent shareholder in Forrest 
Group, and will not be exploited before 2020.  Chinese companies 
will reportedly exploit the mineral reserves in Mashamba West and 
Dikulwe in exchange for road construction and other 
infrastructure-building projects. 
 
¶31. (U) The Ministry of Mines announced on February 18, 2008 that 
the DRC had completed the review of 60 mining contracts and has made 
the results available to respective companies.  The Commission 
recommended cancellation of 16 contracts, including joint ventures 
between GECAMINES and Swanepoel/Exaco, MIBA and SENGAMINES, and 
OKIMO and Amani Gold.  A GDRC panel will determine which 
recommendations to accept, and the next step in the process will be 
renegotiations with a GDRC Task Force.  (Ref Kinshasa 294) 
 
¶32. (U) The Mining Days Conference took place in Kinshasa from March 
12 to 14, during which the Ministry of Mines planned to make quick 
decisions to implement the mining code.  Martin Kabwelulu, the 
Minister of Mines, said the objective for the conference was to 
evaluate the implementation of the 2002 Mining Code and to introduce 
good governance principles through the Extractive Industries 
Transparency Initiative (EITI) practices.  Delegates from 
international organizations, decentralized administrative entities, 
organizations of artisanal mining exploiters, tax collection 
services, government experts, and Chambers of Commerce participated 
in the event. 
 
¶33. (U) Central African Mining & Exploration Company (CAMEC) 
completed its joint venture with Prairie International, 
majority-owned by the Gertler family, after negotiations with 
GECAMINES.  CAMEC and Prairie have since restarted operations on 
Mukondo Mountain.  CAMEC announced that the new deal with GECAMINES 
clears the company from further review of its mining licenses. 
CAMEC also raised USD 87.27 million (72.5 million new shares at USD 
1.21 per share) to develop its Luila copper cobalt facility, 
estimating a possible 100,000-ton copper cathode production capacity 
per year. 
 
¶34. (U) GECAMINES expelled artisanal miners from its Kamatana 
concession, 3 km from Likasi in the Katanga province, on March 6. 
Police killed one miner after fighting broke out with artisanal 
miners that would not leave.  Police also forced artisanal miners 
off of an Anvil Mining concession near Kolwezi on March 31, firing 
teargas into the air.  Artisanal miners burned tires and threw 
Molotov cocktails in protest in Kolwezi and nearby Luilu. 
 
Multilateral Cooperation 
------------------------ 
 
¶35. (U) In an effort to enhance the level of education in DRC, the 
GDRC and UNICEF estimate the need in the education sector at USD 93 
million from 2008 to 2012.  Part of this projected expenditure wll 
 
KINSHASA 00000326  006 OF 024 
 
 
be taken from the DRC budget while the rest should be raised from 
outside sources.  This plan targets reforms in education as well as 
increasing the number of children in schools. 
 
Nuclear 
------- 
 
¶36. (U) A Department of Energy/Department of State delegation met 
with the GDRC Office of the Presidency, the Ministry of Higher 
Education and Scientific Research, and officials from CREN-K 
(Regional Center for Nuclear Studies - Kinshasa) during the week of 
March 17.  The DOE/DOS team is working toward eventually defueling 
the two nuclear reactors located at the University of Kinshasa and 
repatriating all U.S.-origin nuclear elements currently in CREN-K 
facilities.  While DRC government officials were opposed to 
defueling one of the reactors, key members of the Ministry and 
CREN-K agreed to meet for technical meetings in the near future. 
(See Septel) 
 
Petroleum 
--------- 
 
¶37. (U) Senator Lunda Bululu, former PM under Mobutu, says the 2008 
budget is unconstitutional.  He says that it does not include the 
required petroleum revenue sharing among provinces based upon their 
population size. (Note: the DRC is only producing about 25K barrels 
of oil per day, compared to nearly 200M barrels per day in 
neighboring Angola.  End note.) 
 
¶38. (U) A geologist from the Ministry of Mines announced that 
significant petroleum reserves exist in eastern Ituri, Orientale 
Province.  The geologist said a South African company, South Africa 
Congo Oil (SACOIL), negotiated a contract with the GDRC to share 
production from Block 3, located south of Lake Albert in Ituri.  The 
Ministry of Hydrocarbons also announced Block 1 would be assigned to 
SACOIL after Tullow Oil (UK) and its partner, Heritage Oil (Canada), 
had relinquished the concession (a claim Tullow Oil denies). 
 
¶39. (U) PERENCO, a French petroleum company specializing in on- and 
off-shore oil exploitation in the DRC is planning to invest USD 50 
million to double production.  Currently, the company produces 25 
thousand barrels per day and exports 350 thousand barrels per month. 
 At the moment PERENCO has a 6 MW hydroelectric dam equipped with 
gas compression facilities, a water injection system, electricity 
generators, a petroleum storage vessel, and a 300 kilometer pipeline 
(210 miles).  The GDRC has a 20 percent share in PERENCO. 
 
¶40. (U) Brazilian investors from High Resolution Technical Petroleum 
(HRTP) visited the DRC on March 26 and met with Prime Minister 
Gizenga.  HRTP said that they will launch their first petroleum 
drilling at Maindombe Lake, Bandundu next year.  Dr. Keith Millheim, 
President of Global Drilling (a U.S. company) is a partner with the 
Brazilian investors.  HRTP is investing USD 100 million of which USD 
20 million was used on feasibility studies. 
 
Public Enterprises 
------------------ 
 
¶41. (U) Aiming to increase receipts, the new manager of SONAS (the 
National Insurance Company) launched a promotion campaign providing 
for a free replacement of car insurance stamps.  In a close 
partnership with the traffic police the brake - block (Denver Boot) 
will be used to immobilize cars that do not have current insurance 
stamps. 
 
¶42. (U) Union employees of the DRC National Water Company (REGIDESO) 
are protesting against possible World Bank-funded reforms as part of 
the public enterprise reform process.  Employees feel that improved 
efficiency and competitiveness should not translate to layoffs. 
 
¶43. (U) The Pilot Committee for the Reform of State Enterprises 
(COPIREP) has confirmed the awarding of the State Rail Company 
(SNCC) management contract to Vectoris, a Belgian firm.  Management 
of SNCC will now be mixed Congolese and Belgian.  The Ministry of 
Portfolio, which oversees COPIREP, hopes that this move will 
contribute to the eventual return of SNCC to profitability. 
 
¶44. (U) Recently-signed management contracts for GDRC river 
transport parastatal ONATRA and rail transport parastatal SNCC will 
cost a total of USD 8 million.  Belgian firm Vectoris and 
Spanish/French firm PROGOSA will provide expertise that it is hoped 
will turn the unprofitable and under-equipped transportation 
parastatals around.  ONATRA personnel, meanwhile, are reportedly 
more worried about the lack of new equipment (e.g. locomotives and 
riverboats). (Comment: While rolling/floating stock for the two 
companies is in abysmal condition and short supply, no sane investor 
 
KINSHASA 00000326  007 OF 024 
 
 
is going to pour millions of dollars into poorly managed companies. 
End comment.) 
 
¶45. (U) The newly-installed CEO of the Congolese Office des Routes 
used the 37th anniversary of the agency to deplore its lack of 
financial resources to cover operational costs and investment.  He 
also denounced what he saw as the marginalization of his agency by 
funding and implementation of projects by outside entities. 
 
Public Finance 
-------------- 
 
¶46. (U) The GDRC is struggling to meet the key macroeconomic targets 
required for eventual reestablishment of the formal IMF country 
program.  The GDRC is hoping to conclude a new program by March in 
order to achieve Highly Indebted Poor Country (HIPC) completion 
point before the end of 2008.  The challenge lies with maintaining 
GDRC expenditures within revenues. 
 
¶47. (U) The GDRC's Technical and Economic Commission presented its 
annual report to the Council of Ministers on February 12.  According 
to the Commission, the poor economic performance during the 4th 
quarter of 2007 was due to slow processing in the ports of Matadi 
and Boma; backlogs of merchandise at the Kasumbalesa border; 
reluctance of economic operators to BIVAC (customs) inspections; 
OCC's refusal to adopt the "guichet unique" (one-stop service for 
import/export clearance); and many other border issues.  These 
problems led to a decreased supply of goods, higher prices in the 
interior, and lower DRC customs revenue. 
 
¶48. (U) Budget Minister Adolph Muzito says that the GDRC has begun 
retrocession of state revenues to the eleven provinces.  This is 
happening before actual adoption of the decentralization law by the 
National Assembly. Muzito stated that the GDRC would make sure that 
this money reaches the commune (the smallest administrative entity) 
level.  USD 6 million has reportedly been given to Kinshasa province 
for the period January/February 2008. 
 
¶49. (U) Tons of foreign-produced cigarettes are reportedly entering 
the DRC via Bunia, Province Orientale, in eastern Congo near the 
border with Uganda, without paying required customs and duty fees. 
Smuggling from Uganda is thought to be the cause. 
 
¶50. (U) Speaker of the National Assembly Vital Kamerhe urged GDRC 
officials to allocate required budget support to provinces in 
anticipation of a vote on the so-called equalization law, as part of 
the overall decentralization process.  This would allow provincial 
governments to address their emergency needs. 
 
¶51. (U) According to the BCC, annual state revenues reached FC 162 
billion (USD 324 million) and expenditures FC 161 billion (USD 322 
million) through March 10, for a net positive balance of about USD 2 
million. 
 
¶52. (U) DRC foreign exchange reserves decreased by USD 4.38 million, 
down to a total of USD 170 million, which represents one week of 
imports.  (Note: BCC Governor Masangu told Ambassador Garvelink on 
March 26 that this low level of reserves was "not a problem" because 
of the ease with which dollars can be obtained from the many in DRC 
circulation.  End note.) 
 
Telecom 
------- 
 
¶53. (U) In an agreement signed by the Republic of South Korea and 
DRC, South Korea will connect GDRC institutions via intranet 
starting with the ministries of Foreign Affairs, Justice, Plan, 
Budget, Finance, PTT, and Public Works. 
 
Transportation 
-------------- 
 
¶54. (U) Public transportation in Kinshasa has become even more 
difficult over recent months.  The number of buses in circulation is 
considered insufficient, and people now rely more on taxis.  Because 
the taxis are shortening their travel distances to maximize profits, 
the waiting-time for transportation is often more than an hour. 
 
¶55. (U) The Kinshasa Urban Transport Company (STUC, an apt acronym), 
has launched a program to increase the number of buses in 
circulation.  STUC's CEO announced that at least 50 buses will be 
put back into circulation due to a significant acquisition of spare 
parts.  STUC also held an awards ceremony to congratulate Congolese 
mechanics that were trained by Tata Motors (the Indian supplier of 
most buses in the DRC). 
 
 
KINSHASA 00000326  008 OF 024 
 
 
¶56. (U) At a meeting in Matadi, the GDRC decided that at the end of 
the month they will auction containers that are piling up at 
ONATRA's port.  This should ease congestion and allow normal 
operations to resume. 
 
Monthly Inflation and Exchange Rates 
------------------------------------ 
 
¶57. (U) The monthly inflation rate for March was 5.6 percent. The 
UNCLASSIFIED 
 
SIPDIS 
PROG 04/03/2008 
AMB:WGARVELINK 
ECON:DMORTON, NKABANGU 
ECON:GGROTH, CCORKEY 
KCTY 
 
AMEMBASSY KINSHASA 
SECSTATE WASHDC 
INFO RWANDA COLLECTIVE 
SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE 
DEPT OF COMMERCE WASHDC 
DEPT OF TREASURY WASHDC 
HQ USEUCOM VAIHINGEN GE 
JAC MOLESWORTH RAF MOLESWORTH UK 
CIA WASHDC 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EMIN ELAB EAIR PGOV CG
SUBJECT: DRC FEBRUARY/MARCH ECONOMIC REVIEW 
 
¶1. (U) Summary 
 
Aviation 
-------- 
- MONUC Owes Government of Uganda USD 10 Million in Aviation Fees 
-  Royal Air Maroc Service to Casablanca and Europe 
-  Air Zimbabwe Offers Flights from Kinshasa to Dubai and Brussels 
 
Banking Sector 
-------------- 
- Low Rate of Bank Account Ownership in DRC 
- Official Central Bank Interest Rate is 24 Percent 
- Positive Foreign Exchange Balance 
- Money Supply Increases by 15 Percent 
- Congolese Central Bank Announces New Treasury Bill Issue and 
Process 
 
Bilateral Cooperation 
--------------------- 
- Belgium to Help Modernize DRC Customs Agency 
- New Partnership Enhances Expertise in Accounting Practices 
 
Commercial 
---------- 
- Cosmetic Producers Resist Ban on Products 
 
Cooperation 
----------- 
- GDRC Standardizing Bidding Procedures 
 
Corruption 
---------- 
- DRC and South Africa Join to Fight Corruption 
 
Energy 
------ 
- World Energy Council Announces Grand Inga Project 
- WB Director: SNEL Needs USD 20B to Rehab Inga Dam 
- SNEL Seeks Proposals for Generator Rehab 
 
Forestry 
-------- 
-  World Bank Reviews its Forestry Activities in DRC 
- GDRC Defends Timber Export Legality 
 
Governance 
----------- 
- Commission: USD 2B Missing from Treasury 
 
Health 
------ 
- Malnutrition in Katanga Province Increasing 
 
Infrastructure 
 
KINSHASA 00000326  009 OF 024 
 
 
-------------- 
- World Bank Funds USD 50 Million in Road Projects 
 
Labor 
----- 
- MONUC Head Promotes Contracts with Local Businesses 
- National Labor Council Meets 
 
Microfinance 
------------ 
- Association Sets Up Work Plan 2008 to 2012 
- DRC National Microfinance Strategy Published 
- Proposal for Statistics Law delivered to Plan Ministry 
 
Mining 
------ 
- VM Mines: All Mining Contracts to be Renegotiated 
- MIBA Needs USD 50 Million to Improve Production 
- China to Exploit Two GECAMINES Concessions 
- Mining Contract Review Commission Contacts 61 Companies 
- Mining Conference On 2002 Mining Code and EITI Practices 
- CAMEC and Prairie Complete Joint Venture and Restart Operations at 
Mukondo 
- Police Expel Artisanal Miners from Mining Concessions 
 
Multilateral Cooperation 
------------------------ 
- UNICEF and GDRC Work to Enhance Education 
 
Nuclear 
------- 
- DOE/DOS Delegation Negotiates with GDRC to Defuel Nuclear 
Reactors 
 
Petroleum 
--------- 
- Senator: 2008 Budget Does Not Share Oil Revenues 
- SACOIL Gains Oil Concession; Tullow Loses One 
- French Petroleum Company Invests in Bas-Congo 
- Brazilian Investors Launch Petroleum Drilling 
 
Public Enterprises 
------------------ 
- New Manager of SONAS Launches Operation Insurance 
- Union Protests Against Water Company Reforms 
- SNCC Management Contract Awarded to Belgian Firm 
- USD 8 Million to Revitalize ONATRA and SNCC 
- Office des Routes Celebrates 37 Years, then Complains 
 
Public Finance 
-------------- 
- GDRC Struggling to Meet Key IMF Requirements 
- GDRC Cites Causes of Poor 4th Quarter Performance 
- The GDRC Committed to Retrocede Revenues to Provinces 
- Cigarette Smuggling in Bunia 
- Deputies Debate GDRC Support to Provinces 
- State Revenues Reach 162 Million 
- Foreign Exchange Reserves Decrease 
 
Telecom 
------- 
- GDRC Ministries Get Connected 
 
Transportation 
-------------- 
- Public Transportation Shortage in Kinshasa 
- STUC Increases Buses in Circulation 
- GDRC to Auction Matadi Cargo Containers 
 
End Summary. 
 
Aviation 
-------- 
 
¶2. (U) MONUC (the United Nations Mission in the DRC) owes USD 10 
million to the Ugandan Civil Aviation Authority for landing fees, 
air navigation, airport passenger service, and change facilities. 
The debt accrued from March 2002 through January 2008.  On August 8, 
2003, the UN and Ugandan Government signed an agreement allowing 
MONUC to use Entebbe as their base for flying in and out of DRC, but 
the agreement did not stipulate how the fees would be paid. 
 
¶3. (U) Royal Air Maroc (RAM) airline inaugurated flights from 
Kinshasa to Europe and Africa via Casablanca on March 29.  The 
company will fly on Fridays and Sundays and will operate Boeing 
737-800 aircraft with economy and business class sections. 
 
KINSHASA 00000326  010 OF 024 
 
 
 
¶4. (U) The Congolese airline, Lignes Ariennes Congolaises (LAC), 
signed a contract with Air Zimbabwe for joint operations of flights 
from Kinshasa to both Dubai and Brussels.  Air Zimbabwe will provide 
aircraft while LAC will provide rights to DRC airspace.  Air 
Zimbabwe will also operate some DRC domestic flights with LAC.  LAC 
has also signed a Memorandum of Understanding with the Arcane Group 
for DRC airport management. 
 
Banking Sector 
-------------- 
 
¶5. (U) According to the Deputy General Secretary of COMESA, DRC 
still has one of lowest levels of bank account ownership on the 
continent.  Of the 60 million Congolese only 100,000 have accounts 
in the DRC banking system.  This situation impedes commercial 
development in eastern and southern African regions. 
 
¶6. (U) The official Congolese Central Bank (BCC) interest rate is 24 
percent. This rate was decided by BCC in early January 2008. 
 
¶7. (U) According to the Central Bank, the year-to-date total of 
purchased foreign currencies reached USD 120 million while sold 
foreign currencies was USD 126 million. This means that some USD 6 
million worth of Congolese francs (FC 3 billion) were removed from 
circulation during the period January 1 through March 10. 
 
¶8. (U) Money supply has increased by nearly 15 percent since the end 
of December 2007.  (Note: This is not a surprise considering the 
sharp depreciation of the Congolese franc, nearly ten percent, since 
December.  Exchange rate fluctuations tend to reflect changes in 
money supply very closely and quickly in the DRC.  End note.) 
 
¶9. (U) In an effort to reduce the amount of Congolese francs in 
circulation, the Central Bank (BCC) has announced a new process for 
issuance and redemption of Treasury Bills.  Offers by those wishing 
to purchase the new T-bills will be submitted thru merchant banks 
and include the buyer's suggested interest rate and the amount to be 
purchased (in FC 1,000,000 units, about USD 1,700 each).  The BCC 
will then analyze all the offers and sell the T-bills at the lowest 
interest until all the bills are sold. 
 
Bilateral Cooperation 
--------------------- 
 
¶10. (U) According to an existing accord signed between DRC and 
Belgium, both countries are committed to fight against smuggling at 
the international level.  After a visit in DRC, the General 
Inspector of the Belgian Customs Agency declared that Belgium would 
help DRC to promulgate its new customs code.  The new code should be 
published in June. 
 
¶11. (U) A new partnership between the Belgian Royal Institute of 
Auditors and both the Congolese Institute of Auditors and the 
Congolese Permanent Council of Accountancy aims at enhancing the 
level of expertise of DRC auditors and promoting sound accounting 
practices for the annual control of public accounts. 
 
Commercial 
---------- 
 
¶12. (U) The Ministry of Industry has started to enforce a ban on 
hydroquinone by regulating the stocks of certain cosmetics. 
Cosmetics producers are reluctant to comply with the ban, arguing 
that their plants would need adjustments.  Cosmetics with 
hydroquinone, used primarily to lighten skin, are in high demand in 
Kinshasa, and producers may be trying to maintain a profitable 
line. 
 
Cooperation 
----------- 
 
¶13. (U) COMESA, the Common Market for Eastern and Southern Africa, 
has urged the DRC to harmonize its bidding procedures with COMESA 
standards.  A new DRC bidding procedure is ready to be sent to the 
National Assembly according to the Vice Minister of Finance. 
 
Corruption 
---------- 
 
¶14. (U) The DRC and South Africa signed an agreement to fight 
corruption through their civil service ministries.  South Africa 
will also fund some anti-corruption related activities in DRC. 
 
Energy 
------ 
 
KINSHASA 00000326  011 OF 024 
 
 
 
¶15. (U) The World Energy Council launched a new project called 
"Grand Inga" that is intended to provide electricity to sub-Saharan 
African countries through the South African Power Pool.  The project 
would supply the DRC with 52 generators of 750 megawatts (MW) each 
for a total of 39,000 MW.  The electricity companies involved in the 
Grand Inga project met most recently in Gaborone, Botswana on March 
16 -17, 2008, where they concluded that electricity is crucial for 
economic growth and poverty reduction.  The Grand Inga project 
includes both dams, Inga I (inaugurated in 1972 with a potential of 
380 MW) and Inga II (inaugurated in 1982 with a 1,440 MW potential). 
 
 
¶16. (U) According to the World Bank, the DRC Treasury receives only 
35 percent of electricity revenues generated by SNEL.  Marie 
Frangoise Marie-Nelly, Director of the World Bank in Kinshasa, said 
SNEL needs USD 20 billion to rehabilitate Inga dam, expand 
hydroelectric capacity, and improve transmission lines.  She also 
said SNEL should use the available funds of USD 200 million to 
restore turbines and to construct a second power transmission line 
from Inga. 
 
¶17. (U) SNEL published a tender for rehabilitation of turbines 7 and 
8 at INGA 2.  This rehabilitation will fill the current energy 
deficit by responding to the needs of the population, the mining 
industry in Katanga, and supporting energy pools in Sub-Saharan 
Africa.  The deadline for submission is May 22.  Proposals will be 
opened the same day. 
 
Forestry 
-------- 
 
¶18. (U) Since early 2002, the World Bank (WB) has helped the DRC to 
approve 48 million hectares of forest concessions.  Problems with 
exploitation have made the GDRC review some of these contracts, with 
25 million hectares recuperated.  The WB in Kinshasa is preparing 
three reform projects: 1) capacity building for forestry agencies, 
2) capacity building for ICCN (Congolese Institute for Nature 
Conservation) staff, and 3) a multi-donor project to review forestry 
policy with the participation of civil society. 
 
¶19. (U) The GDRC has reacted to Greenpeace accusations of illegal 
exports against two timber companies operating in the DRC.  The 
government says that recent shipments to France were legal and 
covered by the required procedures and documents. 
 
Governance 
----------- 
 
¶20. (U) An audit commissioned by Prime Minister Gizenga reports that 
USD 2 billion went missing from the DRC treasury during the past 18 
months.  The commission audited nine public enterprises and the 
three main revenue collecting agencies (Customs, Taxes, and 
Revenues).  Ministries that oversee public enterprises were said to 
have misappropriated USD 786,819; illegal advantages totaling USD 
1,170,794 were granted to managers, and USD 18,081,738 in losses 
were still to be justified.  "Unconscionable bargains" reached USD 
9,578,420 and interior debt of USD 1,467,826,233 went unpaid.  The 
customs (OFIDA), tax (DGI) and revenue (DGRAD) agencies were said to 
have lost USD 59,980,543, USD 56,600,955 and USD 1,705,015,941 in 
income, respectively. 
 
Health 
------ 
 
¶21. (U) Cases of malnutrition in and around mining cities in Katanga 
are increasing due to the reduction of agricultural activities by 
the population in formerly agricultural areas.  The province now 
imports eighty percent of the cereal it consumes, most of this from 
South Africa.  Governor Katumbi has decreed that all mining 
companies will cultivate at least 500 hectares (over 1000 acres). 
 
Infrastructure 
-------------- 
 
¶22. (U) A USD 50 million high-priority World Bank road project 
(Pro-Routes) will re-pave sections that are currently impassable. 
The roads targeted are Kisangani-Buta-Bondo-Bunduki (620 km, about 
450 miles) in Province Orientale, with connections to Equateur 
Province; and Uvira - Kasomeno (1,180 km, about 800 miles) 
connecting Sud Kivu and Katanga provinces.  This project will serve 
highly populated areas and connect to a network of about 7,000 km 
(almost 5,000 miles) of high-priority roads funded by other donors 
including the International Development Association (IDA).  The WB 
project also includes a comprehensive social and environmental 
program. 
 
KINSHASA 00000326  012 OF 024 
 
 
 
Labor 
----- 
 
¶23. (U) Alan Doss, the new SRSG to the DRC, plans to promote the use 
of DRC SMEs for MONUC contracts.  Doss committed to initiating 
workshops that will help local businesses understand MONUC's 
procurement process. 
 
¶24. (U) The National Labor Council began on March 25, 2008 with 
delegates from the Ministry of Labor, private companies, and the 
labor unions.  Council delegates will review resolutions from the 
First National Labor Council; adoption of the Labor Code and jobs 
that foreigners are prohibited to hold; and the guaranteed minimum 
salary for professionals. 
 
Microfinance 
------------ 
 
¶25. (U) RIFIDEC (Regroupement des Institutions de Micro Finance du 
Systhme Dcentralis du Congo), a platform of micro financial 
institutions, has set up its 2008 - 2012 work plan.  This work plan 
targets modernization and outreach.  RIFIDEC includes 26 
institutions authorized by the Central Bank in eight provinces, and 
helps some 120 cooperatives and microfinance institutions to 
formalize their operations. 
 
¶26. (U) The National Microfinance Strategy document provides 
information on the current situation, the national policy/strategy, 
and an action plan for 2008-2012.  Approximately 60,000 accounts 
exist in 75 microfinance institutions authorized by the Congolese 
Central Bank.  Private banking products and services in the DRC are 
still poor in general, while the need for banking and credit 
services are high and increasing. 
 
 
¶27. (U) A committee will present the Ministry of Plan a proposal for 
new laws regulating the collection and organization of statistics. 
The draft proposal suggests standardizing the statistical methods 
used by various GDRC organizations.  Statistics are currently 
collected by the National Council of Statistics, the National 
Institute of Statistics, and various provincial-level agencies.  The 
Ministry of Plan hopes to improve the reliability and availability 
of statistics in the DRC. 
 
Mining 
------ 
 
¶28. (U) The Vice Minister of Mines, Victor Kasongo Shomari, 
announced in February that all of the DRC mining contracts reviewed 
needed to be renegotiated.  Kasongo, leading a delegation to the 
Indaba mining conference in South Africa, said the review process 
turned out to require "multiple major surgeries" rather than the 
minor corrections initially envisioned.  The GDRC will start 
negotiations with the mining companies, who will then have the 
opportunity to appeal any decision within 30 days. 
 
¶29. (U) MIBA is looking for USD 50 million in funding to improve 
production.  The diamond parastatal announced that it will use 90 
percent of the funding for new investments and 10 percent for 
operations.  MIBA is in the process of reducing expenses by 25 
percent. 
 
¶30. (U) Forrest Group International has signed an agreement to 
retrocede two concessions, Mashamba West and Dikulwe in Katanga 
province, to GECAMINES for USD 825 million.  The concessions 
belonged to Katanga Mining, a 24.5 percent shareholder in Forrest 
Group, and will not be exploited before 2020.  Chinese companies 
will reportedly exploit the mineral reserves in Mashamba West and 
Dikulwe in exchange for road construction and other 
infrastructure-building projects. 
 
¶31. (U) The Ministry of Mines announced on February 18, 2008 that 
the DRC had completed the review of 60 mining contracts and has made 
the results available to respective companies.  The Commission 
recommended cancellation of 16 contracts, including joint ventures 
between GECAMINES and Swanepoel/Exaco, MIBA and SENGAMINES, and 
OKIMO and Amani Gold.  A GDRC panel will determine which 
recommendations to accept, and the next step in the process will be 
renegotiations with a GDRC Task Force.  (Ref Kinshasa 294) 
 
¶32. (U) The Mining Days Conference took place in Kinshasa from March 
12 to 14, during which the Ministry of Mines planned to make quick 
decisions to implement the mining code.  Martin Kabwelulu, the 
Minister of Mines, said the objective for the conference was to 
evaluate the implementation of the 2002 Mining Code and to introduce 
 
KINSHASA 00000326  013 OF 024 
 
 
good governance principles through the Extractive Industries 
Transparency Initiative (EITI) practices.  Delegates from 
international organizations, decentralized administrative entities, 
organizations of artisanal mining exploiters, tax collection 
services, government experts, and Chambers of Commerce participated 
in the event. 
 
¶33. (U) Central African Mining & Exploration Company (CAMEC) 
completed its joint venture with Prairie International, 
majority-owned by the Gertler family, after negotiations with 
GECAMINES.  CAMEC and Prairie have since restarted operations on 
Mukondo Mountain.  CAMEC announced that the new deal with GECAMINES 
clears the company from further review of its mining licenses. 
CAMEC also raised USD 87.27 million (72.5 million new shares at USD 
1.21 per share) to develop its Luila copper cobalt facility, 
estimating a possible 100,000-ton cQper cathode production capacity 
per year. 
 
¶34. (U) GECAMINES expelled artisanal miners from its Kamatana 
concession, 3 km from Likasi in the Katanga province, on March 6. 
Police killed one miner after fighting broke out with artisanal 
miners that would not leave.  Police also forced artisanal miners 
off of an Anvil Mining concession near Kolwezi on March 31, firing 
teargas into the air.  Artisanal miners burned tires and threw 
Molotov cocktails in protest in Kolwezi and nearby Luilu. 
 
Multilateral Cooperation 
------------------------ 
 
¶35. (U) In an effort to enhance the level of education in DRC, the 
GDRC and UNICEF estimate the need in the education sector at USD 93 
million from 2008 to 2012.  Part of this projected expenditure will 
be taken from the DRC budget while the rest should be raised from 
outside sources.  This plan targets reforms in education as well as 
increasing the number of children in schools. 
 
Nuclear 
------- 
 
¶36. (U) A Department of Energy/Department of State delegation met 
with the GDRC Office of the Presidency, the Ministry of Higher 
Education and Scientific Research, and officials from CREN-K 
(Regional Center for Nuclear Studies - Kinshasa) during the week of 
March 17.  The DOE/DOS team is working toward eventually defueling 
the two nuclear reactors located at the University of Kinshasa and 
repatriating all U.S.-origin nuclear elements currently in CREN-K 
facilities.  While DRC government officials were opposed to 
defueling one of the reactors, key members of the Ministry and 
CREN-K agreed to meet for technical meetings in the near future. 
(See Septel) 
 
Petroleum 
--------- 
 
¶37. (U) Senator Lunda Bululu, former PM under Mobutu, says the 2008 
budget is unconstitutional.  He says that it does not include the 
required petroleum revenue sharing among provinces based upon their 
population size. (Note: the DRC is only producing about 25K barrels 
of oil per day, compared to nearly 200M barrels per day in 
neighboring Angola.  End note.) 
 
¶38. (U) A geologist from the Ministry of Mines announced that 
significant petroleum reserves exist in eastern Ituri, Orientale 
Province.  The geologist said a South African company, South Africa 
Congo Oil (SACOIL), negotiated a contract with the GDRC to share 
production from Block 3, located south of Lake Albert in Ituri.  The 
Ministry of Hydrocarbons also announced Block 1 would be assigned to 
SACOIL after Tullow Oil (UK) and its partner, Heritage Oil (Canada), 
had relinquished the concession (a claim Tullow Oil denies). 
 
¶39. (U) PERENCO, a French petroleum company specializing in on- and 
off-shore oil exploitation in the DRC is planning to invest USD 50 
million to double production.  Currently, the company produces 25 
thousand barrels per day and exports 350 thousand barrels per month. 
 At the moment PERENCO has a 6 MW hydroelectric dam equipped with 
gas compression facilities, a water injection system, electricity 
generators, a petroleum storage vessel, and a 300 kilometer pipeline 
(210 miles).  The GDRC has a 20 percent share in PERENCO. 
 
¶40. (U) Brazilian investors from High Resolution Technical Petroleum 
(HRTP) visited the DRC on March 26 and met with Prime Minister 
Gizenga.  HRTP said that they will launch their first petroleum 
drilling at Maindombe Lake, Bandundu next year.  Dr. Keith Millheim, 
President of Global Drilling (a U.S. company) is a partner with the 
Brazilian investors.  HRTP is investing USD 100 million of which USD 
20 million was used on feasibility studies. 
 
KINSHASA 00000326  014 OF 024 
 
 
 
Public Enterprises 
------------------ 
 
¶41. (U) Aiming to increase receipts, the new manager of SONAS (the 
National Insurance Company) launched a promotion campaign providing 
for a free replacement of car insurance stamps.  In a close 
partnership with the traffic police the brake - block (Denver Boot) 
will be used to immobilize cars that do not have current insurance 
stamps. 
 
¶42. (U) Union employees of the DRC National Water Company (REGIDESO) 
are protesting against possible World Bank-funded reforms as part of 
the public enterprise reform process.  Employees feel that improved 
efficiency and competitiveness should not translate to layoffs. 
 
¶43. (U) The Pilot Committee for the Reform of State Enterprises 
(COPIREP) has confirmed the awarding of the State Rail Company 
(SNCC) management contract to Vectoris, a Belgian firm.  Management 
of SNCC will now be mixed Congolese and Belgian.  The Ministry of 
Portfolio, which oversees COPIREP, hopes that this move will 
contribute to the eventual return of SNCC to profitability. 
 
¶44. (U) Recently-signed management contracts for GDRC river 
transport parastatal ONATRA and rail transport parastatal SNCC will 
cost a total of USD 8 million.  Belgian firm Vectoris and 
Spanish/French firm PROGOSA will provide expertise that it is hoped 
will turn the unprofitable and under-equipped transportation 
parastatals around.  ONATRA personnel, meanwhile, are reportedly 
more worried about the lack of new equipment (e.g. locomotives and 
riverboats). (Comment: While rolling/floating stock for the two 
companies is in abysmal condition and short supply, no sane investor 
is going to pour millions of dollars into poorly managed companies. 
End comment.) 
 
¶45. (U) The newly-installed CEO of the Congolese Office des Routes 
used the 37th anniversary of the agency to deplore its lack of 
financial resources to cover operational costs and investment.  He 
also denounced what he saw as the marginalization of his agency by 
funding and implementation of projects by outside entities. 
 
Public Finance 
-------------- 
 
¶46. (U) The GDRC is struggling to meet the key macroeconomic targets 
required for eventual reestablishment of the formal IMF country 
program.  The GDRC is hoping to conclude a new program by March in 
order to achieve Highly Indebted Poor Country (HIPC) completion 
point before the end of 2008.  The challenge lies with maintaining 
GDRC expenditures within revenues. 
 
¶47. (U) The GDRC's Technical and Economic Commission presented its 
annual report to the Council of Ministers on February 12.  According 
to the Commission, the poor economic performance during the 4th 
quarter of 2007 was due to slow processing in the ports of Matadi 
and Boma; backlogs of merchandise at the Kasumbalesa border; 
reluctance of economic operators to BIVAC (customs) inspections; 
OCC's refusal to adopt the "guichet unique" (one-stop service for 
import/export clearance); and many other border issues.  These 
problems led to a decreased supply of goods, higher prices in the 
interior, and lower DRC customs revenue. 
 
¶48. (U) Budget Minister Adolph Muzito says that the GDRC has begun 
retrocession of state revenues to the eleven provinces.  This is 
happening before actual adoption of the decentralization law by the 
National Assembly. Muzito stated that the GDRC would make sure that 
this money reaches the commune (the smallest administrative entity) 
level.  USD 6 million has reportedly been given to Kinshasa province 
for the period January/February 2008. 
 
¶49. (U) Tons of foreign-produced cigarettes are reportedly entering 
the DRC via Bunia, Province Orientale, in eastern Congo near the 
border with Uganda, without paying required customs and duty fees. 
Smuggling from Uganda is thought to be the cause. 
 
¶50. (U) Speaker of the National Assembly Vital Kamerhe urged GDRC 
officials to allocate required budget support to provinces in 
anticipation of a vote on the so-called equalization law, as part of 
the overall decentralization process.  This would allow provincial 
governments to address their emergency needs. 
 
¶51. (U) According to the BCC, annual state revenues reached FC 162 
billion (USD 324 million) and expenditures FC 161 billion (USD 322 
million) through March 10, for a net positive balance of about USD 2 
million. 
 
 
KINSHASA 00000326  015 OF 024 
 
 
¶52. (U) DRC foreign exchange reserves decreased by USD 4.38 million, 
down to a total of USD 170 million, which represents one week of 
imports.  (Note: BCC Governor Masangu told Ambassador Garvelink on 
March 26 that this low level of reserves was "not a problem" because 
of the ease with which dollars can be obtained from the many in DRC 
circulation.  End note.) 
 
Telecom 
------- 
 
¶53. (U) In an agreement signed by the Republic of South Korea and 
DRC, South Korea will connect GDRC institutions via intranet 
starting with the ministries of Foreign Affairs, Justice, Plan, 
Budget, Finance, PTT, and Public Works. 
 
Transportation 
-------------- 
 
¶54. (U) Public transportation in Kinshasa has become even more 
difficult over recent months.  The number of buses in circulation is 
considered insufficient, and people now rely more on taxis.  Because 
the taxis are shortening their travel distances to maximize profits, 
the waiting-time for transportation is often more than an hour. 
 
¶55. (U) The Kinshasa Urban Transport Company (STUC, an apt acronym), 
has launched a program to increase the number of buses in 
circulation.  STUC's CEO announced that at least 50 buses will be 
put back into circulation due to a significant acquisition of spare 
parts.  STUC also held an awards ceremony to congratulate Congolese 
mechanics that were trained by Tata Motors (the Indian supplier of 
most buses in the DRC). 
 
¶56. (U) At a meeting in Matadi, the GDRC decided that at the end of 
the month they will auction containers that are piling up at 
ONATRA's port.  This should ease congestion and allow normal 
operations to resume. 
 
Monthly Inflation and Exchange Rates 
------------------------------------ 
 
¶57. (U) The monthly inflation rate for March was 5.6 percent. The 
UNCLASSIFIED 
 
SIPDIS 
PROG 04/03/2008 
AMB:WGARVELINK 
ECON:DMORTON, NKABANGU 
ECON:GGROTH, CCORKEY 
KCTY 
 
AMEMBASSY KINSHASA 
SECSTATE WASHDC 
INFO RWANDA COLLECTIVE 
SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE 
DEPT OF COMMERCE WASHDC 
DEPT OF TREASURY WASHDC 
HQ USEUCOM VAIHINGEN GE 
JAC MOLESWORTH RAF MOLESWORTH UK 
CIA WASHDC 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EMIN ELAB EAIR PGOV CG
SUBJECT: DRC FEBRUARY/MARCH ECONOMIC REVIEW 
 
¶1. (U) Summary 
 
Aviation 
-------- 
- MONUC Owes Government of Uganda USD 10 Million in Aviation Fees 
-  Royal Air Maroc Service to Casablanca and Europe 
-  Air Zimbabwe Offers Flights from Kinshasa to Dubai and Brussels 
 
Banking Sector 
-------------- 
- Low Rate of Bank Account Ownership in DRC 
- Official Central Bank Interest Rate is 24 Percent 
- Positive Foreign Exchange Balance 
- Money Supply Increases by 15 Percent 
- Congolese Central Bank Announces New Treasury Bill Issue and 
Process 
 
Bilateral Cooperation 
--------------------- 
- Belgium to Help Modernize DRC Customs Agency 
- New Partnership Enhances Expertise in Accounting Practices 
 
 
KINSHASA 00000326  016 OF 024 
 
 
Commercial 
---------- 
- Cosmetic Producers Resist Ban on Products 
 
Cooperation 
----------- 
- GDRC Standardizing Bidding Procedures 
 
Corruption 
---------- 
- DRC and South Africa Join to Fight Corruption 
 
Energy 
------ 
- World Energy Council Announces Grand Inga Project 
- WB Director: SNEL Needs USD 20B to Rehab Inga Dam 
- SNEL Seeks Proposals for Generator Rehab 
 
Forestry 
-------- 
-  World Bank Reviews its Forestry Activities in DRC 
- GDRC Defends Timber Export Legality 
 
Governance 
----------- 
- Commission: USD 2B Missing from Treasury 
 
Health 
------ 
- Malnutrition in Katanga Province Increasing 
 
Infrastructure 
-------------- 
- World Bank Funds USD 50 Million in Road Projects 
 
Labor 
----- 
- MONUC Head Promotes Contracts with Local Businesses 
- National Labor Council Meets 
 
Microfinance 
------------ 
- Association Sets Up Work Plan 2008 to 2012 
- DRC National Microfinance Strategy Published 
- Proposal for Statistics Law delivered to Plan Ministry 
 
Mining 
------ 
- VM Mines: All Mining Contracts to be Renegotiated 
- MIBA Needs USD 50 Million to Improve Production 
- China to Exploit Two GECAMINES Concessions 
- Mining Contract Review Commission Contacts 61 Companies 
- Mining Conference On 2002 Mining Code and EITI Practices 
- CAMEC and Prairie Complete Joint Venture and Restart Operations at 
Mukondo 
- Police Expel Artisanal Miners from Mining Concessions 
 
Multilateral Cooperation 
------------------------ 
- UNICEF and GDRC Work to Enhance Education 
 
Nuclear 
------- 
- DOE/DOS Delegation Negotiates with GDRC to Defuel Nuclear 
Reactors 
 
Petroleum 
--------- 
- Senator: 2008 Budget Does Not Share Oil Revenues 
- SACOIL Gains Oil Concession; Tullow Loses One 
- French Petroleum Company Invests in Bas-Congo 
- Brazilian Investors Launch Petroleum Drilling 
 
Public Enterprises 
------------------ 
- New Manager of SONAS Launches Operation Insurance 
- Union Protests Against Water Company Reforms 
- SNCC Management Contract Awarded to Belgian Firm 
- USD 8 Million to Revitalize ONATRA and SNCC 
- Office des Routes Celebrates 37 Years, then Complains 
 
Public Finance 
-------------- 
- GDRC Struggling to Meet Key IMF Requirements 
- GDRC Cites Causes of Poor 4th Quarter Performance 
- The GDRC Committed to Retrocede Revenues to Provinces 
 
KINSHASA 00000326  017 OF 024 
 
 
- Cigarette Smuggling in Bunia 
- Deputies Debate GDRC Support to Provinces 
- State Revenues Reach 162 Million 
- Foreign Exchange Reserves Decrease 
 
Telecom 
------- 
- GDRC Ministries Get Connected 
 
Transportation 
-------------- 
- Public Transportation Shortage in Kinshasa 
- STUC Increases Buses in Circulation 
- GDRC to Auction Matadi Cargo Containers 
 
End Summary. 
 
Aviation 
-------- 
 
¶2. (U) MONUC (the United Nations Mission in the DRC) owes USD 10 
million to the Ugandan Civil Aviation Authority for landing fees, 
air navigation, airport passenger service, and change facilities. 
The debt accrued from March 2002 through January 2008.  On August 8, 
2003, the UN and Ugandan Government signed an agreement allowing 
MONUC to use Entebbe as their base for flying in and out of DRC, but 
the agreement did not stipulate how the fees would be paid. 
 
¶3. (U) Royal Air Maroc (RAM) airline inaugurated flights from 
Kinshasa to Europe and Africa via Casablanca on March 29.  The 
company will fly on Fridays and Sundays and will operate Boeing 
737-800 aircraft with economy and business class sections. 
 
¶4. (U) The Congolese airline, Lignes Ariennes Congolaises (LAC), 
signed a contract with Air Zimbabwe for joint operations of flights 
from Kinshasa to both Dubai and Brussels.  Air Zimbabwe will provide 
aircraft while LAC will provide rights to DRC airspace.  Air 
Zimbabwe will also operate some DRC domestic flights with LAC.  LAC 
has also signed a Memorandum of Understanding with the Arcane Group 
for DRC airport management. 
 
Banking Sector 
-------------- 
 
¶5. (U) According to the Deputy General Secretary of COMESA, DRC 
still has one of lowest levels of bank account ownership on the 
continent.  Of the 60 million Congolese only 100,000 have accounts 
in the DRC banking system.  This situation impedes commercial 
development in eastern and southern African regions. 
 
¶6. (U) The official Congolese Central Bank (BCC) interest rate is 24 
percent. This rate was decided by BCC in early January 2008. 
 
¶7. (U) According to the Central Bank, the year-to-date total of 
purchased foreign currencies reached USD 120 million while sold 
foreign currencies was USD 126 million. This means that some USD 6 
million worth of Congolese francs (FC 3 billion) were removed from 
circulation during the period January 1 through March 10. 
 
¶8. (U) Money supply has increased by nearly 15 percent since the end 
of December 2007.  (Note: This is not a surprise considering the 
sharp depreciation of the Congolese franc, nearly ten percent, since 
December.  Exchange rate fluctuations tend to reflect changes in 
money supply very closely and quickly in the DRC.  End note.) 
 
¶9. (U) In an effort to reduce the amount of Congolese francs in 
circulation, the Central Bank (BCC) has announced a new process for 
issuance and redemption of Treasury Bills.  Offers by those wishing 
to purchase the new T-bills will be submitted thru merchant banks 
and include the buyer's suggested interest rate and the amount to be 
purchased (in FC 1,000,000 units, about USD 1,700 each).  The BCC 
will then analyze all the offers and sell the T-bills at the lowest 
interest until all the bills are sold. 
 
Bilateral Cooperation 
--------------------- 
 
¶10. (U) According to an existing accord signed between DRC and 
Belgium, both countries are committed to fight against smuggling at 
the international level.  After a visit in DRC, the General 
Inspector of the Belgian Customs Agency declared that Belgium would 
help DRC to promulgate its new customs code.  The new code should be 
published in June. 
 
¶11. (U) A new partnership between the Belgian Royal Institute of 
Auditors and both the Congolese Institute of Auditors and the 
 
KINSHASA 00000326  018 OF 024 
 
 
Congolese Permanent Council of Accountancy aims at enhancing the 
level of expertise of DRC auditors and promoting sound accounting 
practices for the annual control of public accounts. 
 
Commercial 
---------- 
 
¶12. (U) The Ministry of Industry has started to enforce a ban on 
hydroquinone by regulating the stocks of certain cosmetics. 
Cosmetics producers are reluctant to comply with the ban, arguing 
that their plants would need adjustments.  Cosmetics with 
hydroquinone, used primarily to lighten skin, are in high demand in 
Kinshasa, and producers may be trying to maintain a profitable 
line. 
 
Cooperation 
----------- 
 
¶13. (U) COMESA, the Common Market for Eastern and Southern Africa, 
has urged the DRC to harmonize its bidding procedures with COMESA 
standards.  A new DRC bidding procedure is ready to be sent to the 
National Assembly according to the Vice Minister of Finance. 
 
Corruption 
---------- 
 
¶14. (U) The DRC and South Africa signed an agreement to fight 
corruption through their civil service ministries.  South Africa 
will also fund some anti-corruption related activities in DRC. 
 
Energy 
------ 
 
¶15. (U) The World Energy Council launched a new project called 
"Grand Inga" that is intended to provide electricity to sub-Saharan 
African countries through the South African Power Pool.  The project 
would supply the DRC with 52 generators of 750 megawatts (MW) each 
for a total of 39,000 MW.  The electricity companies involved in the 
Grand Inga project met most recently in Gaborone, Botswana on March 
16 -17, 2008, where they concluded that electricity is crucial for 
economic growth and poverty reduction.  The Grand Inga project 
includes both dams, Inga I (inaugurated in 1972 with a potential of 
380 MW) and Inga II (inaugurated in 1982 with a 1,440 MW potential). 
 
 
¶16. (U) According to the World Bank, the DRC Treasury receives only 
35 percent of electricity revenues generated by SNEL.  Marie 
Frangoise Marie-Nelly, Director of the World Bank in Kinshasa, said 
SNEL needs USD 20 billion to rehabilitate Inga dam, expand 
hydroelectric capacity, and improve transmission lines.  She also 
said SNEL should use the available funds of USD 200 million to 
restore turbines and to construct a second power transmission line 
from Inga. 
 
¶17. (U) SNEL published a tender for rehabilitation of turbines 7 and 
8 at INGA 2.  This rehabilitation will fill the current energy 
deficit by responding to the needs of the population, the mining 
industry in Katanga, and supporting energy pools in Sub-Saharan 
Africa.  The deadline for submission is May 22.  Proposals will be 
opened the same day. 
 
Forestry 
-------- 
 
¶18. (U) Since early 2002, the World Bank (WB) has helped the DRC to 
approve 48 million hectares of forest concessions.  Problems with 
exploitation have made the GDRC review some of these contracts, with 
25 million hectares recuperated.  The WB in Kinshasa is preparing 
three reform projects: 1) capacity building for forestry agencies, 
2) capacity building for ICCN (Congolese Institute for Nature 
Conservation) staff, and 3) a multi-donor project to review forestry 
policy with the participation of civil society. 
 
¶19. (U) The GDRC has reacted to Greenpeace accusations of illegal 
exports against two timber companies operating in the DRC.  The 
government says that recent shipments to France were legal and 
covered by the required procedures and documents. 
 
Governance 
----------- 
 
¶20. (U) An audit commissioned by Prime Minister Gizenga reports that 
USD 2 billion went missing from the DRC treasury during the past 18 
months.  The commission audited nine public enterprises and the 
three main revenue collecting agencies (Customs, Taxes, and 
Revenues).  Ministries that oversee public enterprises were said to 
 
KINSHASA 00000326  019 OF 024 
 
 
have misappropriated USD 786,819; illegal advantages totaling USD 
1,170,794 were granted to managers, and USD 18,081,738 in losses 
were still to be justified.  "Unconscionable bargains" reached USD 
9,578,420 and interior debt of USD 1,467,826,233 went unpaid.  The 
customs (OFIDA), tax (DGI) and revenue (DGRAD) agencies were said to 
have lost USD 59,980,543, USD 56,600,955 and USD 1,705,015,941 in 
income, respectively. 
 
Health 
------ 
 
¶21. (U) Cases of malnutrition in and around mining cities in Katanga 
are increasing due to the reduction of agricultural activities by 
the population in formerly agricultural areas.  The province now 
imports eighty percent of the cereal it consumes, most of this from 
South Africa.  Governor Katumbi has decreed that all mining 
companies will cultivate at least 500 hectares (over 1000 acres). 
 
Infrastructure 
-------------- 
 
¶22. (U) A USD 50 million high-priority World Bank road project 
(Pro-Routes) will re-pave sections that are currently impassable. 
The roads targeted are Kisangani-Buta-Bondo-Bunduki (620 km, about 
450 miles) in Province Orientale, with connections to Equateur 
Province; and Uvira - Kasomeno (1,180 km, about 800 miles) 
connecting Sud Kivu and Katanga provinces.  This project will serve 
highly populated areas and connect to a network of about 7,000 km 
(almost 5,000 miles) of high-priority roads funded by other donors 
including the International Development Association (IDA).  The WB 
project also includes a comprehensive social and environmental 
program. 
 
Labor 
----- 
 
¶23. (U) Alan Doss, the new SRSG to the DRC, plans to promote the use 
of DRC SMEs for MONUC contracts.  Doss committed to initiating 
workshops that will help local businesses understand MONUC's 
procurement process. 
 
¶24. (U) The National Labor Council began on March 25, 2008 with 
delegates from the Ministry of Labor, private companies, and the 
labor unions.  Council delegates will review resolutions from the 
First National Labor Council; adoption of the Labor Code and jobs 
that foreigners are prohibited to hold; and the guaranteed minimum 
salary for professionals. 
 
Microfinance 
------------ 
 
¶25. (U) RIFIDEC (Regroupement des Institutions de Micro Finance du 
Systhme Dcentralis du Congo), a platform of micro financial 
institutions, has set up its 2008 - 2012 work plan.  This work plan 
targets modernization and outreach.  RIFIDEC includes 26 
institutions authorized by the Central Bank in eight provinces, and 
helps some 120 cooperatives and microfinance institutions to 
formalize their operations. 
 
¶26. (U) The National Microfinance Strategy document provides 
information on the current situation, the national policy/strategy, 
and an action plan for 2008-2012.  Approximately 60,000 accounts 
exist in 75 microfinance institutions authorized by the Congolese 
Central Bank.  Private banking products and services in the DRC are 
still poor in general, while the need for banking and credit 
services are high and increasing. 
 
 
¶27. (U) A committee will present the Ministry of Plan a proposal for 
new laws regulating the collection and organization of statistics. 
The draft proposal suggests standardizing the statistical methods 
used by various GDRC organizations.  Statistics are currently 
collected by the National Council of Statistics, the National 
Institute of Statistics, and various provincial-level agencies.  The 
Ministry of Plan hopes to improve the reliability and availability 
of statistics in the DRC. 
 
Mining 
------ 
 
¶28. (U) The Vice Minister of Mines, Victor Kasongo Shomari, 
announced in February that all of the DRC mining contracts reviewed 
needed to be renegotiated.  Kasongo, leading a delegation to the 
Indaba mining conference in South Africa, said the review process 
turned out to require "multiple major surgeries" rather than the 
minor corrections initially envisioned.  The GDRC will start 
 
KINSHASA 00000326  020 OF 024 
 
 
negotiations with the mining companies, who will then have the 
opportunity to appeal any decision within 30 days. 
 
¶29. (U) MIBA is looking for USD 50 million in funding to improve 
production.  The diamond parastatal announced that it will use 90 
percent of the funding for new investments and 10 percent for 
operations.  MIBA is in the process of reducing expenses by 25 
percent. 
 
¶30. (U) Forrest Group International has signed an agreement to 
retrocede two concessions, Mashamba West and Dikulwe in Katanga 
province, to GECAMINES for USD 825 million.  The concessions 
belonged to Katanga Mining, a 24.5 percent shareholder in Forrest 
Group, and will not be exploited before 2020.  Chinese companies 
will reportedly exploit the mineral reserves in Mashamba West and 
Dikulwe in exchange for road construction and other 
infrastructure-building projects. 
 
¶31. (U) The Ministry of Mines announced on February 18, 2008 that 
the DRC had completed the review of 60 mining contracts and has made 
the results available to respective companies.  The Commission 
recommended cancellation of 16 contracts, including joint ventures 
between GECAMINES and Swanepoel/Exaco, MIBA and SENGAMINES, and 
OKIMO and Amani Gold.  A GDRC panel will determine which 
recommendations to accept, and the next step in the process will be 
renegotiations with a GDRC Task Force.  (Ref Kinshasa 294) 
 
¶32. (U) The Mining Days Conference took place in Kinshasa from March 
12 to 14, during which the Ministry of Mines planned to make quick 
decisions to implement the mining code.  Martin Kabwelulu, the 
Minister of Mines, said the objective for the conference was to 
evaluate the implementation of the 2002 Mining Code and to introduce 
good governance principles through the Extractive Industries 
Transparency Initiative (EITI) practices.  Delegates from 
international organizations, decentralized administrative entities, 
organizations of artisanal mining exploiters, tax collection 
services, government experts, and Chambers of Commerce participated 
in the event. 
 
¶33. (U) Central African Mining & Exploration Company (CAMEC) 
completed its joint venture with Prairie International, 
majority-owned by the Gertler family, after negotiations with 
GECAMINES.  CAMEC and Prairie have since restarted operations on 
Mukondo Mountain.  CAMEC announced that the new deal with GECAMINES 
clears the company from further review of its mining licenses. 
CAMEC also raised USD 87.27 million (72.5 million new shares at USD 
1.21 per share) to develop its Luila copper cobalt facility, 
estimating a possible 100,000-ton copper cathode production capacity 
per year. 
 
¶34. (U) GECAMINES expelled artisanal miners from its Kamatana 
concession, 3 km from Likasi in the Katanga province, on March 6. 
Police killed one miner after fighting broke out with artisanal 
miners that would not leave.  Police also forced artisanal miners 
off of an Anvil Mining concession near Kolwezi on March 31, firing 
teargas into the air.  Artisanal miners burned tires and threw 
Molotov cocktails in protest in Kolwezi and nearby Luilu. 
 
Multilateral Cooperation 
------------------------ 
 
¶35. (U) In an effort to enhance the level of education in DRC, the 
GDRC and UNICEF estimate the need in the education sector at USD 93 
million from 2008 to 2012.  Part of this projected expenditure will 
be taken from the DRC budget while the rest should be raised from 
outside sources.  This plan targets reforms in education as well as 
increasing the number of children in schools. 
 
Nuclear 
------- 
 
¶36. (U) A Department of Energy/Department of State delegation met 
with the GDRC Office of the Presidency, the Ministry of Higher 
Education and Scientific Research, and officials from CREN-K 
(Regional Center for Nuclear Studies - Kinshasa) during the week of 
March 17.  The DOE/DOS team is working toward eventually defueling 
the two nuclear reactors located at the University of Kinshasa and 
repatriating all U.S.-origin nuclear elements currently in CREN-K 
facilities.  While DRC government officials were opposed to 
defueling one of the reactors, key members of the Ministry and 
CREN-K agreed to meet for technical meetings in the near future. 
(See Septel) 
 
Petroleum 
--------- 
 
 
KINSHASA 00000326  021 OF 024 
 
 
¶37. (U) Senator Lunda Bululu, former PM under Mobutu, says the 2008 
budget is unconstitutional.  He says that it does not include the 
required petroleum revenue sharing among provinces based upon their 
population size. (Note: the DRC is only producing about 25K barrels 
of oil per day, compared to nearly 200M barrels per day in 
neighboring Angola.  End note.) 
 
¶38. (U) A geologist from the Ministry of Mines announced that 
significant petroleum reserves exist in eastern Ituri, Orientale 
Province.  The geologist said a South African company, South Africa 
Congo Oil (SACOIL), negotiated a contract with the GDRC to share 
production from Block 3, located south of Lake Albert in Ituri.  The 
Ministry of Hydrocarbons also announced Block 1 would be assigned to 
SACOIL after Tullow Oil (UK) and its partner, Heritage Oil (Canada), 
had relinquished the concession (a claim Tullow Oil denies). 
 
¶39. (U) PERENCO, a French petroleum company specializing in on- and 
off-shore oil exploitation in the DRC is planning to invest USD 50 
million to double production.  Currently, the company produces 25 
thousand barrels per day and exports 350 thousand barrels per month. 
 At the moment PERENCO has a 6 MW hydroelectric dam equipped with 
gas compression facilities, a water injection system, electricity 
generators, a petroleum storage vessel, and a 300 kilometer pipeline 
(210 miles).  The GDRC has a 20 percent share in PERENCO. 
 
¶40. (U) Brazilian investors from High Resolution Technical Petroleum 
(HRTP) visited the DRC on March 26 and met with Prime Minister 
Gizenga.  HRTP said that they will launch their first petroleum 
drilling at Maindombe Lake, Bandundu next year.  Dr. Keith Millheim, 
President of Global Drilling (a U.S. company) is a partner with the 
Brazilian investors.  HRTP is investing USD 100 million of which USD 
20 million was used on feasibility studies. 
 
Public Enterprises 
------------------ 
 
¶41. (U) Aiming to increase receipts, the new manager of SONAS (the 
National Insurance Company) launched a promotion campaign providing 
for a free replacement of car insurance stamps.  In a close 
partnership with the traffic police the brake - block (Denver Boot) 
will be used to immobilize cars that do not have current insurance 
stamps. 
 
¶42. (U) Union employees of the DRC National Water Company (REGIDESO) 
are protesting against possible World Bank-funded reforms as part of 
the public enterprise reform process.  Employees feel that improved 
efficiency and competitiveness should not translate to layoffs. 
 
¶43. (U) The Pilot Committee for the Reform of State Enterprises 
(COPIREP) has confirmed the awarding of the State Rail Company 
(SNCC) management contract to Vectoris, a Belgian firm.  Management 
of SNCC will now be mixed Congolese and Belgian.  The Ministry of 
Portfolio, which oversees COPIREP, hopes that this move will 
contribute to the eventual return of SNCC to profitability. 
 
¶44. (U) Recently-signed management contracts for GDRC river 
transport parastatal ONATRA and rail transport parastatal SNCC will 
cost a total of USD 8 million.  Belgian firm Vectoris and 
Spanish/French firm PROGOSA will provide expertise that it is hoped 
will turn the unprofitable and under-equipped transportation 
parastatals around.  ONATRA personnel, meanwhile, are reportedly 
more worried about the lack of new equipment (e.g. locomotives and 
riverboats). (Comment: While rolling/floating stock for the two 
companies is in abysmal condition and short supply, no sane investor 
is going to pour millions of dollars into poorly managed companies. 
End comment.) 
 
¶45. (U) The newly-installed CEO of the Congolese Office des Routes 
used the 37th anniversary of the agency to deplore its lack of 
financial resources to cover operational costs and investment.  He 
also denounced what he saw as the marginalization of his agency by 
funding and implementation of projects by outside entities. 
 
Public Finance 
-------------- 
 
¶46. (U) The GDRC is struggling to meet the key macroeconomic targets 
required for eventual reestablishment of the formal IMF country 
program.  The GDRC is hoping to conclude a new program by March in 
order to achieve Highly Indebted Poor Country (HIPC) completion 
point before the end of 2008.  The challenge lies with maintaining 
GDRC expenditures within revenues. 
 
¶47. (U) The GDRC's Technical and Economic Commission presented its 
annual report to the Council of Ministers on February 12.  According 
to the Commission, the poor economic performance during the 4th 
 
KINSHASA 00000326  022 OF 024 
 
 
quarter of 2007 was due to slow processing in the ports of Matadi 
and Boma; backlogs of merchandise at the Kasumbalesa border; 
reluctance of economic operators to BIVAC (customs) inspections; 
OCC's refusal to dopt the "guichet unique" (one-stop service for 
iport/export clearance); and many other border issus.  These 
problems led to a decreased supply of oods, higher prices in the 
interior, and lower DC customs revenue. 
 
¶48. (U) Budget Minister Adolh Muzito says that the GDRC has begun 
retrocessio of state revenues to the elevn provinces.  This is 
happening before actual adoption of the decentralization law by the 
National Assembly. Muzito stated that the GDRC would make sure that 
this money reaches the commune (the smallest administrative entity) 
level.  USD 6 million has reportedly been given to Kinshasa province 
for the period January/February 2008. 
 
¶49. (U) Tons of foreign-produced cigarettes are reportedly entering 
the DRC via Bunia, Province Orientale, in eastern Congo near the 
border with Uganda, without paying required customs and duty fees. 
Smuggling from Uganda is thought to be the cause. 
 
¶50. (U) Speaker of the National Assembly Vital Kamerhe urged GDRC 
officials to allocate required budget support to provinces in 
anticipation of a vote on the so-called equalization law, as part of 
the overall decentralization process.  This would allow provincial 
governments to address their emergency needs. 
 
¶51. (U) According to the BCC, annual state revenues reached FC 162 
billion (USD 324 million) and expenditures FC 161 billion (USD 322 
million) through March 10, for a net positive balance of about USD 2 
million. 
 
¶52. (U) DRC foreign exchange reserves decreased by USD 4.38 million, 
down to a total of USD 170 million, which represents one week of 
imports.  (Note: BCC Governor Masangu told Ambassador Garvelink on 
March 26 that this low level of reserves was "not a problem" because 
of the ease with which dollars can be obtained from the many in DRC 
circulation.  End note.) 
 
Telecom 
------- 
 
¶53. (U) In an agreement signed by the Republic of South Korea and 
DRC, South Korea will connect GDRC institutions via intranet 
starting with the ministries of Foreign Affairs, Justice, Plan, 
Budget, Finance, PTT, and Public Works. 
 
Transportation 
-------------- 
 
¶54. (U) Public transportation in Kinshasa has become even more 
difficult over recent months.  The number of buses in circulation is 
considered insufficient, and people now rely more on taxis.  Because 
the taxis are shortening their travel distances to maximize profits, 
the waiting-time for transportation is often more than an hour. 
 
¶55. (U) The Kinshasa Urban Transport Company (STUC, an apt acronym), 
has launched a program to increase the number of buses in 
circulation.  STUC's CEO announced that at least 50 buses will be 
put back into circulation due to a significant acquisition of spare 
parts.  STUC also held an awards ceremony to congratulate Congolese 
mechanics that were trained by Tata Motors (the Indian supplier of 
most buses in the DRC). 
 
¶56. (U) At a meeting in Matadi, the GDRC decided that at the end of 
the month they will auction containers that are piling up at 
ONATRA's port.  This should ease congestion and allow normal 
operations to resume. 
 
Monthly Inflation and Exchange Rates 
------------------------------------ 
 
¶57. (U) The monthly inflation rate for March was 5.6 percent. The 
UNCLASSIFIED 
 
SIPDIS 
PROG: 4/3/2008 
AMB: WGARVELINK 
ECON: GGROTH; AID: KWIEGAND, JBRYAN; FFP: JCONWAY 
ADCM: CCLOUD, AID: SHAYKIN 
KCTY 
 
AMEMBASSY KINSHASA 
SECSTATE WASHDC 
INFO SADC COLLECTIVE 
RWANDA COLLECTIVE 
AMEMBASSY NAIROBI 
CIA WASHDC 
 
KINSHASA 00000326  023 OF 024 
 
 
DEPT OF AGRICULTURE WASHDC 
JAC MOLESWORTH RAF MOLESWORTH UK 
HQ USEUCOM VAIHINGEN GE 
 
SIPDIS 
 
USDA for FAS: DEVANS 
NAIROBI for FAS: KSMITH 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EMIN ELAB EAIR PGOV CG
SUBJECT: Impact of Rising Food Prices in DRC 
 
REF: 06 Kinshasa 1182 
 
¶1. (U) Summary.  Food availability in the DRC is already poor, with 
high levels of malnutrition.  Food price statistics indicate a 25 
percent increase in food prices over the last six months, in 
addition to an overall tripling of food prices since the end of 
¶2000.  Substitution from imported grains and oils to locally 
produced cassava (manioc) and palm oil seems to be one coping 
mechanism.  Local food purchases by the UN World Food Program may 
help, but even this program shows the poor availability of food in 
the DRC.  End summary. 
 
------------------------------ 
Food Availability Already Poor 
------------------------------ 
 
¶2. (U) Food availability in the DRC is very poor, with high rates of 
malnutrition throughout the country due to conflict, displacement, 
plant disease, severely degraded transportation and infrastructure, 
lack of credit, high levels of corruption and banditry, chronic 
underinvestment in research, and other factors.  Over the past 15 
years, food insecurity has increased significantly: between 1991 and 
2002, the number of undernourished people tripled, from 12 to 36 
million, and now includes approximately 72 percent of the 60 million 
population.  During this same period, average per capita caloric 
intake declined from 2170 to 1610 calories per day. Preliminary 
results from the recent Demographic Health Survey completed in DRC 
show that 46 percent of children under 5 are malnourished.  The 
United Nation's Food and Agriculture Organization (FAO) categorizes 
the DRC as a low-income food-deficit country.  In urban markets such 
as Kinshasa and Lubumbashi, rising world prices for staple 
commodities can only further negatively impact this situation. 
Congolese media regularly issue anecdotal reports about increasing 
food prices and the country's inability to feed itself. 
 
-------------------- 
Food Price Increases 
-------------------- 
 
¶3. (U) There are a number of measures of food price increases 
available in the DRC.  Both the IMF and the Congolese Central Bank 
(BCC) have economic units that conduct market basket surveys in 
order to determine inflation rates.  The official DRC inflation rate 
for 2007, as measured by the IMF and BCC, was just under ten 
percent.  The GDRC National Statistics Institute (INS) and the 
Embassy Kinshasa Economic Section also conduct market basket 
surveys.  The Economic Section survey has found that over the period 
October 1 to March 31, 2008, the price of the average Kinshasan's 
food basket has increased by about 25 percent, with food costs more 
than tripling between December 2000 and December 2007.  (Note: The 
embassy market basket survey begun in December 2000 was indexed then 
at 100, and now stands at over 300 for basic food items.  Inflation 
was often very high prior to 2003, sometimes in triple digits.  End 
note.)  INS statistics track more closely to Embassy findings than 
to IMF and BCC statistics, and show food price increases and 
inflation rates for 2007 and since October 2007 of 36 and 20 
percent, respectively, with close agreement on food price increases 
during those periods.  Recent increases in inflation and food prices 
in Kinshasa are largely attributable to rising fuel and 
transportation costs, with double digit increases observed in both 
October 2007 and again in March 2008. 
 
--------------------------- 
Bread Still Popular, but... 
--------------------------- 
 
¶4. (U) Conflict and economic decline has transformed the urban 
economy from a largely formal sector to about a 90 percent informal 
sector today.  Many people have become dependent upon daily, untaxed 
sources of income (as opposed to monthly salaries) and are 
increasingly dependent upon day-to-day income and subsistence 
purchases, especially in the form of bread. Because bread, 
especially for breakfast, has now become a relatively larger 
 
KINSHASA 00000326  024 OF 024 
 
 
proportion of the urban diet, as the price for wheat and corn 
increases, cassava flour could be substituted for wheat flour and 
corn meal in increasing proportion to produce bread.  (Note: during 
certain periods of the 1980s, this experiment in "cassava bread" was 
tried and failed.  End note.)  As with public transportation, where 
the GDRC-fixed taxi and bus fares were circumvented by shortening 
routes, the price of bread has been maintained only through an 
apparent reduction in portion size. 
 
----------------------- 
Let Them Eat Cassava... 
----------------------- 
 
¶5. (U) In the DRC, the primary food source has been and largely 
still is cassava. Though all the cassava consumed in the DRC is 
produced in-country, the price of cassava has also increased in line 
with other basic food commodities measured (approximately 25 percent 
over the last six months).  This is likely due to increasing 
transportation costs and increased demand as the urban population 
substitutes for the more expensive rice and corn (maize) that are 
also staples of the average Kinshasan diet.  For the same price, 
approximately USD 50, you can buy twice as much cassava (100 kilos, 
or 220 pounds) as rice or maize (50 kilos, 110 pounds), making 
cassava the cheapest calories. (Note: DRC cassava production, like 
the caloric intake of its people, has also decreased significantly 
over the last 15 years (as elsewhere in Africa), due primarily to 
the cassava mosaic virus.  Luckily, another staple of the Kinshasan 
diet is the cassava leaf that often accompanies the cooked 
cassava-flour dough, since the leaves are relatively high in 
vitamins, minerals and protein.  End note.)  In rural areas, where 
consumption is largely limited to cassava produced by subsistence 
farms, there should be lesser impacts of price increases. 
 
-------------------------- 
 ...and Cook with Palm Oil 
-------------------------- 
 
¶6. (U) As the price for vegetable oil increases worldwide, and, 
parenthetically, has investors looking seriously at rehabilitating 
abandoned palm oil plantations in the DRC, there seems to be an 
increased local demand for artisanally produced palm oil. (Note: The 
once thriving industrial production and processing of palm oil in 
the DRC, which reached almost half a million tons in the 1980s, has 
been reduced to the point where domestic DRC producers of refined 
oil, soap, and cosmetics are forced to import palm oil from Malaysia 
and Indonesia (reftel) End note.)  Meanwhile, perhaps due to these 
higher imported vegetable oil prices and resultant substitution, 
unrefined domestic palm oil prices have increased faster than any 
other commodity over the last six months but it continues to be a 
better buy than imported, refined oils. 
 
-------------------- 
Local Food Purchases 
-------------------- 
 
¶7. The UN World Food Program (WFP) has a mandate and money for local 
purchase of food in areas of excess production to feed the hungry in 
areas of need.  WFP/DRC was able to purchase 5,638 metric tons (MT, 
about 2,200 pounds) of local food commodities in 2007 and has 
already purchased 2,534 MT in 2008. WFP buys from large scale 
farmers, traders, and NGOs that organize small scale farmers.  The 
commodities purchased are maize (2/3 of total) and beans (1/3 of 
total).  Regionally (Zambia, Uganda, Kenya, Namibia, South Africa 
and Tanzania), WFP/DRC has been able to purchase a total of 32,994 
MT, primarily maize.  This relatively low level of in-country 
purchases is another indicator of poor food availability in the 
DRC. 
 
¶8. (U) Comment.  The Congolese people in general, and Kinshasans in 
particular, know how to get along despite hard times.  One old joke 
goes: "What did we do before there were candles?" Answer: "We had 
electricity."  The same might someday be said about cassava bread 
and wheat bread, or palm oil and U.S. vegetable oil.  The most 
disturbing aspect of this food price trend is that, even with 
substitution as a coping mechanism, there are those who are having a 
difficult time putting food on the table. Recent events in Burkina 
Faso, Cameroon, and elsewhere suggest that there is only so much 
elasticity in hunger, and that eventually the population may decide 
that it has not had enough...to eat. End comment. 
 
Garvelink