COUNTRY REPORT
Zambia Democratic Republic of Congo
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3rd quarter 1999
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ISSN 1369-4839
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Printed and distributed by Redhouse Press Ltd, Unit 151, Dartford Trade Park, Dartford, Kent DA1 1QB, UK Contents
3 Summary
Zambia
5 Political structure 6 Economic structure 7 Outlook for 1999-2000 11 The political scene 14 Economic policy 16 The domestic economy 17 Mining and energy 19 Agriculture 19 Infrastructure and services 20 Foreign trade and payments
Democratic Republic of Congo
22 Political structure 23 Economic structure 26 The political scene 31 The domestic economy 32 Mining
34 Quarterly indicators and trade data
List of tables
9 Zambia: forecast summary (domestic) 10 Zambia: forecast summary (external) 33 Zambia: quarterly indicators of economic activity 34 Democratic Republic of Congo: quarterly indicators of economic activity 35 Zambia: foreign trade 36 Zambia: direction of trade 37 Zambia: refined copper exports 37 Zambia: UK trade 38 Zambia: Japanese trade 38 Democratic Republic of Congo: trade with major partners
EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 2
List of figures
11 Zambia: gross domestic product 11 Zambia: kwacha real exchange rates 16 Zambia: inflation 17 Zambia: international copper prices 25 DRC: gross domestic product
EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 3
August 2nd 1999 Summary
3rd quarter 1999
Zambia
Outlook for 1999-2000 The ruling Multiparty Movement for Democracy will pay lip service to improving its governance record in order to impress donors. Pledges worth $630m are therefore likely to be fulfilled. The president, Frederick Chiluba, looks set to resign in 2001 as he focuses on securing a diplomatic victory in the Democratic Republic of Congo (DRC) by which he can be remembered. The new finance minister, Katele Kalumba, will be well received but government spending targets will be exceeded this year as civil service wage demands increase. The sale of the main copper mines is now likely to go ahead in early 2000 but the continued delay will constrain real GDP growth to 1.5% this year before rebounding to 5% in 2000. Large wage and energy price increases will push up average inflation to 28% in 1999 but it should fall to 23% in 2000. Falling copper prices and production will subdue export earnings over the forecast period, but donor transfers should narrow the current-account deficit to $251m in 1999 and $240m in 2000.
The political scene Donors demanded action on human rights and transparency at a meeting in Paris and the government promised to respond. The finance minister, Edith Nawakwi, has been replaced by Mr Kaluma, possibly in a move to appease donors. The ZAP coalition has faced problems in registering which, it claims, are politically motivated. As opposition parties woo the Lozi vote, the issue of secession for Barotseland has taken on new impetus as Namibian Lozis have taken direct action against their government. The first steps towards a new understanding with Angola have been taken, but Mr Chiluba’s ceasefire agreement for the DRC may yet fail.
Economic policy Civil servants have won a court action awarding them a 40% wage increase and local council workers have demanded the payment of wage arrears. The tax authorities have been criticised for being heavy handed.
The domestic economy • Inflation is on the rise again. The stock exchange has been performing well and its first rights issue has been released. Two local airlines are to start operating and the railways are likely to be leased.
• Copper and cobalt production have been falling as talks on the privatisation of Nkana and Nchanga have continued. Energy prices went up in June, while the government has invited new private investment into the sector. The food import requirement is down in 1999 but corridor disease has affected cattle farmers.
Foreign trade and Two new tourism projects are under way. Donors have pledged $630m and payments heavily indebted poor countries debt relief could be worth $900m.
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Democratic Republic of Congo
Outlook for 1999-2000 Despite the signing of a peace accord in July by all countries involved in the war in the DRC, peace is not yet at hand. Rwanda’s commitment remains doubtful, as highlighted by the refusal of the rebel Rassemblement congolais pour la démocratie (RCD), which it supports, to sign the accord. Uganda, however, may be willing to respect the accord, now that the rebel Mouvement pour la libération du Congo (MLC) has signed it. Even if all rebels sign, implementing the accord will be difficult, particularly as no provision has been made for the many groups fighting Rwanda in the east, such as the Hutu interahamwe. If the war drags on, President Laurent Kabila’s position will become more fragile, particularly as the economy will continue to deteriorate, as illustrated by the unhalted slide of the franc congolais.
The political scene A peace accord was signed in July in Lusaka by all countries involved in the war. The accord includes a cessation of hostilities, the deployment of a UN peacekeeping force, the withdrawal of all foreign forces, the disarming of all militias and the holding of a national dialogue. However, the RCD has so far refused to sign, owing to factional infighting. Fighting has therefore continued on the ground, although the MLC signed the accord in August in a surprise turnaround, reflecting the growing rift between Uganda, which supports the MLC, and Rwanda, which supports the RCD. Congo’s internal opposition has supported the peace accord, but has continued to be harassed, while the signing of the accord means that the "national debate" has been put on hold. The UN High Commissioner for Refugees, Sadako Ogata, has visited Congo, as refugee numbers have continued to swell. The international community has supported the peace process, and Mr Kabila has improved relations with the new South African president, Thabo Mbeki.
The domestic economy • The free-fall of the franc congolais has continued. Fuel shortages have erupted again, prompting the arrest of several oil company directors. Civil servants have started a strike for higher salaries.
• Gécamines has been embroiled in a legal dispute with its former trading agent.
Editors: Piers Haben; Markus Scheuermaier All queries: Tel: (44.20) 7830 1007 Fax: (44.20) 7830 1023 Next report: Our next Country Report will be published in December
EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 Zambia 5
Zambia
Political structure
Official name Republic of Zambia
Form of state Unitary republic
Legal system Based on the 1996 constitution
National legislature National Assembly; 150 members elected by universal suffrage; all serve a five-year term
National elections November 1996 (presidential and legislative); next elections due in 2001
Head of state President elected by universal suffrage for a term of five years
National government The president and his appointed cabinet
Main political parties The Movement for Multiparty Democracy (MMD) is the ruling party, with a huge parliamentary majority. The National Party (NP), Zambia Democratic Congress (ZDC) and Agenda for Zambia (AZ) also have seats in parliament. The former sole party, the United National Independence Party (UNIP), and several other opposition groups boycotted the 1996 elections and have no seats. The United Party for National Development (UPND) was formed in late 1998 but already seems to have attracted considerable support. The Zambia Alliance for Progress (ZAP) is a coalition formed in early 1999 and comprises the National Citizens Coalition (NCC), the ZDC, AZ, the Labour Party, the Lima Party, the National Party (NP) and a non-governmental organisation, the National Pressure Group (NPG). There are over 30 parties in all
President Frederick Chiluba
Vice-president Christon Tembo
Key ministers Agriculture & fisheries Sureshi Desai Commerce, trade & industry David Mpamba Communications & transport David Saviye Community & social development, lands Dawson Lupunga Defence Chitalu Sampa Education Godfrey Miyanda Energy & water development Ben Mwila Environment William Harrington Finance Katele Kalumba Foreign affairs & co-operation Kelly Walubita Health Nkandu Lou Home affairs Peter Machungwa Labour & social services Edith Nawakwi Legal affairs Vincent Malambo Local government & housing Bennie Mwiinga Mines Syamujaye Syamukayumbu Office of the president Eric Silwamba Tourism Anoshi Chipawa Works & supply Golden Mandeni
Central bank governor Jacob Mwanza
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Economic structure
Latest available figures
Economic indicators 1994 1995 1996 1997 1998a GDP at market prices (ZK bn) 2,241 2,998 3,970 5,156 6,395 Real GDP growth (%) –3.5 –2.3 6.5 3.5 –0.8 Consumer price inflation (av; %) 54.6 34.9 46.3 24.8 22.9b Population (m) 7.90 8.08 8.28 8.48 8.74 Exports fob ($ m) 1,066a 1,233a 1,093a 1,135a 903 Imports fob ($ m) 903a 1,074a 965a 1,144a 980 Current-account balance ($ m) –57a –139a –150a –206a –351 Reserves excl gold ($ m) 268 223 223 239 69 Total external debt ($ bn) 6.61 6.85 7.11 6.76 6.69 External debt-service ratio, paid (%) 31.4 194.6 26.1 29.7a 31.9 Copper outputc (‘000 tonnes) 354 307 320 325a 293 Exchange rate (av; ZK:$) 669.37 864.12 1,207.90 1,314.50 1,862.07d
July 30th 1999 ZK2,500:$1
Origins of gross domestic product 1996 % of total Components of gross domestic product 1997 % of total Agriculture 12 Private consumption 58 Industry 39b Government consumption 15 Mining 9 Gross fixed capital formation 37 Construction 2b Change in stocks 1 Manufacturing 31b Exports of goods & services 30 Government & other services 49 Imports of goods & services –43 GDP at market prices 100 GDP at market prices 100e
Principal exports 1996b $ m Principal imports 1993 $ m Copper 568 Crude oil 144 Cobalt 193 Fertiliser 30
Main destinations of exports 1997f % of total Main origins of imports 1997f % of total Japan 11.6 South Africa 48.3 Saudi Arabia 11.5 UK 8.1 Thailand 10.6 Zimbabwe 7.2 India 7.5 Saudi Arabia 6.1 a EIU estimates. b Official estimate. c ZCCM financial years starting April 1st. d Actual. e Total does not sum due to rounding. f Based on partners’ trade returns, subject to a wide margin of error.
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Outlook for 1999-2000
Donors will scrutinise In the next two years the Zambian government’s commitment to political governance— freedom and transparency in governance will be put to the test. In recent years the ruling Movement for Multiparty Democracy (MMD) has attracted growing criticism over its harsh treatment of political opponents and the independent press. The government insists that the human rights situation will improve and produced a glossy good governance document for the consultative group (CG) of donors meeting in Paris in late May to prove it. The MMD’s failure to deliver on its commitment to improving human rights and increasing transparency in the past gives cause for scepticism over whether it will stick to its promises this time round. However, the quarterly monitoring by donors provided for in this year’s CG agreement will encourage more effort by the government than previously, especially as the continued inflow of donor funds is seemingly dependent upon it.
—although some leniency is Despite pressure for change, there is a school of thought among donors and expected in the interests of commentators which reasons that, despite allegations of harassment and regional stability torture of opposition politicians and the press, Zambia still compares favour- ably with most of its neighbours on governance and human rights issues. The argument runs that it is better for donors to deliver on aid pledges so as to ensure domestic stability, even if the criteria on human rights and governance laid out by the CG are not fully met. This argument is likely to gain increasing support in the coming year if conditions deteriorate further in Angola, Zimbabwe and the Democratic Republic of Congo (DRC). The most likely outcome of these conflicting pressures is that while some improvements in political freedoms and government accountability will occur, the harassment of opposition politicians and the press will probably continue, albeit at a lower level than previously. Thus, while the domestic discontent of recent years will continue unabated, and industrial relations disputes over redundancies will remain a cause for concern, there are unlikely to be any serious domestic disturbances around which the opposition can rally the nation. In this way the MMD will stay firmly in control while the opposition parties will probably continue to founder.
Mr Chiluba wants an end- Internal jostling for position within the MMD is expected in 2000 as President of-term foreign policy Frederick Chiluba continues to insist that he will not run for the presidency in success in Congo 2001. Indeed, even the most dedicated of Zambian conspiracy theorists are now beginning to accept that he may mean it. With his impressive dedication to the daunting task of bringing peace to the DRC, Mr Chiluba appears to be trying to secure a genuine foreign policy success to be remembered by. Mr Chiluba has used his economic leverage over the Congolese government, and the good will generated by his endeavours, with considerable skill, and the ceasefire document signed in Lusaka on July 11th is an impressive testament to that. However, the deal’s impact could easily be lost if Congolese rebels, over whom Mr Chiluba has little leverage, do not sign. There is little that Mr Chiluba can do about this, and he will have to allow others, notably South Africa, to take the initiative in overcoming this obstacle.
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At least Mr Chiluba can take comfort in having successfully faced down Angola’s allegations of his government’s complicity with the rebel União Nacional para a Independência Total de Angola (UNITA). These accusations will probably not be heard again for a while, since the Angolan government is currently more concerned with self-preservation then regional relations.
The new finance minister The new finance minister, Katele Kalumba, is one of the brightest stars in the will be welcomed ruling MMD. His appointment, in June, has been met with approval in business and finance circles, and bodes well for budgetary and general economic policymaking. The former finance minister, Edith Nawakwi, known for her confrontational approach, has moved to the Ministry of Labour at a time when industrial disputes are increasing. However, her predecessor, Peter Machungwa, was also combative, and the civil servants and council workers who are in dispute with the government will notice little difference.
Indeed, the government seems determined not to improve on the 30% wage increase it agreed with civil servants earlier in the year, despite being ordered to do so by the Industrial Relations Court (IRC). Scant attention has been paid to IRC rulings in the past, but this time the case is going to the Supreme Court. If this court upholds the IRC ruling, the government will find it harder to resist paying. This will in turn further endanger the 1999/2000 budget expenditure target and push up the budget deficit, although high levels of inflows from donors suggest that the overall deficit (including grants) as a proportion of GDP will be lower than in 1998/99.
The purchase of the main There is clearly excess capacity in the global copper industry at present and copper mines will probably growing stockpiles are maintaining downward pressure on prices. However, be settled in 2000— copper holds out considerable promise to those mining outfits that survive the next five years as new cable technology has overcome many of copper’s disadvantages compared with fibre-optic cable. Such prospects offer some cheer to the government as it tries to finalise a deal on privatising Zambia’s main copper mines. Nonetheless, the London-based Anglo American Corporation (AAC) will continue to delay its decision to buy the Nkana and Nchanga mines until the company has a clearer picture of international production capacity over the next few years. Since there are no other buyers, AAC and its likely partner, Codelco of Chile, are in no danger of losing the purchase. However, after two years of negotiations the price is now extremely low (1st quarter 1999, page 19), suggesting that AAC will in fact go ahead with the deal and, further, that it will not wait much longer than the beginning of next year for fear that the continued decline of Zambia Consolidated Copper Mines will destroy the Copperbelt’s capacity to recover.
—and the delay will In her January budget, the then finance minister, Ms Nawakwi, predicted real constrain GDP growth GDP growth of 4% this year, with mining output rising by 6%, manufacturing in 1999 output by 5% and agricultural output by 5.5%. The EIU was more pessimistic (2nd quarter 1999, page 9) and eight months into 1999, our forecast is proving the more accurate. In the mining sector, indications are that copper output in 1999 will be 280,000-285,000 tonnes, just below the 1998 figure. Since the fortunes of many manufacturing firms are closely tied to the mining industry,
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manufacturing production will probably be lower than in 1998. While some Zambian manufacturers have warned of a 7% decline in 1999 a 2% drop is more likely. There is still no official crop estimate for 1999. However, the signs are that the maize crop may exceed the EIU’s earlier estimate of 800,000 tonnes, suggesting that agricultural production is set to increase by 3% in 1999 while 2% growth is projected in services as a result of rising demand from civil servants, who are to receive a hefty wage increase, of up to 40%. However, these will not be enough to offset the dismal performance elsewhere and real GDP growth this year is forecast at just 1.5%.
—but the prospects for Serious problems at the Roan Antelope mine in Luanshya, and the delay in the 2000 are better privatisation of the copper mines until late this year or early 2000, suggest that growth in mining output in 2000 will be lower than previously expected, at around 6%. Prospects for manufacturing and services will, however, brighten with the inflow of foreign direct investment (FDI) associated with the privati- sation of the mines and the expected advent of a trade deal with the Southern African Customs Union (SACU), and growth of 5% and 6% are forecast respect- ively. Agricultural growth will remain constrained by lack of access to fertiliser and other inputs, but a 2.5% growth rate remains feasible, depending on the weather. The overall impact on GDP will be more positive than in 1999 and real GDP growth is forecast at 5% in 2000.
Inflation will rise in 1999 Inflation showed signs of upward pressure when it rose to 27.2% in June. The before falling in 2000 combined effect of a 12% electricity rise, a 10.9% increase in the price of fuel and a pay settlement of some 40% for civil servants, which may or may not be paid, will further stoke inflationary pressures during 1999. Thus despite an improved harvest, which will dampen food price increases, annual average inflation is forecast to rise to 28% this year from 23% in 1998.
In 2000 a more stable currency, greater wage restraint after this year’s sharp rises and continued good harvests are expected to ease inflationary pressures allowing average annual inflation to fall to 23%.
Zambia: forecast summary (domestic) (% change year on year)
1997a 1998a 1999b 2000b Real GDP 3.5c –0.8 1.5 5.0 of which: agriculture –6.0 –5.0 3.0 2.5 manufacturing 3.2 0.0 –2.0 5.0 mining 2.0 –9.0 –2.5 6.0 services 4.2 –1.0 2.0 6.0 Consumer pricesd Average 24.8c 22.9 28.0 23.0 Year-end 19.4c 30.6 24.2 18.4
a EIU estimates. b EIU forecasts. c Actual. d Low-income index, urban areas.
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Exports will remain Export earnings will be affected by low world copper prices and subdued prod- subdued— uction in 1999, pushing copper earnings down to an estimated $434m. Cobalt earnings should remain flat, as slightly higher world prices offset falling prod- uction, as should earnings from manufactured goods, demand for which is stag- nant in Zambia’s strife-torn neighbours. Only horticultural exports to Europe offer some relief but this will not be enough to stop overall export earnings declining marginally to $869m in 1999. While the main copper mines are expected to be sold early in 2000, copper production is not expected to start to increase dramatically until late in the year. However, copper prices are forecast to rise slightly which, combined with rising export earnings from manufactured and horticultural goods, should push total export earnings up to $1bn in 2000.
Import expenditure will remain high, rising to $1bn in 1999 and $1.2bn in 2000, fuelled by civil service wage rises and rising oil prices in 1999, and demand for imported capital goods in 2000. However, the overall current- account balance will benefit from donor grants. This means that the deficit is forecast to narrow to $251m in 1999 and to $240m in 2000.
—but greater currency On the back of strong donor inflows, the Zambian kwacha has remained stable stability is forecast this year at around ZK2,500:$1, even strengthening for short periods. However, international reserves remain at dangerously low levels—about one month of import cover—while the continued delay in the privatisation of the main copper mines means that FDI will be lower than expected in 1999, while dwindling export earnings preclude any improvement in the current account. Although foreign-exchange inflows from donors will continue to relieve some of the pressure on the kwacha, the currency is still forecast to fall to ZK2,680:$1 at the end of 1999, leaving an annual average exchange rate of ZK2,546:$1.
Continued donor inflows, and the expectation of rising levels of FDI associated with the successful privatisation of the mines, should bolster the currency in 2000. The kwacha should thus remain relatively stable in real terms, falling in line with inflation differentials to an annual average rate of ZK2,900:$1 with a year-end rate of ZK3,044:$1.
Zambia: forecast summary (external) ($ m unless otherwise indicated)
1997a 1998a 1999b 2000b Merchandise exports fob 1,135 903 869 1,032 of which: copper 623 493 434 532 Merchandise imports fob 1,144 980 1,020 1,160 Current-account balance –206 –351 –251 –240 Exchange rate (ZK:$) Average 1,315c 1,862c 2,546 2,900 End-period 1,414c 2,299c 2,680 3,044
a EIU estimates. b EIU forecasts. c Actual.
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HIPC debt relief may be Zambia will continue to strive for further debt relief by gaining heavily only be from 1983 indebted poor country (HIPC) status. However, the outlook for the relief of Zambia’s onerous debt burden—repayments of which often take up one-third of export earnings—has been overshadowed by the claims of those cam- paigning for debt relief that only debt drawn down before 1983 will be eligible for relief. This will mean that only $1bn of Zambia’s total external debt stock will be affected by the HIPC initiative. Although $1bn of relief has already been granted under an earlier Paris Club initiative (2nd quarter 1999, page 20), this will still leave $5bn ineligible. The World Bank will argue that 1983 is not arbitrary, but is the date when Zambia first went to the Paris Club to get a loan payment deferred. However, this is not an obviously winning point and they will find it hard to defend it convincingly. Nonetheless, whoever wins the debate, it is unlikely that donors will be able to find extra resources over and above the $70bn they currently have to support further debt relief.
Zambia: gross domestic product Zambia: kwacha real exchange rates (c) % real change, year on year 1990=100 7 120 Zambia ZK:DM 6 Africa 5 110
4 ZK:$ 100 3
2 90
1 80 0
-1 1996 97 98(a) 99(b) 2000(b) 70 ZK:¥ZK:¥ (a) EIU estimates. (b) EIU forecasts. (c) Nominal exchange rates adjusted for changes in relative consumer prices. Sources: EIU; IMF, International Financial Statistics; World 1990 91 92 93 94 95 96 97 97 98(a) 98(a) 99(b)99(b)2000(b) 2000(b) Economic Outlook.
The political scene
Good governance is on the On May 26th-28th the consultative group (CG), a forum for Zambia’s main agenda again— international donors, held its annual discussion in Paris. As in previous years, the governance record in areas such as human rights and corruption within the ruling Movement for Multiparty Democracy (MMD) came to the fore. While the government produced its own report, which highlighted its achieve- ments to date and set out lofty goals for the future, human rights organisations (HROs), including the New York-based Human Rights Watch (HRW) and the London-based Amnesty International (AI), outlined the government’s alleged failings over the previous year. AI focused on the police force, providing evidence of an increase in extrajudicial shootings and torture as well as rising political interference, including the active recruitment of MMD supporters into the police force. HRW reported cases of torture and gave examples of govern- ment harassment of the independent press and opposition parties. HRW also
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detailed the apparent failure of the government to honour promises it made at the last CG meeting, particularly with regard to stamping out the use of torture, and reform of the security forces.
—as the government The government was represented at the CG meeting by the then minister of promises donors that it is finance, Edith Nawakwi, and the minister of legal affairs, Vincent Malambo. serious about the matter While Ms Nawakwi ignored the reports from the HROs and accused donors of supporting these groups instead of funding Zambia’s social services sector, Mr Malambo was more diplomatic and tried to allay fears that the government did not take such criticisms seriously. The general outcome of the CG meeting was positive, and donors pledged $630m in development assistance and balance-of-payments support for this year (see Foreign trade and payments). To the delight of HROs, donors also agreed to hold quarterly meetings to monitor the government’s progress on the commitments it made in Paris. Since the CG meeting, Zambian HROs have reported that the government has tried to involve them more in governance issues but so far this has amounted to little more than workshops on the subject. Meanwhile, the HROs are concerned that the government will remain inert on issues not specifically raised by donors, such as police misconduct.
Ms Nawakwi is sacked as The surprise removal on June 29th of Ms Nawakwi from her position as finance finance minister minister, and her subsequent redeployment to the Ministry of Labour, also appears to be part of a post-CG strategy by the president. Because donor assistance makes up about one-third of Zambia’s budgeted revenue, Zambian finance ministers must possess diplomatic skill sas well as financial acumen, and since donors care about governance, the finance minister needs at least to appear to care too. However, on her return from Paris, Ms Nawakwi accused HROs of plotting “in dark corners” and warned them not to expect their concerns about governance to be met. Had Ms Nawakwi demonstrated other talents during her brief tenure in the finance ministry to compensate for such diplomatic shortcomings then she might have kept her job but, as it was, President Frederick Chiluba had little to gain from retaining her. But by replacing her with the talented former minister of home affairs, Katele Kalumba, Mr Chiluba was able to signify his own commitment to good govern- ance. Mr Kalumba has been replaced at home affairs by the former minister of labour, Peter Machungwa.
ZAP runs into difficulties— In spite of the government’s commitment to greater political openness, the Zambia Alliance for Progress (ZAP), a coalition of small opposition parties established in May (2nd quarter 1999, page 11), has faced difficulties in regis- tering with the authorities. The registrar of societies ruled on June 4th that ZAP could not be registered because its constitution contravened the national cons- titution. The main point of contention is that ZAP’s constitution allows members to retain their individual party identities while standing under the ZAP umbrella. However, the Zambian constitution does not allow dual party membership for members of parliament (MPs), so that sitting MPs would have to resign and fight their seats again if their parties joined the alliance. ZAP denounced the ruling as political, but independent legal observers seemed to regard it as fair. Shortly afterwards, in a move that really did seem political, the
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national sports council reversed a previous decision to allow ZAP to stage its official launch at its premises on the grounds that political events were not allowed there.
ZAP subsequently postponed its launch but did manage to register on July 12th after the party had scrapped its dual membership provision. However, this change appears to have caused the parties that form ZAP to have second thoughts about the whole project, with none noticeably keen to dissolve in order to join ZAP.
—and is unable to stand in No party was able to stand under the ZAP banner in local elections in late July local elections because of the registration delay, although one of its constituent parties, Agenda for Zambia (AZ), did gain a seat. The elections were for the 29 remain- ing seats in which voting was postponed from the main local elections last December because of heavy rains (1st quarter 1999, page 12). The vote was generally considered to be free and fair, although the turnout was extremely low. Unsurprisingly, the MMD won 21 seats, Kenneth Kaunda’s United National Independence Party won three seats, Anderson Mazoka’s newly formed United Party for National Development (UPND) won two seats and one independent candidate gained a seat.
The Lozi vote takes on Meanwhile, as the EIU predicted (2nd quarter 1999, page 7), ZAP has stated growing importance— that it will support a review of the Barotseland agreement. Under the Barotseland agreement the British colonial administration held out the pros- pect of self-determination for the Lozi people of western Zambia, but Lozi hopes were dashed at independence in 1963 when the new government insisted on a unified Zambian state. AZ, one of ZAP’s constituent members, is closely associated with Lozi attempts to secure self-determination. The UPND has also been courting the Lozi vote. In late June its president, Mr Mazoka, visited the Lozi king, Litunga Ilute Yeta III, and told him that he envisaged an important role for traditional chiefs in local government.
—as Namibian Lozi Shortly after Mr Mazoka’s visit to the Lozi king, police in nearby Mongu secessionists are detained announced that they were holding six Namibian Lozi independence activists. The men originally fled Namibia’s Caprivi strip near the Zambian border after a crackdown last year by the Namibian government against what it alleged was a secessionist plot. Having first sought political asylum in Botswana the six fled to Zambia. Fearing local opposition amongst Zambian Lozis the authorities soon transferred the detainees to Lusaka, where they have since remained. Mr Chiluba and the president of Namibia, Sam Nujoma, were united in their condemnation of Lozi secessionism during bilateral talks in April and are expected to co-operate in cracking down on Lozi activists. This issue was brought to the fore by fighting in Namibia’s Caprivi strip in early August, which precipitated a state of emergency in that area.
Angola and Zambia agree Discussions between Angolan and Zambian intelligence chiefs in mid-May, to improve relations— mediated by Swaziland’s King Mswati III (2nd quarter 1999, page 13), proved more fruitful than expected. The talks were intended to resolve the long- running dispute between the two governments over Angolan allegations that
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Zambia is assisting the rebel Uniâo Nacional para a Independência Total de Angola (UNITA). An agreement was signed on June 9th “to forget all past disputes” and to establish regular bilateral intelligence meetings while re- activating the existing joint permanent commission on defence and security. The delegations further agreed to seek a ministerial meeting at which the agree- ment could be formally ratified. Foreign ministers from the two countries pursued the issue informally at the Organisation of African Unity (OAU) summit in Algiers in July. However, no date has yet been set for a formal minis- terial summit, which would in turn pave the way for a meeting between Mr Chiluba and President Eduardo dos Santos of Angola.
Despite the displays of reconciliation, the Angolan government may not have actually changed its view on Zambia, but may instead have adopted a less confrontational approach for now in order to assuage international opinion. Both the US Federal Bureau of Investigations (FBI) and the Dutch investigative team found, as the EIU envisaged, that the bombs that rocked Lusaka in February (2nd quarter 1999, page 13) were the work of an Angolan covert operations team. The US government, whose views matter to the beleaguered Angolan government, subsequently expressed its strong disapproval through diplomatic channels.
—but a ceasefire in Congo Mr Chiluba has been preoccupied over the last few months with trying to end must still be signed the war in the Democratic Republic of Congo (DRC), which culminated in the Lusaka summit from June 24th to July 13th (see Democratic Republic of Congo page 26). Mr Chiluba’s travels have been expensive, though the EU has agreed to refund him for most of them, and time consuming, leaving him little time for much else. Much to the delight of the government, which has been accustomed to generally dismal publicity over the last few years, Mr Chiluba has been congratulated by nearly everyone for his work so far, but now faces the thorny problem of persuading the Congolese rebels to sign the ceasefire agreement. Mr Chiluba’s decision in late July to postpone indefinitely a trip to the DRC’s Kivus provinces to talk to rebel leaders showed that he knows that he has neither leverage nor their good will.
The rebels’ ill will was illustrated in early June when guerrillas from the Rassemblement congolais pour la démocratie (RCD) staged crossborder raids near Kaputa. Although the RCD denied the raids, at least ten militiamen were arrested. Kaputa is a target because of the presence of Congolese refugees fleeing the fighting, though most of them have by now been transferred to Mporokoso further south.
Economic policy
The industrial relations The government’s fiscal targets, set out in the 1999 budget (1st quarter 1999, court awards civil servants page 16), suffered a setback in May as its wage bill came under pressure. a 40% wage increase— Although civil service unions negotiated a 30% wage increase for 1999 earlier this year (1st quarter 1999, page 15), an increase catered for in the budget, the unions have continued to challenge a wage freeze implemented last year. At
EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 Zambia 15
the end of May the unions took the government to the Industrial Relations Court (IRC) over the issue. On June 16th the IRC ruled that the freeze was illegal and awarded workers a 10% increment, on top of the 30% increase, significantly above government expenditure targets. In July the government said it would appeal and the award has yet to be paid. Though frustrated by this response, the unions nonetheless view it as an improvement on a similar dispute in February 1996. That time the IRC awarded civil servants a 45% wage increase, but the then minister of finance, Ronald Penza, simply ignored the ruling and offered 11% instead (2nd quarter 1996, page 9).
—as council workers The government’s budgetary expenditure targets are also being threatened by demand payment of wage wage pressures at a local level. Council workers on the Copperbelt went on arrears strike in mid-June in protest at growing salary arrears. Local councils have been putting off paying wages since the central government removed many of their traditional revenue sources, notably rental income in the wake of forced council house sales. The Zambia United and Local Authorities Workers’ Union (ZULAWU) argued that the central government should therefore increase its funding to councils to enable them to pay their staff, but the minister of local government, Bennie Mwiinga, refused to discuss the matter during the strike, which he ruled illegal. Once the strike ended in late June, negotiations began between ZULAWU and Mr Mwiinga. As a concession, the government offered a wage rise of ZK40,000 ($16) per month for all council workers. However, the core issue of funding remains unaddressed with Mr Mwiinga stating merely that implementation would be left to those councils that could afford it, while he would “begin consultations” to secure funds for those that could not. ZULAWU rejected these terms and in mid-July threatened a national strike. It later withdrew the threat in favour of continued negotiations.
ZRA tactics generate an The Zambia Revenue Authority (ZRA) reported in late June that its recent visits explosive response to Lusaka traders showed that most underdeclared their turnover to reduce their value-added tax (VAT) returns by as much as 90%. Such visits, during which ZRA officials turn up unannounced and sit in on the conduct of business, are proving deeply unpopular with local businesses. In early June a Lusaka businessman was arrested for punching a ZRA official and in late July the president of the United Party for National Development (UPND), Anderson Mazoka, advised business people in Livingstone to take the ZRA to court for harassment, pledging the UPND’s assistance.
On July 24th a hand grenade planted under a minibus outside the ZRA’s headquarters in Lusaka exploded, injuring no one but damaging two vehicles.
EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 16 Zambia
The domestic economy
Energy price increases push After reaching a two-year high in January of 31.6%, Zambia’s year-on-year up inflation inflation rate dropped to 26.6% in May. However, inflation immediately
Zambia: inflation started to rise again to 27.5% in June following an increase in electricity tariffs, % change, year on year by 12%, in that month. Inflationary pressures will be further exacerbated by 35 fuel prices increases of 10.9% in July, and the civil servants’ pay award which, if actually paid, will increase wages by some 40% (see above). 30 While these recent increases have been largely energy-related, money supply
25 growth has also been rapid in May and June, raising fears that excess liquidity will similarly fuel inflationary pressures. The Bank of Zambia (BoZ, the central 20 bank) reported that the broad money supply (M2) fell, rather improbably, by over 5% in 1998 but that it rose above 15% during May and June. 15 The official reason given is that increased aid inflows have added to domestic liquidity but, in fact, it is the reduction in domestic borrowing by the govern- Jan . .Apr . . Jul . .Oct. . Jan . .Apr . . 1998 99 ment associated with the aid flows that is boosting domestic liquidity. At the Source: Bank of Zambia. end of March banking claims against the government totalled ZK629bn, but these fell to ZK539bn ($215m) by late July.
The Lusaka Stock Exchange The Lusaka Stock Exchange (LuSE) index is outperforming inflation. At the end embarks on its first rights of July the index stood at 204, a 26% increase on the beginning of the year. issue However, overall activity on the LuSE has remained generally muted and the index rise was probably caused by Anglo American’s sale of its shares in Zambia Breweries.
While the all-share index is performing well, the LuSE is also expanding as new financial instruments are introduced into the small bourse. The LuSE's first rights issue was launched on June 18th and will be concluded on August 20th. The issue seems to be attracting strong demand with over 1,000 letters of application being requested. Zambia Breweries hopes to use the issue to raise $8.5m for its acquisition of Northern Breweries from a UK-based company, Lonrho (2nd quarter 1999, page 17).
Meanwhile, as part of LuSE’s efforts to harmonise its rules with those of other stock exchanges in the Southern African region, the public shareholding in any listed company is now a mandatory 30%, up from the previous level of 10%.
Manufacturing industry In a sign of the general decline of Zambia’s manufacturing industry in the face continues to decline of a stagnant economy and stiff competition from abroad, Livingstone’s Zambia Textiles is cutting costs by shedding nearly half of its 325-strong work- force. Tanup, another Livingstone-based textiles company, closed down in March. In July Kafue Textiles was reported to have failed to meet export orders worth ZK1bn ($400,000) because it had spent all the money previously provided by the government on wage arrears, and is unable to secure further credit from its suppliers of lint cotton. Manufacturers claim that competition from abroad is unfair and have frequently accused South African firms of dumping produce on to the Zambian market.
EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 Zambia 17
Mining and energy
Copper production and Zambian copper production has remained below 20,000 tonnes a month this prices stay low— year because of the ongoing delay in privatising the mines and the deterior- ating situation at Binani’s Luanshya mine (see below). However, an up-turn is expected towards the end of the year, as richer ore is mined and repairs on machinery are completed. The total figure for 1999 is expected to be about 280,000 tonnes, although this will still be about 3% lower than production in 1998.
Meanwhile, the downward pressure on international copper prices has continued, primarily as a result of the market’s assessment that stockpiles will keep growing, after several major mines in the US and Canada have postponed decisions on closure. In May copper cost 68.5 cents/lb on the London Metal Exchange (LME). This was only 51.5% of its 1995 price, making copper the world’s worst performing commodity in the period, followed closely by coffee.
—while cobalt production Cobalt production at Zambia Consolidated Copper Mines (ZCCM) averaged falls but the price rises over 350 tonnes per month during 1998, but production fell to 300 tonnes in March, and to only 255 tonnes in April. Further declines to as low as 180 tonnes a month are possible as new investment awaits the finalisation of the sale of the main state-owned mines. However, the performance of the priva- tised mines is hardly better. Cobalt production for January was 73 tonnes, but only 17 tonnes in March because of ongoing disruption at the Roan mine in Luanshya. However, cobalt prices have been increasing, reaching $20/lb in June, up from $15/lb the month before.
Talks on Nkana and Prior to its listing on the London Stock Exchange in June, Anglo American Nchanga are continuing— Corporation (AAC) told fund managers that although base metals formed an integral part of its expansion strategy, Zambian copper mines were not a priority Zambia: international copper prices area. Nonetheless, AAC remains formally interested in purchasing ZCCM’s main Cents/lb copper mines, Nkana and Nchanga, and has issued occasional statements saying 120 that negotiations are “on track”. Chile’s Codelco has publicly expressed its
110 interest too, and even went to the consultative group meeting of donors in Paris to say so. One of AAC’s pre-conditions for a deal was external financing and this 100 may now be in place in the guise of the World Bank’s International Finance
90 Company (IFC), which is likely to take an equity stake of between 10% and 20%. IFC has confirmed its interest, but says it must first carry out detailed financial 80 and technical assessments before committing itself. Despite the Zambian 70 government's assurances that a final deal will be agreed in September, it now seems unlikely that anything substantial will be settled until early next year. 1996. . . 97 . . . 98 . . . 99 . Meanwhile, a Polish mining group, KGHM, is on the verge of signing a memo- Sources: London Metal Exchange; EIU. randum of understanding (MoU) for ZCCM’s Mufulira division. As the EIU reported earlier (2nd quarter 1999, page 19), KGHM has accepted the terms and price tag of approximately $10m previously negotiated by Reunion Mining.
EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 18 Zambia
—and Binani has proposed The problems for India’s Binani mining company, which owns the Luanshya 3,000 redundancies at plant of Roan Antelope Mining Corporation of Zambia (RAMCOZ), have RAMCOZ worsened in recent months. Despite promising, a little rashly, when it bought the plant that there would be no redundancies, Binani has had to lay off excess labour and in mid-July announced a second wave of redundancies, totalling 3,000 job losses, or about half of the remaining workforce. Miners say they will only accept the job cuts if standard redundancy packages are provided by the company. However, in the past the company has failed to pay out on redundancy packages, suggesting that Binani is unlikely to be able to afford such packages this time and setting the scene for a continuation of the industrial relations disputes that have plagued RAMCOZ since the sale (2nd quarter 1999, page 17). Although Binani announced in June that it would develop a new mine called Muliashi North, costing $63m—with construction beginning in July 2000 and production starting in January 2001—the continued problems at RAMCOZ suggest that the new project will not materialise.
ZESCO’s latest price rise At the end of May the Energy Regulation Board (ERB) approved an application infuriates local businesses— by the Zambia Electricity Supply Company (ZESCO), for a 12% electricity tariff increase. The Zambian Chambers of Commerce and Industry, the Manufacturers’ Association and the Zambian National Farmers’ Union (ZNFU) had campaigned hard against the increase and reacted angrily to the ERB’s decision. ZESCO stated that it was under pressure to secure the increase because of the terms of a World Bank loan, but opponents of the increase claimed it was mainly due to ZESCO’s inefficiencies and profligate spending.
Meanwhile, despite government assurances to the contrary, a fire at the Indeni refinery in May resulted in severe fuel shortages. The price of fuel went up by 10.9% in early July, although it is unclear whether this was related to rising international oil prices or to the fire. The Zambia State Insurance Corporation has confirmed that the costs of rebuilding the refinery will be paid by itself and by international insurers.
—as new investment Around the same time as the price increases, the minister of energy, Ben Mwila, opportunities in the energy announced new opportunities and incentives for investors in the energy sector. sector are announced Mr Mwila said that 30-year contracts would be made available for many existing state assets and future projects, with a ten-year exemption from corpo- ration tax and a total exemption from customs dues and sales taxes for both production and transmission equipment. Several international companies have since expressed an interest, but have found there is nowhere they can receive information on the assets and that no procedures are in place for processing applications.
The government’s decision to bring private investors into the energy market is perhaps designed to reinvigorate the flagging privatisation process, which has been tarnished by the fiasco surrounding the sale of the main copper mines. However, the Zambia Privatisation Agency is so absorbed with the mines at present that no action is expected on the sale of energy assets until the mining issue has been finalised.
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Agriculture
Commercial importers hail Despite the absence of a precise crop forecast for this season, there is a consen- the FRA’s financial woes sus that the maize import requirement in 1999 will be 100,000-150,000 tonnes, compared with about 450,000 tonnes last year because of a good crop after adequate rains. However, in early July the government said that its Food Reserve Agency (FRA) would not be able to afford to purchase the necessary maize later in the year, blaming farmers and agents who had failed to repay loans for fertilisers last season. The ZNFU, which represents commercial farmers, responded by calling on the government to pursue loan defaulters and thus establish whether the fault lies with farmers or with the distribution agents. The ZNFU believes that it is mainly agents who are to blame while farmers suffer by being denied further credit. The union further urged the government to grant more export licences to farmers—the government tries to restrict exports in order to subdue domestic prices—so that they can pay back any outstanding loans.
Relatively high production this year sent domestic prices plummeting in the first half of the year, as regional demand was running high—there is a regional maize deficit of over 2m tonnes. Commercial maize dealers are meanwhile untroubled by the FRA’s woes. They argue that the private sector is perfectly capable of importing the required maize, and suggest that this may at last force the government to stop treating the FRA like an agricultural marketing board, disrupting the commercial market in the process (4th quarter 1998, page 8).
Corridor disease is In mid-July local government politicians from Southern Province reported a spreading in Southern severe outbreak of corridor disease among livestock, which had already wiped Province out entire herds in some districts. They appealed for central government funds to enable farmers to control its spread, claiming that farmers could not afford to borrow the necessary money. If the disease goes unchecked, farmers in Southern Province are set for several difficult years. By August the government had not responded to the appeals for help.
Infrastructure and services
Local airlines take off After granting licences to two local private air lines, Roan Air and Eastern Air, to operate regional and intercontinental flight routes in May, the government concluded bilateral air service agreements with Namibia and South Africa in early July. The government then called on the two local airlines to sign co- operation agreements with the Namibian and South African aviation author- ities, which will ease the allocation of landing rights. In order to help Roan and Eastern establish themselves, South African Airways has promised not to use its largest aircraft on Zambian routes in return for which the Zambian govern- ment has promised to ease the restrictions on the number of flights that South African Airways can undertake to Zambia.
The government shifts its In June a Toronto-based consultancy, Canadian Pacific, began a World Bank- rail privatisation stance— financed study to examine the potential for concessioning Zambia Railways.
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The focus of the study suggests a shift in the government’s stance, away from outright privatisation towards leasing the assets, and Canadian Pacific reckons several international companies are already interested.
In the meantime, Hifab International of Sweden will continue to manage the railways until August 2000, having won the two-and-a-half year contract in March 1998 (2nd quarter 1998, page 19). Hifab’s approach thus far has seemingly disappointed the board of Zambia Railways, which had hoped it would instil a more entrepreneurial culture into the railways. It has found instead that the Hifab team seems to be as steeped in the culture of the state- owned bureaucracy as the existing staff.
—and roads are improved On June 22nd the government signed a $6m contract with the Beijing-based China Hainan Corporation for the long-awaited repair of the roads in Ndola and Kitwe, attributing the delays to procurement procedures imposed by the World Bank. China Hainan staff began arriving in Kitwe on July 21st, and the necessary machinery arrived in early August. The repairs are expected to create 500 local jobs and are a vital step towards regenerating the Copperbelt.
Foreign trade and payments
Investment prospects for While the economy is generally declining, the tourism industry has shown tourism improve steady growth and is benefiting from a stream of new investments. In late June private South African and Zambian investors announced that they had started building luxury tourist lodges on the Zambezi river in Luangwa. In late July Sun International finally secured the government’s agreement that it could import duty free all construction and other materials for a planned luxury hotel resort near Victoria Falls. These concessions give the go ahead for con- struction to begin and the resort is expected to start receiving visitors late next year. Sun International optimistically predicts that the resort will eventually attract 500,000 tourists a year.
CG donors pledge $630m— Zambia’s international reserves have been worryingly low since 1998 when they were run down in order for the country to remain current on its debt- service obligations. Although reserves rose on the back of donor inflows, from $69.4m in December 1998 (or under one month of import cover) to $107.6m in January, they have since fallen back again, to $67.9m in May.
However, further large inflows of foreign exchange are expected from donors throughout the rest of the year, allowing reserve levels to recover. At the consultative group (CG) meeting in late May donors pledged $390m in project assistance and $240m in balance-of-payments support, which are conditional on a number of economic and good governance criteria. Donors further indi- cated that additional funding could be provided if copper price levels fall further and if the sale of the remaining Zambian Consolidated Copper Mines assets remains broadly on track.
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—and HIPC debt relief In July the G7 group of leading industrialised nations met in Cologne, could be worth $900m Germany, and members pledged $70bn for the heavily indebted poor countries (HIPC) initiative. Zambia is a prospective candidate for HIPC status but the benefits may not be as large as originally thought. The Jubilee 2000 campaign, an international co-ordinating body of groups pressing for debt relief, said that in Zambia’s case only the debt accrued before 1983—$1bn—would be eligible for relief as this was when Zambia first applied for debt relief. In May Canada and Italy said that they would unilaterally cancel Zambia’s bilateral debt and in mid-July France made the same offer. All three countries are, however, only minor bilateral creditors so it is not expected to make a significant difference to Zambia's debt-service obligations.
Aid briefs
• In May Japan donated ZK33bn ($13m) for malaria control and for building a bridge at Chirundu on the Zambezi river, which lies on the main road between Lusaka and Harare.
• In May the Canadian International Development Agency pledged $20m for health, education and environment projects and disbursed an initial $2m.
• In June the World Bank granted Zambia a massive $840m credit for its basic education sub-sector investment programme (BESSIP); $340m is budgeted for the first phase of BESSIP, running from 1999 to June 2002, and another $500m will be disbursed for the second phase from 2001 to 2005.
• Also in June, the EU donated ZK10bn for Zambia’s public-sector reform programme.
• Zambia and Denmark concluded discussions in mid-June that will see Zambia receiving $140m in bilateral assistance over the next five years.
• In mid-June Germany donated DM20m ($11m) to support structural adjust- ment, and Japan donated ¤33m ($35m) in non-project grant aid.
EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 22 Democratic Republic of Congo
Democratic Republic of Congo
Political structure
Official name République Démocratique du Congo
Form of state Unitary republic
Legal system All executive, legislative and military powers are vested in the president. The judiciary remains independent, but the president has the power to appoint and dismiss magistrates. Following a coup in May 1997, the previous transitional constitution was abolished. A new draft constitution was approved by the Constitutional Commission in March 1998
National legislature Suspended
National elections July 1984 (presidential) and September 1987 (legislative). The next presidential and legislative elections were due in April 1999 but have been postponed
Head of state The president, Laurent Kabila
National government The president is head of a 23-member government. There is no prime minister. The government was last reshuffled in March 1999
Main political parties The ruling Alliance des forces démocratiques pour la libération du Congo-Zaïre (AFDL) was officially dissolved in April 1999, after Mr Kabila established new grass-roots structures, the comités du pouvoir populaire (CPP), his new power base. Rebels opposed to Mr Kabila have formed the Rassemblement congolais pour la démocratie (RCD), which de facto split in May 1999, as well as the Mouvement pour la libération du Congo (MLC). The Union pour la démocratie et le progrès social (UDPS) remains a strong opposition voice
President & head of the executive Laurent Kabila
Ministers of state Internal affairs Gaëtan Kakudji Foreign affairs & international co-operation Yerodia Abdoulaye Ndombasi Oil Pierre-Victor Mpoyo Planning Badimani Dilembu Mulumba
Other key ministers Civil service, public works & social security Paul Kapita Shabani (UDPS) Defence Laurent Kabila Education Kamara Wa Kaikara Economy & industry Bemba Saolona Energy Babi Mbayi Finance Mawapanga Mwana Nanga Health Mashako Mamba Human rights Léonard She Okitundu Information & tourism Didier Mumengi Justice Mwenze Kongolo Mines Frédéric Kibassa-Maliba
Central bank governor Jean-Claude Masangu
EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 Democratic Republic of Congo 23
Economic structure
Latest available figures
Economic indicators 1994 1995a 1996a 1997a 1998a GDP at market prices (NZ bn) 165a 40,045b 306,637 792,154 18.9c Real GDP growth (%) –3.9 1.6b 0.9d –6.4b –3.5b Consumer price inflation (av; %) 23,761 542b 659d 176b 147b Population (m) 42.6 43.9 45.4 46.6 47.8 Exports fobe ($ m) 1,028 1,563 1,547d 1,390d 1,577 Imports fobe ($ m) 581 871 1,089d 807d 819 Current-account balance ($ m) –415 –630 –621d –871d n/a Reserves excl gold ($ m) 121 147b 83b n/a n/a Total external debt ($ m) 12,322 13,241 12,826 12,330 n/a External debt-service ratio, paid (%) 1.2 1.4 2.7 0.9d n/a Copper production (‘000 tonnes) 30.6 35.0 40.2 37.7 34.9f Cobalt production (‘000 tonnes) 3.6 4.0 4.1 3.0 3.9f Diamond production (m carats) 16.3 22.0 22.2 22.0 24.5f Exchange rate (av; NZ:$) 1,194 7,024d 52,400d 145,988d 1.98g
July 30th 1999 FC4.5:$1 (official rate); FC9.8:$1 (parallel rate)
Origins of gross domestic product 1994 % of total Components of gross domestic product 1995 % of total Agriculture 52.0 Private consumption 81.0 Industry 11.0 Public consumption 4.9 Manufacturing 7.0 Gross investment 9.4 Services 30.0 Exports of goods & services 28.2 GDP at factor cost 100.0 Imports of goods & services –23.5 GDP at market prices 100.0
Principal exports 1997 $ m Principal imports 1997 $ m Diamonds 717 Consumer goods 295 Copper & cobalt (Gécamines) 253 Capital goods 129 Coffee 168 Raw materials 104 Energy products 156
Main destinations of exports 1997h % of total Main origins of imports 1997h % of total Belgium-Luxembourg 42.7 South Africa 21.3 US 22.3 Belgium-Luxembourg 14.2 South Africa 8.0 Chinai 7.8 Italy 3.9 Netherlands 4.5 a EIU estimates. b Actual from the Banque centrale du Congo. c In FC m. The nouveau zaïre was replaced by the franc congolais (FC) on June 30th 1998. d Official estimate. e Balance-of-payments basis. f January-October. g FC after June 30th 1998. h Based on partners’ trade returns, subject to a wide margin of error. i Including Hong Kong.
EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 24 Democratic Republic of Congo
Outlook for 1999-2000
Rwanda’s commitment to Although the signing of a ceasefire accord in Lusaka, by the Democratic peace remains doubtful— Republic of Congo (DRC), Zimbabwe, Angola and Namibia, and by Uganda and Rwanda, on July 10th is a step forward, it is hardly a sign that the end of the war is imminent. The most significant obstacle to peace remains the refusal of the rebel Rassemblement congolais pour la démocratie (RCD) to overcome its internal differences and sign the accord. However, an equally dangerous obstacle is the distrust that continues to characterise the relationship between the government of the Congolese president, Laurent Kabila, his allies (Zimbabwe, Angola and Namibia), and Rwanda and Uganda which support the rebels. Given the considerable influence that the Rwandan government has wielded over the RCD throughout the course of the war, it seems highly unlikely that it would now be unable to make the RCD’s leadership resolve its internal differences and sign the peace accord. The Rwandan government’s failure to do so would amplify suspicions that it is manipulating the splits within the RCD leadership in order to keep the war going and, consequently, that its signing of the peace accord was merely a cosmetic exercise, designed to entrench its hold on eastern Congo, without the burden of fighting Mr Kabila’s troops and their allies.
—while the rift widens The Ugandan government has decided that for the moment, its interests are with Uganda best served by siding with the Mouvement pour la libération du Congo (MLC), which is headed by a businessman, Jean-Pierre Bemba, and has been making steady headway on the military front in the north-western Equateur province. Mr Bemba’s unexpected signing of the Lusaka peace accord on August 1st is most probably another attempt by the Ugandan government to further distance itself from the RCD and its Rwandan ally, and points to a significant rift between the two former allies. Mr Bemba’s decision to sign the accord has also isolated his ally and the former president of the RCD, Ernest Wamba dia Wamba, who has been relying on the MLC and Uganda since setting up his rival RCD faction in Kisangani. Without their backing, he has little to bring to the negotiating table, and no longer represents a significant threat to the peace process, as he does not currently wield any military power. As a result, Mr dia Wamba could now find himself entirely sidelined from the negotiating process.
Implementing the peace Even if the RCD signs the Lusaka agreement, a sustainable peace is by no accord will be difficult— means assured. The accord, which provides for the establishment of a Joint Military Commission comprising officers from the various armies fighting in the DRC and charged with overseeing the peace until a UN force is deployed, assumes a significant amount of voluntary co-operation between the belli- gerent parties. A more fundamental problem is that both Uganda and Rwanda have explained their involvement in the war as necessary to protect their own security interests against the disparate rebel groupings that operate in the eastern part of the DRC. However, none of these rebel groupings were involved in the negotiation process and they are unlikely to subject themselves to the terms of a peace accord that provides for their disarmament and repatriation.
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Any level of ongoing violence will make a deployment of a UN peacekeeping force unlikely, and the peace accord impossible to sustain.
—as the interahamwe will By far the most divisive issue will be the disarmament of the Rwandan Hutu remain a problem militia, the interahamwe, which have been fighting alongside Mr Kabila and his allies since the beginning of the war. The interahamwe are responsible for the 1994 genocide in Rwanda in which an estimated 800,000 Tutsi and moderate Hutu were killed. Eliminating the interahamwe is the Rwandan government’s top priority and remains the main reason for its involvement in the DRC. Although the interahamwe fought alongside Mr Kabila’s troops in the war, the alliance was essentially one of convenience, and it is highly unlikely that they will now halt their military activities, as the vast majority of their combatants would face charges of genocide upon returning to Rwanda. The same concerns apply to the Mai-Mai, an ethnically based militia whose main objective is to fight what they see as growing Tutsi hegemony in the DRC’s eastern Kivu provinces.
Mr Kabila’s position will If the rebels do not sign the agreement and the military campaign continues, become more fragile Mr Kabila’s position will become increasingly fragile. Although he can still count on the military support of Zimbabwe, Namibia and Angola, his own poorly paid and largely untrained army and civil service may desert him. Mr Kabila will also struggle to counter resistance from the civilian population, whose support for his regime has been largely eroded over the past 12 months of war. Mr Kabila’s fragile grip on power therefore bodes ill for the national dialogue, another key component of the peace accord, which is to be organised within 45 days of the signing of the agreement by all parties. The aim of the national dialogue is to reconcile the government, the armed and the unarmed opposition and to discuss the political future of the DRC. However, since the signing of the ceasefire, arbitrary arrests of opposition politicians, journalists and human rights activists have continued in the capital, Kinshasa, casting doubt on the government’s commitment to opening up political dialogue.
The economy will continue The government will continue to struggle to raise foreign-exchange revenue, to deteriorate which it desperately needs to pay for vital imports. The shortage of foreign exchange will be most noticeable in the petrol sector and recurrent fuel shor- DRC: gross domestic product % real change, year on year tages are expected to continue. At the same time, the shortage will contribute to
6 the steady depreciation of the currency, the franc congolais, and will feed inflationary pressures, as most goods are imported. In spite of the ban on the 4 use of dollars and continued crackdowns on exchange bureaux throughout 2 (a) Kinshasa, the government has failed to stabilise the parallel market exchange 0 rate, which stood at FC9.8:$1 at the end of July, from FC3.6:$1 at the end of
-2 December 1998. The Banque centrale du Congo (BCC) is likely to follow the steady depreciation of the parallel market rate with another devaluation of the -4 official rate, which has been standing at FC4.5:$1 since April. DRC -6 Africa Foreign investors will continue to be deterred by the current climate of -8 1994 95 96 97 98 uncertainty, while tension within the already economically stretched (a) Official estimate. Sources: EIU; Banque centrale du Congo; IMF, World population will continue to grow. Economic Outlook.
EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 26 Democratic Republic of Congo
The political scene
A peace accord is signed in Following several weeks of difficult and frequently interrupted talks between Lusaka— the foreign and defence ministers of the Democratic Republic of Congo (DRC), the countries involved in the war in the DRC—Zimbabwe, Namibia, Angola, Rwanda and Uganda—representatives of the Congolese government, the rebel Rassemblement congolais pour la démocratie (RCD) and the Mouvement pour la libération du Congo (MLC), a draft peace plan was agreed to on July 7th in Lusaka, Zambia. The following weekend, the heads of state of the six countries met in Lusaka and signed the final peace accord (see box).
The Congolese president, Laurent Kabila, made a number of concessions, and the final agreement includes virtually none of his previous demands. Parti- cularly surprising is the fact that Rwandan and Ugandan troops will be allowed to stay in the DRC until the arrival of a UN peacekeeping force, whereas Mr Kabila had previously stated that he would not sign any agreement until both countries agreed to withdraw immediately from Congolese territory. However, it seems that Mr Kabila was motivated to sign the agreement by the realisation that he was unlikely to be able to sustain the war effort for much longer, as his government lacks the money and his allies are growing tired of the war.
The accord calls for the following:
• cessation of hostilities within 24 hours of the signing of the agreement
• establishment of a Joint Military Commission (JMC) composed of officers from all the involved armies to oversee the accord
• deployment of a UN peacekeeping force
• withdrawal of all foreign forces within nine months of the signing
• reintegration of Congolese soldiers fighting alongside the rebels into the Forces armées congolaises (FAC; the Congolese army)
• disarming of the Rwandan Hutu militia, known as the interahamwe, which have been fighting alongside the FAC during the war
• amnesty for all combatants, with the exception of those who have participated in acts of genocide (the latter exemption is a reference to many of the Hutu interahamwe who actively participated in the 1994 genocide in Rwanda); and
• holding of a “national dialogue” including all armed and unarmed Congolese political groups (this is likely to supersede the “national debate” initiated by President Kabila in March ).
EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 Democratic Republic of Congo 27
—but the rebels refuse However, rebel representatives refused to sign the agreement amidst internal to sign disputes between the president of the RCD faction in Goma, Emile Ilunga, and the leader of the RCD faction in Kisangani, Ernest Wamba dia Wamba. Mr dia Wamba, the former president of the RCD who was ousted by rebel hardliners in May (2nd quarter 1999, page 29), remains steadfast that he is the legitimate leader of the movement. Although a number of senior members of the RCD have defected to his side, it seems clear that most members of the rebel move- ment have chosen to side with Mr Ilunga, who replaced Mr dia Wamba as president. Mr Ilunga continues to control the vast majority of RCD rebel troops, and maintains close ties to the Rwandan government, whereas the RCD-Kisangani, which has established close links with the Ugandan govern- ment, now relies primarily on Ugandan troops and funds.
During the peace negotiations, both factions cited the presence of the other as reason to repeatedly abandon the talks. The military leader of the RCD, Jean- Pierre Ondekane, threatened that his troops would continue to fight if Mr dia Wamba were to be a signatory to the peace agreement, insisting that Mr Ilunga was the only representative of the RCD rebels. Exacerbating the rift between the two factions have been rumours that Mr Kabila met Mr dia Wamba in late June.
Fighting continues— Although the Lusaka peace accord was hailed as a major breakthrough in so far as it succeeded in bringing the major parties to an agreement, the squabbles within the RCD mean that it has made little difference with regard to the war on the ground. Within 24 hours of the signing of the accord, the Rwandan, Ugandan, Zimbabwean, Namibian, Angolan and Congolese armies had stop- ped fighting. However, in the days following the signing of the accord, RCD troops—loyal to the faction in Goma—captured several major towns close to Mbuji-Mayi, the country’s diamond mining centre and a key military objective of the rebel movement. The rebels’ backers, Rwanda and Uganda, have them- selves cast doubt on their commitment to the peace accord. Following the signing of the accord, the Rwandan vice-president and head of the Rwandan army, Paul Kagame, said that his government would still prefer to see Mr Kabila replaced as the head of the Congolese government.
—as the rebels remain Both the FAC and the allied forces have warned that they will retaliate in stubborn— response to further attacks, but the rebels have maintained a generally uncon- ciliatory stance towards the peace process. The announcement by Mr Kabila, shortly after signing the agreement, that he was granting an amnesty to the rebels was met largely with indifference on their part. One rebel spokesman said that Mr Kabila himself should be prosecuted.
In addition, rivalry between the two RCD factions has continued. Mr dia Wamba and Mr Ilunga have repeatedly met in Tanzania under the mediation of the Tanzanian president, Benjamin Mpaka, and the Zambian president, Frederick Chiluba—the main mediator in the Lusaka peace process—who have been trying to urge the parties to resolve their differences. However, all sides remain steadfast that they are the real representatives of the movement and the rift has remained unresolved. Mr Ilunga said that it would be impossible for the RCD-Goma to allow Mr dia Wamba to sign the agreement as he was not in command of the RCD’s troops, who would interpret his signing as a betrayal.
EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 28 Democratic Republic of Congo
—and Rwanda and Uganda The split in the rebel movement reflects a growing rift between the once go their separate ways closely allied Ugandan and Rwandan governments over how to handle the war in the DRC. Although the two shared the common objective of establishing a buffer zone in the eastern part of the DRC, where various rebel groups operate, over the past year diverging interests have blurred that goal. In mid-May the Rwandan government accused the Ugandan army chief of staff, James Kazini, of committing gross human rights violations and of abusing his position to reap financial rewards. At the same time, the MLC, which is supported by Uganda, has chosen to align itself with Mr dia Wamba. The split came to a head in an incident in Kisangani in late May when a march in support of Mr dia Wamba’s faction ended in a gun fight between Rwandan and Ugandan soldiers, which left several people dead. Tensions appeared to be escalating further at the end of July.
A lost son signs on for In a surprise turnaround, the leader of the rebel MLC, Jean-Pierre Bemba, peace signed the peace accord on August 1st in Lusaka. Mr Bemba explained that he had signed the agreement in order to give Mr Kabila the opportunity to leave power voluntarily. Mr Bemba added that his troops would observe a ceasefire for six days in order to give the RCD the opportunity to sign the agreement, but also made it clear that his forces would retaliate if they were provoked by troops loyal to Mr Kabila.
The signing of the agreement came several days after MLC troops captured the northern town of Zongo, which is on the border with the Central African Republic (CAR). The capture of Zongo prevents Mr Kabila’s government from deploying additional troops in the north via Bangui, the capital of the CAR. The MLC had already handicapped the government’s ability to operate in the north-eastern province of Equateur in July, when it captured the northern town of Gbadolite—the home of the former president, Mobutu Sese Seko, and the government’s main airbase in the north—and a few weeks later, Gemena. At that time, Mr Bemba stated outright that he would continue fighting until he reached Kinshasa.
The interahamwe remain The issue of disarming the Rwandan Hutu interahamwe militia was a major an unsolved issue obstacle throughout peace negotiations, and is likely to remain one of the most divisive issues in the process. The Rwandan government has accused Mr Kabila and his close ally, President Robert Mugabe of Zimbabwe, of arming and training the interahamwe. Although the Congolese and Zimbabwean governments have denied the allegations, both have agreed to disarm the militia. However, state- ments made by the Congolese government since then indicate that it remains unwilling to acknowledge the presence of the interahamwe, as it feels that Rwanda is manipulating the issue to maintain a military presence in the eastern DRC. The Rwandan government has consistently justified the presence of its troops on Congolese soil since the outbreak of the war in August, as necessary to defend its borders against incursions by the interahamwe.
The international In mid-July the US president, Bill Clinton, appealed to the rebels to sign the community supports the agreement, as did the EU and the UN. In addition, the UN Security Council has accord— approved the sending of an advance team of 90 military specialists to the DRC
EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 Democratic Republic of Congo 29
to assess peacekeeping needs. At the Organisation of African Unity (OAU) summit in Algeria in mid-July, the OAU appointed an Algerian general, Rachid Lalli, to act as the head of the Joint Military Commission (JMC), charged with overseeing the peace until the eventual arrival of a UN peacekeeping force. Mr Lalli arrived in Zambia in late July for a briefing on the JMC.
—and Mr Kabila makes a Relations between the DRC and South Africa have improved since the election new friend in June of Thabo Mbeki as the new South African president. Relations between the two countries had been tense following the initial refusal by South Africa’s former president, Nelson Mandela, to endorse the military intervention in the DRC by Zimbabwe, Angola and Namibia. Since his inauguration, Mr Mbeki has taken a more active role in the peace process, encouraging all sides to sit down and negotiate. Mr Mbeki despatched his new foreign minister, Nkosazana Zuma, to meet the Ugandan president, Yoweri Museveni, and the Rwandan president, Pasteur Bizimungu, in late July, but the mission failed to bring the rebels to sign the Lusaka accord. However, around the same time, Mr Kabila and several government ministers travelled to South Africa on a private visit, and Mr Kabila met Mr Mbeki. There was much speculation surrounding the purpose of the visit, but it seems that talks focused primarily on future co- operation between the two countries.
The opposition is behind Domestic opposition politicians have almost unilaterally expressed their the Lusaka accord— support for the Lusaka peace agreement. Amongst many others, Etienne Tshisekedi, the doyen of the political opposition and leader of the Union pour la démocratie et le progrès social (UDPS), issued a statement in which he hailed the agreement as an important step towards peace and national reconciliation. Previously, Mr Kabila ordered the release from prison in mid-June of several high-profile political prisoners, including the leader of the Forces novatrice pour l’union et la solidarité (Fonus), Joseph Olenghakoy, who were arrested in 1998. At the same time, the government has touted the return to the country of several senior officials in the administration of the former president, Mobutu Sese Seko, including a former prime minister, General Likulia Bilongo, as a sign of its conciliatory attitude. Reaction to their return has been largely unenthusiastic, however.
—but continues to be Nonetheless, the opposition’s relationship with the government has remained harassed difficult. Several opposition politicians have been arrested since the accord was signed. Many openly wondered why the government continued to harass them when it was engaged in a peace process that calls for national reconci- liation, and many called for Mr Kabila’s amnesty for the rebels to be extended to all political prisoners. The UDPS has criticised the government for the ongoing arbitrary arrests of its supporters, arguing that the signing of the Lusaka accord amounts to an acknowledgement of the opposition’s right to exist. At present, all existing political parties are illegal, as a law governing poli- tical activity, which was introduced in January, has been unanimously rejected by opposition parties (1st quarter 1999, page 32). The law dissolved all political parties and required them to go through an obstructive registration process to be legally acknowledged by the government.
EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 30 Democratic Republic of Congo
A march for peace is On the occasion of the first anniversary of the war, a civil society grouping, the hijacked Campagne nationale pour une paix durable (CNPD), organised a march in Kinshasa. Organisers stressed that the march was an opportunity for the Congolese to express their desire for peace. However, the government hijacked the event, adding thousands of unarmed soldiers and members of the comités du pouvoir populaire (CPPs, grass-roots political structures introduced by Mr Kabila in mid-March; 2nd quarter 1999, page 29), and prohibiting the presi- dent of the CNPD and editor of the opposition daily Le potentiel, Modeste Mutinga, from delivering a speech. The government’s reaction to the event bodes ill for the process of national reconciliation.
The national debate dies a A representative of the Roman Catholic Sant’Egidio community, Father Matteo quiet death Zuppi, and another from the Francophone states, Emile Derlin Zinsou, arrived in Kinshasa in early June as possible mediators in the national debate initiated by Mr Kabila in March (2nd quarter 1999, page 27). The debate, which was originally planned to take place in early May, was denounced by opposition politicians as a farce, as the government dominated the organisation of the debate and unilaterally determined its participants. The leader of the UDPS, Etienne Tshisekedi, however, had renewed his call for the Italian Sant’Egidio religious community, which helped to bring about the peace process in Mozambique, to mediate.
During their visit, Father Zuppi and Mr Zinsou met opposition politicians, other notables and government officials to discuss the organisation of the debate. At the end of their visit, both said that they planned to set up an organising committee comprising representatives of the opposition rebels and the government. However, the planned national debate seems to have been superseded by the provision for a national dialogue contained in the Lusaka peace accord.
Squabbles continue among In late July, following several highly publicised squabbles within his cabinet— Mr Kabila’s ministers most notably between the minister of the interior, Gaëtan Kakudji, and the minister in charge of oil, Pierre-Victor Mpoyo—Mr Kabila ordered all ministers to clear all statements to the media with the presidency first. Several days later, the minister of information, Didier Mumengi, informed local radio and tele- vision stations that they were no longer allowed to relay foreign news pro- grammes of any kind, ostensibly because the stations are not in compliance with regulatory statutes on co-production. International radio stations, such as the BBC and Voice of America, can now only be captured on short wave.
Ms Ogata comes to The UN High Commissioner for Refugees (UNHCR), Sadako Ogata, visited Kinshasa— Kinshasa as well as several refugee sites in the DRC in late June, on a tour which also took her to Rwanda and Burundi. However, she was not able to meet Mr Kabila. Relations between his government and the UN, in particular the UNHCR, have been tense since the disappearance of several hundred thousand Hutu refugees during Mr Kabila’s military campaign to overthrow Mr Mobutu’s government in 1996-97.
However, in a gesture of appeasement, since early June the Congolese government has evacuated about 600 ethnic Tutsi who had been arrested or
EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 Democratic Republic of Congo 31
had taken refuge in government sites when widespread anti-Tutsi pogroms erupted throughout the country in the wake of the outbreak of war in August 1998. The Tutsi, many of whom are Congolese, were flown to Rwanda in a mission co-ordinated by the Congolese ministry of human rights and the International Committee of the Red Cross.
—while refugee numbers The DRC is currently host to refugee populations from Angola, the Republic of are swelling Congo, as well as Rwanda and Burundi. Thousands of Angolans fleeing the escalating civil war in their country have been pouring into the DRC, while Congolese from across the Congo river continue to seek refuge from their own civil war. Burundian refugees also remain concentrated in the area around Mbuji-Mayi.
At the same time, at the end of July, up to 500 Congolese refugees were arriving daily in Tanzania from across Lake Tanganyika, while in mid-July fighting between MLC and government troops in north-western Equateur province prompted about 6,000 Congolese to flee to the neighbouring Central African Republic.
The domestic economy
The franc congolais On June 30th the franc congolais formally replaced the nouveau zaïre, the last celebrates its first currency issued by the former president, Mobutu Sese Seko. Under the terms of birthday— the monetary reform accompanying the introduction of the new currency in 1998, nouveau zaïre bills remained legal tender for one year but have now been withdrawn from circulation.
The monetary reform programme was supposed to be the cornerstone of the government’s economic reform programme, but its initial success has been severely diminished by the war. The government did manage to contain the spread between the official and the parallel rate in the first months following the introduction of the currency, a remarkable feat in a country that has seen six monetary reform programmes since independence in 1960. However, since the war broke out in August last year, the Banque centrale du Congo (BCC; the central bank) has been forced to devalue the currency in four times in succession in order to keep up with the galloping depreciation of the parallel rate.
—but the free-fall Since late May the parallel rate has depreciated from FC6.8:$1 to FC9.8:$1 at continues the end of July, compared with an official rate of FC4.5:$1, while annualised inflation peaked at 238% in June, before falling slightly to 219% in July. The sharpest drop in the exchange rate came in June, when the rate fell to FC9.2:$1. It has since stabilised, largely as a result of a shortage of franc congolais bills on the market. The government has continued to blame the depreciation of the parallel rate on economic “saboteurs” rather than on its own macroeconomics policies, the dire state of the economy and the shortage of foreign reserves. Monetary policy now consists almost entirely of repeated crackdowns on exchange bureaux on the pretext that they are not in compliance with the BCC’s requirements.
EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 32 Democratic Republic of Congo
The petrol crisis could Owing to chronic foreign-exchange shortages, a severe three-week fuel crisis become explosive— erupted again in late June and early July in Kinshasa, causing a increasingly high-profile dispute over what caused the shortage. According to the minister of the economy and industry, Bemba Saolona, the government provided $5m to fuel companies in June to pay for imports, which put an end to the crisis. However, it seems that the fuel companies decided to apply this sum to the estimated $22m debt, which they claim they are owed by the government. In the absence of a clear explanation, the powerful minister of state for the interior—and Mr Kabila’s nephew—Gaëtan Kakudji, convened a meeting of the Commission des crimes économiques, which accused several small Congolese fuel companies of hoarding supplies and selling them at rates above the government’s fixed price. The directors of the accused companies, as well as the the oil minister’s cabinet director, were arrested.
The minister, Pierre-Victor Mpoyo has rebuffed the allegations, arguing that the companies in question control only a small percentage of the fuel market. Lawyers have explained that their clients were forced to sell 20% of their stocks at above the fixed price in order to keep their businesses running. Most of the companies in question have been supplying the bulk of their fuel to government industries on credit.
—while civil servants may At the same time, the umbrella civil service union, the Intersyndicale de rise up l’administration publique (IAP), started a strike on August 2nd. The IAP has been negotiating with the finance ministry and the public works ministry for a new salary regime for several months, and its demands include the raising of the minimum monthly salary to FC450 ($45) from its current level of FC80, as well as the resignation of the minister of finance, Mawapanga Mwana Nanga, whom they hold responsible for their problems. The strike will be a tough test for the cash-strapped government, which cannot afford to allow the vast civil service structure to collapse at a time when it is already severely weakened. However, given the government’s dire shortage of revenue, it is difficult to imagine how the demands can be met, and it is therefore possible that Mr Kabila will dismiss Mr Mawapanga in an attempt to appease civil servants.
Mining
Gécamines remains in The dispute between the country’s copper and cobalt mining giant, the difficulty Générale des carrières et des mines (Gécamines), and its former trader, Mitsui, has worsened, as Gécamines has threatened to take legal action against it in an attempt to regain control of 133 tonnes of cobalt that are in the trader’s hands. In March Gécamines cancelled its contracts with all its marketing agents and granted exclusive marketing rights to MRG, a London-based trader. Gécamines has asked for cobalt to be returned, but Mitsui says that the cobalt has already been paid for under its contract with Gécamines. According to Gécamines, Mitsui has refused to allow Gécamines agents access to their warehouses to verify their cobalt stocks.
EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 Quarterly indicators and trade data 33
Quarterly indicators and trade data
Zambia: quarterly indicators of economic activity
1997 1998 1999 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr Production: mining Qtrly totals Copper in concentrates ‘000 tonnes 85.6 81.7 87.7 93.1 92.8 109.4 107.5 77.7 50.8a Prices Monthly av Consumer prices 1995=100 178.8 181.6 192.8 n/a n/a n/a n/a n/a n/a change year on year % 27.1 22.8 22.7 n/a n/a n/a n/a n/a n/a Copper: LME, $ cents/lb 113.6 102.9 86.7 77.1 78.5 74.4 70.1 63.9 66.5 Money End-Qtr M1, seasonally adj ZK bn 305.7 333.6 354.2 368.4 350.5 357.8 413.7 391.8 403.6b change year on year % 19.2 24.0 31.0 22.4 14.7 7.3 16.8 6.4 n/a Foreign tradec Qtrly totals Exports fob $ m 297.9 307.5 279.6 246.3 301.0 328.0 337.8 n/a n/a Imports fob “ 260.2 286.0 276.4 261.4 298.4 291.3 288.1 n/a n/a Exchange reserves End-Qtr Foreign exchange $ m 202.7 255.7 238.0 155.1 117.6 101.1 68.6 73.2 67.9d Commercial bank assets “ 153.8 138.6 155.0 148.1 177.2 193.1 198.9 176.4 162.9b Exchange rate Official rate ZK:$ 1,313.4 1,322.9 1,414.8 1,698.4 1,931.0 1,976.9 2,298.9 2,288.5 2,403.1d
Note. Annual figures of most of the series shown above will be found in the Country Profile. a Total for April-May. b End-April. c DOTS estimate, figures are subject to revision. d End-May.
Sources: World Bureau of Metal Statistics, World Metal Statistics; IMF, International Financial Statistics; Direction of Trade Statistics, quarterly.
EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 34 Quarterly indicators and trade data
Democratic Republic of Congo: quarterly indicators of economic activity
1996 1997 1998 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr Mining: production Annual totals Copper in concentrates ‘000 tonnes 40.2 ( 37.7 ) ( 41.0 ) Z i n c “ 1 . 2 ( 1 . 2 ) ( 1 . 2 ) Agriculture: production Annual totals Coffee ‘000 tonnes 59 ( 48 ) ( 54a ) Prices Monthly av Consumer prices, Kinshasa 1995=100 1,414 2,228 2,305 1,934 1,897 n/a n/a n/a n/a change year on year % 680 587 354 145 34 n/a n/a n/a n/a Wholesale prices: coffee: US US cents/lb 68.9 75.2 88.7 79.0 79.9 85.5 89.3 79.8 81.2b copper: LME, $ “ 97.4 109.7 113.6 102.9 86.7 77.1 78.5 74.4 70.1c Money End-Qtr M1, seasonally adj NZ bn 4,147d n/a n/a n/a n/a n/a n/a n/a n/a change year on year % 503d n/a n/a n/a n/a n/a n/a n/a n/a Foreign tradee Qtrly totals Exports fob $ m 356 370 282 349 291 296 299 313 299 Imports cif “ 320 254 218 273 296 262 265 230 294 Exchange holdings End-Qtr Bank of Zaire: goldf $ m n/a n/a 14.1 13.1 12.4 11.7g n/a n/a n/a foreign exchange “ 82.5 n/a n/a n/a n/a n/a n/a n/a n/a Deposit money banks: assets ” 87.9h n/a n/a n/a n/a n/a n/a n/a n/a Exchange rate Market rate NZ/FC:$ 120,000 175,000 110,000 120,000 110,000 128,000 135,000 2.2i 3.6
Note. Annual figures of most of the series shown above will be found in the Country Profile. a Estimate. b Average for 1 Qtr 1999, 77.4; average for 2 Qtr 1999, 67.7. c Average for 1 Qtr 1999, 63.9; average for 2 Qtr 1999, 66.5. d Figure for end-2 Qtr 1996. e DOTS estimate, figures are subject to revision. f End-quarter holdings at quarter’s average of London daily price less 25%. g End-January. h Figure for end-3 Qtr 1996. i On June 30th 1998, the Franc congolais (FC) replaced the Nouveau Zaire (NZ) at a rate of 1:100,000.
Sources: World Bureau of Metal Statistics, World Metal Statistics; FAO; IMF, International Financial Statistics; FT.
EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 Quarterly indicators and trade data 35
Zambia: foreign trade (ZK m)
Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Imports cif 1985 1986 1987 1988 1989 1990 1991 Cereals 43 75 13 130 171 176 n/a Other food, drink & tobacco 38 54 219 93 143 430 n/a Crude materials 32 71 123 100 155 760 n/a Petroleum & products 459 111 806 828 2,219 5,209 n/a Chemicals 317 411 1,171 1,180 1,274 4,335 n/a Rubber manufactures 53 118 198 156 181 579 n/a Paper & mnfrs 33 54 90 124 180 493 n/a Textile manufactures 59 107 194 163 263 1,212 n/a Iron & steel 76 152 217 263 451 1,303 n/a Other metals & mnfrs 93 245 263 266 450 1,403 n/a Machinery 517 1,276 1,817 1,838 2,467 7,999 n/a Road vehicles 276 548 1,066 1,150 1,443 4,501 n/a Other transport 21 57 55 257 548 3,724 n/a Scientific instruments etc 24 74 109 120 164 598 n/a Total incl others 2,133 4,448 6,627 6,898 12,601 36,554 51,624
Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Domestic exports foba 1987 1988 1989 1990 1991 1993 1994 Tobacco 17 29 24 125 256 n/a n/a Cobalt 466 598 1,101 2,544 7,289 10,434 12,323 Copper 6,845 8,340 16,353 33,734 52,539 323,668 293,151 Lead 20 19 9 1 5 n/a n/a Zinc 131 162 302 438 429 2,270 293 Total incl others 8,032 9,720 18,336 39,037 67,583 579,036 554,279 Re-exports 27 66 98 107 85 n/a n/a a 1992 figures are not available.
Source: National sources.
EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 36 Quarterly indicators and trade data
Zambia: direction of trade ($ m)
Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec 1990 1991 1992 1993 1994 1995 1996 1997a Imports fob South Africa 206 165 224 303 157 259 293 518 UK 197 149 98 75 73 72 83 87 Zimbabwe 57 44 55 47 52 57 71 78 Saudi Arabia 4 83 47 51 1 97 60 66 US 124 57 72 20 11 29 41 33 Japan 8176383028452728 India 23 35 24 9 19 19 26 27 Pakistan 1 1 1 n/a n/a n/a 1 17 Germanyb 142 34 31 33 21 19 23 16 Total incl others 1,207 811 837 702 455 782 834 1,071 Exports fob Japan 168 204 152 105 105 158 120 126 Saudi Arabia 29 29 83 69 83 83 100 114 Thailand 37 34 39 54 72 100 114 101 India 33 122 21 45 56 62 69 92 France 74 108 48 82 38 32 23 77 UK 11 50 20 11 32 22 36 70 Taiwan n/a n/a 8 9 2 12 2 60 Zimbabwe 16 44 23 21 22 29 53 58 US 9 24 5 3 5 93 29 52 Total incl others 544 1,077 752 891 758 986 1,039 1,156 a DOTS estimates. b Includes former East Germany from July 1990.
Source: IMF, Direction of Trade Statistics, yearbook.
EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 Quarterly indicators and trade data 37
Zambia: refined copper exports (tonnes)
Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Feb 1993 1994 1995 1996 1997 1998 1999 Japan 85,334 55,445 52,647 50,111 29,677 27,843 5,904 Thailand 49,030 62,637 40,933 46,904 48,286 23,555 5,370 France 49,990 18,896 11,243 10,696 23,687 43,079 2,500 India 21,186 20,209 22,872 24,946 13,778 7,674 1,099 US 760 2,000 27,779 8,958 41,338 12,684 1,000 Malaysia 30,230 31,369 21,092 28,594 31,788 13,829 400 Indonesia 3,499 5,146 7,676 2,793 1,497 2,257 300 Germany 0 0 0 1,667 0 0 120 China 0 0 0 0 3,997 3,301 0 Belgium 49,167 29,939 22,500 17,071 11,411 1,835 0 Netherlands 1,001 0 0 0 0 1,099 0 Italy 5,041 3,024 2,098 400 1,000 0 0 UK 0 3,999 0 0 200 0 0 Greece 6,871 3,524 374 2,936 0 0 0 South Korea 0 4,096 800 410 0 0 0 Total incl others 436,522 360,657 291,869 276,079 303,784 227,980 30,840 Source: World Bureau of Metal Statistics, World Metal Statistics.
Zambia: UK trade (£ ‘000)
Jan-Dec Jan-Dec Jan-Dec Jan-May Jan-May 1996 1997 1998 1998 1999 UK exports fob Food, drink & tobacco 677 989 536 171 147 Chemicals 3,256 8,557 4,123 1,586 1,447 Rubber manufactures 103 465 76 61 17 Paper & manufactures 338 239 207 82 40 Textile yarn, cloth & manufactures 221 547 275 182 54 Non-metallic mineral manufactures 885 374 522 308 59 Iron & steel 456 315 86 38 11 Metal manufactures 734 1,106 622 496 335 Machinery incl electric 29,877 22,285 19,507 10,492 4,077 Transport equipment 5,118 3,332 3,531 1,814 2,127 Clothing & footwear 1,573 491 628 267 532 Scientific instruments etc 2,137 432 1,766 863 386 Total incl others 51,544 45,620 35,387 17,204 11,444 UK imports cif Fruit & vegetables 3,681 5,172 5,075 2,050 1,938 Sugar & preparations 79 11,926 96 20 17 Textile yarn, cloth & manufactures 6,410 6,689 2,827 1,317 647 Iron & steel 0 1,000 4,816 2,421 842 Non-ferrous metals 4,927 4,574 9,126 2,629 3,658 Machinery & transport equipment 220 970 173 121 15 Total incl others 17,726 32,067 24,582 9,944 7,617 Source: UK HM Customs & Excise, Business Monitor, MM20.
EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999 38 Quarterly indicators and trade data
Zambia: Japanese trade (¥ m)
Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Apr Jan-Apr Japanese imports cif 1993 1994 1995 1996 1997 1998 1998 1999 Copper cathodes 20,668 11,455 15,764 13,938 9,617 8,810 5,151 3,015 Total incl others 23,562 17,896 20,261 20,871 16,670 15,170 7,587 4,684 Source: Japan Tariff Association, Japan Exports & Imports.
Democratic Republic of Congo: trade with major partnersa ($ ‘000; monthly averages)
Belg-Lux France USb Germany UK Exports to Democratic Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-May Jan-May Republic of Congo fob1997 1998 1997 1998 1996 1997 1997 1998 1998 1999 Food, drink & tobacco 1,794 2,056 1,502 1,125 1,987 1,139 128 64 116 30 Mineral fuels 107 192 310 392 15 10 13 5 8 0 Chemicals 1,682c 1,694c 363c 424c 273 129c 278c 278c 250 75 Rubber manufactures 159d 131d 13d 11d 6 2d 27d 41d 01 Textile yarn, cloth & mnfrs 647d 432d 29d 18d 152 576d 86d 141d 31 Non-metallic mineral mnfrs 718e 1,613e 27e 90e 2 3e 16e 12e 00 Metals & manufactures 450 474 95 147 162 45 218 203 68 110 Machinery incl electric 2,291 3,252 350 377 2,039 935 526 517 222 49 Transport equipment 1,843 2,180 190 139 143 87 375 466 135 42 Clothing, footwear & handbags 211 165 76 58 76 13 24 2 0 2 Scientific instruments etc 400 438 56 77 67 37 14 12 33 2 Total incl others 10,851 13,522 3,245 3,084 6,102 3,132 2,226 2,756 968 398
Belg-Lux USb Germany France UK Imports from Democratic Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-May Jan-May Republic of Congo fob1997 1998 1996 1997 1997 1998 1997 1998 1998 1999 Coffee, cocoa, tea & spices 337 439 0 0 151 369 490 289 0 0 Animal feeding stuffs 0 0 275 139 0 0 0 0 0 0 Rubber & mnfrs 2 0 23 2 133 29 0 1 38 0 Wood & mnfrs 368 447 65 47 0 282 745 626 161 11 Metal ores & scrap 19f 1f 26 41f 0f 26f 0f 0f 00 Mineral fuels 0 0 10,947 13,431 1,890 0 0 0 0 0 Chemicals 95c 230c 7 45 33 1 5 4 0 0 Non-metallic mineral mnfrs 45,772e 50,909e 7,246 7,886e 35e 20e 21e 2e 00 Non-ferrous metals 613g 396g 2,171 2,273g 465g 685g 312g 159g 425 171 Machinery & transport eqpt 28 22 2 9 2 1 2 2 1 2 Total incl others 47,472 57,252 21,642 24,574 3,685 1,944 1,730 1,190 643 196 a Figures from partners’ trade accounts. b US exports to the D RC averaged $3.5m and $2.6m per month for the periods January-May 1998 and 1999. US imports from the DRC averaged $16.6m and $17.4m per month for the periods January-May 1998 and 1999. c Including crude fertilisers and manufactures of plastics. d Including crude materials. e Including precious metals and jewellery. f Ores, slag and ash. g Including scrap and manufactures.
Sources: UN, External Trade Statistics, series D; UK HM Customs & Excise, Business Monitor, MM20.
EIU Country Report 3rd quarter 1999 © The Economist Intelligence Unit Limited 1999