Zambia Democratic Republic of Congo

COUNTRY REPORT

1st quarter 1998

The Economist Intelligence Unit 15 Regent Street, London SW1Y 4LR United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The EIU delivers its information in four ways: through subscription products ranging from newsletters to annual reference works; through specific research reports, whether for general release or for particular clients; through electronic publishing; and by organising conferences and roundtables. The firm is a member of The Economist Group.

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Contents

3 Summary

Zambia

5 Political structure

6 Economic structure

7 Outlook for 1998-99

10 Review 10 The political scene 14 The economy 16 Mining and energy 18 Agriculture 18 Banking 19 Foreign trade and payments

Democratic Republic of Congo

21 Political structure

22 Economic structure

23 Outlook for 1998-99

24 Review 24 The political scene 29 The economy 38 Health

39 Quarterly indicators and trade data

List of tables 8 Zambia: forecast summary (domestic) 9 Zambia: forecast summary (external) 16 Zambia: budget forecasts, 1998 25 DRC: executive committee of the AFDL (appointed Nov 12th 1997) 30 DRC: inflation, 1997 30 DRC: exchange rates, 1997 31 DRC: financing plan for emergency stabilisation and recovery programme (1998-99) 33 DRC: expected medium-term annual receipts from mining exports 39 Zambia: quarterly indicators of economic activity

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40 DRC: quarterly indicators of economic activity 41 Zambia: foreign trade 42 Zambia: direction of trade 42 Zambia: refined copper exports 43 Zambia: UK trade 43 Zambia: Japanese trade 44 DRC: trade with major partners

List of figures 9 Zambia: Gross domestic product 9 Zambia: kwacha real exchange rate 24 DRC: gross domestic product

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February 10th 1998 Summary

1st quarter 1998

Zambia Outlook for 1998-99: The government’s uneasy relations with the domestic opposition and international donors will continue as long as the former president, Kenneth Kaunda, remains under house arrest, especially because the government’s case against Mr Kaunda and other detained opposition leaders appears weak and largely unfounded. Further coup attempts are unlikely; however, large-scale civil service redundancies will not improve the government’s standing. Yet its hands are tied on this issue. Amid doubts over Zambia’s soiled governance record, the World Bank and the IMF will be watching progress on civil service reform closely and the government will have little choice but to proceed if aid inflows are to continue. Multilateral institutions’ willingness to disburse funds in spite of Mr Kaunda’s detention will be bolstered by Zambia’s positive economic performance. Average real GDP growth of 4.5% is forecast for 1998, as fiscal and monetary policy remains tight and the privatisation of Zambia Consolidated Copper Mines (ZCCM) proceeds. The beleaguered manufacturing sector should see some relief with the domestic relaxation of tariffs on vital inputs and South African promises to increase Zambian access to its markets. Inflation is forecast to decline to an annual average rate of 18% although the impact of El Niño remains uncertain and food prices could rise if there is a drought, or if current flooding continues. The government’s optimistic goal of reducing current poverty levels of 70% to 50% by 2000 on the back of projected economic growth alone is unlikely to be successful, and tensions between donor demands on the one hand and the population’s needs on the other are sure to make this a challenging year for Zambia’s politicians.

Review: Mr Kaunda, along with other opposition leaders, was accused of col- lusion in the coup attempt of October 28th 1997 and was placed under house arrest. None of the accused has yet been formally charged. The cabinet was reshuffled in December. In late November the government announced a wage freeze to help finance its public-sector reform programme, much to the dismay of trade unions which have denounced the freeze and planned redundancies. The finance minister’s budget for 1998 assumes higher donor financing. Year- on-year inflation fell to a 1997 low of 18.5% in December. Several recent ZCCM privatisation initiatives have been unsuccessful. The Food Reserve Agency has come under fire for undermining domestic maize sales with large-scale imports.

Democratic Republic of Outlook for 1998-99: Political and economic prospects are bleak. The regime Congo will become increasingly oppressive, yet plagued by factional splits. Fighting in the eastern DRC will continue to sap the government’s credibility and divert scarce military resources. The economic stabilisation and recovery programme appears sensible, but the government will have a hard time securing external financing while concerns over governance persist. No matter what the final outcome of the dispute with American Mineral Fields (AMF), the government’s abrogation of its contract will put off international investors, who will now think twice about relying on government commitments.

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Review: A major cabinet reshuffle has further sidelined the Tutsi faction, in favour of President Kabila’s Katangese supporters. The government presented its Economic Stabilisation and Reconstruction Programme at the Friends of Congo conference in December, yet it failed to secure significant external financing. Fighting in the eastern part of the country between government troops and various militia groups has escalated, while the UN commission of enquiry into massacres in the region was once again stalled. A coup attempt was foiled but rumours abound that anti-Kabila forces have begun to crop up. Average inflation and the exchange rate have been stabilised. The government has cancelled AMF’s contract for the Kolwezi mine.

Editor: Stephanie Wolters All queries: Tel: (44.171) 830 1007 Fax: (44.171) 830 1023

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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 (last reshuffle in December 1997)

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. There are over 30 parties in all

President Frederick Chiluba Vice-president Christen Tembo

Key ministers Agriculture & fisheries Edith Nawakwi Commerce, trade & industry Enoch Kavindele Communications & transport Dawson Lupunga Community development & social welfare Samuel Miyanda Defence Chitalu Sampa Education Godfrey Miyanda Energy & water Ben Mwila Environment Alfeyo Hambayi Finance Ronald Penza Foreign affairs Keli Walubita Health Katele Kalumba Home affairs Peter Machungwa Information & broadcasting David Mpamba Labour & social security Newstead Zimba Lands Anoshi Chipawa Legal affairs Vincent Malambo Local government & housing Bennie Mwiinga Mines Syamukayumbu Syamujaye Science & technology Lawrence Shimba Tourism Amusa Mwanamwambwa Transport & communications vacant Without portfolio Michael Sata Works & supply Suresh Desai

Central bank governor Jacob Mwanza

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Economic structure

Latest available figures

Economic indicators 1993 1994 1995 1996a 1997a GDP at market prices (ZK bn) 1,482 2,120 3,297 3,388 4,312 Real GDP growth (%) 5.1 –3.1 –3.9 6.4b 2.5 Consumer price inflationc (av; %) 183.3 54.6 34.9 43.9d 24.8 Population (m) 8.94 9.20 9.37 9.65 9.94 Exports fob ($ m) 949 1,057 1,186 975a 1,067 Imports fob ($ m) 950 928 869a 1,199a 1,350 Current account ($ m) –88 –185 –314 –319a –468 Reserves excl gold ($ m) 192.3 268.1 134.0 164.0 170 Total external debt ($ bn) 6.82 6.61 6.85 6.85 7.1 External debt-service ratio, paid (%) 34.9 31.7 205.3 25.7 22.3 Copper outpute (’000 tonnes) 403 354 307 320d n/a Exchange rate (av; ZK:$) 452.76 669.37 857.23 1,203.71d 1,330.00

February 6th 1998 ZK1,527.5:$1

Origins of gross domestic product 1996b % of total Components of gross domestic product 1996b % of total Agriculture 17 Private consumption 85 Mining 9 Government consumption 18 Manufacturing 37 Gross fixed capital formation 11 Construction 2 Change in stocks 4 Commerce 10 Exports of goods & services 16 Government & other services 25 Imports of goods & services –34 GDP at market prices 100 GDP at market prices 100

Principal exports 1996b $ m Principal imports 1993 $ m Copper 568 Crude oil 144 Cobalt 193 Fertiliser 30 Electricity 1

Main destinations of exports 1996f % of total Main origins of imports 1996f % of total Japan 18 South Africa 34 Thailand 12 Saudi Arabia 12 Saudi Arabia 9 UK 9 India 7 Zimbabwe 8 a EIU estimates. b Official estimates. c Low-income index, urban areas. d Actual. e ZCCM financial years starting April 1st. f Based on partners’ trade returns, subject to a wide margin of error.

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Outlook for 1998-99

The attorney-general The Zambian attorney-general, Bonaventure Mutale, is hoping that the police needs evidence on coup will uncover hard evidence of the complicity of politicians, including the former accomplices— president, Kenneth Kaunda, in the October 1997 coup attempt by junior army officers. If he fails to procure appropriate evidence, his case will appear to be based on little more than conjecture and confessions extracted under duress, which will impress neither the Zambian general public nor the international community, nor, crucially, the Zambian judiciary. Bilateral donors whose ire has already been raised by the extraordinarily clumsy and heavy-handed way the detentions of senior opposition politicians have been handled so far, will probably react by withholding aid—at least in the short term—even though Zambia’s economic performance will incline them to continue their support.

—and the government’s The detentions throw up the thorny question of how the government will response to the HRC will respond to strong recommendations by the Human Rights Commission (HRC) be closely watched that police officers who have tortured coup suspects should be disciplined. Although opposition parties and civil rights groups initially expressed little confidence in the HRC, dismissing it as a toothless body designed to reassure donors, its recent performance has prompted a reassessment of the HRC and has garnered support for its own bid for greater powers. The president, Frederick Chiluba, is probably aware that he must at least appear to be sensitive to the HRC’s recommendations. He has promised to be responsive, yet this would mean undermining the attorney-general’s case, particularly if evidence against the accused remains as unconvincing as it is at present.

Civil service unions’ hands Civil service unions recognise that 1998 is a critical year for civil service reform are tied and that the government will have to dismiss large numbers of civil servants in order to retain its credibility with multilateral donors. Unions are also aware that there is little chance of halting the downsizing or of lifting the government- imposed wage freeze, and realise that the government seems to relish ignoring their wishes as publicly as possible. Despite the support of the Zambian Council of Trades Unions (ZCTU), there is little prospect of extensive cross-sectoral strike action in support of the civil service unions. Emphasis will therefore focus on securing the timely delivery of benefits promised to civil servants, particularly redundancy payments. Workers have been assuaged somewhat by Mr Chiluba’s promise of improved wages once the reform process has been completed; however, in the meantime, they will allow their productivity to drop even further while they manoeuvre more desperately to retain their positions. The trend of the most experienced and qualified employees accepting voluntary redundancy packages will intensify, and is likely to leave government departments short- skilled in many areas.

Forecasts of 5.5% real GDP In his budget of January 30th the finance minister, Ronald Penza, forecast growth in 1998 seem average real GDP growth of 5.5% in 1998, and claimed that this rate could be optimistic— sustained until 2000. Mr Penza expects that 5.5% growth will be achieved in 1998 through a 7.5% increase in copper production this year and a 5% increase in agricultural output. While it is likely that copper production will increase this year, the EIU forecasts growth in copper production of only 3-4%. The positive

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effect of increased copper production on GDP will be tempered by continued low international copper prices. Meanwhile, agricultural GDP, which declined in real terms by 6% in 1997 after growth of 18% in 1996, could recover somewhat this year if the adverse weather conditions associated with the El Niño oceanic current do not wreak too much havoc. To estimate growth in the agricultural sector of over 5% would err heavily on the side of optimism. The EIU anticip- ates growth of 1%. Trade negotiations with South Africa will mean greater access to South African markets for Zambian manufacturers, but there is little prospect of an end to South African dumping of subsidised produce in Zambia, and local manufacturers will struggle to compete. It is likely that the reduction in manufacturing growth of the last two years will be arrested, but there will be little appreciable growth in the sector. This suggests that real economic expansion of 5.5% in 1998 is optimistic; we maintain our forecast for growth in 1998 at 4.5%. Assuming that a recovery in the agricultural sector materialises, and that the privatisation campaign bears further fruit, we forecast growth of 4.8% in 1999.

Zambia: forecast summary (domestic) (% change, year on year) 1996a 1997b 1998c 1999c Real GDP 6.4 2.5 4.5 4.8 of which: agriculture 18.0 –6.0 1.0 3.0 manufacturing 4.0 3.2 3.5 3.7 mining 3.8 5.5 6.0 7.5 Average consumer pricesd 43.9e 24.8 18.0 12.0

a Official estimates. b EIU estimates. c EIU forecasts. d Low-income index, urban areas. e Actual.

—as do poverty reduction Sustained average growth rates of over 5%, coupled with the increases in projections spending on the social sector promised in the budget, would indeed reduce poverty in Zambia in line with the government objectives. However, projections that poverty could be reduced by 20% in two years seem highly optimistic. The government’s public-sector reform programme is perceived by the Chiluba administration and international donors as an integral part of its poverty reduction plan, as the redundancies are intended to transfer resources from non-productive to productive areas of the economy. However, taking into consideration the fact that each of the 59,000 workers who are scheduled to be dismissed are estimated to have an average of at least five dependants, no less than 300,000 people—nearly 3% of the population—will be worse off unless these workers are reabsorbed into the wage economy. Even if they are successfully reintegrated and economic growth of 5% materialises, such a steep reduction in the incidence of poverty seems very optimistic.

Mr Penza’s gamble on Mr Penza knows his history well, and his gamble in assuming sustained high donor support is likely to levels of donor assistance despite an alarming absence of official commitments succeed will probably pay off, as it has in the past. Structural adjustment success stories remain scarcer than donors would like, and Zambia’s macroeconomic performance has been too encouraging to sacrifice to concerns over good governance. As in the past, donors would probably like to see less provocative behaviour from the Zambian government in order to facilitate the disbursement of development assistance. However, they seem realistic about the prospects for a radical improvement in political behaviour.

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Anglo American may play With the fate of the Nkana and Nchanga copper mines finally sealed, the way for time on Konkola Deep is clear for an end to the long-running discussions between Anglo American and Zambia Consolidated Copper Mines (ZCCM) on Konkola Deep (4th quarter 1997, page 11). Negotiations may be delayed further, as the government wants Anglo American to take over the Mufulira mine and concentrator, but Anglo American is more likely to use the Nkana concentrator instead. This would leave the Mufulira mine stranded, and would force its closure, the blame for which would be foisted on the ZCCM negotiating team. Anglo American may now opt to play for time; there is no other serious buyer in sight, the multilateral donors who support Zambia want a conclusion of the deal as soon as possible and ZCCM’s losses accumulate each month. All three factors are increasing the pressure on the ZCCM team, while further delays are likely to count in Anglo’s favour.

Maize imports will cause It is likely that the government-run maize-importing body, the Food Reserve strife Agency (FRA), will lower maize prices, which will dent private-sector profits. The government can expect criticism during 1998, with the Zambia National Farmers Union (ZNFU) accusing the government of having abandoned free- market principles where agriculture is concerned. As long as Zambian maize purchases continue, particularly from small farmers, the government will probably opt to ignore the complaints, but if it transpires that maize imports have been procured to the detriment of Zambian maize producers who are consequently left holding unsold crops, the government will have a difficult time justifying its actions.

Zambia: forecast summary (external) ($ m unless otherwise indicated) 1996a 1997a 1998b 1999b Merchandise exports fob 975 1,067 1,141 1,307 of which: copper 593 746 798 914 Merchandise imports fob1,199 1,350 1,428 1,513 Current-account balance –456 –468 –445 –365 Average exchange rate (ZK:$) 1,203.7c 1,330 1,660 1,780

a EIU estimates. b EIU forecasts. c Actual.

Zambia: gross domestic product Zambia: kwacha real exchange rates (c) % real change, year on year 1990=100 8 140

6 130 ZK:DM 4 120 ZK:$ 2 110

n/a 100 0

Zambia 90 -2 Africa 80 -4 1995 96 97(a) 98(b) 99(b) 70 (a) EIU estimates. (b) EIU forecasts. (c) Nominal exchange rates ZK:¥ adjusted for changes in relative consumer prices. Sources: EIU; IMF, International Financial Statistics; World Economic Outlook. 1990 91 92 93 94 95 9697(a) 97 98(b) 98 99(b) 99

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Review

The political scene

Mr Chiluba pursues The Zambian attorney-general, Bonaventure Mutale, has attempted to build a opposition members after case in which key opposition and government figures stand accused of master- the attempted coup— minding the attempted coup of October 28th 1997. According to government statements, the army officers who staged the coup attempt previously met Kenneth Kaunda, the former president and head of the United National Independence Party (UNIP), Dean Mung’gomba, the head of the Zambia Democratic Congress (ZDC), and Roger Chongwe, the leader of the Liberal Progressive Front (LPF). It is alleged that each officer was paid ZK400,000 ($270) to stage the coup, and was promised an additional $13,300 if it was successful. According to the allegations, the army officers were to stay in power for three months before abdicating to a coalition government headed by Mr Kaunda and Mr Mung’gomba.

—detaining Mr Kaunda— Mr Mung’gomba was detained shortly after the coup (4th quarter 1997, page 9), and his attempt to challenge his detention was defeated in the Lusaka High Court in January. Mr Kaunda was in Zimbabwe at the time of the coup but returned to Zambia shortly afterwards. He was arrested on Christmas Day 1997, prompting international outrage and a hurried visit by the former Tanzanian president, Julius Nyerere, to try either to secure his release, or to hurry the government towards an official statement of charges against him. After vehemently denouncing the foreign pressure brought to bear as being of colonial inspiration, the president, Frederick Chiluba, acquiesced to what he termed Mr Nyerere’s “reasonable” requests and had Mr Kaunda removed from maximum security imprisonment and placed under house arrest instead. The government delayed official statements explaining the reason for Mr Kaunda’s arrest until January 11th, when he was accused of involvement in trying to overthrow the government in the October 28th coup attempt. Mr Kaunda is now challenging the grounds of his detention in the courts. Meanhile, Mr Chongwe is in Australia, where he intends to remain, claiming that Mr Chiluba wants him killed. Neither Mr Kaunda, Mr Mung’gomba, nor any other alleged coup conspirator has been officially charged, and all are being detained under special powers granted to the government by the state of emergency that Mr Chiluba imposed shortly after the coup attempt. The state of emergency was extended for another three months from January 29th.

—and Nakatindi Wina of According to government sources the coup conspirators are alleged to have met the MMD at the farm of the Wina family near Lusaka. The chairwoman of the ruling Movement for Multiparty Democracy (MMD) women’s committee, Nakatindi Wina, was arrested in connection with the coup on January 28th, although her husband, Sikota Wina, the MMD’s national chairman, has not been detained. Both the Winas were forced to resign from key government posts in 1994 after allegations of drug smuggling. They managed to bounce back into favour, mainly by providing substantial funding for Mr Chiluba’s election campaign

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in 1996 (1st quarter 1997, page 12); however the recent allegations have jeopardised Mr Wina’s position.

One of the main pieces of evidence against Mrs Wina is her statement on October 30th 1997 that she had prior knowledge of the coup and that she had tried to warn Mr Chiluba, unsuccessfully, of the threat. The allegations about the meeting at the Wina farm emanated from Major Musonda Kangwa, one of the army officers implicated in the coup, but he subsequently told the Lusaka High Court on January 14th that his statement had been extracted after torture by the police. Other detained officers have also said that they were tortured, and some, such as Captain Jackson Chiti, subsequently retracted their claims that opposition politicians had been involved in the coup plot, maintaining that police brutality had forced the allegations.

Will Mr Chiluba heed Although international human rights groups have been denied access to the human rights detained coup suspects, the Zambian Human Rights Commission (HRC) has commission’s warning? been granted visits, and has upheld the allegations of torture, reprimanding the police and recommending that legal action be taken against them. At present, the HRC’s mandate is limited to verbal condemnations, but it has requested additional powers from the government. Responding to the HRC’s allegations, the outgoing chairman of the MMD, Christopher Chawinga, warned the HRC in mid-November against adopting too vigorous a defence of the alleged coup conspirators’ human rights. However, Mr Chiluba has promised to respond to its recommendations. Testimony extracted under duress is inadmissible in Zambian courts, and the state runs the risk that, unless hard evidence can be found, the eventual court case will not only fail to secure convictions but will also damage the domestic and international reputation of the Zambian government and its security apparatus.

The opposition refuses Unsurprisingly, fresh attempts to foster a dialogue between opposition parties dialogue and the MMD have floundered since Mr Kaunda’s arrest. The minister without portfolio, Michael Sata, announced in early December that the government was prepared to initiate a dialogue with the opposition, and preliminary talks took place on December 9th-10th. It was agreed at the initial meeting that almost all of the key opposition demands would be included in the agenda for the next meeting, and the prevailing mood afterwards was optimistic. Predict- ably, however, every major opposition party withdrew from the negotiations after Mr Kaunda’s arrest, leaving behind a bevy of one-man parties, some of which are so small that they share the same address and phone number. The government elected to press on with the talks process despite its loss of credibility, on the grounds that the opposition had requested the talks in the first place. Accordingly, Mr Chiluba and the MMD held talks on January 3rd in Lusaka with several insignificant or unknown politicians.

Mr Chiluba reassures Until substantive and uncoerced testimony to the contrary materialises, suspi- junior army officers cions will remain that the main cause underlying the coup attempt was junior officers’ discontent with their commanders and the government in general (4th quarter 1997, page 9). There is some evidence that the government has taken these views on board. In a government reshuffle on December 2nd Mr Chiluba demoted the minister of defence, Ben Mwila, to the relatively

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insignificant post of energy and water development. At the same time the army chief-of-staff, Nobby Simbeye, was sent on a mission for the diplomatic service, while the air-force commander, Ronnie Shikapwasya, was retired. Speaking at a graduation ceremony for officers from the Defence Staff College in Lusaka, Mr Chiluba declared that concerted efforts were being made to improve the employment conditions in the military, noting that insufficient progress had been made. Mr Chiluba then appealed to officers for their patience, asking them to trust in his government’s commitment to deliver change as soon as possible.

The cabinet reshuffle The other major casualty of the cabinet reshuffle was the vice-president, Godfrey includes major Miyanda, who had until then been tipped by many to replace Mr Chiluba as demotions— party leader when the MMD’s electoral mandate expires in 2001. Mr Miyanda has been given the education portfolio and replaced as vice-president by Lieutenant-General Christen Tembo, formerly the minister of mines. General Tembo was a popular army commander during the Kaunda era but was arrested in connection with a suspected coup plot against Mr Kaunda in 1991, and subsequently released and pardoned. Under the Chiluba administration General Tembo headed the tourism and foreign affairs ministries before assuming the mining portfolio. During his tenure at the Ministry of Mines Mr Tembo opposed the laisser-faire approach of the finance minister, Ronald Penza, to the privatisation of Zambia’s copper mines, insisting on greater government control of the process. Despite the fact that Mr Chiluba must relinquish the presidency in accordance with the constitution at the next election, some suspect that Mr Miyanda was getting too close for comfort.

—and key promotions Keli Walubita, now minister of foreign affairs, was another beneficiary of the reshuffle. Mr Walubita had been minister of mines before the November 1996 election, but after a period of lacklustre performance found himself demoted to the Ministry of Works nad Supply in the post-election cabinet. Mr Chiluba has given him another chance with this promotion, and Mr Walubita’s first task will be to minimise the considerable international fallout from the government’s inept handling of Mr Kaunda’s detention. Peter Machungwa, hitherto the minister of labour and social security, was also promoted after evidently impressing Mr Chiluba with his tough, unyielding dealings with the civil service unions in their continuing struggle with the government over salaries and planned restructuring. Mr Machungwa has been rewarded with the impor- tant home affairs portfolio, while the outgoing minister, Chitalu Sampa, has been made minister of defence.

MMD party elections MMD party elections in December have also resulted in changes to the leader- are held— ship at a local level. Mr Chawinga lost his mandate as Lusaka party chairman and was replaced by Sonny Mulenga. Mr Chawinga’s removal was greeted with relief by many, including the Zambia Independent Monitoring Team (ZIMT), which recently accused him of being too keen to ban human rights organisations such as the ZIMT itself. Mr Mulenga, while less confrontational than Mr Chawinga, has been dogged by allegations of financial difficulties in his business enterprises which may yet compromise his tenure as MMD chairman. Most MMD local elections took place without controversy, but the Kafue branch

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was accused by senior party members of bringing the party into disrepute through bitter factional fighting that resulted in the need to repeat the poll.

—but local elections will Local elections in Zambia, which were scheduled to take place in late 1997, have to wait have been postponed for financial reasons. Although Mr Penza set aside ZK16bn ($10.5m) for local elections in the January 1998 budget, the minister of local government, Bennie Mwiinga, has yet to specify a date. In the meantime, he has ruled that no councils are to be dissolved, despite the expiration of their democratic mandate.

Civil service wage freezes On November 27th the government announced a freeze on all public-sector should cover wages until the end of 1998 at the earliest to allow it to finance its long-awaited redundancies— public-sector reform programme, which was suspended in March 1996 (2nd quarter 1996, page 9). The programme envisages the downsizing of the civil service from 139,000 to 80,000 employees by the end of 1999. The government intends to lay off 15,000 employees by the end of March, and a further 8,000 by the end of April. In order to reassure workers, Mr Chiluba has promised that “ghost” workers—functionaries who are still paid despite not working, usually because they are dead—will be the first to be cut from the payrolls. He has also promised that the expected 80,000 remaining employees will eventually receive higher wages in real terms.

The government passed a bill at the end of 1997 stating that those earmarked for redundancy must receive their redundancy payments before they vacate their positions. The legislation further stipulates that workers who do not receive their payments upon leaving their posts are entitled to receive their salaries until redundancy payments are made. Civil servants who were laid off in December did not receive their compensation, and it remains to be seen whether they will be paid their salaries instead. Meanwhile, most government workers are trying to retain their jobs with little regard for their responsibilities, and accusations of nepotism, corruption and tribalism abound.

—but the ZCTU objects Nearly every Zambian trades union has endorsed the civil service unions’ opposition to the wage freeze. The Zambian Council of Trades Unions (ZCTU) has denounced the freeze and resolved to fight it, claiming that the measure de- prives workers of their constitutional right to collective bargaining. The ZCTU has also condemned the retrenchment packages on the grounds that they are based on outdated wage agreements from 1992. The two civil service unions, the Civil Servants Union of Zambia (CSUZ) and the National Union of Public Service Workers (NUPSW), are continuing to demand the pay increases they were awarded in 1996 and 1997, and are desperately seeking ways to block the redundancy programme. In early January the CSUZ appealed to the Zambian Association of Chambers of Commerce and Industry (ZACCI) to intercede on its behalf, and the NUPSW is suing the government over the retrenchment packages. Nonetheless, the government, aware that further funding from the Bretton Woods institutions requires the implementation of public-sector reforms, has ignored the unions’ demands. The government has yet to take serious steps to deregister the civil service unions as it previously threatened (4th quarter 1997, page 10), but it has pressed on with its case against the teachers’ union, which was suspended by the industrial court on December 16th.

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The economy

Mr Penza aims to reduce The minister of finance, Ronald Penza, unveiled his 1998 budget on January 30th, poverty through growth promising continued low inflation, macroeconomic stability and sustained economic growth, and placing new emphasis on poverty reduction. Condemning the fact that 70% of Zambian people were affected by poverty, Mr Penza pledged to reduce this indicator to 50% by 2000. Total government expenditure for 1998 has been set at ZK1.74trn ($1.26bn), 44% of which has been allocated to social- sector spending, up from 34% last year. Education is to receive 19.7%, health 14.1% and employment and welfare 3.4% of total expenditure. Mr Penza informed parliament that the government intends to increase nationwide access to safe drinking water and promised that more social-sector reforms would be implemented. In addition, he announced that ZK1.1bn ($780,000) had been set aside for poverty alleviation programmes; however $780,000 will have little impact on a national scale, and the main, if uninspiring, component of the government’s poverty reduction strategy is economic growth. Government statistics put average real GDP growth in 1997 at 3.5% and forecast 5.5% growth in 1998. The 1997 figure is 2% lower than the government had projected in the 1997 budget, but 1% higher than the EIU’s forecast of 2.5%. Although achieving growth of 3.5% is not implausible, in light of a World Bank report, Zambia: Prospects for Sustainable Growth 1995-2005 (2nd quarter 1997, page 13), official statistics probably overstate the absolute level of Zambia’s GDP by as much as 50%.

Manufacturers’ pleas are The Civil Servants Union of Zambia (CSUZ) has called for an increase in the tax addressed threshold from ZK60,000 ($39) a month to ZK150,000 to help mitigate the effect of the wage freeze. Mr Penza did raise the threshold in the budget, but only to ZK84,000, which has not satisfied the CSUZ. Manufacturers’ demands received more attention, and several measures were included in the budget, designed to improve the perilous position of Zambian manufacturing. First, the widely de- tested Import Declaration Fee (IDF) will be scrapped from April 1st. Second, a tax amnesty has been introduced for outstanding direct taxes, customs duties and value-added tax (VAT) payments of which the Zambia Revenue Authority (ZRA) has no record; prospective amnesty recipients are required to register before March 31st. There is no amnesty, however, on those taxes of which the ZRA is already aware, and any application for amnesty on such taxes would appear to render the applicant liable to prosecution. To apply for amnesty is thus risky for the applicants themselves, who are for the most part unaware of whether the ZRA already has information on them or not. As the ZRA’s collection powers have again been enhanced this year, this could increase the risk that defaulters who apply for amnesty will in fact be prosecuted.

VAT was retained at 17.5% despite manufacturers’ hopes for a reduction, but the compliance limit for companies required to make monthly returns was increased from ZK100m ($66,500) to ZK200m. VAT exemptions were extended to those companies whose shares are not listed on the Lusaka Stock Exchange (LuSE) as well as those with listed shares. Non-governmental organisations (NGOs) were granted VAT exemptions for building materials to assist the construction of schools and hospitals, creating a potentially lucrative loophole for those in the construction industry who have good connections with NGOs.

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Mr Penza has also promised to reduce import duties on an unspecified range of raw materials required by manufacturers. On sensitive trade issues, he distanced himself from the free-trade principles of the Movement for Multiparty Democracy (MMD) in order to protect Zambian industries currently suffering from subsidised imports from elsewhere in the Southern African Development Community (SADC) region. The levy on imported second-hand clothes has been increased from $1/kg to $5/kg, and Mr Penza has promised new duty rates from April 1st for imported tyres, sugar, soft drinks, edible oil, flour and batteries. In a measure designed to improve the competitiveness of the country’s major fertiliser manufacturer, Nitrogen Chemicals of Zambia, the tax on fertiliser production has been lowered from 35% to 15%. Mining companies were offered two significant tax concessions in the budget, with the mineral royalty tax reduced from 3% to 2% and the withholding tax on interest and dividends reduced from 15% to 10%.

New levies could save Promised extra levies on imported batteries may be enough to save Chloride Chloride Zambia Zambia, which has been on the verge of bankruptcy for some months faced with cheaper imports from Zimbabwe and South Africa. After Dunlop’s withdrawal last year (4th quarter 1997, page 13), the Zambian Manufacturing Association (ZAM) predicted that Chloride would be the next to go, but the Ministry of Finance appears to have judged that Zambia cannot afford to lose any more major manufacturers in the name of free trade.

Mr Penza gambles on The budget indicates that Mr Penza is relying on a repeat of last year’s successful further donor assistance gamble of assuming high levels of donor support in the absence of guarantees during the budgetary exercise. The 1998 budget assumes donor financing of ZK639.59bn ($425m)—or 35% of projected revenue—a 3% increase on 1997, contradicting Mr Penza’s claim to have reduced the country’s dependence on foreign aid. Significantly, the government has only budgeted 20% of the funds needed to finance the public-sector reform programme, assuming that the remainder will be supplied by donors who are spearheading the initiative. Mr Penza criticised donors’ preoccupation with indicators of good governance as making the provision of aid less predictable, but expressed confidence that donors’ support would materialise again in 1998.

Year-on-year inflation The official figure for year-on-year inflation for December of 18.5% will prob- dropped to 18.5% in ably help to persuade donors that the MMD government is worth backing December despite their misgivings about governance. Although weather patterns associated with the El Niño oceanic current remain unpredictable, widespread flooding will damage agricultural output, and consequently food prices are expected to increase. However, there will be no increases in civil service wages in 1998 and the government will continue to maintain tight fiscal policies to satisfy donor requirements. While inflation may edge slightly upwards in early 1998 as fuel price rises feed through the economy, the downward trend in prices will continue in 1998, and we have revised our forecast for average annual inflation in 1998 to 18%. Mr Penza is standing by anti-inflationary policies, aiming to reduce the average rate of inflation to 4% by 2000. Treasury-bill rates also drifted further downwards in the fourth quarter of 1997 and are now little over 12%. The Bank of Zambia (BoZ, the central bank) has made it clear on several

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occasions that it would like commercial banks to respond by lowering lending rates but owing to the high rate of commercial bankruptcies and concerns about devaluation, the banks have remained reluctant. The commercial rate for short-term lending in many banks continues to hover around 50%.

Zambia: budget forecasts, 1998 (ZK bn) Total revenue 1,817.59 Direct taxes 384.00 Excise taxes 229.82 Trade taxes 278.18 VAT 197.00 Foreign funding 639.59 Non-tax revenue 89.00 Total expenditure 1,741.34 Wages & emoluments 422.38 Recurrent departmental charges 336.58 Grants & other payments 199.84 Pensions & other gratuities 20.00 Constitutional & statutory 295.90 Capital expenditure 295.00 Other 171.64 Forecast budget surplus 76.25 Source: Zambian Ministry of Finance.

National Breweries is listed The listing of National Breweries on the LuSE is under way and shares will be sold throughout February. The minimum investment permissible is ZK100,000, which buys 500 shares at ZK200 (13 cents). A total of 18.9m shares are available for sale. The listing of Zambia Breweries in 1997 was very successful, and was oversubscribed by 50%. Lonrho has a controlling stake in National Breweries, which announced its plans to list early last year.

Lusaka is soon to have a According to a state-owned newspaper, Times of Zambia, foreign direct invest- new mall ment (FDI) inflows reached only $125m in 1997. It seems that a substantial proportion of the funds has been spent on the smart new shopping mall which is being built opposite the showgrounds in Lusaka by Shoprite Checkers, and Stocks and Stocks of South Africa, in conjunction with the Commonwealth Development Corporation (CDC). Due for completion in 1999, the mall’s retail outlets are apparently already fully booked.

Mining and energy

The fates of Nkana and In mid-November a deal for the Nkana and Nchanga copper mines was finally Nchanga are finally reached between the Zambia Consolidated Copper Mines (ZCCM) negotiating settled— team and the Kafue consortium, led by South Africa’s Anglovaal subsidiary, Avmin (4th quarter 1997, pages 15-16). No official details of the settlement were released, but they are reportedly similar to Kafue’s last publicised payment offer of $220m cash, $750m for investment and a further $250m for social spending. Final settlements on labour and environmental issues have not yet been reached, but the parties have agreed that this will not impede the conclusion of the sale. The settlement on Nchanga and Nkana paves the way for an agreement between South Africa’s Anglo American and the Kafue team over

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the mineral-rich Konkola Deep mine. Negotiations over the mine have been protracted and the main obstacle cited by negotiating teams was the Nkana and Nchanga deal.

—while other mining The Chambishi copper mine near Kitwe on the Copperbelt was sold to deals fall through— Canada’s Ivanhoe Capital (IC) in mid-November. At the time, the president of IC, Robert Friedland, expressed both his commitment to establishing Chambishi as a world-class low-cost copper producer and his confidence that fresh investment would lower production costs and raise output to 40,000 tonnes/year. However, in mid-January IC announced that it would be pulling out of the Chambishi deal. The Ministry of Mines seems to be largely to blame for the pull-out, as it failed to check the financial viability of the deal, which was predicated on financing from South-east Asia.

Meanwhile, Cyprus Amax, an American mining company, bought the Kansanshi mine from ZCCM for $48m in mid-November, and said it would be looking to extend the mine’s proven reserves of 29m tonnes, which have a 2.9% copper grading. In mid-January ZCCM announced that it was halting production at the existing Kansanshi mine. Cyprus Amax intends to continue prospecting for more copper reserves on the mine, but 146 miners have lost their jobs.

—but Zambia’s investment The financial and economic crisis in South-east Asia has certainly dampened climate remains safer prospects for copper producers, and it is little surprise that investors who have than the DRC’s most recently bought into ZCCM are reconsidering. At the same time, the withdrawals and the Kansanshi job losses have fuelled Copperbelt worker concerns about their prospects in a privatised copper industry. The government, in contrast, has barely reacted to the withdrawals, reassuring committed investors of its steadfast adherence to free-market principles, although the tendering processes that allowed Cyprus Amax and Ivanhoe to buy in November are likely to be criticised. Mining companies which decided to forgo Zambian privatisation sales in favour of assets in the neighbouring Democratic Republic of Congo (DRC, formerly Zaire) were alarmed to hear in early January that the Congolese state mining company, Gécamines, had revoked the concession previously awarded to America Mineral Fields (AMF)—even after it had paid millions of dollars upfront—awarding it to South Africa’s Anglo American consortium instead. While pickings might be richer in the DRC than in Zambia, the investment climate in Zambia will be far more secure for the foreseeable future.

Benicon buys the Maamba The Zambia Privatisation Agency (ZPA) announced the sale of the Maamba colliery collieries in late November 1997. Benicon of South Africa has bought an 80% stake for around $22m, $16m of which is accounted for by Maamba’s debts. Benicon has operations of its own in Mozambique, but is mostly occupied with contract mining for Anglo American. The Maamba sale brings some relief to the ZPA as the colliery is in a precarious financial position. Its liabilities and operating losses are eight and seven times respectively greater than its assets, and creditors are calling for its liquidation.

Scores of jobs are lost in Hundreds of jobs have been lost in the energy sector over the past quarter. In the energy sector late November at least 250 jobs were cut in the recently privatised ZCCM power

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division, which was bought in mid-July by the Copperbelt Energy Consortium (3rd quarter 1997, page 14). In early January the energy parastatal, Zesco, announced the dismissal of 200 part-time workers, some of whom had been working for the company for several years. Zesco sparked outrage by refusing to pay the dismissed workers any benefits, citing a lack of resources.

Agriculture

Uncertainty surrounds the Speculation and uncertainty still surrounds the government’s plans for the role of the FRA Food Reserve Agency (FRA) in Zambia and the FRA’s true role in the Zambian agricultural sector remains unclear. Government policy is that the private sector should replace the state in domestic and international maize procurement, as well as in the purchasing and distribution of fertiliser, and that the FRA should provide emergency backup in the event of serious food shortages. How- ever, the quantities of maize which the FRA appears to have been directed to buy seem to have introduced major competition to the private sector.

Nevertheless, the FRA struggled to purchase maize in November and December, as the Treasury was late in releasing its budget allocation for 1998; it has since been set at $11m. In early December the president, Frederick Chiluba, criticised the agency for making insufficient efforts to buy maize domestically. Notwith- standing, agriculture ministry officials suggest that maize imports will continue. Meanwhile the Zambia National Farmers Union (ZNFU) indicated in early December that the private sector would import 100,000 tonnes of maize to meet shortages in 1998. Uncertainty about weather conditions this year is pervasive, and there is widespread fear that adverse weather conditions associated with the El Niño oceanic current will cause a serious drought despite excess rainfall to date. Flooding throughout the country could prove as damag- ing as drought conditions, and although reported incidents of famine have been rare, a local daily, The Post, reported in mid-December that villagers in the central district of Kapiri Mposhi were so hungry that they were subsisting on wild berries. According to the Ministry of Agriculture, in late January around 890,000 Zambians were in need of food relief.

Fresh investments are Zambia Sugar is to invest $21m in its operations in 1998 and has moved its made in commercial head office from Lusaka to Mazabuka, where most of its sugar is produced. agriculture Export and import services will remain based in Lusaka. Meanwhile, Universal Lead Tobacco announced in late January that it was to invest $18m in Zambian tobacco this year, and committed itself to both providing inputs to small farmers and to buying their tobacco crop.

Banking

Banks’ core liquid asset Zambia’s banking woes have continued (4th quarter 1997, page 14). The Credit ratio is cut to 30% Bank, which narrowly escaped closure in October, finally succumbed on November 28th, when its operations were suspended by the Bank of Zambia (BoZ, the central bank). On December 4th the BoZ placed Manifold Bank under the receivership of an international accountancy giant, Coopers & Lybrand. Many deposit-holders desperately tried and failed to withdraw their money

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before it folded. Meanwhile the Prudence Bank, which closed in mid-October, finally paid out its creditors in mid-December. The BoZ is aware that public confidence in the banks has fallen sharply in recent months, shaken by the suspicion that Zambian banks are overexposed because of the riskiness of loans to the commercial sector. The BoZ has nonetheless reduced the sector’s required core liquid-asset ratio—the ratio of a bank’s stock of cash, Treasury bills and current-account balances with the BoZ to its total liabilities to the public— from 38.5% to 33.5% in early December, and again to 30% later in the month.

Foreign trade and payments

South Africa agrees to Prospects have improved for Zambia’s manufacturing sector after long- open its markets to anticipated progress in South Africa’s bilateral trade negotiations with Zambia. Zambian goods South Africa currently exports goods worth around $300m a year to Zambia, but imports only $50m. South Africa now appears prepared to allow nearly all Zambian products greater access to its market, with the notable exceptions of milk, sugar and cut roses. The South African trade minister, Alec Erwin, visited Zambia in mid-November and promised that access would be opened up this year, but made little mention of any moves to stop the dumping of subsidised South African products onto the Zambian market.

Zambia’s external debt as of the end of 1997 stands at $7.1bn, $700m more than the previous year, and only $100m less than when the Movement for Multiparty Democracy (MMD) took office in 1991. More than $2bn of that is in arrears on principal and interest payments. The finance minister conceded that debt relief prospects were poor this year, and said that the government expected to pay more than $200m in debt servicing.

A meeting with Bretton The World Bank announced in mid-December that it had postponed a meeting Woods institutions is planned for December between Zambia and its key international donors, owing postponed indefinitely— to slow progress in the privatisation of Zambia Consolidated Copper Mines (ZCCM) and because it wanted to study the IMF assessment of the current macroeconomic situation. In mid-December the IMF produced a fairly positive assessment of Zambia’s performance, and concluded a successful round of enhanced structural adjustment facility (ESAF) negotiations with the government. The two reached agreement on key policy objectives to 2000, and the IMF pledged to fund the ESAF for 1998. Nonetheless, despite progress on the ZCCM privatisation, in early January the Bank postponed the donors’ meeting once again, suggesting that the governance issues which remain high on the agenda of bilateral donors have become increasingly significant for the Bank as well (4th quarter 1996, page 14).

—but the World Bank Despite endorsing bilateral donors’ concerns for governance issues the Bank grants balance-of- has maintained funding commitments, releasing $32m in balance-of- payments support of $32m payments support on December 11th, and lending $350,000 for capacity building in government ministries one week later.

Japan reschedules In December Italy and Japan joined other members of the Paris Club that are Zambian debt official bilateral creditors of Zambia in implementing the debt rescheduling

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agreed in February 1996 (2nd quarter 1996, pages 16-17). It was agreed then to restructure debt-servicing obligations due on $650m of Zambia’s bilateral debt over the next three years. Zambia’s outstanding commitments to the Italian government are relatively small and only $10m of debt has been rescheduled (with $6m of the sum simply written off). In contrast, Japan is Zambia’s largest bilateral creditor and its slow implementation of the 1996 agreement was a cause of some concern to the Zambian Ministry of Finance. Japan has now rescheduled $127m of Zambian debt, $51m of which is owed to Japan’s Overseas Economic Co-operation Fund (OECF), $50m to the Export-Import Bank of Japan, with the remainder owed to Japanese commercial banks but in- sured by the Japanese government. Japan has gone for the so-called Option B, in which all debt is rescheduled and not written off, although the Zambian government is hoping that it will consider the more generous Option A in the future.

Aid news The UN Development Programme (UNDP) and the Irish government granted $1.4m in mid-November for capacity building in Lusaka’s peri-urban commun- ities. The Zambian government has also contributed $172,000 to the cause. The Irish government is scheduled to release $2m during 1998 for Zambia’s reforms to the health sector.

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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 has been abolished. A new draft constitution is promised for March 1st 1998

National legislature Suspended

National elections July 1984 (presidential) and September 1987 (legislative). Next presidential and legislative elections due in April 1999

Head of state President, Laurent Kabila

National government The president is head of a 26-member executive dominated by the Alliance des forces démocratiques pour la libération du Congo-Zaïre (AFDL). There is no prime minister

Main political parties Parties are banned. However, the AFDL is composed of the Alliance démocratique des peuples (ADP), Mr Kabila’s Parti révolutionnaire du peuple (PRP), the Conseil national de la résistance (CNR) and the Mouvement révolutionnaire pour la libération du Congo-Zaïre. In addition, the Union pour la démocratie et le progrès social (UDPS) remains de facto a strong opposition voice

President and head of the executive Laurent Kabila (AFDL)

Ministers of state Economy and petroleum Pierre-Victor Mpoyo Interior Gaetan Kakudji (AFDL)

Other key ministers Agriculture & livestock Mawapanga Mwana Nanga (AFDL) Civil service Paul Kapita Shabani (UDPS) Commerce Paul Bandoma Defence Laurent Kabila (AFDL) Education Kamara Rwakaikara Energy Pierre Lokombe Kitete Environment & tourism Eddy Angulu (AFDL) Finance & budget Ferdinand Tala Ngai Foreign affairs Bizima Karaha (AFDL) Health Jean-Baptiste Sondji Industry & small enterprises Babi Mbayi (AFDL) Information & cultural affairs Raphael Ghenda (AFDL) International co-operation Célestin Luanghy Justice Mwenze Kongolo (AFDL) Labour & social security Thomas Kanza Mines Frédéric Kibassa-Maliba Planning Etienne-Richard Mbaya Transport & communications Henri Mova Sakanyi

Central bank governor Jean-Claude Massungu Muilongo

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Economic structure

Latest available figures

Economic indicators 1993 1994 1995 1996a 1997a GDP at market prices (NZ bn) 36.9a 1,835.0a 11,779.0a n/a n/a Real GDP growth (%) –14.5 –7.2b –0.6b 1.3b –4.0 Consumer price inflation (av; %) 1,893 23,761 542 659c 73.0 Population (m) 41.2 42.6 43.9 45.4 46.6 Exports fobd ($ m) 1,144 1,272 1,451b 1,629b 1,300 Imports fobd ($ m) 668 629 870b 921b 875 Current account ($ m) –659 –415 –630b –621b –871 Reserves excl gold ($ m) 46.2 120.7 146.6 82.5c n/a Total external debt ($ m) 11,270 12,322 13,137 13,900 15,000 External debt-service ratio, paid (%) 1.0a 0.9a 1.5a 2.0 0.1 Copper production (’000 tonnes) 48.3 33.6 33.9 37.4 50,000 Cobalt production (’000 tonnes) 2.2 3.6 4.0 5.1 5,500 Diamond production (m carats) 15.2 16.3 22.0 21.8 15.5 Exchange rate (av; NZ:$) 2.5 1,194.1 7,024.0 52,400.0c 145,988

February 6th 1998 NZ137,500:$1

Origins of gross domestic product 1994 % of total Components of gross domestic product 1992 % of total Agriculture 53.4 Private consumption 68.8 Industry 15.6 Public consumption 21.7 Manufacturing 5.5 Gross fixed capital formation 7.1 Services 31.2 Change in stocks –0.2 GDP at factor cost 100.0 Exports of goods & services 21.6 Imports of goods & services –19.0 GDP at market prices 100.0

Principal exports 1994 $ m Principal imports 1994 $ m Diamonds 451 Consumer goods 232 Coffee 247 Capital goods 116 Copper & cobalt (Gécamines) 184 Raw materials 93 Energy products 85

Main destinations of exports 1996e % of total Main origins of importse % of total Belgium-Luxembourg 43 South Africa 19 US 16 Belgium-Luxembourg 17 South Africa 5 Hong Kong 6 Italy 5 US 6 a EIU estimates. b Official estimate. c Actual. d Balance-of-payments basis. e Based on partners’ trade returns, subject to a wide margin of error.

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Outlook for 1998-99

The emperor’s new foes Only through violent assertions of power has the regime of President Laurent Kabila been able to establish itself as the new leadership of the Democratic Republic of Congo (DRC). However, factional splits within the Alliance des forces démocratiques pour la liberation du Congo-Zaïre (AFDL) are already pro- liferating. The Kivu faction is losing ground, with Deogratias Bugera, its last significant agent in Kinshasa, confined to the administrative leadership of the AFDL. The promotion of Gaetan Kakudji—also a member of the AFDL leadership and a cousin of President Kabila—from governor of Katanga to minister of internal affairs betrays both the rise of the Katangese faction and the president’s tendencies to nepotism, which may be attributed less to family values than to Mr Kabila’s distrust of other members of the AFDL leadership. Meanwhile, internal AFDL squabbles rooted in ethnic and regional differences are re-enacted with equal vigour at the national level and the government has failed to establish its authority over the entire country. In recent months it seems to have lost complete control in Kivu, where a fully fledged war has resumed between baHunde Mai-Mai guerrillas, Rwandan militiamen and former Rwandan and Zairean armed forces on the one hand and the government and local Tutsi population on the other. Armed government opponents are reportedly grouped south of Kinshasa, and, despite official denials by the government of the neighbouring Central African Republic, significant numbers of troops of the former president, Mobutu Sese Seko, are known to be concentrated in that country.

Mr Kabila cannot even count on the support of his own army, as he has so far failed to demobilise the bulk of the former Zairean armed forces (FAZ) and is only slowly building up a loyal military. Meanwhile, Rwandan troops loyal to Mr Kabila have left Kinshasa to participate in renewed hostilities in Rwanda, and have been replaced with Angolan soldiers—ostensibly to intervene should there be a resurgence of conflict across the river in Congo (Brazzaville)—whose purpose is widely believed to be the protection of the Kabila regime. Under the circumstances, Mr Kabila could be forgiven for developing a heightened sense of paranoia.

Authoritarian tendencies— It has become clear that Mr Kabila’s interest in a transition to democracy is merely token, as the news from Kinshasa over the last quarter has more than confirmed initial fears that the government has strong authoritarian tendencies and only a modicum of commitment to good governance. Journalists and newspaper publishers are frequently detained without charges, their offices have been invaded by troops, and several have been beaten; not even foreign radio stations are free from censorship. Political opponents and those openly critical of the regime have been tried by military tribunals. Meanwhile, Mr Kabila is fostering his own personality cult, frequently referring to himself in the plural and having adopted the official title of mzee—Swahili for “the wise man”. The new regime has demonstrated little if any interest in political dialogue with the opposition, whose position is bound to deteriorate under the Kabila government. In this context, Mr Kabila’s reassurances that elections will be held in early 1999 appear worthless. Even if elections are organised by early 1999, which is a dubious prospect in light of the lack of specific census planning, it is

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unlikely that the Kabila regime will allow them to take place in a free and fair manner.

—could foster strange The increasing intransigence of the Kabila regime is likely to come back to alliances haunt the leader and his henchmen. The regime’s already limited support base is rapidly disappearing, while those opposition members who are not lured into government can only conclude that negotiation is not an option and may begin to seek other means of power sharing. Also looming is the threat from a disenchanted and, more importantly, unpaid military force. Recent initiatives such as the establishment of training camps for youths and young adults are unlikely to foster the loyal support which the government patently lacks. It is the AFDL that taught the Congolese that volatility and opportunism can forge unlikely but successful alliances; Mr Kabila will now have to keep a watchful eye on his most enthusiastic pupils.

The bill for While the reconstruction programme that the government presented in reconstruction looms December to the Friends of Congo conference in Brussels is economically sound, the $1.1bn necessary to fund the programme is lacking, and the Kabila DRC: gross domestic product government seems unwilling to acknowledge the links between its political % real change, year on year 8 behaviour and economic performance. International donors will not meet the regime’s exaggerated expectations of imminent and large foreign aid inflows, 4 and little of the reconstruction programme will be implemented in 1998. Simi- (a) larly optimistic thinking seems to have informed the government’s projections 0 (a) for revenue collection and a future expansion in mining production on which -4 it has based most of its economic projections (see The economy). To make (b) matters worse on the economic front, the cancellation in January of American -8 (a) Mineral Fields (AMF)’s contract for the Kolwezi mine and the signing of a Congo -12 substitute agreement with a consortium of several foreign mining concerns— Africa the exact circumstances of which are still unclear—will do little to encourage -16 1993 94 95 96 97 potential foreign investors who do not have close ties with the new regime. (a) Official estimates. (b) EIU estimate. Sources: EIU; IMF, World Economic Outlook. Review

The political scene

The Tutsi faction is losing The president, Laurent Kabila, reshuffled his government on January 4th 1998, influence— creating two new senior cabinet portfolios, for the economy and the interior. Gaetan Kakudji, the former governor of Katanga and the president’s cousin, was appointed minister of state for the interior, while Pierre-Victor Mpoyo, formerly a member of the opposition Union pour la démocratie et le progrès social (UDPS) and minister of economy, industry and trade under Mobutu Sese Seko, the former president, was appointed minister of state for economy and petroleum. Mr Kakudji’s ascent to power was perceived as symbolic of the increasing political leverage of the Katangese in government as a result of Mr Kabila’s tendency to distribute power that favours his region of origin— Katanga—rather than his adopted region—Kivu. The Tutsi influence in the Kabila administration had already declined significantly with the dismissal in

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late November of the presidential security adviser, Masasu Nindaga, who was the de facto army chief of staff and a founder of the Alliance des forces démocra- tiques pour la libération du Congo-Zaïre (AFDL) in Kivu in 1996. Mr Masasu was imprisoned in early December and accused of “tribalism”, setting up his own private militia, running a private prison and expropriating property. The appointment of the AFDL Executive Committee by Mr Kabila on November 12th, in which Deogratias Bugera is once again the lone Tutsi figure, and the return home of most Rwandan troops, suggest a significant waning in the Tutsi faction’s influence.

DRC: executive committee of the AFDL (appointed Nov 12th 1997)

Chairman Laurent Kabila Secretary-general Deogratias Bugera First deputy secretary-general Gaetan Kakudji Executive secretaries International relations Bahombua Florentin Songambele Social & cultural affairs Agathe Mulimbi Mutoke Treasury Joseph Habi Mulingba Mass organisation Shambui Kalala Administration Tshamala Tshingwomba

—and the Tutsis suffer While their politicians suffer setbacks in Kinshasa, baTutsis in the Kivu region further violence are once again suffering violent persecution, this time at the hands of an ad hoc alliance of Hutu militiamen, local inhabitants and troops of the former Zairean armed forces (FAZ). Violent ethnic tensions have continued unabated in the Kivu area since late 1997. Self-labelled baHunde Mai-Mai rebels, who once fought alongside AFDL forces, are now waging a virtual guerrilla war against the south Kivu authorities and the local baTutsi. The Masisi-Bukavu-Goma region is also again infested with Rwandan Hutu interahamwe militiamen, Ugandan rebel Allied Democratic Forces—with the Ugandan army in hot pursuit—and FAZ soldiers. The Mai-Mai and Rwandan interahamwe militia have resumed their full-scale campaign of terror against the local baTutsi who fare little better now than they did in 1996 when similar persecution led them to start the revolt that toppled Mobutu and brought the AFDL to power. Ex-Rwandan armed forces and Mai-Mai militiamen jointly launched an assault against the Congolese Tutsi refugee camp of Mudende in Rwanda, where hundreds were allegedly massa- cred, and against the city of Bukavu on December 10th and 11th, engaging local government troops in combat. Both the Ugandan and Rwandan governments have threatened to attack their enemies within Congolese territory. Ominously, the government of the Democratic Republic of Congo (DRC) asked the World Food Programme to withdraw from Kivu on December 11th, raising fears that it wanted to rid the region of foreign observers before launching reprisals.

The Kabila regime Predictions that the AFDL would relax its dictatorial style and become more tightens its grip— transparent after a few months in power have been belied by an apparently unending series of decisions that aim to intimidate any significant source of opposition and eliminate already limited political freedom. In October an opposition politician, André Bo-Boliko Lokonga, the president of the Parti démocrate et social chrétien (PDSC), was barred from travelling abroad to attend a meeting of the Democratic Christian International in Paris. The director of a local newspaper, Palmarès, was detained without charge for several days

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in September and October, while the director of the Phare newspaper, Polydor Muboyayi, was detained for over five weeks from September 8th for publishing an article alleging that Mr Kabila was setting up his own presidential guard. The editor-in-chief of Mambenga, Essor Africain and L’Alarme was also arrested on November 24th on the charge of “being an agent” of the UN commission of inquiry. He was released three days later. In the same month Mr Kabila addressed national media organisations and warned them to exercise restraint or face disciplinary action. On November 30th, two days after programmes were broadcast on an exchange of gunfire between government and FAZ troops in Kinshasa, the government banned the local-relay FM broadcasting of Radio France Internationale, the BBC and Voice of America, and accused them of “soiling the image” of the DRC and waging a “disinformation campaign”. The minister of the interior, Raphael Ghenda, further announced the dismissal of national radio journalists also serving as correspondents for foreign radio stations. Adding cultural control to its quest for political hegemony, in November the government also censored a recording by a popular singer, Tabu Ley, for the alleged immorality of a song in which he praises the pleasure of dancing. On January 23rd the government took its campaign of oppression a substantial step further, sentencing by military tribunal two opposition leaders—Mathieu Kalele and Jean-François Kabanda of the UDPS—to two-year jail terms for “agitating the public”. The next day the government reported that Pastor Théodore Ngoy would also be tried by a military tribunal for “subversive preaching verging on insulting the head of state and on threatening state security”.

—ignoring the opposition Asked in a press conference before his January government reshuffle whether and concentrating on the the new cabinet would include opposition members, Mr Kabila answered that security apparatus— he “did not know whether there was an opposition to which we have to open ourselves”. When asked why a Congolese reporter for the BBC World Service had been imprisoned, Mr Kabila answered: “Concerning your detained col- league, I do not know why he was arrested. There are so many people arrested in this country. I do not know.” One explanation for Mr Kabila’s apparent inability to keep up with the many arrests may be the proliferation of new opaque security forces and agencies. Mr Kabila has set up a new political police agency, the National Intelligence Agency (NIA); according to the New York-based Human Rights Watch, the NIA has cells in its headquarters where it keeps political and other detainees. He has also established a new branch of the army, the Military Detection of Anti-Patriotic Elements (Demiap), which is charged with identifying unpatriotic elements in the armed forces.

—while still promising The vigour of the government’s political repression eclipses its very limited elections in 1999 progress towards electoral democratisation. The government has so far only met the first four criteria of a ten-step election programme, which conveniently lacks a timetable. In his New Year address Mr Kabila reiterated his earlier promise that “the organisation of the head count of our people and the holding of elections on the basis of universal suffrage” will have taken place by early 1999—a gran- diose statement few observers are willing to believe. Organising a population census—a precondition for a referendum and elections—is sure to create much ethnic controversy, given the DRC’s intricacies of politics and citizenship. Finally, the programme takes no account of the existence of a draft constitution

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which was laboriously drawn up by the national conference in the first half of the 1990s.

The military is out of Unable to move ahead with plans to demobilise and rehabilitate up to 75,000 control— of the former FAZ owing to a lack of financing, the Kabila regime has been faced with an increasingly restless military, which is also amplifying the government’s own ethnic tensions. On November 28th, a few days after the dismissal from the army high command of Major Masasu Nindaga, a promi- nent FAZ field officer in the battle against the AFDL, between 11 and 20 people died in crossfire in Kinshasa, apparently between troops loyal to Mr Masasu and those loyal to the president. The shooting took place a few hundred yards from the presidential residence. Several days later the president announced a series of measures to restore order in the army: all military vehicles were to be painted green, officers were to be regrouped into four barracks in Kinshasa and the hiring of military escorts—a frequent practice by which private citizens, politicians and businessmen rented the services of the army as personal security militias—was to be restricted. Fifty soldiers had already appeared before a court martial in September for mutinous disruption in a military camp in Kinshasa and demanding payment of their salaries. There was reportedly another mutiny in Matadi and Boma on January 21st-23rd which was apparently crushed by troops dispatched from Kinshasa. Three days later a military firing squad publicly executed 21 alleged common-law criminals—most of whom were in fact soldiers—charged with murder and armed robbery in Kinshasa, after Mr Kabila rejected their requests for clemency. Three soldiers had already been sentenced to death in Bukavu in December for criminal conspiracy, armed robbery and disobeying orders, two of whom were executed in January.

—and Mr Kabila fashions A new National Service under the authority of the president was set up in his own armed forces October to organise young people, including university graduates, “for the reconstruction and development of the country”. The commander in charge is Kalume Numbi. The servicemen and women will receive paramilitary training, civic education and agricultural training. It was not clear to what extent recruit- ment to the National Service would be voluntary. In addition, the new regime has been training new recruits for the national army in camps in Katanga. Mr Kabila presided over the enlistment of several hundred recruits at a ceremony on December 20th. Some observers believe that the regime has already begun to build a new army with a heavy Katangese component.

The expatriate opposition After months of rumours that some of Mr Mobutu’s henchmen were preparing becomes restless in South a coup in South Africa (4th quarter 1997, page 26), South African authorities Africa— reported in December that they had arrested three former Zairean generals—the former defence minister, Mavua Mudima, the ex-presidential guard commander, Nzimbi Nzale, and the former chief of staff of the army, Baramoto Kpama—upon their return from a secret meeting in Kahemba, the DRC, on the grounds that they were travelling with false documentation. Kahemba, which lies within territory controlled by an Angolan rebel group, the União Nacional para a Independência Total de Angola (UNITA), is about 50 km from the Angolan border and about 500 km south of Kinshasa. The area is reportedly a hotbed of Hutu militiamen and former Mobutu soldiers. The three men had

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chartered a small private propeller plane from South Africa and must have benefited from technical help and refuelling in several countries. The government of the DRC suffered a setback on January 15th when the Pretoria High Court released all three generals after they claimed that they had been travelling under the refugee documents they had received from the South African authorities. Persistent rumours suggest that the three generals had been planning to stage a coup around December 20th. Mr Kabila’s early return from his trip to China on December 19th, and the organisation of military manoeuvres on the outskirts of Kinshasa on December 18th-20th, suggest that the government took the rumours seriously. In December Mr Kabila also asked the Angolan government to station some troops it had previously dispatched to Congo (Brazzaville), in Kinshasa. The official reason was to keep them available for possible future interventions in Congo (Brazzaville), but it is more likely that Mr Kabila needs them as reinforcements in the event of an attack from the south. Furthermore, the Angolan troops’ redeployment transpired shortly after the return of Rwan- dan troops to Rwanda, which may have left the Congolese army vulnerable.

—and elsewhere Other opponents of Mr Kabila appear to be organising themselves abroad. A new party, the Union pour la république, was set up in Paris and Brussels in October with Léon Kengo wa Dondo, a former dissenting prime minister under Mobutu, as one of its founders. General Baramoto apparently went to Brussels in November to meet the party’s representatives. In September Emile Ilunga, the head of the Conseil national de la résistance, the Brussels-based political wing of the Katangese Gendarmes—a Katangese independence movement dat- ing back to the early independence period—called for an opposition political conference to set up a true government of national unity. According to Mr Ilunga, General Jean-Delphon Mulanda, the military chief of staff of the Gendarmes, has been detained in Katanga since May 1997 together with 400 of his followers, despite fighting Mobutu’s forces alongside the AFDL in the civil war, perhaps indicating that Mr Kabila is wary of the group’s influence in his home province. Some 16 opposition parties, including the UDPS, have also set up an organisation called the Forces vives et démocratiques du Congo.

Mr Kabila successfully Meanwhile, Mr Kabila has continued to score political points more successfully isolates Mr Tshisekedi at home. The chairman of the “moderate” wing of the UDPS, Frédéric Kibassa- Maliba, agreed to join the government on November 27th at the rather junior level of deputy minister of mines, to become the first leading opposition politician to join the Kabila regime from the main opposition coalition under Mobutu, the Union sacrée de l’opposition radicale et ses alliés (USORAL). In addition, Mr Kabila appointed Ferdinand Tala Ngai, a former associate of UDPS leader Etienne Tshisekedi, as deputy minister of finance. The appointments were perceived as an attempt to further isolate Mr Tshisekedi by co-opting credible members of the former USORAL opposition. In the January reshuffle Mr Kibassa-Maliba was promoted to minister of mines and Mr Tala Ngai was promoted to minister of finance and the budget.

The governor of Eastern Kasai, Jean Mulamba M’Sasiri, and his deputy, Leonard Mbaya Matungulu, were suspended by Mwenze Kongolo, the minister of the interior, on November 19th for allegedly promoting an antagonistic attitude towards the national authorities. The two men are members of the UDPS, the

dominant party in Kasai, and were elected by the population of Mbuji-Mayi upon the city’s liberation by the ADFL troops in 1997. Their suspension was widely perceived as yet another attempt to weaken Mr Tshisekedi. They were replaced by Omar Kamba as governor and Jean-Charles Okoto Lola as deputy.

The UN inquiry is delayed After protracted delays, the UN commission of inquiry into the massacres of again Hutu refugees finally left Kinshasa for Mbandaka on December 7th to begin its investigation. The foray outside the capital proved short-lived as the team was evacuated to Kinshasa on December 15th after their base was targeted by pro- testers, who were clearly obeying the orders of the regime. Still confined to Kinshasa, the commission is now waiting to resume its work, the prospects for which grow dimmer the further entrenched the Kabila regime becomes. Accord- ing to the office of the UN High Commissioner for Refugees (UNHCR), some 213,000 Rwandan refugees remain unaccounted for.

Relations with France On November 28th, the first councillor at the French Embassy, Eric Lubin, was remain sour declared persona non grata and expelled from the country on charges of espio- nage and attempting to sabotage the Friends of Congo conference (see The Economy). Mr Lubin had apparently been in touch with the generals in South Africa who were later implicated in plotting to overthrow the president. The French government retaliated by expelling his Congolese counterpart in Paris, Yeye Lobota. A few days earlier the DRC had also threatened to leave the Francophonie organisation if the French government did not support its stabilisation and recovery programme. Mr Kabila did not attend the Francophonie conference in Hanoi on November 13th. Curiously, however, during the Brussels meeting of the Friends of Congo in December, the Congolese delegation made much of its normalised relations with France. While the delegates were meeting in Brussels, the government dispatched Dominique Sakombi Inongo, a former ambassador to France under the Mobutu regime, and now special adviser to Mr Kabila, to hold discussions with French officials in Paris.

The economy

Progress is made on The government has ambitious—yet not unrealistic—expectations for macroeconomic stabilisation— economic stabilisation in 1998: projected average real GDP growth of 2.5%, average annual inflation of 12.5% and an average exchange rate of NZ130,000:$1. Average inflation has slowed, and a tight monetary policy has allowed the official exchange rate to stabilise at NZ137,500:$1 while the parallel rate has actually appreciated, reaching NZ110,000:$1 in November 1997. Following another year of recession in 1997, a real growth rate of 2.5% in 1998 is not impossible, although some stabilisation policies will have deflationary effects and could dampen short-term prospects for growth. However, the government’s revenue target of $700m is wildly optimistic and will depend on a significant resumption of production at Gécamines, the state-owned mining company, and on effective control of customs. The government plans to spend $415m on its stabilisation and recovery programme; the remainder is earmarked for recurrent government costs; however the 1998 budget has not yet been drafted.

DRC: inflation, 1997 (% change)

1 Qtr 2 Qtr Jul Aug Consumer prices 57.52 3.44 7.3 1.7 Sources: IMF, Government of the DRC, International Risk and Payment Review.

The introduction of the Congolese franc and the liquidation of insolvent banks are also on the government’s agenda for 1998. Reform of the monetary system is already moving ahead, albeit quite slowly as the country is divided into four de facto currency zones. In Kinshasa all nouveau zaïre banknotes are accepted except for the NZ500,000 and NZ1m “prostate” notes, whereas in Kasai only old zaïres are used in transactions. Meanwhile, in Katanga, the prostate notes are considered legal tender. On December 17th the government officially withdrew the “prostate” notes from circulation and gave residents of Katanga until December 31st to exchange them for NZ100,000 bills. From January 1st 1998 it is illegal to hold more than $20,000 in cash. In an attempt to revive the nearly non-existent banking system, any transaction above this amount must be managed through the banking system.

DRC: exchange rates, 1997 (NZ:$) Apr Nov Official 180,000 137,500 Parallel n/a 110,000 Sources: IMF, Government of DRC; International Risk and Payment Review.

The government defines In its economic stabilisation and reconstruction programme (ESRP), the its terms— government officially declared that its economic policies were “of social market” inspiration, which it defines as a “means of ensuring the judicious distribution of roles among the state and other players in society: business, associations, non-governmental organisations (NGOs) and local authorities”, based on the principle of subsidiarity by which “the government will not intervene in economic and social activity except when it can clearly act more effectively than can businesses, associations, NGOs, churches and local authorities.” This is still far from a total endorsement of a market economy, but it is more liberal than earlier statements had suggested, and the government has indicated its perception of the private sector as the engine for economic growth. The ESRP, which identifies infrastructure, agriculture and mining as the three pillars of future economic growth, covers the 1997-98 period and is the first step towards elaborating a more comprehensive “minimum three-year programme” for 1997-99, which is expected to lead to a national conference on reconstruction sometime in 1998. In the ESRP the government attributes the current economic crisis to the previous administration—a fair claim, for once— and highlights the following macroeconomic stabilisation and adjustment policies which have already been adopted by the new administration:

• the establishment of officially licensed foreign-exchange dealers to reduce the premium between the official and parallel rates, and facilitate exchange- rate convergence;

• the deregulation of the telephone industry;

• the establishment of a debt commission to determine the precise amount of debt owed, and to whom; and

• the adoption of a fiscal policy with expenditure set at the level of actual revenue.

It is still too early to tell whether the government’s actions will confirm the laisser-faire rhetoric of the ESRP—or indeed whether it is serious about implementing its policies at all. The government estimates necessary costs of the ESRP at a grand total of $1,682m. It intends to finance $415m from its own budget, request $575m from foreign donors and creditors and rely on the private sector for $693m.

DRC: financing plan for emergency stabilisation and recovery programme (1998-99) ($ m) Budget External Private Total Political & economic stabilisation 206.0 234.5 0.0 440.5 Constitutional commission 5.0 0.0 0.0 5.0 Courts & tribunals rehabilitation 0.0 5.0 0.0 5.0 Demobilisation & rehabilitation 0.0 160.0 0.0 160.0 Motivation of key personnel in financial control agencies 170.0 0.0 0.0 170.0 Monetary reform 31.0 69.5 0.0 101.0 Logistics 9.0 20.0 0.0 29.0 Forex requirements 21.0 45.0 0.0 66.0 Other 1.0 4.5 0.0 5.5 Economic recovery 138.5 177.0 630.0 945.5 Road repairs & maintenance 51.0 110.5 254.0 415.5 Rehabilitation of transport companies 42.5 10.0 26.0 78.5 Agriculture 45.0 56.5 0.0 101.5 Rehabilitation of farm access roads 45.0 20.0 0.0 65.0 Agency capacity building 0.0 30.0 0.0 30.0 Combating tracheomycosis 0.0 6.5 0.0 6.5 Energy 0.0 0.0 350.0 350.0 Human capital 70.0 163.3 63.0 296.3 Health 15.0 28.0 58.0 101.0 Education 55.0 86.3 5.0 146.3 Capacity building 0.0 49.0 0.0 49.0 Financing needs 414.5 574.8 693.0 1,682.3 Financing available 414.5 0.0 150.0 564.5 Financing gap 0.0 574.8 543.0 1,117.8 Source: Government of the DRC, Communication to the Meeting of Friends of the DRC.

—and announces reforms The ESRP also announced the government’s intention to suspend the invest- to the investment, tax and ment code of the Mobutu era which had already been partially amended by governance codes guidelines made public shortly after the May 1997 takeover (3rd quarter 1997, page 28), and to eliminate all provisions for 100% tax exemptions until a review of the entire tax system had been completed. The overhaul of the tax regime is expected to result in the imposition of value-added tax (VAT) and a new tariff structure. Some responsibilities for taxation will be devolved to regional and local authorities. The government plans to introduce a “code of good governance” for civil servants as part of its struggle against corruption, which it rightly perceives as having been a key impediment to sustained development in the past.

Infrastructure is a The transportation network is to receive the lion’s share of planned investments priority— ($416m), most of which is expected to come from the private sector ($254m) through subcontracting to groups that would recover investments by charging user tolls. A private group named Five has already been awarded a contract for the rehabilitation of the Matadi-Kinshasa highway—the conduit for 65% of Kinshasa’s imports—and that of the two cities’ port facilities. Road tolls ranging from $2 to $25 according to weight were imposed on this route from January 2nd. Given The DRC’s enormous size, the existence of an effective road network is essential for economic development. It presently takes around 15 days for a truck to drive the 200 km distance from Matadi to Kinshasa.

Air transportation has long been a popular alternative for more affluent Congolese but it is not targeted in the reconstruction programme. However, the government inaugurated the successor to the ignominious Air Zaïre, Lignes aeriennes congolaises (LAC), on December 1st. The company has one aero- plane, a Boeing 737, and is limited to domestic routes. In the future it may recover some of the assets of Air Zaïre—the latest director of which is currently under arrest and being sued by the new regime—such as the DC10 that was seized in Tel Aviv in 1993 for failure to pay landing rights or the former presidential Boeing 707 which has been parked in Lisbon since 1992.

—even in agriculture Agriculture has only been allocated $102m of new investment, two-thirds of which will be used for the rehabilitation of access roads to farms. The capacity of small producers to maintain subsistence production in the face of economic chaos under the former president, Mobutu Sese Seko, proved remarkably resil- ient, and the government claims that it is investing a relatively low amount because it wants to maintain a high level of decentralisation for the agricultural sector. No less than 10,960 km of farm access roads have been selected for rehabilitation, and work will begin on 4,525 km of roads in 1998.

The mining sector is key The enormous potential of the mining industry in the DRC has already attracted considerable attention from international mining companies, and, if the government can persuade them of the security of potential investments, the mining sector will see a quick revival and provide the government with much- needed revenue. The government has stated its intention to treble current export revenue from mining to $2.85bn over an unspecified “medium term”, based on a projected twentyfold expansion of copper production. The new Gécamines director, Ambroise Mbaka Kawaya Swana, expects Gécamines’s annual output of copper to reach 475,000 tonnes in five to six years and national production to exceed 1m tonnes. Projections for increases in cobalt production to 600 tonnes—equal to their record level in 1986—are similarly unreasonable, while diamond production already hovers around the projected $600m. However, the Banque nationale du Congo (the central bank) acknow- ledged that diamond output had contracted in 1997, probably as a result of disturbances from the war. Total production for the first nine months of the year amounted to 11.6m carats, down from 14.3m carats over the same period in 1996, making it unlikely that the DRC would reach annual production of above 20m carats as it did in 1995 and 1996.

DRC: expected medium-term annual receipts from mining exports ($ m) Copper (700,000 tonnes at $2,000/t) 1,400 Cobalt (40,000 tonnes at $15,000/t) 600 Zinc (200,000 tonnes at $1,000/t) 200 Diamonds 600 Gold 40 Manganese 10 Total 2,850 Source: Government of the DRC, Communication to the Meeting of the Friends of the DRC.

It is unfortunate that while the government is stressing investment in transportation, it has deprived itself of one of its main export routes, through the reckless nationalisation of Sizarail, the rail company which was partly owned by South Africa’s Spoornet and a Belgian company (4th quarter 1997, page 33). As a result of the DRC’s failure to indemnify Spoornet, its imprisonment of Sizarail’s former boss, Patrick Claes, and its $20m debt to the South African carrier, the latter decided on December 31st, with the backing of the South African government, to suspend all traffic to and from the DRC, leaving Gécamines stranded without an export route for its output.

Energy is to receive The Société nationale d’électricité (SNEL) has drawn up a rehabilitation pro- further investment— gramme for the energy sector which will focus on upgrading and repairing existing electrical infrastructure and developing export capabilities. The programme is expected to cost $350m, and to be funded entirely by private investments. Discussions with a South African banking consortium, RWE/Lahmeyer International, ABB and Medic/ICM for $150m in investment are reportedly under way.

—as are social sectors The government has not entirely neglected the dire needs of the population, and has earmarked $101m from public and private sources for health projects, $58m of which is allocated to water and sanitation programmes, $147m to education and $49m to civil service training and other measures to boost state capacity.

The DRC is between a rock The Friends of the Democratic Republic of Congo met in Brussels in early and a hard place— December to discuss relief and development assistance, and to appraise the government’s presentation of the ESRP. The meeting, sponsored by the World Bank, was not a pledging conference, as the DRC is not engaged in a fully fledged stabilisation and structural adjustment programme, and was intended to give the government the opportunity to explain its vision of the country’s economic future and gauge donors’ potential support for the new regime. The Bank’s status does not allow it to provide loans to countries—such as the DRC—which have accumulated arrears and do not have a track record of economic reform. This puts the government in a catch-22 situation, and the conference was meant to redress this imbalance by giving the DRC an opportunity to present a draft programme and test whether the rest of the donor community would break the deadlock by releasing bilateral funds. The government presented a more cohesive policy platform than at the Friends of Congo meeting in Paris in September at which there seemed to be little consensus.

It also showed a more mature profile, having abandoned early claims to renege on the $14bn in international debt accumulated under the Mobutu regime. However, the government has not yet resumed debt-service obligations and has discontinued the token monthly payments to the World Bank and the IMF which the Kengo government had managed for a while.

Representatives of 26 governments and international organisations attended the Brussels conference, including South Africa and Uganda which are not donor countries. The World Bank, the IMF, the EU and the African Development Bank (ADB) represented the multilateral aid community, while France, the UK, Germany, the US, Canada, Japan and Belgium were the main bilateral donors present. The foreign minister, Bizima Karaha, the finance minister, Mawapanga Mwana Nanga, and the central bank governor, Jean-Claude Massangu Muilongo, led the 35-person Congolese delegation which presented the ESRP.

—strapped for cash— The Friends of Congo meeting resulted in pledges of $85m from the EU and of $20m from Belgium, less than 10% of the government’s financing requirement for the ESRP. A Trust Fund was also set up to concentrate on social and community- based projects and to allow smaller donors to pool their resources, but no money has yet been pledged. Other initiatives which resulted from the conference included setting up a capacity-building programme under the leadership of the UN Development Programme (UNDP), establishing dialogue between multilateral organisations on the management of the DRC’s external debt and arrears payments, giving the World Bank a co-ordinating role for new aid flows and meeting again in six months to review the government’s progress and donors’ support.

—despite the availability The EU reportedly has $470m available for disbursements to the DRC, $215.5m of donor funds of which consists of prior commitments under the Lomé Convention agreements which were frozen in 1992; however it called for improvements in human rights and democratisation before providing additional assistance. Of the $85m pledged by the EU, $49m was earmarked for health projects in Kivu, Kasai and Kinshasa and the remainder for the rehabilitation of the roads sur- rounding Kinshasa. The $20m pledged by the Belgian government will finance health, education and food-security projects.

Following her meeting with President Kabila in Kinshasa on December 11th, the US secretary of state, Madeleine Albright, also pledged $35m-40m in assistance, subject to the approval of Congress. The package would finance the development of democratic institutions, and the improvement of health and fiscal infrastructure, contributing $10m to the Trust Fund. Aside from the $10m Trust Fund pledge, the rest of the package is only scheduled to be disbursed in 1998/99 (October-September). Congress’s approval of assistance to the Kabila regime is unlikely at the moment, both because of the continued leverage of former Mobutu backers in Washington, and because of Congress’s sensitivity to human rights questions.

Shortly before Mrs Albright’s visit the US president, Bill Clinton, appointed a new ambassador to Kinshasa, William Swing, a career diplomat, hitherto ‘ambassador to Haiti, and formerly ambassador to Nigeria, South Africa, Liberia and Congo (Brazzaville).

But Mr Kabila prevails— In spite of relatively limited and vague pledges of support, the DRC’s official radio hailed the conference as a success. This can be attributed in part to the fact that donor countries did not bring up the refugee issue or the stalled UN investigation. Nonetheless, the demotion of Mawapanga Mwana Nanga from the finance ministry to the agriculture ministry in the January reshuffle suggests that the president was not as pleased with the outcome of the conference as official statements allege.

—and turns his attention Mr Kabila has, however, received pledges of support from non-Western backers. eastwards On a trip to China in mid-December, the president officially secured a “$150m package, $100m of which will be aid or loan and $50m free of charge”, possibly meaning a $50m grant component and the remainder in loans. In October Kuwait provided $9.8m for the rehabilitation of some roads around Kinshasa but the Congolese radio, which announced the deal, did not specify whether it was a loan or a grant. Meanwhile, Egypt provided $148,000 of emergency food aid to Kinshasa in November.

Mr Mobutu’s riches would Meanwhile, the 125 employees of the Office of Ill-Gotten Gains (Office des be helpful biens mal acquis, OBMA) are continuing their search at home and abroad for assets illegally obtained by the former elite. Within the DRC, the OBMA is trying to identify privately appropriated state-owned assets, outstanding bank loans and unpaid taxes. So far, ten businesses worth a total of $200m have been confiscated, approximately 350 houses and apartments in Kinshasa have been seized, and 200 court cases are being prepared. German television also reported in November that six tonnes of “Mobutu gold”, worth $90m, had been hidden in The Gambia by the former president’s son, Kongolo Mobutu. The Gambian government, which has its own problems with embezzlement, denied aware- ness of the reserves.

The first Mobutu crony to be tried for corruption and embezzlement is the former director of Air Zaïre, General Kikunda Ombala, whose televised trial began in December. It was suspended shortly afterwards in order to allow the supreme court to review Mr Ombala’s lawyers’ argument that the court does not have jurisdiction because of Mr Ombala’s military status. The trials of another 32 former dignitaries of the Mobutu regime started in December.

Private investors wait in Private companies were also present in the margins of the Brussels meeting. the wings— High-ranking representatives of Bechtel, Barrick, American Mineral Fields (AMF), Union Minière, Tractebel, Georges Forrest International, Unibra, Belgolaise, Générale de Banque and Banque Bruxelles Lambert attended a dinner with Mr Mawapanga and Mr Massungu on December 4th, organised by the Belgium-African Caribbean Pacific (ACP) chamber of commerce. Bechtel, a US civil engineering firm, delivered a “national master plan” to the government in November which contributed to the government’s programme presented at the conference. Bechtel is also reported to have prepared a 4,000-page report on the country’s mineral resources and infrastructure with detailed maps from satellite photographs. In exchange for these services to the government, observers believe that Bechtel may receive a contract to develop a free-trade zone near Matadi.

—and worry about the Private foreign investors remain concerned about the prevailing arbitrariness government’s practices— with which the government seems to be handling its contractual commitments and new negotiations. The arrest of the Belgian director of the railroad company Sizarail, who will be tried in Kinshasa for embezzlement, has caused widespread concern. Also of concern are the government’s demands that investors make initial cash deposits at the new Banque de commerce et de dévéloppement as a precondition for investment agreements. Rumours in the financial community in Kinshasa suggest that Mr Kabila and some of his ministers have a personal stake in the new bank, which is held by a company called Comiex, the shareholders of which allegedly include two ministers, the brother of the Ugandan president and Rwandan, Angolan and Eritrean interests. The bank’s president, Alfred Kalisa, a US and Rwandan citizen, says he owns 20% of the Bank with the remaining 80% equally split between Congolese and foreign shareholders.

—such as its about-face in The AMF contract to reprocess copper tailings at Kolwezi was signed in April the contract for Kolwezi— 1997 when the AFDL was still en route to Kinshasa, and has since run into serious difficulties. In September the government appeared to be indefinitely delaying the signing of the final agreement—despite positive results from appraisal drillings—owing to its disagreements with Gécamines. This did not prevent AMF from retaining Merrill Lynch in October in order to put together a financial package for its massive investment. In January 1998, however, it was announced that the agreement was cancelled at Gécamines’s behest but with the government’s approval. The government gave several explanations for the reversal, all of which essentially revolve around three issues: that the original agreement was passed in breach of an ongoing tender process; that AMF failed to deliver on some of its commitments in earlier contracts; and that AMF did not yet have the financial capacity to deliver on its commitments. In statements released in the Congolese and Belgian press in early January, Gécamines’s director, Mr Swana, announced that the procedure for the tender on the Kolwezi concentrator tailing project had been cancelled, and that the project being considered with AMF was, in any case, only at the negotiation stage. In these statements, Gécamines also identified difficulties with past projects in which it had been jointly involved with AMF. The rehabilitation of the underground mine and concentrator at Kipushi was awarded to AMF in 1996 under the Mobutu regime. A pre-feasibility study for the project was completed in June 1997 and was not considered adequate by Gécamines, whose criticisms of the study allegedly did not receive a response from AMF. The construction of a treatment plant for old zinc tailings from the Kipushi concentrator and a new zinc refining plant was also reportedly suspended because of AMF’s alleged failure to respond to Gécamines’s criticism of its pre-feasibility study. Gécamines has also accused AMF of having violated proper procedure in an ongoing tender process over copper and cobalt tailings at the Kolwezi concentrator. According to Gécamines, six companies—including AMF and Anglo American—had met the pre-qualification steps in a call for tenders for this project in early February 1997 but none of them had come up with an accept- able final offer by April 1997 at which time Gécamines requested that they “improve their commercial offers”.

—which Gécamines says In an attempt to settle the controversy, Mr Swana issued the following state- was secured under duress— ment: “While these improved commercial offers were being awaited, the town of Lubumbashi fell into the hands of the AFDL. Taking advantage of the situation at that time, AMF managed to get some leaders of the AFDL, who had not yet reached Lubumbashi, to make contact with Gécamines, to sign a document in the town of Goma on April 13th 1997. The document granted AMF all of the projected developments of the Kipushi location and also the Kolwezi concentrator tailings treatment project. It was on the ground of such documents that AMF made statements to the press relating to the conclusion of contracts valued at $1bn. Having noted the irregularities which have sullied AMF’s actions, the authorities, after being contacted by Gécamines, have cancelled all the disputable documents and invited AMF to carry out direct negotiations with Gécamines.”

This reversal suggests that AFDL contracts are not reliable for foreign investors and that nothing short of a presidential decree confirming an agreement is worth securing before starting effective operations on the ground. The AFDL government’s abrogation of a commitment it engaged in itself, at the request of Gécamines, is an index of the mining company’s renewed leverage and the clout of its new director.

—and has been since been Whether Gécamines’s insistence on abrogating the agreement is motivated by awarded to another— its respect for the tender process is another matter altogether. On January 19th the Dow Jones Newswire and the New Congo Network reported that there had been a meeting to discuss the Kolwezi mine between Gécamines and a consortium of mining companies believed to consist of Anglo American, Iscor and Billiton of South Africa, First Quantum Minerals of Canada, Union Minière of Belgium, China National Non-Ferrous Metals Industry Corporation (CNNC) and some Angolan interests. On January 22nd the government announced that a protocol agreement had been signed in Kinshasa on January 14th with the consortium, and Anglo American issued a statement pledging “to join hands with Gécamines” to mine the country’s Kolwezi area. Meanwhile, AMF is suing Anglo American and two of its associate companies, Minorco and De Beers, in the US on the grounds that it interfered in its contract for the Kolwezi project. The US Department of Justice, which has unsuccessfully sued De Beers in the past for its “cartelisation” of the international diamond market, reportedly views the AMF trial as a new opportunity to go after the South African diamond giant.

In a similar vein, Australia’s Rhodes Mining, which had been awarded a gold mining licence in Kivu discovered in September that the Kabila government had promised the same property to a Ugandan coffee planter and had to pay the latter $3m to secure its investment.

—while some investors Several foreign investors continue to do business with the government. Accord- forge ahead ing to Africa Energy and Mining, Interlacs, a company owned by Belgium’s George Forrest International—which is also involved in copper and cobalt mining in Lubumbashi—plans to develop an open-cast coal mine on its site at Makala near Kalemie and to boost its annual output from 28,000 to 120,000 tonnes. Interlacs supplies coal to nearby cement companies and also hopes to increase its sales to

new clients such as Gécamines for which George Forrest is a major supplier. In November the government also signed an agreement with Australia’s Russel Resources International, giving the company a 51% stake in a gold concession alongside the government and the Office des mines d’or de Kilo Moto (OKIMO) in North Kivu. The concession comprises the Mongbwalu deposit north of Bunia which has proven resources of 5.4m tonnes with an average gold grading of 5g/tonne. According to Russel’s projections it can produce for less than $200/oz, well below depressed world prices. Russel will reportedly pay OKIMO an annual $3m for the title to the property and $100,000 per month during the exploration period.

Health

Heavy rains bring about a Unusually heavy rains led to flooding of the Congo river in December and cholera outbreak in to the beginning of an epidemic of cholera. 30 children died of cholera in Kisangani Kisangani in December alone, according to UNICEF, and some 740 individuals were hospitalised. By January the death toll had reached more than 200. The children were following a military training and re-education programme in a city-based army camp which contains about 4,000 children, aged 8 to 18, all of whom apparently are former Mai-Mai rebels. They are believed to have drunk water contaminated by flooding. Médecins sans frontières, an international non-governmental organisation, reported that the conditions in the camp were generally very poor, with some children starving, others lying on the floor in coma-like states and many struck by dysentery and cholera. The flooding destroyed 1,496 dwellings in Kisangani and almost 8,000 people were left homeless.

EIU Country Report 1st quarter 1998 © The Economist Intelligence Unit Limited 1998 Quarterly indicators and trade data 39

Quarterly indicators and trade data

Zambia: quarterly indicators of economic activity

1995 1996 1997 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr Production: mining Qtrly totals Copper in concentrates ’000 tonnes 85.6 86.2 86.0 88.3 93.6 96.2 79.1 85.6 81.7 56.6a Prices Monthly av Consumer prices: 1990=100 3,099 3,594 4,007 4,343 4,566 4,847 5,465 5,520 5,555b n/a change year on year % 30.5 45.7 42.7 49.1 47.3 34.9 36.4 27.1 n/a n/a Copper: LME, $ cents/lb 136.5 131.7 116.6 112.4 89.8 97.4 109.7 113.6 102.9 86.7 Money End-Qtr M1, seasonally adj: ZK bn 210.0 207.1 226.6 271.2 281.0 247.3 286.9 323.3 348.6 362.3c change year on year % 148.8 61.0 47.5 37.9 33.8 19.4 26.6 19.2 24.1 n/a Foreign traded Annual totals Exports fob $ m ( 986 ) ( 1,000 ) ( n/a ) Imports fob “ ( 782 ) ( 885 ) ( n/a ) Exchange reserves End-Qtr Bank of Zambia: foreign exchange $ m n/a 121.3 85.1 118.6 122.4 161.4 144.2 169.8e n/a n/a Commercial bank assets “ 107.2 116.5 140.6 207.2 146.8 148.7 136.5 153.8 138.6 153.8c Exchange rate Official rate ZK:$ 934.6 1,000.0 1,219.5 1,234.6 1,265.8 1,282.1 1,282.1 1,320.1 1,336.2 1,346.5c

Note. Annual figures of most of the series shown above will be found in the Country Profile. a Total for October-November. b July only. c End-October. d DOTS estimates. e End-May.

Sources: World Bureau of Metal Statistics, World Metal Statistics; IMF, International Financial Statistics; Direction of Trade Statistics, yearly.

EIU Country Report 1st quarter 1998 © The Economist Intelligence Unit Limited 1998 40 Quarterly indicators and trade data

DRC: quarterly indicators of economic activity

1995 1996 1997 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr Mining: production Annual totals Copper in concentrates ’000 tonnes ( 30.0 ) ( 42.2 ) ( 38.7a ) Zinc “ ( 0.8 ) ( 1.2 ) ( 1.1a ) Agriculture: production Annual totals Coffee ’000 tonnes ( 76b ) ( 76b ) ( n/a ) Prices Monthly av Consumer prices, Kinshasa: 1990=0.01 207,130 297,532 553,198 988,974 1,547,596 2,405,814 4,312,738 6,793,407 7,027,163 n/a change year on year % 1,664 549 362 511 647 709 680 587 354 n/a Wholesale prices: coffee: US US cents/lb 139.0 122.9 107.2 94.7 90.0 77.8 68.9 75.2 88.7 79.0c copper: LME, $ “ 130.9 136.5 131.7 116.6 112.4 89.8 97.4 109.7 113.6 102.9d Money End-Qtr M1, seasonally adj: NZ bn 688 1,217 1,809 2,590 4,147 n/a n/a n/a n/a n/a change year on year % 856 524 408 511 503 n/a n/a n/a n/a n/a Foreign trade Qtrly totals Exports fob $ m 105 90 111 158 153 168 113 n/a n/a n/a Imports cif “ 113 73 106 99 121 102 102 n/a n/a n/a Exchange holdings End-Qtr Bank of Zaire: golde $ m 8.1 8.1 8.1 6.6 6.4 6.3f n/a n/a n/a n/a foreign exchange “ 148.0 145.1 146.6 55.8 63.3 71.2 82.5 n/a n/a n/a Deposit money banks: assets ” 80.2 81.8 69.2 72.8 71.4 87.9 n/a n/a n/a n/a Exchange rate Market rate NZ:$ 5,550 9,200 14,831 27,404 38,962 66,610 112,652g 171,450g 137,500g 137,500gh

Note. Annual figures of most of the series shown above will be found in the Country Profile. a Estimate for January-November. b Estimate. c Average for 4 Qtr, 79.9. d Average for 4 Qtr, 86.7. e End-quarter holdings at quarter’s average of London daily price less 25%. f End-July. g Source: FT. h End-4 Qtr, 137,500.

Sources: World Bureau of Metal Statistics, World Metal Statistics; FAO, Quarterly Bulletin of Statistics; IMF, International Financial Statistics; FT.

EIU Country Report 1st quarter 1998 © The Economist Intelligence Unit Limited 1998 Quarterly indicators and trade data 41

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 1st quarter 1998 © The Economist Intelligence Unit Limited 1998 42 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 1989 1990 1991 1992 1993 1994 1995 1996a Imports fob South Africa 271 206 165 224 315 157 259 303 Saudi Arabia 5 4 83 47 53 1 97 107 UK 259 197 149 98 75 73 72 81 Zimbabwe 7557445547525767 US 68 124 57 72 20 11 29 46 Germanyb 187 142 34 31 33 21 19 43 India 30 23 35 24 9 19 19 23 Japan 107 81 76 38 30 28 45 19 France 16 12 7 15 10 8 12 15 Total incl others 1,275 1,207 811 837 716 455 782 885 Exports fob Japan 222 168 204 152 105 105 158 175 Thailand n/a 37 34 39 54 72 100 122 Saudi Arabia 3829298369838392 Taiwan n/a n/a n/a 8 9 2 12 73 India 44 33 122 21 45 56 62 71 Belgium-Luxembourg 48 31 140 45 66 47 67 61 US 14 9 24 5 3 5 93 59 Zimbabwe 2216442321222935 DRC 10 8 3 5 10 33 27 32 Total incl others 663 544 1,076 752 891 758 986 1,000 a DOTS estimates. b Includes former East Germany from July 1990.

Source: IMF, Direction of Trade Statistics, yearbook.

Zambia: refined copper exports (tonnes) Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Nov 1991 1992 1993 1994 1995 1996 1997 Thailand 28,946 37,361 49,030 62,637 40,933 46,904 45,864 US 0 0 760 2,000 27,779 8,958 37,139 Malaysia 21,036 33,324 30,230 31,369 21,092 28,594 31,388 Japan 125,939 94,857 85,334 55,445 52,647 50,111 26,313 France 49,176 52,612 49,990 18,896 11,243 10,696 23,687 India 14,280 19,149 21,186 20,209 22,872 24,946 13,154 Belgium 31,120 26,156 49,167 29,939 22,500 17,071 11,411 China 0 5,000 0 0 0 0 3,997 Indonesia 9,078 5,040 3,499 5,146 7,676 2,793 1,097 Italy 10,989 15,850 5,041 3,024 2,098 400 1,000 UK 5,750 0 0 3,999 0 0 200 Greece 7,686 7,876 6,871 3,524 374 2,936 0 Germany 0 500 0 0 0 1,667 0 South Korea 0 0 0 4,096 800 410 0 Total incl others 382,326 411,892 436,522 360,657 291,869 276,079 281,442 Source: World Bureau of Metal Statistics, World Metal Statistics.

EIU Country Report 1st quarter 1998 © The Economist Intelligence Unit Limited 1998 Quarterly indicators and trade data 43

Zambia: UK trade (£ ’000) Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Oct Jan-Oct 1993 1994 1995 1996 1996 1997 UK exports fob Food, drink & tobacco 883 448 554 677 555 646 Chemicals 8,913 4,972 3,880 3,256 2,876 7,264 Rubber manufactures 201 163 80 103 86 221 Paper & manufactures 448 357 156 338 289 223 Textile yarn, cloth & manufactures 257 329 780 221 181 494 Non-metallic mineral manfactures 1,687 624 1,361 885 577 320 Iron & steel 818 390 299 456 343 199 Metal manufactures 2,582 499 466 734 709 1,039 Machinery incl electric 39,487 21,794 23,680 29,877 23,593 18,936 Transport equipment 7,076 4,533 5,465 5,118 4,648 2,920 Clothing & footwear 466 1,620 1,174 1,573 1,259 400 Scientific instruments etc 4,502 3,234 6,687 2,137 1,889 2,161 Total incl others 73,548 44,523 49,819 51,544 41,431 38,829 UK imports cif Fruit & vegetables 1,300 1,167 1,824 3,681 3,186 4,327 Sugar & preparations n/a n/a 20 79 79 11,918 Textile yarn, cloth & manufactures 3,143 3,767 7,459 6,410 5,508 5,872 Non-ferrous metals 6,406 6,737 8,425 4,927 4,369 4,177 Machinery & transport equipment 451 308 350 220 184 951 Total incl others 12,056 13,038 19,460 17,726 15,352 29,531 Source: UK HM Customs & Excise, Business Monitor, MM20.

Zambia: Japanese trade (¥ m) Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Aug Jan-Aug Japanese imports cif 1993 1994 1995 1996 1996 1997 Copper cathodes 20,668 11,455 15,764 13,938 10,131 7,440 Total incl others 23,562 17,896 20,261 20,871 14,273 12,301 Source: Japan Tariff Association, Japan Exports & Imports.

EIU Country Report 1st quarter 1998 © The Economist Intelligence Unit Limited 1998 44 Quarterly indicators and trade data

DRC: trade with major partnersa ($ ’000; monthly averages) Belg-Lux USb Germany France UK Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Oct Jan-Oct 1995 1996 1995 1996 1995 1996 1995 1996 1996 1997 Exports to DRC fob Food, drink & tobacco 2,739 2,632 2,567 1,987 288 276 1,396 1,922 181 178 Mineral fuels 75 153 14 15 25 5 162 157 119 8 Chemicals 1,943 1,831 193 273 578 425 520 556 458 360 Rubber manufactures 166 134 2 6 78 70 17 12 22 18 Textile yarn, cloth & mnfrs 1,036 827 126 152 36 18 42 16 9 52 Non-metallic mineral mnfrs 406 1,295 31 2 49 35 77 36 14 1 Base metals 323 263 315 109 172 363 60 66 66 7 Metal manufactures 366 362 36 53 138 109 56 30 31 51 Machinery incl electric 3,794 3,513 1,506 2,039 805 896 797 643 268 482 Transport equipment 2,778 3,126 88 143 1,203 857 279 186 319 552 Clothing, footwear & handbags 343 319 116 76 6 8 92 119 28 7 Scientific instruments etc 347 535 64 67 41 26 68 97 8 17 Total incl others 15,915 17,005 6,401 6,102 5,770 5,177 4,014 4,238 2,242 2,100 Imports from DRC cif Coffee, cocoa, tea & spices 589 423 108 0 1,336 778 2,293 1,416 73 71 Animal feeding stuffs 0 0 188 275 0 0 0 0 0 0 Crude rubber 0 0 0 23 175 151 5 4 153 74 Wood & cork 234 438 21 65 748 472 612 473 807 261 Crude minerals & fertilisers 0 1 562 518 75 22 1 1 1 0 Metal ores & scrap 24 3 238 26 109 73 0 0 22 2 Petroleum & products 0 0 11,354 10,947 0 2,167 0 0 0 0 Chemicals 2 27 119 7 72 8 5 92 0 0 Non-metallic mineral mnfrs 54,962 54,611 6,885 7,246 11 7 0 1 565 0 Non-ferrous metalsc 891 2,275 3,049 2,171 1,647 920 359 213 119 200 Machinery & transport eqpt 29 13 1 2 30 11 0 0 32 9 Total incl others 57,658 58,272 22,787 21,642 5,431 5,700 3,490 2,375 1,981 731 a Figures from partners’ trade accounts. b US exports to the DRC averaged $6.7m and $3.3m per month for the periods January-October 1996 and 1997. US imports from the DRC averaged $21.8m and $25.1m per month for the periods January-October 1996 and 1997. c Mainly copper and zinc.

Sources: UN, External Trade Statistics, series D; UK HM Customs & Excise, Business Monitor, MM20.