Zambia Zaire

COUNTRY REPORT

1st quarter 1996

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Summary

Zambia, Zaire 1st quarter 1996

February 9, 1996

Zambia Political and economic structures Pages 2-3

Outlook: The agreement with the IMF and the weakness of the opposition give the government good reason to expect victory in October’s elections. Donor relations are on a solid footing and economic performance will improve even if ESAF targets are not met. Real GDP growth is likely to be around 3.8% in 1996. Pages 4-6

Review: Problems have arisen over the adoption of the draft constitution. Frederick Chiluba has been re-elected as the MMD’s leader. The voter registration exercise has had an inauspicious beginning. The former president, Kenneth Kaunda, has expressed his determination to contest the presidential elections. The Rights Accumulation Programme (RAP) has been formally succeeded by an ESAF agreement with the IMF. Donors have followed this up with significant aid pledges for 1996. The finance minister, Ronald Penza, has presented a balanced budget for this year but problems have arisen over a pay award for civil servants. There have been warnings over food supply, despite the return of normal rains. Talks have begun with Anglo American Corporation over the Konkola Deep project. Production and profitability have fallen at ZCCM. SADC has debated the vexed issue of regional tariff levels. Pages 6-16

Zaire Political and economic structures Pages 17-18

Outlook: The president, Mobutu Sese Seko, is back in charge, although beyond his Gbadolite headquarters the country will remain in chaos. The economy’s halting recovery remains extremely tentative. Pages 19-20

Review: Mr Mobutu is the only national figure to call for rapid elections, but polls have indicated that he would lose to the former prime minister, Etienne Tshisekedi, at least in Kinshasa. Members of the HCR-PT have awarded themselves a monthly $1,000 stipend. University professors have gone on strike. The government has dropped its December 31 ultimatum for the departure of Rwandan refugees but has maintained pressure for their return. Inflation has rebounded. The exchange rate has deteriorated rapidly after several months of stability. The 1996 budget was announced on time and is set to balance although it is based on some unrealistic assumptions. A cargo plane has crashed in a crowded market, killing more than 250 people and confirming one of the worst air safety records in the world. Pages 20-26

Statistical appendices Pages 27-33

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EIU Country Report 1st quarter 1996 © The Economist Intelligence Unit Limited 1996 2 Zambia

Political structure: Zambia

Official name: Republic of Zambia

Form of state: unitary republic

Legal system: based on the 1973 constitution as amended in 1991

National legislature: National Assembly; 150 members elected by universal suffrage; all serve a five-year term

Last elections: October 1991 (presidential and legislative)

Next elections: October 1996 (presidential and legislative)

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 July 1995)

Main political parties: the Movement for Multiparty Democracy (MMD) is the ruling party. The former sole political party, the United National Independence Party (UNIP), is now in opposition. The other party with seats in parliament is the National Party (NP). Other parties (31 in all) include the Labour Party and the National Conservative Party (NCP)

President Frederick Chiluba Vice-president Godfrey Miyanda

Key ministers agriculture, food & fisheries Suresh Desai commerce, trade & industry Dipak Patel community development & social welfare Paul Kaping’a defence Ben Mwila education Alfeyo Hambayi energy & water Edith Nawakwi environment William Harrington finance Ronald Penza foreign affairs Christen Tembo health Michael Sata home affairs Chitalu Sampa information & broadcasting, government spokesman Amusa Mwanamwambwa labour & social security Newstead Zimba lands Luminzu Shimaponda legal affairs Remmy Mushota local government & housing Bennie Mwiinga mines & mineral development Keli Walubita science, technology & vocational training Kabunda Kayongo tourism Gabriel Maka transport & communications Dawson Lupunga works & supply Simon Zukas youth, sports & child development Patrick Kafumokache

Governor of Bank of Zambia Jacob Mwanza

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Economic structure: Zambia

Latest available figures

Economic indicators 1991 1992 1993 1994a 1995a GDP at market prices ZK m 218,276 469,564 1,640,748 2,318,287b n/a Real GDP growth % –0.4 –0.6 5.1 –5.4b –3.7 Consumer price inflationc % 92.6 197.4 189.0 55.0 30.0 Population m 8.39 8.64 8.94 9.25 n/a Exports fob $ m 1,172 1,177 1,013 1,075 1,150 Imports fob $ m 752 829 803 845 900 Current account $ m –307 –288 –258 –200 –90 Reserves excl gold $ m 184.6 150.0 192.3 297.0 n/a Total external debt $ bn 7.29 6.94 6.79 6.89 7.00 External debt-service ratio % 51.1 29.5 32.8 31.0 25.0 Copper outputd ’000 tons 387 432 392 350 330 Exchange rate (av) ZK:$ 64.64 172.21 452.76 669.37 910.00

February 9, 1996 ZK1,010:$1

Origins of gross domestic product 1994b % of total Components of gross domestic product 1994b % of total Agriculture 32 Private consumption 97 Mining 6 Government consumption 10 Manufacturing 22 Gross fixed capital formation 11 Construction 5 Change in stocks –1 Commerce 22 Exports of goods & services 24 Government & other services 13 Imports of goods & services –41 GDP at market prices 100 GDP at market prices 100

Principal exports 1993 $ m Principal imports 1993 $ m Copper 830 Crude oil 144 Cobalt 74 Fertiliser 30 Zinc 3 Electricity 1

Main destinations of exports 1994e % of total Main origins of imports 1994e % of total Japan 14 South Africa 35 Saudi Arabia 11 UK 16 Thailand 10 Zimbabwe 11 Pakistan 8 New Zealand 6 a EIU estimates. b Provisional. c Low-income index, urban areas. d ZCCM financial years starting April 1. e Based on partners’ trade returns, subject to a wide margin of error.

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Zambia

Outlook

Mr Chiluba and the MMD The president, Frederick Chiluba, began 1996 with reason to be confident about look forward to 1996— his prospects in the presidential election scheduled for October. Mr Chiluba was comfortably re-elected as leader of the ruling Movement for Multiparty Democracy (MMD) and the party has had some success in its attempt to present a more united front.

—confident that donor The government has also won a significant economic victory with the formal relations are on a solid conclusion in early December of the Rights Accumulation Programme (RAP) footing— and the agreement of an Enhanced Structural Adjustment Facility (ESAF) with the IMF. Access to new IMF funding over the next three years will be useful but just as important was the praise which came from the Fund for the government’s economic policy. As long as such approval continues donor support can be assured. This was confirmed at the World Bank-sponsored Consultative Group Meeting, at which donors pledged continued financial support for the country’s economic reform programme. Donor perceptions of the government’s economic policy intentions were reinforced by the growth-oriented budget presented by the finance minister, Ronald Penza, in late January.

—and despite likely Despite these political and economic gains, the government will have to con- pressure over governance tend with growing hostility from domestic opposition parties, the Church and issues other civil groups. In particular, there will be strong criticism on issues relating to this year’s elections, specifically the updating of the voters’ register and the adoption of the draft constitution. If the government insists that the draft constitution be adopted through the current MMD-dominated National Assembly (parliament), and not by a constituent assembly and national referendum, it risks heightened political unrest and a possible deterioration in relations with donors. A compromise is likely, with the MMD agreeing to drop controversial clauses from the constitution or with the elections being held under the 1991 constitution. In the face of continued legal challenges to the government’s chosen method of introducing the constitution the only alternative may be to postpone the elections, hardly likely to win the government praise from donors on governance issues.

MMD election victory The MMD is unlikely to meet any serious challenge from the domestic political remains likely opposition. The United National Independence Party (UNIP), the main opposition group, led by the former president, Kenneth Kaunda, the National Party (NP) and the Zambia Democratic Congress (ZDC) may increase their numbers

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in parliament from the present 25 seats (out of 150) held between them. However, it is extremely unlikely that they will erode the MMD’s position sufficiently to threaten its hold on power. UNIP retains too much in the way of connections with a more autocratic past, while the smaller opposition parties are too small and too new to attract widespread support.

Forecast summary (domestic) (% change) 1994a 1995b 1996c 1997c Real GDP –5.4 –3.7 3.8 3.4 of which: agriculture –19.8 –10.0 15.0 5.0 mining –12.7 –4.0 2.0 4.5 manufacturing –12.0 –3.0 1.5 1.5 Consumer prices (av) 55 30 15 10

a Provisional. b EIU estimates. c EIU forecasts.

Economic targets will be The government will have difficulty meeting the economic targets laid out tough to meet under the ESAF agreement although those that are missed will not be so by a sufficient margin to endanger relations with the IMF. Against a target of 6%, real GDP growth is likely to reach around 3.8% in 1996 followed by an expan- sion of 3.4% in 1997. Consumer price inflation is also likely to fall more slowly than targeted under the ESAF, reaching an average of 10% in 1997 rather than this year as set out under the ESAF. Aid inflows will underpin a recovery in the current-account balance in 1996, although the deficit may begin widening again in 1997.

Other crucial structural reforms, in particular the privatisation of Zambia Con- solidated Copper Mines (ZCCM) and the reduction of the bloated civil service, are unlikely to be achieved in this election year, given their obvious political implications. Donors will not relax the pressure to push these changes through but, again, failure to get them through before the end of 1996 will probably not be sufficient to cause a rift in relations with the government.

Forecast summary (external) ($ m unless otherwise indicated) 1994a 1995a 1996b 1997b Merchandise exports fob 1,075 1,150 1,100 1,150 of which: copper 880 900 890 820 Merchandise imports fob845 900 880 900 Current-account balance –258 –200 –90 –150 Average exchange rate (ZK:$) 669c 910 1,150 1,250

a EIU estimates. b EIU forecasts. c Actual.

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Gross domestic product Zambian kwacha: real exchange rate (d) % real change on previous year 1990=100 6 110

4 100

(a) 90 0 ZK:$ -2 Zambia 80 Africa ZK:DM -4 70

-6 ZK:¥ 1993 94 95(b) 96(c) 97(c) 60 (a) Not available. (b) Estimates. (c) Forecasts. (d) Nominal exchange rates adjusted for changes in relative consumer prices. Sources: EIU; IMF, International Financial Statistics; World 1990 91 92 93 94 95(b) 96(c) 97(c) Economic Outlook.

Review

The political scene

The LAZ and the Church The Law Association of Zambia (LAZ) held an extraordinary meeting on oppose the draft December 3 to discuss the proposed method for the adoption of the draft constitution— constitution. The government had earlier rejected a suggestion from the Constitutional Review Commission (CRC) that a special assembly be formed to consider the new constitution and that the matter then be put to a referendum (4th quarter 1995, page 7). A statement after the meeting said that the LAZ did not agree with the government’s proposed timetable for the adoption of the new constitution, which the ruling Movement for Multiparty Democracy (MMD) hopes to rush through before the legislative and presidential elections in October this year. The LAZ warned that the issue would have to be put before the courts for a ruling. The organisation also said that the adoption of the constitution should be deferred until after the 1996 elections.

Church representatives immediately followed this with a statement signed by the chairman of the Christian Council of Zambia, urging the government to take longer to adopt the new constitution. The Church statement pointed out that if the new constitution is rushed through it will soon need amending or replacing.

—but the president is The president, Frederick Chiluba, continues to insist that his government will determined to see it not climb down over the issue of the adoption of the constitution. In response through— to the LAZ and the Church he reiterated his opposition to the recommendations of the CRC, saying that the new constitution would be debated and adopted in parliament this year.

—although the Supreme In a marked display of judicial independence on January 11, Lusaka’s Supreme Court lays a new obstacle Court ordered a review of the Public Order Act. A statement from the court said in his path that permits should not be required for public meetings or demonstrations as they contravened freedom of expression and assembly as guaranteed under the

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present (interim) constitution. In an attempt to clarify the situation, the in- spector general of police, Francis Ndhlovu, said that those wanting to hold public meetings were required to “consult” the police. In September the government rejected a recommendation that the Public Order Act be removed.

The MMD re-elects The MMD held its third national convention in December in order to elect a Mr Chiluba as its leader— party president and the policy-making National Executive Committee (NEC). After four years of internal squabbling, centred mainly on allegations of corruption, the party was determined to build a united image in advance of October’s legislative and presidential elections. Mr Chiluba was re-elected as the party’s president, winning 1,087 votes compared with the 69 polled by his opponent, Levy Mwanawasa. Mr Mwanawasa resigned his government post of vice- president in mid-1994, citing marginalisation and corruption within the party as the reason (3rd quarter 1994, page 6). The MMD convention also voted to nominate Mr Chiluba as the party’s presidential candidate in the October elections and elected the country’s vice-president, Godfrey Miyanda, to the same post within the party.

—but there are reminders Mr Mwanawasa was booed by the majority of the 2,000 delegates at the con- of old divisions in the vention as he delivered his manifesto speech. In his address he said that the party party lacked a strategy for maintaining the popularity which secured victory in 1991. He also warned that the government lacked the capacity to implement the party’s policies, saying that the people who have been entrusted with the responsibility of implementing policy are incapable of doing so and must be removed. He made it clear that he included Mr Chiluba in this group.

Also prominent among those who lost the race for positions in the NEC was the former foreign affairs minister, Vernon Mwaanga, who resigned from the government in January 1994.

The voter registration The first phase of the exercise to update the register of voters (4th quarter 1995, exercise gets off to a slow page 8) began on December 12, leaving less than 11 months to complete the start project before the October elections. By the end of January the MMD and the government’s Elections Office were forced to agree with opposition claims that apathy towards the registration exercise was widespread. All sides concluded that the exercise would take longer than the planned three months and that more publicity was needed. The director of the Elections Office, Rabson Mwansa, said that the government had released ZK55m ($55,000) for this pur- pose, to be targeted mainly at rural areas. By mid-January only negligible numbers were reported to have registered as new voters throughout the country.

Opposition leaders unite In early January opposition party leaders formed an alliance in which they said against Mr Chiluba that they would work together on issues of national importance. The group declared its intention to “remove this insensitive and arrogant Chiluba government”. The leaders came from eight opposition political parties and included the former president, Kenneth Kaunda, who re-entered mainstream politics in 1994 at the helm of the former ruling party, the United National Independence Party (UNIP). Also among those forming the new alliance were Roger Chongwe and Akashambatwa Lewanika, both of whom resigned from the MMD alleging corruption in its senior ranks. The group threatened to boycott the elections set

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for October this year unless the controversial draft constitution was approved through a constituent assembly rather than in the National Assembly (parliament) as the government insists (see above).

Mr Kaunda insists on In a separate statement Mr Kaunda mocked the MMD, saying that the party’s contesting the 1996 leaders “will be waiting to hear the election results on the borders because they presidential election— know the crimes they have committed”. He said that UNIP would block the adoption of the draft constitution in its current form and referred to clauses in the document which would disqualify him from contesting the presidential election on the basis of his citizenship. He said that, as he was born a Zambian, nobody could stop him from standing for president. He also said that UNIP will not allow the government to pass the constitution without the broad-based representation which would come from a constituent assembly.

—and he makes threats Mr Kaunda has also demanded the setting up of an independent electoral over changes he sees as commission, saying that the government planned to rig the elections. His necessary— further insistence that this year’s elections be held under the 1991 constitution was coupled with the threat that otherwise “UNIP will eliminate all possible cooperation with the MMD”. Ominously, Mr Kaunda asked how violence could be avoided when Mr Chiluba and the MMD planned to disrupt the stability which Zambia has enjoyed since independence.

—forcing the president to Mr Chiluba’s response was to warn opposition groups that his government warn against violence would deal harshly with the perpetrators of violence during the electoral campaign period. He said that those who sought to impose their will by violent means would be disappointed, as the government intends to meet its oblig- ation to safeguard life and property.

The private press pursues The argument over the citizenship of Mr Chiluba has persisted, with articles in the issue of the president’s the privately owned Post newspaper continuing to allege that he was born in citizenship Zaire. Mr Chiluba has already filed charges against the newspaper over articles carried last year alleging that he had an extramarital affair. The president has warned the Post over its behaviour. He said that his first warning was a friendly one but that he will “not remain toothless for too long”.

The economy

The RAP is succeeded by On December 4 the government and the IMF finally announced the formal an ESAF agreement— conclusion of the four-year Rights Accumulation Programme (RAP) and its replacement with an Enhanced Structural Adjustment Facility (ESAF). IMF concerns over the government’s fiscal discipline had led to a postponement of this announcement from March (4th quarter 1995, page 10). From 1987 arrears on debt-service payments to the IMF meant that, under its rules, Zambia was ineligible for new funds from the Fund until the arrears were cleared. To get around this problem, at the same time as the ESAF was agreed a group of bilateral donors cleared the way for a bridging loan to Zambia of $1.2bn. This was used to clear all arrears to the Fund, which was then free to announce $1.4bn in funding under a three-year ESAF. The bridging loan is to be repaid out of these funds.

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—accompanied by praise The IMF praised the Zambian government’s performance on economic policy, for Zambia’s adjustment saying that it had made great strides in some areas of structural reform under efforts the RAP. These included, according to the Fund, the freeing up of external trade and the elimination of much government intervention in the economy. The government’s economic policy efforts so far were described as having laid the basis for solid economic growth.

Policy objectives under As part of the ESAF the government and the IMF have agreed a series of broad the ESAF— economic targets to be achieved over the three years to December 1998. Macro- economic stabilisation is to strengthened, structural reforms achieved so far are to be consolidated, the economy is to grow in real terms, inflation is to be substantially reduced and international reserves are to be built up. The liberal- isation of the economy is also to be completed, specifically by:

• tax reform aimed at reducing reliance on trade taxation;

• capping the civil service wage bill in real terms;

• continuation of the privatisation programme; and

• allowing the exchange rate to continue floating freely.

—include some tough The real GDP growth target for 1996 set under the ESAF is an ambitious 6%. targets The level of rainfall at the end of 1995 confirmed that there is unlikely to be another drought this year but the government will have to stage-manage a very impressive recovery in agriculture if this rate of GDP growth is to be achieved. The IMF estimates that consumer price inflation averaged 35% in 1995, and the target set under the ESAF is for a reduction to 10% over 1996. This will require the continuation of strict fiscal control by the government, which is also vital to the achievement of the target 1% budget surplus set for 1996. It was agreed that the current-account deficit be narrowed to the equivalent of 6.4% of GDP in 1996, compared with 7.9% in 1995, a target which depends to a large extent on international copper prices which are beyond the government’s control. Among structural reforms agreed with the Fund are the strengthening of the supervisory capacity of the Bank of Zambia (BoZ, the central bank), the privatisation of the state-owned copper mining giant, Zambia Consolidated Copper Mines (ZCCM), and a 2% reduction in the number of civil servants.

Success with IMF yields The new deal with the IMF quickly yielded positive results with other donors. donor support— On December 13-15 the World Bank organised a Consultative Group Meeting between the government and Zambia’s bilateral and multilateral donors. The meeting was held in Bournemouth in the UK, having been hastily moved from Paris due to industrial action in France. Donors echoed the need for sustained macrostability but they also expressed concern over the worsening social conditions in Zambia.

The World Bank estimated Zambia’s gross financial requirements for 1996 to be $750m. This included a substantial allowance for debt-service payments. The World Bank stated that the figure would be smaller if the Paris Club group of Zambia’s bilateral official creditors, expected to meet before the end of February, granted a debt rescheduling. In response donors pledged balance-of-payments support for 1996 of around $300m, as well as a similar amount in project and

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commodity support. All of the pledges were conditional on the government maintaining the momentum of the economic reform programme and achieving tangible progress on several issues of governance. On this last subject, donors made specific reference to an increase in transparency in government as well as stating the importance of the holding of elections judged to be free and fair later this year.

—although donors insist Donors acknowledged the government’s achievements to date under the on the privatisation of privatisation programme but they pressed for the privatisation of ZCCM, say- ZCCM ing that the sale of the copper mining company should be advanced as rapidly as possible. It was noted that two years have passed since studies began on the options for privatising ZCCM (3rd quarter 1994, page 17).

The finance minister The finance minister, Ronald Penza, presented his 1996 budget on January 26. presents the 1996 budget Mr Penza first indicated the failures of 1995, pointing out that real GDP is estimated by the government to have contracted by 3.8% last year and that government expenditure overshot budgeted levels by some ZK110bn ($110m). As a result the EIU has changed its estimate of the charge in real GDP in 1995 to a contraction of 3.7% on the basis that the finance minister was painting a slightly bleaker picture than will turn out to be the case. Mr Penza went on to outline a balanced budget for 1996, set at ZK1.16trn. This represents a 38% increase on the budget set for 1995, a very small increase in real terms.

The finance minister’s policy objectives for 1996 are very much in the spirit of the agreement with the IMF. They include:

• achievement of macroeconomic stability by careful policy management;

• improvement of productivity throughout the economy;

• direction of more resources into the social sector;

• privatisation of ZCCM; and

• enhancement of the performance of the BoZ, the Zambia Revenue Authority (ZRA) and the Ministry of Finance.

1996 budget (ZK bn) Expenditure Personal emoluments 160.1 Recurrent departmental charges 149.7 Grants & other transfers 110.4 Defence & security 45.0 Capital expenditure 381.1 Domestic interest payments 107.0 External interest payments 112.0 Total incl others 1,161.6 continued

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(ZK bn) Revenue Company tax 55.6 Income tax 178.6 Trade taxes 177.2 Excise duties 128.7 Domestic value added tax 103.0 Non-tax revenue 75.7 of which: privatisation receipts 23.1 fees & fines 37.2 External assistance 421.6 of which: project support 309.6 non-project support 112.0 Total incl others 1,161.6 Source: Ministry of Finance.

Measures to promote tax The revenue measures introduced are explicitly intended to enforce tax compli- compliance and protect ance and result in easier administration. More importantly, tax rate cuts and domestic markets the addressing of some current iniquitous arrangements are designed to moti- vate the private sector. Mr Penza announced several changes to duty levels and these were to take place immediately. They included:

• extension of the duty-free status for raw materials coming into the country, which is a follow-up on the break given to manufacturers in the 1995 budget (2nd quarter 1995, page 9);

• removal of the 20% import duty on agriculture and mining machinery;

• reduction of import duty on other raw materials and productive machinery from 20% to 5%;

• reduced duty on intermediate goods from 20% to 15% and duty on final products from 40% to 25%; and

• changes in duty allowances so that imports by the government and most currently exempt organisations would henceforth attract duty, although some exempt organisations (such embassies and churches) may claim refunds on certain goods.

Income tax allowances are There was good news for wage earners with the announcement in the budget increased that annual income up to ZK600,000 ($6,000) is exempt from income tax, a 50% increase on the allowance in 1995. However, it was also announced that cash benefits, apart from those related to medical and funeral benefits, are liable to taxation. Some disappointment was expressed by the Civil Servants’ Union of Zambia which in a statement after the budget said that the annual earning exemption should have been raised to ZK1.5m.

Zambian economists The 1996 budget was generally welcomed. The Economic Association of welcome the budget— Zambia (EAZ) issued a statement expressing its happiness with it. The EAZ expressed confidence that the measures outlined would promote growth and that the duty reductions for the agriculture and mining sectors were a step in the right direction.

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—but the industrial court The finance minister’s good work with the 1996 budget was thrown into doubt rules for higher civil on February 1 when the Lusaka Industrial Court ruled that civil servants should servants wages— be awarded a 45% wage increase. The ruling followed an application made by the Civil Servants Union of Zambia after deadlock was reached in negotiations with the government. Mr Penza had agreed to a 30% wage increase (2nd quarter 1995, page 13).

—and Mr Penza threatens An incensed Mr Penza described the court’s ruling as “irresponsible”, saying that to resign over the issue the government does not have the money to increase civil service pay by more than 30%. He pointed out that if a higher wage increase was to be met it would mean printing money, something he was not prepared to contemplate. He said “[I] would rather resign than see this country go back into its past economic malaise.” The Industrial Court later issued a summons for the finance minister to appear on contempt charges for failing to abide by its decision.

Progress is reported on During the budget presentation, the finance minister recorded impressive pro- the privatisation gress in the privatisation programme. A total of 102 companies have been programme privatised under the programme, which began in 1992 with the aim of selling off or otherwise reducing the government stake in over 200 companies. Total receipts from privatisation in 1995 were ZK27.5bn ($28m), of which ZK12.5bn went towards redundancy payments and the operating costs of the Zambia Privatisation Agency (ZPA). A further ZK12.9bn has been allocated to improving the capital base of some of the companies still to be privatised.

Barotseland chiefs reject Traditional rulers in Western Province said on November 6 that they were the new Land Act “divorcing” themselves from the president and ruling party as a protest against the adoption of the 1995 Land Act (4th quarter 1995, page 12). The act took away traditional rulers’ powers of control over land in their areas where indi- vidual title deeds can be obtained. They were also irked by the government’s failure to recognise the Barotseland Agreement which was entered into with British colonial rulers and under which they were guaranteed the right to an independent legal system and control over natural resources on their land (2nd quarter 1994, page 10). The agreement has been watered down through a series of legislative amendments since independence in 1964. The traditional rulers said that they would give directives to their people to vote against the MMD in the October elections.

TAZARA plans massive The Tanzania-Zambia Railway Authority (TAZARA) has announced that it in- retrenchment tends to lay off 2,000 of its 6,750 workforce in 1996 to improve its financial position. TAZARA’s chief executive, Antisne Mweemba, said that the company, which is jointly owned by the Zambian and Tanzanian governments, was operating on a shoestring because its annual cargo had dropped to 648,000 tons in 1995 from annual levels of around 1.2m tons in the late 1980s. Costs are reported to be far outstripping revenue. The company has also embarked on a commercialisation programme following the acquisition of 30 new passenger coaches with a $9m concessional loan from China.

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Agriculture

A food deficit in 1996 is Good rains were reported in late 1995 following the drought of 1994/95, but possible despite good the Zambia National Farmers’ Union (ZNFU) said on December 20 that the rains— country may face a food deficit in 1996 because of a lack of funding for inputs affecting large numbers of farmers. The government has yet to make available an interim financing package for farmers badly hit by the drought. Debt relief totalling ZK29bn ($29m) is due to over 200 peasant farmers whose crops were devastated. Peasant farmers account for around 70% of annual maize output.

—as the maize meal price The price of maize meal has continued to soar in recent months. It reached keeps soaring ZK17,000 per 90-kg bag at the end of October, up from ZK12,000 per bag at the end of September. This is attributed to a shortfall in maize supplies and stocks, a hangover from the 1994/95 drought.

The government commits The finance minister, Ronald Penza, said in his budget speech that the govern- funds to the ASIP— ment would this year contribute ZK29.4bn ($29m) to the four-year World Bank-sponsored Agriculture Sector Investment Programme (ASIP) launched last year (4th quarter 1995, page 12). Donors, he said, would contribute ZK58bn.

—and farmers get some To allow more access to finance and promote productivity in the agriculture relief in the budget sector, Mr Penza widened the zero-rated value-added tax (VAT) category to include basic agricultural products, essentially enabling farmers to reclaim VAT paid on inputs. The government will forgo ZK20bn in revenue for 1996 as a result of this measure, although it does not become effective until July. Farmers will be required to register for VAT in order to benefit from the scheme.

The ZNFU welcomed the zero rating on duty, saying that it would reduce costs by an average of 5%. However, the organisation also said that the ZK166m allocated for agricultural-sector expenditure in the budget was inadequate.

Mining

The government starts Talks between South Africa’s Anglo America Corporation (AAC) and the talks on the development Zambian government on the development of the Konkola Deep Mine Project of Konkola began in London in mid-January, following the earlier signing of a letter of understanding. The provisional agreement proposed the investigation of the possibility of AAC leading a consortium of investors in Konkola, an idea in which the Zambian government had earlier expressed interest (2nd quarter 1995, page 15). The Zambian delegation to these initial talks comprised the chief executive of the Zambia Privatisation Agency (ZPA), Valentine Chitalu, the chairman of the government unit on privatisation, Willa Mung’omba, and the AAC resident managing director, Anderson Mazoka. The finance minister, Ronald Penza, said that subject to a satisfactory outcome of the negotiations and the finalisation of a feasibility study indicating an acceptable return, implementation of the project would be started as soon as possible.

EIU Country Report 1st quarter 1996 © The Economist Intelligence Unit Limited 1996 14 Zambia

ZCCM looks for ways to Zambia Consolidated Copper Mines (ZCCM) is expected to embark on a World halt the production Bank-designed remedial plan based on recommendations made by a technical decline review team from the Bank in November. ZCCM’s chief executive, Edward Shamutete, said that the plan, the details of which are expected to be made public ZCCM copper production '000 tons during the first quarter of 1996, would run until March 31, 1997, and would focus

440 on stabilising declining copper production at just over 300,000 tons/year (t/y). The company missed its production target of 390,000 tons for the 1994/95 420 financial year, producing only 350,000 tons (4th quarter 1995, page 13). 400

380 Mr Penza gave his government’s commitment to the privatisation of ZCCM in his budget speech, but he also echoed concerns over its poor performance and 360 pointed out that this has had a severe effect on the country’s macroeconomic 340 performance. He said that relative to ZCCM’s three-year interim survival plan,

320 covering the period 1994/95 to 1995/96 (3rd quarter 1994, page 18), copper production had remained below target, resulting in a loss of revenue of over 1990 91 92 93 94 95(a) $600m. However, Mr Penza still stopped short of setting target dates for the (a) Estimate. privatisation of ZCCM. Source: ZCCM annual reports.

ZCCM continues to record ZCCM produced 73,625 tons of copper for the quarter ended September 30, reduced production— 1995, some 22% lower than the 94,093 tons produced in the corresponding quarter of 1994. Cobalt production was 667 tons for the quarter compared with 680 tons achieved in 1994. Low production was attributed to ore tonnage and grade constraints at the Nchanga open pit, numerous maintenance problems at the Nkhana smelter and concentrator, as well as an acid shortage and low input level at the Nchanga tailings leach plant.

—although bought-in Copper sales of the company’s own production for the three months to metal sees total copper September 30 were 79,414 tons, 13,876 tons lower than same quarter in 1994. sales rise Total sales, however, including bought-in metal stood at 133,305 tons compared with 113,533 tons in the corresponding period of the previous year.

Cobalt sales are down— Cobalt sales, at 509 tons in the quarter to the end of September, were lower than in the same period of 1994 when they stood at 1,126 tons. This was despite much-improved prices, with average earnings on sales standing at ZK52m/ton in the three months to the end of September last year, compared with ZK28m/t in 1994.

—and precious metals Revenue from precious metals amounted to ZK448bn ($448m) during the revenue is lower quarter to September 30 last year, compared with sales of ZK538bn in 1994.

Total sales revenue for the quarter to September 30 last year stood at ZK397bn compared with ZK224bn in the same quarter of 1994. The higher total is attributed to higher prices on the market, the depreciation of the local currency and higher bought-in metal tonnage. Despite rising revenue, ZCCM made a net loss of ZK7.4bn in the three months to the end of September, compared with a net profit of ZK5bn in 1994.

ZCCM buys MEMACO In December it was announced that ZCCM had bought the UK and US subsidi- aries of the government-owned Metals Marketing Corporation (MEMACO). The government’s director of state enterprises, Steven Mwaba, said that the

EIU Country Report 1st quarter 1996 © The Economist Intelligence Unit Limited 1996 Zambia 15

purchase was effective from January 1. The UK company has changed its name to ZCCM (UK) while MEMACO Trading of the US has become ZCCM Trading. MEMACO was ZCCM’s sole marketing agent until August 1994, when ZCCM began to work on its own marketing as part of a broader restructuring of the parastatal sector introduced by the government.

Finance

Three more banks close The financial sector continued to suffer during the final quarter of 1995 with the closure of three more banks as a result of liquidity problems. The Bank of Zambia (BoZ, the central bank) ordered the closures of the African Commercial Bank, New Capital Bank and Commerce Bank. This followed the earlier dra- matic collapse of Meridien BIAO Bank Zambia (4th quarter 1995, page 11). The closures contributed to increases in interest rates, the depreciation of the exchange rate and a net drawdown of foreign reserves during the last three months of 1995.

ZCCM lists shares on the On January 24 ZCCM announced the listing of a block of B shares on the Lusaka stock exchange— Stock Exchange (LSE). Local investors can thus become direct shareholders in the copper mining giant. ZCCM is the third company to be listed on the two- year-old LSE. The other two are Chilanga Cement and Rothmans (Zambia).

—and tax relief is used to In his budget speech, the finance minister, Ronald Penza, announced that encourage more listings companies listed on the LSE would henceforth be liable for a reduced rate of company income tax (corporation tax). The rate is reduced from 35% to 30% to encourage new listings in order to enable companies to raise more capital domestically.

In other measures to encourage business more generally, Mr Penza reduced the rate of withholding tax on interest, dividends, royalties, rental income, management consultancy fees and lump-sum payments from 25% to 15% and he abolished the surtax for contractors and suppliers. The threshold for exemption of tax on interest income was raised annually from ZK60,000 to ZK240,000.

Foreign trade

SADC meets to examine The Southern Africa Development Community (SADC) held a one-day minis- regional trade vis-à-vis terial meeting in Lusaka on December 2 in order to examine regional trade SACU— patterns, particularly those relating to the South Africa Customs Union (SACU). Other SADC countries have said that SACU, which groups together South Africa, Botswana, Lesotho, Swaziland and Namibia is responsible for trade imbalances in the region. The meeting, attended by trade and finance ministers from all 12 SADC members (Angola, Botswana, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Swaziland, South Africa, Tanzania, Zambia and Zimbabwe), was seen as a first step towards the drawing up of a new regional trade pact.

EIU Country Report 1st quarter 1996 © The Economist Intelligence Unit Limited 1996 16 Zambia

—but South Africa cannot Several SADC countries are trying to negotiate bilateral trade agreements with enter into bilateral South Africa, which they accuse of dominating and adversely affecting their agreements economies through unfair trade practices. However, South Africa has said that it cannot enter into any new bilateral trade agreements with countries outside the SACU because it would violate World Trade Organization (WTO) rules. These compel South Africa, as a middle-income state, to extend to all developing countries any preferential treatment it might extend to SADC members in bilateral trade agreements. The South African government argues that in such circumstances it would be very vulnerable to competition from many of the Asian developing countries.

The one-day SADC meeting in Lusaka in December resolved that a multilateral trade agreement with South Africa was more realistic than many bilateral ones, as South Africa could then apply to the WTO for a waiver to sign up to a new multilateral agreement within the SADC framework. The meeting’s main find- ings are expected to be presented before a special meeting of legal experts scheduled for March 1996, while a final draft proposal on trade cooperation is expected to be published by SADC later in the year.

The government takes Partly to address complaints of unfair trading from Zambian manufacturers measures to protect against South Africa and Zimbabwe in particular, the finance minister, Ronald domestic industries— Penza, proposed in his budget that tariff rates within the Common Market for East and Southern Africa (COMESA) be set at 40% across the board. This would be a substantial reduction from the present 60% and would remove major tariff anomalies and improve the competitiveness of Zambian producers.

—and warns of stiffer Mr Penza went on to warn that trading partners which do not provide access to action against unfair their markets to Zambian producers would find that the government will not trading hesitate in taking reciprocal measures to divert trade to countries operating more open and market-driven trade regimes. The reference was directed specifically at South Africa and Zimbabwe, which both impose prohibitive tariffs on goods entering their countries from Zambia.

EIU Country Report 1st quarter 1996 © The Economist Intelligence Unit Limited 1996 Zaire 17

Political structure: Zaire

Official name: République du Zaire

Form of state: unitary republic

Legal system: a transitional constitution was approved by representatives of the major political factions in September 1993 and its tenure was extended for two years in July 1995

National legislature: the Sovereign National Conference handed over legislative power to an Haut conseil de la république (HCR) in December 1992. This body was combined with the Conseil législatif to form the HCR-Parlement de la transition (HCR-PT) in January 1994

Last elections: July 1984 (presidential); September 1987 (legislative)

Next elections: July 1997 (presidential and legislative)

Head of state: president, nominated by the Mouvement populaire pour le renouveau (MPR) congress and elected (unopposed) by universal suffrage; Mobutu Sese Seko has held this post since November 1965; the transitional charter reduced the powers of the president

National government: the prime minister, elected by the HCR-PT, and the 46-member Conseil exécutif (cabinet; appointed July 1995)

Main political parties: the MPR was the sole legal party, but legislation passed in December 1990 opened the door for the registration of political parties under an evolving multiparty system. More than 300 have been registered, including the MPR, Parti démocrate et social-chrétien (PDSC), Parti socialiste africain (PSA), Union des fédéralistes et des républicains indépendants (UFERI) and Union pour la démocratie et le progrès social (UDPS). Those opposed to Mr Mobutu are grouped together in the Union sacrée de l’opposition radicale et alliées et société civile (USORAS)

Prime minister Kengo wa Dondo Deputy prime ministers with defence portfolio Admiral Mavua Mudima with interior portfolio Gustave Malumba Mbangula with international cooperation portfolio Mozagba Ngbuka Bamwanga with foreign affairs portfolio Gérard Kamanda wa Kamanda

Key ministers agriculture Wivine Nlandu Nguz budget Bolenge Mokesombo environmental protection & tourism Joseph Ruhana Mirindi finance Pay Pay wa Syakassighe foreign trade Jibi Ngoyi health and family affairs Florentine Soki Fwani Eyenga higher & university education, scientific research Moshobekwa Kalimba justice Joseph Nsinga Udjuu mines Mayo Mambeke transport & communications Thambe Mwamba

Governor of Banque du Zaire Djambolekela Loma Okitongono

EIU Country Report 1st quarter 1996 © The Economist Intelligence Unit Limited 1996 18 Zaire

Economic structure: Zaire

Latest available figures

Economic indicators 1991 1992 1993 1994 1995a GDP at market prices NZ m 47.2 1,765.5 36,820.9a n/a n/a Real GDP growth % –7.2 –12.3 –10.4 –7.4b 2.0 Consumer price inflation % 2,155 4,129 1,890 23,770 460 Population m 36.7 39.9a 41.1a 43.0a n/a Exports fobc $ m 1,500a 1,219 1,147 1,028 1,350 Imports fobc $ m 1,200a 914 616 581 849 Current account $ m –850a –763 –398 –350 –500 Reserves excl gold $ m 182.9 156.7 46.2 120.7 154.6d Total external debt $ m 10,826 10,968 11,280 11,649 12,000 External debt-service ratio % 10.1a 3.0a 1.0a 1.0a 1.5 Copper production ’000 tons 276.1 147.3 48.3 33.6 26.0 Cobalt production ’000 tons 8.6 6.4 2.2 3.6 4.0 Diamond production m carats 18.3 13.3 15.2 15.6 n/a Exchange rate (av)e Z:$ 15,587.0 0.2 2.5 1,194.1 5,000.0

February 9, 1996 NZ11,900:$1

Origins of gross domestic product 1989 % of total Components of gross domestic product 1992 % of total Industry 33.5 Private consumption 68.8 Manufacturing 11.2 Public consumption 21.7 Agriculture 30.2 Gross fixed capital formation 7.1 Services 36.3 Change in stocks –0.2 GDP at market prices 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 1994f % of total Main origins of imports 1994f % of total Belgium-Luxembourg 38 Belgium-Luxembourg 16 USA 16 South Africa 12 South Africa 9 Germany 8 Italy 8 Hong Kong 7 a EIU estimates. b Official estimate. c Balance-of-payments basis. d End-October, actual. e New currency, nouveau zaire (NZ), introduced in October 1993 at a parity of NZ1:Z3m; for comparison the rate shown refers to the new currency from 1992. f Based on partners’ trade returns, subject to a wide margin of error.

EIU Country Report 1st quarter 1996 © The Economist Intelligence Unit Limited 1996 Zaire 19

Zaire

Outlook

Mr Mobutu is back to November 1995 was the 30th anniversary of the president, Mobutu Sese Seko, stay— as Zaire’s head of state. Ever the phoenix of African politics, Mr Mobutu again appears to be securely at the helm of his country, having outmanoeuvred both the massed ranks of the domestic opposition and that part of the international community which sought to force him to alter his style of government. Yet, in three decades, Zaire has not progressed but finds itself embroiled in perpetual political fiasco with its economy a shambles amid widely envied resources. Although Mr Mobutu marketed his leadership to Western governments with the line “Mobutu or chaos”, recent Zairean history has proved that this threat was an empty one. Mr Mobutu is head of state but so endemic is the chaos that Zaire barely functions as a nation-state. Given what he has survived, it is hard to imagine what could arise in the future to force Mr Mobutu from office.

—although he reigns over Zairean civil society has regressed to a state where right to life and property are a collapsed country— poorly guarded, if at all. Government is supposed to help society move away from such dire circumstances, but in Zaire it is the behaviour of those holding the levers of power who have ensured the country’s virtual demise. With GDP per head at around $100, Zaireans are poor by any standard. Even their own army loots and robs, and ensures that insecurity remains rampant. While the Zairean polity remains in the hands of individuals who are, in general, moti- vated by greed, there is little prospect of an improvement in the lot of the ordinary Zairean. In turn, the momentum of the downward spiral is maintained by the daily prospect of falling living standards, the perfect environment for the nurture of a generation fixated with defending, if not improving, its material circumstances.

—and indeed a whole In fact, Mr Mobutu seems to have reinstated his authority not only at home, but region also abroad, especially in the Great Lakes region, composed of Zaire’s north- easterly neighbours. His control of the flow of about 1 million Rwandan refugees has given him substantial leverage over the Kigali government and, indirectly, over its Ugandan benefactor. The former US president, Jimmy Carter, who has attempted regional mediation, may be naive in his apparent belief that Mr Mobutu is genuinely interested in conciliation and that he will keep his promise to report to international tribunals members of the former Rwandan army who are hiding in refugee camps. Indeed, these soldiers constitute one of Mr Mobutu’s prime diplomatic weapons, one which he may well use to threaten, harass and maybe eventually subdue the new Rwandan government.

EIU Country Report 1st quarter 1996 © The Economist Intelligence Unit Limited 1996 20 Zaire

The economy has the Average inflation in 1995 appears to have been below 500%, a huge improve- potential to recover— ment on the estimated 23,000% seen in 1994. The second half of 1995 was significantly better than the first, suggesting that an improving trend may persist into 1996. However, even this optimistic picture includes inflation in the low triple digits. If a variety of vested interests do not sabotage his economic programme, the prime minister, Kengo wa Dondo, could stabilise the exchange rate. The 1996 budget, although unrealistically optimistic in its underlying assumptions, is a laudable exercise in austerity and fiscal equilibrium. Overall, determination in economic policy, together with a renewed trickle of foreign aid, suggest a better year ahead than has been seen for at least five years.

—or to plunge back into Any recovery, however, is as fragile as it is possible to imagine. Although recession overall inflation was down in 1995, September and October witnessed worry- ing slippage, acting as a reminder of how easily things can get out of control in Zaire. Furthermore, after several months of stability, the exchange rate col- Gross domestic product lapsed again from September onwards. The credibility of Mr Kengo’s policies % real change on previous year will be at stake as he gets tested further on the price and currency fronts in the 6 first few months of 1996. The international environment will not help, with 4 copper prices generally depressed and liable to cancel out any effect from 2 increased production. In addition, the World Bank and the IMF are disap- 0

-2 pointed with the government’s dealings with creditors, intended to pay off its

-4 debt to the African Development Bank (ADB) against a share of a privatised

-6 Gécamines. A firm line may be taken and the Bretton Woods Institutions’

-8 Zaire preferential creditor status applied to the letter. Between them the World Bank -10 Africa and the IMF could almost certainly persuade Zaire’s other bilateral and multi- -12 lateral aid partners to turn off the trickle of aid that has begun. The blocking of -14 the ADB-Gécamines deal may, in fact, benefit the Zairean government in the 1992 93 94 95(a) long run, as it would prevent the discounted sale of its foremost asset. Short- (a) Estimates. Sources: EIU; IMF, World Economic Outlook. term prospects, however, for new investment in physical capital and for a sustained upturn in copper and cobalt output could be fatally damaged.

Review

The political scene

An attempt at a unity In September the president, Mobutu Sese Seko, gave his prime minister, Kengo government is dismissed wa Dondo, a mandate to reshuffle and enlarge the government appointed in by the opposition July (4th quarter 1995, page 20). The main aim was to include politicians from the still-unrepresented factions within the Forces politiques du conclave (FPC, the political grouping which supports the president) and the radical opposition, dominated by the Union pour la démocratie et le progrès social (UDPS). Mr Kengo was also empowered to appoint new provincial governors and heads of national companies. It was widely expected that control of six out of Zaire’s 11 provinces would go to the FPC, these being Shaba, Maniema, Kivu Nord, Haut-Zaire, Equator and Kasai Oriental.

However, in December the UDPS and another radical opposition party, the Parti démocrate et social-chrétien (PDSC), declined Mr Kengo’s offer to join a

government of national unity, preferring to concentrate their political efforts on the forthcoming legislative and presidential elections. These are scheduled to be held in July 1997 although it is uncertain whether they will take place.

Mr Mobutu calls for The probability that elections will ultimately be held has been increased by the elections apparent change in the attitude of the president. Having been behind many of the postponements of the end of the political transition over the last four years, he is now a keen advocate of early elections. During a trip to Paris in October Mr Mobutu gave several interviews in which he complained that he was the only Zairean politician asking for early elections in the presence of international observers. During the trip, the president’s supporters approached the European Union (EU) and the UN with requests for election observers, a follow- up to earlier contacts in Portugal (see below).

The opposition has If elections do eventually take place, the opposition will go into them with its majority support in confidence boosted by the results of an opinion poll conducted in Kinshasa in Kinshasa July and August and published in September in the opposition newspaper, Le Potentiel. The poll indicated that the UDPS, which is led by the one-time prime minister, Etienne Tshisekedi, would come first in legislative elections in the capital with 43.5% of the votes, followed by Mr Mobutu’s Mouvement populaire pour le renouveau (MPR) with 12.9%. The poll also implied that the PDSC would win 5.1% of votes cast, that Mr Kengo’s Union des démocrates indépen- dants (UDI) would win 3.8% and the Union fédéralistes et des républicains indépendants (UFERI) some 2.7%. The pollsters also asked about voting intentions in any presidential elections. Here, Mr Tshisekedi also came out ahead with 43.6% of intended votes, well in front of Mr Mobutu with 17.6%.

It is worth bearing in mind that, although a distant second to Mr Tshisekedi, Mr Mobutu’s performance marks a substantial improvement over his performance in a similar poll in March 1992. On that occasion the president secured only 5% of presidential voting intentions. This is a reminder, if one were needed, of Mr Mobutu’s exceptional capacity for coming back, even after his apparent political demise.

HCR-PT members reward During a closed-door meeting on October 26 the 748 members of the Haut themselves generously— conseil de la république-Parlement de transition (HCR-PT, the transitional legislature) voted to give themselves a monthly salary equivalent to $1,000. Zairean university professors are paid the equivalent of $10 per month and many civil servants, when they are paid, collect even lower salaries. The members of the HCR-PT went as far as threatening to go on strike should the government not open the necessary credit lines for the payment of these stipends. The rationale for such generous pay was a reduction of the temptation to succumb to corruption.

Some concrete business was carried out by the interim legislature on November 17 when the HCR-PT approved the formation of the Commission nationale electorale (CNE) which is to oversee the organisation of presidential and legislative elections by July 1997. The CNE has 44 members, half coming from the FPC and half from the broad-based, opposition-dominated coalition, the Union sacrée de l’opposition radicale et alliées et société civile (USORAS), which

includes the UDPS as well as the pro-government Union pour la république et la démocratie (URD).

—while students demand University professors went on strike at the beginning of the academic year, in to be taught order to hammer home their claims for higher salaries. Students then organised a mass demonstration on November 7 and 8 demanding that classes restart. In response, army and police units surrounded Kinshasa’s university campus on November 8. The students called off their action the next day, once the Ministry of Higher Education had promised to hold a meeting to address the issue.

The tension remains high On November 11 the army joint chief-of-staff, General Eluki Monga, escaped a over refugees in Kivu— terrorist attack in Goma, Kivu Province, where thousands of Rwandan refugees are still housed. A bomb in a package which was to have been carried aboard the aircraft returning General Monga to Kinshasa exploded at the airport. The government denounced a “plot against the state” and blamed Rwandan ele- ments. About 15 bomb and hand-grenade explosions were reported in Goma in October and November alone.

Despite the accusations made by Zaire against Rwanda, of plotting against the state, it was the Rwandan authorities which apprehended five armed Rwandans from the former national army, the Forces armées rwandaises (FAR). The five soldiers were attempting to escape to Zaire on October 18, reportedly after spending several days committing miscellaneous acts of sabotage in Rwanda. Their leader admitted that they had originally come from a refugee camp in Zaire, where they had received military instruction from a former officer of the FAR.

—but they are to stay After the Office of the UN High Commissioner for Refugees (UNHCR) declared longer— in late September that it was unlikely to be able to honour its commitment to repatriate all Rwandan refugees by the end of the year, the HCR-PT, Mr Kengo and the UDI reiterated their call for the departure of all Rwandan refugees by December 31. During a trip to Germany, Mr Kengo argued that the departure of the Rwandans would be necessary, inter alia, to allow the accurate com- pletion of Zaire’s population census in advance of the 1997 legislative and presidential elections. However, on December 7, faced with the increased like- lihood that there would be no significant departure of refugees before the end of the year, pressure from the international community, the opposition of Mr Mobutu to the expulsion of refugees (see below), and a growing threat to his own credibility on the issue, Mr Kengo cancelled the deadline without setting a new date for the refugees’ departure. The numbers of Rwandans returning home has not exceeded a couple of thousand per day since October. The total number of Rwandan refugees on Zairean soil is thought to be not much less than 1 million.

—as Mr Mobutu is Mr Mobutu, who could justifiably be described as the archetypal Machiavelli, unexpectedly hospitable has taken the opposite stance to Mr Kengo and the HCR-PT. He declared in an interview published in a Belgian daily, La Libre Belgique, that “in his soul and conscience” he could not accept that the refugees be chased back to their country. Thus, he encourages his supporters in the government to put pressure on Rwanda by threatening the forced expulsion of refugees (4th quarter 1995,

page 22), while simultaneously courting the approval of Western governments for his humanitarian stance by distancing himself personally from any such policy. Following Mr Mobutu’s declaration, the number of Rwandans returning to their country reportedly fell to less than 150 per day.

Mr Mobutu meets Jimmy On September 29 while on a visit to Portugal, Mr Mobutu met the former US Carter— president, Jimmy Carter. Mr Carter heads the Atlanta-based Carter Foundation, which assists developing countries with conflict resolution and the organisation of democratic elections. Much of the discussion between the two was reported to concern the problem of the Rwandan refugees, but the subject of the 1997 Zairean elections and the conditions for the Carter Foundation’s support for them must have been touched upon. Mr Mobutu’s camp was prompt to repre- sent the meeting as an endorsement of Mr Mobutu by Mr Carter and to spread rumours that Mr Carter would seek to influence the US president, Bill Clinton, on the issue of removing the travel restrictions imposed on the Zairean president and his entourage.

—and goes to the UN Information available last quarter suggested that Mr Mobutu was to be denied anniversary celebration— a visa to travel to the USA. In fact a visa was eventually granted, allowing the Zairean president to go to New York for the 50th anniversary of the UN in October. His travel permit, however, restricted him to the city of New York, despite his reported attempts to go to Washington and lobby US policy-makers. The Clinton administration’s official position remains that Mr Mobutu is the principal obstacle in the way of democracy and, ultimately, development in Zaire. After their meeting, Mr Carter said that Mr Mobutu had agreed to iden- tify those perpetrators of the Rwandan massacres who are resident in Zairean camps and to deliver them to international tribunals.

As part of what appears to be a continuing campaign to prove that he is once more acceptable in diplomatic circles, Mr Mobutu went to Paris in November to participate in the ceremonies marking the 50th anniversary of the UN Education Scientific and Cultural Organisation (UNESCO). Later that month he attended the African Great Lakes Conference in Cairo, held under the spon- sorship of Jimmy Carter and South Africa’s Archbishop Desmond Tutu.

—before heading for Libya Despite the evident thawing of the attitude of the international community towards his regime, on December 10 Mr Mobutu paid a visit to the leader of international outcasts, the Libyan president, Colonel Muammar Qadhafi. It had been 20 years since the two leaders met. Mr Mobutu spent a few days in Libya but the substance of the two leaders’ discussions was not divulged.

Infant mortality rises and According to a study by the UN Children’s Fund (UNICEF), Zaire’s infant mor- life expectancy falls tality rate increased from 137 per thousand live births in 1984 to 142 per thousand in 1995. The rate reaches as high as 156 per thousand live births in rural areas, and is as low as 107 in some urban areas. In 1992 the average rate of infant mortality in sub-Saharan Africa (excluding South Africa) was 100 per thousand live births. As if to confirm the worsening conditions for the mass of the Zairean population, the national average of life expectancy at birth (defined as the age that a new-born has a 50% chance of reaching) fell from 47 years in 1984 to 46.4 years in 1995. Once again, this compared poorly with 51 years for

the rest of sub-Saharan Africa. Furthermore, UNICEF reported that only 30% of children aged 12 to 24 months are immunised against any diseases.

The economy

The IMF opposes the In September a Zairean team, led by the finance minister, Pay Pay wa ADB-Gécamines deal Syakassighe, and the governor of the Banque du Zaire (the central bank), Djambolekela Loma Okitongono, flew to Washington for a meeting with representatives of the IMF. The major hurdle to normalised relations with the IMF remains the country’s arrears to the Fund. The Fund has expressed its strong disapproval of Zaire’s attempt to find private partners to pay its debt to the African Development Bank (ADB). The government’s plan is apparently to clear its arrears to the ADB in order to secure new finance for investment in the state cobalt and copper mining giant, Gécamines. The financial benefits of the planned privatisation of the mining parastatal would be earmarked for the private financiers who cleared the indebtedness to the ADB. However, like the World Bank, the IMF has the status of a privileged creditor. Under the rules of both bodies, if a country which is in arrears secures funding from another source, the first arrears to be paid off must be those owed to the Bretton Woods institutions.

Despite this planned contravention of the IMF’s rules, the Fund sent a consultation mission to Kinshasa in December. The team described the progress made on economic reform by the prime minister, Kengo wa Dondo, as “very encouraging”. Also in Zaire’s favour is the fact that, for the last year, the World Bank has been paid around $3m every month, a symbolic payment taken as a sign of goodwill.

Currency management The July agreement between the Banque du Zaire and the private foreign stumbles— exchange operator, Qualitoles (4th quarter 1994, page 24), fell through shortly after its implementation. According to the agreement, every month Qualitoles was to sell $20m (from diamond exports receipts) on the domestic market in order to bid up the price of the Nouveau Zaire. The Banque du Zaire was to compensate Qualitoles for any losses due to the improvement of the exchange rate. The agreement, which was denounced at the time by Mr Kengo, was abandoned when it had manifestly failed to prop up the exchange rate by September. Nevertheless, Qualitoles has continued to exert pressure on the government and the Banque du Zaire to reinstate the arrangement.

—and inflation is not yet After a promising 0.5% fall in the consumer price index in August, prices tamed returned to being essentially out of control in September and October. Con- sumer prices were reported to have increased by 39.6% and 25.7% in the two months respectively, the highest monthly rates seen since January when prices rose by 28%. Average inflation in 1995 is now more likely to be around 460%, up compared with an expected 199% only a few months ago. Some doubt has obviously been shed upon on the effectiveness of Mr Kengo’s anti-inflationary policies and over the central bank’s ability to exert any control over prices.

Mr Kengo presents the On November 3 Mr Kengo presented his 1996 budget to the Haut conseil de la 1996 budget république-Parlement de transition (HCR-PT). The budget projects both government revenue and expenditure at NZ5,700bn (about $500m). The pro- posals were attacked by opposition deputies because no provision is made for salary increases in the civil service. Mr Kengo stated that the budget is based on the assumption of real GDP growth of 1.3% in 1996, which, although optimistic, is no longer impossible. However, the expectation of an annual inflation rate of 20% is ludicrous in view of the slippage of late 1995, while the assumed average exchange rate for 1996 of NZ11,900:$1 also has little to recommend it. Indeed, the official exchange rate tumbled at the end of November to NZ10,600:$1 after several months of relative stability, while the nouveau zaire traded on the parallel market at around NZ12,000:$1.

1996 budget (NZ bn) Total revenue 5,700 Customs & excise duties 1,428 Local taxes 1,350 Gécamines 500 Diamond mines 179 Oil distribution 698 Other 1,545 Total expenditure 5,700 Wages & salaries 2,904 Goods & services 1,440 of which: election related 607 Public debt service 1,178 Capital expenditure 178 Source: Pan African News Agency.

Energy and transport

Regional development Plans by the Provincial Authorities in Kasai Occidental to attract foreign invest- picks up ment appear to be having some success. In particular, the proposed Katende hydroelectric project, which involves the construction of a dam with a 6-mw hydroelectric generating facility, has caught the attention of international companies. According to the industry newsletter, Africa Energy and Mining, no less than 11 companies from seven countries (Germany, Belgium, China, the UK, Italy, Poland and Switzerland) have responded to an invitation to tender for work on the first phase of the project. The invitation was issued by the Conférence pour le dévéloppement économique et social du Kasai Occidental (Codesko).

A plane crash in Kinshasa Zaire’s notoriously poor air safety record worsened on January 8 when a cargo kills more than 250 plane crashed into the crowded Simba Zikidi market in Kinshasa soon after taking off from the domestic airport at Ndolo. At least 250 people, mostly women and children, were killed. The aircraft was a Antonov-32 owned by a private Zairean company, African Air. Its Russian crew of four, which survived the crash, was detained by police after an angry mob attempted to stage a public lynching. It appears that the cause of the crash was overloading, although it was initially unclear what the plane was carrying and where it was

heading. However, later in January rumours emerged that the death toll in the crash was so high because the plane was packed with fuel oil, allegedly destined for Angola. A month earlier a Lockheed Electra passenger plane, owned by another private Zairean company, crashed in Angola, killing 141 people.

Air Zaire’s bankruptcy is In September Brussels’ appellate court confirmed the Air Zaire bankruptcy confirmed by a Belgian judgement made by a lower court in June. As a result, Air Zaire’s remaining court assets in Belgium will be seized and auctioned to pay off the company’s creditors who are owed a total of around $55m. The judgement includes Air Zaire’s DC10 among the assets but its current location in Israel places it out of reach of Belgian courts. Air Zaire is, however, forbidden to fly over or land in Belgium and if it did it would risk having its aircraft seized. Three companies, Sabena and Skyjet of Belgium, as well as South African Airways, are candidates to take over Air Zaire’s domestic and international network.

Foreign trade and payments

Aid made conditional on On November 4 the 15 European Union (EU) members and the 70 Africa- human rights— Caribbean-Pacific (ACP) countries signed an agreement in Mauritius revising the fourth Lomé Convention which places Ecu13.3bn ($17bn) at the disposal of ACP governments for development projects. Unlike its predecessors, this agreement makes aid commitments and disbursements conditional upon respect for human rights, democratic principles and the rule of law. Although the EU suspended development aid to Zaire in 1993, and although Zaire fails to meet the political conditions of the agreement, the Zairean deputy prime minister, Mozagba Ngbuka, was present at the signing and put his signature to the document.

—less than a month after On October 17, despite the absence of an improvement in the human rights EU approval of $117m for situation in Zaire, the European Commission approved Ecu90m ($117m) of Zaire funding for a rehabilitation programme for Zaire to be disbursed over four years. An EU spokesperson specified, however, that this decision did not imply a normalisation of the EU’s relations with Zaire as the programme’s implementation will be conditional upon the evolution of economic and political reforms, and disbursement will be progressive. The funds will be allocated “without the intervention of the Zairean government” to non-governmental organisations (NGOs) and private enterprises, with the aim of improving basic infrastructure and stimulating the production and marketing of food crops.

There is confusion on the While most Western countries officially continue to blacklist Zaire for develop- status of aid ment assistance, several have resumed commitments and disbursements of non-humanitarian aid. In November the German government declared that it would not resume its development aid to Zaire, as an improvement in the human rights situation was still necessary. However, the German foreign minister, Klaus Kinkel, had already agreed to help Mr Kengo with his government’s reforms and, a month earlier, Germany granted Zaire DM30m ($21m) for environmental protection in the areas of Kivu devastated by the refugee camps. Belgium has remained stricter, however; the government has continued its policy of limiting aid to humanitarian purposes only.

Appendix 1

Quarterly indicators of economic activity in Zambia

1993 1994 1995 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 tons 105.4 98.5 99.7 97.6 91.9 95.2 81.8 89.9 85.6 57.2a Prices Monthly av Consumer prices: 1990=100 1,980.6 2,047.4 2,301.2 n/a 2,583.1 2,712.9 3,052.0 n/a n/a n/a change year on year % 227 164 113 n/a 30.4 32.5 32.6 n/a n/a n/a Copper: LME, $ cents/lb 86.7 75.7 84.5 96.6 111.3 126.0 133.0 130.9 136.5 131.4b Money End-Qtr M1, seasonally adj: ZK m 21,344c n/a n/a n/a n/a n/a n/a n/a n/a n/a change year on year % 66.6c n/a n/a n/a n/a n/a n/a n/a n/a n/a Foreign traded Annual totals Exports fob $ m ( 904 ) ( 758 ) ( n/a ) Imports fob “ ( 702 ) ( 455 ) ( n/a ) Exchange holdings End-Qtr Bank of Zambia: golde $ m n/a n/a 0.00 0.00 0.00 0.00f n/a n/a n/a n/a foreign exchange “ 159.1 192.3 207.5 237.8g n/a n/a n/a n/a n/a n/a Exchange rate Market rate ZK:$ 344.8 500.0 1,000.0 1,000.0 1,000.0 666.7 769.2 909.1 909.1 909.1h

Note. Annual figures of most of the series shown above will be found in the Country Profile. a Total for October-November. b Average for October-November. c End-1 Qtr 1992. d DOTS estimate.e End-quarter holdings at quarter’s average of London daily price less 25%. f End-October. g End-May. h End-November.

Appendix 2

Quarterly indicators of economic activity in Zaire

1993 1994 1995 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr Mining: production Annual totals Copper in concentrates ’000 tons ( 46.0 ) ( 30.0 ) ( 21.0a ) Zinc “ ( 10.0 ) ( 0.6 ) ( 0.5a ) Agriculture: production Annual totals Coffee ’000 tons ( 90b ) ( 88b ) ( n/a ) Prices Monthly av Consumer prices, Kinshasa: 1990=0.01 74 626 4,278 11,739 54,155 119,833 161,800 207,130 275,014c n/a change year on year % 640 2,508 9,407 22,475 73,082 19,043 3,682 1,664 n/a n/a Wholesale prices: coffee: USA USA cents/lb 57.7 61.8 63.2 94.0 170.1 152.0 138.3 139.0 122.9 113.5d copper: LME, $ “ 86.7 75.7 84.5 96.6 111.3 126.0 133.0 130.9 136.5 131.4d Money End-Qtr M1, seasonally adj:e new Z m 1,468 6,481 21e 72 193 376 428 695 n/a n/a change year on year % 905 2,503 3,484 7,158 13,047 5,702 1,938 865 n/a n/a Foreign trade Qtrly totals Exports fob $ m 117 72 81 65 131 144 132 105 108f n/a Imports cif “ 108 91 76 76 96 135 105 113 17f n/a Exchange holdings End-Qtr Bank of Zaire: goldg $ m 8.7 6.2 6.3 6.3 8.1 8.1 8.0 8.1 8.1 8.0h foreign exchange “ 148.5 46.2 152.6 148.9 146.7 120.7 143.8 148.0 145.1 152.1h Deposit money banks: assets ” 58.3 62.4 59.3 56.7 73.5 81.2 84.2 80.2 86.1i n/a Exchange rate Market rate new Z:$ 2.64 35.00 175.00 520.00 2,150.00 3,250.00 3,600.00 5,550.00 9,200.00 11,402.99h

Note. Annual figures of most of the series shown above will be found in the Country Profile. a Total for January-September. b Estimate. c Average for July-August. d Average for October-November. e From 1 Qtr 1994, new Z bn. f July only. g End-quarter holdings at quarter’s average of London daily price less 25%. h End-October. i End-July.

Appendix 3

Zambia’s foreign trade (ZK m) Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec 1985 1986 1987 1988 1989 1990 1991 Domestic exports fob Tobacco 2 4 17 29 24 125 256 Cobalt 24 385 466 598 1,101 2,544 7,289 Copper 1,286 4,429 6,845 8,340 16,353 33,734 52,539 Lead 7 16 20 19 9 1 5 Zinc 53 99 131 162 302 438 429 Total incl others 1,502 5,348 8,032 9,720 18,336 39,037 67,583 Re-exports 6 19 27 66 98 107 85 Imports cif 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 & manufactures 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 & manufactures 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 continued

Appendix 3 (continued)

Direction of trade ($ m) Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec 1988 1989 1990 1991 1992 1993 1994 Exports fob Japan 194 222 168 204 152 105 105 Saudi Arabia 48 38 29 29 83 69 83 Thailand 28 n/a 37 34 39 54 72 Pakistan 1 n/a n/a 3 12 66 58 Malaysia 22 27 21 30 61 53 57 India 56 44 33 122 21 45 56 Belgium-Luxembourg 32 48 31 140 45 66 47 France 51 97 74 108 48 82 38 Zaire 5 10 8 3 5 10 33 Total incl others 871 663 544 1,076 752 904 758 Imports fob South Africa 158 271 206 165 224 303 157 UK 19 259 197 149 98 75 73 Zimbabwe 35 75 57 44 55 47 52 Japan 84 107 81 76 38 30 28 Germanya 53 187 142 34 31 33 21 India 35 30 23 35 24 9 19 USA 212 68 124 57 72 20 11 Italy 39 39 30 5 17 12 8 France 31 16 12 7 15 10 8 Total incl others 880 1,275 1,218 811 837 702 455 a Includes former East Germany from July 1990.

Appendix 4

Zambia’s domestic exports of copper (tons) Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Aug 1989 1990 1991 1992 1993 1994 1995 Refined copper Total 456,365 459,924 382,326 411,892 436,522 360,657 208,865 Japan 131,515 152,735 125,939 94,857 85,334 55,445 43,116 Thailand 20,989 32,040 28,946 37,361 49,030 62,637 31,733 USA 3,464 625 0 0 760 2,000 23,929 India 30,892 30,815 14,280 19,149 21,186 20,209 17,990 Malaysia 15,729 23,413 21,036 33,324 30,230 31,369 13,364 Belgium 61,064 31,297 31,120 26,156 49,167 29,939 12,529 France 38,381 68,111 49,176 52,612 49,990 18,896 7,544 Indonesia 9,890 16,499 9,078 5,040 3,499 5,146 3,691 Italy 43,653 24,713 10,989 15,850 5,041 3,024 2,098 South Korea 5,832 0 0 0 0 4,096 800 Greece 16,178 14,200 7,686 7,876 6,871 3,524 25 UK 11,684 10,379 5,750 0 0 3,999 0 Netherlands 15,148 1,251 876 0 1,001 0 0 China 0 0 0 5,000 0 0 0 Germanya 4,997 2,001 0 500 0 0 0 Former Yugoslavia 4,973 0 0 0 0 0 0 Finland 4,001 0 0 0 0 0 0 a Includes former East Germany from July 1990.

Appendix 5

UK trade with Zambia (£’ 000) Jan-Dec Jan-Dec Jan-Dec Jan-Oct Jan-Oct 1992 1993 1994 1994 1995 Imports cif Fruit & vegetables 1,604 1,300 1,167 1,027 1,531 Textile yarn, cloth & manufactures 3,109 3,143 3,767 2,867 6,382 Non-ferrous metals 909 6,406 6,737 6,096 7,463 Machinery & transport equipment 783 451 308 300 230 Total incl others 7,279 12,056 13,038 11,170 16,787 Exports fob Food, drink & tobacco 644 883 448 275 437 Chemicals 7,012 8,913 4,972 4,096 3,384 Rubber manufactures 353 201 163 151 65 Paper & manufactures 745 448 357 322 148 Textile yarn, cloth & manufactures 548 257 329 194 730 Non-metallic mineral manufactures 1,787 1,687 624 537 1,299 Iron & steel 2,174 818 390 388 230 Metal manufactures 1,337 2,582 499 380 332 Machinery incl electric 33,528 39,487 21,794 17,268 20,405 Transport equipment 9,035 7,076 4,533 3,898 4,526 Clothing & footwear 970 466 1,620 1,048 989 Scientific instruments etc 2,812 4,502 3,234 2,478 6,346 Total incl others 65,127 73,548 44,523 35,346 43,312

Appendix 6

Japan’s trade with Zambia (¥ m) Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Nov Jan-Nov Imports cif 1990 1991 1992 1993 1994 1994 1995 Copper cathodes 60,778 41,435 25,136 20,668 11,455 10,947 15,086 Total incl others 63,122 45,244 31,532 23,562 17,896 16,771 19,235

Appendix 7

Trade of Zaire with major trading partnersa ($ ’000; monthly averages) Belg-Lux USAb Germany France UK Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Oct Jan-Oct Imports from Zaire cif 1993 1994 1993 1994 1993 1994 1993 1994 1994 1995 Coffee, cocoa, tea & spices 204 226 10 18 467 468 741 1,045 72 122 Animal feeding stuffs 0 0 205 80 0 0 0 0 0 0 Crude rubber 12 17 0 0 55 53 4 0 113 72 Wood & cork 144 345 30 4 438 609 362 723 764 536 Crude minerals & fertilisers 0 5 695 728 64 137 0 0 0 0 Metal ores & scrap 16 1 76 15 200 28 0 0 0 0 Petroleum & products 0 0 11,658 9,649 0 0 0 0 0 0 Chemicals 13 19 274 1,005 58 103 9 28 0 1 Non-metallic mineral manufactures 29,172 52,166 3,502 2,704 19 3 1 0 0 0 Non-ferrous metalsc 3,676 608 434 1,887 902 699 119 934 180 389 Machinery & transport equipment 94 82 0 59 132 49 1 0 11 92 Total incl others 34,847 54,357 20,918 16,492 3,268 3,016 1,351 2,910 1,386 1,464

Belg-Lux Germany USAb France UK Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Oct Jan-Oct Exports to Zaire fob 1993 1994 1993 1994 1993 1994 1993 1994 1994 1995 Food, drink & tobacco 1,648 1,926 257 145 825 869 893 824 146 243 Mineral fuels 28 44 16 8 15 10 50 19 2 98 Chemicals 1,120 1,330 380 367 138 184 425 518 258 398 Rubber manufactures 152 115 19 56 27 2 16 35 9 10 Textile yarn, cloth & manufactures 388 533 4 13 70 164 21 33 27 8 Non-metallic mineral manufactures 586 674 16 8 0 0 81 37 4 15 Base metals 112 187 189 53 17 165 4 51 25 69 Metal manufactures 296 260 95 156 62 32 24 54 20 33 Machinery incl electric 2,584 2,499 676 870 539 768 266 404 260 399 Transport equipment 1,997 2,254 744 1,494 277 162 224 246 229 365 Clothing, footwear & handbags 181 218 7 5 80 81 87 101 6 11 Scientific instruments etc 200 258 11 23 43 44 151 52 31 14 Total incl others 10,491 11,695 2,978 5,569 2,929 3,285 2,424 2,617 1,448 2,060 a Figures from partners’ trade accounts. b US imports from Zaire averaged $16.3m and $22.1m per month for the period January-October 1994 and 1995. US exports to Zaire averaged $3.2m and $6.6m per month for the period January-October 1994 and 1995. c Mainly copper and zinc.