Zambia Democratic Republic of Congo

COUNTRY REPORT

3rd 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 11 Review 11 The political scene 16 The economy 17 Mining and energy 19 Manufacturing and commerce 20 Transport and telecommunications 20 Agriculture 22 Health 23 Foreign trade and payments

Democratic Republic of Congo 25 Political structure 26 Economic structure 27 Outlook for 1998-99 30 Review 30 The political scene 35 The economy 38 Mining

39 Quarterly indicators and trade data

List of tables 9 Zambia: forecast summary (domestic) 11 Zambia: forecast summary (external) 18 Zambia: copper and cobalt production, 1998 19 Zambia: international copper prices 21 Zambia: cereals production estimates, 1997-98 31 DRC: regional distribution of ministers, government as of June 1st 1998 39 Zambia: quarterly indicators of economic activity 40 Democratic Republic of Congo: 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 Democratic Republic of Congo: trade with major partners

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List of figures 11 Zambia: gross domestic product 11 Zambia: kwacha real exchange rates 29 DRC: gross domestic product

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July 30th 1998 Summary

3rd quarter 1998

Zambia Outlook for 1998-99: Kenneth Kaundas sudden and presumably forced retirement from politics and the leadership of UNIP will further weaken the party. As yet, no clear successor has emerged, and factional squabbling is expected to continue, while the decision to end the boycott of forthcoming local elections indicates that UNIP supporters are aware of the partys weakened position. UNITAs recent capture of several towns along the Angolan border with Zambia has increased the likelihood that Angolan government troops will attack its bases from within Zambian territory. The finance ministers gamble that donors will bail out the debts of the mining parastatal, ZCCM, to the private sector could backfire. Donors are likely to disburse pledged funds in the next few months. However, they will wait as long as possible in the hopes of pressuring the government into completing the ZCCM privatisation process. Inflation will remain high, and the exchange rate could come under more pressure should donor funds fail to materialise. Following the collapse in negotiations for the sale of ZCCM assets and a shortfall in copper production, overall real GDP for this year is now forecast to fall by 1.9%, and rise by 2.8% in 1999. Review: Although the circumstances surrounding his release from detention are unclear, Mr Kaunda seems to have traded a continued career in politics for his freedom. Splits in UNIP have emerged since then, and the party has announced that it would contest local elections although none of its preconditions for doing so have been met by the government. A cabinet reshuffle has led to changes in the key portfolios. Donors have pledged $530m in project and balance-of-payments support in May, but funds have not yet been disbursed. The National Christian Coalition has announced its intention to form a political party. Angola has continued to accuse the government of allowing UNITA to operate from within its territory. Foreign-exchange levels remain low, and the exchange rate has depreciated considerably in May-June in part because of the strong depreciation of the South African rand. The Bank of Zambia has raised interest rates and the stock exchange suffered a severe blow. ZCCMs creditors in the energy sector have appealed to the government to pay ZCCMs debts, and talks between ZCCM and Copperbelt Energy Consortium over the sale of the Nkana and Nchanga mines have collapsed. Copper production figures for the first quarter of 1998 indicate a sharp drop in output. Zambias agricultural sector has been hit hard by El Niño and faces a cereals deficit for this year.

Democratic Republic Outlook for 1998-99: Although the release of an opposition leader, Etienne of Congo Tshisekedi, from internal exile and the resumption of arrears payments to the IMF are signs that the Kabila government is beginning to feel less immune to domestic and international pressures, the ruling AFDLs repressive measures will continue. The governments heightened sense of paranoia with regard to its hold on power will prohibit progress towards democratisation and continue to strain its relations with the international donors. Relations with Rwanda and Uganda will continue to deteriorate as long as the government fails to put an

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end to escalating violence in the east, and the recent removal of several Tutsis from high-level positions will not send Rwanda encouraging signals. Economic policymaking remains fragmented and incoherent, and economic growth is expected to remain depressed. It remains unclear whether the resumption of minimal arrears payments to the IMF will be sufficient to clear the way for donor funds. The launch of the new currency will be a crucial test of the governments commitment to economic stabilisation. Review: Mr Tshisekedi was released from detention in early July, but a number of his supporters were arrested shortly thereafter, and several officials remain in detention. The government has made some moves towards tackling corruption by targeting ministers. Mr Kabila has appointed a new government, which includes more ministers with ties to his home province, Katanga. Those who worked with the Mobutu government have been excluded from the eligibility for membership in the Constituent Assembly. A number of Mr Kabilas opponents have been organising abroad. A more severe threat to his power is growing in the eastern part of the country where violence is escalating. The UN has released its report on alleged massacres of Hutu refugees during the 1996-97 war, and has implicated the AFDL. The government has denounced the findings of the report. Uganda and Rwanda have turned down Mr Kabilas invitation to attend a regional security summit in mid-May. Copper and cobalt production in 1997 was lower than expected, and the mining sector has failed to attract significant investment. The government has made its first arrears payment on its debt, and launched the new currency. Late note: At the time of this report going to print, Banyamulenge soldiers of the Forces armées congolaises, allied with other loose groupings of soldiers, had staged an uprising in the eastern part of the country which quickly gathered momentum. A western front opened days later and rebels were closing in on the capital, Kinshasa, in late August. 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 Christon Tembo

Key ministers Agriculture & fisheries Amusaa Mwanamwambawa Commerce, trade & industry Enoch Kavindele Communications & transport Dawson Lupunga Community & social development Samuel Miyanda Defence Chitalu Sampa Education Godfrey Miyanda Energy & water development Ben Mwila Environment Alfeyo Hambayi Finance Edith Nawakwi Foreign affairs Keli Walubita Health Nkandu Lou Home affairs Peter Machungwa Information & broadcasting David Mpamba Labour & social services Newstead Zimba Lands Anoshi Chipawa Legal affairs Vincent Malambo Local government & housing Bennie Mwiinga Mines Syamukayumbu Syamujaye Office of the president Eric Silwamba Science & technology Lawrence Shimba Sport & youth development William Harrington Tourism Katele Kalumba 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 2,241 3,298 3,970 5,156b Real GDP growth (%) 6.8 3.5 2.3 4.9 2.9b Consumer price inflationc (av; %) 183.3 54.6 34.9 46.3d 24.8b Population (m) 8.94 9.20 9.37 9.65 9.94 Exports fob ($ m) 949 1,057 1,186 975 1,122 Imports fob ($ m) 950 928 869a 1,199 1,144 Current-account balance ($ m) 88 185 314 330 229 Reserves excl gold ($ m) 192.3 268.1 227.7 222.7 170.0 Total external debt ($ bn) 6.82 6.61 6.85 6.85d 7.12 External debt-service ratio, paid (%) 34.9 31.7 205.3 25.7 29.7 Copper outpute (000 tonnes) 403 354 307 320d 378d Exchange rate (av; ZK:$) 452.76 669.37 857.23 1,203.71d 1,334.00d

July 24th 1998 ZK1,962.5:$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 b c d e f EIU estimates. Official estimate. Low-income index, urban areas. Actual. ZCCM financial years starting April 1st. Based on partners trade returns, subject to a wide margin of error.

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Outlook for 1998-99

Mr Kaundas retirement The agreement between those who brokered the release from detention of Kenneth will weaken UNIP Kaunda, the former president and leader of the opposition, United National Independence Party (UNIP), was that Mr Kaunda would retire gracefully from politics, fashioning his retreat after that of Julius Nyerere, formerly a president of Tanzania and now an elder statesman. On the face of it, the idea seems plausible enough, and was given practical momentum by Mr Kaundas solemn pronouncements that he would concentrate on pan-African issues. However, the crucial difference between Mr Kaunda and his role-model is that Mr Nyereres Chama Cha Mapinduzi (CCM) is still the ruling party in Tanzania, while Mr Kaundas UNIP has never been in a weaker position than it is now. Mr Kaundas decision in June to reverse the planned UNIP boycott of forthcoming local elections in spite of the governments refusal to meet any of its preconditions indicates that he realises this and now believes that the party cannot afford another self-induced electoral wipe-out. All of this is good news for the governing party, the Movement for Multiparty Democracy (MMD). In its weakened state and without central leadership, UNIP is unlikely to represent a real threat to the MMD, while its anticipation in elections will lend credibility to an MMD victory. The release of Mr Kaunda could also allow it to recover some lost ground with donors as well as rights organisations, although this will depend on how it handles potential violations by Mr Kaunda of his exile from politics.

as a successor has yet to Fortunately for UNIP, local electionswhich were supposed to take place in be identified Junehave been delayed, and are now rumoured to be scheduled to take place in September. However, this still does not give the party much time to find a new leader and for him or her to establish some kind of control over the party. Mr Kaundas semi-coerced retirement leaves UNIP increasingly vulnerable to internal squabbling, as no clear successor has yet been identified although signs are that Mr Kaunda may be pushing his sons into the job. Factionalism at the top has become particularly bitter of late, and for the time being only Mr Kaunda has the ability to unite the party. However, he will be severely constrained by a vigilant government-controlled press which will be watching closely whether he sticks to his new role of the apolitical statesman. In its pursuit, the press will have the help of plenty of disaffected UNIP central committee members. After the forthcoming special national congress at which his successor is to be selected, Mr Kaunda may find it increasingly difficult to exert the kind of backstage pressure he is used to.

The government has yet to The attorney-generals theory that a deeper political conspiracy, rather than prove its case in the the isolated actions of several drunken soldiers, are behind the 1997 coup treason trial attempt has yet to be seriously examined in the treason trial and it is too early to say how the theory will fare when it is. The state has dropped two of its cases against coup suspects so far, but maintains its case against Dean Munggomba, the leader of the Zambia Democratic Congress (ZDC) and Nakatindi Wina, the former chairwoman of the MMDs womens committee. If either of their cases are dismissed through the application of the nolle prosequi clausebasically a

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dismissal of the case of the unspecified reasons rather than a retraction of the actual chargesit will become increasingly obvious that the states accusations are based more on malicious intentions than actual evidence of the accuseds guilt.

Zambian diplomacy may Regional events will also continue to dominate Zambias foreign policy. One of not keep Angolan troops the many casualties of the Angolan conflict has been the warring parties respect at bay for the sovereignty of its neighbours. Both the Democratic Republic of Congo (DRC, formerly Zaire) and Congo (Brazzaville) are host to the Angolan governments Forcas Armadas Angolanas (FAA), who arrived without invitation, and facilitated to a great extent the overthrow of the late former Zairean president, Mobutu Sese Seko, and the Congolese president, Patrick Lissouba, who have both been replaced by allies of the Angolan government. While the Zambian president, Frederick Chiluba, faces no such threat to his position, the Angolan government continues to make it clear that it suspects that the armed opposition, União para a Independência Total de Angola (UNITA), operates from Zambian soil and that it may take action against UNITA troops within Zambia. The Zambian government is trying to avert such action diplomatically, and has embarked on a flurry of missions to assure the Angolan government that there is no UNITA presence in the country. However, the Angolan government remains unconvinced and UNITAs recent capture of two Angolan towns near the Zambian border has increased the likelihood of intervention by FAA troops from within Zambian territory.

Ms Nawakwis gamble After enjoying the success of securing significant pledges of donor funding at could backfire the May Consultative Group meeting of donors in Paris, the finance minister, Edith Nawakwi, now faces stiffer challenges. Although the recent spate of re- placements of key figures at the Ministry of Finance merely seems to indicate her desire to consolidate her position in much the same way as her predecessor, Ronald Penza, her uncompromising approach to the controversy over com- plicated debts that Zambia Consolidated Copper Mines (ZCCM) owes to the private energy sector (see Energy and mining) is somewhat troubling. Ms Nawakwis brinkmanship strategyshe has ruled that government is not responsible for resolving the issuemay be an attempt to pressure donors to bail out one of the debtors. However, the chances that this will happen are slim.

Pressure is on to settle the If Ms Nawakwi is intending to pressure donors into bailing out ZCCM, it would sale of ZCCM assets be just the latest move in the increasingly complex game between donors and the government. Donors have pledged balance-of-payments support to the government in May, but disbursements of the funds have so far not been made. Although no explicit linkage was made between the completion of the stalled sale of ZCCMs Nkana and Nchanga mines and the disbursal of funds, donors have not been happy with the governments handling of the process, and the government will feel increasingly under pressure as long as funds are delayed (2nd quarter 1998, page 8). However, the government has not yet demonstrated renewed urgency to sell the Nkana and Nchanga mines and it remains to be seen which side will crack first. Donors could decide that they do not want their original pledges of support to look pointless and ill-judged and disburse at least some funds, or the government may eventually succumb to

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such substantial financial pressures that it is forced to sell ZCCM to the next available bidder no matter how low the offer. The first scenario seems more likely, but the governments obvious confidence that it can consistently out- bluff the donors irritates them and could backfire this time around.

Zambia: forecast summary (domestic) (% change, year on year) 1996a 1997b 1998c 1999c Real GDP 4.9 2.9e 1.9 2.8 of which: agriculture 18.0 6.0 0.0 1.8 manufacturing 4.0 3.2 1.5 3.7 mining 3.8 2.0 4.0 4.0 Average consumer pricesd 46.3e 24.8 25.7 24.7

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

Pressure for an The government faces growing pressure to elaborate a sound anti-poverty strat- anti-poverty policy will egy which rectifies the decline in the standard of living of impoverished Zambians grow as a result of the economic reforms imposed in the 1990s. The issue is becoming increasingly poignant as macroeconomic stability remains elusive in spite of widespread retrenchments and austerity measures. The government does not have the option of abandoning the reform programme as this would almost certainly mean the end of economic assistance from donors, while eroding the cornerstone of the MMDs platform. Consequently, the government has few options but to continue to plead for debt relief. Although the campaign to ease the qualification criteria for entrance into the highly indebted poor countries (HIPC) initiative has gained a prominent political profile in Europe in recent months and appears to have the support of the World Bank, it is still far from becoming official policy among major donors. More likely, the Zambian government will maintain the status quo, while the majority of Zambians will continue to experience declining standards of living.

Potential buyers will wait Copper and cobalt production at non-ZCCM mines is picking up and is set to for ZCCMs desperation to increase further, demonstrating to an envious ZCCM just what investment in mount infrastructure can do for production figures. Meanwhile, delays in the further privatisation of ZCCM assets seem inevitable. No prospective buyers have been prepared to put in a formal offer for the Nkana and Nchanga mines, indicating that they think that the longer they wait, and the higher ZCCMs debt and desperation levels mount, the lower the price they will eventually have to pay. This is a pretty safe bet: as its many creditors seek to call in their debts in the coming months, ZCCMs position is only expected to weaken. ZCCM and the government will be angry at Anglo-American Corporation (AAC)s linkage of their purchase of Konkola Deep with settlement of the Nkana sale, and will probably cite it as evidence of collusion between AAC and members of the Copperbelt Mining Company (CMC) who were the original bidders for Nkana.

Ratification of the trade Members of the Zambian Chamber of Commerce and Industry (Zacci) have deal with SACU could take been prematurely celebrating the conclusion of the trade deal between Zambia some time and the Southern Africa Customs Union (SACU). Member states must still ratify the deal, and this could take some time. However, the agreement is undeniably

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good news for Zambia, particularly for its agro-industrial sector, which stands to benefit most from greater access to SACU markets. The recent sharp depreciation of the South African rand will limit South Africas ability to import goods from countries with strong currencies, allowing Zambia to take advantage of the continued weakness of the kwacha relative to the rand and increase its exports to South Africa. However, Malawi has had a preferential trade deal with SACU for some time which has barely affected the trade imbalance between the two, and Zambia is unlikely to benefit greatly in the immediate future.

The trend away from It is increasingly likely that Zambia will be unable to meet its cereals deficit this maize production will year. Harvests throughout Southern Africa have been unimpressive while inter- continue national donors are more likely to make the bulk of their cereal donations to desperately needy countries such as Sudan, Ethiopia and Eritrea. Purchased and donated goods will probably avert starvation for most Zambians, but malnutrition levels are likely to increase. Although weather forecasts for the next season are uncertain, the shortage of agricultural inputs, particularly fertiliser, seems certain to continue, adversely impacting the maize crop. Given better weather conditions, cereals harvests in the 1999 season will improve on this years levels but the longer-term trend away from maize will continue. To some extent, this is a positive development, as agricultural policy under Mr Kaunda encouraged maize production in unsuitable areas, which are once again being planted with suitable crops.

Inflation will remain high The recent depreciation of the South African rand will further stoke strong and the exchange rate inflationary pressures in the Zambian economy. The kwacha depreciated could fall significantly in May and June, dropping from ZK1,880:$1 in early May to ZK1,975:$1 in the last week of June. The exchange rate stabilised in July, reaching ZK1,962:$1 on July 24th. Assuming that balance-of-payments financial support will be disbursed in the next few months, the EIU does not expect a significant deterioration of the exchange rate over the course of the next two quarters, and have revised our forecast for the average annual exchange rate downwards only slightly, to ZK1,985:$1 in 1998. However, if the funds are not released, the kwacha could come under further pressure towards the end of the year. Although year-on-year inflation reached 25.7% in May, we had already factored high inflation into our previous report and have therefore revised our forecast for average annual inflation to increase slightly to 25.7%. Recent sharp increases in interest rates will constrain both consumer spending and manufacturing investment, dampening growth prospects.

Growth will be negative There is ongoing uncertainty that the ZCCM privatisation process will be com- in 1998 pleted before the end of the year, and if copper output does not increase in the last two quarters of 1998 annual production could register a 25% drop from already low production levels in 1997. Meanwhile, the EIUs third-quarter World Commodity Forecasts has revised downwards its assumptions for global prices primarily owing to surplus supplies and low growth in demand in Asia and Australasia. We now forecast the annual copper price to average only 77.4 cents/lb in 1998 and 74.5 cents/lb in 1999. Copper is Zambias dominant export and we have consequently revised our forecast for export earnings further downwards, to $877m in 1998. In addition, the El Niño weather pattern

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has caused severe flooding in some areas of the country, and drought conditions in others, and growth in the agricultural sector will remain constrained. Conse- quently, we have revised our forecast for GDP growth in 1998 further downwards, and now anticipate real GDP to fall by 1.9%. GDP growth is expected to rebound to 2.8% in 1999, assuming a return to normal weather conditions and that the completion of the ZCCM privatisation process leads to a recovery of copper production.

Zambia: forecast summary (external) ($ m unless otherwise indicated) 1996a 1997a 1998b 1999b Merchandise exports fob 975 1,122 877 921 of which: copper 593 746 569 609 Merchandise imports fob1,073 1,144 1,025 1,178 Current-account balance 330 229 317 398 Average exchange rate (ZK:$) 1,203.7c 1,333.81c 1,985.00 2,558.00

a b c EIU estimates. EIU forecasts. Actual.

Zambia: gross domestic product Zambia: kwacha real exchange rates (c) % change, year on year 1990=100 6 120 ZK:DM 4 110

2 100

n/a 0 90

Zambia -2 ZK:$ Africa 80

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

Review

The political scene

Mr Kaunda is released and The former Zambian president, Kenneth Kaunda, was released from detention quits politics on June 1st, the first day of the trial of the 80 other people accused of involvement in the failed coup attempt in October 1997 (4th quarter 1997, page 8). Upon his release, Mr Kaunda announced that he intended to retire from the leadership of the United National Independence Party (UNIP). Mr Kaundas announcement was received with great disappointment by most UNIP members, who seem to fear that there is no suitable candidate to replace him. Follow- ing a three-day central committee meeting in early July, the party accepted Mr Kaundas resignation, pledging to hold elections.

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The circumstances The circumstances surrounding Mr Kaundas release and the states decision to surrounding his release drop charges against him remain the subject of many rumours. Various UNIP are unclear and South African sources have privately informed the press that the president of South Africa, Nelson Mandela, brokered a deal, with the help of regional leaders, between members of Mr Kaundas family, the UNIP legal team and the government, whereby Mr Kaundas release was made contingent upon his retirement from politics. However, both Mr Mandela and Mr Kaunda have officially denied such claims. Vincent Malambo, the minister of legal affairs, further confused the situation when he announced on June 5th that the decision to drop charges against Mr Kaunda was because of unspecified inappropriate circumstances apparently involving neither the quality of evidence against Mr Kaunda nor any political deal, but which he was unable to comment on because the issue was judicial. Mr Malambo went on to welcome Mr Kaundas decision to quit politics, saying that Zambia yearned to have a father of the nation like Julius Nyerere, Tanzanias former president, a line which has subsequently been echoed throughout the government-controlled media.

but are unlikely to be Mr Kaunda is reported to be unhappy at Mr Malambos insinuation that the aired in court state still believes him guilty of misprision of treason, and has threatened to take the matter to court to force the government to reveal the reasons for his release and clear his name. However, such a court case is likely to lead to the unravelling of the deal between Mr Kaundas supporters and the government, and reveal the identity of those involved. Although the government stands to lose more from such an exposure, it seems more likely that Mr Kaundas threat is intended more as a warning to the government to let the matter rest. If this was indeed the strategy, it seems to have worked as the government has remained noticeably quiet about the issue since.

Squabbling within UNIP is Meanwhile, Mr Kaunda has been busy attending to UNIPs internal problems. worse than ever Following several weeks of open hostility between Sebastian Zulu, the UNIP secretary-general and his supporterswho include the party chairman, Malimba Mashekeand Mr Kaundas sons, Wezi Kaunda and Phanji Kaunda, and their supporters, Mr Kaunda suspended Mr Zulu from his position on May 26th. Mr Zulu challenged his suspension on the grounds that Mr Kaunda had no right to make such a decision while in detention, a position gleefully endorsed by Michael Sata, the Movement for Multiparty Democracy (MMD) minister without portfolio. Within UNIP, Mr Zulu was widely criticised for disloyalty to Mr Kaunda, particularly by the secretary for publicity, Bwendo Mulengela, who supports Mr Kaundas sons, prompting Mr Zulu to threaten legal action. Following Mr Kaundas release, Mr Zulu told the state-owned Times of Zambia that the recent changes in the party were a covert attempt by Mr Kaunda to set up Wezi Kaunda as the new leader of the party, while Mr Masheke told the state-owned Mail on Sunday that Mr Kaundas departure did not represent a problem for UNIP as there were plenty of people who could replace him, though he declined to name any. It therefore came as no surprise that Mr Zulu and Mr Mashekes appearances at the UNIP congress in early July were greeted with chants of sell-outs should go from members of the rank and file. On July 10th Mr Kaunda unconvincingly assured the party that all

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misunderstandings had been sorted out, yet prohibited UNIP members from using the press to air their grievances with each other.

UNIP will contest local UNIPs internal wranglings have distracted attention from its turn-around dec- elections after all ision to participate in forthcoming local elections. Elections were scheduled for June and a new date has yet to be announced, but September is now seen as likely. Until now, UNIP, as well as most other opposition parties, was commit- ted to boycotting the elections (2nd quarter 1998, page 7). Since the government has refused to meet any of the preconditions the opposition set for its participation, it is likely that UNIPs participation in the elections was one of the conditions attached to Mr Kaundas release. It is clear that those heads of state suspected of brokering the deal were dismayed at the opposition boycott of the 1996 elections and concerned that another boycott would further undermine Zambian democracy. Part of the decision to participate will undoubtedly also have been linked to UNIPs own concerns that another poll boycott would only serve to undermine its standing and play into the hands of the MMD.

Rajan Mahtani is arrested The trial of 80 people accused by the government of participating in the failed for treason and then October 1997 coup attempt began on June 1st. As expected, the case is proceed- released ing slowly, and soldiers testimonies so far confirm the theory that drunken idiocy rather than political conspiracy inspired the coup attempt. A temporary addition to the line-up of suspects was Rajan Mahtani, a former Finance Bank director, who fell out of favour with the government in spectacular fashion after a period as one of its closest friends. Mr Mahtani was arrested in early June and charged with financing Nakatandi Wina in her alleged role in the coup, only to be released six weeks later. As with Mr Kaunda, the state entered a nolle prosequi without giving any reason. In Mr Mahtanis case, the reason appeared to be the granting by a Lusaka magistrate of his request for a preliminary investigation into the charges against him, which the government, no doubt with good reason, decided was best avoided. What is clear so far is that Ms Wina and her husband, Sikota Wina, the MMD chairman, received loans from the Finance Bank on a number of occasions, apparently with minimal collateral. The Winas have insisted that these were normal business loans, while Mr Mahtani maintains that they were for the MMDs 1996 election campaign. The Finance Bank nearly folded earlier this year after a number of government departments withdrew their deposits, restoring them once Mr Mahtani was removed as director. Mr Mahtani is also the chairman of Zambia Express Airways (Zamex), the airline company which the Zambian government bizarrely stripped of its permission to fly between London and Lusaka in April (2nd quarter 1998, page 19). Aside from his possible role as financier of the coup attempt, Mr Mahtanis main crime appears to have been his failure last year to secure a substantial maize import. It is widely rumoured that the deal would have included a substantial commission for the government. Meanwhile, opposition parties and civil society groups have denounced what they see as the governments abusive application of the nolle prosequi clause, claiming that the government is using this legal loophole merely as a means to temporarily detain its enemies with no evidence.

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President Chiluba removes Meebelo Kalima, the former director of public prosecutions (DPP), was uncere- a controversial official moniously suspended by the presidents office pending investigation into suspected misconduct on May 16th. Mr Kalima resigned shortly afterwards, and Mr Munthali is now in place as the acting DPP. Mr Kalima has been unpopular outside government circles for some time. He was vice-chairman of the Electoral Commission during the disputed 1996 general election and was appointed DPP in spite of the disapproval from most opposition parties and civil society groupings. In July 1997 the Anti-Corruption Commission (ACC) accused Mr Kalima of hampering its investigations into the housing minister, Bennie Mwiinga (3rd quarter 1997, page 11). The Inter-Africa Network for Human Rights and Development has accused Mr Kalimas office of losing a number of dockets for important cases and has urged the investigative tribunal appointed by Mr Chiluba to complete its work as quickly as possible.

The finance minister The finance minister, Edith Nawakwi, triumphed early in her tenure when builds her own team Zambias donors pledged $530m in financial aid for 1998 at the Paris Club meeting in mid-May (see Foreign trade and payments). At the meeting Ms Nawakwi promised that Zambia would conduct a complete reform of the police and prison service provided it was receiving the necessary financial assistance. Ms Nawakwi also echoed the sentiments of her predecessor, Ronald Penza, that donors should clarify conditionalities for lending rather than punishing the Zambian government for its actions on an ad hoc basis. Since the meeting, Ms Nawakwi has been busy replacing Mr Penzas appointees to key positions with her own people. On June 22nd Patrick Chimya was replaced as the head of the Zambia Revenue Authority (ZRA) by Emmanuel Kasonde, the former finance minister and ex-National Party (NP) member. Mr Kasonde rejoined the MMD in June 1997 (3rd quarter 1997, page 11). Ms Nawakwi also replaced Gershon Mumba as managing director of the Development Bank of Zambia with Dipak Malik, formerly of ZCCM, and Mr Simukoko as managing director of the Zambia National Building Society with Clement Mugala. The top positions in the Zambia Privatisation Agency (ZPA), a semi-autonomous government body, remain unchanged for now, and the organisation appears to be reclaiming some of its powers and assuming a stronger role in attempts to proceed with the privatisation of ZCCM than it did in Mr Penzas final months as minister of finance.

Civil service unions take Following the failure of a civil servants strike on March 9th to change the their concerns to governments mind about the 1998 civil service wage freeze (2nd quarter 1998, courtagain page 13), civil service trade unions decided in early June to take their case to court. The unions have been down this road before. On February 1st 1996 the Lusaka Industrial Court awarded civil servants a 45% pay increase (1st quarter 1996, page 12) which was later rejected by Mr Penza on the grounds that there was no money to pay them (2nd quarter 1996, page 9). Given that this is also the governments current reason for maintaining the wage freeze, the unions prospects of securing wage increases appear slim whatever the court decides. The unions, however, appear to be counting on Ms Nawakwi being less cavalier about court rulings than Mr Penza.

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Doctors go on strike The health minister, Nkandu Lou, issued a circular to doctors on May 20th apparently suspending their on-call allowances, and doctors at the University Teaching Hospital (UTH) responded by going on strike a week later. Ms Lou later reversed the circulars announcement, and somewhat improbably claimed that it was merely intended to generate discussion, but by then doctors had decided to continue their protest until a member of other long-standing agreements had been addressed. Doctors are paid ZK200,000 (£102) per month, and one of their main complaints was about pay. The doctors strike soon spread to Ndola and Kitwes main hospitals, receiving the backing of the Civil Servants Union of Zambia (CSUZ), although the executive body of the Resident Doctors Association called off the strike on June 1st, for what it termed ethical reasons. Doctors ended the strike shortly afterwards to allow negotiations with the government a chance to resolve the issue, while unionised workers at UTH embarked on industrial action on June 9th. In early July Ms Lou gazetted legislation forbidding doctors working at public health centres to strike and empow- ering the Medical Association of Zambia (MAZ) to punish violators, while the MAZ has already independently asked doctors who went on strike to justify why they should not be punished. The Zambia Council of Trade Unions (ZCTU) and a number of other civil society bodies have denounced the legislation and repeated their call that the right to strike be enshrined in the constitution.

The National Christian The National Christian Coalition (NCC), headed by Nevers Mumba, an evan- Coalition plans to become gelical pastor and one of President Chilubas persistent critics, announced its a political party intention to become a political party under the new name of the National Citizens Coalition on June 19th. The government has been surprisingly touchy about criticism from the NCC in recent months, and Mr Sata in particular has gone out of his way to discredit Mr Mumba. The governments sensitivity to criticism from the NCC may in part be explained by the fact that Mr Chiluba is himself a devout Christian as well as by the fact that a party with strong ties to the Church could have the potential to attract a population disillusioned with the MMD government. Since the NCCs latest announcement, the Registrar of Societies has commented that the move would be illegal and that Mr Mumba could face prosecution if he proceeds.

Renewed fighting in Zambian troops stationed in Angola to help enforce the terms of the Lusaka Angola threatens the peace accords returned home in early June and Mr Chiluba commented that the Zambian border peace process in Angola was on track. On June 17th the Angolan president, Eduardo dos Santos, met the Zambian foreign minister, Keli Walubita, in Luanda amid ongoing Angolan accusations that Zambia is willingly or unwill- ingly allowing União para a Independência Total de Angola (UNITA) to operate from its territory. A joint Angolan-Zambian delegation was dispatched to the areas in question but found no evidence of UNITAs presence. Since then, Angola has slid further towards renewed civil war, and Unita has reportedly recaptured the Angolan towns of Lumbala Nguimbo and Cazombo near the Zambian border. It would be difficult for Angolan government forces to attack these towns from inside Angola, but Angolan army units are reportedly stationed in Kolwezi, near the Angolan and Zambian border in the Democratic Republic of Congo (DRC, formerly Zaire). According to the UNs Integrated Regional Information Network (IRIN), the Angolan government has made it

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clear that it will not hesitate to order its troops to cross Zambian territory and wrest these towns from UNITAs control.

The economy

Foreign exchange is still Despite donor pledges of $530m for 1998, including $235m in balance-of- in short supply payments support at the Paris Club meeting in mid-May, it appears that none of the money had arrived by early July, leaving Zambia still critically short of foreign exchange. According to recent figures from Citibank, foreign-exchange transactions through the commercial banking system declined by $202m year on year in the first half of 1998, from $762m in the corresponding period of 1997. The situation had reached a critical stage by May, as Zambia Consolidated Copper Mines (ZCCM) had released only $2m onto the foreign-exchange markets. By mid-June matters had improved slightly thanks to ZCCMs release of about $30m over the course of the month.

Asian woes increase the In addition to low foreign-exchange levels, the effects of the Asian economic inflationary pressures crisis have also played an important role in the deterioration of the countrys exchange rate. The kwacha has continued to depreciate over the quarter, from ZK1,880:$1 on May 8th to a low this year of ZK1,999:$1 on June 24th, repre- senting a 37% decline in value year on year. The slippage of the exchange rate is partly owing to a knock-on effect of the rapid depreciation of the South African rand in the same period, which fell from R5.09:$1 in late May to R6.18:$1 by July 24th. The depreciation of the rand seems to have been caused largely by investor and speculators hostile sentiments towards emerging markets after severe economic difficulties in Asia.

The BoZ responds by Inflation, which averaged 24% in 1997 and reached a year-on-year rate of tightening monetary 21.4% in the first quarter of 1998, rose by 2.3% in April and another 1.3% in policy May. The Bank of Zambia (BoZ, the central bank) has responded by promising to tighten monetary policy further, and interest rates have risen since. The 280-day Treasury-bill rate rose from 13.12% in April to 18.8% in June. For the year, inflation is estimated to average 26%.

The stock exchange is The depreciation of the currency in May and June and general investor uncer- dealt a blow tainty have adversely affected the Lusaka Stock Exchange (LuSE). Total market capitalisation has fallen after registering a 120% year-on-year increase in dollar terms in 1997, rising to $630m, 210% higher than when trading began in February 1994. By July capitalisation had fallen sharply, to $549m, 15% lower than in December 1997 and only 183% higher than the 1994 level. So negative is the sentiment that it now appears possible that none of the remaining companies that had been planning to list this year will do so, including British Petroleum Zambia. Low trading volumes of only $2,000 in the first week in July also indicate depressed interest in the exchange, as average trading levels per week for the first months of 1998 are estimated at $20,000.

The government The Ministry of Finance has revised upwards its figures for revenue collection underspends on capital in the first quarter, from ZK248bn ($126m) to ZK254bn, and has revealed that expenditure government expenditure in the period was ZK232.7bn. Current expenditure

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was roughly in keeping with what was allocated in the budget presented in January, while capital expenditure, at ZK9.63bn, was only 7% of the annual budgeted total of ZK137.5bn, largely because anticipated donor funding had not yet come through.

A new report finds that The UN Development Programme (UNDP) report launched in Lusaka on Zambian poverty is April 2nd concluded that two-thirds of Zambians were poor and that their living worsening situation had not improved during the 1990s (2nd quarter 1998, page 15). A report released on July 7th by the Zambian non-governmental organisation (NGO), the Campaign Against Poverty, concurs with the UNDPs overall findings on poverty levels, but concludes that the standard of living of many Zambians has in fact declined in the 1990s. The report found that infant mortal- ity levels have more than doubled from 97 deaths per 1,000 births in 1980 to 197 per 1,000 in 1998 and that life expectancy had fallen from 54 years in the mid-1980s to less than 45 years today. The report also found that primary school enrolment had declined from 96% in the mid-1980s to less than 80% today, leaving over 500,000 school-aged children without access to schooling. The report also concluded that chronic malnutrition affects nearly half of the poor- est rural households and over 40% of the chronically poor in urban areas.

Mining and energy

Ms Nawakwi risks a The finance minister, Edith Nawakwi, has been confronted with some tough blackout at ZCCM decisions in the recent dispute between the government-run Zambia Electricity Supply Corporation (Zesco), and the Copperbelt Energy Consortium (CEC). The CEC announced in mid-June that Zambia Consolidated Copper Mines (ZCCM) payment arrears amounted to $55m, forcing it to incur debts of a similar magnitude with Zesco, and the CEC has appealed to the government to intervene. However, Ms Nawakwi has taken the position that because Zesco owes the government $40m in back taxes, the government is not responsible for resolving the matter, and that Zesco must resolve the issue directly with the CEC. One way out of the impasse would be for the government to provide ZCCM with the funds to pay its debts to the CEC. Indeed Syamukayumbu Syamujaye, the minister of mines promised as much when he stated on July 23rd that the government would settle ZCCMs outstanding debts and urged ZCCMs suppliers to continue servicing the company. However, ZCCMs debts are huge and suppliers are sceptical that the government will honour all of them. Furthermore, if the government were to pay ZCCMs debt to the CEC in order to avoid a shutdown of ZCCMs power supply, this would encourage other suppliers to use whatever leverage they have to force the settlement of their unpaid bills.

ZCCM privatisation Valentine Chitalu, the chairman of the Zambia Privatisation Authority (ZPA), encounters more obstacles confirmed on June 22nd that talks between the Avmin-led Kafue consortium, now called the Copperbelt Mining Company (CMC), and ZCCM over the sale of the Nkana and Nchanga mining complexes had been broken off. The talks initially collapsed on April 2nd when the CEC sharply reduced the price it was offering in the wake of the collapse in the copper price. Negotiations between the two resumed shortly afterwards and the CEC improved its offer and

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dropped its demand that ZCCMs port handling facilities in the Tanzanian port of Dar es-Salaam be included in the package. Mr Chiluba said in early June that the two sides were still talking, but ultimately CECs revised offer was rejected by ZCCM as too low. There have been rumours since then that other companies are interested in acquiring the mines, including Ispat International, owned by a British national, Laskhmi Mittal, but no firm offers have been made. Ispat International already owns a stake in the Luanshya copper mine. Mr Chitalu has stated that he remains confident that the matter will be re- solved by the end of the year.

AAC links Konkola Deep The South African company Anglo-American Corporation (AAC) has nearly deal to sale of the Nkana completed its lengthy feasibility study of the Konkola Deep mine and has and Nchanga mines stated that it hopes to discuss the findings of the study with the government in the next two months. AACs annual chairman statement did not reveal any new information about the mine itself, but did state key conditions that must be met in order for AAC to decide to pursue the project: that AAC secure sufficient financing for the venture; and that the privatisation of ZCCM be concluded. The latter condition indicates that AAC will not proceed with work on the Konkola Deep mine before the sale of the Nkana and Nchanga mines is complete, a condition which is likely to be met with opposition from the ZCCM negotiating team when the two meet to discuss the findings of the feasibility study. Improbable rumours that ZCCM has approached AAC to take over the management of the company while the privatisation process is being worked out have recently been circulating. AAC has denied that the government has approached the company with this proposal and has said that if it should, AAC would need to be sure that ZCCM could pay for its services, and that it would therefore insist upon securing guarantees from multilateral or bilateral funding sources.

Zambia: copper and cobalt production, 1998 (tonnes) ZCCM Other ZCCM Other copper copper cobalt cobalt Jan 20,165 477 447 8 Feb 15,581 3,148 245 47 Mar 20,089 3,022 372 74 Apr 17,491 1,593 308 39 May n/a 5,277 n/a 68 Source: Bank of Zambia.

Copper production looks Estimates currently vary about the magnitude of ZCCMs losses, but some set to fall by up to 25% observers have estimated that the company is losing $2m a day. In an attempt this year to cut costs, ZCCM has been laying off ex-patriate staff in its Nkana and Nchanga divisions, 600 workers at Mufulira have been sent on forced leave and at least another 300 are expected to follow them this year. Meanwhile, ZCCMs copper production this year has been extremely low. Total output in the first quarter was only 55,800 tonnes. If production remains at this level in sub- sequent quarters annual output would reach only 223,000 tonnes, a 30% drop from 1997 annual production, which was already unimpressive. However, new investments that are being financed through the Swiss bank UBS should ensure

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that production picks up slightly later in the year. In addition, production is picking up at the privatised mines, and particularly at Chibuluma. The likely net result is that annual copper production in 1998 will be 20-25% lower than in 1997. Meanwhile, international copper prices dropped to their lowest level in February, when they were over 30% lower than a year earlier, but have since picked up a little. The EIUs third-quarter World Commodity Forecasts now forecasts average annual prices in 1998 to drop to 77.4 cents/lb, and to 74.5 cents/lb in 1999.

International copper prices (cents/lb) 1997 1998 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr Jan Feb Mar Apr 109.68 113.61 102.87 86.65 77.09 76.55 75.48 79.25 81.65 Source: IMF, International Financial Statistics.

First Quantums operation In late May Australias First Quantum Minerals announced its first shipment of at Bwana Mkubwa is copper from the Bwana Mkubwa mine, which it acquired in 1996. The com- going well pany is processing copper oxide tailings at a rate of 4,500 tonnes/day, producing both copper cathodes and sulphuric acid. The sulphuric acid plant is apparently doing particularly well, producing 50 tonnes of acid a day above its scheduled 300 tonnes, and its total production for the year is expected to be 70,000 tonnes.

Manufacturing and commerce

Drink Coca-Cola The US conglomerate, Coca-Cola, demonstrated its power in Zambia in early June, when Enoch Kavindele, the minister of commerce, trade and industry, caved in to the companys demands for a reduction in duty levels on Coca-Cola products, in order to avoid the company postponing its investments and pos- sibly pulling out of the country altogether. Although the government has previously ignored similar demands from the tyre manufacturer Dunlop and pharmaceuticals company Johnson & Johnson which both subsequently closed down their Zambian production plants, the prospect of losing the US soft-drinks giant proved too much for it to contemplate. A 25% levy on soft drinks, which was imposed in early 1998, had pushed the price of a bottle of Coke to ZK800 (40 cents) beyond the means of many struggling Zambians, and Coca-Cola argued for months for a reduction of the levy to 9%. Sensing that its case was getting nowhere, Coca-Cola announced in late May that it had post- poned its planned investment in a new bottling plant worth $75m. By June 1st the duty on Coca-Colas products had been reduced to 5%, on the condition that the company immediately proceeded with construction of the bottling plant, which Coca-Cola has said it is prepared to do. Mr Kavindele denied favouring Coca-Cola over other companies, and blamed the increase in the levy to 25% on Alfeyo Hambayi, his predecessor, who is now the minister of the environment. A bottle of Coke now costs ZK500.

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Chilanga cement Patrick Goreman, the managing director of Chilanga cement, complained in complains about business late May that inappropriate legislation has raised the cost of manufacturing in costs Zambia. Mr Goremans complaints also included high import levies, direct taxes and fuel costs, which are considered to be too high and regionally un- competitive. Nonetheless, Chilanga has managed to increase its cement exports from 47,000 tonnes in 1994 to 197,000 tonnes in 1997. The company recently invested more than ZK400m in its plant and machinery for the production of a new cement called Blockmate, which the company intends to market on the Zimbabwean as well as Zambian markets.

Transport and telecommunications

Actel gets a licence The Zambian government has granted an investment licence thought to be worth $52m to the US-owned African Continental Telecommunications (Actel), which aims to establish itself as an important competitor to Telecel Zambia, which recently invested $20m to extend its own coverage in Zambia (2nd quarter 1998, page 19).

The Lusaka-London route There are growing suspicions that the governments withdrawal of Zamexs is cancelled rights to fly the route between Lusaka and London are related more to its hostility towards the companys managing director, Rajan Mathani, than to technical problems. The government recently announced that the route had been abandoned altogether for now, and the lands minister, Anoshi Chipawa, has stated that the route would be reopened for service after unspecified technical and administrative measures were rectified, while declining to reveal how long this would take or what was really the problem with Zamexs proposed operation of the route.

Roan Air is formed Roan Air, formerly ZCCMs airline and prior to that Northern Rhodesia Aviation Services, has been sold to a management buy-out team for $2.5m. The team is now set to spend around $11.6m on new aircraft and equipment. Roan Air has already received authorisation to operate between Lusaka and Windhoek, Namibia, and is seeking permission to fly to Zimbabwe as well.

Agriculture

Zambia is hit hard by A mission from the UNs Food and Agriculture Organisation (FAO) and World El Niño Food Programme (WFP) published their joint crop and food supply assessment report for Zambia on June 4th, having spent just over two weeks in Zambia from late April until mid-May. The mission found that within the Southern African region, Zambia has been hit hardest by the El Niño weather pattern. El Niño- related torrential rains in the north and drought in the south have severely affected harvests and only the Central and Eastern provinces have emerged relatively unscathed. The report estimates that 15% of cultivated land has been lost to flooding in northern Zambia. The researchers also found that many farmers in southern Zambia had lost their entire harvest owing to the drought.

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and the maize harvest is The agricultural sector was further hit by heavy cattle losses following the down by 43% spread of corridor disease (thileriosis) in Southern province, and a nation- wide shortage of inputs, particularly fertiliser. Since most subsistence farmers till the land using cattle driven ploughs, the loss of livestock has had a knock- on effect on the size of the area under cultivation, which the UN missions estimates to have been reduced by 25-30%. The shortage of inputs primarily affected the maize harvest, which has also been reduced by the fact that farmers are increasingly switching to the cultivation of more profitable crops. The mission estimated total maize production in 1997/98 at 548,000 tonnes and total cereals production at 707,000 tonnes. This figure indicates a 43% drop in the 1998 maize crop on 1997, 41% lower than the average for the last five years. The input shortage seems set to persist for most farmers this season as the government confirmed in mid-July that it has ordered the Food Reserve Agency (FRA) only to supply fertiliser to farmers who can put up adequate collateral. This policy will favour relatively prosperous commercial farmers rather than subsistence farmers.

Zambia: cereals production estimates, 1997-98 (000 tonnes) Maize 548 Sorghum 24 Illet 60 Rice 4 Wheat 71 Total cereal output 707 Source: FAO/WFP.

leaving a substantial The UN mission has also estimated that total cereals stocks in the country, shortfall including those held by the FRA, private traders and private households, amounted to 107,000 tonnes, with estimated cereals consumption requirements in 1998-99including human consumption, seed retention, livestock feed and beer brewing1.47m tonnes. This leaves a large deficit of 660,000 tonnes. Com- mercial cereals imports for the season are predicted to reach 364,000 tonnes, which still leaves a deficit of 296,000 tonnes. The UN mission found that while private traders were ready to meet the total rice and wheat deficits through importation, most were reluctant to become involved in maize imports. Millers told the mission that the reluctance to get involved in maize imports was because of the impact of the kwachas depreciation on profits, the scarcity of foreign exchange, and low purchasing power among Zambian consumers. However, these factors also affect rice and wheat importers, and a more realistic answer appears to be that traders are fearful that the government could intro- duce some form of price controls once the maize is inside the country, thus destroying their profit margins.

The WFP is providing On June 23rd the WFP signed a $25m agreement with the Zambian govern- emergency relief ment to provide 47,723 tonnes of food aid and essential non-food items, most of which will be maize meal. Most of the aid is to be targeted at over 200,000 malnourished children and pregnant women, and about one-third is reserved for low-income households in informal urban settlements as part of the WFPs food for work programme. This still leaves Zambia with a cereals deficit of

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249,000 tonnes. The WFP hopes that this deficit will be met through international assistance given Zambias extremely limited capacity to import any more food than it has already planned to do.

ASIP stakeholders are A two-day consultative meeting in Lusaka on the Agricultural Sector Invest- dissatisfied ment Programme (ASIP) in late June revealed widespread stakeholder dissatis- faction with the programme. The ASIP is jointly run by the government and stakeholdersrecipients of fundingand its main purpose is to co-ordinate donor funds and their allocation to various projects. George Mburathi, the resident representative of the FAO, told delegates that ASIP was performing badly and was in need of urgent review. Mr Mburathi appeared to blame the Ministry of Agriculture and Fisheries, urging it to renew its commitment to ASIP and lead its restructuring, while clarifying the relative roles of the private and public sector in the process. Amusaa Mwanamwambawa, the minister of agriculture, told the meeting that the recent report on ASIP by specialists from the University of Zambia and the ministry left the government with the option of either dumping or reforming ASIP and that the government had decided on the latter. Bemoaning poor private-sector participation but not taking responsibility for it, Mr Mwanamwambwa proposed that stakeholders form a committee to review ASIPs progress at regular intervals. However, Mr Mwanamwambas statements apparently did little to convince most delegates that Mr Mburathis pleas had been taken on board.

Profits from flower and The Zambia Export Growers Association (ZEGA) announced on June 2nd that vegetable exports grow its members had earned $38.4m from vegetable and flower exports to Europe over the last year$22.6m from flowers and $15.4m from vegetables. Exports of flower and vegetables amounted to 5,231 tonnes, 35% more than the year before. ZEGA predicted a further 25% increase in exports this year, but expressed concern that the kwachas depreciation would slash export earnings.

Tea production increases The Binani group is investing $4m in its recently acquired Kawambwa tea estate, and has already increased monthly production from 10 tonnes to 100 tonnes, according to the company. Binani plans to export most of this tea, but wants the government to protect its share of the domestic market by preventing unfair competition from imported teas. Binani also intends to plant 500 ha of coffee and 250 ha of tobacco on the estate.

Health

There are plans to fortify The National Milling Company plans to fortify maize meal with vitamins. In maize with vitamins early June a spokesman for the company announced that it had already bought the vitamins but was just waiting for the government to pass legislation that would prevent unscrupulous competitors from labelling ordinary maize meal as fortified.

Zambian TB levels are the The Paris-based magazine Marchés tropicaux et mediterranéens published statis- highest in the region tics in mid-May indicating that the Zambian population has the highest tuberculosis infection rate per head in Southern Africa. Of every 100,000 Zambians, 424 are thought to have tuberculosis, compared with 216 in South Africa and

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only 144 in Tanzania. Tuberculosis and HIV infection are closely linked in Sub-Saharan Africa, and Zambias high HIV rates are an important contributory factor to the tuberculosis figures.

Polio inoculation is The government announced in early June that it intended to ensure that 2.1m working children aged between six months and five years are inoculated against polio this year. Thanks to similar campaigns over the last two years, there have apparently been no new cases of polio in Zambia since 1996.

A new health centre opens The Kalingalinga health centre was opened in Lusaka on June 18th, at a cost of in Lusaka ZK525m ($267,000). Most of the funds have come from the British government through its Zambia Health and Population Sector Aid programme, with total funds of ZK62bn.

Foreign trade and payments

Donors pledge $530m Much to the disappointment of Zambian and international human rights in Paris organisations, which had wanted strong human rights conditionalities placed on aid disbursement, members of the Paris Club pledged Zambia $530m for 1998 at their meeting of May 12th-13th. During the meeting, donors raised human rights concerns but appear to have been sufficiently reassured by the government to release funds. Civil society groups have since promised to monitor the governments implementation of its commitment to improving human rights conditions. Meanwhile, the donors seemed to be more concerned with the pace of economic reform, and ZCCMs privatisation in particular, though the government has adhered to its position that it will not sell Zambia Consolidated Copper Mines (ZCCM) off at rock bottom prices. Donors went along with the governments stance at the meeting, but the distinct lack of any disbursal of funds since suggests that they are still trying to exert pressure for a speedy sale. Donors relenting on the aid freeze at the Paris Club meeting reflects their genuine concern about Zambias economic prospects this year, which look distinctly grim unless some balance-of-payments support arrives soon. Funding pledged to date includes $295m for project support and $235m for programme aid, most of which is balance-of-payments support. These figures do not include a further $120m in debt relief. The government had asked for $300m in project support, $289 in balance-of-payments support and another $70m for its public-sector reform programme (PSRB), but Ms Nawakwi has expressed confidence that the shortfall can be met with aid from bilateral donors.

Zambia signs a trade The Zambian trade minister, Enoch Kavindele, met his counterparts from agreement with SACU Botswana, Namibia, South Africa, Swaziland and Lesotho, the member states of the Southern African Customs Union (SACU), in mid-July in Pretoria, at which they endorsed the long-awaited trade agreement between Zambia and SACU (2nd quarter 1998, page 21). It appears that the final list of Zambian products to receive preferential access to the SACU market has been agreed upon and that ministers will now present the agreement for ratification by the governments. South African officials have expressed cautious optimism that the South African

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parliament will ratify the agreement by September but preferred not to comment on how long the process will take in the legislatures of other SACU member states.

Aid news • The oil producers cartel OPEC announced in late May that it would be lending Zambia $5m for education and that another $1.2m was on its way for the rehabilitation of smallholdings. • The French Development Agency (ADF) is increasing its involvement in Zambia in line with the new French effort to cultivate closer links with anglo- phone Africa, particularly in the east and south. The agency has approved FFr68m ($11.4m) for the Kafue Gorge power station and a network upgrading pilot project, which are expected to be disbursed soon. • Norway pledged ZK101m ($15,000) in early June for the upgrading of magistrates courts, and found itself immersed in a drama about whether the money was intended only for the Lusaka High Court, or for magistrates courts around the country. The Norwegian High Commission assured Zambians that it was for all courts, but not before the magistrates association had denounced donors and the government for ignoring them. Two weeks later the Norwegians made a donation of ZK75m ($382,000) for the Zambia ex-prisoners rehabilitation and counselling trust (Zepract).

EIU Country Report 3rd quarter 1998 © The Economist Intelligence Unit Limited 1998 Democratic Republic of Congo 25

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 was approved by the Constitutional Commission in March 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 The 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 Kabilas 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 & head of the executive Laurent Kabila (AFDL)

Ministers of state Interior Gaetan Kakudji (AFDL) Without portfolio Pierre-Victor Mpoyo, Deogratias Bugera, Badimani Bilembo Mulumba

Other key ministers Agriculture & livestock Mawapanga Mwana Nanga (AFDL) Civil service Paul Kapita Shabani (UDPS) Commerce Paul Bandoma Defence Laurent Kabila (AFDL) Education Kamara Rwakahikara Energy Eleko Botula Finance & budget Ferdinand Tala Ngai Foreign affairs Bizima Karaha (AFDL) Health Jean-Baptiste Nsonji Industry & small enterprises Babi Mbayi (AFDL) Information & cultural affairs Didier Mumengi (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 Sakani

Central bank governor Jean-Claude Massangu Muilongo

EIU Country Report 3rd quarter 1998 © The Economist Intelligence Unit Limited 1998 26 Democratic Republic of Congo

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 90,564.8 150,410.1 Real GDP growth (%) 13.1b 3.9b 0.7b 0.9b 4.1b Consumer price inflation (av; %) 1,893 23,761 542 659c 176 Population (m) 41.2 42.6 43.9 45.4 46.6 Exports fobd ($ m) 1,144 1,028 1,563b 1,547b 1,390 Imports fobd ($ m) 668 581 871b 1,089 807 Current-account balance ($ 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 (%) 0.4a 1.3 1.5 2.7 0.0 Copper production (000 tonnes) 48.1 30.6 35.0 40.2 37.7 Cobalt production (000 tonnes) 2.1 3.3 4.0 4.0 3.0 Diamond production (m carats) 15.2 16.3 22.0 22.2 22.0 Exchange rate (av; NZ:$) 2.5 1,194 7,024 52,400c 145,988b

e July 24th 1998 CF137,500:$1

Origins of gross domestic product 1994 % of total Components of gross domestic product 1992 % of total Agriculture 52.0 Private consumption 68.8 Industry 11.0 Public consumption 21.7 Manufacturing 7.0 Gross fixed capital formation 7.1 Services 30.0 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 1996f % of total Main origins of importsf % of total Belgium-Luxembourg 43 South Africa 19 US 16 Belgium-Luxembourg 17 South Africa 5 Hong Kong 6 Italy 5 US 6 a b c d e EIU estimates. Official estimate. Actual. Balance-of-payments basis. The nouveau zaïre was replaced by the Congolese franc on June 30th f 1998. Based on partners trade returns, subject to a wide margin of error.

EIU Country Report 3rd quarter 1998 © The Economist Intelligence Unit Limited 1998 Democratic Republic of Congo 27

Outlook for 1998-99

The government begins to There have been a number of encouraging signs over the past quarter that the feel pressured government of the president, Laurent Kabila, may now be more willing to co-operate, both with its domestic opposition as well as with international donors. In early July Etienne Tshisekedi, the leader of the main opposition party, the Union pour la démocratie et le progrès sociale (UDPS), was released from internal exile, political opponent Arthur Zahidi Ngoma was freed from prison, and a number of independent intellectuals from the Mobutu government have been co-opted into the regime over the past few months. Meanwhile, the government has begun to clear some of the arrears it owes on its debt to the IMF in June. While these events seem to indicate that the Kabila government is beginning to feel less immune to domestic and international pressure, it would be wrong to interpret them as a wholesale shift in the governments attitude towards a political opposition it is afraid of and the international community it so resents. Continued arbitrary arrests of journal- ists, publishers, non-governmental organisation (NGO) workers and private business indicate that the prevailing tendency within the Alliance des forces démocratique pour la libération du Congo-Zaire (AFDL) continues to be to apply repressive measures in order to silence its opposition. For now, government policy is likely to continue to be trapped by the regimes heightened sense of paranoia. As long as it remains convinced that it can only maintain its grip on power through repressive means, and sees an international conspiracy to overthrow it at every turn, significant movement towards democratisation is unlikely, and relations with the donor community will remain strained.

but will not give in yet For the moment the government is likely to adhere to its staunchly anti- Western stance, especially given the publication in late July of the UNs report on the AFDLs alleged role in the massacres in the eastern part of the country during the war in 1996-97. Although the report stops short of referring to the killings as genocide, its widely expected conclusion that the AFDL, along with Rwandan army troops, are responsible for the incidents has prompted the Kabila government to accuse the UN and countries such as France and the US of waging a smear campaign against it. In its defence, the UNs handling of the affair was somewhat clumsy, and a discussion of the report by the US ambassador to the UN, Bill Richardson, in an interview with Radio France International before its publication gave the government the perfect opportunity to register its outrage. Ironically, the government could stand to win additional popular support in the wake of the affair, as Mr Kabila has appealed to the populations sense of nationalism, positioning himself as the protector of Congolese sovereignty. As the government put it in its response report to the UN, the Democratic Republic of Congo (DRC, formerly Zaire) will never accept to have democratisation and human rights imposed upon itself from abroad, before affirming its own sovereignty.

EIU Country Report 3rd quarter 1998 © The Economist Intelligence Unit Limited 1998 28 Democratic Republic of Congo

Relations will deteriorate The DRCs relations with Rwanda and Uganda are expected to remain tense in with regional allies the coming months. A hodgepodge of ethnically based rebel groups actively campaigning against all three governments have continued their activities in the eastern part of the DRC, and the Kabila governments failure to put an end to the violence or take an active stance are widely believed to be the main causes for the souring of its relations with its erstwhile supporters. The recent removal or demotion of the few remaining Tutsisin high-level government positionsin particular, James Kabare, the Rwandan officer who was the interim commander of the army, and the governments order in late July that Rwandan troops must leave the country indicate that the Kabila government has decided to respond to the cooling of relations by distancing itself from its origins in the eastern part of the country. However, it will do so at its own peril; fighting continues to escalate, and could represent a real threat to the Kabila government, especially now that neither the Rwandan nor Ugandan governments are willing to come to its rescue.

Moves towards The government continues to maintain that it will hold elections in 1999. democratisation are However, it remains unclear which parties will be allowed to participate, as dubious Mr Kabila has not yet said that the currently banned opposition parties would be allowed to compete. One possibility is that Mr Kabila follows a Nigeria-like scenario, whereby the regime creates the parties which are allowed to contest the elections. If the eligibility requirements which the government has imposed on membership in the Constituent Assembly, barring politicians previously associated with the Mobutu regimethat is, the vast majority of the DRCs political classare any indication of future policy, free and fair elections are doubtful. The selection of the 300 members of the Constituent Assembly in the coming months will provide a crucial test of the AFDLs commitment to true democracy.

The AFDLs economic Economic decision-making will remain fragmented and inefficient, complicat- policy lacks coherence ing the initiation of a credible dialogue with the donors. No fewer than four ministries as well as the Banque du Congo (the central bank) are currently involved in the economic policymaking process, while the ministries of mining, industry, energy and commerce also hold substantial economic responsibilities. The lack of policy co-ordination has become such a problem that the World Bankwhose missions have found it difficult to know whom to talk tohas set up an interministerial committee on economic issues. In the wake of the governments retreat on the finance ministers promise to the IMF to restart arrears payments in March, the regimes economic credibility has continued to suffer. However, to some extent the cabinet reshuffle in June streamlined government operations and could go some way towards convinc- ing donors that the administration is moving in the direction of sound economic policymaking. The removal of Pierre-Victor Mpoyo as the minister of economy and petroleum will particularly please donors who frowned upon his pro-China bias and his alleged erratic style.

but it resumes arrears A more important signal will have been sent by the resumption in June of repayments monthly arrears payments to the IMF. So far, the governments monthly payments have been minimal, at $1.5m, and it remains unclear whether this will be sufficient to clear the way towards a resumption of IMF funding. However, the resumption of payments is, nevertheless, significant as it indicates the rising influence of those elements within the government that have always understood that a stand-off with the international financial institutions will come at the cost of economic recovery.

while the lack of The passage of the 1998 budget in May was good news, but the release of only transparency is worrisome a few specific details was some cause for concern. Well-informed observers suggest that up to 50% of expenditure in the budget is allocated to defence. Meanwhile, an estimated 40% of government revenue is not captured by the Treasury, paving the way for speculation that the money is making its way into unknown government accounts and secret budgets. However, fiscal inconsis- tencies could also be the result of enduring corrupt practices. Most observers in Kinshasa agree that while corruption has decreased and ministers in particular have a harder time getting away with requesting bribes, it continues to exist and, if anything, it is more sophisticated than under the Mobutu regime.

The government expects To a great extent, the governments current disappointment at the absence of too much significant donor aid is the result of its own unduly high expectations. Even if the government did succeed in becoming more popular with Western donors, commitments would still fall short of what the regime expects and what it needs DRC: gross domestic product to undertake significant economic reconstruction. In addition, unless the IMF % real change, year on year 8 and bilateral donors give the government their crucial stamps of approval, the DRC is unlikely to receive significant private investment inflows. Although 4 private investors may be less concerned with the regimes democratic perform- (a) 0 ance, they are interested in the existence of a transparent legal and regulatory (a) framework, and equally crucially, the governments commitment to guarantee- -4 (b) ing these rights, requirements which the AFDL regime has so far failed to meet.

-8 (a) For the moment, the situation does not seem to be improving. The govern-

DRC ments dissolution of the executive committee of the Fédération des entreprises -12 Africa du Congo (FEC) in late April for reasons of state and its banning of the

-16 Association des jeunes entrepreneurs congolaises (AJEC) a few weeks earlier 1993 94 95 96 97 (a) Official estimates. (b) EIU estimate. do not bode well for its willingness to create a stable and attractive environ- Sources: EIU; IMF, World Economic Outlook. ment for private investment. In addition, there have been widespread reports that corruption is increasing.

Economic performance Despite the governments initial successes at stabilising the economy, it is will remain disappointing currently presiding over a new bout of economic depression. Recent economic in 1998 indicators point to a downturn in overall activity, with real GDP now expected to post a fall of some 6% in 1998a 6% growth rate is considered the minimum to initiate any meaningful recovery. Given the dire state of the economy, there is some danger that the government will resort to printing money. Jean- Claude Massangu, the governor of the central bank, who is widely respected for his firm stance on monetary policy, is unlikely to condone such activities. However, the issuing of the new currency in late June could provide tempting opportunities (see The economy).

Review

The political scene

Etienne Tshisekedi is Etienne Tshisekedi, the leader of the opposition party, Union pour la démocratie freed et le progres social (UDPS), who was sent into internal exile to his home province of Eastern Kasai by the president, Laurent Kabila, in early February, returned to Kinshasa upon his release on July 1st. The government did not announce Mr Tshisekedis release, in order to avoid public demonstrations and celebrations by UDPS supporters in the capital. Mr Tshisekedi was released one month after the government flew him to meet Mr Kabila in Lubumbashi on May 30th, for his first meeting with the president since the AFDL overthrew the Mobutu regime in May 1997. It is widely believed that Mr Tshisekedis release was in part an attempt by the government to shore up its flagging support. However, it was also a shrewd move intended to avert a UDPS boycott of the new currency, the Congolese franc, which was officially introduced on June 30th. The UDPS boycotted the Mobutu governments introduction of the nouveau zaïre in 1993, and had been making tacit threats to boycott the Congolese franc in the weeks preceding its launch. In his first public statement following his release, Mr Tshisekedi said that he still refused to recognise the governments ban on political activities and that he would continue to voice his opposition to the AFDL government. On July 10th, barely two weeks later, government soldiers forcibly entered Mr Tshisekedis home and arrested 48 UDPS members, including 12 high-level UDPS officers, and detained them on charges of violating the ban on political activity. On July 22nd the majority of those detained were released, although a senior adviser, Marcel Mbayo, as well as four other party members currently remain in detention.

but five ministers are On June 1st the government removed five ministers from their posts: Raphaël arrested Ghenda, the minister of information and cultural affairs, Etienne-Richard Mbaya, the minister of planning, Pierre Lokombe Kitete, the minister of energy, Kambale Mututulo, the minister of state enterprises, and Biselele Kanumutambi, the deputy minister for state enterprises have been arrested and charged with corruption. It is difficult to assess whether, and to what extent, the accused are guilty, but observers agree that the ministers were either undisciplined or less upright than their peers. However, Mr Gendhas dismissal was certainly related to his spokesmans de- scription of Belgium as a terrorist country following the discovery of arms in the Belgian consulate in Lubumbashi in April (2nd quarter 1998, page 32). The arms were apparently being sent back to Belgium after having been brought into the country with the agreement of the then Zairean government in March 1997 for the purpose of defending the embassy should the AFDLs march into Lubumbashi be violent. The accusation strongly angered the Belgian foreign minister, Erik Derijke, and contributed to a rapid deterioration of relations between the two countries.

and Mr Kabila appoints On June 1st Mr Kabila appointed a new government, increasing the number of a new government ministers to 37 from 29. Mr Kabila appointed two additional senior ministers

of state: Deogratias Bugera, the former secretary of the AFDL, now holds the position of minister of state without portfolio; while Badenianyi Mulumba was promoted to minister of state in charge of planning. It is unclear whether Mr Bugeras appointment is a promotion or a demotion, but he is likely to have less autonomy from the president in his new position, and his removal from his old post is widely interpreted as a sign that the government is trying to reduce further the influence of the Tutsi faction within the AFDL. Pierre- Victor Mpoyo, previously the minister of state for the economy and petroleum, is now without portfolio. Although he remains highly respected by the president, Mr Mpoyowho had been promoted after the governments failure to secure significant funding commitments at the Friends of Congo conference against which he had warnedhas lost some of his influence in matters of economic policy. His apparent demotion seems to follow his failed attempts to secure significant funding from the Chinese. Mr Mpoyo is also in poor health. Mr Kabila also created four new ministries in the latest reshuffle: a Ministry of Human Rights, occupied by Cheick Leonard Okitundu, as well as Ministries for Culture and the Arts, Development and Strategy, and Fisheries and Forest Resources. Juliana Lumumba, the daughter of Patrice Lumumba, the countrys first post-independence prime minister, was promoted to head the newly created Ministry of Culture and the Arts.

DRC: regional distribution of ministers, government as of June 1st 1998

No. of No. of Province ministersa deputy ministers Total Katanga 8 0 8 Bas-Congo 5 0 5 Bandundu 3 3 6 South Kivu 3 1 4 Eastern Kasai 3 1 4 Western Kasai 3 0 3 Equateur 2 1 3 Maniema 2 0 2 North Kivu 1 0 1 Orientaleb 1 0 1 Unknown 0 1 1

a b Including the president and the four senior ministers of state. Formerly Haut-Zaire.

Source: Government reports.

which is dominated by The geographical composition of the cabinet is heavily tilted towards Katanga the Katanguese province, the home region of Mr Kabila and eight of his ministers, and the Congolese weekly, Le Soft, reports that most of the ministers from the two Kasai provinces were either born or raised in Katanga. In mid-July Mr Kabila replaced the interim commander of the army, the Rwandan officer, James Kabare, with Commandant Kifwa Celestin. Mr Celestin, who was formerly chief of the national police forces, is reportedly a close ally of Mr Kabilas and also hails from Katanga province. Mr Kabares replacement is another in a series of signs that the Kabila regime is distancing itself from its origins in the eastern part of the country. The eastern Kivu provinces are severely under-represented, and Mr Bugera and Bizima Karaha, the minister of foreign affairs, are now the only

Tutsis from the region in the upper echelons of the government. The declining influence of the Tutsi faction in the AFDL parallels the deterioration of the governments relations with Uganda and Rwanda (see below).

Justine Kasavubu is Justine Kasavubu, the daughter of Joseph Kasavubu, the DRCs first president, dismissed who briefly served as minister for civil service in the AFDL government in 1997, was dismissed from her post as Congos ambassador to Belgium in June, after her government informed the Belgian authorities that it was appointing Emile Kanengele in her stead. Mr Kanengele, a Katanguese, was Mr Kabilas deputy chief-of-staff until he was suspended on May 2nd for abuse of power and undiscipline, according to the newspaper Le Soft. The presidency released no further details on the accusations against Mr Kanengele, but apparently decided that an ambassadorial appointment in Brussels was both enough punish- ment and sufficient forgiveness. Ms Kasavubu, who served as the representative for the opposition UPDS in Brussels before her appointment to the Kabila government, had a tumultuous term as ambassador which culminated in her refusal to meet Mr Karaha during one of his visits to Brussels in February 1998. Ms Kasavubu was called back to Kinshasa earlier this year but returned to Brussels to resume her ambassadorial function, apparently upon her own initiative, and without the governments approval. Ms Kasavubu set up her own party, the Rassemblement Démocratique du Congo (RDC), in June.

There are concerns about In his May 17th speech to the nation, Mr Kabila repeated his earlier commit- who will serve in the ment to organise elections in 1999 and to allow political parties to resume their Constituent Assembly activities six months prior to the date of the election. A week later he signed a decree giving the still unappointed Constituent Assembly the power to pass laws regarding the regulation of political parties and the organisation of the electoral commission. The decree confirms earlier fears that the government is attempting to find a way to exclude the opposition from political participation, as former dignitaries in the Mobutu regime and those suspected of political and economic crimes will not be eligible for membership in the 300-strong Constituent Assembly. Although the extent to which this decree will be implemented is unknown, it gives the government a legal basis to exclude Mr Tshisekedi, as well as most of DRCs political class, from the Constituent Assembly, as many of Sese Seko Mobutus opponents were members in his government at one point or another. A further concern is Mr Kabilas statement that, although the ban on political parties activities would eventually be lifted, the parties that are allowed to exist may not be the same as the current ones, suggesting the possibility that the regime itself create the parties which are allowed to contest the elections.

There is a resurgence of There was a resurgence of activity by opposition movements, old and new, over opposition activity the course of the past quarter. Currently residing in Belgium, Léon Kengo wa Dondo, a former prime minister, chose the first anniversary of the AFDLs takeover in May to break his silence and declare that the AFDLs performance was largely negative and that the regime was setting up a totalitarian state. It is believed that Mr Kengo has been meeting with French and Belgian government officials who may consider him to be a credible alternative to Mr Kabila. Mr Kengo performed relatively well as one of Mobutus last prime ministers

from 1994 to 1997, managing to resist presidential pressures to a certain extent. However, he is rather unpopular with the Congolese population, not least because of his Rwandan originshe is the son of Rwandan and Polish parents and would not be eligible for the presidency under the current draft constitution. Mr Kengo is resurfacing at a time when other opponents to the Kabila regime are losing some of their credibility. General Ngbale Nzimbi, the former head of the Special Presidential Division, and General Kpama Baramoto, head of the Civil Guard as well as Admiral Mavua Mudima, the former defence minister, were expelled from their exile in Côte dIvoire in May for allegedly engaging in activities considered incompatible with their duty of restraint. The three former officials fled South Africa earlier this year for fear of being extradited to DRC, and went on to Niger which granted them asylum (1st quarter 1998, page 27). It is widely believed that the three are attempting to regain control of disbanded troops of the Forces armees zairoises (FAZ) in order to challenge Mr Kabila militarily, but their credibility is now rather limited and their peregrinations have taken on something of a comical dimension. Not much more credible is the new Conseil de la république fédérale démocra- tique du Congo, which was set up in Brussels in May by Willy Malants, a retired Belgian officer and alleged mercenary, and Robert Steward, the former director of American Mineral Fields (AMF), and the author of the Bechtel reconstruction plan which was presented to the government at the Friends of Congo meeting in December 1997 (4th quarter 1998, page 28). Both men attempted to position themselves as advisers to the AFDL during the liberation war and in the early days of the regime, allegedly hoping to parlay their influence into mineral interests, but apparently fell out of favour and have now become opponents. Although neither Mr Malants nor Mr Stewart are Congolese nationals, this has not prevented them from declaring the Conseil as the government-in-exile.

and ongoing violence in More worrisome to the governmentand to the neighbouring governments of the east Rwanda and Ugandais the continued armed opposition in the Kivu provinces by a mix of Rwandan and Ugandan rebels, local populations resentful at the Tutsis apparent hegemony in the region, and the local baHunde Mai-Mai militia. Despite its attempts to end the violence through military and diplo- matic means, the government has so far failed to bring peace to the eastern provinces. On May 22nd, 30 Congolese and a Belgian were reportedly killed by rebels along the Congolese border near Goma. The incident took place barely two weeks after Mr Kabila claimed that the government had the situation in Kivu under complete control. The government has said that it arrested 500 Mai-Mai guerrillas on May 30th.

Relations turn sour with Mr Kabilas failure to put an end to ongoing violence in the eastern part of the the DRCs African partners country is no doubt one of the reasons why relations with the DRCs eastern neighbours have worsened. Apparently disappointed with the course of events in DRC, Rwandan and Ugandan leaders have been publicly criticising the Kabila government with increasing frequency. Both the Rwandan and Ugandan presidents declined Mr Kabilas invitation to attend a regional security summit in Kinshasa scheduled to coincide with the celebrations of the first anniversary of the AFDLs takeover in mid-May. Only 3 of 16 invited guests attendedthe president of Zimbabwe, Robert Mugabe, the president of the Central African

Republic, Felix Patassé, and the vice-president of South Africa, Thabo Mbeki and the government was forced to cancel the summit. Mr Mbeki returned home to South Africa immediately, but Mr Mugabe and Mr Patassé stayed on until May 17th to attend a military parade and Mr Kabilas speech in front of a half-empty Stadium of the Martyrs in Kinshasa. A week after the anniversary, Pierre-Victor Mpoyo, the former minister of economy and petroleum and now minister of state without portfolio, attacked Yoweri Museveni, the president of Uganda, for his comments that Mr Kabila appeared to lack control of the country. Mr Mpoyo also accused unspecified top Ugandan officials of trafficking in timber, gold and diamonds from the DRC.

The government remains Joseph Olenghankoy, the leader of the opposition group Forces novatrice repressive delunion et de la solidarite (FONUS), Zahidi Ngoma, a UNESCO employee in Kinshasa and chairman of the opposition group, Mouvement des Forces du Futur, and Major Masasu Nindanga, a former special adviser to the president, were tried before a military tribunal in Lubumbashi in May. The three were detained as political prisoners in a prison in the province of Katanga when they managed to escape in April, only to be recaptured weeks later (2nd quarter 1998, page 28). Mr Masasu was sentenced to 20 years in prison, and Mr Olenghankoy to 15 years. Mr Ngoma was given a one-year suspended sentence and released on account of his poor health. Meanwhile, 20 peoplebelieved to be military personnelwere sentenced to death in Bukavu on May 16th for armed robbery and theft of ammunition from a military tribunal. They have since entered a plea for a presidential pardon. The AFDL has already executed 56 individuals since January 1st, and military tribunals are currently the only functioning courts of law in the entire country.

The UN releases its human On June 30th the UN released the report of its inquiry into the AFDLs alleged rights report human rights violations against Hutu refugees during the liberation war in 1996-97. The report holds the Kabila regime responsible for the systematic massacre of thousands of Rwandan refugees, although it does not give specific figures. The report also allegedly provides evidence that AFDL soldiers attacked refugee camps and executed unarmed people, including women and children, and accuses the government of attempting to cover up the killings, while also concluding that Rwandan army troops share responsibility for the massacres. Although the UN report stops short of calling the killings acts of genocide, it reserves the right to do so if the intention to kill people based on their Hutu ethnicity is established. The report has been forwarded to the UN Security Council which may or may not act on its recommendations, among other things set up an international tribunal to establish individuals responsibility in the alleged massacres. The UN report was based on the UN investigation teams relatively limited findings while in the DRC. The teams attempts to proceed with the investigation were repeatedly blocked by the Kabila government, while observers have also said that internal squabbling compromised its ability to conduct a proper investigation. The UN secretary-general, Kofi Annan, withdrew the team in April, frustrated at the governments conduct (2nd quarter 1998, page 31). The report concludes that further investigation into the massacres is necessary.

which, not surprisingly, Responding to the publication of the report, the Kabila government issued a angers the government strongly worded communiqué in which it claimed to be scandalised by the UNs attitude and called the UN dysfunctional and anachronistic. The communiqué also singled out France as sharing responsibility for a campaign to denigrate the Congolese regime and referred to the role which the French militarys Operation Turquoise played in the 1994 genocide of Tutsis in Rwanda. Both the Rwandan and Congolese governments have denied the accusations in the report, while the Kabila government stressed that the inquiry was never completed as the UN team withdrew from DRC of its own volition in April. The Congolese government has appealed to UN member countries to reject the conclusions of the report.

Relations with donors A delegation of the European Union (EU), headed by the British foreign min- remain tense ister, Tony Lloyd, visited Kinshasa in early June and met with Mr Kabila for four hours, after which the delegation reiterated that the EU was not ready to resume structural co-operation, but would monitor closely the governments progress in several domains. Prior to the visit, the EU had been one of the sources of financing which the government had most counted on securing as it is not contingent upon World Bank and IMF approval. The EU had originally announced that it might resume its aid programmebeyond ongoing human- itarian assistanceand has made the largest pledge of funds within the donor community, committing $100m to the rehabilitation of public health facilities and road infrastructure, in addition to promising $33m for the elections on the condition that all parties are allowed to participate. After relations with Belgium turned sour upon the discovery of arms at the Belgian consulate in Lubumbashi and the labelling of a Congolese official as a terrorist, the visit by Yves Haesendonck, the Belgian foreign ministers chief-of- staff, was considered a significant step towards the progressive normalisation of relations between the two countries. Relations with Francewhich the government had been attempting to mendtook a turn for the worse in early July when the Congolese government accused France of manipulating the UN report into alleged massacres in the eastern part of the country to wage a negative campaign against the Kabila regime.

and Mr Kabila tries to Mr Kabila made a three-day visit to Libya in April, but is unlikely to have drum up support in Libya secured any financial assistance given that Libya has its own economic problems. A few weeks earlier, an emissary of the Cuban president, Fidel Castro, visited Mr Kabila in Kinshasa.

The economy

The economy is at a Having failed to secure significant inflows of either foreign aid or foreign standstill investment, DRCs economy has reached a near stand-still. Although the situation is not as dire as it was during 1993-96, it is certainly not the significant economic recovery that the government had promised the population. The government has claimed that it has at least succeeded in stabilising the economy. It seems, however, that its pronouncements may have been premature. According to figures recently released by the IMF, inflation remained as high as

176% in 1997, well above the governments official figure of 13.7%. The enor- mous discrepancy casts a shadow of doubt over the governments current estimates that the annual rate of inflation in the first half of 1998 has averaged only 12.5%. Whether the government can maintain low inflation will depend to a great extent on whether the newly introduced currency remains stable, and, crucially, on whether it refrains from printing money.

and main export earners Real GDP growth is estimated to have contracted by 4.1% in 1997, and is are constrained by low expected to post a similar outcome for 1998. The government had hoped that prices the mining sector would attract investment, and that production in the sector would increase in 1998. However, its erratic handling of mining contracts, and the absence of a clear regulatory and legislative framework, have so far deterred large-scale investment. In fact, mining production in 1997 was significantly lower than originally estimated, while the temporary recovery of cobalt output also seems to have come to a halt. Total copper output for 1997 is now estimated at 37,700 tonnes, a drop from earlier estimates of 50,000 tonnes. Cobalt production only reached 3,000 tonnes in 1997, down from previous estimates of 5,500 tonnes. In addition, to abysmally low output levels, the poor outlook for the mining sector is compounded by depressed global prices for most of DRCs main mining exports. Copper and cobalt prices have been declining since the fourth quarter of 1997, following the economic collapse in Asia, while the gold price also remains depressed. As a result of low prices, a number of mines are experiencing severe financial constraints which have been compounded by lack of investment. The possibility of closures of some of the mines is increasing.

The DRC makes its first The DRC has finally taken the crucial first step towards normalising relations debt-service payment with the IMF and the World Bank. After months of misunderstandings and since 1996 animosity between the government and the Bretton Woods institutions, the Kabila government paid the IMF an estimated $1.5m towards the reduction of the arrears accumulated on its $14bn debt. Although this is certainly a very minimal amount, it has significant symbolic value as it is the Kabila governments first payment and indicates that the administration is beginning to understand that it must normalise relations with donors if it is to secure the significant amount of funding which it requires for economic reconstruction. The payment also comes just in time to prevent the IMFs suspension of the DRC, which was scheduled for June 30th. The DRCs total debt to the IMF amounts to $550m, of which $450m are in arrears. Its total debt to the World Bank is estimated at $1.5bn, of which $180m is in arrears. Congo is currently in non-accrual status with the World Bank, which means that it is not eligible for lending, but is receiving grant-based technical and statistical assistance estimated at about $1.5m. According to the 1998/99 budget, the government is scheduled to make monthly payments of up to $3.7m to the IMF this year, which still falls short of the $5m monthly payments which the Kengo administration made until late 1996. It remains unclear whether monthly payments of only $1.5m will be sufficient to reduce total arrears, normalise relations with the IMF and the World Bank, and open the door to debt forgiveness and further lending. The government has yet to sit down with IMF econ- omists and set targets for macroeconomic stabilisation, which it will need to do if it wants eventually to secure a deal for the resumption of an IMF programme.

The government After several delays, mostly due to the difficulties in creating one unified mone- introduces the new tary zone, the government introduced the new currency, the Franc congolais currency (Congolese franc) throughout the country on June 30th. The Congolese have one year to exchange old and new zaïre notes for Congolese francs at the rate of 100,000 nouveau zaïres to the franc. This is equivalent to an exchange rate of approximately 1.4 francs to the dollar. The Banque du Congo (the central bank) has announced that the franc will not be pegged to any foreign currency or basket of foreign currencies, and will float freely. The initial central bank buying rate for the dollar was set at 1.45 francs and the selling rate at 1.38 francs to the dollar. Prior to the launch of the new currency, the government reduced the circulation of large denominations of zaïres and nouveau zaïres by injecting dollars into the economy in exchange for these notes, retiring the notes once purchased, and then allowing banks and companies to transfer the different national currencies between regions. This triggered a process of arbitrage which led to a convergence of various parallel exchange rates vis-à-vis the dollar. However, in the weeks immediately preceding the launch of the currency the parallel-market exchange rate once again began to diverge, with the greatest difference emerging between Kinshasa and the eastern city of Bukavu, and the franc has depreciated considerably since its introduction in late June, dropping to 1.53 francs to the dollar in the parallel market by late July. The government announced in mid-July that currency speculation is an offence that carries the death penalty.

and the World Bank sets The World Bank began formal negotiations with the government in mid-June to up the Friends of Congo set up the Trust Fund which had been agreed upon with donors at the Friends of Trust Fund Congo meeting in Brussels in December 1997 (1st quarter 1998, page 34). The Trust Fund acts as a mechanism that allows donors who want to support the country but are hesitant to do so to have some control over the use of their donations, as grants to finance high-priority projects would be deposited in the trust fund and managed by the World Bank. However, so far the Trust Fund initiative has not been particularly successful. As of June, only the governments of the UK, Canada and Sweden had actually paid their contributions into the Fund. It now holds $16m, and 11 other countries have made pledges totalling $32m. The World Bank has identified the transportation, health, education and urban environment sectors as eligible to receive funds of up to $500,000 for individual projects. According to the World Bank proposal, any organised bodyincluding non-governmental organisations (NGOs)can submit an application to receive funding as long as they hold legitimate status under Congolese law. However, the government has not yet given its approval to the World Bank proposal and is likely to be uncomfortable with NGOs eligibility to receive funding. World Bank missions travelled to Kinshasa in June and July to negotiate the proposal with the government.

The government wants to The AFDL government still owes civil servants considerable salary arrears. Al- reform the civil service though bureaucrats in Kinshasa now tend to be paid more regularly than they were under the Mobutu administration, some provincial civil servants, including public school teachers, still have not been paid since the AFDL takeover over a year ago. According to the government, there are 645,000 civil servants throughout the country, however, many are believed to be fictional employees,

or those who owe their jobs to connections and probably never actively occupied their posts. In 1995 the Mobutu government promised that it would reform the civil service, reducing its staff by half, but according to the list of employees that the current minister for civil service, Paul Kapita Shabani, in herited, the reform never seems to have taken place. The UN Development Programme (UNDP) has provided the government with a $480,000 technical assistance grant to help identify actual civil servants throughout the country, and eliminate fictitious employees. According to Mr Kapita, the governments objective is to reduce the civil service to 350,000 employees, 110,000 of which would be bureaucrats. In the meantime, Mr Kapita has drafted a proposal to retire 10,000 civil servants which has been submitted to the president. The DRC currently does not have a computerised database of government employees, nor have civil servants received any training since 1983.

Mining

According to the most recent edition of the Mining Journal, International Panorama Resource Corp, Horanda and Phelps Dodge Corp have agreed to collaborate on the assessment and possible acquisition of the Sodimico mining concessions in Katanga. International Panorama is already involved in the Kakanda copper-cobalt tailings project, which it plans to scale down, according to Africa Energy and Mining. International Panorama now estimates total production at the Kakanda mine at 1.3m tonnes of tailings per year, from which it will derive 14,500 tonnes of copper and 1,500 tonnes of cobalt per year over the course of a minimum of 15 years. Additional investment costs are estimated at $112m. Kakandas reserves are estimated at 18.4m tonnes, with copper gradings of 1.22% and cobalt of 0.15%. The government has awarded Australias Anvil Mining exclusive rights to ex- plore the gold deposits near Kalemie in southern Kivu. Its exploration area covers 18,150 sq km.

An infrastructure project On June 15th the government began recruiting 50,000 workers to maintain begins and rehabilitate tarred and dirt roads. Those who have already gone to work in Kinshasa seem to concentrate mostly on street cleaning. The workers salary will be $50 per month.

and Lubumbashi airport In May the governmental agency Régie des Voies Aériennes (RVA) began reno- is renovated vating the airport in Lubumbashi. Total investment is expected to be $600,000. Renovation of the terminal and the control towerbuilt in 1958are the first priorities as they no longer meet the requirements of the International Civil Aviation Organisation. The runway will be renovated in the second phase of the project.

EIU Country Report 3rd 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 1998 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr Production: mining Qtrly totals a Copper in concentrates 000 tonnes 86.2 86.0 88.3 93.6 96.2 79.1 85.6 81.7 87.7 93.1 Prices Monthly av b Consumer prices 1990=100 3,594 4,007 4,343 4,566 4,847 5,465 5,520 5,606 5,950 6,270 change year on year % 45.7 42.7 49.1 47.3 34.9 36.4 27.1 22.8 22.7 n/a c Copper: LME, $ cents/lb 131.7 116.6 112.4 89.8 97.4 109.7 113.6 102.9 86.7 77.1 Money End-Qtr d M1, seasonally adj ZK bn 226.3 237.8 256.4 269.0 270.3 301.1 305.6 333.6 354.2 348.3 change year on year % 76.0 47.5 37.8 33.8 19.4 26.6 19.2 24.0 31.0 n/a e Foreign trade Qtrly totals Exports fob $ m 261.2 228.7 305.1 263.2 223.1 254.2 302.4 320.0 n/a n/a Imports fob 207.5 232.6 238.6 252.9 280.1 236.0 235.8 267.4 n/a n/a Exchange reserves End-Qtr d Foreign exchange $ m 210.5 158.5 185.8 170.2 220.7 181.7 202.7 255.7 238.0 185.0 d Commercial bank assets 116.5 140.6 207.2 146.8 148.7 136.5 153.8 138.6 155.0 156.5 Exchange rate f Official rate ZK:$ 1,000.0 1,219.5 1,234.6 1,265.8 1,282.1 1,282.1 1,320.1 1,336.2 1,449.3 1,754.4

Note. Annual figures of most of the series shown above will be found in the Country Profile. a b c d e f Total for April-May, 57.2. January only. Figure for 2 Qtr, 78.5. End-February. DOTS estimate, figures are subject to revision. End-April, 1,851.9.

Sources: World Bureau of Metal Statistics, World Metal Statistics; IMF, International Financial Statistics; Direction of Tr ade Statistics, quarterly.

EIU Country Report 3rd quarter 1998 © The Economist Intelligence Unit Limited 1998 40 Quarterly indicators and trade data

Democratic Republic of Congo: quarterly indicators of economic activity

1995 1996 1997 1998 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr Mining: production Annual totals Copper in concentrates 000 tonnes 30.0 ( 40.0 ) ( 38.0 ) n/a Zinc 0.8 ( 1.2 ) ( 1.2 ) n/a Agriculture: production Annual totals a a Coffee 000 tonnes 76 ( 76 ) ( n/a ) n/a Prices Monthly av b Consumer prices, Kinshasa 1990=0.0001 5,532 9,890 15,476 24,058 43,127 67,934 70,272 58,959 57,826 56,795 change year on year % 362 511 647 709 680 587 354 145 34 n/a Wholesale prices: c coffee: US US cents/lb 107.2 94.7 90.0 77.8 68.9 75.2 88.7 79.0 79.9 85.5 d copper: LME, $ 131.7 116.6 112.4 89.8 97.4 109.7 113.6 102.9 86.7 77.1 Money End-Qtr M1, seasonally adj NZ bn 1,809 2,590 4,147 n/a n/a n/a n/a n/a n/a n/a change year on year % 408 511 503 n/a n/a n/a n/a n/a n/a n/a Foreign trade Qtrly totals Exports fob $ m 111 158 153 168 113 52 29 85 n/a n/a Imports cif 106 99 121 102 102 58 71 72 n/a n/a Exchange holdings End-Qtr Bank of Zaire: e f g gold $ m 8.1 5.8 5.7 6.3 n/a n/a 14.1 13.1 12.4 11.7 foreign exchange 146.6 55.8 63.3 71.2 82.5 n/a n/a n/a n/a n/a Deposit money banks: assets 69.2 72.8 71.4 87.9 n/a n/a n/a n/a n/a n/a Exchange rate h h hi Market rate NZ:$ 14,831 27,404 38,962 66,610 112,652 171,450 110,000 115,000 106,000 137,500

Note. Annual figures of most of the series shown above will be found in the Country Profile. a b c d e Estimate. Average for January-February. Average for 2 Qtr, 89.3. Average for 2 Qtr, 78.5. End-quarter holdings at quarters average of f g h i London daily price less 25%. End-July. End-January. Source: FT. End-2 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 3rd 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 3rd 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 1990 1991 1992 1993 1994 1995 1996a Imports fob South Africa 206 165 224 315 157 259 414 Saudi Arabia 4 83 47 53 1 97 107 UK 197 149 98 75 73 72 81 Zimbabwe 57 44 55 47 52 57 67 US 124 57 72 20 11 29 46 Germanyb 142 34 31 33 21 19 43 India 23 35 24 9 19 19 31 Japan 81 76 38 30 28 45 19 France 12 7 15 10 8 12 15 Total incl others 1,207 811 837 716 455 782 1,004 Exports fob Japan 168 204 152 105 105 158 175 Thailand 37 34 39 54 72 100 122 Saudi Arabia 29 29 83 69 83 83 110 India 33 122 21 45 56 62 74 Taiwan n/a n/a 8 9 2 12 73 US 9 24 5 3 5 93 59 Belgium-Luxembourg 31 140 45 66 47 67 44 South Africa 2 5 5 13 16 19 40 Zimbabwe 16 44 23 21 22 29 35 Total incl others 544 1,076 752 891 758 986 1,020 a b DOTS estimates. Includes former East Germany from July 1990.

Source: IMF, Direction of Tr ade Statistics, yearbook; quarterly.

Zambia: refined copper exports (tonnes) Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Mar 1992 1993 1994 1995 1996 1997 1998 France 52,612 49,990 18,896 11,243 10,696 23,687 14,220 Japan 94,857 85,334 55,445 52,647 50,111 29,677 12,543 Thailand 37,361 49,030 62,637 40,933 46,904 48,286 4,367 Malaysia 33,324 30,230 31,369 21,092 28,594 31,788 3,620 US 0 760 2,000 27,779 8,958 41,338 2,660 India 19,149 21,186 20,209 22,872 24,946 13,778 1,142 Belgium 26,156 49,167 29,939 22,500 17,071 11,411 559 Indonesia 5,040 3,499 5,146 7,676 2,793 1,497 200 South Korea 0 0 4,096 800 410 0 100 China 5,000 0 0 0 0 3,997 0 Italy 15,850 5,041 3,024 2,098 400 1,000 0 UK 0 0 3,999 0 0 200 0 Greece 7,876 6,871 3,524 374 2,936 0 0 Germany 500 0 0 0 1,667 0 0 Total incl others 411,892 436,522 360,657 291,869 276,079 303,784 59,792 Source: World Bureau of Metal Statistics, World Metal Statistics.

EIU Country Report 3rd 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-Dec Jan-Apr Jan-Apr 1993 1994 1995 1996 1997 1997 1998 UK exports fob Food, drink & tobacco 883 448 554 677 989 88 159 Chemicals 8,913 4,972 3,880 3,256 8,557 1,225 1,357 Rubber manufactures 201 163 80 103 465 93 49 Paper & manufactures 448 357 156 338 239 118 53 Textile yarn, cloth & manufactures 257 329 780 221 547 230 127 Non-metallic mineral manfactures 1,687 624 1,361 885 374 79 104 Iron & steel 818 390 299 456 315 100 5 Metal manufactures 2,582 499 466 734 1,106 167 409 Machinery incl electric 39,487 21,794 23,680 29,877 22,285 8,789 9,792 Transport equipment 7,076 4,533 5,465 5,118 3,332 1,195 1,526 Clothing & footwear 466 1,620 1,174 1,573 491 170 140 Scientific instruments etc 4,502 3,234 6,687 2,137 432 1,022 478 Total incl others 73,548 44,523 49,819 51,544 45,620 15,404 15,228 UK imports cif Fruit & vegetables 1,300 1,167 1,824 3,681 5,172 1,233 1,331 Sugar & preparations n/a n/a 20 79 11,926 22 20 Textile yarn, cloth & manufactures 3,143 3,767 7,459 6,410 6,689 2,410 1,119 Non-ferrous metals 6,406 6,737 8,425 4,927 4,574 380 2,375 Machinery & transport equipment 451 308 350 220 970 878 36 Total incl others 12,056 13,038 19,460 17,726 32,067 5,775 7,033 Source: UK HM Customs & Excise, Business Monitor, MM20.

Zambia: Japanese trade (¥ m) Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Mar Jan-Mar Japanese imports cif 1993 1994 1995 1996 1997 1997 1998 Copper cathodes 20,668 11,455 15,764 13,938 9,617 2,081 1,241 Total incl others 23,562 17,896 20,261 20,871 16,670 3,841 2,852 Source: Japan Tariff Association, Japan Exports & Imports.

EIU Country Report 3rd quarter 1998 © The Economist Intelligence Unit Limited 1998 44 Quarterly indicators and trade data

Democratic Republic of Congo: trade with major partnersa ($ 000; monthly averages) b Belg-Lux US Germany France UK Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Apr Jan-Apr 1995 1996 1995 1996 1995 1996 1995 1996 1997 1998 Exports to Democratic Republic of Congo fob Food, drink & tobacco 2,739 2,632 2,567 1,987 288 276 1,396 1,922 251 98 Mineral fuels 75 153 14 15 25 5 162 157 9 10 Chemicals 1,943 1,831 193 273 578 425 520 556 361 247 Rubber manufactures 166 134 2 6 78 70 17 12 17 0 Textile yarn, cloth & mnfrs 1,036 827 126 152 36 18 42 16 9 3 Non-metallic mineral mnfrs 406 1,295 31 2 49 35 77 36 3 0 Base metals 323 263 315 109 172 363 60 66 16 51 Metal manufactures 366 362 36 53 138 109 56 30 56 34 Machinery incl electric 3,794 3,513 1,506 2,039 805 896 797 643 828 194 Transport equipment 2,778 3,126 88 143 1,203 857 279 186 164 137 Clothing, footwear & handbags 343 319 116 76 6 8 92 119 4 0 Scientific instruments etc 347 535 64 67 41 26 68 97 27 39 Total incl others 15,915 17,005 6,401 6,102 5,770 5,177 4,014 4,238 2,230 978 Imports from Democratic Republic of Congo cif Coffee, cocoa, tea & spices 589 423 108 0 1,336 778 2,293 1,416 24 0 Animal feeding stuffs 0 0 188 275 0 0 0 0 0 0 Crude rubber 0 0 0 23 175 151 5 4 93 43 Wood & cork 234 438 21 65 748 472 612 473 464 12 Crude minerals & fertilisers 0 1 562 518 75 22 1 1 0 0 Metal ores & scrap 24 3 238 26 109 73 0 0 0 0 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 0 0 c Non-ferrous metals 891 2,275 3,049 2,171 1,647 920 359 213 280 354 Machinery & transport eqpt 29 13 1 2 30 11 0 0 4 1 Total incl others 57,658 58,272 22,787 21,642 5,431 5,700 3,490 2,375 1,075 541 a b Figures from partners trade accounts. US exports to the DRC averaged $4.4m and $3.8m per month for the periods January-April 1997 and c 1998. US imports from the DRC averaged $16.0m and $29.3m per month for the periods January-April 1997 and 1998. Mainly copper and zinc.

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