Zambia Democratic Republic of Congo
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COUNTRY REPORT Zambia Democratic Republic of Congo The full publishing schedule for Country Reports is now available on our website at http://www.eiu.com/schedule. 1st quarter 2000 The Economist Intelligence Unit 15 Regent St, 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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ISSN 1369-4839 Symbols for tables “n/a” means not available; “–” means not applicable Printed and distributed by Redhouse Press Ltd, Unit 151, Dartford Trade Park, Dartford, Kent DA1 1QB, UK Contents 3 Summary Zambia 5 Political structure 6 Economic structure 6 Annual indicators 7 Quarterly indicators 8 Outlook for 2000-01 13 The political scene 15 Economic policy 17 The domestic economy 17 Economic trends 19 Mining 21 Agriculture 22 Infrastructure and services 23 Foreign trade and payments Democratic Republic of Congo 25 Political structure 26 Economic structure 26 Annual indicators 27 Quarterly indicators 28 Outlook for 2000-01 31 The political scene 38 Economic policy 39 The domestic economy 39 Economic trends 41 Mining EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 2 41 Foreign trade and payments 43 Trade data List of tables 8 Zambia: forecast summary 17 Zambia: budgets 20 Zambia: copper price and production 21 Zambia: cobalt price and production 40 Democratic Republic of Congo: volume of production 42 Democratic Republic of Congo: external trade 43 Zambia: foreign trade 44 Zambia: direction of trade 45 Zambia: refined copper exports 45 Zambia: UK trade 46 Zambia: Japanese trade 46 Democratic Republic of Congo: trade with major partners List of figures 7 Zambia: foreign exchange reserves 7 Zambia: M1 growth 12 Zambia: gross domestic product 12 Zambia: kwacha real exchange rates 18 Zambia: inflation 19 Zambia: exchange rate 20 Zambia: copper production 27 Democratic Republic of Congo: foreign trade 27 Democratic Republic of Congo: copper prices 30 Democratic Republic of Congo: gross domestic product EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 3 February 18th 2000 Summary 1st quarter 2000 Zambia Outlook for 2000-01 The winner of the contest for the leadership of the ruling Movement for Multiparty Democracy (MMD) should win the 2001 presidential election. With the opposition in disarray, the MMD will almost certainly win the legislative election too. The government will keep turning down Angolan government requests to allow it to pursue rebel UNITA forces into Zambia. There will be a further influx of Angolan refugees. Zambia’s mines are unlikely to be affected by Congo’s civil war. Continued problems at the Indeni refinery will keep real GDP growth to 4.5% in 2000, though higher mining output will help growth reach 5.8% in 2001. Currency stability will serve to contain inflationary pressure, but higher oil prices will push average inflation to 17% in 2000. Higher copper exports will halve the current-account deficit by 2001. The political scene The president has decided not to alter the constitution in order to run for a third term. The chairman of the United National Independence Party intends to challenge Kenneth Kaunda for the party presidency. Relations have worsened between two other opposition parties, the Zambia Alliance for Progress and the National Party. Increased ministerial contacts have improved relations with Angola, but Zambia has refused to allow Angolan forces into its territory. Angolan jets have bombed north-western Zambia, and thousands more Angolan refugees have streamed across the border. Economic policy The 2000 budget has offered tax breaks for tourism and mining, but does little to cut the high indirect tax burden faced by manufacturing. Public spending is to rise to clear some of the state copper mining company’s debts. The domestic economy • Real GDP grew by an estimated 2% in 1999, largely because of mining’s poor performance. Solid agricultural growth and tight monetary policy helped reduce inflation to 20.6% by end-1999. The kwacha depreciated by 14.7% against the dollar. • First Quantum Minerals and Glencore bought the Nkana and Mufulira mines for $43m. Copper production fell in the last two months of 1999. Despite a drought in December, the maize crop has been forecast to rise by up to 20% year on year in 2000. Structural constraints and financial difficulties at the Food Reserve Agency have worsened prospects for subsistence farmers. • A report on options for Zambia Railways has gone before the cabinet. Foreign trade and Comesa, the regional trade grouping, has said Zambia has nothing to fear from payments regional free trade, although some of its manufactures will become uncompetitive. The IMF has not yet reached a decision on resuming ESAF payments, but expects to make recommendations about debt relief soon. EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 4 Democratic Republic of Congo Outlook for 2000-01 The UN will put the onus on the parties to the conflict in Congo to demonstrate compliance with the Lusaka peace accord before a UN peace- keeping force can be deployed. Assurance of his own position in a transition government may make Mr Kabila more open to complying with the peace accord. Some ministers may be jettisoned in a future transitional government. The military stalemate will drag on although Rwanda and Uganda will adopt the more limited war aim of pursuing rebel forces operating in Congo rather than overthrowing Mr Kabila. Ethnic tensions will remain tense in Rwanda occupied areas of the country. The economic situation will remain extremely negative until the government agrees to reverse its disastrous policies banning foreign currency transactions and maintaining an over-valued exchange rate. The political scene The UN Security Council held a special session on the Congo conflict in late January addressed by all the heads of state of the countries involved. The US ambassador to the UN, Richard Holbrooke, has visited all countries in the region as part of increased international efforts to find a peaceful solution. Agreement has been reached on a neutral mediator for the national dialogue in Congo involving the government, the rebels and the political opposition. Relations with South Africa have deteriorated following the visit of a prominent opposition leader. Intense fighting has continued in which the government and its Zimbabwean allies have faired poorly. UN observers have been deployed despite government objections. Rwanda and Uganda have encouraged the three main rebel movements to increase mutual co-ordination. Ethnic violence has increased in eastern Congo. The government and rebel forces have been accused of serious human rights abuses in a UN report. Economic policy The government has continued with disastrous foreign currency and exchange rate policies despite mounting evidence of the economic damage which they are causing. A 100% devaluation of the Franc Congolais was announced in January although the currency still remains some 330% overvalued. The domestic economy The franc congolais has continued to drop on the parallel market and declined by 113% from September to February despite harsh measures by the government to enforce compliance with the official exchange rate. Real GDP contracted by 14.5% in 1999. Humanitarian agencies report that malnutrition rates are rising in the capital, Kinshasa, due to the adverse economic climate. A new chairman has been appointed for the state copper company, Gécamines. Foreign trade and Exports fell by 60% in January-September 1999 from the year earlier due to loss payments of territory in the war and the impact of adverse economic policy decisions. Late note The UN Security Council voted on February 25th to approve a 5,573-strong UN force in Congo including 500 observers.