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.

London New York Hong Kong The Economist Intelligence Unit The Economist Intelligence Unit The Economist Intelligence Unit 15 Regent St The Economist Building 25/F, Dah Sing Financial Centre London 111 West 57th Street 108 Gloucester Road SW1Y 4LR New York Wanchai United Kingdom NY 10019, US Hong Kong Tel: (44.20) 7830 1000 Tel: (1.212) 554 0600 Tel: (852) 2802 7288 Fax: (44.20) 7499 9767 Fax: (1.212) 586 1181/2 Fax: (852) 2802 7638 E-mail: [email protected] E-mail: [email protected] E-mail: [email protected]

Website: http://www.eiu.com

Electronic delivery EIU Electronic New York: Alexander Bateman Tel: (1.212) 554 0600 Fax: (1.212) 586 1181 London: Jan Frost Tel: (44.20) 7830 1183 Fax: (44.20) 7830 1023 This publication is available on the following electronic and other media:

Online databases NewsEdge Corporation (US) Microfilm FT Profile (UK) Tel: (1.718) 229 3000 World Microfilms Publications Tel: (44.20) 7825 8000 (UK) DIALOG (US) CD-ROM Tel: (44.20) 7266 2202 Tel: (1.415) 254 7000 The Dialog Corporation (US) LEXIS-NEXIS (US) SilverPlatter (US) Tel: (1.800) 227 4908 M.A.I.D/Profound (UK) Tel: (44.20) 7930 6900

Copyright © 2000 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Intelligence Unit Limited. All information in this report is verified to the best of the author's and the publisher's ability. However, the EIU does not accept responsibility for any loss arising from reliance on it.

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.

Editors: Douglas Mason (Democratic Republic of Congo); Paul Gamble (Zambia) All queries: Tel: (44.20) 7830 1007 Fax: (44.20) 7830 1023 Next report: Our next Country Report will be published in May

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 Zambia 5

Zambia

Political structure

Official name Republic of Zambia

Form of state Unitary republic

Legal system Based on the 1996 constitution

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

National elections November 1996 (presidential and legislative); next presidential and legislative elections due in 2001

Head of state President elected by universal suffrage for a term of five years

National government The president and his appointed cabinet

Main political parties The Movement for Multiparty Democracy (MMD) is the ruling party, with a huge parliamentary majority. The National Party (NP) and Agenda for Zambia (AZ) also have seats in parliament. The former sole party, the United National Independence Party (UNIP), and several other opposition groups boycotted the 1996 elections and have no seats. The United Party for National Development (UPND) was formed in late 1998 but already seems to have attracted considerable support. The Zambia Alliance for Progress (ZAP) is a coalition formed in early 1999 and comprises the National Citizens Coalition (NCC), the Zambia Democratic Congress (ZDC), AZ, the Labour Party, the Lima Party and a non-governmental organisation, the National Pressure Group (NPG). There are over 30 parties in all

President Frederick Chiluba

Vice-president Christon Tembo

Key ministers Agriculture & fisheries Suresh Desai Commerce, trade & industry William Harrington Communications & transport Nkandu Luo Community & social development, lands Samuel Miyanda Defence Chitalu Sampa Education Godfrey Miyanda Energy & water development David Saviye Environment Ben Mwila Finance Katele Kalumba Foreign affairs & co-operation Kelly Walubita Home affairs Peter Machungwa Labour & social services Edith Nawakwi Legal affairs Vincent Malambo Local government & housing Ackson Sejani Mines Syamujaye Syamukayumbu Office of the president Eric Silwamba Tourism Anoshi Chipawa Works & supply Gilbert Mandani Central bank governor Jacob Mwanza

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 6 Zambia

Economic structure

Annual indicators

1995 1996 1997 1998 1999a GDP at market prices (ZK bn) 2,998 3,970 5,157 6,710 8.542 Real GDP growth (%) –2.3 6.5 3.5 –2.0 2.0b Consumer price inflation (av; %) 34.9 46.3 24.8 24.3 26.9c Population (m) 8.08 8.28 8.48 8.72 8.96 Exports fob ($ m) 1,233 1,093 1,135 899a 830 Imports fob ($ m) 1,188 1,116 1,176 1,196a 1,224 Current-account balance ($ m) –142 –154 –206 –285a –281 Reserves excl gold ($ m) 223 223 239 69 45c Total external debt ($ bn) 6.85 7.18 6.76 6.69a 6.38 External debt-service ratio, paid (%) 194.6 20.5 20.7 32.0a 32.8 Copper outputd (‘000 tonnes) 341 327 325 299 260b Exchange rate (av; ZK:$) 864.12 1,207.90 1,314.50 1,862.07 2,388.02c

February 18th 2000 ZK2,882.5:$1

Origins of gross domestic product 1998 % of total Components of gross domestic product 1998 % of total Agriculture 17 Private consumption 78 Industry 22 Government consumption 16 Mining 6 Gross fixed capital formation 14 Construction 5 Change in stocks 0 Manufacturing 11 Exports of goods & services 29 Government & other services 62 Imports of goods & services –38 GDP at market prices 100 GDP at market prices 100

Principal exports 1998 $ m Principal imports 1993 $ m Copper 430 Crude oil 144 Cobalt 154 Fertiliser 30

Main destinations of exports 1998e % of total Main origins of imports 1998e % of total Saudi Arabia 11.9 South Africa 52.2 Japan 11.5 Zimbabwe 7.9 UK 10.5 UK 6.3 France 7.4 Japan 3.4 a EIU estimates. b Official estimate. c Actual. d ZCCM financial years starting April 1st. e Based on partners’ trade returns; subject to a wide margin of error.

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 Zambia 7

Quarterly indicators

1998 1999 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr Prices Consumer pricesa (1990=100) 6,425 6,850 7,151 7,619 8,366 8,702 9,101 9,417 % change, year on year 17.7 24.1 37.8 28.1 30.2 27.0 27.3 23.6 Copper: LME (cents/lb) 77.1 78.5 74.4 70.1 63.9 66.5 76.1 78.9 Financial indicators Exchange rate ZK:$ (av) 1,543.9 1,827.6 1,940.8 2,136.0 2,288.1 2,377.9 2,403.6 2,482.5 ZK:$ (end-period) 1,698.4 1,931.0 1,976.9 2,298.9 2,288.5 2,439.5 2,413.7 2,632.2 Interest rates (av; %) Deposit 11.90 11.40 13.13 15.90 18.60 20.47 21.00 n/a Lending 30.37 28.37 31.80 36.67 38.37 40.37 41.23 n/a Treasury bill 17.73 20.06 29.29 32.67 35.26 36.66 36.70 n/a M1 (end-period; ZK bn) 357.0 359.3 376.4 414.9 379.7 398.2 432.3 n/a % change, year on year 22.3 14.7 7.4 16.8 6.4 10.8 14.9 n/a Sectoral trends Copper in concentrates, production (‘000 tonnes) 93.1 92.8 109.4 107.5 77.7 71.4 65.7 56.2 Foreign tradeb ($ m) Exports fob 203.0 236.1 258.5 251.7 203.8 212.5 n/a n/a Imports fob 258.3 297.1 288.3 281.0 244.7 281.9 n/a n/a Trade balance –55.3 –61.0 –29.8 –29.3 –40.9 –69.4 n/a n/a Foreign reserves Reserves excl gold (end-period; $ m) 155.2 118.1 101.3 69.4 73.3 55.5 72.6 45.4 a EIU estimates. b DOTS estimate; figures are subject to revision.

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

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 8 Zambia

Outlook for 2000-01

Zambia: forecast summary ($ m unless otherwise indicated) 1998a 1999a 2000b 2001b Real GDP growth (%) –2.0c 2.0d 4.5 5.8 Consumer price inflation (av; %) 24.3c 26.9c 17.0 15.0 Merchandise exports fob 899 830 945 1,086 of which: copper 495 416 515 616 Merchandise imports fob 1,196 1,224 1,320 1,440 Current-account balance –285 –281 –185 –139 Exchange rate (av; ZK:$) 1,862.07c 2,388.02c 3,000.00 3,400.00

a EIU estimates. b EIU forecasts. c Actual. d Official estimate.

Candidates line up to Despite a flurry of rumours to the contrary, President Frederick Chiluba has succeed President Chiluba said he will stick to the constitution and not seek a third term in the 2001 presidential election. Mr Chiluba had preferred to keep people guessing about his intentions in order to prevent an open struggle that still has the potential to destroy the ruling party, the Movement for Multiparty Democracy (MMD). Mr Chiluba is likely to take an active role in the selection of his successor, but does not have the authority just to impose his choice. The front-runners for the contest are the environment minister, Ben Mwila, who has been the most overt in his campaigning for the leadership (but actions such as taking out a national newspaper advertisement criticising MMD policies have not endeared him to the party’s hierarchy); the vice-president, Christon Tembo; the party chairman, Michael Sata; and the finance minister, Katele Kalumba. However, at this stage it is too early to predict the outcome with any degree of certainty.

The MMD will win the next Whoever ends up heading the party, the MMD looks set to win the next general election legislative election. The increasingly desperate strategy of the United National Independence Party (UNIP) illustrates the trouble the main opposition party is in. On February 7th the UNIP president, Kenneth Kaunda, announced that he was launching a campaign of civil disobedience to bring down the govern- ment. Although this strategy worked for Mr Kaunda against the British in the 1950s, it was a complete failure against the MMD in 1996, primarily because of the lack of interest of most Zambians. Things appear no different this time. Far from posing any threat to the MMD, all Mr Kaunda’s campaign will do is heighten the electorate’s image of UNIP as a collection of yesterday’s people. The vote of those opposed to both the MMD and UNIP, which is potentially large, will be split between the United Party for National Development (UPND) and the Zambia Alliance for Progress (ZAP). Relations between the two parties are tense, making the prospect of an electoral pact slight.

South Africa will support The Zambian government will continue to do everything it can to limit the Zambia’s refusal to country’s involvement in the Angolan civil war. Although the Angolan countenance MPLA bases government may well repeat its recent requests for permission to position its troops on the Zambian side of the border in an attempt to cut off the supply

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 Zambia 9

lines and escape routes of the rebel movement, União Nacional para a Independência Total de Angola (UNITA), the Zambian position is expected to remain the same. The Angolan government has permission for troops of the Movimento Popular de Libertação de Angola (MPLA) to use Namibian and Congolese soil in their anti-UNITA operations and has the strong backing of Zimbabwe for its military approach to the conflict. If, as seems highly likely, the Angolan government fails to score a decisive military victory against UNITA, it will be tempted to blame the intransigence of the Zambian government. Fortunately for the MMD, its position on this issue has important backers. The first is the South African government, which has not welcomed the widening of Angola’s war to embrace its neighbours. In early February South Africa restated its belief that political negotiations should recommence, as the Angolan conflict could not be resolved militarily. The US administration will continue to support Mr Chiluba, if only to prevent the further apparent failure of its policy of active engagement in order to avoid conflict spreading in Africa.

Incursions by MPLA and With or without the Zambian government’s permission, military incursions by UNITA will continue both MPLA and UNITA forces will continue, and the Zambian armed forces will not be able to stop them. Although a worsening of relations between the Angolan and Zambian governments would suit UNITA, it is in neither government’s interest, and the likelihood of a relatively speedy application of external pressure means that any skirmishes that do occur will be contained.

The refugee influx will More refugee arrivals from Angola seem certain, and the UN High continue Commissioner for Refugees (UNHCR) will come under pressure to ensure that the refugee camps do not become UNITA training grounds, as happened with the Rwandan camps in eastern Zaire in 1994. The UNHCR and other non- governmental organisations will cover most of the immediate cost of the refugees, although social service provision will be strained in affected areas. Incidence of crime in border regions is likely to go up, but Zambia’s frontier with Angola is remote and sparsely populated, and there seems little prospect of events there disrupting the rest of the country too greatly during 2000-01.

Congo’s civil war will not Spill over from the civil war in the Democratic Republic of Congo should also threaten the Copperbelt be negligible, even though the border with Congo is not far from some of Zambia’s most valuable copper mines. Zimbabwean—and to a lesser degree Namibian—soldiers have secured the defence of the major mining assets in Congo’s southern provinces of Katanga and Kasai Orientale, and seem set to remain for at least another year, which makes large-scale open conflict near the Zambian border unlikely.

Mining productivity and The commodity cycle has entered an upward phase just in time for Zambia to earnings will rise reap the benefits of increased production from privatised mines on the Copperbelt. Ownership of the Nkana and Mufulira mines will be transferred on March 15th to a new company called Mopani Copper Mines, 90% owned by a consortium consisting of First Quantum Minerals (FQM) of Canada and Glencore of Switzerland, according to a deal signed on February 18th. The remaining 10% will continue to be held by the government. The problem

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 10 Zambia

mine in 2000 will remain Luanshya. The government held back from taking action in 1999 in order not to frighten off investors with a failed privatisation, but it will get tougher on the Indian mine owner, Binani, this year. The government’s preferred option is for Binani to seek a partner, but it is hard to see anyone willing to come forward without being able to take over important management functions and without a mandate to renegotiate important aspects of the mine package. Anglo American Corporation (AAC) is hoping that the World Bank can be induced to pay for the repairs and renovations that are required at the Nkana smelter before its three-year management lease runs out, leaving them with the first option to buy. Minerals exploration will pick up in Zambia in the next two years, with AAC already prospecting for gold in North Western province. However, international investor sentiment is still not particularly favourable to prospecting, and junior partners will continue to find backers hard to come by.

ESAF payments will resume Payments under the IMF’s enhanced structural adjustment facility (ESAF) are in the second half of 2000 expected to resume in the third quarter of 2000, following the completion of the privatisation of Zambia Consolidated Copper Mines (ZCCM). Although the government failed to meet most of the targets set out in its ESAF in 1999 (see Economic policy), this is unlikely to prove too great a stumbling-block for the Fund. Hitting the 1999 targets was in effect predicated on the ZCCM sale going through, as they were not achievable without balance-of-payments support from the Fund. Currently, the government has to fund ZCCM losses of an estimated $1m-3m a day, and the uncertainty over the sales is denting production and thus export earnings. However, the progress made on the sale of the mines so far, and the government’s commitment to economic reform, means that new funding from bilaterals may come once the decision to resume IMF support is reached.

The budget deficit target is The 2000 budget, drawn up in consultation with the IMF, projects a fiscal likely to be exceeded deficit, including external assistance, of ZK124bn ($44m), representing 1.2% of forecast GDP. Total state spending is set to rise by 33%, largely the result of the government allocating ZK423bn to reducing some of ZCCM’s debts to local companies. Pressure on the government to implement vote-winning policies in the run up to the 2001 elections should ensure that the budget deficit target is exceeded. The increasing intrusion of the Angolan conflict brings further potential for budgetary overshoot. Military expenditure has not been significantly increased in the latest budget (see Economic policy), and it is possible that extra spending will be required. Non-governmental organisations will cover most of the immediate cost of the refugees. On the revenue front, in light of the perceived threat to jobs from the removal of trade barriers under the Comesa free trade deal (see Foreign trade and payments), manufacturing sector companies have been lobbying the government for a reduction in their tax liabilities. However, substantial tax revenue was surrendered in the 2000 budget, and the government will not be well placed to forego these again in 2001. State spending is expected to continue to rise in 2001, reflecting election- related expenditure.

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 Zambia 11

Selling 20% of Zamtel may The government’s privatisation programme is expected to be accelerated in not be enough 2000-01. However, progress will be slow. The recent offer of 20% of the telecommunications parastatal, Zamtel, has generated interest, but not much of it from the kind of reputable players the government wants to attract into the sector. Even with management rights, international telecoms companies will be looking for a bigger stake, and the government will probably have to oblige. Alternatively, some operators might be satisfied by a promise to increase the proportion of Zamtel for sale at some specified future time.

GDP growth will exceed 4% The finance minister, Katele Kalumba, has made a budget forecast of 4% this year growth for Zambia in 2000 that is likely to be exceeded. The economy is set to benefit from increased mining output and a rising copper price, and, thanks to recent rains, a good chance of improved agricultural production. Commercial farmers are expected to lead agricultural growth as usual, since they are better able to expand production and to adapt in the face of temporary climatic problems, such as the mini-drought in December 1999. The $45m fund for subsistence farmers announced in the 2000 budget is good news for the subsector, but is unlikely to compensate fully for the expected decline in their ability to obtain adequate fertiliser stocks and storage capacity.

On the downside, regional free trade agreements will harm the manufacturing sector and delays in the repair of the Indeni oil refinery (caused by the unwillingness or inability of the insurers to pay up) will ensure that fuel supply and prices continue to have a negative effect on economic performance. Manufacturers will continue to suffer from relatively high overheads and increasing regional competition, particularly in the wake of two regional free- trade agreements, both of which are due to come into effect by the end of this year. Hence, the EIU is scaling back its real GDP growth forecast for 2000 to 4.5% from the earlier forecast of 5.1%. We retain the real GDP growth forecast of 5.8% for 2001, however, primarily because Zambia will continue to enjoy further increases in mining output and higher copper prices.

The exchange rate will We expect the privatisation of ZCCM to be concluded, bar a few minor assets, continue to depreciate by the end of the second quarter of 2000. Pressure on the exchange rate over the next two years will then be eased by increased inflows from donors—as the main obstacle to this was the delay in ZCCM’s sale—and rising foreign reserves. This will help strengthen the kwacha, though in the short term depreciation will continue, and we forecast an average for 2000 of ZK3,000:$1, and ZK3,400:$1 for 2001.

Inflation will fall further Relative exchange-rate stability will help contain inflation. The government forecast of an average rate of 14% for 2000 is likely to prove too ambitious, in part because of higher oil prices and the continued effect of the fire at the Indeni refinery on the domestic fuel price. Average inflation of 17% is more likely in 2000. With Indeni expected to be substantially repaired by 2001, inflation should ease further, averaging 15% for the year.

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 12 Zambia

Higher exports will help The delay to the completion of the sale of the remaining ZCCM assets (see improve the current- Mining) means significant increases in copper production will not be possible account deficit until late in the year. The EIU has lowered its copper price forecast for 2000— from an annual average of 90 cents/lb to 83.3 cents/lb, the result of an increase in global production in the second half of 1999—and we now do not expect exports to pass the $1bn level until 2001. Nonetheless, the growth in copper export revenue compared with 1999 will more than offset the fall in exports of manufactured goods caused by a slowdown in the sector. The deterioration in the outlook for manufacturing will also reduce growth in demand for foreign capital goods, the largest component of imports. Although higher world oil prices will add to the import bill, import growth will be outpaced over 2000 and 2001 by export growth fuelled by rising copper export revenue, resulting in an improving merchandise trade balance.

The growth in imports will cause a further widening of the substantial deficit on the services account—a result of Zambia’s landlocked position. However, assuming the resumption of IMF funding from the second half of 2000, inflows of new official transfers from donors should, together with the reduction of the merchandise trade deficit, ensure that the overall current-account deficit continues to narrow, from an estimated $281m in 1999 to $185m in 2000 and to $139m in 2001.

HIPC debt relief will take Prospects for substantial debt relief under the heavily indebted poor countries time (HIPC) initiative have improved recently, and Zambia currently stands to benefit from the forgiveness of about half its $6.5bn debt. The uncertainty is when this will happen. Promises from HIPC sponsors that the process will be speeded up and streamlined in 2000 have been thrown into question by the recent behaviour of the US Congress and it now seems quite possible that Zambia will not benefit substantially until 2001 at the earliest.

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 Zambia 13

The political scene

A minister attacks the In a speech in mid-February President Frederick Chiluba finally laid to rest any government as the suggestion that he might alter the constitution to allow himself to run for a presidential election nears third term. Mr Chiluba’s decision allows other party members to stake their claim to become the candidate of the Movement for Multiparty Democracy (MMD)—and the likely victor—in next year’s presidential election. The most overt in his campaigning has been the environment minister and MMD founder member, Ben Mwila, who went so far as to take out full page advertisements in Zambia’s daily newspapers on January 6th criticising the political leadership and economic management of Mr Chiluba’s MMD govern- ment. Mr Mwila described Zambia’s economy as in “intensive care” and said its government was guilty of “autocracy and arbitrariness”. Since then, MMD student associations at the University of Zambia and the Copperbelt University have stated their support for Mr Mwila.

Mr Chiluba, although reportedly furious, has not responded publicly, and Mr Mwila has retained his cabinet position. However, on January 11th Mr Chiluba suspended for an indefinite period the tourism minister, Anoshi Chipawa, who is thought to support Mr Mwila. Mr Chipawa is also the MMD provincial chairman in North Western province, and therefore a useful ally in any campaign to secure the MMD’s candidacy for the presidency. There are reports that Mr Chiluba has intervened personally to prevent local MMD branches from hosting rallies and public speeches by Mr Mwila, though this has been made difficult by Mr Mwila’s tactic of making high-profile public appearances when Mr Chiluba is out of the country. There is little ideologically to separate Mr Chiluba and Mr Mwila; Mr Chiluba’s opposition to Mr Mwila’s presidential aspirations appears rather to be rooted in personal animosity.

Kenneth Kaunda has rivals The opposition United National Independence Party (UNIP) has still not for the UNIP leadership hosted its long expected extraordinary party congress (4th quarter 1999, page 12), at which its candidate for next year’s presidential election will be selected. The congress was due to be held in December 1999, but was postponed after the assassination of Wezi Kaunda, the son of the party president, Kenneth Kaunda, in November. Police have arrested three men in connection with the murder and have shot dead another. The police consider the killing to have been criminally motivated, but the Kaunda family asked the UK government to send detectives to conduct an independent investigation. The UK government agreed, and with the permission of the Zambian government is currently funding the deployment of a British police team in Zambia. Meanwhile, Mr Kaunda continues to run UNIP, despite the fact that he is barred from contesting Zambia’s presidency by the 1996 constitution. The controversial secretary-general, Sebastian Zulu, is known to covet the UNIP presidency and in mid-December another UNIP heavyweight, the party chairman, Malimba Masheke, declared himself to be in the running.

ZAP and UPND trade Relations have deteriorated sharply between the United Party for National accusations Development (UPND), and the Zambia Alliance for Progress (ZAP), who compete for the votes of the potentially sizeable proportion of the electorate

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 14 Zambia

that is opposed to both the MMD and UNIP. During the notably ill-tempered campaigning that preceded council by-elections in 12 wards around the country in early December, the UPND accused ZAP of denigrating the party as tribalist—a charge that ZAP denies. Members of the MMD have frequently accused the UPND of tribalism in the past. The UPND’s founder, the former managing director of Anglo American Corporation (AAC) in Zambia, Anderson Mazoka, is Tonga, an ethnic group that has had little high-level political representation in post-independence Zambia. At the polls the MMD won five council seats, the UPND four, ZAP two and UNIP one.

On January 27th the National Party (NP) signed an 18-month electoral pact with the UPND. The NP was a key constituent member of ZAP at its founding (2nd quarter 1999, page 11), but has nonetheless agreed with the UPND to a programme of mutual support during elections, with the possibility of a merger at the end of the 18 months.

Angola and Zambia Angola’s foreign minister, João Bernardo de Miranda, visited Zambia on exchange ministerial November 23rd, as envisaged in an agreement signed between the two visits— countries on June 9th to strengthen bilateral relations (3rd quarter 1999, pages 13-14). Relations have been under strain for some time, with the Angolan government accusing its Zambian counterpart of providing covert assistance to the rebel União Nacional para a Independência Total de Angola (UNITA), a charge that the Zambian government rejects. The ministerial visit achieved little of substance, but signalled that relations between the two countries are improving, and brought the possibility of a presidential summit sometime in 2000. Mr Miranda tried to secure a Zambian commitment not just to desist from helping UNITA, but also to assist its armed forces in the resumption of their full-scale assault on the rebels. While the Zambian government repeated its promise to Mr Miranda that it would not help UNITA, it refused to countenance active support for Angolan government forces.

—as Angolan jets bomb Angolan air force jets bombed sparsely populated areas of Zambia’s North north-western Zambia— Western province near the Angolan border on December 6th. Elizabeth Kalenga, the MMD member of parliament for the area, said that the raid took place while forces of Angola’s ruling Movimento Popular de Libertação de Angola (MPLA) were pursuing UNITA units on the Angolan side of the border, but said she was not sure if the bombs had been dropped intentionally on Zambia. While pilot error cannot be ruled out, there is a possibility that the raid was deliberate. Angola has previously sought to intimidate Zambia into supporting its war against UNITA, as was shown in the bombing campaign that rocked Lusaka in February 1999 (2nd quarter 1999, page 13). Angola has secured the military co-operation of Congo and Namibia, so that Zambia is the only one of its neighbours not prepared to offer this kind of assistance.

—and thousands more The intensification of the MPLA campaign against UNITA in December and refugees stream across the January forced thousands more refugees into Zambia. Between October and border late January over 21,000 Angolan refugees arrived, 12,000 crossing in January alone, bringing the total number in Zambia to around 171,000. In addition, Zambia’s Congolese refugee population is estimated at 40,000. Humanitarian

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 Zambia 15

disaster was close in late January when thousands of refugees were threatened by floods from the Zambezi river in a camp near the Angolan border. The UN High Commissioner for Refugees, Sadako Ogata, visited the site on January 23rd and a week later nearly 4,000 refugees were moved to Mongu, further east. Humanitarian workers are now concentrating their efforts on the plight of an estimated 8,000 refugees who are stranded further south at Sinjembela on the west bank of the Zambezi, with no means of crossing and few supplies.

Another concern for the Zambian government is that UNITA soldiers have entered Zambia with the refugees, increasing the probability of MPLA retaliatory raids. There have already been several incidents in which armed Angolan units have entered Zambia in search of supplies, and the Zambian army has increased its presence in the border regions. In most cases so far the presumption has been that the raiders are from UNITA, though UNITA has denied this, claiming that they are government forces trying to draw Zambia into the conflict. Zambian police on the spot say that in most cases it is hard to tell.

Junior doctors go on strike Junior doctors throughout Zambia went on strike in mid-December in protest against deteriorating working conditions and low pay. In late December senior doctors voiced their support for the junior doctors, but on January 4th the health authorities suspended the junior doctors and forbade them to leave the country. On January 10th senior doctors began a five-day stay-away in support of the junior doctors, resulting in the postponement of most surgical operations nationwide. Many junior doctors have since been fired for dereliction of duty. With those that remain on strike facing financial hardship, the government, which has not yielded to any of the doctors’ demands, clearly has the upper hand in the dispute.

Economic policy

The finance minister The finance minister, Katele Kalumba, presented the 2000 budget, prepared presents a $44m deficit with technical support from the IMF, to parliament on January 28th. In a budget— departure from previous years, a deficit of ZK124bn ($44m) has been budgeted for the year. Revenue is forecast at ZK2.8trn. Of the total, 35% is to come from donors, and direct tax revenue is forecast to account for ZK585bn, 27% more in kwacha terms and 12.4% more in real terms than in 1999.

—with tax breaks for Indirect tax revenue is forecast fall by $10m in real terms compared with 1999, tourism— to ZK1.01trn, largely because of reductions in tax rates in sectors that the government has prioritised for growth. Zambia currently attracts only 4% of the region’s tourists, and accordingly, Mr Kalumba, who used to be the tourism minister, extended considerably the list of tourist activities that are zero rated, as well as reintroducing the waiver on tourist visa fees and removing the 5% duty payable on the importation of aircraft.

—and mining— In his treatment of tax breaks for the mining sector, Mr Kalumba mainly confirmed agreements that the government had made with Anglo American

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 16 Zambia

Corporation (AAC) during negotiations for the Konkola and Nchanga mines (4th quarter 1999, page 16) in 1999. The mining royalty was reduced from 2% to 0.6% of gross value, all excise duty on electricity was removed, the corporate tax rate was reduced from 35% to 25%, withholding tax on interest was removed and 100% deductions for capital expenditure were allowed. It was not clear from Mr Kalumba’s budget speech whether these concessions applied to mines sold earlier in the privatisation programme, though government sources have since indicated that they do.

—but less generous Mr Kalumba gave a more modest response to requests for concessions from the concessions for agriculture Zambia National Farmers’ Union (ZNFU), adding only a few more agricultural and manufacturing inputs to the list of imports incurring reduced rates of duty. Mr Kalumba also gave a cautious response to the manufacturing sector’s pleas for a reduction in its indirect tax burden. The main changes were that excise duty on electricity was cut from 10% to 7%, and that customs tariffs on a range of manufacturing inputs were provisionally lowered. In addition, Mr Kalumba confirmed that Zambia would remove tariffs on imports from Common Market for Eastern and Southern Africa (Comesa) countries by November 1st 2000, in accordance with the Comesa free-trade treaty (see Foreign trade and payments). Mr Kalumba also gave Coca-Cola the tax regime it had been pressing for since June 1998 (3rd quarter 1998, page 19), by cutting the excise duty on carbonated soft drinks from 25% to 10%—an announcement that gave wry amusement to a former commerce minister, Enoch Kavindele, who lost his job over the issue (4th quarter 1998, page 12). Mr Kalumba added that he would be reviewing excise duties on beer, and would make a decision by March.

Expenditure will rise On the expenditure side constitutional and statutory spending is set to rise rose because of ZCCM’s debts from ZK367bn to ZK850.8bn. This additional expenditure is to be used to pay off some of the debts of Zambia Consolidated Copper Mines (ZCCM) to local suppliers. Spending is to be reduced on the public-sector reform programme, although it is government policy to widen its scope and effect during 2000.

The IMF has yet to decide An IMF team evaluating Zambia’s performance under its enhanced structural whether to resume ESAF adjustment facility (ESAF) completed its work on December 14th, but has yet payments to make its findings public. The IMF agreed in March 1999 to resume ESAF payments worth $349m over three years (2nd quarter 1999, page 20), but subsequently suspended disbursements because of the delay in privatising ZCCM, and slippage on other economic targets. The IMF resident represen- tative, Kenneth Myers, said that the Fund had reached agreement with the Zambian government on a wide range of issues, but was still concerned with implementation, not least regarding ZCCM’s privatisation. Mr Myers added that while the ESAF funds were important, of far greater significance was Zambia’s prospects for qualifying for enhanced debt relief under the heavily indebted poor countries (HIPC) initiative. Mr Myers said that if all went well, a presentation could be made to the IMF board on the issue by the end of June 2000, enabling a decision to be made soon afterwards. Half of the $1.2bn Zambia owes the Fund could be forgiven under the HIPC initiative.

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 Zambia 17

Zambia: budgets (ZK bn) 1999 2000 Total expenditure 2,227.7 2,957.0 Wages & salaries 400.1 500.6 of which: public-sector reform 80.0 74.0 Pensions & gratuities 19.0 26.0 Recurrent department charges 381.4 452.5 of which: contingency reserve 170.0 164.0 Grants & other payments 230.0 249.6 Constitutional & statutory expenditure 367.0 850.8 Food Reserve Agency 12.0 12.0 Capital expenditure 818.0 865.5 Total revenue 2,227.7 2,833.0 Direct tax 459.0 585.0 Company income tax 107.0 119.0 Pay as you earn 303.0 400.0 Other income taxes 49.0 66.0 Indirect tax 920.0 1,013.0 Trade taxes 387.7 402.4 Excise duties 262.3 270.6 VAT 270.0 340.0 Mineral royalty 21.0 2.0 Tax arrears 0.0 191.0 Non-tax revenue 60.0 37.0 External assistance 767.7 1,005.0 Project support 648.2 778.2 Non-project report 119.5 226.8 Budget balance 0.0 –124.0 Source: Deloitte & Touche, Zambia Budget 2000.

One-fifth of the state Mr Kalumba reported that by the end of 1999, 240 of the 280 parastatal telecoms company is enterprises targeted for privatisation had been divested. He confirmed that the for sale government was offering a 20% share of the telecommunications company, Zamtel, for sale in 2000 with management rights, and repeated the by now familiar, but this time more plausible, mantra that ZCCM’s privatisation would be concluded shortly.

The domestic economy

Economic trends

Growth in 1999 comes in The finance minister, Katele Kalumba, said in his budget speech that real GDP well below government growth was 2% in 1999, slightly better than the 1.5% forecast by the EIU in target— August (3rd quarter 1999, page 9), but still way off the 4% predicted by his predecessor, Edith Nawakwi, in the January 1999 budget (1st quarter 1999, page 18) and agreed with the IMF. The main reasons for the poor performance, according to Mr Kalumba, were delays in selling off Zambia Consolidated Copper Mines (ZCCM), which contributed to low mining sector output and led

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 18 Zambia

to donors withholding $132m of the $307m in balance-of-payments and project support they had previously pledged; and the fire at the Indeni refinery in May (2nd quarter 1999, page 9). Non-mining performance was better. Mr Kalumba revealed that agriculture, manufacturing and construction grew by 13.8%, 2.8% and 11.2% respectively in 1999. The government’s target for real GDP growth in 2000 is 4% (see Outlook for 200-01).

—but output rose in all but The rise in agricultural output of 13.8% compared with a meagre 1.8% rise in the metals sector 1998, and was due to increases in maize, rice, bean (both mixed and soya) and cotton production. In his speech Mr Kalumba affirmed that the government would only intervene in the agricultural market if there was a serious emergency; indeed, the debts of the Food Reserve Agency (FRA) are such that it can afford to do little else (see Agriculture). Manufacturing growth of 2.8% was an improvement on the 1998 rate of 1.8%, but high overheads and the depressed consumer market ensured that performance was still disappointing. Mining output fell by a hefty 25% in 1999, with copper production falling by 12.9% and cobalt production by 34%. By contrast, construction boomed, rebounding from a 10% contraction in 1998 to grow by 11.2% in 1999, thanks to some big new developments like the Manda Hill shopping complex in Lusaka and the Sun International hotel in Livingstone. In the tertiary sector, commercial banks’ capitalisation, asset quality and liquidity all improved in 1999, and the value of non-performing loans fell by ZK25.4bn to ZK84.3bn during the year.

—and inflation overshoots The year-end inflation rate for 1999 was 20.6%, above the government’s its target again ambitious 15% target, but still a lot better than the 30.6% recorded in 1998. Mr Kalumba gave the main reason for the slippage as the impact of the Indeni fire on fuel prices. He added that tight monetary policy and a good harvest had prevented an even higher inflation rate. The government’s inflation target for this year is 14%.

The kwacha takes a dive Sharp falls in December ended a sustained period of relative stability for the Zambian currency against the dollar. Overall, the kwacha depreciated by 14.7% against the dollar in 1999, ending the year at ZK2,750:$1. The improvement in

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 Zambia 19

performance from 1998, when the currency fell by 64.5% against the dollar, can largely be explained by an increase in foreign-exchange flows from donors. Donor support, however, did not reach the level projected in the 1999 budget. Together with a $105m decline in export earnings, this explains why foreign exchange reserves missed their end-1999 target of $120m by $20m.

Poverty keeps rising Shortly before the budget, the Central Statistical Office produced a report that indicated that the proportion of households living in poverty in Zambia had risen from 69% in 1996 to 73% in 1999. Poverty incidence was highest in Western province, at about 89%.

In his budget speech, Mr Kalumba conceded that poverty levels were too high and restated his government’s commitment to bring levels down through the national poverty reduction plan (NPRP), which involves increased government spending in the social sector in the context of a continuing liberalisation programme. Mr Kalumba stressed that high external debt-service payments made this harder and pledged that funds expected to be released under the heavily indebted poor countries (HIPC) initiative (see Foreign trade and payments) would be directed towards the NPRP. Many local non-governmental organisations were unimpressed by this and the Catholic Commission for Justice and Peace accused Mr Kalumba of “glossing over” poverty reduction in the budget.

Mining

FQM and Glencore buy the On February 18th a consortium of Canada’s First Quantum Minerals (FQM) Nkana and Mufulira and Glencore International of Switzerland announced the purchase of a 90% mines— stake in a new company called Mopani Copper Mines. The company will acquire from Zambia Consolidated Copper Mines (ZCCM) its Nkana and Mufulira mining complexes. The remaining 10% of Mopani will be owned by the Zambian government. The purchasers, who beat off a bid from London- based Metorex, the owners of Chibuluma South, will pay $20m on March 15th, the date that ownership is transferred, and five annual instalments totalling $23m, from January 2003. Mopani has promised to invest $159m in the mines in the first three years and an additional further $343m over a unspecified timeframe, subject to further evaluation.

The deal excludes the Nkana smelter and refinery, which is to be managed by Anglo American Corporation (AAC) under the terms of its purchase of Konkola and Nchanga in October (4th quarter 1999, page 16). However, the Mufulira smelter is likely to be more than adequate for the needs of the Nkana and Mufulira mines—indeed, some analysts expect competition for concentrates between Copperbelt smelters throughout 2000. The Nkana and Mufulira mines produced 86,000 tonnes of copper and 1,250 tonnes of cobalt during the year to March 1999. According to a statement released by the government and FQM, Nkana hosts a resource of 323m tonnes grading 2.21% copper and 0.10% cobalt, while Mufulira hosts a resource of 71m tonnes grading 3.10% copper.

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 20 Zambia

—after KGHM fails to make The Polish mining group, KGHM, had previously been expected to buy up its mind Mufulira for an estimated $10m (3rd quarter 1999, page 17), but its request in November for an extension to the deadline for a final tender was rejected by the Zambian government, leaving the way open to FQM and Glencore to make a bid. FQM had already shown interest in the Nkana mine (4th quarter 1999, page 16). AAC was apparently not consulted about the sale of Nkana and Mufulira to FQM and Glencore, and is believed to be not pleased about the deal, having expected the sale of Mufulira to KGHM instead, though AAC has denied this. Analysts are now questioning the wisdom of AAC’s decision not to buy the Nkana smelter, but it appears that AAC balked at the prospect of paying the estimated $60m required to rehabilitate it, and is hoping that if this obligation remains with the Zambian government, funds may be made available by the World Bank for the task.

The January 31st deadline for the conclusion of the sales of both Nkana and Mufulira, and Konkola, Nchanga and Nampundwe, has passed with neither sale concluded. Parties to both agreements insist, however, that they are near completion and have predicted conclusion “soon”. Although such promises have been made in the past, negotiations with AAC have reached an advanced stage, and the sales are expected to be completed by the end of the second quarter.

Zambia: copper price and production

Pricea (cents/lb) Production (tonnes) 1997 103.3 301,000 1998 75.2 298,900 1999 71.4 260,300

a Annual average.

Sources: Bank of ambia; EIU.

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 Zambia 21

Copper production falls in Zambian copper production fell in the final two months of 1999, partly because November and December of the poor quality of concentrates going through the smelters but more importantly because of production disruptions at Luanshya and continued uncertainty surrounding the fate of ZCCM. Prices for both copper and cobalt remained depressed. A pick-up in global economic activity has caused growth in consumption, but this has been outpaced by growth in supply—the result of an expansion in the number of low-cost solvent-extraction/electrowinning (SXEW) projects, which has caused a build-up in stocks.

Zambia: cobalt price and production

Pricea ($/lb) Production (tonnes) 1998 21.14 5,658 1999 18.24 3,300

a Annual average.

Sources: Bank of Zambia; EIU.

Ndola Lime is for sale again The sale of Ndola Lime was transferred away from the ZCCM negotiating team and back to the Zambia Privatisation Agency (ZPA) in late January. While the sale was being handled by ZCCM, Belgium-based Sacoma, won the tender despite having no relevant experience, no technical partner and no ready access to the $17.5m asking price. Sacoma was, however, rumoured to have a covert connection to the president, Frederick Chiluba (4th quarter 1998, page 18). Pressure from AAC is the main reason why Ndola Lime was transferred back to the ZPA, since AAC wants a reliable source of lime for its mining operations and threatened to obtain it from South Africa if Ndola Lime was not sold to a reputable and competent company—in the year since it was awarded the tender, Sacoma had failed to secure the necessary finance or a technical partner. The ZPA has asked Zambia’s Chilanga Cement and South Africa’s Portland Cement if they are still interested in submitting bids. The two companies are expected to send teams round to inspect the plant shortly.

Agriculture

Commercial farmers have Prospects for the maize harvest in March have been damaged by an survived the December unexpected dry spell in December and early January, which damaged the crops dry spell— planted in November. Many commercial farmers have since reported that they were able to replant in mid-January, and with the rains now falling again, they expect a healthy harvest. Indeed, because the area under maize cultivation in commercial farms was much higher this season than the previous season, some agricultural experts are already forecasting a 20% increase in the maize crop.

—but prospects are poor for The situation is much more serious for subsistence farmers, however, since subsistence farmers most were not in a position to undertake substantial replanting in January and must face the full consequences of the December drought. In addition, access for subsistence farmers to agricultural inputs, and fertiliser in particular, was much weaker this season than previously, partly because of the failure of the Food Reserve Agency (FRA) to procure and distribute supplies in a timely

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 22 Zambia

fashion through its network of local agents, and partly because the fertiliser that was available has become too expensive for many. Farmers in Petauke, in Eastern province, for example, were reported in January as being unable to afford the ZK5,000 ($1.81) deposit required for a 90-kg sack of fertiliser, leading local government councillors to predict famine in their areas unless there was government assistance.

The names of FRA debtors The FRA has cleared most of the substantial debts it incurred in late 1998 (1st are published in the press quarter 1999, page 20), although Nedbank and Investec, two South African banks, are still owed money. It was Nedbank’s refusal to roll over its credit facility to the present season that lies behind much of the FRA’s financial predicament. In addition, the agency has been plagued by low levels of repayments from its local agents. Lists detailing who owed what to the FRA were published in the Zambian press in January, and provoked considerable interest, largely because of the number of politicians and other well-connected people they contained. Since then many of those accused of owing the FRA money have denied the charges, or blamed the debts on someone else, but the publication of the lists nonetheless appears to have increased repayment levels to the FRA.

Lower domestic The government forecast for domestic maize consumption in 2000 is 650,000- consumption reduces the 850,000 tonnes. However, increasing poverty levels (see Economic trends) maize import requirement should bring consumption levels down, in turn reducing the import require- ment. Industry analysts currently expect a 100,000-tonne import requirement, which is well within the procurement capability of the commercial sector. Traders are now beginning to take an interest in importing the maize, having been reassured by the finance minister’s budget speech, other government statements and the poor financial condition of the FRA that this time they will not be undercut by the subsidised sale of maize procured by the agency. Meanwhile, the maize price has begun its traditional first quarter ascent, as last year’s stocks finally start to run out and farmers wait for the next harvest. Maize had been fairly steady at around $140-150/tonne but has recently climbed to $170/t, and is expected to peak at around $200/t before coming down again on the strength of the new harvest.

Infrastructure and services

A report on Zambia The World Bank-financed study by a Toronto-based consultancy, Canadian Railways is before cabinet Pacific, into the potential for offering parts of Zambia Railways to foreign concessionaires (3rd quarter 1999, page 19), has been presented to the cabinet. The study is thought to recommend either dividing the railway into freight and passenger services, or into southern and northern services, but to argue for the connection between rolling stock and track to be maintained. Zambia Railways management wants to spend $54m on track over the next five years and $24m on rolling stock over the next three, but is hampered by the fact that it is owed $10m by a variety of debtors including Zambia Consolidated Copper Mines. Insiders expect only $2.5m will ever be repaid.

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 Zambia 23

Meanwhile, Zambia and Zimbabwe announced plans in November to build a new railway line between Kafue, just south of Lusaka, and Lion’s Den, 140 km north-west of Harare. The line is expected to cost $80m-100m, but it does not appear that financing for it has yet been procured.

Foreign trade and payments

Comesa says Zambia has In his budget speech the finance minister, Katele Kalumba committed the nothing to fear from government to the implementation of the Common Market for Eastern and regional free trade— Southern Africa (Comesa) free-trade agreement by October 2000, despite the concerns of the Zambia Association of Manufacturers (ZAM) that the country is not ready for regional free trade (4th quarter 1999, pages 18-19). In response, the Comesa secretary-general, Erastus Mwencha, said in January that Zambia was one of the region’s top exporters and should have nothing to fear. A report produced in late 1999 by Comesa concluded that the removal of tariffs would not greatly affect Zambia, because so little of the country’s foreign trade is conducted with the region. According to Comesa figures, only 25% of Zambia’s non-copper exports go to Comesa countries, and only 12% of its imports come from them. However, these figures are compiled from national customs returns, which notoriously under-report intra-regional trade because of its often “hidden” nature.

—but some manufacturers The report found that 100% tariff reductions would result in a ZK7.36bn will suffer ($2.94m) revenue loss to the Zambian government, but points out that this would be counterbalanced in the first year by a ¤6m ($6.2m) grant from the EU. According to the report, the Comesa agreement will also increase import levels and thus the government’s value-added tax (VAT) receipts. The study endorses ZAM’s concerns about the effect of Zambia’s other import duties and high utility costs on its regional competitiveness, and about the problem of non-tariff barriers in neighbouring states, but argues that these are not the fault of the Comesa agreement. The report also predicts that the agreement will make key Zambian products like textiles, soap, edible oil and cement very expensive domestically compared with Comesa imports, thus confirming ZAM’s worry that the agreement will result in a loss of its members’ domestic market share.

Debt briefs • On November 19th the US wrote off 49% of Zambia’s bilateral debt, worth $32m. Servicing of the remaining debt has been rescheduled.

• Zambia is in line for 100% cancellation of the $448m bilateral debt it owes the UK. This should be completed by the end of 2000, according to an announcement by the chancellor of the exchequer, Gordon Brown, in late December.

• The Finnish government said on January 18th that it would cancel Zambia’s $10m debt provided that the Zambian government spent $2.5m on environmental projects in return.

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 24 Zambia

• On February 3rd Japan agreed to grant Zambia $4.5m in debt relief to help the country service its balance of payments.

Aid briefs • On November 17th the EU pledged $1.54m to support Zambian forestry services.

• On December 12th Norway pledged $3m towards a $4m project intended to enhance private-sector participation in agriculture. The other $1m is expected to come from the Zambia National Farmers’ Union, the Zambian government and commercial farmers.

• In early January the Netherlands government said it would release $10m in balance-of-payments support because it believed the Zambia Consolidated Copper Mines privatisation to be largely complete.

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 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 was abolished. A new draft constitution was approved by the Constitutional Commission in March 1998

National legislature Suspended

National elections July 1984 (presidential) and September 1987 (legislative). The next presidential and legislative elections were due in April 1999 but have been postponed indefinitely

Head of state The president, Laurent Kabila

National government The president is head of a 23-member government. There is no prime minister. The government was last reshuffled in March 1999

Main political parties The ruling Alliance des forces démocratiques pour la libération du Congo-Zaïre (AFDL) was officially dissolved in April 1999, after Mr Kabila established new grass-roots structures, the comités du pouvoir populaire (CPP), his new power base. Rebels opposed to Mr Kabila have formed the Rassemblement congolais pour la démocratie (RCD), which in effect split in May 1999, as well as the Mouvement pour la libération du Congo (MLC). The Union pour la démocratie et le progrès social (UDPS) remains a strong opposition voice

President, head of the executive & minister of defence Laurent Kabila

Ministers of state Internal affairs Gaëtan Kakudji Foreign affairs & international co-operation Yerodia Abdoulaye Ndombasi Oil Pierre-Victor Mpoyo Planning Badimani Dilembu Mulumba

Other key ministers Civil service, public works & social security Paul Kapita Shabani (UDPS) Education Kamara Wa Kaikara Economy & industry Bemba Saolona Energy Babi Mbayi Finance Mawampanga Mwana Nanga Health Mashako Mamba Human rights Léonard She Okitundu Information & tourism Didier Mumengi Justice Mwenze Kongolo Mines Frédéric Kibassa-Maliba

Central bank governor Jean-Claude Masangu

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 26 Democratic Republic of Congo

Economic structure

Annual indicators

1995 1996a 1997a 1998a 1999a GDP at market prices (NZ bn)b 40,045 306,637 792,154 18.9 70.0 Real GDP growth (%) 1.6 0.9c –6.4d –3.5d –14.5 Consumer price inflation (av; %) 542 659c 176d 147d 333 Population (m) 43.9 45.4 46.6 48.2 49.4 Exports fobe ($ m) 1,563 1,547 1,390 1,577 965 Imports cife ($ m) 397 424d 318 322 372 Current-account balance ($ m) –630 –621c –658d –583d n/a Reserves excl gold ($ m) 147 83d n/a n/a n/a Total external debt ($ m) 13,241 12,826d 14,384 15,172 n/a External debt-service ratio, paid (%) 1.4a 2.7 0.9c n/a n/a Copper production (‘000 tonnes) 35.0a 40.2 37.7 36.1 23.8 Cobalt production (‘000 tonnes) 4.0a 4.1 3.0 4.7 1.8 Diamond production (m carats) 22.0a 22.2 22.0 29.4 18.5 Exchange rate (av; NZ:$)f 7,024 52,400c 145,988c 2.0 4.1

February 18th 2000 FC9:$1 (official rate); FC32:$1 (parallel rate)

Origins of gross domestic product 1997 % of total Components of gross domestic product 1995 % of total Agriculture 57.9 Private consumption 81.0 Industry 16.9 Public consumption 4.9 Services 25.2 Gross investment 9.4 GDP at factor cost 100.0 Exports of goods & services 28.2 Imports of goods & services –23.5 GDP at market prices 100.0

Principal exports 1997 $ m Principal imports 1997 $ m Diamonds 717 Consumer goods 295 Copper & cobalt (Gécamines) 253 Capital goods 129 Coffee 168 Raw materials 104 Energy products 156

Main destinations of exports 1998g % of total Main origins of imports 1998g % of total Belgium 51.9 South Africa 25.0 US 13.7 Belgium 14.3 South Africa 9.4 Nigeria 6.8 Finland 3.7 Kenya 4.8 a EIU estimates. b From 1998, in FC m. The nouveau zaïre was replaced by the franc congolais (FC) on June 30th 1998. c Official estimate. d Actual. e Balance-of-payments basis, Banque Centrale du Congo. f FC after June 30th 1998. g Based on partners’ trade returns, subject to a wide margin of error.

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 Democratic Republic of Congo 27

Quarterly indicators

1997 1998 1999 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr Prices Consumer prices, Kinshasa (1995=100) 1,897 n/a n/a n/a n/a n/a n/a n/a % change, year on year 34 n/a n/a n/a n/a n/a n/a n/a Wholesale prices Coffee (cents/lb) 79.9 85.5 89.3 79.8 81.2 77.4 67.7 62.2 Copper, LME, cash (cents/lb) 86.6 77.1 78.5 74.4 70.9 63.8 66.5 76.2 Exchange rate NZ/FC:$a (end-period) 110,000 128,000 135,000 2.2 3.6 ( 4.1b ) Sectoral trends Mining production (annual totals) Copper in concentrates (‘000 tonnes) 37.7 ( 36.1c ) ( 2 3 . 3 c ) Zinc (‘000 tonnes) 1.2 ( 1.2 ) ( 0.8d ) D i a m o n d s ( m c a r a t s ) 2 2 . 0 ( 2 9 . 4 ) ( 1 8 . 5 ) Coffee production (annual totals; ‘000 tonnes) 70 ( 57 ) ( 56e ) Foreign tradef ($ m) Exports fob 291 292 292 308 287 298 307 n/a Imports cif 288 242 247 225 238 182 187 n/a Trade balance 3 50 45 83 49 116 120 n/a a On June 30th 1998 the franc congolais (FC) replaced the nouveau zaïre (NZ) at a rate of 1:100,000. b EIU estimate for 1999 average. c December-November. d January-August. e Estimate. f DOTS estimate; figures are subject to revision.

Sources: World Bureau of Metal Statistics, World Metal Statistics; UN Food and Agriculture Organisation; IMF, International Financial Statistics; FT.

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 28 Democratic Republic of Congo

Outlook for 2000-01

The peace process will Following the special meeting of the UN Security Council in New York on enter a crucial stage January 24th-27th on the war in the Democratic Republic of Congo which was addressed by all heads of state involved in the conflict, the peace process has entered into a decisive stage. Although the meeting itself was largely inconclusive, it did at least provide the opportunity to all sides to state their positions and reiterate their commitment to the Lusaka peace accord signed in July last year (3rd quarter 1999, page 26). More importantly, it has focused outside scrutiny on the need for compliance.

The UN has put the onus on While the concerns of all sides are addressed in the Lusaka accord—which pro- the combatants to vides for the disarmament of all non-state actors, the withdrawal of foreign show progress— troops and a democratic transition in Congo—the reluctance to compromise and demonstrate commitment to its implementation risks jeopardising the ap- proval and the eventual deployment of the UN force. Although the US, France, the UK and the UN secretary-general, Kofi Anan, are pushing for approval of the UN force, there are sufficient reasons to rule out immediate deployment given the extremely volatile situation on the ground—particularly in the east of the country—and the fact that all signatories have not yet demonstrated that they are prepared to stop fighting. Expectations from the UN also vary from actor to actor, who will cry foul if they do not perceive their interests being met. President Laurent Kabila is expected to remain firm on his stance that all non-invited foreign troops, by which he means those from Uganda, Rwanda and Burundi, must leave the country. However, both Uganda and Rwanda, which have justified their deep military penetration into Congo on the need to neutralise rebel movements operating from there, will not withdraw from Congolese territory until they have sufficient security guarantees. A further complicating problem is the position of the various armed groups which are not signatories to the accord but which are bound under it to be disarmed— including the interahamwe militia and the former Rwandan army responsible for the deaths of 800,000 people in the Rwandan genocide in 1994—and have little incentive for compliance. These groups are closely allied with Mr Kabila’s ragtag government army, the Forces armeés congolaises, and it is doubtful that either he or his allies are willing—or capable—of disarming them.

—and deployment is far Despite these less than auspicious conditions, the international community from assured has at least decided to push for approval and deployment of a UN force when pre-conditions are met. In early February the US tabled a resolution at the Security Council supporting the UN force although it stressed that this will not take place before all parties have given firm and credible assurances on the safety of UN personnel and their commitment to complying with the Lusaka peace accord. The US Congress must also approve the US resolution and it is quite possible that this will result in the imposition of even more stringent conditions governing the deployment. Even should the Security Council approve the sending of peace-keepers, it is far from clear that forces will be on the ground before the end of the year.

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 Democratic Republic of Congo 29

Assurance of his own Despite his erratic leadership and otherwise precarious position, the co- position may open operation of Mr Kabila remains central to the peace process. Although neither Mr Kabila to compromise— the international community or the US have satisfied his demand that the cur- rent war be denounced as an aggression by Rwanda and Uganda, he did at least leave the Security Council meeting feeling that the US, in particular, has under- stood his position. This thawing of relations could go some way towards changing Mr Kabila’s previous impression that the international community is implacably hostile to him, thus increasing his willingness to engage in the peace process. The proposal of a key ally, the Angolan president, José Eduardo dos Santos, that the Congolese parties to the conflict should accept that Mr Kabila’s position as head of state in a future transition government is not negotiable in the upcoming national dialogue involving the rebels and the unarmed opposition, also seems to have strengthened his security regarding his own position (4th quarter 1999, page 29). Foreign actors are reportedly also behind such a deal and are said to be actively pressuring the rebels to accept the proposal. If Mr Kabila were to get such a guarantee, he would probably be much more willing to compromise on other aspects of the peace deal, such as where the UN troops are to be deployed.

—although some of his Unfortunately for his ministers, they are unlikely to receive similar guarantees ministers may be jettisoned and their knowledge of this has contributed to the strong lobby within the Congolese government that has an interest in seeing the peace process fail. Many of Mr Kabila’s ministers have by now amply demonstrated their incom- petence and corruption, both on the domestic and the international scene, and would be unlikely to be accepted as members of a transition government. Mr Kabila seems to have realised this and there is a growing chance that he may choose to reorganise his cabinet before the upcoming national dialogue in the hopes that he can take a stronger team to the negotiations. However, this puts him in a difficult position, as some of his most controversial ministers, such as the minister of state for foreign affairs, Yerodia Abdoulaye Ndombasi, the minister of state for the interior, Gaëtan Kakudji, and the minister of justice, Mwenze Kongolo, are also his closest and most loyal advisors. It is highly unlikely that Mr Kabila will dismiss either Mr Ndombasi or Mr Kakudji although he may decide to shift them to less visible positions.

The opposition is unlikely In spite of recent attempts, Mr Kabila is unlikely to be able to lure any members to be lured into cabinet of the political opposition into a new government, as most opposition politi- cians have interpreted his renewed wooing as a poorly disguised attempt to increase the legitimacy of his government in the run-up to the national dialogue, for which a proposed date has yet to be set. It is conceivable, however, that the internal opposition, as well as the rebels, may accept Mr Kabila as the president of a transitional government if he can provide satisfactory guarantees that he will submit himself to the outcome of a democratic national election.

The military stalemate will Little change is expected in the military situation over the coming months as drag on— the current stalemate drags on. The offensives launched by the various parties following the signing of the Lusaka peace accord in July last year in an attempt to gain strategic advantage have now petered out into renewed deadlock. Clearly, none of the sides in the conflict has the means to achieve a military

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 30 Democratic Republic of Congo

victory and many are growing visibly weary. In addition, most groups will now need to be seen to be complying with the terms of the Lusaka peace accord and this makes any large offensives—in violation of the ceasefire in the eyes of the international community—unlikely in the near future.

—and limited military Nonetheless, this still does not spell a definitive halt to the fighting. The activity will continue existing situation of de facto partition of the country into zones of influence for the various groups will be preserved and military activity in these areas will probably continue. It appears that Rwanda and Uganda may be planning renewed offensives closer to their own borders in north and south Kivu provinces against rebel movements which have launched attacks from there. However, such attacks will probably not be against Mr Kabila’s own forces or those of his external allies and this may signal a retreat in the war aims of Rwanda and Burundi in Congo from overthrowing Mr Kabila to the more limited objective of combating the domestic rebel movements which have sought refuge in Congo.

The economic situation The economic situation remains extremely negative and there is no prospect of will remain grim— the deterioration being arrested until the government reverses some of its more disastrous economic policy decisions including the ban on foreign-currency holdings and the fixing of the exchange rate at its current unrealistic level of FC9:$1 compared with a parallel market rate of FC32:$1. In the absence of an increase in government revenue—which is an extremely unlikely prospect— the government will also continue to finance its growing budget deficits by printing money, putting further pressure on the exchange rate (see The domestic economy).

—as the government The chronic shortage of foreign exchange will continue, influenced by the fact continues with disastrous that the diamond trade, Congo’s main foreign-exchange earner, has been driven policymaking almost completely underground by the government’s disadvantageous foreign- currency and exchange-rate policies. Other official attempts to control market operations by diktat will continue to back-fire spectacularly. Shortages of basic goods are expected to worsen given increasingly forceful attempts on the part of the government to set price ceilings. Both importers and domestic traders who supply the capital with the bulk of its basic goods and foodstuffs are being increasingly hindered by these policies and are either withdrawing from the market or resorting to expensive and risky attempts at evasion. Growing casualties from the state sector are expected as the government has shown no let-up in its practice of pillaging key parastatal companies such as Minière de Bakwanga, the state-run diamond mining company, and the Office nationale de transports. Some of their earnings are in dollars and they are running out of money to finance their own operations. Many privately owned businesses, which have persevered under decades of otherwise adverse conditions, are also expected to close given the currently impossible business climate.

Late note The UN Security Council voted on February 25th to approve a 5,573-strong UN force in Congo including 500 observers. As expected, however, it has attached the important proviso that deployment of a force cannot come about before all parties to the conflict have provided guarantees on co-operation, including as

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 Democratic Republic of Congo 31

regards the security of the UN force. The UN will be gauging whether the actors are willing to make the compromises needed to make the peace process work. This may prove decisive in indicating whether the war will be resolved through the existing peace agreement or bog down into a more drawn-out, even decades long, conflict.

The political scene

The UN Security Council After much prevarication on whether or not he would attend, President holds a crucial meeting Laurent Kabila travelled to New York for the UN Security Council’s special ses- on Congo sion on the conflict in the Democratic Republic of Congo on January 24th- 27th. The session, which was initiated by Richard Holbrooke, the US ambassa- dor to the UN, convened the heads of state and representatives of the seven nations involved in the war—Uganda, Rwanda, Burundi, Angola, Zimbabwe, Namibia and Congo—and was aimed at moving forward the implementation of the Lusaka peace accord signed by all parties in July 1999 (3rd quarter 1999, page 26). Stronger Western engagement, including the proposal that the UN approve the deployment of a 5,573-strong peacekeeping force, was urged by the African participants although the meeting ended inconclusively on this and other points thanks to the unwillingness to compromise of the various parties who largely stuck to their original positions.

The participants stick to In his address to the Security Council, Mr Kabila restated his appeal to the their positions international community to condemn the war as an aggression by Rwanda, Uganda and Burundi and demanded the immediate withdrawal of all uninvited foreign troops. The Ugandan president, Yoweri Museveni, and the Rwandan president, Pasteur Bizimungu, reiterated that they would not withdraw from Congo unless they had satisfactory guarantees that the various rebel groups operating there no longer represented a threat to their security. Although all the presidents appealed to the UN to dispatch peacekeeping troops as soon as possible, their primary interests are in implementing those terms of the peace accord most disadvantageous to their adversaries rather than demonstrating a willingness to compromise themselves.

Confirming Mr Kabila’s The Angolan president, José Eduardo dos Santos, a key ally of the Kabila gov- position may offer a ernment, argued that the signatories to the Lusaka accord should accept that way out— Mr Kabila’s position as president was not negotiable in the planned national dialogue between the government, the rebels and the unarmed opposition. According to the Lusaka accord, the parties at the national dialogue are to agree to a transitional government in the period leading to democratic national elections. However, the text does not specify whether this means that Mr Kabila will have to be replaced as president. While the UN did not officially respond, the US is said to have accepted that Mr Kabila stay on as president of a transitional government and will reportedly be applying pressure on the rebels to accept the proposal. If all parties do agree, this would be a significant victory for Mr Kabila as it would amount to international legitimation of his

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 32 Democratic Republic of Congo

position as head of state. It could also go some way towards making him more amenable to compliance with the terms of the peace accord.

—and Zimbabwe is President Robert Mugabe of Zimbabwe, a staunch ally of the Kabila govern- desperate for a deal ment, made an impassioned appeal to the UN to send a peacekeeping force as soon as possible. Coming from the embattled Mr Mugabe, who faces enormous domestic opposition to the military intervention in the Congo, the appeal was certainly sincere. Although members of Mr Mugabe’s government and senior military officers are certainly benefiting from business ventures being set up in Congo (4th quarter 1999, page 36), the war is both extremely unpopular and costly for Zimbabwe. While Mr Mugabe is not expected to abandon Mr Kabila now, he will be applying pressure on him to engage in the peace process.

The US backs UN Despite the otherwise intransigent positions of the various parties, their deployment apparently sincere desire for the deployment of a UN force—even if for different reasons—was sufficient to lead the US to table a resolution at the UN Security Council in early February in favour of the deployment of 500 monitors backed by some 5,000 troops. The operation, which is estimated to cost $160m in the first year and is to include infantry as well as medical, communications and aviation units, will be empowered to monitor the cease- fire, investigate violations, verify the disengagement of forces and help with humanitarian operations. The US has ruled out deployment of its own troops and it is not yet clear which countries will be contributing to the UN force. (See now Outlook for 2000-01, Late note.)

Fighting has continued— Ceasefire violations by all parties have continued over the past quarter with particularly heavy fighting concentrated in Equateur province, where Congolese troops and their allies have been involved in frequent confrontations with the Mouvement pour la Libération du Congo (MLC)—led by millionaire businessman Jean-Pierre Bemba—and Ugandan troops. In November the MLC made steady gains in the province, capturing Boende and later Basankusu. For their part, Congolese government troops recaptured several positions which they had lost to the rebels since the signing of the ceasefire, notably the town of Bokungu in late December. In early February MLC rebels were moving south-west from Basankusu and there was continuous fighting in the area, while government troops were reportedly advancing north from Ikela towards Kisangani.

—putting government It is now apparent that in July Rwandan troops and rebels belonging to the forces into difficulty— faction of the Rassemblement congolais pour la démocratie (RCD), led by Emile Ilunga, surrounded Ikela, cutting off supply lines and trapping several thousand Zimbabwean, Namibian and Congolese troops. In an expensive operation, Zimbabwe was forced to airdrop supplies to their troops for several months in a desperate attempt to prevent the town from falling. The siege was reportedly the subject of talks between the Rwandan government and a four- man military delegation in Kigali in early December following which an agreement was reached whereby the Rwandans would allow the troops to be supplied by land, air and river, with the Zimbabweans surrendering control of Bokungu, a nearby town which had been captured by Congolese and allied

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 Democratic Republic of Congo 33

troops the previous week. Zimbabwe has denied that the meeting took place and that any agreement was reached. In mid-January, however, the Congolese government announced that allied forces had managed to enter Ikela by land and raise the siege.

—after starting the The Congolese government, despite its claims that it has abided by the cease- fighting fire and only acted defensively, clearly bears much of the responsibility for the recent fighting, having launched a large offensive against rebel positions in Equateur over the past quarter, as a confidential UN report has confirmed. The offensive now appears to have petered out with few successes having been achieved. However, rebel forces have not been blameless in seeking opportunities to acquire new territory. The latest incidents serve to underline

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 34 Democratic Republic of Congo

the difficulties of maintaining the peace accord in the absence of neutral monitors to gauge compliance.

Refugee movements have Meanwhile, the heavy fighting in Equateur is reported by humanitarian increased agencies to have involved severe human rights abuses against the civilian population by both government and rebel forces. The United Nations High Commission for Refugees (UNHCR) estimates that at least 7,000 people have fled the fighting since late November, most of whom have sought refuge in the neighbouring—and also war-torn—Republic of Congo (Brazzaville) where local authorities estimate the number of refugees at 12,000. Civilians have also been fleeing the bombing of rebel-held areas by government forces. They have acquired Russian-made Antonov transport planes which they have used to drop crude, locally made bombs containing metal and glass. The bombing is reportedly extremely inaccurate although little is known about numbers of casualties. The Congolese government is also reported to have acquired Illuyshin transport and MiG fighter aircraft. Meanwhile, Rwanda is also re- ported to have purchased helicopters and to be acquiring MiG fighters.

Rwanda and Uganda In an apparent effort to shore up their strategic position in Congo, Rwanda and promote co-operation Uganda have moved to mend their relations which had been seriously among the rebels— damaged by the clashes between their two armies in Kisangani in August 1999 (4th quarter 1999, pages 26-27). The two countries are also working to promote a united front among the fractious rebel movements for the upcoming national dialogue. Representatives of the two RCD factions, led by Emile Ilunga and Ernest Wamba dia Wamba, as well as the MLC, led by Jean-Pierre Bemba, met in Kabale, Uganda, on December 17th-21st, and announced that while they would not be merging as Uganda and Rwanda had hoped, they would establish a presidential forum and joint political and military commissions. They have yet, however, to join their military forces, although a follow-up meeting was held in early January to discuss a unified military strategy.

—but face civilian Popular opposition to the rebels in the areas they control has become opposition— increasingly vocal. In late January activists in the eastern rebel-held town of Bukavu called for a shut-down of all activity in protest against “foreign occupation” of the area. The shut-down was fully observed by residents of the town for one week, paralysing the local economy. Around the same time, several thousand women took to the streets in Kisangani in protest against the Rwandan occupation of the city. Such demonstrations are now expected to increase given the local communities’ new found assertiveness.

—leading to ethnic Ethnic tensions have escalated significantly in the eastern rebel-controlled violence— town of Bunia and since December serious clashes have taken place between the Hema and Lendu communities. They have co-existed uneasily in the past; tensions have now been exacerbated by alleged favouritism by Ugandan and rebel troops towards the Hema, particularly in regard to land distribution. The creation by the rebels of the new Kabale-Ituri province and the appointment of a Hema as its governor reinforced this view, and escalating violence from the Lendu followed. Subsequently, Wamba dia Wamba, the leader of the RCD rebel faction which has its headquarters in Bunia, replaced the governor and vice-

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 Democratic Republic of Congo 35

governor with non-Hema or Lendu appointees. Aid agencies have reported continuing violence in the area throughout January and February and estimate that 180,000 people have been displaced by the conflict, most of them Lendu, and an estimated 7,000 killed, most of them Hema. The Uganda Peoples’ Defence Force (UPDF—the Ugandan army) is also reported to have supplied weapons to the Hema side.

—and growing tension in There are growing concerns that further ethnic violence may erupt in north the Kivus and south Kivu provinces between Congolese Tutsis and other ethnic groups. Long-standing tensions between the communities have been exacerbated by the Rwandan occupation of the area, leading to the formation of a local militia force known as Mai-Mai, opposed to the Rwandan and Ugandan presence in the area and allied with Rwandan interahamwe Hutu rebels and Mr Kabila’s forces. Local civic leaders have manipulated antagonism towards Tutsis leading to concern that ethnic violence may be imminent. The UN warned in December that the slightest incident could trigger attacks on Tutsis living in the Kivus and appealed to the local authorities to refrain from spreading hostile propaganda and allow humanitarian aid agencies increased access to the area. Meanwhile, there is evidence that rather than make common cause with the interahamwe against Rwanda, Congolese Hutus are opting for a tactical alliance with Congolese Tutsis against those opposed to the presence of both groups in the Kivus.

The government is An international human rights organisation, Amnesty International, has criticised for human released a report on the human rights situation in Congo which is strongly rights abuses— critical of both the rebels and the government. Condemning the government as repressive, the report states that the human rights situation has deteriorated since Mr Kabila came to power. Amnesty expressed specific concerns about various state security institutions which have sweeping powers of arrest and detention, citing in particular the Agence nationale de renseignement (ANR), the national intelligence agency, and the Detection militaire des activités anti- patrie (Demiap), the security service which is part of the military. Both the ANR and Demiap fall directly under presidential jurisdiction and detainees have little recourse to the law.

—as are the rebels In a separate report Amnesty noted widespread human rights abuses in rebel- held territories. The report condemns both factions of the RCD, as well as the Mai-Mai militia and the rebel Peuple en armes pour la libération du Rwanda (Palir) who are fighting alongside Congolese government forces, for systematic abuses against civilians. According to a local human rights NGO, both rebel and Ugandan and Rwandan forces are engaged in regular acts of violence and robbery. The level of violence is also exacerbated by the sheer number of rebel movements and factions operating in Congo. There are now estimated to be ten of these as well as the armies of six sovereign states.

The government announces In early December the human rights minister, Léonard She Okitundu, a ban on civilian announced the release, by presidential decree, of 136 political prisoners. Most executions— of them had been detained without charge for periods ranging from several months to several years. Among those released were a senior member of the

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 36 Democratic Republic of Congo

Union pour la démocratie et le progrès social (UDPS), as well as several dozen members of the Parti Lumumbiste-Unifié (Palu). No reason was given for their release. Mr Okitundu also announced a government moratorium on carrying out death sentences on civilians. Since Mr Kabila came to power in May 1997 at least 130 judicial executions have been carried out, one of the highest rates in the world. The announcement has not completely stopped the judicial use of the death sentence, including for economic crimes. Mr Kabila’s decision to liberate political prisoners and put a moratorium on executions may have been an attempt to keep his promise to Roberto Garreton, the UN rapporteur for human rights in the Congo who visited Kinshasa in August 1999, that he would investigate allegations of arbitrary arrests and detentions (4th quarter 1999, page 30).

—but is still harassing its The gesture has by no means put an end to the arrest of government political opponents opponents, and numerous political prisoners remain in jail. Cleophas Kamitatu of the opposition Parti pour la démocratie sociale chrétienne (PDSC), who was ambassador to Japan in the Mobutu era and was arrested in October last year, remains in prison on the dubious charge that he sold the Congolese embassy in Tokyo without government authorisation. The government maintains that Mr Kamitatu is not a political prisoner and that his arrest is unconnected with the fact that his son, Olivier Kamitatu, is an advisor to the MLC rebel leader, Mr Bemba. Meanwhile, the pace of military executions continues unabated, with 20 soldiers executed in the last week of January alone, in what appears to be a growing indication of desertions from the government army, the Forces armeés congolaises (FAC).

A government propaganda In an apparent effort to bolster popular enthusiasm for his government, campaign is launched— Mr Kabila and his ministers in mid-October launched a bizarre propaganda campaign culminating in a two-week patriotism seminar, entitled “Eveil Patriotique”. Prominent public and private figures were required to attend the seminar, chaired by members of the government, to discuss their role as Congolese patriots. Several weeks later Mr Kabila announced that he was forming self-defence committees composed of 20,000 armed civilians subject to the authority of the comités du pouvoir populaire (CPP), Mr Kabila’s grassroots democracy structures. Since then, however, the idea seems to have lost momentum, and there has been little official mention of them.

—and elections to new Elections of CPP officials were abruptly called in late-January by the CPP’S popular committees secretary-general, the former minister of information, Raphael Ghenda, who are held declared a three-day official holiday to facilitate public participation in the voting. The event appears to have largely backfired, however, as few people understood the purpose of the elections and voter turn-out was extremely low. It still remains unclear who was eligible to stand as a candidate or what types of structures the candidates were being elected to, and there have been several public protests that the so-called elections were not conducted in a transparent manner. According to Mr Ghenda, however, the representatives of the CPPs will eventually form a new national parliament; he rejected suggestions that they were a form of one-partyism. In the meantime they have been subject to widespread ridicule by members of the public who compare them with the

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 Democratic Republic of Congo 37

revolutionary committees set up by the party of the former president, Mobutu Sese Sekou, the Mouvement populaire de la révolution.

After initial obstruction, In late November the UN Security Council renewed a three-month mandate for UN observers are deployed the 90 unarmed UN military liaison officers stationed in the capitals of the combatant countries, but deferred a vote on deploying a larger contingent of observers to Congo. Since the arrival of the first liaison officers in Kinshasa in mid-September relations have been strained with the government which has refused to guarantee the security of UN personnel and blocked a UN technical team from travelling in government-controlled territory (4th quarter 1999, page 28). A key point of contention was the government’s insistence that liaison officers be deployed in front-line, rather than government-controlled, areas although this point was finally resolved following the intervention of the UN secretary-general’s special envoy to the Congolese peace process, Moustaffa Niasse, in early October. As a result, UN liaison teams have now been deployed in Boende, Lisala, Kabinda and Goma, together with several officers of the Organisation of African Unity (OAU).

International engagement International interest in the conflict in Congo has increased over the past is stepped up— quarter. In December the US ambassador to the UN, Richard Holbrooke, travelled to the region and met the heads of state of the countries involved in the war as well as the leaders of the three rebel factions fighting Mr Kabila, ending up in Kinshasa where he met Mr Kabila and leaders of the main opposition parties. Mr Holbrooke expressed optimism that a mediator for the planned inter-Congolese dialogue would be found and that all parties to the conflict would commit themselves to making the Lusaka peace accord work. He warned, however, that the willingness of the US and the international community to deploy a peacekeeping force would depend on adherence to the terms of the peace accord. Mr Holbrooke later invited the heads of state of the various countries to address the UN Security Council in January.

—and agreement on a Several days after Mr Holbrooke’s visit to Kinshasa, Salim Ahmed Salim, the mediator is reached president of the Organisation of African Unity (OAU), announced that all parties had agreed to accept Sir Ketumile Masire, the former president of Botswana, as mediator of the national dialogue. A tentative agreement on who should mediate appeared to have been reached in mid-October, with all sides endorsing Padre Matteo Zuppi of the Roman Catholic Sant’ Egidio community which had mediated in the Mozambican peace process (4th quarter 1999, page 29). However, the RCD subsequently withdrew its agreement. The appoint- ment of Sir Ketumile as mediator is a major step forward—despite some criticism of the fact that he is not a French-speaker—although serious obstacles remain as neither a location nor a date for meetings have been agreed. Mr Kabila continues to maintain that the dialogue should take place in Congo, but it would be virtually impossible to find a Congolese location that would satisfy the security concerns of all parties. In late January Sir Ketumile indicated that 150 representatives from the government, the rebels, the political opposition and civil society would be invited to participate in the dialogue and rejected the suggestion that the event be held in Kinshasa.

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 38 Democratic Republic of Congo

Relations with South Relations between Congo and South Africa have deteriorated over the past Africa deteriorate quarter, with Mr Kabila in late January openly accusing the South African government of supplying weapons to Rwanda and the rebels. The South African government denied the charges and reiterated that it was interested in playing a neutral role in finding a peaceful solution. Relations between the two countries have been strained since the former president, Nelson Mandela, refused to sanction military intervention in Congo in support of Mr Kabila’s government shortly after hostilities broke out in August 1998. Relations had already been inflamed by the visit to South Africa in December of Etienne Tshisekedi, the leader of Congo’s main opposition UDPS, on his first trip abroad since Mr Kabila came to power in May 1997, his previous attempts to leave the country having been blocked by the government. The visit was ostensibly for health reasons, although he did meet Mr Mandela, the current head of state, Thabo Mbeki, and the foreign minister, Nkosazana Zuma, to discuss the conflict in Congo. Unsurprisingly, the visit raised the ire of certain members of the Congolese government, most notably Yerodia Abdoulaye Ndombasi, the minister of state for foreign affairs, who accused him of being a traitor. Mr Kabila took a softer stance, stating that Mr Tshisekedi was allowed to express himself to whomever he wished and that he would encounter no resistance if he attempted to return to the country. Mr Tshisekedi has also reportedly met leaders of the RCD and MLC.

Economic policy

Obtuse economic policy The government has shown little interest in responding to calls for a reversal of continues— its exchange rate and controlled pricing policies despite mounting evidence of the economic damage that they are causing. In mid-January, however, the Banque centrale du Congo (BCC, the central bank) did announce a 100% devaluation of the franc congolais to FC9:$1 from FC4.5:$1, the rate at which it has been fixed since April 1999. Ostensibly this was an attempt to narrow the spread between the official and parallel market rates for the currency and entice more commerce back into official channels, although in this regard the measure has had little effect. This is largely because even at the newer rate the currency is still over-valued by some 330% against the parallel market rate which was trading at FC32:$1 in early February. After the devaluation, the authorities followed with the introduction of new price ceilings for basic goods although these have also been widely ignored. In early February the government also introduced magasins du peuple (people’s stores) which are to be set up throughout the capital to act as price regulators. It is not clear how the government plans to stock the stores, however, as few traders will be willing to sell their goods at the government’s prices.

—and the government Attempts to convince government members that the fixed exchange rate as appears deaf to reason well as the ban on foreign currency transactions introduced in September last year (4th quarter 1999, page 33) are hugely counter-productive have not met with success. In late January hopes that the government would reverse these measures were raised when Gaëtan Kakudji, the minister of the interior and

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 Democratic Republic of Congo 39

head of the Commission on Economic Crimes, announced that the government would hold an open forum to discuss how to address the economic situation. However, at the meeting Mr Kakudji reneged on earlier pledges to allow participants to speak freely and insisted that discussion avoid the question of the exchange rate and focus on the economic war which he said saboteurs were waging against the economy. Business people in Kinshasa expressed dismay as they had been earlier informed by the minister of economy and industry, Bemba Saolona, a prominent businessman, to prepare questions on the subject of the economy in general. Nonetheless, the incident has at least indicated that there is some division within the government over the efficacy of its policies and that there are those in its ranks who advocate the scrapping of the current measures.

Mr Kabila sacks then Underlining the confusion in government over economic policy, in early reinstates two ministers December Mr Kabila suspended the minister of finance, Mawampanga Mwana Nanga, and the minister of planning, Badimani Mulumba, on the grounds of insubordination. Business circles in Kinshasa attributed the suspension of the two ministers to the fact that they had granted permission to a Lubumbashi- based business to use an exchange rate more favourable than the official one. Mr Mawampanga’s suspension came as less of a surprise as he is extremely unpopular with civil servants who blame him for holding up salary negotiations and the subsequent implementation of a new salary scale. In January, however, both ministers were allowed to resume their posts on Mr Kabila’s orders without further explanation.

The domestic economy

Economic trends

The bad news continues— The deterioration of the Congolese economy has continued over the past quarter. As expected, attempts to bolster the franc congolais and force adherence to the heavily over-valued official exchange rate via drastic measures banning the use of foreign exchange have had the opposite effect from that desired by the government (4th quarter 1999, page 33). Over the past quarter the franc congolais has continued to depreciate steadily on the parallel market, dropping 113% from late October to its current rate of FC32:$1 in early February.

—as does the printing The depreciation is the result of an acute shortage of foreign exchange coupled of money with high monetary growth as the government continues to finance its growing budget deficits by printing money. Official sources have now confirmed that the sharp drop on the parallel market over a two week period in September from FC11:$1 to FC17:$1 was caused by a massive increase in money supply (4th quarter 1999, page 34). Statistics from the Banque centrale du Congo (BCC, the central bank) indicate that money supply rose by FC237m to FC1.95trn ($217bn) in September 1999 compared with an average monthly increase of FC74m in the first nine months of the year. Government spending

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 40 Democratic Republic of Congo

rose concurrently, from FC268m in August, to FC797m in September. Prices have also continued to rise alongside the depreciation of the black market rate. Annual inflation also rose to 333% in 1999 from 147% the year earlier according to estimates from the US embassy in Kinshasa.

The economy contracts Preliminary government estimates based on data from the first half of 1999 even more sharply indicate that real GDP contracted by 14.5% in 1999, a significantly sharper drop than the year before, when real GDP shrank by 3.5%. Statistics from the BCC indicate that production has dropped in almost all sectors in 1999, particularly mining and agricultural export crops. However, a large part of the drop can be accounted for by the fact that the government has lost control of territory in the course of the war and does not either include or have access to production statistics from rebel-held areas.

Democratic Republic of Congo: volume of production (tonnes, unless otherwise stated) Nov 1998 Nov 1999a % change Copper 36,086 23,804 –34 Gécamines 35,077 23,367 –50 Sodimico 1,009 437 –57 Cobalt 3,688 1,800 –51 Zinc (ingots) 1,147 n/a – Diamonds (‘000 carats) 24,463 18,520 –24 Artisanal 18,070 14,144 –22 Minière de Bakwanga 6,393 4,376 –32 Gold (kilos) 135 7 –94 Coffee 33,716 16,038 –52 Cut wood 34,268 15,386 –55 Uncut wood 79,656 27,226 –66 Rubber 2,798 n/a – Palm oil 15,910 5,664 –64

a Preliminary, latest month available vary for 1999 data.

Source: Banque centrale du Congo.

A humanitarian The general restriction on most informal sector activity imposed by the disaster looms on the government’s economic policies have proved serious enough that international government’s doorstep aid organisations in Kinshasa have expressed growing concern that a humanitarian crisis may emerge. Increasing food shortages and growing poverty have led to rising rates of malnutrition in Kinshasa’s lower income suburbs according to a study of the non-governmental organisation, Action Against Hunger.

The rebels propose to While the financial sector may have come close to a halt in Kinshasa, the rebel establish a banking system Rassemblement congolais pour la démocratie (RCD), has been undertaking moves to establish a formal banking system in the eastern third of the country which it nominally controls together with Rwanda and Uganda. In late December a 60-member delegation, led by Ernest Wamba dia Wamba, travelled to Grenada to hold discussions with First International Bank, a Grenada-based

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 Democratic Republic of Congo 41

investment bank. First International is reportedly to lend $80m to the RCD, ostensibly to be used in the infrastructure sector. In return, it is to receive a 55% share in the African Union Reserve (AUR), a body set up by the RCD, ostensibly to manage the exploitation of local resources in the “interests of the people”. AUR is reportedly also creating a private central bank which will be authorised to issue a new currency backed by gold and diamonds. However, few other details about the deal have been released by either party.

Mining

Gécamines gets a On November 3rd President Laurent Kabila announced the appointment of new chairman— Belgian businessman, Georges Forrest, as the new chairman of the board of Générale des Carrières et des Mines (Gécamines), the state copper and cobalt mining giant, thereby ending the reign of a Zimbabwean entrepreneur, Billy Rautenbach, who had been appointed chairman less than a year earlier.

Mr Rautenbach’s appointment had been controversial from the start as the move was widely considered to be part of the burgeoning business ventures awarded to Zimbabwe as a reward for its military support of Mr Kabila’s govern- ment. Opposition to Mr Rautenbach increased further owing to unpopular—if overdue—decisions, most notably the plan to retrench more than 16,000 of the company’s 26,000 employees as part of a massive restructuring programme (2nd quarter 1999, page 33). This led to a series of strikes in which Mr Kabila himself was forced to intervene. In his year at the helm of Gécamines, however, Mr Rautenbach noticeably failed to turn around the ailing mining giant—once the engine of the national economy with annual copper output of 450,000 tonnes—and production dropped by 50% in 1999 to an all-time low of 28,000 tonnes.

Mr Forrest is a veteran of the Congolese mining scene and owner of Entreprise Générale Malta Forrest (EGMF), a mining services company which supplies the country’s principal mines in Katanga province, as well as other businesses. As Mr Forrest is also directly involved with Gécamines at the Kov Courroie mine, he stands to gain a great deal of business from his new position. Mr Kabila may be thinking exactly the same, as Mr Forrest has shares in a Belgian munitions factory.

Zimbabwe gains another In the latest joint venture between the Congolese and Zimbabwean mining concession governments, the government announced that the two would be jointly exploiting the Senga-Senga diamond mine which is 50 km from Mbuji-Mayi.

Foreign trade and payments

Exports and Exports of major goods dropped sharply in 1999 and according to the minister imports decline of planning, Badimani Mulumba, this fall was an estimated 49% in the first nine months of the year. Mr Badimani explained that the bulk of the drop was attributable to the war and the fact that many of Congo’s main export-

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 42 Democratic Republic of Congo

producing zones are under rebel control although it is also clear that the figures indicate heightened evasion given the adverse business climate created by the government’s economic policies. Imports have also declined sharply largely for the same reasons, including the ban on the use of foreign currencies imposed by the government last year, as well as the general contraction in the economy.

Democratic Republic of Congo: external tradea ($ m) 1995 1996 1997 1998 1999a Exports 1562.9 1546.3 1389.8 1441.5 724.5 Gold 13.9 17.7 10.9 2 0.1 Diamonds 730.1 764.5 716.6 881.8 433 Copper, Cobalt (Gécamines) 305.3 261.6 253.1 292 107.2 Petrol 122.6 211.6 153.2 97.5 75.5 Coffee 288.3 150.3 168 108 61.3 Others 102.7 140.6 88 60.2 47.4 Imports 870.9 1,089.1 807.9 1,118.5 352.8 Consumer goods 301.2 301.4 294.8 374.7 123.5 Raw materials 161.3 177.1 103.7 175.6 43.1 Equipment 135 239 129.4 165.5 61.5 Energy 140.6 205.5 156.3 173.4 70.9 Others 132.8 166.1 123.2 229.3 53.8 Trade balance 692 457.2 581.9 323 371.7

a First nine months of the year.

Source: Banque centrale du Congo.

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 Trade data 43

Trade data

Zambia: foreign trade (ZK m) Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Imports cif 1985 1986 1987 1988 1989 1990 1991 Cereals 43 75 13 130 171 176 n/a Other food, drink & tobacco 38 54 219 93 143 430 n/a Crude materials 32 71 123 100 155 760 n/a Petroleum & products 459 111 806 828 2,219 5,209 n/a Chemicals 317 411 1,171 1,180 1,274 4,335 n/a Rubber manufactures 53 118 198 156 181 579 n/a Paper & mnfrs 33 54 90 124 180 493 n/a Textile manufactures 59 107 194 163 263 1,212 n/a Iron & steel 76 152 217 263 451 1,303 n/a Other metals & mnfrs 93 245 263 266 450 1,403 n/a Machinery 517 1,276 1,817 1,838 2,467 7,999 n/a Road vehicles 276 548 1,066 1,150 1,443 4,501 n/a Other transport 21 57 55 257 548 3,724 n/a Scientific instruments etc 24 74 109 120 164 598 n/a Total incl others 2,133 4,448 6,627 6,898 12,601 36,554 51,624

Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Domestic exports foba 1987 1988 1989 1990 1991 1993 1994 Tobacco 17 29 24 125 256 n/a n/a Cobalt 466 598 1,101 2,544 7,289 10,434 12,323 Copper 6,845 8,340 16,353 33,734 52,539 323,668 293,151 Lead 20 19 9 1 5 n/a n/a Zinc 131 162 302 438 429 2,270 293 Total incl others 8,032 9,720 18,336 39,037 67,583 579,036 554,279 Re-exports 27 66 98 107 85 n/a n/a a 1992 figures are not available.

Source: National sources.

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 44 Democratic Republic of Congo

Zambia: direction of trade ($ m) Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec 1992 1993 1994 1995 1996 1997a 1998a Imports fob South Africa 224 303 157 259 293 518 591 Zimbabwe 55 47 52 57 71 78 89 UK 98 75 73 72 83 87 72 Saudi Arabia 47 51 1 97 60 66 68 Japan 383028452728 39 India 24 9 19 19 26 27 29 China 4 4 3 3 5 12 24 US 72 20 11 29 41 33 24 Germany 313321192316 16 Total incl others 837 702 455 782 834 1,071 1,125 Exports fob Saudi Arabia 83 69 83 83 100 114 113 Japan 152 105 105 158 120 126 110 UK 20 11 32 22 36 70 100 France 48 82 38 32 23 77 71 Thailand 39 54 72 100 114 101 56 South Africa 5 n/a 16 19 43 40 51 India 214556626992 49 Taiwan 89212260 n/a Zimbabwe 23 21 22 29 53 58 34 Total incl others 752 891 758 986 1,039 1,156 949 a DOTS estimates.

Source: IMF, Direction of Trade Statistics, yearbook, quarterly.

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 Trade data 45

Zambia: refined copper exports (tonnes) Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec 1993 1994 1995 1996 1997 1998 1999 Thailand 49,030 62,637 40,933 46,904 48,286 23,555 32,904 Japan 85,334 55,445 52,647 50,111 29,677 27,843 22,891 France 49,990 18,896 11,243 10,696 23,687 43,079 13,691 Malaysia 30,230 31,369 21,092 28,594 31,788 13,829 10,393 India 21,186 20,209 22,872 24,946 13,778 7,674 9,470 Indonesia 3,499 5,146 7,676 2,793 1,497 2,257 7,999 Germany 0 0 0 1,667 0 0 2,320 US 760 2,000 27,779 8,958 41,338 12,684 1,000 China 0 0 0 0 3,997 3,301 1,000 Netherlands 1,001 0 0 0 0 1,099 299 Belgium 49,167 29,939 22,500 17,071 11,411 1,835 0 Italy 5,041 3,024 2,098 400 1,000 0 0 UK 0 3,999 0 0 200 0 0 Greece 6,871 3,524 374 2,936 0 0 0 South Korea 0 4,096 800 410 0 0 0 Total incl others 436,522 360,657 291,869 276,079 303,784 227,980 205,933 Source: World Bureau of Metal Statistics, World Metal Statistics.

Zambia: UK trade (£ ‘000) Jan-Dec Jan-Dec Jan-Dec Jan-Nov Jan-Nov 1996 1997 1998 1998 1999 UK exports fob Food, drink & tobacco 677 989 536 500 385 Chemicals 3,256 8,557 4,123 3,821 2,621 Rubber manufactures 103 465 76 75 31 Paper & manufactures 338 239 207 198 73 Textile yarn, cloth & manufactures 221 547 275 269 193 Non-metallic mineral manufactures 885 374 522 513 62 Iron & steel 456 315 86 52 41 Metal manufactures 734 1,106 622 602 578 Machinery incl electric 29,877 22,285 19,507 18,288 9,145 Transport equipment 5,118 3,332 3,531 3,390 2,942 Clothing & footwear 1,573 491 628 580 1,399 Scientific instruments etc 2,137 432 1,766 1,443 910 Total incl others 51,544 45,620 35,387 33,046 22,553 UK imports cif Fruit & vegetables 3,681 5,172 5,075 4,776 4,660 Sugar & preparations 79 11,926 96 58 37 Textile yarn, cloth & manufactures 6,410 6,689 2,827 2,560 1,107 Iron & steel 0 1,000 4,816 4,748 974 Non-ferrous metals 4,927 4,574 9,126 7,723 6,781 Machinery & transport equipment 220 970 173 167 104 Total incl others 17,726 32,067 24,582 22,446 14,683 Source: UK HM Customs & Excise, Business Monitor, MM20.

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000 46 Democratic Republic of Congo

Zambia: Japanese trade (¥ m) Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Oct Jan-Oct Japanese imports cif 1993 1994 1995 1996 1997 1998 1998 1999 Copper cathodes 20,668 11,455 15,764 13,938 9,617 8,810 8,274 4,630 Total incl others 23,562 17,896 20,261 20,871 16,670 15,170 14,265 9,559 Source: Japan Tariff Association, Japan Exports & Imports.

Democratic Republic of Congo: trade with major partnersa ($ ‘000; monthly averages) Belg-Lux France USb Germany UK Exports to Democratic Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Nov Republic of Congo fob 1997 1998 1997 1998 1997 1998 1997 1998 1998 1999 Food, drink & tobacco 1,794 2,056 1,502 1,125 1,139 804 128 64 70 35 Mineral fuels 107 192 310 392 10 1 13 5 3 3 Chemicalsc 1,682 1,694 363 424 129 50 278 278 222d 59d Rubber & manufactures 159 131 13 11 2 3 27 41 10 5 Textile fibres, yarn, cloth & mnfrs 647 432 29 18 576 207 86 141 11 12 Non-metallic mineral mnfrse 718 1,613 27 90 3 26 16 12 0 1 Metals & manufacturesf 450 474 95 147 45 158 218 203 61 59 Machinery incl electric 2,291 3,252 350 377 935 1,360 526 517 230 34 Transport equipment 1,843 2,180 190 139 87 83 375 466 103 70 Clothing, footwear & handbags 211 165 76 58 13 6 24 2 0 6 Scientific instruments etc 400 438 56 77 37 7 14 12 24 1 Total incl others 10,851 13,522 3,245 3,084 3,132 2,834 2,226 2,756 815 360

Belg-Lux USb Germany France UK Imports from Democratic Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Nov Republic of Congo fob 1997 1998 1997 1998 1997 1998 1997 1998 1998 1999 Coffee, cocoa, tea & spices 337 439 0 2 151 369 490 289 0 0 Animal feeding stuffs 0 0 139 47 0 0 0 0 0 0 Rubber & mnfrs 2 0 2 0 133 29 0 1 59 4 Wood & mnfrs 368 447 47 25 0 282 745 626 83 17 Ores, slag & ash 19 1 41 16 0 26 0 0 0 0 Mineral fuels 0 0 13,431 6,601 1,890 0 0 0 0 0 Chemicalsc 95 230 45 46 33 1 5 4 0 0 Non-metallic mineral mnfrse 45,772 50,909 7,886 6,350 35 20 21 2 0 4 Non-ferrous metalsf 613 396 2,273 1,804 465 685 312 159 414 440 Machinery & transport eqpt282294212213 Total incl others 47,472 57,252 24,574 15,041 3,685 1,944 1,730 1,190 570 483 a Figures from partners’ trade accounts. b US exports to the DRC averaged $3m and $1.9m per month for January-November 1998 and 1999. US imports from the DRC averaged $15.1m and $19.5m per month for January-November 1998 and 1999. c Including crude fertilisers and manufactures of plastics. d Excluding crude fertilisers and manufacture of plastics. e Including precious metals and jewellery. f Including scrap and manufactures.

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

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 2000