COUNTRY REPORT Zambia Democratic Republic of Congo 2nd quarter 1999 The Economist Intelligence Unit 15 Regent Street, London SW1Y 4LR United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The EIU delivers its information in four ways: through subscription products ranging from newsletters to annual reference works; through specific research reports, whether for general release or for particular clients; through electronic publishing; and by organising conferences and roundtables. The firm is a member of The Economist Group. 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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 1 Contents 3 Summary Zambia 5 Political structure 6 Economic structure 7 Outlook for 1999-2000 11 Review 11 The political scene 15 The economy 17 Business news 18 Agriculture 18 Mining and energy 19 Foreign trade and payments Democratic Republic of Congo 22 Political structure 23 Economic structure 24 Outlook for 1999-2000 26 Review 26 The political scene 31 The economy 33 Mining 34 Foreign trade, aid and payments 35 Quarterly indicators and trade data List of tables 9 Zambia: forecast summary (domestic) 10 Zambia: forecast summary (external) 32 Democratic Republic of Congo: official production, Jan-Feb 35 Zambia: quarterly indicators of economic activity 36 Democratic Republic of Congo: quarterly indicators of economic activity 37 Zambia: foreign trade 38 Zambia: direction of trade 38 Zambia: refined copper exports 39 Zambia: UK trade 39 Zambia: Japanese trade 40 Democratic Republic of Congo: trade with major partners EIU Country Report 2nd quarter 1999 © The Economist Intelligence Unit Limited 1999 2 List of figures 11 Zambia: gross domestic product 11 Zambia: kwacha real exchange rates 19 Zambia: copper production 19 Zambia: international copper prices 20 Zambia: international reserves 25 DRC: gross domestic product 30 DRC: President Kabila’s approval rating 31 DRC: exchange rates 31 DRC: inflation EIU Country Report 2nd quarter 1999 © The Economist Intelligence Unit Limited 1999 3 May 21st 1999 Summary 2nd quarter 1999 Zambia Outlook for 1999-2000: The formation of a new opposition alliance, ZAP, will not pose a threat to the ruling MMD, which will continue to crack down on domestic opponents. Industrial unrest is expected in the civil service. Relations with Angola will remain thorny and Zambia may well be the victim of more destabilisation tactics. More refugees will flood in from the DRC. The privatis- ation of the main copper mines should go ahead by the end of the year, but copper production will be down this year. This will hold down real GDP growth at 1.1% in 1999, although increased copper production and rising investment should bring a recovery to 4.5% in 2000. This also means that exports will rise in 2000 after a poor performance in 1999. Import demand will be strong in both years, fuelled by investment demand for capital goods, and we expect a deteri- oration of the current account in 1999 and 2000. Nonetheless, donor inflows should ensure currency stability, which will ease inflationary pressures, and although average inflation will rise in 1999, it will fall in 2000. Zambia may qualify for HIPC status, although it will only benefit from substantial debt relief beyond the forecast period. Review: A new opposition alliance, ZAP, has been formed, but UNIP and the UPND are not included. A Zambian court has ruled that the former president, Kenneth Kaunda, is not entitled to citizenship. The Angolan government has again accused Zambian officials of supporting UNITA. Although both sides have agreed to Swazi mediation, relations remain tense and Angola is suspected of being behind a series of bomb blasts in Lusaka. The Ndeni oil refinery has been damaged by fire. Journalists at the Post have been charged with espionage after comparing Zambian and Angolan military forces. President Chiluba’s mediation attempts in the DRC have come to nothing, while refugees pour into Zambia. New import tariffs have led to sharp price rises. There has been widespread industrial unrest this year. After good rains the maize and sugar harvests will rise in 1999, but food imports will still be required. Copper prod- uction is falling as Anglo-American has still to secure a partner to buy the main mines. Substantial balance-of-payments support has been provided by donors, boosting foreign-exchange reserves. The Paris Club has agreed to write off $660m of Zambia’s external debt. Democratic Republic Outlook for 1999-2000: The “national debate” initiated by President Kabila of Congo will remain stalled as long as the opposition and the rebels have no meaningful say in the event. This will put the government’s credibility at risk. However, the outcome of the conflict in the DRC will depend even more on the position of key external actors, particularly as the rebels continue to squabble among themselves. Although Uganda may withdraw from the RDC, Rwanda will maintain its military presence. With no end in sight to the conflict, the economy will remain depressed and the Congolese franc will fall further. EIU Country Report 2nd quarter 1999 © The Economist Intelligence Unit Limited 1999 4 Review: President Kabila dismissed the cabinet in February, but there were few changes in the new government announced in March. However, the chief of staff, Abdoulaye Yerodia, was promoted to minister of foreign affairs, while Bemba Saolona, a businessman, was appointed minister of the economy. In March President Kabila announced plans for a “national debate”, but this was rejected by the domestic opposition and the rebels. As a result, the event has been postponed twice. The peace process, spearheaded by the Zambian president, Frederick Chiluba, has lost momentum, and a surprise peace deal signed in Libya in April between President Kabila and the Ugandan president, Yoweri Museveni, has been rejected by the rebels and Rwanda. The military situation has remained confused, with both the government and the rebels making unverifiable claims. The rebel Rassemblement congolais pour la démocratie (RCD) split in May, further adding to the confusion. The first congress of President Kabila’s new support base, the Comités du pouvoir populaire (CPP), was held in April. Arrests have continued in Kinshasa, while support for Mr Kabila has fallen further. The Congolese franc has continued to fall on the black market, fuelled by skyrocketing inflation, prompting the government to devalue the official rate. Economic production has remained depressed. The state-owned mining company Gécamines has continued to experience difficulties, as has the diamond industry. Editors: Piers Haben; Markus Scheuermaier All queries: Tel: (44.171) 830 1007 Fax: (44.171) 830 1023 Next report: Our next Country Report will be published in September EIU Country Report 2nd quarter 1999 © The Economist Intelligence Unit Limited 1999 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 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