US embassy cable - 04KINSHASA1631

UNCLAS SECTION 01 OF 03 KINSHASA 001631 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EAID, ECON, EFIN, EINV, ELAB, ELTN, EMIN, ENRG, EPET, ETRD, EWWT, PGOV, PREL, CG 
SUBJECT: ECONOMIC REPORT - AUG 20 THROUGH AUG 27 
 
1. (U) Summary.  Both exchange rates and prices remain 
stable.  Gravity Diamonds of Australia is planning a 
joint venture with BHP Billiton for diamond exploration 
in the Kasais.  CHEMAF has resumed production at a Mine 
de l'Etoile concession abandoned by Gecamines.  The DRC 
became a member of the African Trade Insurance Agency, 
which provides import/export credit and investment 
insurance.  Perenco has purchased the DRC's offshore 
oil concessions from Chevron-Texaco.  Celtel launched 
international roaming service in Europe, West Africa, 
Asia, and the Middle East.  Rehabilitation of two key 
bridges linking Kinshasa to Bandundu province via 
National Route No. 1 will begin before the end of 2004. 
Matadi port workers threatened to strike due to rumors 
of ONATRA cooperation in a DRC-Brazzaville bridge 
proposal.  End Summary. 
 
MONETARY AND PRICE UPDATE 
 
2. (U) Prices remain fairly stable, with only a slight 
decrease noted in fuel prices.  Agricultural items are 
in plentiful supply on the Kinshasa market, with 
commerce steady from Bandundu over the recently 
repaired Mai-Ndombe bridge. 
 
3. (U) Exchange rates remain stable, with bank rates 
hovering around FC 390 to USD 1.  Parallel market rates 
are generally within FC 5 of the bank rate.  Rates in 
eastern provinces remain slightly elevated due to 
continuing tensions. 
 
MINING 
 
GRAVITY DIAMONDS IN JOINT VENTURE WITH BHP BILLITON 
 
4. (U) The Australian firm Gravity Diamonds plans to 
explore the Kasai region of the DRC alongside BHP 
Billiton.  Gravity Diamonds has raised 10.8 million 
Australian dollars (AD) from BHP Billiton and European 
investors, and intends to raise another AD 9 million by 
listing on Australia's Alternative Investment Market. 
After the fundraising, BHP Billiton will own 9.6 
percent of the company and outside investors will own 
58 percent.  Gravity Diamonds' parent company, Gravity 
Capital, is listed on the Australian Stock Exchange. 
 
CHEMAF BEGINS PRODUCTION AT MINE DE L'ETOILE 
 
5. (U) Chemical of Africa (CHEMAF) has begun commercial 
heterogenite mining operations on the Kalukuluku 
concession, which was abandoned by Gecamines in July 
2003.  The concession is situated on the Mine de 
l'Etoile near Lubumbashi, and is estimated to hold 15 
million tons of ore.  Current heterogenite production 
is rated at 50-70 tons per day, but CHEMAF plans to 
increase production to 350 tons per day.  Local 
artisanal miners had occupied the concession since 
Gecamines' departure.  (Note.  VP Bemba was moving to 
annul the contract signed by Gecamines, the Ministry of 
Mines, and CHEMAF.  However, no official annulation 
decree has yet been issued.  End Note.) 
 
TRADE AND INVESTMENT 
 
DRC JOINS AFRICAN TRADE INSURANCE AGENCY 
 
6. (U) The DRC has become the eleventh member state of 
the African Trade Insurance Agency (ATI).  ATI was 
established by the Common Market for Eastern and 
Southern Africa (COMESA) in May 2000, and is the 
continent's only multilateral import/export credit and 
political risk insurance agency.  Member states are 
required to commit funds to ATI to compensate investors 
who suffer losses as a result of political or economic 
upheaval.  ATI syndicates its covered risks among major 
international insurance agencies. 
 
PETROLEUM 
 
PERENCO TAKES OVER DRC OFFSHORE DRILLING 
 
7. (SBU) The French oil company Perenco has acquired 
Chevron-Texaco's offshore drilling concessions in the 
DRC.  The deal requires GDRC approval before the 
transfer of the title can be completed, but Chevron- 
Texaco is no longer operating the concessions.  Perenco 
has been present in the DRC since 2000, and has already 
acquired onshore concessions in East Banana, Mibale, 
and Liawenda-Kinkasi.  Chevron-Texaco will maintain its 
presence in the DRC through its Kinshasa representative 
office. 
 
INFRASTRUCTURE 
 
INGA PRIVATIZATION CONTROVERSY 
 
8. (U) DRC Vice-Minister of Foreign Affairs Mbwinga 
Bila was quoted in the press as stating that 
electricity parastatal SNEL was "surprised" and 
"unhappy" to hear that the South African firm Eskom had 
formed a consortium with the Industrial Development 
Corporation and SNC Lavalin of Canada to bid on the 
repair and expansion of the hydroelectric facilities at 
Inga I and Inga II.  Bila also stated that SNEL's 
unhappiness "is justified by the fact that they are not 
a part of the consortium."  SNEL reportedly has an 
existing partnership with Eskom, though not one that 
would preclude Eskom from pursuing development projects 
in the DRC with other companies. 
 
CELTEL LAUNCHES INTERNATIONAL ROAMING SERVICE 
 
9. (U) Celtel, the second largest cellular operator in 
the DRC, has launched a new international roaming 
service after signing bilateral agreements with 
numerous foreign service providers.  Celtel customers 
will now have access to cellular networks in much of 
Europe, West Africa, Asia, and the Middle East. 
 
TRANSPORTATION 
 
BRIDGE REHABILITIATION TO BEGIN BY YEAR'S END 
 
10. (U) Public Works Minister Jose Endundu announced 
that complete rehabilitations of the Mai-Ndombe and 
Kwango bridges on National Route No. 1 from Bandundu 
province to Kinshasa will begin by the end of 2004. 
The EU has agreed to finance the projects at a cost of 
900,000 Euros.  (Note.  Commercial traffic is currently 
using the recently repaired temporary Mai-Ndombe 
bridge, installed after the original bridge was 
destroyed during the civil war.  Upcoming work will 
rehabilitate the original bridge.  End Note.) 
 
LABOR 
 
MATADI PORT WORKERS THREATEN STRIKE 
 
11. (U) Local press reports that workers at the Port of 
Matadi are threatening to strike due to rumors that 
ONATRA (port authority) aims to build a road and rail 
bridge over the Congo River linking the DRC with Congo- 
Brazzaville.  The Port of Matadi has recently 
experienced a reduction in commerce due to low water 
levels on the Congo River.  Many ships have been 
diverted to Pointe-Noire, Congo-Brazzaville.  Port 
workers are demanding that money be allocated for 
proper dredging and channel marking along the river. 
(Comment.  Port workers are rightly worried that their 
jobs are in danger.  Operations at the port have been 
seriously encumbered by a lack of dredging in river 
channels over recent years.  However, construction of a 
bridge linking the DRC to Congo-Brazzaville would be 
fiscally impractical and would carry significant 
political baggage.  End Comment.) 
 
12. (U) INFLATION BY CATEGORY  (IN PERCENT) 
 
WEEK ENDING            7/30    8/6     8/13    8/20 
FOOD                   2      -1      -2       0 
BEVERAGE               0       0       0       0 
NON-FOOD               0       0       0      -1 
CLOTHING               0       0       0       0 
RENT                   0       0       0       0 
TRANSPORT              0       0       0       0 
SCHOOL COSTS           0       0       0       0 
UTILITIES              0       0       0       0 
COMBINED FIGURES 
WEEKLY INFLATION       0.9    -0.2    -0.6     0.0 
MONTHLY INFLATION      1.2    -0.2    -0.8    -0.8 
 
13. (U) EXCHANGE RATE DEVELOPMENTS 
 
                   7/30     8/6      8/13     8/20 
CENTRAL BANK RATE  389.109  389.115  390.175  390.594 
PARALLEL MARKET 
-KINSHASA          385-390  385-390  385-390  385-390 
-LUBUMBASHI        380-385  380-385  380-385  380-390 
-MBUJI MAYI        380-385  380-385  385-390  385-390 
-KISANGANI         400-410  375-385  375-385  380-390 
-GOMA              400-410  400-410  400-410  400-410 
-BUKAVU            400-410  400-410  400-410  400-410 
 
MEECE