US embassy cable - 04KINSHASA1669

UNCLAS SECTION 01 OF 02 KINSHASA 001669 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EAID, ECIN, ECON, EFIN, EIND, EINV, EMIN, ENRG, ETRD, CG 
SUBJECT: ECONOMIC REPORT - AUG 28 THROUGH SEPT 3 
 
 
1. Summary.  Prices are stable with the exception of 
food items, which registered a 7 percent increase. 
Exchange rates remain stable.  Adastra Minerals is 
seeking to become a major metals producer in the 
region.  Bindura Nickel Corporation (BNC) and Gecamines 
are in advanced negotiations for a joint nickel 
production venture.  The GDRC signed memoranda of 
understanding with the governments of both Zimbabwe and 
South Africa.  The ICRC provided new pumps to Regideso 
in Kisangani to ensure a supply of running water for 
the city.  The World Bank has approved the release of 
USD 60 million for infrastructure and socio-economic 
capacity building projects throughout the DRC. 
 
MONETARY AND PRICE UPDATE 
 
2. Prices remain stable aside from a significant 
increase in food costs, which rose 7 percent for the 
week ending on August 27.  The cost increase may be due 
to merchant price gouging in attempts to cover school 
fees for the upcoming academic year.  School fees 
typically strain the budget of the average Congolese 
household. 
 
3. Exchange rates remain stable with bank rates 
hovering at over FC 390 to 1 USD.  Parallel market 
rates remain within an FC 5 band above or below the 
official rate.  Rates in the eastern provinces remain 
slightly elevated. 
 
MINING 
 
ADASTRA SEEKS TO EXPAND OPERATIONS, SIGNS WITH UMICORE 
 
4. International press reported Adastra Minerals (aka 
America Mineral Fields) COO Bernard Pryor as stating 
that the company is seeking to become a major metals 
producer in the region.  The company has already signed 
a joint venture agreement with Gecamines for a 
copper/cobalt tailings project at Kolwezi, and recently 
awarded the contract for the project feasibility study. 
Adastra also reported that it has signed a long-term 
supply agreement under which Umicore will purchase 
cobalt to be produced from the Kolwezi project. 
Additionally, Adastra is involved in a joint venture 
with Gecamines to resume activity at the DRC's Kipushi 
zinc mine, which has been closed for a decade but could 
be operational again by 2006.  Adastra intends to 
extract zinc from Kipushi for processing in South 
Africa. 
 
BNC AND GECAMINES IN ADVANCED NEGOTIATIONS 
 
5. International press reported that Bindura Nickel 
Corporation (BNC) chairman Kalaa Mpinga said his firm 
is finalizing a joint venture agreement with Gecamines 
for a nickel production project in the DRC.  BNC was 
acquired last year by Mwana Africa Holdings and is 
listed on the Zimbabwe Stock Exchange. 
 
FOREIGN INVESTMENT 
 
ZIMTRADE ABANDONS WAREHOUSE PROJECT 
 
6. Local press reported that Zimtrade, Zimbabwe's 
struggling parastatal trade promotion body, has 
abandoned its plans to construct warehousing facilities 
for Zimbabwean companies in the DRC.  Several 
Zimbabwean business ventures will reportedly be 
jeopardized by the project's cancellation. 
 
ECONOMIC COOPERATION 
 
DRC AND ZIMBABWE SIGN MEMORANDA OF UNDERSTANDING 
 
7. International press reported that the DRC and Zambia 
have signed several memoranda of understanding relating 
to commerce, energy, and mining.  DRC Minister of 
Regional Cooperation Mbusa Nyamwisi signed the 
agreements with Zimbabwean Foreign Minister Stan 
Mudenge.  Specifically, the memoranda are intended to 
improve road transportation between the two countries, 
harmonize their mineral exploration operations, and 
resolve a dispute over electrical power sold to 
Zimbabwe by DRC energy parastatal SNEL. 
 
DRC AND SOUTH AFRICA TO INCREASE COOPERATION 
 
8. As part of South African President Thabo Mbeki's 
attempts to safeguard the transition process in the 
DRC, delegates from the two countries met during 
Mbeki's recent DRC visit to discuss matters of economic 
cooperation.  Press reported that the meetings resulted 
in the signing of an agreement on health matters, a 
memorandum of understanding on economic cooperation, 
and an agreement for the reciprocal protection and 
promotion of investment. 
 
INFRASTRUCTURE 
ICRC PROVIDES PUMPS TO REGIDESO IN KISANGANI 
9. The ICRC has delivered ten pump units to Regideso in 
Kisangani to replace failing pumps installed in 1982. 
The pumps will be used to filter and chemically treat 
Kisangani's water supply.  Installation of the pumps 
will boost Regideso capacity and allow it to supply 
nearly all of Kisangani's 600,000 residents with 
running water. 
AID 
 
WORLD BANK APPROVES USD 60 MILLION GRANT 
 
10. The World Bank approved the release of USD 60 
million to aid demobilization, social capital building, 
and infrastructure-related projects in the DRC.  The 
money will be distributed to provincial and local 
government agencies and NGOs. 
 
11. INFLATION BY CATEGORY  (IN PERCENT) 
 
WEEK ENDING            8/6     8/13    8/20    8/27 
FOOD                  -1      -2       0       7 
BEVERAGE               0       0       0       0 
NON-FOOD               0       0      -1       0 
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      -0.2    -0.6     0.0     2.6 
MONTHLY INFLATION     -0.2    -0.8    -0.8     1.7 
 
12. EXCHANGE RATE DEVELOPMENTS 
 
                   8/6      8/13     8/20     8/27 
CENTRAL BANK RATE  389.115  390.175  390.594  392.045 
PARALLEL MARKET 
-KINSHASA          385-390  385-390  385-390  390-395 
-LUBUMBASHI        380-385  380-385  380-390  380-390 
-MBUJI MAYI        380-385  385-390  385-390  385-395 
-KISANGANI         375-385  375-385  380-390  380-390 
-GOMA              400-410  400-410  400-410  400-410 
-BUKAVU            400-410  400-410  400-410  400-410 
 
MEECE