US embassy cable - 04KINSHASA1724

UNCLAS SECTION 01 OF 02 KINSHASA 001724 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: EAIR, ECON, PGOV, CG 
SUBJECT: AIR KASAI ENCOUNTERS TURBULENCE 
 
 
1. Sensitive but unclassified.  Protect accordingly. 
 
2. (U) Summary.  Air Kasai, a private aviation firm, built 
numerous airstrips in Kasai Occidental province to provide 
air transportation to otherwise isolated diamond mining 
areas.  Soon after launching its operations, Air Kasai 
encountered opposition from local government officials, 
traditional chieftans, and rival companies that resulted in 
government attempts to expropriate its airstrips.  Government 
action is still pending, and Air Kasai is fighting the 
expropriation decision.  This episode demonstrates some of 
the difficulties of doing business in the DRC and illustrates 
the frailty of the country's property rights and commercial 
law.  End Summary. 
 
Background 
---------- 
 
3. (U) Air Kasai, a private aviation firm, was incorporated 
in the DRC approximately two years ago.  The company operates 
Russian Antonovs (2 AN-2s and 3 AN-26s) within Kasai 
Occidental province and between Kasai Occidental and 
Kinshasa.  Air Kasai bought plots of land in Kasai Occidental 
from the GDRC on which to build airstrips for the company's 
exclusive use.  These eleven airstrips allowed Air Kasai to 
offer transportation to otherwise inaccessible areas in Kasai 
Occidental's diamond mining regions. 
 
4. (U) Air Kasai's operations contributed to an overall 
increase in the DRC's diamond exports by opening 
transportation links to previously isolated locales.  They 
also provide a lifeline for transport of goods into remote 
areas not easily reached by bush roads.  At the outset, 
business was good for Air Kasai.  The company's monopoly on 
air transportation in Kasai Occidental allowed significant 
control over pricing, with a half-hour flight costing 
approximately USD 300 per passenger. 
 
Complaints 
---------- 
 
5. (U) Shortly after Air Kasai launched its operations, local 
"chefs coutumiers" (traditional chieftans holding little 
formal power but significant social influence) began 
complaining that Air Kasai had unlawfully constructed 
airstrips on their land, despite the fact that Air Kasai had 
purchased legal title to the property.  The chieftans 
demanded compensation and took their grievances to the 
provincial authorities in Tshikapa.  (Comment: Local 
chieftans quite often demand payment from companies operating 
in their zones of influence.  Absent government financing and 
attention, the chieftans attempt to collect funds from any 
available source.  End Comment.) 
 
6. (SBU) Provincial officials in Tshikapa took up the cause 
and complained to RVA (air transportation authority) and the 
Ministry of Transportation that Air Kasai "did not respect 
the laws" and "had refused to assist the government during 
the expulsion of Congolese from Angola."  (Note: This refers 
to the forced repatriation of Congolese engaged in illicit 
mining activities in Angola.  End Note.)  Provincial 
officials, including the mayor of Tshikapa, reiterated their 
protests to Econoffs during a recent visit to Kasai 
Occidental.  The mayor of Tshikapa also added to the list of 
grievances the fact that "Air Kasai does not permit 
government officials to fly for free." 
 
7. (SBU) Meanwhile, a rival aviation firm, Thom's Airways, 
requested and was denied the use of Air Kasai's private 
airstrips.  Thom's Airways also complained to RVA and the 
Ministry of Transportation, claiming that Air Kasai was 
engaging in unfair business practices.  Air Kasai responded 
that it had paid for the land and constructed the airstrips, 
and was therefore entitled to their exclusive use.  (Comment: 
Thom's Airways owns only a single AN-2 which it operates 
infrequently.  Air Kasai claims that Thom's Airways is little 
more than a front for its owner's diamond business.  End 
Comment.) 
 
Intervention 
------------ 
 
8. (SBU) Under pressure from the chieftans, local authorities 
in Tshikapa, Thom's Airways, and RVA, the Minister of 
Transportation signed a decree expropriating Air Kasai's 
airstrips without compensation.  The expropriation is still 
pending, and Air Kasai is fighting the decision.  (Comment: 
Air Kasai insinuated to Econoffs that Thom's Airways 
influenced the Minister of Transportation with contributions 
of illegal diamond revenues.  End Comment.) 
 
9. (SBU) Air Kasai has since agreed to grant Thom's Airways 
landing rights on a fee-per-use basis until the expropriation 
issue is resovled.  (Note: After receiving permission to use 
Air Kasai's airstrips, Thom's Airways promptly began 
undercutting Air Kasai's prices, flying freight into Kasai 
Occidental for a third of its rivals' prices.  End Note.) 
However, the chefs coutumiers and officials in Tshikapa have 
not been placated, and continue their complaints.  Grievances 
against Air Kasai were a common theme of Econoffs' recent 
visit to Tshikapa. 
 
Comment 
------- 
 
10. (SBU) RVA and Ministry of Transportation attempts to 
expropriate Air Kasai's airstrips demonstrate the frailty of 
property rights and commercial law in the DRC.  With investor 
confidence tenuous at best, government expropriation of 
private assets can only further discourage new investment. 
 
11. (SBU) Air Kasai's troubles also illustrate several 
unwritten rules of business in the DRC.  Local chieftains 
should be treated with caution and respect as they carry 
influence beyond their official status.  Small favors (such 
as occassional free flights for local government officials) 
or outright payments are sometimes necessary to grease the 
wheels of private commercial ventures.  Finally, official 
permission and legal documentation offer scant protection 
when political or social interests are aligned against a 
firm, especially if the firm is a small or medium-sized 
business without international backing.  End Comment. 
MEECE