Tuesday, December 16, 2008

DR Congo's Economy in Free Fall

The Central Bank announced on Friday that the DR Congo's economy shrunk by 2.7 percent from July thru October this year, and revised the anticipated annual growth rate downward from 11 percent to 5.9 percent.

The decline is largely due to the slump in international commodity prices. Copper has fallen by 75 percent from its high , diamonds have fallen by 40 percent, and cobalt is now worth only a fifth of what it was worth earlier this year.

Victor Kasongo, the DRC's deputy minister of mines, says that he expects a 30 to 40 percent decline in the production of copper in 2009, to 365,000 tons. Cobalt production will be cut in half, to 32,000 tons.

The impacts of this decline are visible everywhere. Forty-five of 75 copper and cobalt facilities in Katanga have shut down this year. Big firms like Katanga mining and Anvil Mining have shuttered their operations.

Katanga's minister of mines Barthélemy Mumba Gama says that the closure has set about a chain reaction, with restaurants, stores, and even the airport almost completely empty. "People are starting to sell their household goods, develop small, subsistence gardens, and the number of beggars has shot up," said Gama.

The same is true in Kasai Orientale, where MIBA, the giant state-run diamond company, has also closed down, having simply run out of cash. The firm has been mismanaged for ages. It's been used as a cash cow to pay for the war in the east, its infrastructure has never been maintained and is now obsolete and inefficient, payments on its loans are overdue, and bankers were simply unwilling to front it any more cash.

The downturn has MONUC worried. It reports that 52 of the 56 companies operating in Katanga have slowed down their operations, with the prospect of shuttering them entirely. MONUC is organizing "an in depth evaluation of the situation, its impact on the security of the population and on the peaceful coexistence of the communities in the province."

No comments:

Post a Comment