DRC faces economic crisis
2008-12-16 09:31
Kinshasa - Unlike the glaring battles that rage in the eastern Democratic Republic of Congo, the country's economic crisis is more camouflaged but potentially just as potent.
On Friday the Central Bank of Congo (BCC) said economic growth had fallen by 2.7% between July and October and lowered its annual growth forecast from 11% earlier this year to 5.9%.
DR Congo is home to 34% of the world's cobalt reserves - essential for mobile phones - and 10 % of the world's copper supplies. It is also rich in tin, gold, diamonds and uranian.
But since copper has lost 75% of its value since July, diamonds 40% , while cobalt has plummeted to a fifth of its price.
The collapse in commodity prices risks "making our economy more vulnerable than beforehand," President Joseph Kabila told parliament on Saturday.
Miners contracts
Added to this, there are fears over his government's plans to renegotiate miners' contracts allocated at the start of the 2000s.
Major mining companies operating in DR Congo have seen profits and their share prices collapse over the past year and drastically cut production.
Last week Australian company Anvil Mining said it was suspending copper production and shutting its Dikulushi mine in southeast Congo due to low world demand. South African diamond giant De Beers also plans to stop exploration in the country.
Workers, traders and merchants in the mining sector face a stark future.
In the largest mining region, Katanga in the southeast of the country, there are already "200 000 extra unemployed people and the figure will rise to 300 000 or 350 000 by the end of the year," said Katanga province mining minister Barthelemy Mumba Gama.
"The mines are the engine of development and all the other occupations orbit around it," he said, adding that Katanga is grinding to a halt with its shops, restaurants and the airport all empty.
A similar fate confronts the diamond rich Kasai-Occidental province in central Congo where "production has fallen to a very low level," according to the president of the provincial assembly Francois Kabala.
Increased begging
"The consequences are visible to the naked eye," he said, adding that in the provincial capital, Mbuji Mayi, begging has increased and residents were starting to sell belongings on the street.
The export collapse has seen the amount of foreign currency entering the country shrink and caused the Congolese franc to lose 20% of its value against the dollar.
In spite of this, President Kabila urged people not to be "discouraged".
His government has unveiled a draft budget for 2009 of more than $5bn (€3.7m) - a 40% increase on this year's budget - based on a growth rate of 9.0%.
But the government, already bogged down in an expensive battle against rebel leader Laurent Nkunda's in the east, may find it hard to fulfil the ambitious budget, which the opposition attacked as "unrealistic".
"In two months, the Congolese state has run out of money to pay its civil servants," said a diplomatic source who did not want to be named.
He added that President Kabila faces "a catastrophe" as the country's financial crisis threatens "to cause an already fractious social situation to explode".
More than 75% of the country's population lives on less than a dollar a day and DR Congo ranks 167th out of 177 on the UN Human Development Report - the world wealth list.