Zambia Zaire - International University of Japan · 16 Foreign trade and payments Zaire 18...

COUNTRY REPORT

Zambia

Zaire

2nd quarter 1997

The Economist Intelligence Unit15 Regent Street, London SW1Y 4LRUnited Kingdom

The Economist Intelligence Unit

The Economist Intelligence Unit is a specialist publisher serving companies establishing and managingoperations across national borders. For over 50 years it has been a source of information on businessdevelopments, economic and political trends, government regulations and corporate practice worldwide.

The EIU delivers its information in four ways: through subscription products ranging from newslettersto annual reference works; through specific research reports, whether for general release or for particularclients; through electronic publishing; and by organising conferences and roundtables. The firm is amember of The Economist Group.

London New York Hong KongThe Economist Intelligence Unit The Economist Intelligence Unit The Economist Intelligence Unit15 Regent Street The Economist Building 25/F, Dah Sing Financial CentreLondon 111 West 57th Street 108 Gloucester RoadSW1Y 4LR New York Wanchai United Kingdom NY 10019, USA Hong KongTel: (44.171) 830 1000 Tel: (1.212) 554 0600 Tel: (852) 2802 7288Fax: (44.171) 499 9767 Fax: (1.212) 586 1181/2 Fax: (852) 2802 7638e-mail: [email protected] e-mail: [email protected] e-mail: [email protected]

Website: http://www.eiu.com

Electronic deliveryEIU Electronic Publishing New York: Lou Celi or Lisa Hennessey Tel: (1.212) 554 0600 Fax: (1.212) 586 0248London: Moya Veitch Tel: (44.171) 830 1007 Fax: (44.171) 830 1023

This publication is available on the following electronic and other media:

Online databases CD-ROM Microfilm

FT Profile (UK) Knight-Ridder Information World Microfilms Publications (UK)Tel: (44.171) 825 8000 Inc (USA) Tel: (44.171) 266 2202

DIALOG (USA) SilverPlatter (USA)Tel: (1.415) 254 7000

LEXIS-NEXIS (USA)Tel: (1.800) 227 4908

M.A.I.D/Profound (UK)Tel: (44.171) 930 6900

Copyright© 1997 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by anymeans, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Intelligence Unit Limited.

All information in this report is verified to the best of the author’s and the publisher’s ability. However,the EIU does not accept responsibility for any loss arising from reliance on it.

Symbols for tables“n/a” means not available; “–” means not applicable

Printed and distributed by Redhouse Press Ltd, Unit 151, Dartford Trade Park, Dartford, Kent DA1 1QB, UK

ISSN 1350-7087

Contents

3 Summary

Zambia4 Political structure5 Economic structure6 Outlook for 1997-989 Review9 The political scene

12 The economy13 Agriculture14 Mining and energy16 Foreign trade and payments

Zaire18 Political structure19 Economic structure20 Outlook for 1997-9823 Review23 The political scene29 The economy

32 Quarterly indicators and trade data

List of tables8 Zambia: forecast summary (domestic)9 Zambia: forecast summary (external)

15 Zambia: copper production and employment at ZCCM32 Zambia: quarterly indicators of economic activity33 Zaire: quarterly indicators of economic activity34 Zambia: foreign trade35 Zambia: direction of trade35 Zambia: refined copper exports36 Zambia: UK trade36 Zambia: Japanese trade37 Zaire: trade with major partners

List of figures9 Zambia: gross domestic product9 Zambia: Zambian kwacha real exchange rate

22 Zaire: gross domestic product

1

EIU Country Report 2nd quarter 1997 © The Economist Intelligence Unit Limited 1997

May 7, 1997 Summary

2nd quarter 1997

Zambia Outlook for 1997-98: Donors will continue to seek democratic commit-ments from the government. Opposition court challenges to the elections lookset to fail. More dissent will emerge within UNIP. The government will seekgood relations with Zaire’s rebel AFDL. Interest rates will fall further. Govern-ment action on money laundering is awaited. ZCCM horsetrading will intens-ify. The agricultural investment programme will continue to face problems,and the agricultural sector will restrict GDP growth. Inflation will slow and thecurrency outlook is more favourable, but the current-account deficit will re-main large.

Review: Relations with donors have remained delicate. A controversial pressbill has been suspended but continues to cause concern. A permanent humanrights commission has been set up. The courts have steered a path betweengovernment and opposition. Factionalism has flared in UNIP. AIDS statisticsare grim. Reactions to the budget have been favourable. Interest rates havefallen. Trading has increased on the LuSE. Non-traditional agricultural exportshave grown, but gem exports have slowed. Agreement has been reached onKonkola Deep, while talks have continued on other ZCCM units. Copper prod-uction has fallen again. The IMF has approved further ESAF funding of $14m,and the EU has granted $200m over five years.

Zaire Outlook for 1997-98: Mr Kabila is poised to take power but the extent towhich he will collaborate with the Union sacrée opposition remains unclear,and secessionist tendencies may re-emerge. There is heavy speculation thatMr Mobutu may slip into permanent exile, but in any case he will soon ceaseto be a factor. The enduring ethnic dimension of the war will become a liabilityfor Mr Kabila. The economy stands to gain from an end to the Mobutu regime.

Review: The AFDL has captured Kisangani, Mbuji-Mayi and Lubumbashi aswell as more than half the territory of Zaire, with assistance from Rwanda,Uganda and Angola. It is heading towards Kinshasa at a fast pace, unimpededby the collapsing Zairean army. Elections for local officials have been held inmost rebel-held areas, and administrative functions have resumed. Tens ofthousands of Rwandan refugees remain in the country, and have faced persec-ution by Mr Kabila’s troops. Mr Mobutu and Mr Kabila have met face to face ona South African warship, but no firm peace deal has been reached. The AFDLhas confirmed most existing contracts between foreign investors and theZairean government in the mining sector. Crossborder trade has resumed withUganda and Rwanda and tariffs have been reduced. Inflation averaged 659% in1996, fuelled partly by new banknotes.

Editor:All queries:

Gill TudorTel: (44.171) 830 1007 Fax: (44.171) 830 1023

3


Zambia

Political structure

Official name Republic of Zambia

Form of state Unitary republic

Legal system Based on the 1996 constitution

National legislature National Assembly; 150 members elected by universal suffrage; all serve a five-yearterm

National elections November 1996 (presidential and legislative); next elections due in 2001

Head of state President elected by universal suffrage for a term of five years

National government The president and his appointed cabinet (last reshuffle in December 1996)

Main political parties The Movement for Multiparty Democracy (MMD) is the ruling party, with a hugeparliamentary majority. The National Party (NP), Zambia Democratic Congress (ZDC)and Agenda for Zambia (AZ) also have seats in parliament. The former sole party, theUnited National Independence Party (UNIP), and several other opposition groupsboycotted the 1996 elections and have no seats. There are over 30 parties in all

President Frederick ChilubaVice-president Godfrey Miyanda

Key ministers Agriculture & fisheries Edith NawakwiCommerce, trade & industry Alfeyo HambayiCommunity development & social welfare Newstead ZimbaDefence Ben MwilaEducation Siamukayumbu SiamujayeEnergy & water Suresh DesaiEnvironment William HarringtonFinance Ronald PenzaForeign affairs Lawrence ShimbaHealth Katele KalumbaHome affairs Chitalu SampaInformation & broadcasting David MpambaLabour & social security Peter MachungwaLands Dawson LupungaLegal affairs Vincent MalamboLocal government & housing Bennie MwiingaMines Christen TemboScience & technology Enoch KavindeleTourism Amusa MwanamwambwaTransport & communications vacantWithout portfolio Michael SataWorks & supply Keli Walubita

Central bank governor Jacob Mwanza

4 Zambia


Economic structure

Latest available figures

Economic indicators 1992 1993 1994 1995 1996a

GDP at market prices ZK bn 569.4 1,613.7 2,486.3 3,521.7 4,979.7

Real GDP growth % –0.6 5.1 –3.1 –3.9 6.4b

Consumer price inflationc % 197.4 189.0 52.3 35.8 43.8d

Population m 8.67 8.94 9.20 9.37 9.65

Exports fob $ m 1,111 949 1,057 1,186 975b

Imports fob $ m 1,301 950 928 869a 990

Current account $ m –117 –88 –185 –314 –491b

Reserves excl gold $ m 150.0 192.3 268.1 210.5 150.0

Total external debt $ bn 7.00 6.82 6.61 6.85 7.00

External debt-service ratio, paid % 28.9 34.4 31.1 201.9 30.2

Copper outpute ’000 tons 432 403 354 308 311

Exchange rate (av) ZK:$ 172.21 452.76 669.37 857.23 1,203.71d

May 2, 1997 ZK1,295:$1

Origins of gross domestic product 1995b % of total Components of gross domestic product 1995b % of total

Agriculture 17 Private consumption 69

Mining 9 Government consumption 15

Manufacturing 37 Gross fixed capital formation 9

Construction 2 Change in stocks 3

Commerce 10 Exports of goods & services 20

Government & other services 25 Imports of goods & services –15

GDP at market prices 100 GDP at market prices 100

Principal exports 1996b $ m Principal imports 1993 $ m

Copper 568 Crude oil 144

Cobalt 193 Fertiliser 30

Electricity 1

Main destinations of exports 1995f % of total Main origins of imports 1995f % of total

Japan 18 South Africa 28

Saudi Arabia 13 UK 11

Thailand 13 Zimbabwe 9

India 5 Japan 9

a EIU estimates. b Official estimates. c Low-income index, urban areas. d Actual. e ZCCM financial years starting April 1. f Based on partners’ tradereturns, subject to a wide margin of error.

Zambia 5


Outlook for 1997-98

Donors still wantdemocratic commitments

from the government

The grant of substantial and long-term EU funds to Zambia in mid-March,including a balance-of-payments support component, suggests that memberstates are looking for ways to resume bilateral funding, especially since the IMFalso gave a fresh seal of approval to the government’s economic reform effortsin February. However, to avoid an embarrassing political climbdown that willonly make it harder to impose good governance criteria on lending to othercountries, the bilateral donors are still looking for renewed signs of democraticcommitment from the Zambian government. The government’s decision toestablish a permanent human rights commission is one such sign, but it hasbeen offset by the uproar over the draft media bill, which seeks to control whois allowed to be a journalist. The government says it has suspended the bill, butZambia’s independent newspapers continue to sound alarm bells, and even thegovernment media have voiced unease. If the fight continues it may make itharder for donor governments to claim that there is sufficiently good govern-ance in Zambia to justify a resumption of funding. Nevertheless, some donorgovernments will probably consider it safe quietly to resume funding, albeit ona lower scale than before.

Opposition legal petitionsno longer look promising

Opposition party petitions challenging the legality of the electoral register, anddisputing whether the president, Frederick Chiluba, is of pure Zambian stock,seem to be heading nowhere in particular. The Supreme Court’s ruling thatopposition complaints about the electoral register should be investigated fur-ther before fresh by-elections can be held is a victory of sorts for oppositionparties, but will do nothing to overturn the convincing win by the ruling MMDin last November’s general election. The petition disputing Mr Chiluba’s nat-ionality was their best bet, but with this rejected by the court, the parties areleft with little choice but to make the best of life in the political wilderness foranother five years.

More UNIP dissent willsurface

UNIP, which used to rule Zambia as the only legal party, will have the hardesttime of all doing this. Expulsions and resignations have begun already, witheach new dissident encouraged by guaranteed maximum coverage of his objec-tions to the UNIP leader and former president, Kenneth Kaunda, in the state-owned media. Calls have been made for a new party congress, where freshelections can be held for the leadership. Although senior UNIP officials havesaid they are not afraid of such a congress, it is likely to take some time toarrange, as Mr Kaunda will have to employ all his legendary stage-managingskills to prevent any substantive challenge to his position.

The government will tryto send friendly signals to

Zaire’s rebels

The Zambian government, presumably sensing the possibility before too longof a government in Kinshasa headed by the Zairean rebel leader, LaurentKabila, is uncomfortable about hosting refugees loyal to the regime of thebeleaguered president, Mobutu Sese Seko. It has tried sending some back toZaire, but they apparently returned via another border post; Zambia’s strategynow seems to be to make life uncomfortable for them, perhaps in the hope thatthis will send a message to Mr Kabila that the Chiluba government is no ally ofMr Mobutu. Apart from the refugees, there is no special reason for a Kabila

6 Zambia


government and the Zambian government to get on poorly, and the chancesare that relations between Zaire and Zambia will actually improve.

Interest rates are set tofall further

Interest rates are set to dip below 40% in the next few months, following arecent pattern whereby they follow the Treasury-bill rate downwards, keepinga margin of around 10 percentage points between them. This will be good newsfor borrowers, although it is unlikely to stimulate substantial levels of freshborrowing from industrial and agricultural enterprises. There is still a strongpossibility that T-bill rates will rise again before the end of the year, as exportrevenue from the state mining giant, ZCCM, seem set to remain poor for mostof the year; non-traditional export receipts have not been impressive this yeareither, which will increase the government’s temptation to return to the dom-estic capital markets for further financing.

Government action onmoney laundering is

awaited

The government and the Bank of Zambia (BoZ, the central bank) have recog-nised international concerns about the growth of money laundering in Zam-bia, and the BoZ has presented the government with draft legislation so that itcan do something about it. The government’s response will be monitoredclosely, and feeble new laws or a weak commitment to implementing strongerones will be taken as a signal that the government is not serious in its anti-corruption drive. So far, the highest profile government initiative against cor-ruption has been Mr Chiluba’s protestations over the state of Lusaka’s roads, inspite of repeated government- and donor-funded contracts with private com-panies to fix them.

The Zambia Brewerieslisting should go well

The Zambia Breweries share offering is expected to be popular. Beer is a much-loved product in Zambia and the new owner of the company, South AfricanBreweries (SAB), has earned itself a reputation in the region for its aggressivemarketing and sales promotion. A successful listing in June could pave the wayfor a share issue later this year for Northern Breweries, controlled by the UK-based firm Lonrho, all of which will inject further capital into the Lusaka StockExchange and bolster its international credibility.

ASIP is destined forfurther trouble

The increasingly political reputation of the World Bank-sponsored AgriculturalSector Investment Programme (ASIP), intended to coordinate all donor andgovernment investment in agriculture, is doing nothing to bolster its prospectsfor success, although the agriculture ministry is now claiming that most of itsproblems are over. It seems unlikely that it will play a critical role this year inZambian agriculture, which again faces the probability of further successes forcommercial farmers, especially if they are growing non-traditional crops suchas cotton, tobacco and coffee, and lamentable prospects for smaller farmerssticking to maize. However, encouraging evidence is emerging of small-scalecrop diversification in some areas. Castor growing is on the rise, for example,with a castor growers’ association formed last year, and sorghum production isalso reported to be increasing.

ZCCM horsetrading willintensify

The privatisation of ZCCM has entered a critical phase, with the credibility ofthe plan that divided the company’s assets into nine units, most of which area mixed bag of dismal and enticing investment prospects, now being put to the

Zambia 7


test by the bidders. On balance, the sale faces slightly more of a buyers’ than asellers’ market because of ZCCM’s desperate financial position and vast debts,and the tight timetable for privatisation. However, the Zambia PrivatisationAgency (ZPA) and the government established a useful reputation for stubborn-ness during the protracted negotiations over the Konkola Deep mine, andbidders have shown that they are genuinely keen to buy into Zambia’smedium- to long-term mining prospects, which also counts in the ZPA’s fa-vour. Because no one wants negotiations to take as long as those over KonkolaDeep, some of the more unappetising assets are likely to end up unsold and leftto fester in the hands of a ZCCM holding company.

Agriculture will holdback GDP growth

Agriculture will inevitably expand far more slowly this year than it did in 1996,when it was rebounding from the drought. Continuing problems with ruralcredit and fertiliser distribution will also do little to boost the sector, althoughnon-traditional crops such as flowers and vegetables will continue to do well.With the maize crop expected to fall sharply this year, we now expect theagricultural sector as a whole to contract by some 5% in real terms, while ruralpurchasing power will also reduce general economic demand. However, min-ing investment and the related boost to services industries, combined with theprospect of a modest recovery in copper output, should help to underpin realGDP growth of 3% this year, rising to 5% in 1998.

Zambia: forecast summary (domestic)(% change, year on year)

1995a 1996b 1997c 1998c

Real GDP –3.9 6.4 3.0 5.0 of which: agriculture –10.0d 25.0d –5.0 5.5 mining –4.0d 3.5d 5.3 6.0 manufacturing –3.0d 3.0d 3.2 3.5

Average consumer prices 36 44a 30 20

a Actual. b Official estimates. c EIU forecasts. d EIU estimate.

Inflation will slow— Although the finance minister, Ronald Penza, announced a year-end inflationrate of 35% for 1996, the annual average for that year was a less impressive44%. Continued tight fiscal policy should keep inflation on a downward trend,although the credit and other difficulties faced by small-scale maize growersmay exert some upward pressure on food prices. We now expect inflation toaverage 30% this year, slowing further to 20% in 1998.

—and the currencyoutlook is improving—

The kwacha has held fairly steady since the end of 1996, trading at aboutZK1,295:$1 at the end of April, but the currency is likely to come under furtherpressure, as balance-of-payments problems are unlikely to be fully offset by thelimited resumption of aid. Nevertheless, we have revised our currency forecastsslightly to project a less steep depreciation, and now expect the kwacha toaverage ZK1,320:$1 in 1997 and ZK1,475:$1 in 1998.

8 Zambia


Zambia: forecast summary (external)($ m unless otherwise indicated)

1995a 1996b 1997c 1998c

Merchandise exports 1,186 975d 1,040 1,120 of which: copper 957b 568 630 800

Merchandise imports fob 869b 990 1,100 1,280

Current-account balance –314 –491d –535 –470

Average exchange rate (ZK:$) 857 1,204a 1,320 1,475

a Actual. b EIU estimates. c EIU forecasts. d Offical estimate.

—but the current-accountdeficit will remain large

Copper exports, which plunged in 1996, should begin to climb back out of thedoldrums as new mining investment takes hold. The EIU continues to forecastweakening copper prices, however, averaging a projected $1.03/lb and95 cents/lb in 1997 and 1998 respectively, compared with $1.04/lb in 1996.The weakening in non-traditional exports early this year may be a temporaryphenomenon, but we have slightly lowered our forecast for 1997 exports to$1.04bn. Imports are still expected to climb steadily, boosted partly by inputsfor the mining industry. Service payments are likely to remain fairly steady,and we expect a modest increase in balance-of-payments support as the donorboycott fades, but Zambia nevertheless faces a large current-account deficit,estimated at some $535m in 1997 and $470m in 1998.

Review

The political scene

Ministers are stilldenouncing donors

The fact that the 1997 budget (1st quarter 1997, page 13) assumes that donorswill provide the funds for one-third of proposed government spending suggeststhat the government expects relations with them to improve substantiallyduring 1997. There are signs that some donors, mollified by government sig-nals such as the choice of the new cabinet (1st quarter 1997, page 12), are

-4

-2

0

2

4

6

8

1994 95 96(a) 97(b) 98(b)

Zambia

Africa

Zambia: gross domestic product % real change, year on year

(a) Official estimates. (b) EIU forecasts. (c) Nominal exchangerates adjusted for changes in relative consumer prices.Sources: EIU; IMF, International Financial Statistics; WorldEconomic Outlook.

70

80

90

100

110

120

1990 91 92 93 94 95 96 97(b) 98(b)

Zambia: Zambian kwacha real exchangerate (c)1990=100

ZK:$ZK:$ZK:$ZK:$ZK:$ZK:$ZK:$ZK:$ZK:$ZK:$ZK:$ZK:$ZK:$ZK:$ZK:$ZK:$ZK:$ZK:$ZK:$

ZK:¥

ZK:$

ZK:¥ZK:¥

ZK:DMZK:DMZK:DM

ZK:$

ZK:¥

ZK:$

ZK:¥ZK:¥

ZK:DMZK:DMZK:DM

ZK:$

ZK:¥

ZK:$

ZK:¥

ZK:$

ZK:¥

ZK:$

ZK:¥

ZK:$

ZK:¥

ZK:$

ZK:¥

ZK:$

ZK:¥

ZK:$

ZK:¥

ZK:$

ZK:¥

ZK:$

ZK:¥

ZK:DM

Zambia 9


easing their stance, which for most of them in 1996 was one of punishing thegovernment for anti-democratic tendencies and corruption. However, in mid-April the powerful minister without portfolio, Michael Sata, strongly criticisedthe USA for its continued hardline position on Zambia, riding rough-shod overwarnings by the president, Frederick Chiluba, that only he and the foreignminister should comment publicly on foreign relations. Noticeably, the out-burst was not followed by any soothing reinterpretations from either the for-eign ministry or the president’s office.

A new media bill causesconcern—

Furthermore, when the Swedish government expressed its regret over thegovernment’s new draft media bill, the information minister, David Mpamba,retorted bluntly that lectures from foreigners were unwelcome in Zambia. Thedraft bill has drawn denunciations from both local and international mediabodies and raised further questions about the government’s conception ofdemocracy. It proposes that a commission headed by a High Court judgeshould license journalists, and requires that journalists have at least a BA injournalism or mass communications before being allowed to practise. Al-though it has presented the measure as one merely intended to improve stand-ards in the profession, the basic objection has been that the government has nobusiness regulating the media and that publications should be allowed to em-ploy whom they like without the approval of a judge. The government hasresponded by saying the bill is in draft form only, and in mid-April it wasformally suspended, but journalists fear that the government has little inten-tion of backing down on its key regulatory aspects.

—but a permanent humanrights commission is on

the way

Adding to the continued donor unease was a comment in parliament in earlyFebruary by the home affairs minister, Chitalu Sampa, that he would not infuture allow “careless talk” on the streets. However, in a measure designed tobolster the reputation of the ruling Movement for Multiparty Democracy(MMD) for good governance, the government announced in late March that itwould be setting up a permanent human rights commission to investigatehuman rights abuses. Strangely, opposition parties lost no time in denouncingthe initiative, and refused to send any representatives to join the body.

University funding is tobe cut

Clearly fatigued with funding organisations that seem to do little but generatecritics, the government has announced that it will cease funding Zambia’s twouniversities, although it has not set out a timetable for doing so. The educationminister, Siamukayumbu Siamujaye, has suggested that they start “income-generation projects” to sustain their operations, but did not elaborate muchfurther. It is highly unlikely that these could ever match the scale of theircurrent subsidies, which could mean anything from cuts to axing whole de-partments. Mr Siamujaye has also said that he thinks lecturers’ salaries are toolow, and that students are contributing too little to their education; the latterstatement is likely to herald a reduction in their government grants.

The courts steer a pathbetween government and

opposition

One consequence of the disputed elections of November 1996 has been severalpetitions brought by opposition parties challenging the voter registrationprocess and Mr Chiluba’s claims to be a Zambian. The Supreme Court ruled inearly February that no by-elections could be held using the current and

10 Zambia


contested electoral register, compiled by the Israeli firm, Nikuv, until oppos-ition claims about its unfairness have been properly investigated. In mid-March the court threw out an opposition petition contesting Mr Chiluba’snationality, with Justice Bonaventure Bwepe asserting that the petition applic-ation was misconceived and malicious. Nonetheless, a series of allegations havecontinued to be paraded through the courts by people who claim to haveknown and lived with Mr Chiluba when he was younger. One alleged that hewas expelled from school for smoking cannabis, another that his father was aMozambican traditional healer.

Factionalism threatensUNIP

As expected, there are signs of renewed opposition to Kenneth Kaunda’s posi-tion as head of the United National Independence Party (UNIP), with someparty members concluding that the party has benefited little from his leader-ship. Mr Kaunda has never offered for scrutiny the large numbers of voterregistration cards he claims were handed to the party by Zambians dismayed bythe 1996 constitution, leaving most convinced that he has embarrassingly fewof them. Having boycotted the elections, UNIP has no seats in the new parlia-ment, yet foreign donors failed to denounce the elections outright and thusvindicate the party’s stance, even if they did not heartily condone them either.Mr Kaunda’s promised mass campaign of passive resistance against the govern-ment since the elections has simply failed to take off. UNIP expelled threesenior members in early April, including the party’s deputy-secretary for youth,Samson Moyo, citing disciplinary reasons. On April 19 fighting broke out atUNIP’s Lusaka headquarters between a faction loyal to Mr Moyo and thoseworking for the UNIP leadership. The spat spilled onto the streets, causingmany businesses to close for the day in case of further trouble. Mr Moyo, whohas been branded an MMD stooge by UNIP, has been granted ample space topresent his grievances in the state-owned media, and continues to deny anyconnection with the MMD. He has demanded a new national party congress tohold fresh leadership elections.

Zambia accommodatesseveral thousand Zairean

refugees

Zambia has accepted several thousand refugees from Zaire since the rebelAlliance des forces démocratiques pour la libération du Congo-Zaïre (ADFL)moved in on and subsequently captured most of southern Zaire. Zambia hasone of the longest borders with Zaire and has been the destination of choice formany former employees of the Zairean state, to whom the ADFL leader,Laurent Kabila, has been explicit in his hostility. While refusing to be drawn onZambia’s attitude to the rapidly evolving situation in Zaire, the governmenthas not been very welcoming to the refugees, and has sent some of them back.It has also displayed a marked reluctance to spend any of its own money onrefugee camps, appealing for international assistance to deal with the newarrivals. Some money has been forthcoming, but a number of refugees havedied of cholera and overcrowding. In response, the government has promisedto set up proper camps.

AIDS takes a heavy toll The February edition of the London-based publication, Aids Analysis Africa,provided a summary of the latest data on HIV and AIDS prevalence in Zambia.According to the publication, an estimated 700,000 Zambians, or about 13% ofthe population, were HIV-positive in 1994. The newsletter also said the current

Zambia 11


infection rate was estimated at 300-400 per day. The prevalence of HIV infec-tion in urban areas is expected to peak at 33% in 1998, and to reach 20% inrural areas by 2004. In 1990 some 10,000 people in Zambia were reported tohave full-blown AIDS; the health ministry anticipates that this will rise to75,000 by 2000. The number of AIDS orphans is predicted to rise from 70,000in 1993 to up to 600,000 by 2000. In the face of such a devastating spread ofthe virus, the government and aid agencies have placed particular emphasis onAIDS education, but new treatment that can slow the debilitating effects of thedisease remains too expensive for nearly all infected Zambians.

The economy

Reactions to the budgetare favourable

Reactions to the 1997 budget (1st quarter 1997, page 13) have been generallyfavourable, both at home and abroad. The Zambian Congress of Trades Unions(ZCTU) lamented the fact that tax rates have remained high and that littleattempt has been made to bring the informal sector into the tax regime, butwelcomed the reduction of value-added tax (VAT) from 20% to 17.5%. TheZambian Chamber of Commerce and Industry (ZCCI) broadly welcomed thebudget, but offered the reservation that there was too little in it to help agricul-ture. The Zambian National Farmers’ Union (ZNFU) welcomed the govern-ment’s stated intention to depoliticise the maize industry, the decision toreduce VAT, the road improvement programme and news that the telecom-munications parastatal, Zamtel, is to be privatised, but found fault with theincrease in ground rents and the changes to some VAT exemptions. Outsidecommentators took note of the budgetary provision made for redundancypackages this year, which suggests that the government may have rediscoveredthe political will to trim its civil service, but have focused more attention onthe feasibility of the government’s prediction that foreign donors will providearound $370m in both balance-of-payments and project support in 1997. En-couragingly for his budget projections, however, the finance minister, RonaldPenza, revealed in mid-February that he was only $30m short of the $200mbalance-of-payments financing which he estimates Zambia needs this year.Although the 1997 budget is supposed to produce a 1% surplus, without donorassistance it is likely, according to government figures, to record a 7% deficit.

Treasury-bill and interestrates fall

The government has been paying off some of the state’s domestic debts re-cently, which has had the effect of reducing the yield on Treasury bills fromabout 55% late last year to just over 30% by mid-April. Zambia’s commercialbanks have for some time been spending more money on Treasury bills thanon loans to non-governmental Zambian clients, and T-bill rates of return havecome to be seen as a key determinant in the setting of the country’s commer-cial interest rates. Although the latter have fallen from above 50%, they are stillover 40%, some 10 percentage points higher than the Treasury-bill yield, muchto the annoyance of the Bank of Zambia (BoZ, the central bank), which thinksthey should be lower. They are certainly too high to encourage much in theway of renewed borrowing in the foreseeable future. Meanwhile, the year-on-year inflation rate in March was 32%, some 2.7% lower than the previousmonth, partly because of tight monetary policy and partly because of lowerprices for some basic food commodities.

12 Zambia


Money launderinglegislation is promised

Mindful of Zambia’s growing reputation as a haven for money launderers(4th quarter 1996, page 12), the BoZ has placed draft legislation before thegovernment designed to make their lives more difficult. Although the bank hasbeen unwilling to divulge details before the government gives its own reac-tions, the legislation, known as the Prevention of Money Laundering Act, islikely to include new banking rules requiring greater disclosure about majorcurrency transactions, deposits and withdrawals. The bill is expected to betabled before parliament quite soon.

Trading volumes increaseon the Lusaka Stock

Exchange

Things are looking up for the Lusaka Stock Exchange (LuSE), which has in thepast struggled to attract new listings and improve its frequently thin tradingvolumes. After only $300,000 of turnover in 1995, the LuSE recorded $2.6bn in1996, with 241 million shares traded, compared with 8 million in 1995. Theholding company, Trans Zambezi Industries, was listed for the first time on theLuSE and the Zimbabwean stock exchange on April 14, with LuSE staff hopingthat this will both promote the coordination of the region’s exchanges andhelp attract foreign capital to the LuSE. Zambia Breweries shares are now onoffer for ZK150/share (12 US cents), with a minimum purchase of ZK75,000($58). Some 13 million shares have been issued and its listing, originally in-tended for late 1995 before being shelved, is now scheduled for June 6. Thecompany is owned by South Africa’s Anglo American Corporation and SouthAfrican Breweries (1st quarter 1997, page 14).

What’s in a number? A recent report by the World Bank, entitled Zambia: Prospects for SustainableGrowth, 1995-2005, contained evidence suggesting that official statistics over-state the absolute level of Zambia’s GDP by as much as 50%. For example, theWorld Bank’s estimate for the value of agricultural output in 1993, based onofficial crop estimates and Bank estimates of farm gate prices, is ZK144bn($111m), compared with the official figure of ZK400bn. The World Bank teamalso found it hard to believe that manufacturing value added in that year wasanything like as much as $750m, as stated in the official figures. The teamsuspect that such statistical exaggerations have been getting worse over recentyears and ponders the ramifications of GDP being much lower than has pre-viously been thought. One consequence is that it would lower the figure forZambia’s GDP per head, currently estimated at around $370, to about $200,which would be more in line with neighbouring Mozambique and Malawi andmore consistent with available data on poverty. If the World Bank is rightabout GDP, it also throws into question a host of Zambia’s economic statistics.This has not deterred the Bank team, however, which concludes its report withreams of possible statistical scenarios for the next ten years, based on the veryfigures it has called into question.

Agriculture

ASIP’s problems rumble on The World Bank-sponsored Agricultural Sector Investment Programme (ASIP),intended to coordinate all donor and government investment in agriculture,appears at the moment to be primarily a forum for the expression of theirdifferences and disputes. In February the Zambia National Farmers’ Union(ZNFU) accused the government of derailing the programme by not paying its

Zambia 13


contributions. The government responded that it was the donors who were notpaying, preferring instead to transfer their agricultural aid through other chan-nels because of their suspicions regarding the Ministry of Agriculture’s finan-cial management systems. In mid-March the agriculture minister, EdithNawakwi, said that donors were now ready to pay funds direct into ASIP, but atthe same time rejected a $14m EU assistance package for the programme on thegrounds that it was allegedly racist in benefiting mainly white commercialfarmers. The ZNFU, whose policy-making is still primarily in the hands ofcommercial farmers, despite its broad-based membership, protested that theministry should not be complaining as the package had been worked out inconjunction with the ministry. The result has been the apparent de facto disso-lution of ASIP’s national committee.

Non-traditionalagricultural exports grow

Despite the recent overall fall in the value of non-traditional exports (seeForeign trade and payments), such exports continue to go from strength tostrength. The flower industry notched up another notable benchmark inFebruary, when it exported 200,000 roses to the UK for Valentine’s Day. Tobaccoproduction and exports are on the rise, with sales increasing from $3.9m in 1994to $10m in 1996; however, in spite of comparable potential this remains afraction of Zimbabwe’s tobacco exports, estimated to have amounted to $600min 1996. The World Bank report, Zambia: Prospects for Sustainable Growth, 1995-2005 (see The economy), remarked on tobacco’s “substantial scope for profitableexpansion” for smallholders and small-scale commercial farmers, as well as thebig commercial farms. Some health professionals have condemned this view asirresponsible, although the World Health Organisation (WHO) has not publiclyresponded.

Mining and energy

Agreement is reached atlast on Konkola Deep—

A memorandum of understanding was finally signed in mid-February pavingthe way for the acquisition of the prized Zambia Consolidated Copper Mines(ZCCM) asset, Konkola Deep, and the Mufulira smelter, by a consortium led bySouth Africa’s Anglo American Corporation. The investment figure initiallyquoted for the consortium, in which Anglo American has a 40% stake, theSouth African mining house, Gencor, has 30%, and a Canadian-based com-pany, Falconbridge, has the remaining 30%, was $700m-800m, but somesources now put the figure as high as $900m. A feasibility study currently underway was budgeted at $18m; strikingly high, given the level of study the minehas already received in the past. This is supposed to be completed by the end ofJune, enabling a formal takeover. The consortium clearly believes it is on to awinner that will make worthwhile the many months of negotiating needed toget this far, particularly as it was able to secure rights to the Mufulira smelter,which proved a stumbling block in the negotiations for some time. Plenty ofinvestors think so too, as they are busy buying into Zambia CopperInvestments (ZCI), Anglo American’s Zambian mining arm. According to cur-rently available estimates, Konkola Deep has 340m tons of reserves and iscapable of producing 180,000 tons of copper per year.

14 Zambia


—while AvMin wantsNkana and Nchanga—

Avmin, a subsidiary of a South African-based company, AngloVaal, and theprospective buyer of ZCCM’s other major asset, Konkola North, also has itssights set on the Nchanga and Nkana unit. As well as the two mines, thisincludes the Nchanga tailings leach plant and concentrator and the Nkanasmelter (if it is still working; see below), concentrator and cobalt plant. The bidshave not yet been disclosed but the speculation is that AvMin may have offeredabout $100m.

—but most bidders wantto pick and choose

As feared, some of ZCCM’s units have attracted little interest and one or twohave received no bids at all. There is now pressure on the Zambia PrivatisationAgency (ZPA) to tamper with the original privatisation proposals, drawn up bythe UK-based merchant bank, Rothschilds, dividing ZCCM’s assets into ninemain units and ruling out further subdivision (1st quarter 1997, page 16). Thebidders, who were invited into negotiations in early April, are seeking to selectonly the assets they want and not take on other assets bundled into the rele-vant unit. Strengthening their negotiating stance is the fact that they are alsobeing asked to take on ZCCM’s substantial debts, which currently stand ataround $1bn. On the other hand, the rapid increase in new prospecting by thebidders and others suggests that they believe future mining prospects inZambia are encouraging, which strengthens the hand of the ZPA.

Copper productionfalls again—

ZCCM’s copper production has not got off to a good start in 1997, primarily dueto continued problems with the Nkana smelter but also, the company says,because of a shortage of anodes. In February output was a disappointing23,103 tons. The low output seems set to continue, as the Nkana smelter is nowexpected to close down.

—and mass redundancieshave not helped

productivity

In spite of the loss of 9,000 jobs at ZCCM since 1989, productivity has actuallydeclined. Copper production per employee was 8.9 tons in 1996, 13% lowerthan in 1989. The Zambian Congress of Trade Unions (ZCTU) will seek to usethis as part of its attempt to staunch job losses in the privatised remains ofZCCM, but the attitude of bidders at present is that ZCCM is still overstaffed,and they want to see further redundancies.

Zambia: copper production and employment at ZCCM

1989 1996 % change

Copper production (’000 tons) 448,500 313,000 –30

Employees 43,751 35,177 –20

Production/employee (tons) 10.25 8.90 –13Source: Zambia Consolidated Copper Mines.

A gemstone exchange iscoming

Zambia will establish a gemstone exchange this year to boost gem exports,which were officially worth $11.8m in 1996, a healthy increase compared withthe 1995 figure of $8m. Export values have been declining this year, affectingZambia’s foreign exchange revenue, partly because of a rise in exports throughthe parallel economy.

Zambia 15


The Maamba coal mine isclosed for repair

The Maamba coal mine was flooded by rains in late January and has since beenclosed for repair. It will need complete refurbishment and Zambia is beingforced to import coal from Zimbabwe’s Wankie colliery until that happens.

Foreign trade and payments

Non-traditional exportearnings fall

Earnings from non-traditional exports rose substantially in 1995 and 1996, andhave been hailed by many as proof of the success of the government’s marketreforms. However, these earnings have been declining in 1997. Zambia earned$22m from non-traditional exports in December 1996, but $21m in January1997 and only $19m in February. The decline appears to be mainly because ofa fall in gemstone exports, which have helped prompt government reforms ofgemstone marketing (see Mining and energy).

The IMF rules that Zambiacan continue to draw on

ESAF

In a major boost for the Zambian government that will exert some influence onbilateral donor decision-making this year, the IMF completed its mid-termreview of Zambia’s economic performance at the end of February and reporteditself happy enough with progress to allow the country to draw on concession-ary funding of $14m under the Enhanced Structural Adjustment Facility(ESAF). As Mr Penza has commented, this approval paves the way at the veryleast for a formalisation of last year’s agreement with the Paris Club of official,bilateral creditors for a 67% reduction in Zambia’s debt obligations to its mem-bers (2nd quarter 1996, page 16). It also makes a World Bank-sponsored donorconsultative meeting more likely, although there are not yet any official indic-ations of this, and are unlikely to be until there is some kind of resolution ofthe political impasse between bilateral donors and the government.

A new EU grant mayherald an easing of the

donor aid freeze

In mid-March the EU announced a five-year grant of $200m, a 40% increase onits five-year grant of 1991. Some 15% of the funds are intended for balance-of-payments support and to help strengthen the technical capabilities of thefinance ministry. The suspension of this support has been the most importantelement of the donors’ politically inspired aid freeze, and the EU decision maypave the way for a lessening of the boycott by member states. Some 54% of theEU grant is for private-sector development, and in particular the promotion ofnon-traditional exports, tourism and improvements in water supplies. The restis for education, health and various microprojects.

The bulk of fresh aid isfor the social sector

Other major grants this quarter have been aimed at the social sector, partic-ularly water supplies.

• Japan donated ZK7.4bn ($5.7m) in late February for water supplies and afurther ZK462m for judo equipment. It provided a further ZK8.2bn in lateMarch, aimed at the agricultural sector. Most of the money will apparently beused to buy fertiliser, which Zambia was short of for the whole of the lastplanting season (1st quarter 1997, pages 14-15).

• The German government donated ZK3.7bn to the Zambia Venture CapitalFund in late February, with the intention that the money be targeted at com-panies capable of improving Zambia’s roads. The Venture Capital Fund waslaunched in mid-February 1996 by a consortium of European investment

16 Zambia


bodies as a means of developing small-scale business and the LuSE (2nd quarter1996, page 16).

• The African Development Bank (ADB) announced on February 27 that it willspend ZK40bn on water supply projects in Kitwe. The World Bank and theNorwegian government are expected to give a further ZK40bn to the sameprojects.

• The International Development Agency (IDA) will fund a $31.9m pro-gramme of improvements to water and sanitation infrastructure, primarily inLusaka.

Zambia 17


Zaire

Political structure

Official name République du Zaire

Form of state Unitary republic

Legal system A transitional constitution was approved by the major political factions inSeptember 1993. A new, federal constitution was due to be submitted to a referendumin February 1997, but its future is now uncertain

National legislature The Sovereign National Conference handed over legislative power to an Haut conseilde la république (HCR) in December 1992. This body was combined with the Conseillégislatif to form the HCR-Parlement de transition (HCR-PT) in January 1994

National elections July 1984 (presidential) and September 1987 (legislative); next elections due in May1997 (presidential and legislative), but overtaken by military events

Head of state President, nominated by the Mouvement populaire pour le renouveau (MPR) congressand elected (unopposed) by universal suffrage; Mobutu Sese Seko has held this postsince November 1965; the transitional charter reduced the powers of the president

National government The prime minister, in principle elected by the HCR-PT, and the 46-member Conseilexécutif (cabinet); Mr Mobuto directly appointed General Likulia Bolongo as primeminister and reshuffled the cabinet in April 1997. The rebel Alliance des forcesdémocratiques pour la libération du Congo-Zaire (AFDL) now holds most of thecountry

Main political parties The MPR was the sole legal party, but legislation passed in December 1990 opened thedoor to an evolving multiparty system. More than 450 parties have been registered,including the MPR, Parti démocrate et social-chrétien (PDSC), Parti socialiste africain(PSA), Union des fédéralistes et des républicains indépendants (UFERI) and Union pourla démocratie et le progrès social (UDPS). Those opposed to Mr Mobutu are groupedtogether in the Union sacrée de l’opposition radicale et alliées et société civile(USORAS), which is deeply factionalised

Prime minister General Likulia Bolongo

Deputy prime ministers With defence portfolio General Mahele Lieko BokungoWith foreign affairs portfolio Kamanda wa Kamanda

Key ministers Agriculture Ukelo WokingiBudget Kot AyombEconomy & industry Ndombe SitaEnergy & mines Banza MukalaiFinance Mashagiro AbaForeign trade Luzanga ShamandevuInformation Kin-kiey MulumbaInterior General Ilunga ShamangaJustice Tshibwabwa Ashila PashiLabour& civil service Armand Betu KabambaPlanning & national reconstruction Nsinga Udjuu

Central bank governor Patrice Djamboleka Okitongono (suspended)

18 Zaire


Economic structure

Latest available figures

Economic indicators 1992 1993 1994 1995 1996a

GDP at market pricesb NZ m 1,765.5 36,820.9a 1,835,000.0a 11,779,000.0a n/a

Real GDP growth % –10.5 –14.5 –7.2c –0.6c 1.3c

Consumer price inflation % 4,129 1,893 23,761 542d 659d

Population m 39.9 41.2 42.6 43.9 45.4

Exports fobe $ m 1,288 1,144 1,272 1,451c 1,629c

Imports fobe $ m 885 668 629 870c 921c

Current account $ m –811 –659 –415 –630c –621c

Reserves excl gold $ m 156.7 46.2 120.7 146.6 82.5d

Total external debt $ m 10,964 11,270 12,322 13,137 13,900

External debt-service ratio, paid % 4.7a 1.0a 0.9a 1.5a 2.0

Copper production ’000 tons 147.3 48.3 33.6 33.9 37.4

Cobalt production ’000 tons 6.1 2.2 3.6 4.0 5.1

Diamond production m carats 13.5 15.2 16.3 22.0 21.8

Exchange rate (av)f NZ:$ 0.2 2.5 1,194.1 7,024.0 52,400.0

May 2, 1997 NZ176,300:$1

Origins of gross domestic product 1994 % of total Components of gross domestic product 1992 % of total

Agriculture 53.4 Private consumption 68.8

Industry 15.6 Public consumption 21.7

Manufacturing 5.5 Gross fixed capital formation 7.1

Services 31.2 Change in stocks –0.2

GDP at factor cost 100.0 Exports of goods & services 21.6

Imports of goods & services –19.0

GDP at market prices 100.0

Principal exports 1994 $ m Principal imports 1994 $ m

Diamonds 451 Consumer goods 232

Coffee 247 Capital goods 116

Copper & cobalt (Gécamines) 184 Raw materials 93

Energy products 85

Main destinations of exports 1995g % of total Main origins of imports 1995g % of total

Belgium-Luxembourg 37 Belgium-Luxembourg 15

USA 17 South Africa 11

Italy 10 Hong Kong 8

South Africa 8 USA 7

a EIU estimates. b Nouveau zaire (NZ) from 1993 (see below). c Official estimate. d Actual. e Balance-of-payments basis. f New currency, NZ,introduced in October 1993 at a parity of NZ1:Z3m; for comparison the rate shown refers to the new currency from 1992. g Based on partners’trade returns, subject to a wide margin of error.

Zaire 19


Outlook for 1997-98

The rebels will overthrowMr Mobutu’s regime—

What started in October 1996 as a local rebellion against ethnic discriminationhas turned, in little more than six months, into a full-fledged and highlysuccessful national insurgency to overthrow the regime of the president,Mobutu Sese Seko. The AFDL, whose strength has been swollen by recruits fromevery newly captured town, had swept across about two-thirds of the countryby early May, including the economically crucial regions of Shaba and Kasaï.The rebellion is now headed for Kinshasa and it is hard to see what could stillstop the AFDL, short of a foreign intervention. This is very unlikely; Westerncountries will probably want to evacuate their citizens but an all-out militaryeffort to “protect” Kinshasa would be ill-inspired, and would be more likely tolead towards the kind of territorial division of Zaire which Western powerswant to avoid. The capital, where all the remaining government troops haveregrouped, could put up more of a fight than the other cities, most of which(Kisangani excepted) fell with hardly any exchange of fire. Nevertheless, be-cause Kinshasa is also a bastion of anti-Mobutu popular sentiment, it is as likelyto crumble from within as from without.

—but he may retreat toexile before they reach

Kinshasa

With South African-brokered talks in early May failing to produce a clear-cutpeace deal between Mr Mobutu and the AFDL leader, Laurent Kabila, an immi-nent assault on Kinshasa seems inevitable. Mr Kabila has no reason to settle foranything less than Mr Mobutu’s unconditional resignation. Mr Mobutu,clearly much weakened by cancer, has at least offered to step down, but only toa leader elected in polls organised by a transitional authority. Mr Mobutu hasno democratic ambition and has amply proven over the last three decades (andespecially over the last seven years of supposed political transition) that he is adishonest and unethical manipulator who will feign any policy to retainpower. On the other hand, on a purely physical level he has become a shadowof his former self and it is not impossible that he will decide to leave Zaire forexile with some semblance of dignity before the AFDL reaches Kinshasa. Spec-ulation that his trip to a regional summit in Gabon marks his final departurefrom Zaire may prove to be correct, although his officials insist he will returnto Kinshasa. The other key question is the extent to which the Zairean armywill stand and fight, and whether it will run riot in the capital as it has in manyother towns from which it has retreated. Army-led riots on the scale seen in1991 and 1993 in Kinshasa could easily cause more civilian bloodshed thandirect fighting with the AFDL, and would be exacerbated by a power vacuum ifMr Mobutu left Zaire much before the rebels arrived in the capital.

The ethnic dimensionremains—

The nature of the rebellion is dual, however; in addition to overthrowingMr Mobutu, the AFDL’s purpose is to wipe out once and for all the remainingRwandan Hutu militiamen in Zaire. The rebellion began as an armed responseto the harassment of ethnic baTutsi by the Hutu extremist Interahamwe militia,and it was on these grounds that it won the enthusiastic support of Uganda andRwanda (although these governments would also be delighted by Mr Mobutu’sdeparture). The enduring ethnic dimension of the rebellion may become moreof a liability as time goes by, and as the rebels achieve their ends on the Zaireanpolitical front. Episodic clashes continue south of Kisangani, where the AFDL is

20 Zaire


still at pains to find a solution to the problem of some 80,000 Hutu refugees whoare providing a human shield for extremist militiamen. Yet the AFDL should notbe construed as a purely Tutsi affair. There are only four Tutsi commissioners inMr Kabila’s 11-man executive committee; he himself is a Luba from northernShaba. Frontline soldiers, however, are reported to be mostly baTutsi, who arelikely to harbour strong personal resentment against the baHutu and may beresponsible for alleged abuses of the refugees.

—and the democracy ofthe AFDL has limits

Everywhere but in Shaba, Mr Kabila’s men have organised elections for localadministrators shortly after “liberating” new areas. Typically, they assemblelocal clergy, business leaders and intellectuals who then elect a provisionalgovernor and other local officials from their ranks. Members of Mr Mobutu’sMPR have been excluded from this process. In most places, essential stateservices have resumed; schools appear to be functioning and civil servants havereturned to work (although still without pay). In Shaba, however, the AFDLdirectly appointed one of Mr Kabila’s relatives as governor, raising concern thatthe nepotism rife in Zaire will continue (Mr Kabila has also appointed his sonas military commander in Kisangani). Nevertheless, the major mining concernsare back at work and Mr Kabila has made new deals with foreign investors. Hiscontrol over Zaire’s mineral wealth should in theory soon allow him to pay hiscivil servants, which would bolster his legitimacy beyond short-term goodwill.It remains to be seen whether Mr Kabila will show himself a democrat on thenational level, or whether he will avoid holding the elections which manyZaireans are demanding.

Uganda will exert stronginfluence—

Although it is hard to anticipate in what direction a Kabila regime might carryZaire, Uganda’s influence on the rebellion should not be discounted. Ugandahas reformed its social foundations more than most African states, encouragingdemocracy at the village level, but has not adopted a fully fledged democraticsystem at the urban level. Mr Kabila may benefit from widespread grass-rootssupport at first, but he may not liberalise his regime along the lines desired byWestern donors.

—while relations with theexisting opposition will

be vital

In the end a key test of Mr Kabila’s political legitimacy will be whether he canbring Zaire’s existing political opposition on board. Although major oppositionfigures in Kinshasa, including Etienne Tshisekedi of the UDPS, have in effectcollaborated with Mr Mobutu at every stage of the transition (if only by theirinfighting and foot-dragging), they remain a repository of popular democraticaspirations and benefit from substantial support. Much of this support may wellshift to the AFDL, which is widely seen as a “cleaner” alternative to Zaire’s oldpolitical class, but Mr Tshisekedi, at least, will retain strong backing in his nativeKasaï. If Mr Kabila alienates those politicians with firm regional powerbases, hewill probably face a resurgence of secessionism, particularly in mineral-richKasaï and Shaba. Mr Kabila’s conciliatory tone towards Mr Tshisekedi, coupledwith the force used against the gendarmes katangais in Shaba, indicate that theAFDL is not prepared to tolerate secessionist sentiment in either region.

Zaire 21


War stretches from theRed Sea to the Atlantic

Ocean

The Zairean conflict must also be seen within its regional context, as one ele-ment—albeit the most dynamic—of a de facto war that spreads from Sudan onthe Red Sea to Angola on the Atlantic Ocean. The Khartoum government hasenjoyed support from Mr Mobutu in its war against the Christian south, whiledrawing the hostility of the Ugandan president, Yoweri Museveni, himself thetarget of Ugandan rebels based in southern Sudan. Uganda was behind the Tutsitakeover in Rwanda in 1994 and has remained the “godfather” of the Kigaliregime since then. Both Rwanda and Uganda have encouraged and sponsoredthe Kabila rebellion against Mr Mobutu, who supported the former Rwandanregime until 1994 and has since allowed Hutu militiamen on his territory.Finally, after years of support from Kinshasa for the former Angolan rebel move-ment, UNITA, Luanda’s ruling MPLA has been only too happy to help therebellion against Mr Mobutu, by letting Mr Kabila use his territory and possiblysending troops. For its part, UNITA has sent troops to help the Zairean army.

Economic recovery hangsin the balance—

Real income per head in Zaire has deteriorated almost every year since themid-1970s, with only a brief respite in the 1980s, and the country has neverregained its relative prosperity of the late 1950s. In this long-term perspective,Zaire’s economic crisis of the 1990s appears little more than an acceleration ofan already existing trend. What is now at stake is the economic viability ofZaire as a political entity. If the predatory nature of the Mobutu regime wasbehind the decline, then an economic resurrection is possible, provided thenext regime does not fall prey to the same vices. This is, of course, a veryuncertain assumption. Only a thorough democratisation of the political sys-tem, from the village level upwards, will provide the foundations for a health-ier economy and stop Zaire’s natural resources from being an invitation toplunder rather than a developmental asset.

—but the AFDL’smanagement record is not

bad so far

Gross public investment represented no more than 3.3% of GDP in 1996, while2.2% of GDP was made up of private investment, the highest level since 1992.This is encouraging, as it bears witness to the return of foreign investors ontothe mining scene. Such investment is likely to increase in the forecast period,and gross public investment could also rise significantly if the AFDL sticks to itscurrent non-disruptive mining policy. So far, the AFDL is proving much supe-rior to the Mobutu administration in terms of economic management.

There has been no major disruption of mining production, setting aside acts oflooting by the Zairean army. Gold production in Kivu and Haut-Zaire was alsoaffected for some time by the fighting in late 1996, but most companies havesince resumed their activities, sometimes at the urging of the AFDL. In Shabaand Kasaï virtually no disruption was reported, with companies continuingbusiness as usual as the rebels went by. As a result, the forecast by the state-owned mining giant, Gécamines, that it would produce 6,000 tons of cobalt in1997 (roughly the same level as in 1996) remains realistic, albeit optimistic.Coffee, another major foreign-exchange earner, may also benefit. Until now,up to 6,000 tons of coffee were believed to be smuggled each year to Ugandaand Rwanda. This trade may now become official, bringing in state revenue foran AFDL-sponsored administration.

-16

-12

-8

-4

0

4

8

1991 92 93 94(a) 95(a) 96(a)

Zaire

Africa

Zaire: gross domestic product % real change, year on year

(a) Official estimates.Sources: EIU; IMF, World Economic Outlook.

22 Zaire


Review

The political scene

The AFDL sweeps thecountry—

In February the fighting between government forces and the rebel Alliance desforces démocratiques pour la libération du Congo-Zaïre (AFDL; 1st quarter 1997,pages 23-30) spread to the province of Shaba for the first time with the rebels’capture of Kalemie, a port city on Lake Tanganyika, extending the border areaunder rebel control to about 600 miles. On February 7 the rebels announced thecapture of Bafwasende, about 150 miles east of Kisangani, further extending the“liberated” strip to about 800 miles. By February 9 it became obvious that themuch-vaunted government counter-offensive launched in January had all butfizzled out. As the rebels approached Kisangani the city was rocked by armyviolence and demonstrations by angry residents. It was estimated that the AFDLhad grown to about 20,000 troops, swollen with recruits from captured areas.On February 17 and 18 the army used air strikes piloted by mercenaries againstcivilians in Bukavu, to retaliate against the rebellion and break its popularsupport in core areas. The government also began arming Hutu guerrillas livingamong the Hutu refugees in the Tingi Tingi camp in central Zaire, drawing UNcondemnation; Zairean officials denied involvement. The town of Kindu, duewest of Goma, was captured in late February.

—taking Kisangani— On March 15 Kisangani, Zaire’s third largest city with an estimated 400,000inhabitants, finally fell into rebel hands after several days of resistance by some300 Serb mercenaries (who had earlier terrorised the city’s population) and adetachment of the feared presidential guard, the Division spéciale présiden-tielle (DSP). As usual, government troops looted the city as they withdrew; itappears that the mercenaries were kept just as busy trying to prevent govern-ment troops from fleeing as they were fighting the incoming guerrillas.Kisangani was quiet after the takeover, even after the rebels lifted the existingcurfew. AFDL soldiers patrolled the town and enforced a ban on looting, andstolen property was apparently restored to its owners. A general amnesty wasdeclared by radio for government soldiers, who were invited to join the rebel-lion. Some 750 government soldiers were reported to have surrendered in the48 hours following the capture of the city.

—Mbuji-Mayi— On April 5 the AFDL captured Mbuji-Mayi, the capital of Kasaï Oriental andhome town of the main opposition leader in Kinshasa, Mr Tshisekedi. Before thearrival of the rebels, the town’s inhabitants had averted the usual looting byZairean troops by feeding them, paying their wages and chartering four aircraftto send some 600 of them back to Kinshasa. Having identified Mr Tshisekediwith the Mobutu regime in earlier weeks, Mr Kabila showed himself much moreconciliatory in his first public speech in the diamond-trading city. The two Kasaïprovinces show substantial loyalty to Mr Tshisekedi and have essentially runthemselves on an autonomous basis since around 1993; Mr Kabila’s olivebranch was no doubt aimed at defusing potential secessionism.

Zaire 23


—and Lubumbashi— After capturing Kisangani the rebels announced that their next big target wasZaire’s second biggest city, Lubumbashi, hundreds of miles to the south inShaba province. In their fight for Lubumbashi they were helped by thegendarmes katangais, former secessionist police officers from Shaba (formerlyknown as Katanga) who had been exiled in Angola. (Angolan governmenttroops may also have lent a hand.) On March 28 the rebels seized Kasenga,about 135 miles north-east of Lubumbashi. Ever the opportunist, NguzKarl-i-Bond, the Shaban politician who cooperated with Mr Mobutu duringmost of the transition period, called on his followers in Shaba to support therebels. On April 7, with the rebels a mere 20 miles away from Lubumbashi,government troops surrendered and announced their desire to join the rebel-lion. Mr Kabila’s troops walked in with hardly a fight on April 9; the onlyresistance was at the airport, guarded by a DSP contingent which eventuallyescaped by air after threatening to shell the city unless it was allowed to leave.In several parts of Shaba, however, the gendarmes katangais appeared to havebeen the first to capture villages and towns, revealing friction between them-selves and the AFDL. For example, the town of Kasumbalesa, on the borderwith Zambia, was captured by gendarmes claiming to be Mr Kabila’s men. Whenthe real AFDL troops arrived, the gendarmes refused to be disarmed and athree-hour gunfight ensued during which at least 20 gendarmes were killed.

—before threateningKinshasa itself

Following the capture of Kisangani, a consensus formed that the AFDL wascapable of walking into Kinshasa in a matter of a few months. Mr Kabila himselfpromised the capital would fall by June. Political tension in Kinshasa rose al-most immediately, as if local politicians suddenly realised the need for posturingin anticipation of new leaders. As of early May the AFDL appeared to be follow-ing a double path to Kinshasa. On one side they claimed to have captured Kikwitin Bandundu province, the last substantial town before Kinshasa to the east,although the government denied the claim. Troops, either AFDL or Angolan,were also reported in Bas-Zaïre province, near the ocean towns of Matadi andBoma. The Angolan government denied any involvement, although it has notdisputed reports of a major build-up of troops near the Zairean border, withinthe Angolan enclave of Cabinda. Even if Angolan forces were not directly in-volved in the Bas-Zaïre operations, there is suspicion that the AFDL troops mayhave crossed Angolan territory to reach the region. At any rate, this positionedthe rebels east and west of Kinshasa, upstream and downstream on the Zaireriver, in control of access to the ocean and able to choke off the capital’sessential supplies. In addition, there were reports in late April that rebels wereadvancing into Mr Mobutu’s own province of Equateur, and that the city ofBoende, about 150 miles west of Mbandaka, had been captured.

Mr Kengo is dismissed asprime minister—

Upset by the capture of Kisangani, a majority of the members of Zaire’s trans-itional parliament, the Haut conseil de la république-Parlement de transition(HCR-PT), voted on March 18 to dismiss the prime minister, Kengo wa Dondo,and his government while he was in Nairobi for a regional peace meeting.Mr Kengo was dismissed by a vote of 464 to nine, with ten abstentions, al-though the decision may not have been legal for lack of a quorum. The votewas essentially a move by deputies from Mr Mobutu’s MPR to distance them-selves from the government’s military losses by finding a scapegoat, and to take

24 Zaire


things more into their own hands as their leader’s departure looked increas-ingly likely. On March 24 Mr Mobutu approved the HCR-PT’s decision andaccepted Mr Kengo’s “resignation”. The following day an official spokesmanannounced that the president, in what was widely perceived as a ploy to buytime, was willing to negotiate an end to the fighting and share power with therebels. He stated that Mr Mobutu had formed a negotiating team to representhim with the rebels, and had asked the parliament to elect a new prime min-ister. Mr Kengo left for Switzerland in April, ostensibly for a health check-up,amid accusations by other members of the Mobutu government that he hadstolen revenue from the war taxes imposed in November 1996 (1st quarter1997, page 31). Mr Kengo denied the accusations and pledged to return to Zaireto clear his name.

—and Mr Tshisekedialmost takes his place—

In accordance with the transitional constitution, opposition members of theHCR-PT chose Mr Kengo’s replacement; predictably, they selectedMr Tshisekedi, his fourth appointment to head a Zairean government.Mr Tshisekedi promptly offered the AFDL six out of 24 ministerial posts in hisnew government. The rebels rejected the offer outright, calling Mr Tshisekediand his cabinet part of the “Mobutu administration” which they said mustend. At the same time, by proposing such an alliance and refusing to appointany of Mr Mobutu’s allies to the government, Mr Tshisekedi was sure to pro-voke the ire of the president. Against the background of first Mbuji-Mayi andthen Lubumbashi falling to the AFDL, Mr Mobutu’s allies in parliament tried tomeet on April 8 to revoke the appointment of Mr Tshisekedi, but their access tothe parliament building was blocked by pro-Tshisekedi demonstrators.Mr Tshisekedi then invited his supporters to march with him to the govern-ment headquarters on April 9, when he was due to take office, but their waywas blocked by troops, who attacked the demonstrators. Mr Tshisekedi nevermade it to his office and was briefly detained by security forces.

—before Mr Mobutu setsup a military government

Mr Mobutu officially dismissed Mr Tshisekedi and his government on April 10(although this exceeded his powers under the transitional constitution), ap-pointed a military government headed by his former defence minister, GeneralLikulia Bolongo, and declared a state of emergency. Ironically, however, hisdismissal has actually strengthened Mr Tshisekedi’s hand. By inviting in theAFDL and snubbing Mr Mobutu’s supporters, Mr Tshisekedi was almost sure tobe sacked immediately, thus reinforcing his opposition credentials, increasinghis popular legitimacy and making it harder for Mr Kabila to bypass him in anyfuture settlement.

The Union sacrée flexes itsmuscles—

On April 10 Mr Kabila set Mr Mobutu an ultimatum, to resign within threedays or face the continuation of the war and the eventual capture of Kinshasa.Perhaps in a sign of the extent to which his illness has divorced the presidentfrom the political reality of his country, Mr Mobutu said he would meet withMr Kabila—as with any other citizen—if he was asked politely enough. OnApril 14 and 15, after the ultimatum had come and gone and the rebels hadresumed their progress towards Kinshasa, the opposition Union sacrée alliancebrought Kinshasa to a complete standstill in one of Zaire’s most successfulgeneral strikes for a long time, despite the state of emergency. The strike was a

Zaire 25


dual message, telling Mr Mobutu that his rule was considered over while re-minding Mr Kabila that the main party in the Union sacrée, Mr Tshisekedi’sUnion pour la démocratie et le progrès social (UDPS), is powerful in Kinshasaand must be reckoned with.

—and may clash with theAFDL

In early March the AFDL’s “justice minister”, Mwenze Kongolo, announcedthat once it had won the war, the movement intended to set up a one-yeartransitional government leading to general elections. Mr Kabila announcedthat he would form a provisional government excluding any political figurewho had shared power with Mr Mobutu. Strictly speaking this would includeMr Tshisekedi; if this is what Mr Kabila meant, the stance is likely to create aclash with UDPS supporters in Kinshasa.

The Hutu refugeenightmare continues—

In addition to the overthrow of the Mobutu regime, the AFDL wants first andforemost to get rid of concentrations of potentially threatening baHutu inZaire, and to hunt down the extremist Hutu militiamen and former Rwandangovernment forces who have used civilian refugees as a human shield. Thisdimension of the war has complicated the fate of the remaining Rwandanrefugees in Zaire, and violent abuses (including wholesale killings) have un-doubtedly been carried out by the AFDL forces, tarnishing the movement’sreputation outside Zaire. Up to 300,000 Hutu refugees who failed to return toRwanda with the bulk of their compatriots in November 1996 continued towander aimlessly from one makeshift camp to another in Zaire. At first aheadof the frontline, they have been in rebel-controlled territory since early April.Sometimes the rebels have stopped fighting to allow the Office of the UN HighCommissioner for Refugees (UNHCR) time to separate out the civilian refugeesfrom the Hutu militiamen and provide basic assistance to the former; on otheroccasions the AFDL has been widely accused of blanket persecution of civiliansand militiamen alike.

—exemplified by events atTingi Tingi camp—

Events at Tingi Tingi refugee camp in central Zaire powerfully illustrated theplight of the refugees. On February 9 Mr Kabila temporarily halted his troops’advance towards the camp, holding some 125,000 people. On February 15 hegave the UN a three-day ultimatum to separate the militiamen from the bonafide refugees, and to prevent the alleged delivery of arms to the camp. Mostrelief workers were evacuated to Kisangani. In early March AFDL troops finallyattacked the camp after the UN confirmed that the Zairean government wasrunning daily deliveries of arms and ammunition to former Hutu guerrillas inthe camp, driving the refugees north towards Kisangani. However, followingthe AFDL capture of Kisangani the refugees were forced to settle several milesto the south at Kasese and Ubundu. The UN and other relief agencies deliveredfood supplies to the refugees (without differentiating them from the militia-men) in these new makeshift camps, but the AFDL denied its request in earlyApril to use Kisangani airport to repatriate the weakest to Rwanda.

—and elsewhere The rebels’ attitude was symptomatic of a rapid deterioration in relations be-tween the local population and the refugees. On April 20 residents of thevillage of Lula, south of Kisangani, reported that Hutu militiamen had attackedtheir village and killed six people. As a result, armed with machetes and knives

26 Zaire


they in turn attacked aid workers and refugees the following day, looting atrain loaded with 120 tons of food and stealing a further 72 tons of suppliesfrom a UN World Food Programme (WFP) warehouse. The UN accused theAFDL of encouraging these attacks and of deliberately preventing relief oper-ations. Following several days of skirmishes between locals and refugees, thelatter (about 80,000 people) left their camp at Kasese and apparently headedback south-east towards Ubundu, although aerial searches were unable to lo-cate them. Journalists who visited the area on April 24 found the Kasese campsempty. This latest exodus has complicated repatriation efforts, as Ubundu isequipped with only a basic airstrip, which cannot accommodate large carriers.Although many of the scattered refugees have since been retraced, repatriationefforts have been plagued by tragedy; in early May more than 100 people werecrushed to death on an overcrowded train carrying them out of the forest foran airlift to Rwanda.

A weakened Mr Mobutushuttles between Zaire

and France

On February 7 Mr Mobutu returned to Zaire from his latest spell in a Frenchhospital, only to head back to France again on February 21 for yet anotherround of treatment at a hospital in Monaco. Following the capture of Kisanganiin mid-March, rumours spread in Kinshasa that Mr Mobutu was dead. Hisreturn to Zaire on March 21 did not immediately allay these rumours; securityguards ordered everyone, including government ministers, out of the airport,so that no one saw him leave the aircraft. In sharp contrast to his orchestratedreturn of December 1996 (1st quarter 1997, page 28), he was whisked in a blacklimousine with tinted windows to the Tshatshi army camp, his current homein Kinshasa. He finally made a public appearance two days later, followed by aproposal for the creation of a National Council to “join the vital forces of thenation in a national consensus”, a call which went unheeded by the rest of thepolitical class. He was clearly weak and had lost weight; some commentatorshave quoted his doctors as saying he may have up to one year to live.

The USA wavers— The USA, which had kept relative silence since the beginning of the hostilities,appeared to alter its diplomatic course in early February for fear that the con-flict would extend to the subregion as a whole. On February 5 the State Depart-ment called the situation in Zaire “very troubling” and explicitly warnedZaire’s neighbours, Uganda, Rwanda and Burundi, to stay out of the fighting.The newly appointed secretary of state, Madeleine Albright, met Uganda’spresident, Yoweri Museveni, in Washington to convey the same message.Given the progress of the rebellion and the foreign involvement, the USAseems to have begun to fear for the territorial integrity of Zaire. At one stage, italso appears to have believed in the possibility of an electoral transition underMr Mobutu; however, such a belief now appears to have been shelved, andperhaps entirely swept away, by the speed of change dictated by the rebellion.

—and South Africa getsinvolved in the

diplomacy—

In late February the USA backed South Africa’s attempts to bring Mr Mobutuand Mr Kabila to the negotiating table. Mr Kabila went to South Africa, wherehe saw the president, Nelson Mandela, and may also have met senior USofficials. Hopes that he would meet Mr Mobutu face to face were dashed,however, when the Zairean president disowned his own negotiators in SouthAfrica. Washington finally seemed to grasp the reality of the situation on the

Zaire 27


ground on April 9, after the fall of Lubumbashi and the appointment of amilitary government; a State Department spokesman declared to the press thatMr Mobutu’s system of power and patronage was about to become a “creatureof history”, although he stopped short of calling on the president to resign. Atthe end of March the USA sent about 1,800 troops to Brazzaville, across theZaire river in neighbouring Congo, ready to evacuate US citizens from Zaire ifneed be. The aircraft carrier Nassau, with about 1,000 troops, has also beenstationed about 200 miles off the Atlantic coast of Africa, ready to providelogistical support to any US intervention.

—while Belgium andFrance take a back seat

As the USA became one of the central diplomatic actors in the Zaire crisis, thetwo other big traditional foreign players in Zaire, namely France and Belgium,were essentially reduced to waiting in the wings and taking care of their citi-zens. Having stuck to its Mobutu card for too long, France has found itselflargely sidelined both in terms of influence on the ground (after its proposal ofhumanitarian intervention in 1996 came to nothing; 1st quarter 1997, page 24)and in diplomatic terms, although by early May Paris was at pains to give theimpression of being fully involved in international peace initiatives. France hastroops in Brazzaville, while Belgium sent troops to Gabon in March, ready tointervene should it be necessary to rescue foreign citizens in Zaire.

An attempt at mediationis held in Togo—

Representatives of Mr Mobutu and of the AFDL met for the first time in Lomé,Togo, on March 26, during a special summit of the Organisation of AfricanUnity (OAU). There were 15 heads of state present, but those of Rwanda andUganda were not. The AFDL delegates rejected earlier pleas from the Zaireangovernment to join the administration in Kinshasa, saying they would neverenter such a power-sharing arrangement. However, the two sides agreed on theprinciple of a ceasefire and said they would open negotiations in South Africasoon afterwards, although the AFDL refused to accept a ceasefire as a prelimi-nary condition for the talks.

—while South Africa andthe USA step up the pace—

After some confusion in February, when the Kinshasa authorities denied anannouncement by Mr Mandela that Zairean officials would soon meet in SouthAfrica with Mr Kabila, and even claimed that its own negotiators in South Africadid not represent their government, South Africa progressively emerged as themost credible mediator. South Africa’s deputy president, Thabo Mbeki, went toZaire and met Mr Mobutu on March 23. It seemed that both the rebels andMr Mobutu agreed on face to face talks on a ceasefire, to be held in South Africaalong the lines of an earlier peace plan drafted by the UN special envoy to theregion, Mohammed Sahnoun, and approved by the UN Security Council onFebruary 18. The five points of the so-called Sahnoun Plan were: immediatecessation of hostilities; withdrawal of all external forces; reaffirmation of respectfor the national sovereignty of Zaire and other Great Lakes states; protection andsecurity for all refugees; and rapid and peaceful settlement of the crisis throughdialogue, elections and an international conference on peace and developmentin the Great Lakes. On April 5, as Mbuji-Mayi was falling to rebel hands, a firstround of negotiations began in Pretoria. The Mobutu regime was represented bya seven-member committee headed by Mr Mobutu’s special adviser on securityissues, Honoré Ngbanda Nzambo; it also included the foreign minister and

28 Zaire


several members representing the “moderate” opposition, the judicial authori-ties and the army.

—hoping to avert a bloodyhandover of power

On April 26, with the rebels apparently no more than 250 miles from Kinshasa,Washington undertook an 11th-hour diplomatic initiative aimed at preventingan outright rebel military victory. Worried that a sweep of Kinshasa wouldreduce the chances of future elections and end up substituting one dictator foranother (as well as increasing the risk of serious bloodshed in the capital), theUSA announced that it was sending its ambassador to the UN, Bill Richardson,to Zaire to try to restart the stalled attempts at negotiation between Mr Mobutuand Mr Kabila. South Africa scored a diplomatic coup on May 4 whenMr Mobutu and Mr Kabila met face to face for the first time, on board a SouthAfrican warship off the Atlantic coast of Africa. The meeting provided noimmediate breakthrough, with Mr Kabila taking the uncompromising line thatMr Mobutu must cede power immediately to the AFDL. Mr Mobutu did, how-ever, appear for the first time to have agreed that he will hand over power,although he insisted it would only be to a president elected in polls organisedby an unspecified transitional authority.

Has Mr Mobutu left Zairefor good?

On May 7 Mr Mobutu left Kinshasa once more, for Gabon, to attend a crisissummit of francophone African leaders. His departure fuelled heavy speculationin Zaire and elsewhere that he might not return, but slip into exile (possibly inFrance) before the AFDL reached the capital. Such rumours have done therounds before, and have been proved wrong, but Mr Mobutu’s extreme frailty atthis point may tip the balance and convince him to pull out while he can. Onthe other hand, he is a tenacious, stubborn and proud leader, and he may feel itis beneath his dignity to slink away under rebel pressure, even though he canhave no realistic hope of hanging on to power for much longer.

The economy

The rebel zones see arebirth of economic

activity—

On the economic front, Mr Kabila has been impressive so far in his manage-ment of the state apparatus and the economy in the areas he controls. InGoma, where the rebellion started, roads have been mended, electricity re-stored and import and export duties reduced, leading to a resumption of cross-border trade. Border posts with Uganda and Rwanda are reported to be busywith commercial traffic, and customs officials have been arrested for solicitingbribes, suggesting that Mr Kabila may be serious about fighting corruption.Banks have also reopened in rebel-held towns, appearing to derive their re-serves from dollar deposits by the rebel administration. Foreign-owned busi-nesses which have returned include the Dutch-owned Heineken brewery inBukavu, a coffee and lumber mill in Beni, the sugar refinery at Uvira and aGoma-based Belgian shipping company.

—and the AFDL promisesimportant changes

The AFDL’s “finance minister”, Mwana Mawampanga, who holds a doctoratein economics from Penn State University in the USA, announced in March thathe intended to cut the civil service by 10%, eliminating ghost jobs and raising(indeed, paying) salaries for remaining civil servants, who now rarely receivetheir wages. He also vowed to fight inflation and restore confidence in the

Zaire 29


monetary and banking systems by stopping the printing of banknotes. Most ofthese intentions remain only promises so far; local government is still mostlyrun on volunteer labour, and the soldiers are not paid either. In an attempt tochange the pervasive mentality of corruption, the AFDL is holding ideologicalseminars for people who want to join their movement, consisting of classesanalysing the rebellion, the meaning of civil liberties and so on.

Foreign investors dobusiness with Mr Kabila—

The AFDL has wasted no time drumming up foreign investment in the areas itcontrols, and foreign investors seem so far to be just as eager to oblige. Ingeneral, the rebels have declared that they intend to honour contracts betweenZaire and mining companies, while reserving the right to renegotiate details.On April 16 it was announced in Lubumbashi that the AFDL had agreed a$885m contract with the US-based American Mineral Fields to rehabilitate zincmines in Kipushi and copper and cobalt mines in Kolwezi, both in Shaba. Thisis not new investment as such, as American Mineral Fields had signed a similarcontract with the Kinshasa government back in April 1996 (4th quarter 1996,page 26); it appears that the US company is simply acknowledging the changein public authority and securing a commitment from the new leaders. It isunclear, however, whether South Africa’s Anglo American Corporation, whichwas a partner in the 1996 deal, is also party to the new contract. It also seemsthat the Kolwezi project is an addition to the previous contract.

The president of the Canadian-based Consolidated Eurocan Ventures, whichsigned a $350m deal with the Kinshasa government in December to developcopper mining at Tenke-Fungurume (1st quarter 1997, page 32), met Mr Kabilain early April in Shaba and received assurances that the contract would berespected, although there might be some review of the arrangements. Actualproduction at the mine is not expected to start until 2000, when annual outputof 100,000 tons of copper and 8,000 tons of cobalt—much more than currentnational production—is expected. Investors in the Tenke project are hoping forannual production of 400,000 tons of copper by 2010.

—although some contractsare lost

Some contracts appear to have changed hands, however. Mr Kabila is reportedto have agreed a deal with a Belgian-South African mining company to reha-bilitate the Kilo-Moto gold mine in Kivu, apparently contradicting an earliergovernment deal at Kilo-Moto with the US-based Barrick Gold Corporation(4th quarter 1996, page 26). Barrick and another foreign investor, Banro, ig-nored an ultimatum by Mr Kabila in December to contact him within a weekregarding a resumption of mining, otherwise he would call on other investorsto mine them. In early May Mr Mawampanga said that the South Africandiamond giant, De Beers, had lost its exclusive purchasing contract with theSociété Minière de Bakwanga (MIBA), in which it also has a minor stakethrough its 20% interest in the Belgian company, Sibeka. De Beers, whichapproached Mr Kabila in April to seek assurances on the protection of its assetsand employees, claimed that no final decision on the contract had beenreached and that the situation remained “extremely fluid”.

An old Mobutu allychanges sides

The head of MIBA, Mukamba Kadiata Nzemba, appointed by the president,Mobutu Sese Seko, publicly changed sides in March as the AFDL began to marchthrough Kasaï. Inspired by the Luba adage: “He who marries my mother

30 Zaire


becomes my father,” he announced that he would accept the authority ofMr Kabila when the latter arrived in Mbuji-Mayi. Mr Mukamba was clearly in-tent on saving his company, which had an output of 6.5m carats in 1996, a 14%improvement compared with production in 1995. Despite this welcoming atti-tude, there were reports that Mr Kabila forced MIBA’s managers to hand over allthe diamonds on hand. Kasaï’s diamond revenue should represent an annualincome of $300m-400m for the AFDL, excluding smuggled production. Apartfrom this, the rebels seem to have respected property and persons, at mostoccasionally requisitioning some supplies. Officials at the Tenke Fungurumeproject said that the mine lost just three hours’ work, with no looting or threat-ening behaviour by the AFDL troops.

Inflation jumps despite aboycott of new banknotes

According to IMF data, inflation averaged 659% in 1996, up from 542% in1995. As the war in the east scotched any government effort to control spend-ing, prices rose by 17.8% month on month in November and 30% in December1996. This slippage was further reinforced by the introduction of newbanknotes in January 1997 in denominations of NZ100,000, NZ500,000 andNZ1m, rapidly nicknamed “prostates” in reference to Mr Mobutu’s cancer.Consumer prices in most of Zaire’s major towns rose by 30% within days of theintroduction of the new denominations, in spite of a fairly widespread boycottof the new notes. Workers at the state copper and cobalt giant, Gécamines,went on strike at the news that they would be paid with the new notes, and thepresident of the Association Nationale des Entreprises du Zaïre (ANEZA),Bemba Salaona, a friend of the president, publicly invited members of thebusiness organisation not to use them. The rebel radio station, the Voix duPeuple, called on Zaireans in AFDL-held areas to accept notes of NZ1,000,NZ5,000, NZ10,000, NZ20,000 and NZ50,000.

Zaire 31


Quarterly indicators and trade data

Zambia: quarterly indicators of economic activity

1994 1995 1996 1997

4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr

Production: mining Qtrly totals

Copper in concentrates ’000 tons 95.2 81.8 89.9 85.6 86.2 86.0 88.3 93.6 96.2 56.2a

Prices Monthly av

Consumer prices: 1990=100 2,467 2,807 2,913 3,099 3,594 4,007 4,343 4,566 4,847 5,401b

change year on year % n/a 35.3 27.5 30.5 45.7 42.7 49.1 47.3 34.9 n/a

Copper: LME, $ cents/lb 126.0 133.0 130.9 136.5 131.7 116.6 112.4 89.8 97.4 109.7

Money End-Qtr

M1, seasonally adj: ZK bn 128.6 153.6 196.7 210.0 207.8 226.3 224.7c n/a n/a n/a

change year on year % 44.8 36.4 63.8 148.8 61.6 47.3 n/a n/a n/a n/a

Foreign traded Annual totals

Exports fob $ m 758 ( 1,129 ) ( n/a ) n/a

Imports fob “ 455 ( 678 ) ( n/a ) n/a

Exchange reserves End-Qtr

Bank of Zambia:

foreign exchange $ m 237.8e n/a n/a n/a n/a n/a n/a n/a n/a n/a

Commercial banks assets “ 84.3 113.6 110.9 107.2 116.5 140.6 207.2 146.8 148.7 n/a

Exchange rate

Official rate ZK:$ 680.3 793.7 892.9 934.6 1,000.0 1,219.5 1,234.6 1,265.8 1,282.1 1,315.8f

Note. Annual figures of most of the series shown above will be found in the Country Profile.a Total for January-February. b Average for January-February. c End-April. d DOTS estimate. e End-May, 1994. f End-February.

Sources: World Bureau of Metal Statistics, World Metal Statistics; IMF, International Financial Statistics.



Zaire: quarterly indicators of economic activity

1994 1995 1996 1997

4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr

Mining: production Annual totals

Copper in concentrates ’000 tons 30.0 ( 30.0 ) ( 30.0 ) n/a

Zinc “ 0.6 ( 0.8 ) ( 1.2 ) n/a

Agriculture:

production Annual totals

Coffee ’000 tons 80a ( 80a ) ( n/a ) n/a

Prices Monthly av

Consumer prices, Kinshasa: 1990=0.01 119,833 161,800 207,130 297,532 553,198 988,974 1,547,596 2,405,814 4,312,738 6,569,472b

change year on year % 19,043 3,682 1,664 549 362 511 647 709 680 n/a

Wholesale prices:

coffee: USA USA cents/lb 152.0 138.3 139.0 122.9 107.2 94.7 90.0 77.8 68.9 75.3

copper: LME, $ “ 126.0 133.0 130.9 136.5 131.7 116.6 112.4 89.8 97.4 109.7

Money End-Qtr

M1, seasonally adj: new Z bn 356 424 688 1,217 1,809 2,590 3,825c n/a n/a n/a

change year on year % 5,668 1,919 856 524 408 511 n/a n/a n/a n/a

Foreign trade Qtrly totals

Exports fob $ m 144 132 105 90 111 158 153 124d n/a n/a

Imports cif “ 135 105 113 73 106 99 121 102 n/a n/a

Exchange holdings End-Qtr

Bank of Zaire:

golde $ m 8.1 8.0 8.1 8.1 8.1 6.6 6.4 6.3f n/a n/a

foreign exchange “ 120.7 143.8 148.0 145.1 146.6 55.8 63.3 71.2 82.5 n/a

Deposit money banks:

assets ” 81.2 84.2 80.2 81.8 69.2 72.8 71.4 78.1f n/a n/a

Exchange rate

Market rate new Z:$ 3,250 3,600 5,550 9,200 14,831 27,404 38,962 66,610 112,652g 171,450g

Note. Annual figures of most of the series shown above will be found in the Country Profile.a Estimate. b Average for January-February. c End-May. d Total for July and September. e End-quarter holdings at quarter’s average of Londondaily price less 25%. f End-July. g Source: FT.

Sources: World Bureau of Metal Statistics, World Metal Statistics; FAO, Quarterly Bulletin of Statistics; IMF, International Financial Statistics.

Quarterly indicators and trade data 33


Zambia: foreign trade(ZK m)

Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-DecImports cif 1985 1986 1987 1988 1989 1990 1991

Cereals 43 75 13 130 171 176 n/aOther food, drink & tobacco 38 54 219 93 143 430 n/aCrude materials 32 71 123 100 155 760 n/aPetroleum & products 459 111 806 828 2,219 5,209 n/aChemicals 317 411 1,171 1,180 1,274 4,335 n/aRubber manufactures 53 118 198 156 181 579 n/aPaper & mnfrs 33 54 90 124 180 493 n/aTextile manufactures 59 107 194 163 263 1,212 n/aIron & steel 76 152 217 263 451 1,303 n/aOther metals & mnfrs 93 245 263 266 450 1,403 n/aMachinery 517 1,276 1,817 1,838 2,467 7,999 n/aRoad vehicles 276 548 1,066 1,150 1,443 4,501 n/aOther transport 21 57 55 257 548 3,724 n/aScientific instruments etc 24 74 109 120 164 598 n/aTotal incl others 2,133 4,448 6,627 6,898 12,601 36,554 51,624

Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-DecDomestic exports fob 1985 1986 1987 1988 1989 1990 1991

Tobacco 2 4 17 29 24 125 256Cobalt 24 385 466 598 1,101 2,544 7,289Copper 1,286 4,429 6,845 8,340 16,353 33,734 52,539Lead 7 16 20 19 9 1 5Zinc 53 99 131 162 302 438 429Total incl others 1,502 5,348 8,032 9,720 18,336 39,037 67,583Re-exports 6 19 27 66 98 107 85Source: National sources.



Zambia: direction of trade($ m)

Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec 1988 1989 1990 1991 1992 1993 1994 1995a

Imports fobSouth Africa 158 271 206 165 224 303 157 193 UK 19 259 197 149 98 75 73 81 Zimbabwe 35 75 57 44 55 47 52 64 Japan 84 107 81 76 38 30 28 60 USA 212 68 124 57 72 20 11 49 Germanyb 53 187 142 34 31 33 21 23 India 35 30 23 35 24 9 19 23 France 31 16 12 7 15 10 8 21 China 5 4 3 1 4 4 3 20 Total incl others 880 1,275 1,218 811 837 702 455 678

Exports fobJapan 194 222 168 204 152 105 105 201 Saudi Arabia 48 38 29 29 83 69 83 146 Thailand 28 n/a 37 34 39 54 72 133 India 56 44 33 122 21 45 56 69 Singapore n/a n/a 10 45 86 43 17 59 Belgium-Luxembourg 32 48 31 140 45 66 47 57 Malaysia 22 27 21 30 61 53 57 54 France 51 97 74 108 48 82 38 51 Zaire 5 10 8 3 5 10 33 40 Total incl others 871 663 544 1,076 752 904 758 1,129

a DOTs estimate. b Includes former East Germany from July 1990.

Source: IMF, Direction of Trade Statistics, yearly.

Zambia: refined copper exports(tons)

Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Feb1991 1992 1993 1994 1995 1996 1997

Thailand 28,946 37,361 49,030 62,637 40,933 46,904 11,190Japan 125,939 94,857 85,334 55,445 52,647 50,111 6,339Belgium 31,120 26,156 49,167 29,939 22,500 17,071 5,054Malaysia 21,036 33,324 30,230 31,369 21,092 28,594 4,090France 49,176 52,612 49,990 18,896 11,243 10,696 3,288USA 0 0 760 2,000 27,779 8,958 3,140India 14,280 19,149 21,186 20,209 22,872 24,946 1,942Indonesia 9,078 5,040 3,499 5,146 7,676 2,793 200Greece 7,686 7,876 6,871 3,524 374 2,936 0Germany 0 500 0 0 0 1,667 0South Korea 0 0 0 4,096 800 410 0Italy 10,989 15,850 5,041 3,024 2,098 400 0Total incl others 382,326 411,892 436,522 360,657 291,869 280,360 50,599Source: World Bureau of Metal Statistics, World Metal Statistics.



Zambia: UK trade(£ ’000)

Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec1992 1993 1994 1995 1996

UK exports fobFood, drink & tobacco 644 883 448 554 677Chemicals 7,012 8,913 4,972 3,880 3,256Rubber manufactures 353 201 163 80 103Paper & manufactures 745 448 357 156 338Textile yarn, cloth & manufactures 548 257 329 780 221Non-metallic mineral manfactures 1,787 1,687 624 1,361 885Iron & steel 2,174 818 390 299 456Metal manufactures 1,337 2,582 499 466 734Machinery incl electric 33,528 39,487 21,794 23,680 29,877Transport equipment 9,035 7,076 4,533 5,465 5,118Clothing & footwear 970 466 1,620 1,174 1,573Scientific instruments etc 2,812 4,502 3,234 6,687 2,137Total incl others 65,127 73,548 44,523 49,819 51,544

UK imports cifFruit & vegetables 1,604 1,300 1,167 1,824 3,681Textile yarn, cloth & manufactures 3,109 3,143 3,767 7,459 6,410Non-ferrous metals 909 6,406 6,737 8,425 4,927Machinery & transport equipment 783 451 308 350 220Total incl others 7,279 12,056 13,038 19,460 17,726Source: UK HM Customs & Excise, Business Monitor, MM20.

Zambia: Japanese trade(¥ m)

Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-DecJapanese imports cif 1992 1993 1994 1995 1996

Copper cathodes 25,136 20,668 11,455 15,764 13,938Total incl others 31,532 23,562 17,896 20,261 20,871Source: Japan Tariff Association, Japan Exports & Imports.



Zaire: trade with major partnersa

($ ’000; monthly averages)

Belg-Lux USAb Germany France UK

Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec

1994 1995 1994 1995 1994 1995 1994 1995 1995 1996

Exports to Zaire fob

Food, drink & tobacco 1,926 2,739 869 2,567 145 288 824 1,396 230 202

Mineral fuels 44 75 10 14 8 25 19 162 87 136

Chemicals 1,330 1,943 184 193 367 578 518 520 413 432

Rubber manufactures 115 166 2 2 56 78 35 17 15 18

Textile yarn, cloth & mnfrs 533 1,036 164 126 13 36 33 42 14 9

Non-metallic mineral mnfrs 674 406 0 31 8 49 37 77 12 12

Base metals 187 323 165 315 53 172 51 60 61 68

Metal manufactures 260 366 32 36 156 138 54 56 34 27

Machinery incl electric 2,499 3,794 768 1,506 870 805 404 797 377 252

Transport equipment 2,254 2,778 162 88 1,494 1,203 246 279 338 297

Clothing, footwear & handbags 218 343 81 116 5 6 101 92 10 26

Scientific instruments etc 258 347 44 64 23 41 52 68 14 7

Total incl others 11,695 15,915 3,285 6,401 5,569 5,770 2,617 4,014 2,061 2,224

Imports from Zaire cif

Coffee, cocoa, tea & spices 226 589 18 108 468 1,336 1,045 2,293 118 72

Animal feeding stuffs 0 0 80 188 0 0 0 0 0 0

Crude rubber 17 0 0 0 53 175 0 5 75 170

Wood & cork 345 234 4 21 609 748 723 612 561 796

Crude minerals & fertilisers 5 0 728 562 137 75 0 1 0 1

Metal ores & scrap 1 24 15 238 28 109 0 0 2 19

Petroleum & products 0 0 9,649 11,354 0 0 0 0 0 0

Chemicals 19 2 1,005 119 103 72 28 5 1 0

Non-metallic mineral mnfrs 52,166 54,962 2,704 6,885 3 11 0 0 0 477

Non-ferrous metalsc 608 891 1,887 3,049 699 1,647 934 359 414 143

Machinery & transport eqpt 82 29 59 1 49 30 0 0 77 27

Total incl others 54,357 57,658 16,492 22,787 3,016 5,431 2,910 3,490 1,493 1,920

a Figures from partners’ trade accounts. b US exports to Zaire averaged $6.4m and $6.1m per month for the period January-December 1995and 1996. US imports from Zaire averaged $22.9m and $21.6m per month for the period January-December 1995 and 1996. c Mainly copperand zinc.

Sources: UN, External Trade Statistics, series D; UK HM Customs & Excise, Business Monitor, MM20.



Date post:	04-Jul-2020
Category:	Documents
Upload:	others
View:	4 times
Download:	0 times

Zambia Zaire - International University of Japan · 16 Foreign trade and payments Zaire 18...

Documents