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Congo RDC New economic measures |
ECONOMY
The Congolese are deeply worried about what the initial economic measures
taken
by the new government will mean for them. Following devaluation,
there’s
already been a heated reaction in Kinshasa at the beginning of June
On the one hand, there’s a feeling that people should be satisfied with what they have, even if it’s not worth much, —with the hope that things will get better in the future. The new government is mostly made up of technocrats, and its economic measures enjoin the Congolese towards a certain amount of austerity, but promise a better economic situation in the future. There’s no other choice — the Congolese are obliged to accept the necessary sacrifices, but, let’s admit it, without too much conviction.
There’s more of a hint of World Bank pressure, and indeed, all the Congolese are fearful of the Bretton Woods Institutions’ «economic therapy». But these are the first economic measures taken by a new government, which wants to show it is different from the previous administration of «pseudo-revolutionaries» who emerged from the forest and then called itself a government. Making the best of a bad job, the Congolese are ready to set off on the «big adventure». They are somewhat encouraged by the political openness of the new Head of the State, who promises to once again, make Congo «respectable» in the eyes of other nations. But it’s going to be a bitter pill to swallow.
Nearly one week after these initial economic measures were announced, life seems to have come to a halt in Kinshasa, Congo RDC‘s capital. Why? Because the Congolese franc (FC) has been devalued by 84%. And since 26 May, the government has opted to float the currency vis à vis foreign currencies. Consequently, prices have rocketed. The price of petrol per litre at the pumps has risen to four times its original price. Life has become extremely difficult for a population forced to go about its business on foot — taxi and minibus owners have decided, by way of protest against the fuel price increases, to keep their vehicles in their garages. Kinshasa has literally ground to a halt.
The least expensive litre in the world
People had accepted the inevitably that fuel prices would have to rise sooner or later, as it was clear the government was having great difficulty in supplying the country with petroleum products. Indeed, motorists couldn’t understand why the government was refusing to charge realistic prices for these products. You see, a litre of petrol cost twenty cents — less than a bottle of Coca Cola. With the result that it was becoming difficult to renew stocks. However, the Congolese didn’t expect such a sudden and steep rise in prices. The price of a litre of petrol or diesel at the pumps is an indicator of the cost of living. If it gets cheaper, then it means the cost of living is going down, and vice versa.
If, at twenty cents a litre, petrol in Congo RDC wasn’t the cheapest in the world, it was certainly among the cheapest. So much so, that neighbouring Congo-Brazzaville’s taxi-drivers used to cross the River Congo just to fill up their vehicles with fuel, and then went back home. Congo RDC‘s government has a quasi-monopoly over fuel imports and was always in a quandary over the trade. Selling fuel so cheaply was pure loss, if not suicidal from an economic point of view. On the other hand, charging realistic prices meant risking a social implosion. In deciding to raise fuel prices from twenty to 87 cents a litre, the government has clearly taken a risk. It will surely lose some of its popularity, but in the long run, will perhaps win the fight against monetary inflation — a result of the many economic measures it’s in the process of taking.
The fact is, raising the price of fuel to 87 cents a litre is a bitter pill for the Congolese to swallow, but motorists prefer to have to pay more for their fuel, rather than having to spend days and nights queuing at the filling stations without any certainty of being able to get any fuel (there are fixed quotas for fuel distribution). Since the government’s new measures, filling stations are being duly supplied, but remain curiously deserted. Mr. Noël Kahindo is sales manager for Shell-RDC. He says motorists are still in a state of shock. «It’s true that presently we’re not selling as much fuel as previously», he declares, «but in a week, the situation will return to normal». However, it’s a disturbing situation for the petrol companies which have been holding a number of meetings to discuss the problem. The spectacle of Kinshasa’s citizens going everywhere on foot throughout the capital is somewhat worrying. Many put a brave face on the situation and set off on Shank’s pony to reach the city centre — frequently having to cover a very long distance.
Repercussions
Many businesses, large and small, have decided there’s nothing else to do but to shut up shop. They’re prepared to sit it out until they have a clear idea what effects the government’s economic measures are going to have on business in general. The increase in fuel prices almost automatically means an increase in food prices. Kinshasa gets it food supplies from the surrounding areas. When hauliers saw that fuel prices had risen astronomically, they took advantage of the situation to make unacceptable increases in food prices.
Cement is another victim of price increases. Kinshasa is presently one vast building site and get’s its cement from Lukala Cement Factory, a hundred kilometres away in the Bas-Congo Province. The price of cement depends very much on the price of transport and what the Lukala Cement Factory is able to supply. The average housewife’s shopping basket reflects all these price increases, thus making the Congolese more vulnerable and ever poorer.
As we’ve already stated, there’s more than a hint of World Bank and IMF pressure in the initial economic measures taken by the new government. In April and May this year, experts from the Bretton Woods Institutions were in Kinshasa for nearly two months, and it was clear that any decisions taken following their various meetings with the Congolese government, would be highly unpopular. Mr. Faustin Lukwena is an adviser to the President on economic affairs. In a press conference he stated: «Congo RDC must once again become acceptable in the eyes of the world. To achieve this, it must clean up its act and put its economy to rights».
The way things are, the Congolese don’t have much choice and seem ready to stoically swallow the bitterest of pills, so as to ensure a long-term improvement in their socio-economic situation. However, there are no guarantees that the new government is going to follow suit. Le Potentiel is an influential daily newspaper in Kinshasa and doesn’t hide its scepticism. In its leading article on 28 May, the paper criticized the many ways in which central government funds are used, completely outside any ministerial control or authority. As an example, the newspaper cited uncontrolled expenditure by the presidency and the army.
Attempting to set the economy to rights
In a programme on state-run television (26 May), the Minister for the Economy, Finances and Budget, Mr. Matungulu Buyamu, and the governor of the Central Bank of Congo, Mr. Jean-Claude Masangu, both key persons in controlling the country’s monetary policy, said they were determined to apply without fear or favour, all measures involved in implementing the new monetary policy. Jean-Claude Masangu said his bank was going to involves itself 100% in setting the country’s monetary situation to rights. «My policy will be to get hold of as many Congolese francs as possible which are presently circulating in the “parallel economy”, and channel them towards the Central Bank of Congo, so as to be in a position to control the amount of money in circulation». Minister Buyamu said he was determined to balance the budget so that expenditure does not exceed income. The budget for the year 2001 has been approved and he is already at work preparing a draft budget for 2002. He is also revamping the country’s financial institutions i.e. establishing Foreign Exchange Bureaux, trading agencies, etc.
Will these senior officials succeed in their endeavour, taking into account the realities of Congo RDC‘s economic stagnation? Just take a look at the sad history of the rate of exchange. For more than twenty years it’s been characterized by a steep depreciation of the national currency. Since October 2000, the difference between the «parallel» and official rate of exchange is 600%. On 26 May, the government raised the official exchange rate from 50 Congolese francs (FC) for one US dollar, to 313.5 FC for one US dollar. All this has achieved, is to partially close the gap between the two rates, not do away with it entirely. However, there is a risk. In addition to the effects on living standards, the government simply doesn’t have the necessary cash to carry out all its economic measures. There is a real risk it will prove impossible ever to achieve equality between the two rates.
The government says it can count on help from foreign donor nations and organisation, likewise on its own income-generating activities. However, cash-in-hand is mostly obtained from diamond sales. Diamond merchants I’ve spoken to, say they simply can’t understand how the government can be so optimistic, because the diamond industry is very badly organized. Charles Mputu is a Congolese diamond merchant. He says: «Since the monopoly granted to the Israeli company Industrial Diamond International-Congo (IDI-Congo) ended, there’s been no diamond exchange operating, and that’s the government’s fault.» In other words, all diamond-dealing activities remain outside the usual banking institutions.
As for help coming from foreign donor nations and organisations, that’s still hypothetical, because to-date, not much has as been seen. The governor of the Central Bank says he is counting on two sure promises: 123 million euros from the European Union, and 45 million dollars from the United States.
Panic at the central market
Have the government’s efforts proved effective? Just look at what’s happening at Kinshasa’s Central Market. It’s complete panic! The breakdown in the transport system means that traders can’t get to market with their goods; neither can prospective purchasers. The few traders who manage to arrive have practically nothing to sell.
Jean Mvumbi is a frozen chicken salesman. Normally, he would sell six to seven boxes of frozen chickens per day. Since the government’s new economic measures have come into force, he’s lucky if he manages to sell five chickens. Anita Mbuyi sells fish. But for the last four days she hasn’t managed to sell anything and her fish stocks will probably rot. She started to sell fish because her husband’s wages, (he’s a civil servant) were no longer enough to support his family. She’s very pessimistic about the country’s future and doubts if the government’s economic measures will prove effective. She says: «Already business is bad. With the new price-rises, nobody’s coming any longer to the market. During Mobutu’s reign, the police used to harass us, but nobody went hungry. Now we’re wondering how the children will be able to continue in school. School fees will be far too high».
Many Congolese share Mrs. Mbuyi’s concerns, but don’t know whom to blame. The government, who says it’s taken these economic measurers in good faith, to ensure the people’s happiness? Or, Almighty God, who knows everything but who seems to remain insensitive to the supplications of the Congolese people? In Kinshasa, churches and other places of worship are filled to overflowing. There’s never been so many people at prayer!
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