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Contributor: James Ogunleye
Reviving Congo?s Ruined Economy

1994 is a year Emany Mata Likambe will not forget in a hurry. Likambe, like many Congolese ambassadors around the world, had barely presented his credentials to the Polish authorities in 1992 when remittances of salaries and allowance became epileptic. By early 1994, it had dried up. Soon he was ejected out of his flat. After selling his car and personal belongings, Likambe began living a pauper.
Succumbing the harsh living conditions in Poland, he moved in with the homeless, sharing a cardboard ?apartment? at Warsaw railway station. In November 1994, he was attacked by other homeless people, who accused him of falling to perform his ?tenancy obligations?. Likambe?s plight attracted public sympathy and the Polish authorities came to his rescue. Recalled Jan Karczewski, a Polish Foreign Ministry spokesman: ?We invited him to all official receptions to help him to eat.?
To the casual observer the story of Likambe might appear incredulous, but it illustrates the depth to which the economy of Democratic Republic of Congo (formerly Zaire), has sunk. For a nation that held high hopes in the post-independence African economic renaissance, it has been a painful fall.
The decline in the Congolese economy started in 1974, when prices of copper - the mainstay of the economy - collapsed in the world markets. It was a crisis aggravated by the ill-conceived nationalisation of private businesses. But this was only one aspect of the problem. The main damage to the economy was caused by plunder and unbridled thieving of public funds under Mobutu Sese Seko?s regime.
By 1991, Mobutu?s impulse to steal was so strong that only 10 per cent of Congo?s export revenues went through the official tills. In 1992, ?illicit diamond exports of $300 million surpassed official diamond exports of $231 million,? wrote Adekeye Adebajo, a research fellows at the Brookings Institutions in Washington D.C. Copper production, too, was down, from around 500,000 tonnes in the mid-1980s to 37,400 tonnes in 1996.
Macroeconomic indicators, meanwhile, ran riot. Consumer price index, a measure of inflation, shot to 8,828 per cent in 1993 - a feat that earned Congo, Africa?s third largest country, a place in the Guinness Book of Records. By 1994, inflation had sky rocketed to a monstrous 23,761 per cent, before it took a dive. There was bad news, too, on economic output, as negative growth became Congo?s hallmark. The average real GDP between 1993 and 1996 was -21 per cent, while per capita GDP of $100 in 1996 was 70 per cent lower than in 1958. External debt, meanwhile, ballooned from $4 billion at the start of the 1980s to $14 billion in 1996. Zairian Franc, the national currency, became worthless, as it lost ground heavily to US dollar: from 2.5 to a dollar in 1993, it exchanged for 52,400 in 1996! ?The economic situation is disastrous,? commented Jose Endundo, executive director, Business Association of Congo. ?We will have to make a clean sweep and start again.?
In May 1997, Laurent-Desire Kabila, 57, took it upon himself the task to make that fresh start, after shooting his way to power in the civil war that ended 32 years of Mobutu?s misrule. He immediately set up a reform programme, christened Economic Stabilisation and Reconstruction Programme (ESRP). The programme identified agriculture, mining and infrastructures, as linchpins of future growth. Amongst the ESRP policy thrusts are: reforming of the foreign exchange market to facilitate exchange rate convergence between the official and parallel markets; privatisation of state enterprises, and a prudent fiscal policy. The price tag for the ESRP is $1,682 million, expected to be paid up by the government ($415 million); the private sector ($693 million); and the donors ($575 million). In the meantime, however, the government is introducing fiscal measures to stabilise the prostrate economy. It?s reviewing the entire tax system, while planning a 100 per cent tax exemption for priority industry. The civil service, too, received a dose of the medicine with the introduction of a ?Code of good governance?. The code is expected to combat corruption which seriously hindered past development efforts.
Even though it is still too early to assess the impact of the economic reform, reports filtering through independent analysts indicate some success. Take inflation. The inflation rate of 57.5 per cent which obtained when Kabila took over government last May was, by August, brought down to 1.7 per cent. Official exchange rate of NZ180,000 to a dollar in April 1997, appreciated to NZ137,000 in November of the same year. In the parallel markets, exchange rate currently stands at NZ110,000 to a dollar compared to NZ145,988, in 1997. One of the reasons why this anti-inflationary policy has been relatively successful is the government ruling which restricted the amount of cash individuals can hold at particular time. One of the aims of the ruling is to phase out the old Zairian notes in preparation for the new Congolese franc due to be introduced next year.
All in all, for the fiscal year 1998, the government?s projections for real GDP growth is 2.5 per cent, on a 12.5 per cent inflation rate. Revenue is projected at $700 million - but its realisation will depend on full resumption of production at Gecamines, the state-owned mining company. Diamond production, meanwhile, is forecast at 20 million carats per annum while copper outputs are expected to hit 475,000 in the medium term. Cobalt production is projected at 600,000 tonnes, also in the medium term.
But, for Laurent Kabila, financing the yawning gap between projections and available resources, has been one headache that has refused to go away. The ESRP, for instance, will cost $1,683 million, out which the government has only $415 million. Funding the remaining $1,117.8 million would not be easy. At a World Bank-sponsored ?Friends of Congo? conference in Brussels last December, Pierre-Victor Mpoyo, Economy and Petroleum minister, watched, mouth agape, when donors gave a pledge of only $105 million out of the $1.1 billion shopping list he presented to them.
It is not just the official creditors and donors who are wary of the new regime in Kinshasa. Private investors - who are expected to contribute $693 million to the ESRP - are equally sceptical. This situation was not helped by the abrupt cancellation, in January, of American Mineral Fields? contract for the Kolwezi mine, one of the country?s biggest. For many investors, it was the height of policy insanity.
But by far the most dangerous threat to Congo?s economic revival might be political instability which, many say, is being unwittingly nurtured by the authoritarian tendencies of the President. Kabila, who now goes with the official title, mzee - Swahili for the ?wise man? - is said to brook no opposition. In Kabila?s Congo, routine harassment of journalists and political rivals is the norm. At a press conference in January, in reply to a question about the number of people detained by his government, he replied: ?There are so many people arrested in this country. I do not know,?.
And there are rumbles within the military. Between January 21 and 23, two dozen soldiers were publicly executed for their involvement in mutinies in two major army formations last December. Yet, the government seems not to know what to do with the largely unpaid and ill-disciplined soldiers. The civilian leaders, too, are divided, as dangerous factional splits are now emerging within the ruling Alliance of Democratic Forces for the Liberation of Congo-Zaire (AFDL).
All in all, Congo has made a commendable start on its road to economic revival. Whether it will stay the course is a matter for conjecture.
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