Congo's new president will have to regain economic trust of citizens
KINSHASA, Congo (AP) - Patrons heading to an outdoor bar in Congo's capital often stop first at a nearby moneychanger, where they fork over just enough U.S. dollars for a beer. Then they sit down to enjoy their bottle, confident the value of what's in their wallets won't depreciate -- at least not while they drink.
The exchange is a glimpse into a giant shadow economy that gave up on anything government-backed over years of war, dictatorship and neglect. Whoever emerges as winner of a recent presidential vote meant to usher in democracy will have the monumental task of wooing back a citizenry that has gotten used to working around institutions.
"Put your money in a bank?" exclaimed Jeanne Ubenge, 42, one of many moneychangers along a road in the capital that locals call Wall Street. "Only Americans and Europeans put money in the banks."
While most people in this impoverished Central African nation don't do business in American dollars, many Kinshasa residents depend on American currency more than their own Congolese franc, the value of which has tumbled since the first round of presidential elections in July. Final results are expected by Nov. 19 from an Oct. 29 runoff between President Joseph Kabila and former rebel leader and Vice President Jean-Pierre Bemba. Early returns show Kabila with a large lead.
Laurent Kabila, the father of the current president, introduced Congo's current currency in 1998 to replace the New Zaire notes used under late dictator Mobutu Sese Seko.
The franc traded then at about five to the dollar, then depreciated profoundly.
In July, the rate was about 460 francs to the dollar. And in three months since the first-round presidential ballot, the franc's street value in Kinshasa has plummeted further, to about 540 francs to the dollar, according to residents and moneychangers.
The dollar is so important that official exchange rates are announced nightly on television and the radio. Vendors of prepaid cell phone cards -- denominated in U.S. dollars -- carry calculators so they can give the latest rates.
The preference for dollars is also practical: U.S. bills are simply easier to carry than the huge wads of Congolese francs some people are forced to transport around in bags. The largest Congolese note is 500 francs, worth less than a dollar (euro).
As a result, many foreign businesses pay salaries in dollars, and many Congolese conduct large transactions with U.S. notes.
Laurent Kabila, who was assassinated in 2001, first tried to keep all transactions in Congolese francs, but repealed a ban on foreign currencies in 2000. The dollar has flourished since.
Most agree its safer to hold American cash and convert it when needed.
"The shopkeepers, they don't want to go to sleep at night with Congolese francs," said moneychanger Jean-Baptiste Bungiena. "They prefer to sleep with dollars, because they don't trust the bank."
Consumers are also battling inflation in some quarters, though inflation rates overall are no longer growing exponentially.
Still, beer vendor Claude Kalomba said the price of a bottle of popular Skol beer jumped about 50 percent in recent months.
"Since the first round (of voting), the tension has been very strong. So many of the big traders aren't importing anything," said Central Bank spokesman Honore Mulangu.
Forces loyal to both runoff candidates clashed in the capital in August as first-round results were released. The three-day fire fight left at least 23 dead, a shocking reminder of instability in a country ravaged by a 1998-2002 war that pulled in armies from half a dozen African nations.
Consumer prices are expected to grow 10 percent in 2006, after jumping 21 percent in 2005 and increasing 4 percent in 2004, according to a report by the International Monetary Fund. Between 1997 and 2001, consumer prices more than quadrupled.
The IMF refused to renew its backing of Congo's monetary policy in March, saying the country had not adequately reined in corruption or spending -- a state of affairs unlikely to change any time soon.
Because so many in the capital use dollars as their default currency, new money printed or cash infusions from Central Bank reserves show up as a higher exchange rate, said Keiko Kubota, the World Bank's senior economist for Congo. That then pushes more people to deal in dollars.
Regions in the east trade the Congolese franc at vastly different exchange rates and many remote villages have given up on currency altogether -- subsisting primarily on traditional bartering, according to Roger Boulanger, a Congo expert at the Economist magazine's Intelligence Unit.
Most of Congo's people see little of the wealth promised by Congo's large reserves of diamonds, copper and gold, among others. And those that do keep their money as far away from the government as they can.
"About 84 percent of monetary transactions are outside the banking system," Mulangu said. This means the potential tax base for any new administration is small, and hard to grow, Kubota said.
In Kinshasa, the money changers say they don't expect a new administration to make much of a difference in their business.
"The government doesn't influence us too much," Bungiena said. "We're autonomous. They don't exist so much for us."
