Falling metals demand will push Congo's 2009 economic growth below 10 percent and force cutbacks in mining projects just as a conflict risks boosting unplanned spending and inflation, the central bank chief said on Tuesday.
Slowing global growth had undermined demand for metals, said Governor Jean-Claude Masangu, whose country has huge reserves of cobalt, copper, gold and a range of other minerals.
"As a result, several investment projects, both start-ups and expansions, have been postponed, halted or downsized," he told a presentation in Democratic Republic of Congo's capital Kinshasa.
A rush of mining investment after democratic elections in 2006 form the basis of government plans to rebuild an economy shattered by decades of conflict and misrule.
Masangu did not give details of which projects were affected, or which investors were involved.
But he said a loan and investment deal with China, which the government has previously said could be worth up to $9 billion, said would be adjusted once a feasibility study had been completed, due to slowing economic growth in the Asian economy.
Masangu said a joint venture mining company being created by Congolese state miner Gecamines and a Chinese consortium could not escape the negative impact of the crisis and would depend heavily on Chinese demand for metals — which is already down.
"It is a company like all the others — it will be affected just like every mining company … The subsequent feasibility study will involve adjustments," Masangu said on Tuesday.
Masangu said that because of its timing he did not expect the financial crisis to have much effect on Congo's 2008 growth, which the central bank has forecast at around 12 percent.
But economic growth in 2009, which had been forecast at around 11 percent, would now be less than 10 percent, he said.
"CONGO RISK"
"Falling market capitalisation and share prices have negatively affected capital raising on stock markets and via bank loans due both to the crisis and also to the 'Congo risk'," he said.
A devastating five-year regional war fuelled by competition for Congo's mineral riches ended in 2003. But on-off fighting has persisted in the east of the country, where renegade Tutsi General Laurent Nkunda launched a fresh offensive against government troops and U.N. peacekeepers last week.
Masangu said the conflict, which has displaced around 1 million people in two years, would create unbudgeted government spending that could in turn risk driving inflation higher.
Delays to a government review of mining contracts, many of them signed during the country's 1998-2003 war, have also slowed investment in Congo, Masangu said.
Final results from the review have been delayed repeatedly over the past year.
"The revision of mining contracts, coupled with statements on the government's intentions and delays to the announcement of the review have slowed implementation of a good number of investment projects," he said.
He said that among the first negative effects on Congo would be the cancellation of social programmes which many mining companies plan as part of their contracts with the government or under their corporate social responsibility programmes.
Projects included building or improving schools, housing, medical and health facilities and sanitation, he said.
But a deepening crisis would result in large-scale job losses not only in mining, but also in other sectors, he said.
