History page] – The revolution of May 17, 1997, marked the advent of the monetary reform that sanctioned the arrival of the Congolese Franc (CDF). The Central Bank of Congo, the technical body of the government in the monetary field, did not go through four ways to see it at that time. Zoom Eco recalls this page of history told by François Kabuya Kalala and Tshiunza Mbiye in the publication entitled « The Congolese economy and the monetary reform of June 1998 ».
« The political change in the country since May 1997 that changed the name of the country should also imply a change in the monetary unit whose name was associated with that of the country. It is the same with the name of the Institute of issue taken over banknotes, « said the BCC through a note from its Technical Unit for the Monetary Reform (CETEREM) published in July 1998 (p.6) .
Moreover, in view of the economic situation prevailing in 1997, it became even more urgent for the Government to take corrective measures through a two-part economic adjustment program: short-term monetary stabilization and recovery of the economy in the medium term.
Indeed, reminded the CETEREM, « the macroeconomic indicators of the last ten years attest that the Congolese economy bends under the effect of the fundamental imbalances, in spite of various measures of recovery implemented ».
For the defender of Mobutu, the liberator Mzee Laurent-Desire Kabila, the issuance of a new currency called « Congolese franc » had a dual political motivation: that of marking the advent of a new power, and that of claiming subtly of a currency, of the same name, which had been characterized by its relative stability in the colonial era.
The BCC estimated at the time that GDP declined by 42.9% between 1990 and 1994; this downward trend only faded slightly in 1995-1996 before continuing in 1997. Excluding a surplus of $ 57.1 million in 1995 resulting from a large volume of unregulated suspensions at the end of year, the consolidated deficit was $ 157.1 million in 1994 and $ 51.7 million and $ 62.5 million respectively in 1996 and 1997. These budget deficits were substantially by monetary creation.
In 1994, one year after the monetary reform of October 1993, the monetary expansion was 10,323.2% before being reduced to 308,8% in 1995 and 471% in 1996. In addition, Inflation remained very high: the highest level was reached in 1994 with an annual rate of 9,769%, compared to 370% and 753% in 1995 and 1996.
As for the monetary sector, it was pinned on the one hand the gradual demonetisation of the economy. The money supply / GDP ratio had fallen to 4.3% in 1997 from an average of 10% in previous years. On the other hand, the checks suffered a heavy discount in transactions, thus devoting the break of the parity between the fiduciary money and the scriptural money.
The banks themselves were plagued by strong financial disintermediation, while the soaring « dollarisation » was a not-too-obvious sign of the widespread loss of confidence in the national currency.
One reform, four objectives
In the context described above, the monetary reform was particularly necessary to: clean up the monetary and financial environment characterized by the persistence of hyperinflation, the disruption of the payments system and the multiplicity of exchange rates; stabilize the currency and unify the national monetary space; increase the liquidity rate to finance the economy; and, encourage the revival of production activities.
Indeed, the launch of the Congolese franc was only the final step of all the measures forming part of a program of economic adjustment and monetary consolidation. Several prior actions were carried out between May 1997 and June 1998 to stabilize the currency, restore the fiduciary and par value convertibility of bank money into fiduciary money, gradually unify the national monetary space, and to reduce the disparity of the exchange rates between the different places.
Thus, when it was put into circulation on 30 June 1998, the Congolese franc exchanged at the rate of 1 CDF = 100 000NZ in Kinshasa and everywhere circulating the so-called « new zaïres » banknotes. On the other hand, it was exchanged at the rate of 1 CDF = 14 000 000Z in the two provinces of Kasaï where circulated the old Zaïres. This release was spread over a whole year, a time considered sufficient to allow the people of the hinterland to easily exchange their money.
As regards the external parity of the Congolese franc, the monetary authorities have stated (by adherence to the principle of flexible exchange rates) that this parity will be determined according to the prevailing market forces on the eve of the launch of the new currency.
As at June 30, 1998, history indicates that the official exchange rate posted was US $ 1 = CDF 1.3 against US $ 1 = CDF 1.48 a year later on the parallel market. Currently, 20 years later, 1 US dollar = 1650 CDF.
This represents a depreciation of about 111,000%.
Eric TSHIKUMA | Eco Zoom
DRC: in 2020, Goma will host the « NiNyumbani » development fair
The capital of North Kivu province will host in 2020, a development fair entitled: « NINYUMBANI », which means « at home » in Swahili. It is the initiative of a young native of Greater Kivu, Marc Lanoy Kasongo, entrepreneur and founder of OPLUS, a communication, marketing and advertising company.
« NiNyumbani » is an event that brings together different decision-makers from the DRC and the Great Lakes Region around reflections aimed at a clear and achievable future.
It is a platform whose mission is to create a common front against the many challenges related to unemployment, education, access to electricity and water, as well as agricultural and road infrastructure.
This exhibition, which is part of a community development process, is organized once a year around a central theme on which different themes focus on economic opportunities and emerging concerns in the region in order to propose practical solutions that can be applied at cost, in the medium and long term.
This activity is expected to welcome 500 exhibitors from different fields of activity; among others, economic operators, entrepreneurs, state institutions, banks, start-up managers, incubators, civil society and universities, opinion leaders, etc.
In addition to exhibitions, the programme also includes conferences.
« This fair is also being set up to give a new image to our Dear City of Goma and the long-suffering province of North Kivu, whose image is being tarnished both inside and outside the country. We want to demonstrate here the potential of our province, and what we can bring to the development of our country, » explained Marc L. Kasongo, who is in Kinshasa for contacts around the organization of this major Rendez-vous.
To him he added, « we also want to give everyone, whatever their social rank, the opportunity to come and present their products and services, because we aim for development at the grassroots level. NINYUMBANI is our common home, » added the initiator of the activity.
For Marc Lanoy Kasongo, several results are expected from this exhibition.
The aim is to propose solutions to the fundamental development challenges in Greater Kivu and the DRC; to propose new business, industry and investment opportunities and strategies in Greater Kivu and the DRC; to create partnerships between stakeholders; to connect decision-makers in the sub-region; and to create a practical solution through work.
This exhibition, whose date remains to be determined, can only be possible thanks to the contribution of the Congolese, from which Marc Kasongo solicits the involvement of the authorities and mainly the Head of State, who has made the promotion of youth his main concern.
Global: Global value chains have stimulated growth but the momentum is running out of steam!
The World Bank Group published a new report on October 8, 2019 in Washington, D.C., USA. This World Development Report 2020 focuses on trade for development in an era of globalized value chains. It details strategies that will enable developing countries to improve their performance for the benefit of their populations by undertaking reforms that will stimulate their participation in global value chains.
The paper highlights that global value chains or GVCs can continue to stimulate growth, create better jobs and reduce poverty, provided that developing countries undertake deeper reforms and that industrialized countries implement open and predictable policies.
It clearly shows that in an era of globalization, companies can no longer do everything, they specialize and no longer have to produce the entirety of a good on their own.
This book assesses the contribution of VCMs to growth, employment and poverty reduction, but also to inequality and environmental degradation. It also explains how national policies can boost trade growth and ensure that VCMs participate in, rather than oppose, sustainable development. It identifies the shortcomings of the international trading system that have led to dissension between countries, and proposes a roadmap for addressing them through enhanced international cooperation.
This report reveals that it is no longer so obvious today that trade remains an engine of prosperity, this World Bank report points out. Since the 2008 global financial crisis, trade growth has been sluggish and VCM expansion has slowed. The last decade has not seen transformative events comparable to those of the 1990s. Here we are referring to the integration of China and Eastern Europe into the global economy. Two factors are at the root of this slowdown. First, the introduction of labour-saving technologies such as automation and 3D printing could bring production closer to the consumer and reduce the demand for labour both within and outside countries. Secondly, trade conflicts between large countries could lead to a contraction or segmentation of VCMs.
According to this report, global value chains have a positive impact on development.
First, they increase productivity and growth: a 1% increase in participation in global value chains is estimated to increase per capita income by more than 1%, almost twice as much as the gains induced by traditional trade. In Ethiopia, companies engaged in these globalized sectors are twice as productive as their counterparts operating in traditional trade.
Second, they reduce poverty: since the impact of the rise of global value chains on economic growth is greater than that of trade in finished products, their impact on poverty reduction is also greater. Countries such as Mexico and Viet Nam, which are more actively involved in global value chains, have achieved better results in the fight against poverty.
Third, they improve the quality of jobs: firms operating in global value chains attract labour to more productive activities in manufacturing and services, and generally employ more women, thus contributing to the structural transformation of developing countries.
In addition to these positive effects, however, it is noted that VCMs can also have negative effects on the environment. The main environmental costs for VCMs are related to the growth in trade in intermediate goods, and the increase in distances travelled, compared to traditional trade. Their effects include increased carbon dioxide (CO2) emissions associated with transportation (compared to traditional trade) and excess waste.
DRC: two prerequisites for a good national normative system!
Every October 14, the international community commemorates World Standards Day. The theme chosen for this year 2019 is: « Video standards create a stage open to the world ».
In the DRC, according to the Association for the Promotion of Metrology and Standardization, there is still a lack of a proper national standard-setting system. This is despite the fact that the National Standards Committee (NSC) adopted 98 new harmonized standards of the Common Market for Eastern and Southern Africa (COMESA), and a new national standard in 2016.
For the Association pour la promotion de la Métrologie et la Normalisation (APROMEN), two prerequisites are needed to talk about a good national standard-setting system in the country.
« DR Congo cannot optimally benefit from the advantages of the practice of Standardization due to the absence of a coherent National Standards System (NSS). This situation encourages the practice of arbitrariness and corruption while at the same time hindering national, regional and international economic integration and sustainable development, » notes Bertin Ntumba, President of APROMEN.
He takes his thinking further by linking the lack of standardization to the Antonov crash that caused the death of the Head of State’s logistics staff.
According to him, « I see the negative effects of the absence of a rational normative practice in the DRC. With the crash, we inevitably ask ourselves questions: Did the pilot fly according to the standards? Is the airport concerned built and operated to standards? Was there an overload on the plane? Have the weather requirements been taken into account? « .
Questions that show that compliance with standards can prevent and avoid accidents.
It is up to him to add, « without benchmarks (standards) the country gets lost. It is unfortunate that standards are often mentioned only when there are disasters! Where are the national standards in the DRC? Who establishes them? How are they established? The rational practice of standardization is a pillar of economic integration and sustainable development, this expert believes. »
And he proposes the strict observance of these two prerequisites to build a National Normative System worthy of the name in DR Congo:
First of all. A vast campaign to raise awareness and mobilize the National Community on the importance of standardization for development through its stakeholders at all levels: Public Authorities, Civil Society (NGDOs, Consumer Associations, Orders, etc.), the Private Sector, Education, the research community, Conformity Assessors, etc.
Second of all. Relevant legislation on standardization: To ensure that the universal basic principles of standardization are taken into account, including: broad consensus among community stakeholders, transparency, neutrality, openness and relevance in the standards development process.
This World Standards Day is therefore an opportunity for the leaders of the three major standardization organizations, the International Electrotechnical Commission (IEC), the International Organization for Standardization (ISO) and the International Telecommunication Union (ITU), to deliver a message to the international community.
A message that pays tribute to the efforts of thousands of experts around the world who develop voluntary technical agreements, published as international standards.
Through the chosen theme, « video standards create a stage open to the world », these three Leaders wanted to point out that all the technological advances that have made it possible to rapidly improve the quality of video, fostered its accessibility for all and ensured that the entire world enjoys it are based on international standards.
Standardised video compression methods, the result of internationally recognized joint work by IEC, ISO and ITU, demonstrate the essential role of standardization in enabling industry to meet ever-increasing demand in the video segment, one of the most bandwidth-intensive applications on global networks.
Thanks to internationally recognized and applied standards around the world, videos encoded on one device can be played back by another, regardless of the device used. The economies of scale created contribute to market growth, providing confidence for those seeking to innovate and invest in new video services and applications.
In addition to revolutionizing the entertainment industry, technological advances in video have brought us closer to our families and friends around the world, enriched our communication experiences and advanced medicine and education.
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