Salaries took 95 per cent of their allocation this year and building took 0.2 per cent, which is why cement is falling.

By Kanisa Magazine · December 2020

The Congolese state had spent CDF 8,326.5 billion by 24 December 2020, according to the Banque Centrale du Congo’s cumulative Treasury table, about 48 per cent of the CDF 17,225.2 billion the 2020 budget allowed. Three weeks earlier deputies had approved the 2021 finance bill at CDF 14,620.5 billion. That is 76 per cent above what the state actually spent this year.

The gap is the real-economy story beneath the mining headline. The economy outside the mines depends heavily on what the state buys and builds, and this year the state paid its staff and left almost everything else on the shelf.

Where the money went

Wages reached 95 per cent of plan while investment reached 0.2 per cent.

The execution table is blunt. Pay for civil servants, police and the army had absorbed CDF 4,948.3 billion, or 95.2 per cent of the annual wage line. Running costs at CDF 1,313.4 billion exceeded their allocation by 5.5 per cent, and the urgent-spending lines took a further CDF 847.8 billion. External debt service stood at 59.8 per cent of plan.

Capital expenditure was CDF 11.8 billion against a planned CDF 6,408.8 billion. Transfers and subsidies reached 11.2 per cent. Revenue of CDF 8,232.7 billion was 47.8 per cent of the plan, led by the tax directorate’s 58.3 per cent and trailing in customs at 43.4 per cent and oil receipts at 33.5 per cent. The cash deficit was only CDF 93.8 billion, which tells you how the state achieved balance: it matched spending to cash and cut what could wait.

What fell with it

Construction inputs and household goods moved with the public purse.

The BCC’s activity table for the first ten months of 2020 shows cement at 894,511 tonnes against 1,090,312 in the same months of 2019, down 18 per cent. Timber logs fell 56 per cent. Soft drinks fell 16 per cent and wheat flour 7 per cent, while electricity rose 9 per cent and copper 12.5 per cent. The column headings are not fully legible in the extracted text, so the comparison is best treated as direction.

The link from the budget to cement is plain. A road, a school or a market built with public money buys cement, timber and labour. When capital spending runs at 0.2 per cent of plan, those orders do not arrive. Private construction filled some of the gap, but the sector shrank anyway.

The foreign money that held it up

An IMF drawing funded about 9 per cent of the year’s revenue.

The Treasury table records CDF 744.1 billion credited to the account for IMF budget support, roughly US$377 million at the year-end rate and consistent with the April rapid-credit disbursement the IMF approved for Covid-19. That is nine per cent of the year’s receipts. Planned grants for projects, CDF 1,830.6 billion in the budget, show no realisation in the table.

The health picture explains the pressure to keep money flowing. The national Covid-19 committee reported 128 new cases on 1 December, 97 of them in Kinshasa, and a cumulative 12,987 cases with 336 deaths. Kinshasa accounted for 9,910 of the total, so the second wave has hit the capital, where a large part of non-mining activity sits.

What a 76 per cent step-up implies

Treat the 2021 budget as a ceiling, and plan on the 2020 pattern.

The finance law passed with 349 of 350 votes cast and now goes to the Senate. A political fight over a new majority will test it before it becomes spending. Even if the coalition crisis resolves quickly, a state that executed 48 per cent of its 2020 plan is unlikely to execute 100 per cent of a plan 76 per cent larger than its 2020 spending.

For a contractor, the practical advice is to treat public tenders in the first half of 2021 as unlikely to convert to cash, and to ask for advance payments or guarantees on any government works. For a supplier of cement, steel or building materials, the safer plan is to assume private and mining-linked projects drive demand. For a lender, the useful number to watch is not the budget total but the capital-spending line, which stood at CDF 11.8 billion at year-end and is the best single indicator of whether public money is reaching the real economy.