A one-point upgrade rests on copper volume, while the Fund sees the non-mining economy slowing.

By Kanisa Magazine · July 2022

The Banque Centrale du Congo raised its estimate of Congo’s 2022 growth to 7.1 per cent in its digest of 27 July, a full point above the 6.1 per cent it published a month earlier, and it did so in the same weeks that copper fell below US$7,000 a tonne. The upgrade rests on mining output through June. It says little about whether the rest of the economy is keeping up.

The July table also lifts nominal GDP to US$65.4 billion from US$61.7 billion, and GDP per head to US$688 from US$650. The BCC’s footnote states that the estimates rest on production recorded to the end of June 2022. Behind the headline is one sector and one metal.

An upgrade built on copper volume

The BCC’s copper activity index reached 235.3 in June, 36 per cent above the same month of 2021.

The BCC’s monthly index of copper production, with 2015 as 100, ran at 224.1 in March, 183.6 in April, 206.2 in May and 235.3 in June. A year earlier June stood at 173.4. Volume is climbing even as the price falls, which is how a growth forecast can rise while a price chart collapses.

The mechanism is capacity. The IMF’s staff report, published on 5 July, attributes the 2022 expansion in mining to the shift to phase three of the Kamoa expansion plan, and notes in a footnote that only Kamoa has added capacity in 2022. Growth is coming from one mine’s ramp-up, not from the sector as a whole.

The Fund sees less in the rest of the economy

The IMF cut its 2022 growth estimate to 6.1 per cent because non-extractive growth is slowing.

The Fund’s report revises growth to 6.1 per cent from 6.4 per cent and says the cause is slower non-extractive growth. It identifies services and manufacturing, with construction and telecommunications, as the drivers of the non-mining economy, and projects extractive exports at about 44 per cent of GDP. The Fund and the central bank are reading the same year at one point of GDP apart, and the gap is worth roughly US$0.6 billion.

The difference lies in what each counts. The BCC’s estimate follows production through June, where mining dominates. The Fund’s lower figure reflects a slower non-mining economy, where prices are biting: the BCC’s national index showed year-on-year inflation of 9.35 per cent on 24 July, and the Ministry of Economy raised fuel prices on 7 July, with petrol at CDF 2,495 in Kinshasa.

The price fall arrives after the volume

Sales booked at spring prices flatter the second quarter, and the summer price is the one to watch.

The BCC’s own table prices copper at US$8,500 on 29 June and US$7,321 on 22 July, down 14 per cent in three weeks, against US$10,390 at the end of March. Output data lag prices by a month or more, and the fiscal and export effects lag output by another. A growth estimate drawn from June production captures the period of high prices and rising volume. It cannot yet capture the reverse.

The BCC also raised its year-end inflation estimate to 7.5 per cent from 6.2 per cent, and its annual average to 5.3 per cent from 4.8 per cent. Higher growth and higher inflation together describe an economy where nominal income is rising and real purchasing power for households is under pressure.

What a business takes from the upgrade

Read 7.1 per cent as a mining forecast, and size consumer demand separately.

For suppliers to mines, the signal is straightforward: volumes are rising on committed capacity, and the Kamoa ramp-up, along with expansions elsewhere on the Copperbelt, supports demand for transport, power, contract services and construction through 2022. Contract terms matter more than volume, because lower copper prices put pressure on payment cycles at smaller operators.

For consumer-goods and services firms, plan on the IMF’s 6.1 per cent as the working case and the BCC’s 7.1 per cent as the upside, and weight inflation at 9 per cent against any real growth assumption. Later digests, with July and August output, will show whether the upgrade holds or whether the lower copper price has begun to cut output decisions.