February’s price table and the central bank’s own dollars moved in opposite directions.

By Kanisa Magazine · February 2021

Between the end of December and 19 February, the Banque Centrale du Congo’s own price table recorded a 50 per cent rise in LME cobalt, from US$32,000 to US$48,000 a tonne, and an 11 per cent rise in LME copper, from US$7,803.50 to US$8,650. Over the same weeks the central bank’s strict foreign-exchange reserves fell from US$708.9m to US$664.4m. The metals rallied and the reserves did not follow.

That mismatch is the external account’s main lesson for February. Commodity prices set what Congo could earn; the reserves show what actually arrived at the central bank. The distance between the two is where a business reader should look for risk.

What the price table says

Cobalt cathode in London went from US$15.75 to US$21 a pound, while gold fell 5.5 per cent.

According to the BCC weekly digest of 24 February, London cobalt cathode moved from US$15.75 a pound on 31 December to US$17.50 by 29 January and US$21.00 by 12 February, about US$46,358 a tonne. Copper was 54 per cent above its end-January 2020 level of US$5,620. Gold went the other way, from US$1,888.97 to US$1,785.49 an ounce. Brent crude rose from US$51.52 to US$62.62 a barrel, a 21.5 per cent gain that raises the cost of the fuel Congo imports even as metals raise its export receipts.

The reserve that did not follow

Strict reserves covered 0.63 months of imports on 18 February, below the end-year level.

The strict count dipped to US$648.6m on 5 February, recovered to US$680.1m a week later and stood at US$664.4m on 18 February, down 6.3 per cent from 31 December. The broad count, which includes banks’ dollar deposits, had not been updated in the digest after December. A rally can therefore lift export values and bank deposits well before it lifts the reserve the central bank can spend, and it did so this month.

Why the pass-through lags

Receipts go to banks and the Treasury first, and arrive at the central bank after tax dates and spending.

A mining company sells abroad, banks the proceeds, settles royalties and taxes with the Treasury, and pays suppliers. The central bank sees the money when the Treasury’s dollar account is credited or when banks sell dollars to it, and by then some has been spent. Trade in artisanal material matters too. On 25 February the government’s secretary-general for mines described the Musompo trading centre in Lualaba as a way to end clandestine buying counters by centralising artisanal sales under certification. Material sold outside such channels does not generate bankable export proceeds, which may be one reason higher prices do not always show up in the reserve figures. Formalising those sales would bring more of the trade into declared exports, and into the banks.

The minister’s caution

Mines minister Willy Kitobo urged prudence, quoting copper at US$9,600 and cobalt at US$52,000.

On 27 February Zoom Eco reported that Mines Minister Willy Kitobo Samsoni welcomed the rally but urged prudent management, dialogue with stakeholders and continued reform of revenue collection and artisanal mining rules. He put copper at US$9,600 a tonne and cobalt at US$52,000, above the BCC’s 19 February series, and recalled that cobalt once topped US$80,000 in 2017 and 2018. The reminder is the right one: prices that double can also fall back, and revenue that leans on them would fall with them.

What to do while the rally lasts

Contract in dollars, build buffers, and measure counterparties on proceeds that reach local banks.

Suppliers to mining firms should pursue dollar-indexed contracts and early settlement while counterparties are flush. Banks and lenders should treat the strict reserve and the months-of-import figure as the test of whether the rally reaches the state. Mining-sector borrowers should hold part of the windfall as a buffer against the price reversal that the minister himself cited. Fuel importers face the opposite pressure from Brent’s 21.5 per cent rise and should lock supply prices early. A rally is a chance to strengthen balance sheets, not a forecast.