Copper held its gain and cobalt fell by a third, while the state spent dollars faster than mines paid them in.

By Kanisa Magazine · February 2023

Congo’s reserves stood at US$4,329.7 million on 17 February, almost level with the US$4,349.0 million of 31 January. The headline looks calm. Underneath it, the Banque Centrale du Congo’s table of foreign-currency budget execution shows the state spending dollars more than three times as fast as it was collecting them in the first thirteen days of the month.

The external account of a commodity exporter has two clocks: the price clock, which sets what mining pays, and the payment clock, which sets when that money reaches the central bank. February is a month in which the two ran out of step.

Two metals, two directions

Copper held a gain while cobalt gave back a third of its value.

On the BCC’s price table, LME copper stood at US$8,990.50 a tonne on 17 February, against US$9,087 on 31 January and US$8,379 on the last day of 2022, a gain of 7.3 per cent since New Year. LME cobalt, quoted on the Boursorama feed the BCC uses, fell from US$48,565 a tonne at the end of January to US$35,265 on 17 February, down 27 per cent in seventeen days and 32 per cent since 30 December.

The supply side explains it. Glencore reported on 2 February that its cobalt output rose 40 per cent in 2022 to 43,800 tonnes, with the Mutanda mine alone producing 14,700 tonnes of cobalt in hydroxide, and guided to about 38,000 tonnes for 2023. The BCC’s own digest records 111,309 tonnes of Congolese cobalt in 2022, up 19.5 per cent on 2021. More tonnes met softer demand, and the price fell.

From the mine to the vault

Mining dollars reach reserves through tax payments, and February’s trickled.

The mechanism runs through the Treasury. Mining companies pay royalties and taxes partly in dollars. The BCC buys those dollars from the Treasury in what its table calls the repurchase of mining receipts, and they land in reserves. In 2022 the pattern was uneven: US$563.5 million in April, US$97.6 million in October, US$251.6 million in December. January 2023 brought US$110.3 million. In the first thirteen days of February the figure was US$29.6 million.

Timing is the likely explanation, since quarterly payment cycles and settlement dates bunch receipts. The digest does not say so, and a thin first fortnight is not a verdict on the month. But reserves are a stock built from those lumpy flows, and a quiet first half leaves the stock exposed to anything that spends.

Where the dollars went

The army line was the largest single movement in the foreign-currency budget.

The same table shows foreign-currency spending of US$145.7 million in the thirteen days to 13 February, against US$234.2 million for the whole of January. The line labelled army reached US$63.1 million, compared with US$36.0 million in January and US$56.1 million in December. Receipts for the period were US$40.7 million, leaving a deficit of US$105.0 million.

The BCC does not describe the use of the army line, and no causal link should be drawn from a single column. The timing is nonetheless notable. M23 fighters took the town of Kitshanga after the army withdrew, Al Jazeera reported on 1 February, with more than 450,000 people displaced by the months of fighting according to the report. Whether Kinshasa is buying equipment, paying contractors or both, the dollars leave through the same window that reserves come in by.

What the cover tells a treasurer

Months of imports fell from 2.63 to 2.34 even though the dollars barely moved.

Reserve cover is reserves divided by an assumed monthly import bill. On 30 December the BCC showed US$4,382.9 million as 2.63 months, implying an import bill of about US$1.67 billion a month. By 31 January the same arithmetic gave US$1.85 billion, so the denominator had been reset higher for 2023 by roughly 11 per cent. Ten weeks of cover is a modest buffer against a supply shock.

The weekly digest is the early-warning dashboard here, because it shows the receipts line, the army line and the cover ratio long before any annual statistic does. For businesses the signals to watch are the weekly mining-receipts line and the army line. Importers of fuel, food and machinery should hold their dollar cash for the next payment run rather than wait for a better rate, because a thin first fortnight is when the pressure builds. Exporters with cobalt exposure should price 2023 contracts on today’s US$35,000, not January’s US$48,500.