October’s BCC digest lets a reader separate price, volume and financing in the DRC’s reserve rebuild.

By Kanisa Magazine · October 2021

Congo’s external account in October 2021 is being rebuilt by price, volume and a one-off financing event at the same time, and a company reading the headline reserve figure should separate the three. The BCC’s digest of 27 October puts London copper at US$10,651 a tonne on 20 October, 36.5 per cent above its end-2020 price, cathode cobalt at US$56,291, up 61.9 per cent, and Brent crude at US$85.62 a barrel on the 22nd, up 66 per cent.

Strict reserves, those the central bank holds on its own position, stood at US$3,273 million on 22 October, from US$709 million on 31 December. The commodity prices explain part of that climb. They do not explain all of it.

The price effect: two exports up, one import up faster

Brent rose more than copper, so the DRC’s terms of trade improved less than the export headline suggests.

The DRC sells copper and cobalt and imports most of its refined fuel. The BCC table shows copper up 36.5 per cent and cobalt up 61.9 per cent since January, against crude oil up 66.2 per cent. Each tonne of copper therefore buys about 18 per cent less fuel than it did in January, and each tonne of cobalt about the same. For a mining company that matters twice: diesel is a large operating cost at remote sites, and the rise shows up in the franc price of transport and generation.

Cobalt’s jump deserves a separate note. The London cathode quote moved from US$52,428 a tonne to US$56,291 in the second half of October, with the BCC series carrying that figure forward each day, so the digest reflects a single step rather than a trend. A single quote is a thin basis on which to forecast receipts.

The volume effect: Kamoa-Kakula is not yet in the numbers

Cumulative copper output to July was 14.2 per cent higher, and the newest mine started after the period began.

The same digest shows copper output of 1,039,670 tonnes to July against 910,443 tonnes a year earlier, with cobalt up 9.1 per cent. Kamoa-Kakula started producing concentrate on 25 May, so its ramp-up covers only the last two months of the cumulative figure and the entire next one. The price and volume effects therefore compound for the rest of 2021, and a reader looking at the data in October is seeing the early part of both.

The financing effect: a reserve asset, not an earning

The IMF credits the 2021 SDR allocation of about US$1.5 billion and larger central-bank purchases for the rise in gross reserves.

The IMF’s 27 October statement gives US$3.3 billion for reserves in mid-October, up from US$0.8 billion at end-2020, and attributes it to the Special Drawing Rights allocation of August 2021 and stronger foreign-exchange purchases by the Banque Centrale. Governor Malangu Kabedi Mbuyi had told ministers that the record level reached US$3,356.76 million on 17 September, according to Radio Okapi. Import cover on the strict measure is 3.1 months in the digest.

An allocation counts as reserves but is not generated by trade. The test of the external account is how much of the rise comes from dollars bought in the market, and the BCC has not published that split in this digest. The IMF’s own wording points to both, which is the right way to read it.

Consequence for companies with dollar costs

A stronger buffer lowers the risk of a sudden shortage of dollars, not the risk of a fall in the copper price.

For importers, the higher cover reduces the chance that dollars are rationed in the next quarter. For mine suppliers, it raises the chance that payment in dollars can continue without delay. For anyone whose revenue is in francs, nothing in the table changes the cost of inputs priced off Brent. The decisive action is to build contracts that survive a reversal: price-review clauses linked to copper and fuel, dollar escrow for large imports, and delivery schedules tied to the quarter in which Kamoa-Kakula’s output starts to appear in the BCC’s cumulative column.