Copper gained 5 per cent and Brent lost nearly 13 per cent, yet BCC reserves rose by only US$18 million in November.

By Kanisa Magazine · November 2022

November gave Congo’s external account something it had lacked all year: copper moving up while oil moved down. London copper closed the BCC’s latest digest at US$8,067.50 a tonne on 25 November, up 5 per cent from US$7,663 at the end of October, while Brent crude fell from US$92.50 to US$80.89, a drop of nearly 13 per cent. Reserves, however, barely stirred, at US$3,991 million.

For an economy that sells metal and buys fuel, that combination is the best of the cycle. The reserve figure shows how little of it has yet reached the central bank.

A terms-of-trade swing in one month

Higher export prices and a lower import bill moved in Congo’s favour together.

Copper touched US$8,345.50 on 14 November before easing back. Brent, which the BCC lists at US$107.40 at the end of March and US$85.25 at the end of September, fell by roughly a quarter from its spring level. The BCC’s cobalt line is unchanged at about US$51,500 a tonne for the whole month, which says more about the quote than about the market, but even on that reading cobalt did not fall further. Gold gained, from US$1,639 an ounce at the end of October to US$1,757 on 25 November.

The reserve series moved by far less than the prices. It stood at US$3,973 million on 31 October and US$3,991 million on 25 November, or 2.39 months of imports, against US$3,920 million at the end of September. A gain of about US$71 million in two months is small beside the US$460.5 million that a single mine, Kamoa-Kakula, recognised in revenue in the third quarter on sales of a record 93,812 tonnes of payable copper.

Why the cushion grew slowly

Receipts take weeks to reach reserves, and the budget claims the dollars on the way.

The route from price to reserves is long. Export proceeds are repatriated into bank accounts in Congo, some of the foreign exchange is bought by the BCC for the state’s own needs, and the remainder circulates in commercial banks. The central bank’s foreign-currency budget shows what happens at the end of that route: by 23 November, defence spending had taken US$53.5 million of its dollars and the table’s balance line stood at about minus US$115 million. A purchase of dollars from the mining sector of roughly US$93 million in the same November column offset only part of the outflow.

Kamoa-Kakula’s own commentary also points to the costs that sit between the mine and the Congolese economy. Its owners cited rising logistics costs, with trucking and border crossings the main pressure, and raised the low end of 2022 copper guidance to 325,000 to 340,000 tonnes. More tonnes bring more freight, imported spares and fuel, so a part of every export dollar is spent before it is banked.

What the Fund added

A promised US$200 million is worth about five per cent of reserves.

On 18 November the IMF said its staff had reached agreement with the authorities on the third review of the Extended Credit Facility, which would release 152.3 million SDRs, about US$200 million, once its board approved. The Fund projected growth of 6.6 per cent for 2022, helped by higher-than-expected mining output, and pointed to spending pressure from the eastern conflict and arrears repayment, with restraint needed on fuel subsidies. It put reserves at roughly two months of imports at the end of October, a lower figure than the BCC’s own 2.38 months, presumably because the two use different definitions.

The disbursement is worth about five per cent of the BCC’s reserves. It is a useful addition but no substitute for mining receipts: the cushion depends on mining volumes holding, on copper staying above US$8,000 and on Brent staying below US$90.

What importers and exporters should do

A cheaper oil quarter is the moment to fix the next year’s import costs.

For importers of fuel-intensive inputs and for fuel retailers, November’s Brent price is a window. Forward contracts struck at US$81 a barrel for the first half of 2023 would lock in a price 25 per cent below March’s. Exporters outside mining, such as timber and agricultural exporters, can use the stable official rate to pre-sell dollars on three- to six-month terms.

For finance directors the signal in the data is the gap between price and reserves. It says that better terms of trade are real but slow. Plan for a cushion that stays near 2.4 months through the winter, and treat any improvement beyond that as a bonus.