Congo Targets Airtime Touts as Central Bank Props Franc
Kinshasa, DR. Congo, Capital Markets in Africa: Mobile-phone airtime touts on the streets of the Democratic Republic of Congo’s capital have become the latest target in the government’s attempt to stop the slide of the Congolese franc.
The traders who peddle mobile credit to pedestrians in Kinshasa must stop speculating on the exchange rate and sell $1 airtime cards for no more than 1,000 Congolese francs ($1.05), according to a statement issued May 11 by the office of the Vice Prime Minister for Post, Telecommunications and New Technologies, Thomas Luhaka.
The Congolese franc has weakened 2.6 percent so far this year to 951.89 per dollar, after trading little changed all of last year, according to the central bank. The touts, who buy the airtime cards in dollars, have been reselling the minutes at effective exchange rates as high as 1,200 francs in anticipation of a further depreciation in the domestic currency.
The collapse in the prices of copper, the country’s biggest export, and other natural resources like cobalt and oil reduced Congo’s foreign-exchange earnings, bringing pressure to bear on the franc. Congo is Africa’s top copper producer and the world’s largest source of cobalt, which is used to make rechargeable batteries. It produced 995,805 metric tons of copper last year and pumps about 25,000 barrels of oil per day.
The government has vowed to continue protecting the franc, but the gradual erosion of its reserves is limiting its options.
“We are concerned by the history of inflation in this country,” said Vincent Ngonga Nzinga, deputy cabinet director in Prime Minister Matata Ponyo Mapon’s office. “This intervention should help to stabilize things,” he said May 13 in an interview in Kinshasa, after a meeting earlier in the week with the country’s mobile-phone companies.
Vodacom DRC, a unit of Johannesburg-based Vodacom Group Ltd., is Congo’s biggest mobile operator. It competes with companies including Orange SA and Bharti Airtel Ltd.
Analysts including Glenn Tshiany, head of global markets at Standard Bank Group, have said they expect the franc to fall further and that it’s only a matter of time before it reaches 1,000 francs, citing the airtime rates as an important leading indicator. The franc is already trading at 978 per dollar on the parallel market on the streets of Kinshasa, according to figures from the prime minister’s office.
Mobile-phone companies in the Congo, which say they have no control over the street vendors, have raised concern about the inflated prices.
“It has meant a 20 percent increase in the cost of recharging for our clients,” Orange managing director for Congo, Jean-Michel Garrouteigt, said by phone from the capital. “So far the communications seem to be working and the price in Kinshasa has come back down.”
Source: Bloomberg Business News