April 1997

Securing your investments – The Zaïrean dilemma

Securing your investments

The U.S. stockmarkets showed their volatile behaviour in March, the underlying fundamentals are allright but the pressure of a rise of the interest rate and the disbelieve of a number of traders in the potential of the markets turned the market in the first weeks of March negative. The certainty of an intrest rate rise made the markets getting stronger, a lot of listings stabilised and a few grew.

The coming month, or even couple of months, will be a time of defensive investing in the U.S. and expensive markets in Europe. The most promising markets for next month will be Germany, Italy and some emerging markets in South America. Especially South America is promising to be the most profitable in 1997.

To maintain a profit in your U.S. portfolio you shift towards a number of international established firms and some technology companies. With these companies in your portfolio you should be able to counter the downward trend and even make some profit. In the financial sector we continue to advice Citicorp, J.P.Morgan and American Express, we expect some bigger growth in the next month from South Western Bell and GTE in the tele-communications sector, where as it could be very interesting to buy into Compaq, Motorola, Sun computer, Sun microsystems, Lucent technologies and Honeywell in the IT sector. Other interesting companies to invest into are Procter & Gamble, diversified companies like General Electric and Textron, pharmaceutical companies like Pfizer and Eli Lily, we also still like retailer Sears and further companies like Exxon and Boeing.

In the Asian markets we are still considering Japan as a market to return to better times in the third or fourth quarter of 1997. On the Nikkei 225 we are still holding to companies like Sony, NEC and Matsushita in the electronics sector, conglomerates like Mitsubishi Corp. and car producer Toyota.

In Europe times are getting better for markets like Germany and Italy. In countries like the Netherlands and the United Kingdom the markets get a little overvalued and are very much influenced by the happenings in the U.S. This means the stocks will behave faster and more intense to changes in the economy. In the U.K. British Aerospace, British Airways and British Petroleum continue to offer some growth potential where as companies like Cadbury Schweppes and Grand Metropolitan and Barclays Bank in the financial sector offer the best growth chances.

The best investments can be maid in Germany, the companies there are in a very good position and are still busy restructuring themselves to operate efficiëntly on the world market. In the automobile sector BMW and Daimler Benz, in the financial sector Allianz, Deutsche Bank and the Dresdner Bank continue to offer growth. The same is true for MAN, Siemens, Bayer and conglomerates like VEBA and VIAG. Finally the biggest gainers in Germany will be the steelproducers Krupp-Hoesch and Thyssen if their coöperation is to work out well.

In the very expensive markets of Switzerland, Novartis is going to show some impressive growth. The CAC 40 in France is also listing a few companies which benefit from the economic “boom” in the world. The companies all belong to the consumer products/retail industry. Companies which promise to offer some profit are ELF-Sanofi, LMVH, L’Oreal, Carrefour and the entertainment company Canal+.

But with all your investments you should be aware that the markets will be very volatile and a major correction of 5 till 10% in the coming two months will be very likely. Although proper portfolio management should minimise your losses or even avoid them.

The Zaïrean dilemma

The conflict in Zaïre is still going on and there seems no political solution possible on the short term. The military advance of the ADFL forces of Laurent-Désiré Kabila against the government forces of president Mobuto seems to be unstoppable. And possible negotiations between the two sides will be very complicated because of the divergent interests of the two parties. Mobuto wants to keep the power and eventually share it. Where as Kabila wants to reform the government which is impossible as long as Mobuto has a more or less important role to play in that same government.

The ADFL, Alliance of Democratic Forces for the Liberation of Kongo-Zaïre, is using the same strategy as the querilla forces in Uganda and Eritrea have done who are now in power. It is a strategy of encircling the government forces but give them a way out, it is also avoiding nearly all risky military operations, limits casualties on their own side and simultaneous to the military advance a civilian government structure is introduced who has nothing in common with the old political structure. The people have, according the theory of Kabila, to be involved in governing the country, they have to feel responsible for rebuilding their nation. It is a way to rally people behind an idea and get support for your policy.

The forces of Kabila nearly control all areas east of the river Zaïre and they will soon take over the mineral rich provinces of Shaba and upper Zaïre. This will be a boost to the war-chest of Kabila and consequently another nail to the coffin of the power of Mobuto.

The political system of Mobutism drove the country to one of the most impoverished of the world. And this government initiated looting and corruption destroyed all possibilities of Zaïre to gain some wealth for their people.

The victories of Kabila are based on the popularity of Kabila, he promisess some hope for a decent future for the Zaïrean people, and the bad state of the warfighting capabilities of the national army.

The question remains what will happen, does Mobuto give up power, is Kabila capable of conquering the whole country and more important can he keep Zaïre together and finally what is the real power of Kabila in de ADFL?

It seems unlikely that Mobuto can maintain his position as president, he has no means to keep up that position, the bureaucracy and his army are to weak and divided to do so. It is just a matter of time before his fall will be a fact of live.

If Mobuto has stepped down it will become increasingly difficult for Kabila to keep his forces together. The main aim of the uprising has been eleminated and internal power policies will start their own live. Every “leader/war-lord” in the ADFL, in Zaïre and their possible foreign backers in Uganda and Rwanda will try to gain as much power as possible. And the mineral rich provinces might try to gain independence. The wish for independence has already surfaced several times and every time foreign forces, under UN flag or not, were necessary to destroy the independence movement, for example, in Shaba province.

The important question is; does Zaïre remains one country? After the step down of Mobuto the fighting will cease. The simultaneous program of setting up a civilian structure in territories which the ADFL has conquered will help Kabila to keep Zaïre together but you need more than a governmental organisation to do it. It is up to Kabila to enforce quickly a common cause to keep Zaïre united. He has to offer a program which makes sense to all leaders that a united Zaïre is beneficial to all sides/political players. At the same time he has to getaway from the influence of the support which has been given to the ADFL by “friendly” neighbours like Uganda and Rwanda. All those parties have their own policy which is likely not to be in the best interest of Zaïre.

Another internal problem is that Zaïre is in essence a very wealthy country if you consider the mineral resources and its agricultural possibilities. Therefore it will be very tempting for the new rulers not to do the same thing as the Mobuto regime has done in the former decades, use the resources of Zaïre to boost their own wealth. And what is even more dangerous to the unity of Zaïre, and especially to power of the ADFL of Kabila, are the ambitions of the several provinces and local leaders to establish their own little kingdoms.

The ghost of dissolution is closing into Zaïre, the ADFL has a lot of different foreign supporters and it has to rely largely on a Tutsi led army to secure their powerbase. The “new” rulers has to resist the temptation not to exploit the country as done by the Mobuto regime. And finally the several provinces must be kept in the fold of Zaïre. It can be concluded that a change is necessary in Zaïre and the first governmental actions of the ADFL look very promising but the inherent problems associated with the ADFL power-structure must be kept under control. Otherways could the victory of the ADFL in the end become the splitting factor of Zaïre. And that is absolutely an unwanted development.