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Cablegate: Zim Notes December 14, 2007

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ZNR UUUUU ZZH
R 141030Z DEC 07
FM AMEMBASSY HARARE
TO RUEHC/SECSTATE WASHDC 2294
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHUJA/AMEMBASSY ABUJA 1797
RUEHAR/AMEMBASSY ACCRA 1690
RUEHDS/AMEMBASSY ADDIS ABABA 1820
RUEHRL/AMEMBASSY BERLIN 0426
RUEHBY/AMEMBASSY CANBERRA 1097
RUEHDK/AMEMBASSY DAKAR 1454
RUEHKM/AMEMBASSY KAMPALA 1876
RUEHNR/AMEMBASSY NAIROBI 4304
RHEHAAA/NSC WASHDC
RHMFISS/EUCOM POLAD VAIHINGEN GE
RUEHGV/USMISSION GENEVA 0947
RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK
RHEFDIA/DIA WASHDC

UNCLAS SECTION 01 OF 04 HARARE 001119

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TREASURY FOR J.RALYEA AND T.RAND
STATE PASS TO USAID FOR L.DOBBINS AND E.LOKEN
COMMERCE FOR BECKY ERKUL

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E.O.12958: N/A
TAGS: PGOV PREL ASEC PHUM ECON ZI

SUBJECT: Zim Notes December 14, 2007

1. The Embassy Harare Political/Economic Section began producing
Zim Notes in July, 2007 to present a perspective on current events
in Zimbabwe. Suggestions are always welcome. If you would like to
receive Zim Notes by email, as well, please contact Frances Chisholm
at chisholmfm@state.gov. Distribution is restricted to U.S.
government employees.

2. Parallel: ZW$1,700,000:US$1; Official: ZW#$30,000:US$1
Sugar on the parallel market is steady at Z$2.5/2kg vs. controlled
price of Z$247,000/2kg
Cooking oil on the parallel market rose to Z$6million/750ml vs.
controlled price of Z$440,000/750ml
Cash shortage depressed fuel price to Z$3million/liter vs.
Z$60,000/liter at controlled price

-----------------------------
On the Political/Social Front
-----------------------------
3. ZANU-PF Congress Endorses Mugabe - As expected, the ZANU-PF
Congress endorsed President Robert Mugabe as its candidate for
president in next year's elections. Mugabe, in a speech to the
Congress, said elections would take place in March. In a broadside
against western interference in Zimbabwe, he indicated, as he has in
the past, that SADC election monitors would be welcome, but not
monitors from the West.

4. SADC Talks Stalled - SADC talks between ZANU-PF and the MDC
stalled last week over MDC demands primarily for implementation of a
new constitution before elections, postponement of the date for
elections, and electoral reform. See Harare 1107. South African
president Thabo Mbeki has reportedly recalled negotiators to South
Africa this weekend in an attempt to break the impasse. Both
factions of the MDC have indicated they will at last form a
coalition to contest the elections, and will do so with or without
an agreement with ZANU-PF.

5. EU-AU Summit Fallout - The Herald trumpeted Mugabe's attendance
at the Summit as a victory for Zimbabwe over the UK. The lack of
African criticism of Zimbabwe at the Summit led Mugabe and the
ZANU-PF Congress to praise African unity. Meanwhile, responding to
German chancellor Angela Merkel's criticism of Zimbabwe that it
"damages the image of the new Africa, Information Minister
Sikhanyiso Ndlovu publicly called Merkel a "racist," a "fascist,"
and a "remnant of Nazism." The Herald printed a cartoon (reproduced
below) of a Swastika with Summit critics of Zimbabwe, Germany, the
Netherlands, Denmark, and Sweden named on the Swastika's points.

6. Secretary Honors Zim Human Rights Defenders - Secretary Rice
conferred the inaugural Freedom Defenders Award on Zimbabwe Lawyers
for Human Rights (ZLHR) in Washington on December 10, International
Human Rights Day. The award was instituted to honor foreign
activists and/or NGOs that demonstrate outstanding commitment to
1wQT93Rice who remarked that in Zimbabwe "civil society remains under
siege amid political and economic crises caused by the irresponsible
policies of the regime." The Secretary honored ZLHR for its
tireless and fearless efforts "to advance democratic principles, and
in particular, it has taken on the dangerous task of providing legal
representation to persecuted human rights and democracy defenders."
The honor was well deserved. Attacks, arrests and abductions
continue unabated, with more than 500 instances of human rights
abuses reported each month. (See related text and fact sheet.) In
the last year, the ZLHR caseload has increased by more than 20
percent.

7. Coincidence? - ZLHR held its annual Human Rights Lawyer of the
Year award banquet on December 7 at the Holiday Inn, Harare,
conferring the honor posthumously on Lawrence Chibwe, deputy

HARARE 00001119 002 OF 004


secretary of the Law Society of Zimbabwe, after his sudden death in

SIPDIS
an automobile accident last month. The ceremonies were difficult to
bear not only because of the sadness of having lost a charismatic
and dedicated human rights defender, but also because a six-person
band at a very thinly-visited cocktail reception for Zimpapers,
publisher of the government mouthpiece The Herald, blasted music
from the next room throughout the proceedings.

8. Civic Activists Keep Up Street Pressure - In the past week,
activists from Women of Zimbabwe Arise (WOZA) and National
Constitutional Assembly (NCA) staged separate street demonstrations
in Harare that resulted in beatings by police and arrests. On
December 7, police in Harare used batons to break up an estimated
crowd of 300 NCA activists who were demanding a new constitution and
protesting economic conditions. On December 11, more than 75
protesting WOZA members encountered similar police brutality in
Harare. See Harare 1106 for details.

9. SADC Tribunal Rules In Favor Of White Zimbabwean Farmer - The
SADC Tribunal in Windhoek ruled on December 13 in favor of Michael
Campbell who was contesting the compulsory acquisition of his farm
by the GOZ. The Tribunal issued a protection order for his farm and
ordered that the GOZ must not evict or allow the eviction of or
interference with his farm, its owners, employees or property. The
interdict will hold until the Tribunal decides on the main case
dealing with the legality of the contested expropriation. The
Tribunal noted in its ruling that according to relevant SADC
Protocols on human rights, democracy, and the rule of law, SADC
members must protect the rights of their citizens and ensure the
rule of law. Campbell appealed to the Tribunal after the Supreme
Court of Zimbabwe failed to act on his case.

10. New Zealand Extends Zim Travel Sanctions To Adult Children -
New Zealand announced on December 10 the extension of its travel ban
on associates of the Mugabe regime to their adult children.

11. Young Poets Express Anger - A group of mostly young poets,
calling itself Zimbabwe Poets for Human Rights, captivated an
audience of 75 during a 2-hour poetry slam/beat session at the
Embassy's Public Affairs Section. Their work expressed the anger,
despair, outrage and hope felt by many young Zimbabweans, and they
didn't hesitate to blame Mugabe and the GOZ. They asked why
"students armed with nothing but their brains" are being beaten by
cops. Why they are to "Look East when everybody else is looking
West," and why the rhetoric of liberation doesn't apply to young
black Zimbabweans. Members admitted to having been unable or afraid
to perform in public before. The reaction of the audience showed
they share the same outrage and frustration.

--------------------------------------------- ----
On the Economic and Business front
--------------------------------------------- ----
12. Reserve Bank Raises Reserve Requirements, Accommodation Rates
-The RBZ raised reserve requirements for demand deposits from 45% to
50% and for time deposits from 35% to 45% on December 7, reducing
the amount of funds available to the banks for lending and thus bank
revenue. It also increased the overnight accommodation rate to 975%
for secured borrowing (that's over one million percent annual
compounded interest), further cutting into banks' profitability.
Banks are already finding that the RBZ has robbed them of their
corporate borrowers by offering new concessionary lending facilities
(25% annual interest) across sectors. In addition, the banks are
facing the erosion of their deposit base as Zimbabwe's cash crisis
deepens. Lines for cash withdrawals snake around the city's blocks
and cash continues to command a premium in the parallel market.
While the RBZ's move might appear to indicate a tightening of
monetary policy, with the other hand the Reserve Bank is flooding
the market with its quasi-fiscal concessionary lending.
13. RBZ Governor Gono Says "Practical Solution [To Cash Crisis] On

HARARE 00001119 003 OF 004


The Way" - Gono indicated again this week that he will soon take
measures to alleviate the cash shortage. He is widely expected to
lop off more zeros on new bearer cheques some time between the end
of this week's ZANU-PF Congress and Christmas.
14. Inflation Reaches Six Digits, According To Private Account -...
Private sector estimates of the rate of inflation in November vary
from 80,000%, according to one leading supermarket chain, and an
average of 126,000% across income categories according to another
well regarded source.
15. Zimbabwe's Myriad Exchange Rates - As local currency
availability dries up, the Zimbabwe dollar appreciated on the street
this week to about Z$1.7 million:US$, but foreign exchange traders
are shifting more activity into the parallel market for bank
transfers. The official is Z$30,000:US$, the parallel market cash
rate is about Z$1.7 million:US$, the parallel market bank transfer
rate ("RTGS" rate) is about Z$5.2 million:US$, the benchmark Old
Mutual Implied Rate is about Z$4.3 million:US$, the benchmark fuel
price is about Z$3 million:US$, and the Embassy's own current rate
is Z$1.5 million:US$.
16. Meikles-Kingdom Merger Approved - Following uncertainties
surrounding the merger of Meikles Africa Limited and Kingdom
Financial Holdings Limited arising from the high valuation of
Kingdom, Meikles shareholders approved the merger by a margin of 54
to 46 on December 11. Apparently the desire to satisfy looming
indigenization requirements outweighed arguments for revaluation of
Kingdom. The shareholders also approved a name change to Kingdom
Meikles Africa. Based on combined pro-forma March 31, 2007 revenues
of Z$369.9 billion (US$711.35 million at the parallel exchange rate
for bank transfers), the new group will have an estimated market
capitalization of US$250-300 million which works out to 10 percent
of the Zimbabwe Stock Exchange market capitalization. The merged
companies plan to raise capital on the London Stock Exchange to
finance investments in hotels, among other assets, in Zimbabwe and
in the region, according to a member of the Board.
17. LonZim Raises 32.3 Million Pounds on AIM - Investor interest in
cheap local assets, at least in foreign currency terms, appears on
the rise. In this connection, Lonrho set up an investment Fund,
LonZim, in October 2007 to meet the investment demand. According to
Lonrho's chairman, David Lenigas, most of the initial investments
will be in property which he called "as cheap as chips". LonZim was
listed on the Alternative Investment Market in London with a mandate
to invest and operate in Zimbabwe and the Beira Corridor. LonZim
raised 32.3 million pound sterling from investors by selling 46.4
million shares. According to Bloomberg, Lonrho, which owns 39.4
percent of LonZim, said it planned to seek a separate listing of
LonZim shares "on a major stock exchange".

18. Update on "Mother Of All Agricultural Seasons" - Areas in the
central and eastern parts of the country have accumulated more than
200 mm of rainfall so far this agricultural season. Much of the
Midlands, Manicaland, Masvingo and some parts of Matebeleland South
provinces have received more than 125% of their long-term mean
rainfall. However Matebeleland North (Victoria Falls), some parts
of Mashonaland West (Kariba), and South of Midlands (Zvishavane)
have received less than 75% of their long-term average. Now if only
fertilizer were available...

19. No Relief For Business From Price Commission - The Herald
reported on December 8 that a meeting of the Confederation of
Zimbabwe Industries (CZI) with the National Incomes and Price
Commission (NIPC) ended in a stalemate after chairman Godwills
Masimirembwa rejected proposals by business to liberalize the
exchange rate and allow some level of free-play on pricing.
Dismissing business presentations as "cheap", he said industry must
produce "without excuses because cheap funds had been released for
such purposes."
20. Cover price of The Herald Doubles - The National Income and
Price Commission approved a 100% increase in the price of The Herald
to Z$600,000 last week.

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MCGEE

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