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Cablegate: Zim Notes 2-08-2008

VZCZCXRO9312
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSB #0134/01 0461055
ZNR UUUUU ZZH
R 151055Z FEB 08
FM AMEMBASSY HARARE
TO RUEHC/SECSTATE WASHDC 2491
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHUJA/AMEMBASSY ABUJA 1849
RUEHAR/AMEMBASSY ACCRA 1777
RUEHDS/AMEMBASSY ADDIS ABABA 1903
RUEHRL/AMEMBASSY BERLIN 0486
RUEHBY/AMEMBASSY CANBERRA 1180
RUEHDK/AMEMBASSY DAKAR 1537
RUEHKM/AMEMBASSY KAMPALA 1959
RUEHNR/AMEMBASSY NAIROBI 4388
RHEHAAA/NSC WASHDC
RHMFISS/EUCOM POLAD VAIHINGEN GE
RUEHGV/USMISSION GENEVA 1030
RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK
RHEFDIA/DIA WASHDC

UNCLAS SECTION 01 OF 03 HARARE 000134

SIPDIS

AF/S FOR S.HILL
ADDIS ABABA FOR USAU
ADDIS ABABA FOR ACSS
NSC FOR SENIOR AFRICA DIRECTOR B.PITTMAN
TREASURY FOR J.RALYEA AND T.RAND
STATE PASS TO USAID FOR L.DOBBINS AND E.LOKEN
COMMERCE FOR BECKY ERKUL

SIPDIS

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

SUBJECT: Zim Notes 2-08-2008


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. Price Movements-Exchange Rate and Selected products
Parallel rate for cash: ZW$6.4 million:US$1; Bank transfer rate:
Z$7million; Official rate: ZW$$30,000:US$1
Sugar steady at Z$5 million/2kg vs. controlled price of
Z$247,000/2kg
Cooking oil rose to Z$15.5 million/750ml vs. controlled price of
Z$440,000/750ml
Petrol and diesel steady at Z$10 and Z$9 million/liter respectively
vs. Z$60,000/liter at controlled price

-----------------------------
On the Political/Social Front
-----------------------------

3. Makoni Announces Candidacy... Simba Makoni stunned ZANU-PF this
week by announcing he would be a candidate for president. As a
rationale for his candidacy, he cited the desperate situation of the
Zimbabwean people and the failure of national leadership. Although
there had been speculation about a Makoni candidacy for weeks, he
had reportedly told President Mugabe in January that he would not
stand for the presidency. Makoni's immediate backers claim he has
substantial support within ZANU-PF, particularly from the Mujuru
faction, but he has not yet announced his backing, or whether he
will run as an independent or as head of a new party. After the
announcement, ZANU-PF expelled him from the party and state media
lashed out at him as a tool of the West. While Makoni has offered a
ray of hope to many Zimbabweans who have despaired of the MDC,
particularly in light of its failure to reunify, it is too early to
judge Makoni's strength or how the electorate will be split in a
three-person race between Makoni, Mugabe, and Morgan Tsvangirai. See
Harare 096.

4. MDC Reconciliation Fails... The long-anticipated MDC
reconciliation failed last weekend after the Tsvangirai-faction
national council refused to adopt an agreement reached by standing
committees of the two MDC factions on the allocation of
parliamentary seats. The sticking point was the Tsvangirai
faction's demand for more seats in Bulawayo. Both factions are now
independently considering their next steps in the wake of Simba
Makoni's announcement. See Harare 100.

5. GOZ Postpones Nomination Day And Extends Voter Registration
Period... The government postponed the nomination date (when
candidates must declare their intention to run and present requisite
documentation) by a week to February 15 and extended the voter
registration period to February 14. The government claims it
postponed the date in order to allow all political parties to have
more time to submit names of their candidates. Former Information
Minister and current legislator Jonathan Moyo had filed a lawsuit
against the GOZ on the basis that it had set the nomination date
before publication of the final constitutional boundaries as
required by the Constitution. Moyo told embassy officials he thinks
the GOZ rushed to extend the nomination date to avoid the
embarrassment of an adverse court ruling; others believe the GOZ
postponed the date in the wake of Simba Makoni's announcement in
order to give ZANU-PF time to vet candidates and nominate
individuals supportive of Mugabe.

6. American Surgeons Coming Back To Perform More Cleft Palate
Surgeries... Operation of Hope surgeons will return to Harare on
their third visit in early April to perform free lip and cleft
palate surgery on children.

HARARE 00000134 002 OF 003

--------------------------
Economic and Business News
--------------------------

7. Liquidity Improves On The Back Of Monetary Policy Adjustments...
Bank liquidity has improved on the money market with a forecast of
about a Z$11 trillion (US$1,774,193 at Z$6.4 million:US$1) surplus
on February 7, 2008. A survey of most banks found them to be
benefiting significantly from the 10 percentage point reduction in
statutory reserve requirements and the reduction in duration from
270 to 7 days of the zero-coupon non-negotiable certificates of
deposit that mop up excess liquidity, announced by RBZ Governor Gono
in his Monetary Policy Statement (MPS) of January 31. Moreover, the
challenges bedeviling the electronic transfer of funds system (RTGS)
in recent weeks appear to have abated somewhat, possibly due to
volume relief from the twenty fold increase in allowed check
amounts, also announced in the MPS. As a result, the market has
been ending the day in balance and banks have not needed to resort
to the RBZ's prohibitive accommodation rates of 1,200 and 1,650% for
secure and unsecured borrowing respectively.

8. Colgate-Palmolive Pulls Out Of Zimbabwe... Colgate-Palmolive
(Zimbabwe) is shutting down its laundry detergent and fabric
conditioner plant and pulling out of Zimbabwe. According to the
managing director, the past year's price control assault was the
final blow following several downsizing exercises undertaken as the
business environment deteriorated.

9. January Food Inflation Figures In... A leading local
supermarket chain shared with us its food inflation study for
January. Contrary to our own observations of very sharply rising
prices, it showed the month-on-month rate of increase in prices
having roughly halved for the baskets of both high and low-income
earners. The annual rate of inflation remained at around 100,000%
across incomes.

10. Newspaper Prices Soar... In another blow to access to
information for making informed decisions ahead of the March 29
elections, Zimbabweans woke up to a quadrupling of newspaper prices
last week, only days after newspaper companies announced a reduction
in the print run due to newsprint shortages. The government's
mouthpiece, The Herald, now costs Z$3 million, up from Z$900 000;
its weekly, The Sunday Mail, shot up to Z$4 million from Z$1.2
million. In the independent press, The Standard rose to Z$5.6
million from Z$I.2 million, while its sister paper The Zimbabwe
Independent, like the Financial Gazette, is now selling at Z$7.2
million, up from Z$1.8 million.

11. Tobacco Crop Forecast Dropping; Uncertain Outlook For Winter
Wheat... Commercial Farmers' Union (CFU) President Trevor Gifford
told us this week, after completing a countrywide farm tour, that
under the most favorable circumstances, the tobacco crop would
probably only be about 55 million kg this year, down from 73 million
kg last year and well off the GOZ's target of 120 million kg.
Tobacco production peaked at 236 million kg in 2000. On winter
wheat, only 60% of the farmers had been paid for last year's crop
and the foreign exchange portion of payment, promised by RBZ
Governor Gono in his mid-term Monetary Policy Statement of October
1, 2007, was only beginning to trickle in. Gifford said the GOZ's
payment track record and low controlled prices gave no confidence to
farmers to plant wheat this coming winter.

12. Falling Seed Maize Crop... The controlled price of seed maize
(only a fraction of the world price) and the inadequate availability
of inputs will result in a seed maize crop of about 20,000 MT this
year against a national requirement of 35,000 MT plus 25% carry-over
to cover re-planting, according to our contacts at the CFU and in
industry. Zimbabwe, once a major seed maize exporter, will

HARARE 00000134 003 OF 003


inevitably once again be forced to import seed maize in 2008--at
world market prices.

13. More Commercial Farms Gazetted For Acquisition... Thirty-one
commercial farms were listed for acquisition in a General Notice
signed by Didymus Mutasa, Minister of State for National Security,
Lands, Land Reform and Resettlement in the President's Office on
February 1, 2008. The notice transfers ownership of the acquired
land with full title to the State with effect from the date of
publication of the notice.

14. Basal And Top Dressing Fertilizer In Short Supply... The FAO's
Agriculture Coordination Working Group reported on January 31 that
total imports of urea stood at 45,452 MT against a requirement of
764,000 MT, and a total of 51,568 MT of basal fertilizers had been
imported as of 25 January 2008 against a requirement of 720,000 MT.
Fertilizer companies and primary raw material suppliers continue to
operate below capacity due to: prices lagging behind production
costs despite a price review in December 2007; foreign currency
shortages; phosphate shortages; power shortages; coal shortages;
skilled/unskilled manpower shortages; and poor and deteriorating
rail service.

15. Quote Of The Week From RBZ Governor Gono's Monetary Policy
Statement of January 31, 2008:
"Some would want to simply look at our current high levels of
inflation, foreign exchange shortages and other constraints and bay
for the blood of the Central Bank Governor, but the substance of the
matter is that without innovativeness and thinking and acting
outside the box, things could have been worse under the decade-long
spell of sanctions."

MCGEE

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