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Cablegate: Zim Notes March 20, 2008

VZCZCXRO0659
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSB #0225/01 0801643
ZNR UUUUU ZZH
R 201643Z MAR 08
FM AMEMBASSY HARARE
TO RUEHC/SECSTATE WASHDC 2612
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHUJA/AMEMBASSY ABUJA 1881
RUEHAR/AMEMBASSY ACCRA 1824
RUEHDS/AMEMBASSY ADDIS ABABA 1948
RUEHRL/AMEMBASSY BERLIN 0527
RUEHBY/AMEMBASSY CANBERRA 1225
RUEHDK/AMEMBASSY DAKAR 1582
RUEHKM/AMEMBASSY KAMPALA 2004
RUEHNR/AMEMBASSY NAIROBI 4435
RHEHAAA/NSC WASHDC
RHMFISS/EUCOM POLAD VAIHINGEN GE
RUEHGV/USMISSION GENEVA 1075
RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK
RHEFDIA/DIA WASHDC
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 03 HARARE 000225

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
CIA WASHDC

SIPDIS

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

SUBJECT: ZIM NOTES MARCH 20, 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.

------------------------------
Price Movements-Exchange Rate
and Selected products
------------------------------
2. *Parallel rate for cash soared to: ZW$42million:US$1; bank
transfer rate: Z$60 million; official rate: ZW$$30,000:US$1

Sugar jumped to Z$45 million/2kg vs. controlled price of
Z$8million/2kg

Cooking oil steady at Z$40million/750ml vs. controlled price of
Z$9.3million/750ml

Petrol and diesel shot to Z$50million/liter vs. controlled price of
Z$60,000/liter

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

3. ZEC Briefs Stakeholders on Elections... The Zimbabwe Electoral
Commission (ZEC) briefed SADC observers, diplomats, and political
parties on March 18 in Harare, assuring them it was prepared for the
elections. Key questions remained however. The ZEC reported that
more than 300,000 names were added to the voter roll during the 2
week registration period in February, an enormous number. Total
registration is almost 6 million, 300,000 more than in 2005--this
despite a continuing exodus from the country. The ZEC also could not
provide an adequate response to concerns about the dearth of polling
stations in urban areas, and was apparently unaware of a statute
published the day before on March 17 requiring police presence in
polling stations. Additionally, the ZEC was unable to explain how
the integrity of the voting process would be ensured when the final
tally of votes in the presidential race would take place at the
national command center in the absence of observers. All in all, we
have serious doubts as to whether the ZEC is ready for prime time.

4. Western Journalists Still Not Accredited... With elections less
than two weeks away, no western journalists have yet been accredited
to cover them. Press reports indicate that over 300 have applied,
but Byzantine procedures, vetting by three ministries and an active
desire on the part of the GOZ to keep western media out has resulted
in an absence of accreditation for western journalists, although
credentials for journalists from "friendly" countries have been
issued.. Presidential spokesman George Charamba last week accused
foreign journalists in Zimbabwe of being spies. On March 17, he
called in stringers and representatives of foreign media
organizations resident in Harare and delivered a thinly veiled
threat, telling them their election coverage would be closely
scrutinized and their reporters followed over the election period.
(See Harare 214 for details.)

5. Yet Parliament Still Working With Embassy Staff... Despite the
GOZ anti-US rhetoric and the closure last year of the State
University of New York (SUNY) parliamentary support project, the
Parliament's librarian recently reached out to the Embassy
Information Resource Center (IRC) for help in selecting new staff.
The Clerk of Parliament formally invited our IRC director to assist
in interviewing candidates for two librarian positions at
Parliament. The only outsider on the interview panel, our

HARARE 00000225 002 OF 003


director's participation continued a tradition of cooperation with
the Parliamentary library that has not ended even as unfriendly
rhetoric increases.

6. Junior Doctors on Strike... Junior doctors in government
hospitals went out on strike again demanding better pay and improved
working conditions. This marks the third labor action by junior
doctors over the past year. At present, a junior doctor earns
between ZW$700 and $900 million (roughly US$16 - $21) per month - or
about a dollar a day. To put it in context, the average cost of a
one-way commuter bus ride in Harare jumped to ZW$15 million (about
US$0.35) this week. Many nurses also have stopped reporting for
work on a regular basis citing high transport costs. The decline of
working conditions at State hospitals has mirrored that of the rest
of the economy. There is a perpetual lack of basic supplies,
diagnostic machines remain in disrepair due to a shortage of foreign
currency to import necessary parts, surgery rooms do not have
reliable electricity, and blood supplies are insufficient. As such,
doctors are refusing to work in conditions where they have to ration
care and determine who survives.


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

7. *The Zimbabwe Dollar Roller Coaster Continues and Domestic Debt
Skyrockets... The local currency continued its swoon on the parallel
market this week, underpinned by the continued high demand for
foreign currency against the backdrop of low inflows. Surpluses on
the money market also contributed to driving the parallel market
cash rate from Z$30 to Z$40 million:US$1 and the transfer rate from
Z$40 to Z$60 million:US$1. Anxiety associated with elections is
likely to continue pushing parallel rates to record levels in the
short to medium term. Zimbabwe's domestic debt also scaled new
heights, rising from Z$21 trillion at the beginning of the year to
Z$1.4 quadrillion (roughly US$33 million - street rate) by February
29, 2008. The surge in government expenditure is associated with
both the prevailing hyperinflationary environment and the impending
elections. At the same time, revenues have not risen in lock step,
resulting in a widening deficit that the GOZ has had to finance
through increased borrowing from the domestic market. The effect of
such borrowings has been reflected in the high growth in money
supply and, inevitably, inflation.

8. Gold Output Falls Further... Gold output fell 58.9% to 315.7kg
in February from 768.1kg in the same month last year, according to
latest figures from the Chamber of Mines. Gold output in January
dropped to 370.2kg from 819kg in the same month last year, further
decimating a formerly significant source of foreign exchange for the
GOZ.
9. Another Food Company Manager Arrest... As elections draw near,
government has pulled in yet another food company manager on
allegations of overcharging. The GM of Bakers Inn was arrested this
week on charges of selling a standard loaf of bread for Z$9 million
instead of the controlled price of Z$6 million.

10. Johns Hopkins Economist On Zimbabwe's Hyperinflation... In a
short book sponsored by Botswana-listed asset management firm Imara
Holdings Ltd and published this month in Zimbabwe, US economist
Steve Hanke outlines how to stop hyperinflation in Zimbabwe. In
Zimbabwe: Hyperinflation to Growth, he recommends replacing the
central bank with a currency board, dollarization or a less well
known system of "free banking" that was used in Zimbabwe until
1940.

11. "Director of the Year"... Nigel Chanakira was named "Director

HARARE 00000225 003 OF 003


of the Year" by the Institute of Directors this week. Founder of
Kingdom Financial Holdings Ltd, he masterminded the recent merger of
Kingdom, Meikles Africa Ltd, and Tanganda Tea Company, and now
serves as CEO of Kingdom Meikles Africa Ltd. The conglomerate is
planning to raise US$600 million in an IPO in London in May. Half
the money will be invested in Zimbabwe, executives tell us,
including on the refurbishment of the flagship Meikles Hotel; also
in sight is expansion of its TM Supermarket chain outside of
Zimbabwe. ZimSun CEO Shingi Munyeza was runner up for the
prestigious award for the second year in a row. He might have a
shot at the top spot next year: He told us that after the March
elections, ZimSun will announce its acquisition of several leading
hotels in South Africa. He cited four international banks in
association with financing of the acquisitions, as well as with the
recently announced construction of five new ZimSun hotels in
Zimbabwe.

12. Exports, Key To Business Survival... Paper mill breakdowns,
problems in sourcing sufficient coal, and interruptions in power had
a negative effect on production at paper manufacturer Hunyani last
year. Nevertheless, the company's managing director anticipates
exports rising from US$10 million in 2007 to around US$12 million in
the year to October 2008 thanks to increased orders for banana boxes
into Zambia and Mozambique. He lamented the slow pace of price
increase approvals and the punishing export tax in the form of
government retention of a share of forex earnings. Hunyani believes
it could raise exports to 80% of output if allowed to retain 100% of
its export proceeds rather than 65%.

MCGEE

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