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Cablegate: Zim Notes April 25, 2008

VZCZCXRO0501
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSB #0376/01 1161309
ZNR UUUUU ZZH ZDK CTG RUEWMFC 0114 1200925
R 251309Z APR 08 ZDK NUM SVC
FM AMEMBASSY HARARE
TO RUEHC/SECSTATE WASHDC
SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHUJA/AMEMBASSY ABUJA
RUEHAR/AMEMBASSY ACCRA
RUEHDS/AMEMBASSY ADDIS ABABA
RUEHRL/AMEMBASSY BERLIN
RUEHBY/AMEMBASSY CANBERRA
RUEHDK/AMEMBASSY DAKAR
RUEHKM/AMEMBASSY KAMPALA
RUEHNR/AMEMBASSY NAIROBI
RUEHGV/USMISSION GENEVA
RHEHAAA/NSC WASHDC
RHMFISS/EUCOM POLAD VAIHINGEN GE
RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK
RHEFDIA/DIA WASHDC
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 03 HARARE 000376

SIPDIS

C O R R E C T E D C O P Y (ZDK NUM SVC)

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 April 25, 2008

HARARE 00000376 001.5 OF 003


-------------
1. SUMMARY
-------------

Topics of the week:
- Signals or Smoke Screen, State-Media Floats Idea of Government of
National Unity
- No End To Post-Election Violence
- Recount Results Trickle In
- UN Human Rights Officials Visit Harare
- Chinese Ship With Arms For Zimbabwe On Its Way Home
- Government Postpones COMESA Summit
- Substantial Salary Increase For Zimbabwe Defense Forces (ZDF)
Personnel
- Don't Tell The Americans You're Hungry
- Zimbabwe Dollar In Freefall
- Tobacco Auction Floor Opening Delayed
- Bleak Outlook For Cairns Holdings
- Yet Some Investors See Opportunity


---------------------------------
2. Price Movements-Exchange Rate
and Selected products
---------------------------------

Parallel rate for cash shot to ZW$100million:US$1;
Bank transfer rate: Z$140 million;
Official rate: ZW$$30,000:US$1

Sugar more than doubled again to Z$450 million/2kg vs. controlled
price of Z$8million/2kg

Cooking oil again nearly doubled to Z$350 million/750ml vs.
controlled price of Z$9.3million/750ml

Petrol and diesel rose to Z$140 million/liter vs. controlled price
of Z$60,000/liter

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

3. Signals or Smoke Screen, State-Media Floats Idea of Government Of
National Unity... In an unexpected development, the
government-mouthpiece The Herald ran an editorial this week by a
well-known pro-government commentator that called for SADC to
mediate negotiations between ZANU-PF and MDC-Tsvangirai (MDC-T) for
a transitional government of national unity (GNU) with President
Mugabe at its head. It also recommended that the "progressive
international community," represented by the "US/UK establishments,"
act as the third key player in the negotiations. It called on all
stakeholders to recognize and accept that the March 29 elections had
not produced an outright winner in the presidential race and that it
was unlikely that the on-going recount would substantively alter
that position. The editorial disappeared off The Herald's website
in the course of the day and a government spokesman denied the
government was considering a GNU.

According to reports in the April 25 edition of The Independent,
SADC is pushing for a GNU as a solution to Zimbabwe's political
crisis, arguing that the anticipated presidential election runoff
expected sometime in May would not end the impasse. MDC-T Secretary
General Tendai Biti said the proposal in The Herald should be seen
as a reflection of ZANU-PF's thought process, contending that it
showed ZANU-PF knew Mugabe could not win a runoff. There were
reports that soon after the March 29 elections Mugabe realized he
had lost and was close to coming to terms with MDC-T over a GNU and
a transition plan; however, senior regime insiders fearing for their

HARARE 00000376 002.5 OF 003


own future nixed the idea and rolled-out a campaign of violent
retribution to whip the electorate into submission ahead of a second
round of voting. See Harare 0367.

4. No End To Post-Election Violence... Gangs of war veterans and
ZANU-PF youth continue a state-sponsored terror campaign in rural
areas; burning homes, beating opposition supporters in public, and
forcing attendance at ZANU-PF rallies. ZANU-PF thugs and some
security forces are also victimizing and intimidating urban
opposition supporters. Over 450 victims have required medical
treatment for injuries related to post-election violence.
Opposition and human rights groups report shortages of critical
supplies and resources necessary to assist the growing population of
internally displaced persons. Post is working closely with other
international donors and partners to assist. See Harare 0359.

5. Recount Results Trickle In... A contentious recount of 23
constituencies expected to la3
7Q repeated in recent weeks that it
would not participate or honor a re-run or recount, but its party
polling agents were present at the recount centers, as were SADC and
local election observers. Consensus speculation is that ZANU-PF
called for the recounts in order to pad President Mugabe's
embarrassingly low support and wrestle control of the House of
Assembly back from the opposition, which won a majority in the lower
house for the first time ever. ZANU-PF needs to swing at least nine
seats back to its side to regain the majority. So far, the recount
has failed to change any of the previously declared outcomes.
Quoting well-placed ZANU-PF sources, The Independent reported on
April 25 that "things were not going according to plan" and that the
recount was now an "exercise in futility."

6. UN Human Rights Officials Visit Harare... On April 24, donors in
Harare met with two visiting representatives of the UN Office of the
High Commissioner for Human Rights (OHCHR), David Johnson, the
Regional Representative for Southern Africa based in Pretoria and
Tsatsu Dawson, the Zimbabwe desk officer at OHCHR Geneva. Dawson

SIPDIS
explained that the GOZ last year refused to agree to the posting of
a Human Rights Officer in Harare, but that OHCHR hoped to use a
series of visits to make a contribution during this difficult
period. The current visit was focused on helping the UN country
team and Human Rights NGOs deal with the situation, which Johnson
referred to as a "burning crisis." Johnson and Dawson were meeting
with the human rights NGO community and were very interested in the
donor field visits (see Harare 0359). Donors were skeptical about
Johnson's description of OHCHR efforts to create a government-led
clearing house for human rights complaints. However, they agreed
heartily with his statement that, at the moment, the most urgent
issue in Zimbabwe is the human rights crisis, not the political
situation, and that human rights progress is essential to arrive at
a political solution. UN ResRep Dr. Zacarias, surprisingly, said
many of the right things on the human rights situation here.

7. Chinese Ship With Arms For Zimbabwe On Its Way Home... The An Yue
Jiang, which was carrying arms destined for Zimbabwe, is now
returning home, with its cargo, after the shipment was vilified in
the international press and, more significantly, in the region.

8. Government Postpones COMESA Summit... Dodging potential
embarrassment, the Ministry of Foreign Affairs announced this week
the postponement of the Common Market for Eastern and Southern
Africa (COMESA) Summit that had been scheduled to take place on May
5-15 in Victoria Falls, due to "the uncompleted electoral process."
Zimbabwe is about to assume the chairmanship of COMESA.

9. Substantial Salary Increase For Zimbabwe Defense Forces (ZDF)
Personnel... ZDF personnel received a substantial real salary

HARARE 00000376 003.5 OF 003


increase in April. A Warrant Officer who had been earning Z$8
billion/month got Z$25 billion. Even in real U.S. dollar terms, the
increase was significant, going from US$190 four weeks ago, using
the parallel exchange rate for cash, to US$250 today for a Warrant
Officer. The Zimbabwe Republic Police did not get any increase.

10. Don't Tell The Americans You're Hungry... The Operation of Hope
surgical team departed Harare this week after completing 81 free
corrective cleft lip and cleft palate surgeries on its third visit
to Zimbabwe. At a celebration for hospital staff, parents,
patients, and the team, one grateful father told us the hospital
administration had warned parents not to complain to the Americans
about hunger. He also said that he, his wife and infant would stay
on another night at the hospital and depart early the next day
rather than risk a beating at the bus station if they arrived home
at night.

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

11. Zimbabwe Dollar In Freefall... The Zimbabwe dollar is in another
freefall phase, having dropped from Z$82 million:US$1 cash rate
eight days ago to Z$100 million:US$1 today. The depreciation
largely reflects the dire shortage of foreign exchange on the local
market. We hear repeatedly from exporting companies and NGOs that
the Reserve Bank has raided their Foreign Currency Accounts, most
likely to finance the recent election and associated give-aways.

12. Tobacco Auction Floor Opening Delayed... Zimbabwe's famous
tobacco auction floors failed to open as planned this week,
bedeviled by disagreement between growers and government over the
tobacco support price and arrears to farmers for the foreign
exchange portion of last year's crop. Farmers said they will not
deliver their crop until the government has met their demands for
payment and guaranteed a viable support price.

13. Bleak Outlook For Cairns Holdings... Food sector giant Cairns,
suffering from a negative cash flow, might not be able to meet its
interest obligations, according to asset manager Imara Capital,
commenting on the company's interim results to February 29. Volume
declined by 38 percent in the period under review, mainly due to
material shortages. Hyperinflation has eroded any benefit the
company got from deeply subsidized BACOSSI funds last year. See
Harare 0365 and 0366 on how some U.S. companies are faring and
Harare 0363 for an overview on coping in the business community.

14. Yet Some Investors See Opportunity... In the midst of crisis,
some investors see opportunity here that the risk averse abandoned
long ago. Banking on economic recovery and attracted to Zimbabwe's
cheap price tags, investors are looking at sectors with
international links or those that will benefit from an increase in
consumer spending. See Harare 0361.

MCGEE

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