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Cablegate: Zim Notes May 23, 2008

VZCZCXRO1873
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSB #0462/01 1441142
ZNR UUUUU ZZH
R 231142Z MAY 08
FM AMEMBASSY HARARE
TO RUEHC/SECSTATE WASHDC 2941
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHUJA/AMEMBASSY ABUJA 1973
RUEHAR/AMEMBASSY ACCRA 1996
RUEHDS/AMEMBASSY ADDIS ABABA 2117
RUEHRL/AMEMBASSY BERLIN 0662
RUEHBY/AMEMBASSY CANBERRA 1394
RUEHDK/AMEMBASSY DAKAR 1752
RUEHKM/AMEMBASSY KAMPALA 2173
RUEHNR/AMEMBASSY NAIROBI 4604
RHEHAAA/NSC WASHDC
RHMFISS/EUCOM POLAD VAIHINGEN GE
RUEHGV/USMISSION GENEVA 1257
RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK
RHEFDIA/DIA WASHDC
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 03 HARARE 000462

AF/S FOR S.HILL
ADDIS ABABA FOR USAU
ADDIS ABABA FOR ACSS
NSC FOR SENIOR AFRICA DIRECTOR B.PITTMAN
TREASURY FOR D.PETERS 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 EAGR EFIN EMIN ZI
SUBJECT: ZIM NOTES May 23, 2008

-------------
1. SUMMARY
-------------
Topics of the week:

- Tsvangirai to Return
- ZANU-PF Strategy To Maintain Power And Considerations of a GNU
- A Compendium Of Violence
- Media Crackdown
- Two Union Leaders Released On Bail, Another Arrested
- Bishop Kunonga Excommunicated
- Police Officer Fined For Assaulting Human Rights Lawyers
- Water Woes
- Zimbabwe Dollar In Free-Fall
- RBZ Suspends Mechanism For Trading Shares Between Stock Exchanges
-- Tobacco Auctions Interrupted Over Cash Shortages
-- Rich Platinum Claims Change Hands in Hush-Hush Deals
-- Government Orders Prop Up Ag Equipment Manufacturer

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

Parallel rate for cash diverged further, at ZW$430 million:US$1,
from inter-bank average of Z$390 million:US$1
Bank transfer rate jumped to: Z$530 million;
Official rate: ZW$$30,000:US$1

Sugar rose to Z$670 million/2kg vs. controlled price of Z$8
million/2kg

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

Petrol and diesel rose to Z$650million/liter vs. controlled price of
Z$60,000/liter

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

3. Tsvangirai to Return... After several false starts, it appears
that MDC leader Morgan Tsvangirai will actually return to Zimbabwe
this weekend. As yet, there are no definite plans as to when and
where he will kick off the election campaign.

4. ZANU-PF Strategy To Maintain Power And Considerations of a
GNU... Ruling party ZANU-PF's strategy to maintain power centers
around a campaign of terror in rural areas to weaken and intimidate
the opposition, targeted attacks and intimidation of the key
opposition officials, an information campaign to bolster ZANU-PF and
deny the opposition access to media, restrictions on international
election observers and intimidation of local observers, and a
vote-rigging apparatus that will stand in stark contrast to the
electoral structures of March 29. With ZANU-PF concerned that it
could lose the election despite its campaign of terror, and with the
MDC concerned that ZANU-PF might not yield power even if it loses
the election, there is growing talk of negotiations between the two
parties. If negotiations actually do take place, the obstacle to
any agreement will be who would lead. Tsvangirai rightly believes
he won the election and should not have to take a back seat in a
power-sharing arrangement. And even if Mugabe could be persuaded to
step down, those around him are unwilling at this point to give up
the reigns of power and the attendant emoluments of security and
wealth. See Harare 453.

5. A Compendium Of Violence... The Solidarity Peace Trust has
issued a comprehensive report on Zimbabwe's post-election violence:
"Punishing Dissent, Silencing Citizens: The Zimbabwe Elections

HARARE 00000462 002 OF 003


2008." The report concludes that a run-off election "is neither
practical nor desirable" in the current environment and recommends a
transitional government. See http://www.solidaritypeacetrust.org

6. Media Crackdown... Local media watch-dog organizations reported
the arrest or detention of at least five members of the foreign
media and four local journalists in relation to their post-election
reporting; many others have been harassed. The systematic
intimidation of journalists has included the resuscitation of old
legal cases against journalists and the re-arrest of previously
acquitted journalists. The post-election period has seen a
tightening of guidelines at the state-run Zimbabwean Broadcasting
Corporation (ZBC) by ruling party leaders and the dismissal of the
ZBC CEO Henry Muradzikwa for reportedly defying ministerial orders
to deny the opposition neutral pre-election coverage. These severe
limits on freedom of expression are yet more evidence that the
conditions for free and fair elections do not exist.

7. Two Union Leaders Released On Bail, Another Arrested...
Zimbabwe Congress of Trade Union (ZCTU) leaders Wellington
Chibebe and Lovemore Matombo were released on bail after spending
over a week in jail on charges of inciting violence. At their
hearing, Raymond Majongwe, General Secretary of the Progressive
Teachers Union of Zimbabwe (PTUZ) was arrested and held for several
hours; no charges were filed. PTUZ has been outspoken in recent
weeks, publicizing the targeting of teachers in rural areas and the
negative impact of this on rural schools. PTUZ also sponsored a
recent full-page advertisement in The Standard which referred to
President Mugabe as "Mr. Robert Mugabe;" it was perceived by the GOZ
as an insult and "denigrating" to the president.

8. Bishop Kunonga Excommunicated... The Anglican church
excommunicated Bishop Kunonga, a strong supporter of President
Mugabe, the weekend of May 17 for failing to follow church rules and
for starting his own church. This follows weeks of discord between
Kunonga and the newly appointed Bishop, Sebastian Bakare; Bakare's
services continue to experience disruptions by Zimbabwean police and
by Kunonga who insists on sharing the Anglican cathedral while the
courts continue to deal with Bakare's efforts to evict him.

9. Police Officer Fined For Assaulting Human Rights Lawyers... The
High Court recently ordered senior police official Joel Tenderere to
pay a total of Z$90 billion to two human rights lawyers who were
subjected to inhuman and degrading treatment when they were arrested
last year. Tenderere has previously been accused of ordering
assault and torture in other cases, including the arrest of Zimbabwe
Congress of Trade Union leaders in 2006.

10. Water Woes... The Herald reported today that ZINWA (Zimbabwe
National Water Authority) has for the second time in 2 weeks reduced
water production by 30% after running out of treatment chemicals.
Two weeks ago, the authority reduced water production by 20% only to
resume pumping at full capacity early this week before cutting down
again yesterday.

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

11. Zimbabwe Dollar In Free-Fall... The street value of the local
currency plummeted in the past week by 31.5% from Z$275 million:US$1
to Z$430 million:US$1. The Reserve Bank of Zimbabwe (RBZ)
attributed the collapse to excess demand for foreign exchange in the
face of low supply. Its recent liberalization of some foreign
exchange transactions was meant to increase exports and thus forex
earnings, but there is a lag before the positive effect kicks in.
Moreover, market players do not believe that the liberal foreign
exchange regime will last, given the steep increases in the price of
imports that it brought in. As a result, demand for foreign

HARARE 00000462 003 OF 003


exchange has risen far higher than under normal circumstances.

12. RBZ Suspends Mechanism For Trading Shares Between Stock
Exchanges... The RBZ suspended the fungibility of shares in Old
Mutual Limited, ABC and Kingdom Meikles Africa Limited. According to
a communication sent to the Zimbabwe Stock Exchange, shares in these
counters will now only be brought into the country but may no longer
be taken out as the latter entails the movement of much needed
foreign exchange out of the country. Notwithstanding this, Old
Mutual traded 25% firmer, ABC traded steady, and Kingdom Meikles
rose in value.

13. Tobacco Auctions Interrupted Over Cash Shortages... Business
ground to a halt this week at the country's three auction floors
after small-scale farmers stopped selling their crop in protest over
non-payment. Sales by the cash-dependent small-scale growers who
make up about 50% of the market surpass Z$500 billion on average.
For lack of availability of the new Z$5-50 billion "agro-cheques,"
however, these growers were only being paid out Z$5 billion in cash
and the rest in checks (many of the farmers do not have bank
accounts). Large-scale growers are paid via bank transfers. Rodney
Ambrose, CEO of Zimbabwe Tobacco Association told us that the
auctions were starting back up today as the "agro-cheques" became
increasingly available.

14. Rich Platinum Claims Change Hands in Hush-Hush Deals... The
GOZ appears troublingly willing to sell the family silver, or in
this case, platinum, in shadowy deals for short-term benefit to
questionable investors with no experience in platinum and absent
public tender or public scrutiny of the terms. Desperate for forex,
the GOZ has opted for the quick return. See Harare 459.

15. Government Orders Prop Up Ag Equipment Manufacturer... The MD
of publicly traded Steelnet (Zimbabwe), Dave McCann, told analysts
this week that the company had generated strong profits and cash in
the four months to April. Two very big orders for the GOZ's Farm
Mechanization Scheme - one for animal drawn implements and the other
for tractor drawn - had buoyed the numbers.

MCGEE

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