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Cablegate: Zim Notes June 6, 2008

VZCZCXRO3010
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSB #0490/01 1581138
ZNR UUUUU ZZH
R 061138Z JUN 08
FM AMEMBASSY HARARE
TO RUEHC/SECSTATE WASHDC 2993
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHUJA/AMEMBASSY ABUJA 1987
RUEHAR/AMEMBASSY ACCRA 2030
RUEHDS/AMEMBASSY ADDIS ABABA 2151
RUEHRL/AMEMBASSY BERLIN 0693
RUEHBY/AMEMBASSY CANBERRA 1428
RUEHDK/AMEMBASSY DAKAR 1786
RUEHKM/AMEMBASSY KAMPALA 2207
RUEHNR/AMEMBASSY NAIROBI 4638
RHEHAAA/NSC WASHDC
RHMFISS/EUCOM POLAD VAIHINGEN GE
RUEHGV/USMISSION GENEVA 1293
RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK
RHEFDIA/DIA WASHDC
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 04 HARARE 000490

SIPDIS

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

E.O.12958: N/A
TAGS: PGOV PREL ASEC PHUM ECON EAGR EFIN EMIN ZI
SUBJECT: ZIM NOTES June 6, 2008


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

Topics of the week:

- U.S. Diplomats, Staff, Detained and Harassed By Police
- Gov Suspends Field Operations of All NGOs
- United Opposition Unlikely
- Public Unenthusiastic About GNU
- Senior MDC Officials Released
- Violence Spurs Internal Displacement
- Youth Movements Consolidate Election Efforts
- Labor Leader Elected To ILO Governing Board
- Local Currency Plunges at Record Rate
- Annual Inflation Breaching Two Million Percent
- Chamber of Mines Reviews Industry Performance
- Air Zim Paying Retention Bonus
- Poor Outlook for Winter Wheat Crop
- More Dismal Corporate Results

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

Parallel rate for cash diverged further at ZW$1.5 billion:US$1 from
inter-bank average of Z$990 million:US$1

Bank transfer rate jumped to Z$2 billion:US$1; official rate:
ZW$$30,000: US$1

Sugar soared to Z$1.4 billion/2kg vs. controlled price of Z$8
million/2kg

Cooking oil jumped to Z$2 billion/750ml vs. controlled price of
Z$9.3 million/750ml

Petrol and diesel rose to Z$1.3 billion/liter vs. controlled price
of Z$60,000/liter

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

3. U.S. Diplomats, Staff, Detained and Harassed By Police... On
June 5, five U.S. diplomats and two locally employed staff,
accompanied at times by British diplomats, were detained and
harassed by government security forces, officials, and their
supporters, in violation of the Vienna Convention during a
pre-election assessment trip in Mashonaland Central province.
Despite having followed the usual diplomatic procedures of
notification, two vehicles carrying Mission staff were detained for
more than four hours by police. Mission is closely monitoring the
impact of this incident on the local community and is using public
and private diplomatic tools to refute regime propaganda and condemn
the governmentQs illegal actions.

4. Gov Suspends Field Operations Of All NGOs... Following the
suspension last week of CAREQs humanitarian food aid operations
pending investigations of the NGOQs Qpolitical activitiesQ (see
Harare 475), on June 4, Minister of Public Service, Labor and Social
Welfare Nicholas Goche suspended all NGO field operations until
further notice, claiming that a number of them were in breach of the
terms and conditions of their registration.

5. United Opposition Unlikely... In separate briefings, MDC
presidential candidate Morgan Tsvangirai and former independent
candidate Simba Makoni discussed violence, the June 27 runoff, and
their perspectives on a government of national unity (GNU).

HARARE 00000490 002 OF 004


Significant differences in their views indicate that a united
opposition will not be immediately achieved. Both deplored ongoing
violence, but Tsvangirai laid the blame fully at the feet of ZANU-PF
while Makoni stated that both parties were to blame. Both men
called for a GNU to be convened as soon as possible, but v8Q8blic Unenthusiastic About GNU... Approximately 100
Zimbabweans crowded into a discussion sponsored by the Mass Public
Opinion Institute on the prospects for a GNU on May 29. Nearly
everyone in attendance spoke out against the continuing and growing
violence and questioned the motivation to discuss a GNU. Several
pointed out that Zimbabwe already had a failed GNU - the merger of
rival liberation parties ZAPU and ZANU that formed ZANU-PF.
Regardless, talk of a GNU continues in the local press with little
publicized criticism of the idea.

7. Senior MDC Officials Released... The list of MDC officials
fighting legal battles continues to grow. Morgan Tsvangirai was
detained on June 3 - allegedly on charges of "drawing a large
crowd." Notably, today's The Herald claims he was never arrested.
MDC leader Arthur Mutambara was arrested on June 1 in connection
with a scathing article he wrote in April criticizing MugabeQs
government as Qimbecilic;Q he was released on bail two days later.
Newly elected MDC MP Eric Matinenga was released from police custody
on June 4 - having spent 5 days in jail - after the magistrate
dismissed charges that he paid MDC youths to perpetrate violence
against ZANU-PF supporters. Another newly elected MDC MP, Iain Kay,
was released on bail on June 4 after spending 8 days in jail.

8. Violence Spurs Internal Displacement... Independent
international organizations estimate that as many as 20-30 thousand
Zimbabweans have been displaced due to electoral violence since the
March 29 elections, with many more likely unreported. Access to
areas impacted by the violence remains severely limited by the
ruling partyQs systematic campaign to control voting in rural areas.
See Harare 486.

9. Youth Movements Consolidate Election Efforts... Seventeen
Zimbabwean youth organizations are joining forces to launch a
get-out-the-vote campaign ahead of the June 27 presidential runoff.
In addition, they estimate that they have several thousand
volunteers prepared to act as election observers or agents and that
they will be able to reach even the most remote polling places.
They are coordinating their efforts with the MDC to provide
nationwide coverage by MDC-friendly observers and agents, in
contrast to the uncoordinated efforts during the March 29 election
which left some polling places with several observers and others
with none. See also Harare 487 on the Zimbabwe Election Support
NetworkQs (ZESN) runoff plans.

10. Labor Leader Elected To ILO Governing Board... The Zimbabwe
Congress of Trade Unions (ZCTU) 1st Vice-President Lucia Matibenga
was elected to serve as one of 56 members of the governing body of
the International Labor Organization (ILO) at its ongoing annual
conference in Geneva. Meanwhile, Zimbabwe is set to answer charges
of contravening ILO Conventions 87 and 98 which deal with freedom of
association and collective bargaining rights. Matibenga drew
international attention when she was arrested and beaten by police
after a peaceful labor rally in 2006.

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

11. Local Currency Plunges at Record Rate... The Zimbabwe dollar
is trading at Z$1.5 billion:US1$ on the street today, having fallen

HARARE 00000490 003 OF 004


56% in value in the past week and 93% since partial liberalization
of the foreign exchange market in early May. While the divergence
between the street and inter-bank rates narrowed immediately
following the loosening of policy, it has since widened, with the
latter exchange rate now about two thirds of the street rate. The
local currency is expected to continue to fall in value as long as
inflationary expectations remain extremely high.

12. Annual Inflation Breaching Two Million Percent... The swoon in
value of the Zimbabwe dollar is propelling prices into the
stratosphere. A leading supermarket chain calculated the
year-on-year rate of increase in the price of its food-heavy basket
at about 1,350,000% in May and the monthly increase at about 470%.
Another leading company that uses broader based and
income-differentiated baskets put the year-on-year rate in May at
between 1,880,000% and 2,680,000% and the month-on-month rate at
334%.

13. Chamber of Mines Reviews Industry Performance... At its AGM on
May 30, Jack Murehwa, outgoing President of the Chamber of Mines
said that the mining industry was the countryQs largest foreign
currency generator; it contributed about 6% to ZimbabweQs GDP, up
from 4.5% in the 1990s despite declining performance since 2000. He
applauded both the recent replacement of the gold support price with
the international gold price, and the redemption of 35% of forex
earnings at an exchange rate that is now SQmz4:@rk closely with government as
the causes of the industryQs malaise.

14. Air Zim Paying Retention Bonus... A senior Air Zimbabwe
aircraft engineer told us on the visa line that the troubled state
airline had begun paying senior staff a retention bonus of
US$1,000/month in addition to regular salaries/benefits.

15. Poor Outlook for Winter Wheat Crop... The Financial Gazette
reported today figures from the Agriculture Ministry that showed
that less than half the area planted to winter wheat in 2007 had
been planted this season. A second consecutive poor crop will put
immense pressure on the treasury to close the wheat deficit with
costly imports.

16. More Dismal Corporate Results...

- Mutare Board & Paper Mill reported poor results thanks to the
collapse of local paper demand. The controlled price of newsprint,
in particular, weighed down the companyQs 6-monthly results.

- National Tyre Services Limited reported declining sales,
increasing operating costs, and competition from informal and other
small businesses that provide cheaper tires. Nevertheless, analysts
recommend the counter as an economic recovery play, as the company
FQqgU.g@QQs debt-free, has a quality brand, and a country-wide service
network.

- PG Industries noted a 35% drop in volumes across the board in the
past reporting year. The Group manufactures and distributes glass,
wood, boards, doors and related building materials and value-added
products for the furniture, automotive and building industries. It
is shifting its focus to the export market for long-term survival.

- OK Zimbabwe reported revenue down 46% over the past reporting
year; the supermarket chain lost 50% of its stock at the onset of
price controls one year ago this month.

- Econet Wireless HoldingsQs turnover was down 35% in the past
reporting year on the back of unviable tariffs and the soaring cost
of energy, staff, and maintenance. Econet has 60% of ZimbabweQs

HARARE 00000490 004 OF 004


mobile network market.

MCGEE

© Scoop Media

 
 
 
 
 
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