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Cablegate: Zim Notes 8-22-2008

VZCZCXRO7904
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSB #0715/01 2381302
ZNR UUUUU ZZH
R 251302Z AUG 08
FM AMEMBASSY HARARE
TO RUEHC/SECSTATE WASHDC 3327
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHUJA/AMEMBASSY ABUJA 2044
RUEHAR/AMEMBASSY ACCRA 2224
RUEHDS/AMEMBASSY ADDIS ABABA 2345
RUEHRL/AMEMBASSY BERLIN 0875
RUEHBY/AMEMBASSY CANBERRA 1622
RUEHDK/AMEMBASSY DAKAR 1978
RUEHKM/AMEMBASSY KAMPALA 2399
RUEHNR/AMEMBASSY NAIROBI 4831
RHEHAAA/NSC WASHDC
RHMFISS/EUCOM POLAD VAIHINGEN GE
RUEHGV/USMISSION GENEVA 1494
RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK
RHEFDIA/DIA WASHDC
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 04 HARARE 000715

AF/S FOR G. GARLAND
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 8-22-2008

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

Topics of the week:

- Negotiations Stall Again...
- SADC Communiques...
- Parliament to Convene...
- Violence Continues...
- MDC and Donors Meet...
- Magistrate Court Dismisses Case Against MDC MP...
- WOZA Arrests...
- "Zim's inflation not that bad"...
- Exchange Rate Movements...
- The Herald price doubles...
- Mobile Phone Tariffs Up by over 1,000 Percent...
- Levy On Generators...

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

Parallel rate for cash rose slightly to Z$1 trillion ($100
revalued): US$1.

Bank transfer soared to Z$5.5 trillion ($550 revalued): US$1.

Against inter-bank average of Z$22 (revalued): US$1.

Bread on the parallel market trebled to Z$2.5 trillion ($250
revalued).

Sugar more than doubled to Z$2.5 trillion (Z$250 revalued)/2kg.

Cooking oil more than doubled to Z$800 billion (Z$80
revalued)/750ml.

Petrol and diesel are steady at Z$2.2 trillion (Z$220
revalued)/liter.

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

3. Negotiations Stall Again... Continuing talks between MDC and
ZANU-PF on the margins of the SADC Summit in South Africa failed to
overcome the impasse over the allocation of executive power.
ZANU-PF insisted that Mugabe have a share of executive power,
including authority over the security forces, while the MDC and
Tsvangirai insisted that Tsvangirai be head of government with
Mugabe occupying a ceremonial role. South African president Thabo
Mbeki will continue as facilitator of negotiations, backed up by the
SADC Troika of Swaziland (chair), Angola, and Mozambique. After
the summit, Tsvangirai went to Botswana and Kenya to rally support.
He is due back in Harare this weekend to prepare for the opening of
Parliament on August 25. See Harare 703

4. SADC Communiques... The SADC Summit issued two communiques at
the end of the Summit. The final communique of the Heads of State
and Government was signed by representatives of all SADC members
except Botswana, whose president Ian Khama boycotted the Summit in
protest against the presence of Zimbabwean president Robert Mugabe.
It dealt with a panoply of regional issues. With respect to
Zimbabwe, the communique "noted the outcomes of the Extraordinary
Summit of the Organ held during the course of the summit and
reaffirmed its commitment to work with the people of Zimbabwe in
order to overcome the challenges they are facing." The communique

HARARE 00000715 002 OF 004


of the Extraordinary Summit of the Organ of Heads of State and
Government focused exclusively on Zimbabwe and was signed by all
SADC countries, including Botswana. It commended Mbeki in his role
as facilitator of the ZANU-PF-MDC negotiations and encouraged him to
continue. It "expressed strong opinion that documents as contained
in the Facilitator's Report reflect the framework, spirit and
purpose of the SADC and AU Resolutions. In view of that, they are a
good basis for a global agreement." It "encouraged and appealed to
the parties to sign any outstanding agreements and conclude the
negotiations as a matter of urgency" and "recognized that while
negotiations are continuing, it may be necessary to convene
Parliament to give effect to the will of the people as expressed in
the Parliamentary elections held on 29 March 2008."

5. Parliament to Convene... Despite the continued lack of a
political settlement between MDC and ZANU-PF, Mugabe announced
Parliament would convene and select a Speaker and Deputy Speaker on
August 25, with Mugabe formally opening Parliament the next day.
The MDC has indicated it will be present on the 25th for the
swearing- in of parliamentarians and the election of a speaker. The
party has also indicated it will not attend the ceremonial convening
of parliament as it would view the convening as a violation of the
Memorandum of Understanding that forms the basis for negotiations
and as recognition of Mugabe. MDC Secretary General Tendai Biti
issued a statement saying that convening parliament was paramount to
"decapitating" the talks. See Harare 711

6. Violence Continues... There are credible reports of some
violence and intimidation in rural areas, Manicaland and Mashonaland
in particular. While there has been a notable reduction in beatings
and injuries since the June 27 election, and a further reduction
since the signing of the Memorandum of Understanding on July 21,
fear and intimidation continue in rural areas. Notably, food is
increasingly being used as a political tool as the ban on
non-governmental organizations and food distribution programs
continue. See Harare 712

7. MDC and Donors Meet... International donors and the World Bank
met with MDC leaders to discuss the most urgent needs to address the
humanitarian crisis and economic stabilization. Through donor
consultation and internal planning, the MDC is preparing the
groundwork to rapidly address Zimbabwe's development needs, should
it achieve power as a result of the ongoing negotiations. See
Harare 709

8. Magistrate Court Dismisses Case Against MDC MP... MDC MP-elect
for Marondera Central in Mashonaland East province, Ian Kay, is a
free man after a magistrate threw out state charges leveled against
him for allegedly inciting violence in his constituency. Kay was
arrested at the height of the State-sponsored violence against the
MDC in May and spent two weeks in police custody. He was
subsequently granted bail but has been on remand ever since. Human
Rights Watch issued a report this week highlighting political
persecution in Zimbabwe, including Kay's case.

9. WOZA Arrests... Nine members of Women of Zimbabwe Arise (WOZA)
were arrested on August 13 and charged with malicious damage to
property for painting "love" and other slogans on roads near
Bulawayo. All were released on the 16th; two pleaded guilty to an
additional charge of being a public nuisance on the 19th. This week
WOZA also launched a report in South Africa, entitled 'Counting the
Cost of Courage: Trauma Experiences of Women Human Rights Defenders
in Zimbabwe'.

----------------------------------
On the Economic and Business Front
----------------------------------


HARARE 00000715 003 OF 004


10. "Zim's inflation not that bad"... trumpets the banner headline
of the Friday business section of the government mouthpiece The
Herald. The article goes on to say that "there is nothing wrong
with cutting of zeros from the local unit, as many times as possible
until the intended results are achieved." According to data from
the government's Central Statistical Office (CSO), the year-on-year
rate of inflation as measured by changes in the consumer price index
rose from 2.2 million percent in May to 11.2 million percent in June
2008; the month-on-month rate rose from 406 percent to 839 percent.
However, a leading private sector inflation study put the y-o-y
figure in June at 23 million percent and in the hundreds of millions
percent in July on the back of supply side rigidities and the
increase in money supply used to fund the Reserve Bank's
quasi-fiscal activities. In addition, rising costs from the
depreciating local unit are forcing retailers to increase prices
almost daily.

11. Exchange Rate Movements... During the week under review, the
Zimbabwe dollar stabilized somewhat on the parallel cash market but
continued to slide on the parallel bank transfer market. Cash
shortages resurfaced thanks to the low withdrawal limit of Z$300 per
day (roughly US$3). As a result, most transactions were channeled
to the parallel transfer market where the rate went from Z$200:US$1
to Z$550:US$1. We expect the margin between the parallel cash and
transfer rates to continue to widen as long as cash remains short in
the market and people resort to transfers to carry out transactions.
However, on Friday August 22, the Reserve Bank increased the daily
cash withdrawal limit to $500 from $300 with immediate effect for
both individuals and companies. This is the third time in a month
that the RBZ has reviewed the daily cash withdrawal limits.

12. The Herald price doubles... Zimpapers, publisher of The
Herald, increased the cover price by 100% to $100 from $50. Group
CEO Justin Mutasa said the company had no choice but to increase
prices to absorb the new prices of newsprint.

13. Mobile Phone Tariffs Up by over 1,000 Percent... Mobile
telecommunications companies increased tariffs by over 1,000 percent
this week; the last tariff increase occurred a month ago.

14. Levy On Generators... In a surprise move, the GOZ introduced a
levy on generators for domestic or industrial use. All generators
must now be inspected and approved by the Zimbabwe Electricity
Regulatory Commission for fees ranging from US$5 to US$100 depending
on their size. The introduction of the levy comes at a time of
frequent electric power outages due to coal supply shortages to the
Hwange thermal power plant.

------------------
Quotes of the Week
------------------


15. In The Herald, August 16: Zanu-PF Minister of State for
National Security Didymus Mutasa on MDC-T claims that Zanu-PF is
enticing its MPs with bribes:

"I do not think the party would stoop so low and do such things"

16. On Australian Broadcasting Corporation Radio National's
Saturday Extra, August 16: MDC-M leader Arthur Mutambara when asked
if the proposed power sharing agreement between Mugabe, Tsvangirai,
and himself could be a trap:

"I have a question. Do you think I am stupid? When you ask that
question you think we are foolish and we are very offended that you
think we are that stupid. We are smarter than the Australians, we
are smarter than the Americans, we went to better schools than most

HARARE 00000715 004 OF 004


of these leaders in America, in Britain and in Australia. I am
coming out of Oxford. None of your prime ministers can challenge me
intellectually. So how do you patronize me and tell me that I'm
going to be hoodwinked by Mugabe. You are doubting my intelligence.
Shame on you."

17. In the same interview, featured on the front page of The Herald
on August 21, Mutambara further commented:

"It (the West) can go to hell. Who are you? Do we judge your
elections in Australia? Do we judge your elections and your
agreements in America and Europe?"


MCGEE

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