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Cablegate: Zim Notes 9-12-08

VZCZCXRO3062
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSB #0832/01 2591418
ZNR UUUUU ZZH
R 151418Z SEP 08
FM AMEMBASSY HARARE
TO RUEHC/SECSTATE WASHDC 3433
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHUJA/AMEMBASSY ABUJA 2072
RUEHAR/AMEMBASSY ACCRA 2288
RUEHDS/AMEMBASSY ADDIS ABABA 2408
RUEHRL/AMEMBASSY BERLIN 0927
RUEHBY/AMEMBASSY CANBERRA 1685
RUEHDK/AMEMBASSY DAKAR 2041
RUEHKM/AMEMBASSY KAMPALA 2462
RUEHNR/AMEMBASSY NAIROBI 4894
RHEHAAA/NSC WASHDC
RHMFISS/EUCOM POLAD VAIHINGEN GE
RUEHGV/USMISSION GENEVA 1557
RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK
RHEFDIA/DIA WASHDC
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 03 HARARE 000832

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 9-12-08

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

Topics of the week:

- Mugabe and Tsvangirai Reach Deal...
- Last Two MDC MPs Released on Bail...
- USG-Funded NGOs Resuming Field Operations...
- Canada Imposes Sanctions on Zimbabwe...
- Cholera Outbreak in Crowded Township...
- Reserve Bank Allows Some Formal Dollarization...
- Maize Seed Shortage Threatens Crop...
- World Bank Rates Zimbabwe One of the Least Investor-Friendly
Countries...
- Zimbabwe's Protracted Arrears to the IFIs...
- Inflation Factoid...

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

Parallel rate for cash doubled to Z$550:US$1

Bank transfer rose seven-fold to Z$35000:US$1 against inter-bank
average of Z$50:US$1

Bread on the parallel market rose to Z$800

Sugar doubled to Z$1000/2kg

Petrol and diesel rose by two thirds to Z$800/liter

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

3. Mugabe and Tsvangirai Reach Deal... After four days of
mediation, President Mugabe and MDC leader Tsvangirai appeared to
strike a power sharing deal last night. As described, the deal
includes the creation of a Council of Ministers (COM) that will
formulate policy and is chaired by Tsvangirai. Implementation of
policy will reside with the Cabinet, which will continue to report
to Mugabe with Tsvangirai as deputy. According to press reports,
the agreement also creates a National Security Council chaired by
Mugabe with Tsvangirai again as his deputy, along with the Minister
of Defense, Home Affairs, and possibly others. Of the 31 Ministries
(that constitute Cabinet and the COM), ZANU-PF will appoint 15,
MDC-T will appoint 13, and MDC-M has the remaining 3. Uncertainty
remains over how the ministries will be divided. The deal is
scheduled to be formally signed Monday morning. See Harare 828.

4. Last Two MDC MPs Released on Bail... Following a High Court
ruling yesterday, the remaining two MDC MPs were released on bail.
The MPs Pearson Mungofa of Highfield and Bednock Nyaude of Bindura
South had been granted bail last week, but were not released at the
time because the state appealed against the move.

5. USG-Funded NGOs Resuming Field Operations... Partners are in
high gear, obtaining field level approvals from local authorities to
resume operations. Meanwhile, WFP and C-SAFE received approval from
the Ministry of Social Welfare for their food delivery programs. In
addition, the Ministry has agreed to registration protocols to
identify food aid beneficiaries. C-SAFE will undertake a pilot
registration program in Kadoma next week and then registrations will
quickly begin in other areas. C-SAFE began school feeding this week
throughout all of its districts, and has obtained approval from all
district authorities to implement the Safety Net Program. Given

HARARE 00000832 002 OF 003


registration requirements and logistics, no food is likely to be
distributed via either C-SAFE's Safety Net Program or WFP's
Vulnerable Group Feeding Program until mid to late October.
Non-food aid partners supported by the USG are also ramping up
operations, including Oxfam and Mercy Corps.

6. Canada Imposes Sanctions on Zimbabwe... The Canadian Foreign
Ministry announced sanctions against Zimbabwe on September 4 on the
basis of the regime's violation of human rights and "perversion of a
legitimate democratic process," according to Foreign Affairs
Minister David Emerson. The sanctions include a ban on the export
of arms, freezing the assets of top Zimbabwean officials, and
prohibiting Zimbabwean aircraft from flying over or landing in
Canada. Emerson made clear that the sanctions would not affect the
Zimbabwean people and that Canada would continue to provide
humanitarian assistance to Zimbabwe.

7. Cholera Outbreak in Crowded Township... Eight people have died
and 23 have been hospitalized following an outbreak of cholera in
one of Harare's crowded townships. The outbreak occurred last week
in Chitungwiza, a township of approximately a million people in
Harare's southern outskirts that suffers from broken sewers.
Zimbabwe has suffered several cholera outbreaks in recent years
following the collapse of infrastructure due to the country's
political and economic crisis. USAID is responding through its
implementing partners by stocking retail outlets and clinics with
water purification tablets and promoting hygienic practices.

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

8. Reserve Bank Allows Some Formal Dollarization... Amid
widespread informal dollarization of the economy, RBZ Governor Gono
announced the licensing of foreign exchange wholesale and retail
shops, plus service stations, allegedly to increase the availability
of basic good and improve manufacturers' capacity utilization, but
certainly also in the hope of filling the government's forex
coffers. He also reduced the foreign exchange surrender requirement
on exporters and announced new price support for the gold sector.
We questioned the timing of the announcement and don't expect the
initiative to put the country on a sustainable recovery path. See
Harare 786 and 822.

9. Maize Seed Shortage Threatens Crop... Zimbabwe is heading into
the summer planting season about one third short of needed seed
maize. The past year's seed maize crop was poor. On top of that,
price controls have deterred farmers from growing the crop and
delivering it to the formal market. A seed house senior executive
told us the 2008/09 commercial maize harvest could be the smallest
since independence. See Harare 821.

10. World Bank Rates Zimbabwe One of the Least Investor-Friendly
Countries... The World Bank Group's Doing Business 2009 report
ranked Zimbabwe a dismal 158 out of 181 countries surveyed, down
from 152 a year ago. See http://www.doingbusiness.org/.

11. Zimbabwe's Protracted Arrears to the IFIs... At end-June 2008
Zimbabwe owed the IMF about US$137 million; its total arrears to the
international financial institutions came to about US$1.1 billion.
The IMF Executive Board took note in July of Zimbabwe's poor
cooperation on policies and payments and recommended maintaining the
suspension of Zimbabwe's voting rights and its ineligibility to
access IMF resources. See http://www.imf.org/external
pp/longres.aspx?id=4277.

12. Inflation Factoid... Zimbabwe's highest-denomination Z$500
note, worth US$33 on the street at its issuance six weeks ago,

HARARE 00000832 003 OF 003


fetches only 90 US cents on the same market today.

-----------------
Quote of the Week
-----------------

13. An EU diplomat speaking on the deal, reported in the Zimbabwe
Independent of September 12: "We will see, the devil is in the
details---we will see on Monday how the power is shared and if the
opposition has more than a symbolic role."


MCGEE

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