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Cablegate: Zim Notes 10-17-2008

VZCZCXRO9229
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSB #0937/01 2940800
ZNR UUUUU ZZH
R 200800Z OCT 08
FM AMEMBASSY HARARE
TO RUEHC/SECSTATE WASHDC 3579
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHUJA/AMEMBASSY ABUJA 2101
RUEHAR/AMEMBASSY ACCRA 2364
RUEHDS/AMEMBASSY ADDIS ABABA 2482
RUEHRL/AMEMBASSY BERLIN 0992
RUEHBY/AMEMBASSY CANBERRA 1760
RUEHDK/AMEMBASSY DAKAR 2115
RUEHKM/AMEMBASSY KAMPALA 2536
RUEHNR/AMEMBASSY NAIROBI 4968
RHEHAAA/NSC WASHDC
RHMFISS/EUCOM POLAD VAIHINGEN GE
RUEHGV/USMISSION GENEVA 1631
RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK
RHEFDIA/DIA WASHDC
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 03 HARARE 000937

AF/S FOR B. WALCH
ADDIS ABABA FOR USAU
ADDIS ABABA FOR ACSS
NSC FOR SENIOR AFRICA DIRECTOR B.PITTMAN
TREASURY FOR D. PETERS
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 10-17-2008

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

Topics of the week:

- Talks Stall...
- Parliament Opens, Talks Continue...
- Masvingo Governor Blocks Humanitarian Aid...
- 2 Protests; 13 Arrests; over 29 Injured...
- Poor Water Management...
- Zims Continue to go South...
- Check Rate Replaces Transfer Rate And Falls Even Faster...
- New Z$50,000 Note Introduced as Local Currency Becomes
Worthless...
- What Sanctions?...
- Cotton Production Falls...
- Companies Struggle...

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

Parallel rate for cash rose to Z$20,000:US$1

Check rate (see note below) increased nearly ten-fold to
Z$40,000,000:US$1 against inter-bank average of Z$209:US$1

Bread on the parallel market tripled to Z$30,000

Sugar rose to $20,000/2kg

Petrol and diesel quadrupled to Z$40,000/liter

Note: Due to the suspension of the Real-Time Gross Settlement system
by the Reserve Bank of Zimbabwe on October 3, Post will now be
reporting on the unofficial check transfer rate that individuals and
entities are using to make non-cash payments.

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

3. Talks Stall... After a week of talks, mediated by former South
African president Thabo Mbeki, talks between ZANU-PF and the MDC
appear to have stalled. The MDC, which initially insisting on
leading the finance and home affairs ministries, demanded an
expanded discussion on the allocation of all ministries. ZANU-PF
and Mugabe were ready to concede finance but dug their heels over
other MDC demands. See Harare 932.

4. Parliament Opens, Talks Continue... Parliament reconvened on
October 14. Addressing priorities such as Amendment 19
(incorporating the September 15 agreement), a budget, establishment
of committees, and drafting of a new constitution, await the
completion of an agreement between ZANU-PF and the MDC. See Harare
933.

5. Masvingo Governor Blocks Humanitarian Aid... Newly-appointed
Masvingo governor Titus Maluleke addressed a meeting of NGOs on
October 13 and announced new rules for NGO operations. These rules
contradict national level policies, and, according to one NGO
country director, "if implemented would certainly reinforce
patrimonial, patriarchal, ZANU-PF party power structures." The new
rules require that NGOs receive authorization from provincial,
district, and traditional authorities, generally controlled by
ZANU-PF, to operate; they also give traditional leaders the

HARARE 00000937 002 OF 003


exclusive authority to designate recipients. We have learned that
the same rules will also be applied in Manicaland province. The
donor community will coordinate its response.

6. 2 Protests; 13 Arrests; over 29 Injured... Two protests this
week resulted in police beatings and arrests. On Tuesday, Zimbabwe
National Students Union (ZINASU) led approximately 200 students to
Parliament to present a petition listing concerns about the current
state of the education system in Zimbabwe. When they tried to
present the petition, police refused the students entry and began
beating them until they dispersed. Four were arrested and released
after paying a fine; another 26 were injured by police who used
excessive force, according to medical staff. On Thursday, Women of
Zimbabwe Arise (WOZA) led a march of 200 women in Bulawayo to
government offices, demanding a declaration of a national disaster
and immediate food aid for all. Riot police disrupted the protest
by beating the women - breaking one woman's finger - and arrested a
total of nine women. As of Friday morning, only WOZA leaders Jenni
Williams and Magodonga Mahlangu remained in jail; police continue to
deny their lawyer access. See Harare 934.

7. Poor Water Management... Crumbling infrastructure and
mismanagement continues to wreak havoc on Zimbabwe's water supply.
For instance, the cholera mortality rate in Chitungwiza is more than
ten-times the level needed to declare an emergency. See Harare 919.

8. Zims Continue to go South... The South African Consul in Harare
told us that his office approves about 90% of the approximately 2000
visa applications it receives daily, despite a high rate of
fraudulent documents. See Harare 928.

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

9. Check Rate Replaces Transfer Rate And Falls Even Faster...
Since the RBZ suspended the inter-bank transfer system two weeks
ago, alleging that it was fueling depreciation of the Zimbabwe
dollar, and in light of the ongoing cash shortage, transactions have
shifted to personal or bank checks. The surging check volume is
challenging the capacity of banks' outdated clearing equipment
causing backlogs in the payments system. Moreover, the check rate
has plunged from Z$3.5 million:US$1 a week ago to Z$40 million:US$1
on October 17, 2008. NGO operations have been threatened by the
RBZ's policy to halt RTGS transactions. Although a clarification
has allowed for intra-bank RTGS transactions, many NGOs need to
transfer money from foreign accounts to local vendors, who often do
not have foreign accounts.

10. New Z$50,000 Note Introduced as Local Currency Becomes
Worthless... The RBZ issued a new Z$50,000 note this week; in line
with recent practice, it also raised the maximum daily cash
withdrawal limit from Z$20,000 to Z$50,000. The new note is worth
only US$2.50 at the cash rate of Z$20,000:US$1 and it is worthless
at the check rate of Z$40 million:US$1.

11. What Sanctions?... Zimbabwe-US bilateral trade figures for
2008 show Zimbabwe to be back in surplus after having slipped into
deficit in 2007 for the first time in a decade. Bilateral trade
amounted to $135 million in the first 8 months of the year.

12. Cotton Production Falls... Seed cotton production dropped from
253,000 MT last year to 223,000 MT in 2007/08, well short of the
forecast 300,000 MT, according to the Cotton Growers Association
(CGA). Rampant side-marketing of the product by growers added to a
general atmosphere of lawlessness, exacerbated by election-period
unrest in rural areas. The CGA has been unable to push a regulatory
framework for the industry through Cabinet. In the meantime, the

HARARE 00000937 003 OF 003


number of cotton contracting companies scenting forex earnings has
exploded to include parastatals bereft of any agriculture
experience, like the Zimbabwe Electricity Supply Authority (ZESA).

13. Companies Struggle... Sales volumes were down by 36% at
hard-liquor giant African Distillers and revenue down 84% in the
year to end-June. Econet Wireless Holdings reported similarly
dismal results, with revenue down by 30% in the first half of 2008
primarily due to sub-economic state-controlled tariffs. Founded by
self-exiled maverick businessman Strive Masiyiwa, Econet
nevertheless is on the expansion warpath, having grown its
subscriber base by 40% in one year and with sights set on increasing
market share by another 30% to 1.2 million subscribers by 2/09.

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

14. Morgan Tsvangirai, addressing 10-20,000 supporters at a rally
on October 12: "We won the elections on 29 March. Mugabe, the loser
in that election, cannot pretend to be magnanimous to the MDC by
'allocating' us ministries when it is us who have been benevolent
enough to given him the Presidency as a way of national healing and
rebirth"


MCGEE

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