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Cablegate: Masvingo Splinters Into Dual Economies

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 HARARE 001955

SIPDIS

SENSITIVE

STATE FOR AF/S
NSC FOR SENIOR AFRICA DIRECTOR JFRAZER
USDOC FOR 2037 DIEMOND
TREASURY FOR OREN WYCHE-SHAW
PASS USTR FLORIZELLE LISER
STATE PASS USAID FOR MARJORIE COPSON

E. O. 12958: N/A
TAGS: ECON EINV PGOV ZI
SUBJECT: Masvingo Splinters into Dual Economies

1. (SBU) Summary: Despite both an apparent end to the 3-
year drought and relative harmony between local ZANU-PF
and MDC parties, Zimbabwe's southern Masvingo province
faces tough economic times ahead. Only those with access
to U.S. dollars are doing well. The rest often depend on
outside food assistance and unsustainably cheap basic
services such as education and electricity. End Summary.

2. (SBU) That, at least, is our compressed impression
after 2-days interacting with the City of Masvingo's
mayor, key administrators, NGO reps and, beyond city
limits, some of the Province's poorer rural inhabitants.
We do not believe life will get much better for small
farmers even with the drought's passing. Admittedly, the
GOZ's fast-track land reform seems to have decongested
overcrowded communal areas. Yet existing and resettled
communal farmers lack inputs - and collateral to borrow
for inputs. Most upsettingly, it appears the region is
unraveling into parallel U.S. dollar and local economies.

Clean Streets, Functioning Gas Pumps
------------------------------------
3. (SBU) On the surface, Masvingo is a bastion of
political cordiality. Mayor Alois Chaimiti boasted of
constructive relations between his MDC and the local ZANU-
PF, a view seconded by other interlocutors. ZANU-PF
Politburo member Eddison Zvobgo may have undermined his
own party in provincial politics by staking out
independent positions, opening a window for the MDC
alternative. Locals agree the MDC administration has
done a commendable job of improving services and tidying
up the city. Masvingo residents can also buy gas at a no-
wait, well-stocked service station, a rarity in today's
Zimbabwe. An indigenous EXOR station has successfully
drawn on connections to sell fuel openly at market
prices, about 50 percent above the GOZ-controlled rate.

4. (SBU) But Masvingo's economy is at least as blighted
as those elsewhere in the country. Foreign visitors to
the Great Zimbabwe ruins, a major tourist attraction, are
down from an annual 220,000 in 2000 to a projected 20,000
this year. 5-year old Westview Industrial Park,
Masvingo's best hope to establish an industrial base, has
yet to attract a single foreign investor.

5. (SBU) The man-on-the-street is hurting badly. Over
the past year, prices have risen roughly in lockstep with
an 8-fold devaluation in the Zimdollar (from Z$691 to
5650:US$1). A residential lot that cost Z$300,000 a year
ago now sells for Z$4,000,000. School fees have risen
from Z$1,300 to Z$10,000, leaded fuel from Z$69 to 1,700.
Meanwhile, salaries have merely gone up 2-4 fold. That
means the only people buying real estate, pushing
shopping carts, fertilizing land and filling gas tanks
are those with a USD source - generally through forex-
pegged salaries, export-revenue or remissions. USD-
holders also deal with conventional banks rather than
savings-and-loans, where lines for cash withdrawals have
been interminable.

Comment
-------
6. (U) The chasm between USD and local economies is
rapidly broadening, reminiscent of the perpetual duality
under many Soviet-style governments. When the two
economies merge, fatuity abounds. A driver whose
employer dollarizes may earn more than an executive whose
firm does not. Annual tuition at a private Masvingo
school runs US$5, a round of golf just 12 cents. But
visit a Masvingo supermarket and you pay U.S.-level
prices. High inflation (currently 427 percent
annualized) assures that Zimdollar-earners will continue
to lose buying power.

7. (SBU) We also observed - and affix as appendage to
this report - that modest forex assistance goes a long
way in this economy. A US$3,500 grinding mill purchased
through the Ambassador's Self-Help Program saved an
almost 100-year-old school with 456 pupils from pending
closure. US$7,000 brought running water to another rural
school and the surrounding community of 2,000 -
triggering effusive praise from Foreign Minister Stan
Mudenge at last October's inauguration ceremony.

Sullivan

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