Cablegate: Zim Notes 9-26-2008

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ZNR UUUUU ZZH
R 290920Z SEP 08
FM AMEMBASSY HARARE
TO RUEHC/SECSTATE WASHDC 3497
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHUJA/AMEMBASSY ABUJA 2088
RUEHAR/AMEMBASSY ACCRA 2327
RUEHDS/AMEMBASSY ADDIS ABABA 2445
RUEHRL/AMEMBASSY BERLIN 0959
RUEHBY/AMEMBASSY CANBERRA 1723
RUEHDK/AMEMBASSY DAKAR 2078
RUEHKM/AMEMBASSY KAMPALA 2499
RUEHNR/AMEMBASSY NAIROBI 4931
RHEHAAA/NSC WASHDC
RHMFISS/EUCOM POLAD VAIHINGEN GE
RUEHGV/USMISSION GENEVA 1594
RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK
RHEFDIA/DIA WASHDC
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 03 HARARE 000881

AF/S FOR B. WALCH
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 9-26-2008

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1. SUMMARY
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Topics of the week:

- Mugabe UNGA Speech Hits Familiar Themes
- Mbeki Resignation Causing ZANU-PF Concern
- Welshman Ncube Discusses Negotiation Impasse
- Donors Discuss Re-Engagement
- Violence Continues
- Teachers Still on Strike, Union Leader Released
- Ministers to Continue During Deadlock
- Poaching on the Rise
- Cash Shortage Worsens
- Local Currency Falling Nearly 2% per Day in Value
- Zimbabwe Facing Major Cereal Shortages
- Government Widens Tax Brackets

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

Parallel rate for cash doubled to Z$970:US$1

Bank transfer rate increased fivefold to Z$220,000:US$1 against
inter-bank average of Z$123:US$1

Bread on the parallel market rose at Z$1,500

Sugar is steady at $1,000/2kg

Petrol and diesel climbed to Z$1,300/liter

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

3. Mugabe UNGA Speech Hits Familiar Themes... Oblivious to the
situation on the ground in Zimbabwe, Mugabe boasted about the
foundation land reform has established for food security and the
GOZ's contribution to sustainable development. He called the US and
UK vindictive and self righteous, saying those who proposed UNSC
sanctions on Zimbabwe were insane and "themselves international
perpetrators of genocide, acts of aggression and mass destruction."
He pledged ZANU-PF commitment to the September 15 power sharing
agreement, which he lauded as an African solution to an African
problem. For full text of speech, see http://www.un.org/ga/63/
generaldebate/zimbabwe.shtml.

4. Mbeki Resignation Causing ZANU-PF Concern... ZANU-PF officials
are worried about the impact the sudden forced resignation of South
African President Thabo Mbeki will have on the implementation of the
signed agreement. They fear the replacement of a
ZANU-PF-sympathetic Mbeki with potentially a more pro-MDC mediator
could lead to pressure for additional political concessions. See
Harare 874

5. Welshman Ncube Discusses Negotiation Impasse... MDC-M Secretary
General Welshman Ncube gave us his take on a range of issues
including the deadlock in ministerial negotiations, South Africa's
role in breaking the stalemate, and the local and international
criticism surrounding the MDC-M's controversial leader Arthur
Mutambara. Ncube confirmed that allocation of four ministries-Home
Affairs, Foreign Affairs, Finance, and Local Government-is holding
up the implementation of the agreement. See Harare 878.

HARARE 00000881 002 OF 003

6. Donors Discuss Re-Engagement... On September 25, the
like-minded donor group held an all-day workshop on donor
re-engagement. The agenda included sessions to outline and come to
consensus on a recovery plan, how it would unfold operationally
(benchmarks for the GOZ), aid modalities that would be used, areas
of sectoral interest and expected funding levels for different
donors, and mechanisms and principles for coordination. A technical
note outlining the discussion will be presented at the next high
level donor meeting schedule in Ottawa on October 30.

7. Violence Continues... Despite the deal, violence and arbitrary
arrests continue. In Mutare, eight MDC supporters were arrested on
September 19, accused of celebrating the signed agreement by
attacking the house of a ZANU-PF member. In the high-density Harare
suburb of Mbare, dozens of families were attacked by ZANU-PF militia
members in front of police, who took no action. The families had
been illegally evicted in the wake of political violence in June.

8. Teachers Still on Strike, Union Leader Released... This week
the Zimbabwe Teachers' Association (ZIMTA) joined the Progressive
Teachers Union (PTUZ) in the teachers' strike, now in its third
week. PTUZ President Takavafira Zhou was released on September 22
after spending four nights in jail in Masvingo. While he faces
charges of insulting the President, his jailers accused him of
interfering with their children's education and leading the strike.

9. Ministers to Continue During Deadlock... The government's
mouthpiece, The Herald, reported on September 23 that according to
Mugabe's chief secretary, incumbent ministers should continue in
their current positions until the appointment of new ministers has
taken effect.

10. Poaching on the Rise... Zimbabwe's environmental degradation
has accelerated this year in light of growing economic woes and
ongoing political turmoil. Despite increased poaching, only two
culprits have been convicted and numerous others have gone free.
See Harare 863 and a WWF press statement on rhino poaching in
Zimbabwe at www.panda.org/species.

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

11. Cash Shortage Worsens... Banks are barely getting a fifth of
their daily cash requirement from the Reserve Bank as cash grows
increasingly scarce. The shortage drove the bank transfer rate up
fivefold this week. In the meantime, responding to intense public
pressure, the government increased the daily cash withdrawal limit
from Z$1,000 (roughly US$1) to Z$20,000. See Harare 0865.

12. Local Currency Falling Nearly 2% per Day in Value... Since the
revaluation of the Zimbabwe dollar on August 1, the currency has
been losing value at the rate of about 1.8 percent per day. On
September 25, 2008, it was worth about a fifth of its value on
August 1 hen 10 zeros were dropped.

13. Zimbabwe Facing ajor Cereal Shortages... FEWSNET's Zimbabwe
Foo Security Alert of September 24, 2008 reports thatcombined
commercial and humanitarian cereal impots must triple from their
current rate between nw and March 2009 to meet the country's
requiremens for the remainder of the marketing year. At the
current rate, Zimbabwe could run out of cereals y early November.
For full Alert, see www.fews.net/zimbabwe.

14. Government Widens Tax Brackets... The GOZ raised the tax-free
income threshold from Z$500 (roughly US$0.50 on the street) per
month to Z$15,000 (US$15) per month effective September 1, 2008. It
also widened income tax bands; the highest tax rate of 47.5% now

HARARE 00000881 003 OF 003

comes into effect for incomes above Z$300,000 (US$300) per month.
The AIDS levy of 3% of the tax pushes the highest tax rate to 48.9%.
Given galloping inflation, bracket creep has become bracket leap
for most Zimbabweans.

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Quote of the Week: Mugabe on Mugabe
------------------------------------

15. President Robert Mugabe, in an interview following his UNGA
speech on September 25: "They are waiting for a day when this man,
this evil man, called Robert Mugabe is no longer in control," he
said "and I don't know when that day is coming." - New Zimbabwe,
September 25.

MCGEE

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