BARCLAYS BANK MANAGING DIRECTOR ON

C O N F I D E N T I A L SECTION 01 OF 02 HARARE 002952

SIPDIS

STATE FOR AF, AF/S, AF/EPS, EB/IFD/ODF
TREASURY FOR ED BARBER, GRACE SONE
USDOC FOR ERIC HENDERSON
STATE PASS USTR/RWHITTAKER
NSC FOR SENIOR AFRICA DIRECTOR GAYLE SMITH

E.O. 12958: DECL: 06/02/10
TAGS: EFIN PGOV ZI
SUBJECT: BARCLAYS BANK MANAGING DIRECTOR ON
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PAGE 02 HARARE 02952 01 OF 02 021047Z
ZIMBABWE'S WOES AND OUTLOOK

CLASSIFIED BY ECON/COMM OFFICER MARK PROKOP, REASONS
1.5 (B),(D)

REF: HARARE 2817


1. (C) ON JUNE 1 AMBASSADOR AND ECONOFF MET WITH
ISAAC TAKAWIRA, MANAGING DIRECTOR OF BARCLAYS BANK,
AND WHOM WE REGARD AS AN EXCELLENT, WELL CONNECTED
AND INFORMED INTERLOCUTOR, TO DISCUSS ZIMBABWE'S
SITUATION AND OUTLOOK. THE BANKER OPENED HIS SERIOUS
DIALOGUE BY STATING HOW WORRIED HE WAS ABOUT THE
CONSEQUENCES, BOTH INTERNAL AND INTERNATIONALLY, OF
THE LAND ISSUE AND RESETTLEMENT PROCESS AS CURRENTLY
BEING HANDLED BY GOVERNMENT. CALLING IT A DISASTER,
HE STATED IT WAS NOT WELL THOUGHT OUT AND WOULD
NEGATIVELY AFFECT AGRICULTURAL PRODUCTIVITY, LEAVE
THE RESETTLED POPULACE MORE DESTITUTE IN THE FUTURE,
AND DESTROY THE CHANCES OF INTERNATIONAL SUPPORT FOR
THE PROGRAM. (COMMENT: TAKAWIRA IS ALSO A LARGE-
SCALE TOBACCO FARMER IN HIS OWN RIGHT, EMPLOYING 2000
FARM WORKERS. HIS PROPERTY HAS NOT BEEN AFFECTED BY
THE RECENT INVASIONS. CLOSELY AFFILIATED WITH THE
RULING PARTY AND MOVING AT EASE IN THE HIGHEST RANKS
OF THE GOVERNMENT IS LIKELY A CONTRIBUTING FACTOR TO
THIS. TOBACCO FARMING GIVES TAKWIRA A GOOD SENSE OF
THE SENTIMENT OF A SIZABLE SEGMENT OF THE POPULACE.
END COMENT.)


2. (C) THE MANAGING DIRECTOR ALSO TOLD US THAT HIS
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BANK WAS RELATIVELY WELL-POSITIONED REGARDING ITS
EXPOSURE TO THE FARMING INDUSTRY, WHICH IS SUFFERING
ITS WORSE FINANCIAL CRISIS SINCE INDEPENDENCE. WHEN
HE TOOK OVER THE HELM IN 1992, BARCLAY'S FARM-LENDING
BOOK CONSTITUTED 39 PERCENT OF TOTAL LOANS. TODAY
THAT FIGURE IS DOWN TO 19 PERCENT AND IS HEAVILY
RESERVED AGAINST. THE SHRINKAGE WAS DUE TO HIS
DECISION EIGHT YEARS AGO TO WRITE NO NEW FARM
BUSINESS, AS HE KNEW EVEN BACK THEN THAT THE
UNRESOLVED LAND ISSUE WAS A MAJOR PROBLEM WAITING TO
HAPPEN. THOUGH HIS PRESCIENCE WAS VINDICATED, HIS
SENSE OF SHAME AND LOSS AT WHAT HAS OCCURRED WAS
EVIDENT AND HEARTFELT. THE BULK OF THE BANK'S
BUSINESS THESE DAYS IS LENDING TO CORPORATES, WITH
SUCH LOANS MAKING UP 65 TO 70 PERCENT OF THE TOTAL.


3. (C) TAKAWIRA ALSO TOLD US THAT HE HAD RECENTLY
POINTED OUT TO THE ATTORNEY GENERAL A POTENTIAL
PROBLEM WITH THE LAND ACQUISITION PROGRAM AS
CURRENTLY STRUCTURED. HE FURTHER EXPLAINED THAT THE
COMPENSATION PROCEDURES IN THE JUST-SIGNED
LEGISLATION WOULD PAY THE FARMERS IN IOU'S (25
PERCENT OF THE VALUE OF IMPROVEMENTS ON SEIZURE, 25
PERCENT TWO YEARS LATER AND THE BALANCE FOUR OR FIVE
YEARS OUT, SEE REFTEL A) WHICH ONLY CARRY A 25
PERCENT INTEREST RATE. HIS BANK'S LOWEST RATE IS
CURRENTLY 60.5 PERCENT, AND A COURT CASE WOULD SURELY
DECIDE FOR THE PLAINTIFFS THAT THEY WERE
UNDERCOMPENSATED AND DIRECT THE GOZ TO PAY MARKET
RATES. THIS LEGALLY CHALENGABLE DISPARITY WOULD ONLY
MAKE A BAD PROGRAM WORSE, HE OPINED.
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4. (C) ON THE ELECTIONS, TAKAWIRA REVEALED A
PERSONAL BELIEF THAT THE OPPOSITION MOVEMENT FOR
DEMOCRATIC CHANGE (MDC) PARTY MAY DO MUCH BETTER IN
THE POLLS THAN IS WIDELY ASSUMED. HE POINTEDLY TOLD
US STORIES OF CONVERSATIONS HE RECENTLY HAD WITH
RELATIVES OF HIS (AN UPPER RANK MILITARY OFFICER AND
TWO ELDERLY AUNTS),AS WELL AS THE SENTIMENT OF HIS
2000 FARM WORKERS. SUCCINCTLY PUT, HIS MESSAGE WAS
THAT THESE DAYS EVERYONE IN THE COUNTRY IS FOR ZANU-
PF -- UP UNTIL ELECTION DAY. AN 80 OR 90 SEAT MDC
WIN WOULD NOT SURPIRSE HIM, AND HE ASKED OUR
ASSURANCE THAT WE WOULD SUPPORT THE NEW GOVERNEMNT
WERE THIS TO OCCUR.


5. (C) ON OTHER TOPICS, NOTABLY THE FOREX SHORTAGE,
HE CONFIRMED THAT MANY COMMERCIAL OPERATIONS WERE ON
THE VERGE OF SHUTDOWN DUE TO THEIR INABILITY TO PAY
INTERNATIONAL SUPPLIERS OR EVEN THEIR PARENT
COMPANIES. FOR THE PAST FOUR MONTHS THE ZIMBABWEAN
COMPANIES HAD BEEN LIVING ON THE CREDIT AND SUPPORT
OF THEIR HISTORIC FRIENDS AND RELATIONS, BUT THESE
ARE ABOUT EXHAUSTED, WITH DIRE CONSEQUENCES. AS A
SINGLE EXAMPLE HE CITED ZIMBABWE'S LARGEST GOLD
PRODUCER WHICH CURRENTLY OPERATES EIGHT MINES, BUT

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ACTION AF-00

INFO LOG-00 NP-00 AID-00 CEA-01 CIAE-00 CTME-00 DODE-00
ANHR-00 SRPP-00 DS-00 EB-00 EXIM-01 E-00 VC-00
FRB-00 H-01 TEDE-00 INR-00 IO-00 ITC-01 L-00
VCE-00 AC-01 NSAE-00 OMB-01 OPIC-01 PA-00 PM-00
PRS-00 ACE-00 P-00 SP-00 IRM-00 SSO-00 STR-00
USIE-00 FMP-00 PMB-00 DSCC-00 DRL-02 G-00 NFAT-00
SAS-00 /009W
-------------- 5E49E8 021047Z /38
O 021050Z JUN 00
FM AMEMBASSY HARARE
TO SECSTATE WASHDC IMMEDIATE 6196
INFO SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
NSC WASHDC
USDOC WASHDC
DEPTTREAS WASHDC

C O N F I D E N T I A L SECTION 02 OF 02 HARARE 002952

SIPDIS

STATE FOR AF, AF/S, AF/EPS, EB/IFD/ODF
TREASURY FOR ED BARBER, GRACE SONE
USDOC FOR ERIC HENDERSON
STATE PASS USTR/RWHITTAKER
NSC FOR SENIOR AFRICA DIRECTOR GAYLE SMITH

E.O. 12958: DECL: 06/02/10
TAGS: EFIN PGOV ZI
SUBJECT: BARCLAYS BANK MANAGING DIRECTOR ON
CONFIDENTIAL

PAGE 02 HARARE 02952 02 OF 02 021047Z
ZIMBABWE'S WOES AND OUTLOOK

WHICH IS BEING FORCED TO CLOSE SIX OF THEM DUE THE
HARD CURRENCY SHORTAGE. "WITHOUT THESE HARD CURRENCY
EXPORTS THE DOWNWARD SPIRAL JUST ACCELERATES" HE
CONFIDED, "AND I WAKE UP NOW EVERYDAY WORRYING HOW WE
ARE GOING TO SOLVE OUR PROBLEM." TOURISM IS ANOTHER
DISASTER HE STATED, WITH THE OPERATIONS OF SMALL,
INDEPENDENT AND OFTEN BLACK OPERATORS CLOSED DOWN AS
IF THE COUNTRY WERE THREATENED BY WAR. RESTORING
THINGS WILL TAKE A LONG, LONG TIME HE MUSED AT OUR
DEPARTURE, AND THINGS WILL NEVER BE AS BEFORE, HE
CONCLUDED.

MCDONALD

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