C O N F I D E N T I A L SECTION 01 OF 02 HARARE 001124

SIPDIS

STATE FOR AF/S, AF/EPS, EB/IFD/ODF, EB/TPP/ODC
TREASURY FOR ED BARBER, BARAK HOFFMAN
USDOC FOR 2037 ERIC HENDERSON
STATE PASS USTR/RWHITTAKER
NSC FOR SENIOR AFRICA DIRECTOR JFRAZER
LONDON FOR CGURNEY
PARIS FOR BISA WILLIAMS

CONFIDENTIAL

PAGE 02 HARARE 01124 01 OF 02 270600Z
E.O. 12958: DECL: 03/26/11
TAGS: ETRD EFIN PREL PHUM PGOV ZI
SUBJECT: INDUSTRY PERMSEC BRIEFS US ON A RANGE OF
ISSUES: AGOA; DEVALUATION; AND TALKS WITH SOUTH
AFRICA


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

REFS: A) CAPETOWN 405


1. (C) SUMMARY: ON MARCH 26 CHARGE AND ECONOFF MET
WITH STEWART COMBERBACH, PERMANENT SECRETARY AT THE
MINNISTRY OF INDUSTRY AND INTERNATIONAL TRADE IN AN
INFORMAL MEETING TO DISCUSS CURRENT EVENTS AND
DEVELOPMENTS. THE PERMSEC, WITH WHOM WE ENJOY FRANK
AND HONEST DIALOGUE TOUCHED, UNPROMPTED, ON A BROAD
RANGE OF TIMELY AND NOTEWORTHY TOPICS. THE MAIN
POINTS ARE: THAT ZIMBABWE RETAINS HOPE THAT IT WILL
BE ABLE TO QUALIFY FOR THE BENEFITS OF THE AFRICAN
GROWTH AND OPPORTUNITY ACT (AGOA); THAT POLICY
AGREEMENT TO DEVALUE HAS OCCURRED THOUGH WHEN AND BY
HOW MUCH IS YET UNKNOWN; AND THAT THE DIALOGUE WITH
THE SOUTH AFRICANS WAS SUBSTANTIVE AND FRANK, THOUGH
IT IS PREMATURE TO WANT TO SEE CHANGES OR BENEFITS.
THE PERMSEC DID NOT HAVE HARD DATA ON A MEETING DATE
FOR THE MBEKI/MUGABE MEETING, AND WANTS TO MAINTAIN
AN ACTIVE DIALOGUE WITH THE U.S. END SUMMARY.


2. (C) HIS DISTILLED OBSERVATIONS ARE PROVIDED BELOW
IN BULLET FORMAT.
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THE AFRICAN GROWTH AND OPPORTUNITY ACT
--------------

== IS AGOA FOR ZIMBABWE DEAD? BASED ON CONVERSATIONS
HELD LAST YEAR WITH FORMER DAS WHITNEY SCHNEIDMANN
AND USTR'S ROSA WHITTAKER, COMBERBACH WAS UNDER THE
IMPRESSION THAT THERE EXISTS A CERTAIN LATITUDE IN
THE INTERPRETATION OF THE ACT'S DEMOCRACY AND HUMAN
RIGHTS HURDLES SET OUT IN THE ACT'S LANGUAGE. IN
OTHER WORDS, IF ZIMBABWE CAN BE SEEN AS MAKING

PROGRESS TOWARDS IMPROVING ITS RULE OF LAW STANCE AND
RESPECT FOR PROPERTY RIGHTS, IS IT SUFFICIENT TO GET
THE TRADE BENEFITS OF THE ACT? WE POINTED OUT THAT
THIS WAS NOT AN INTERPRETATION WE WERE FAMILIAR WITH,
ALSO NOTING THAT RECENT DEVELOPMENTS, SUCH AS THE
OFFICIAL REACTIONS TO BOTH THE CMAG VISIT PROPOSAL
AND THE RECEPTION GIVEN THE INTERNATIONAL BAR
ASSOCIATION DELEGATION TENDED TO MOVE ZIMBABWE'S CASE
FURTHER BACK, RATHER THAN AHEAD. THE PERMSEC WANTS
TO KEEP THE DIALOGUE OPEN ON THE MATTER, WITH THE
INTERLOCUTORS HE KNOWS AND WITH THOSE REPRESENTING
THE NEW ADMINSTRATION. AS THE EMBASSY IN WASHINGTON
HAD NO ONE CAPABLE OF HANDLING THE DIALOGUE,
COMBERBACH ASKED FOR CONTACT INFORMATION OF VARIOUS
AMERICAN OFFICIALS SO HE COULD DO IT HIMSELF.

== TIED TO THE PRECEDING POINT, COMBERBACH EXPLAINED
THAT HE HAD COMMUNICATED ZIMBABWE'S AGOA
REQUIREMENTS' PROBLEM TO HIS COUNTERPART AT THE
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PAGE 04 HARARE 01124 01 OF 02 270600Z
MINISTRY OF HOME AFFAIRS. HE RELATED TO US, WITHOUT
MUCH ENTHUSIASM, THE RESPONSE HE RECEIVED, WHICH WAS
THAT THE RULE OF LAW IS BEING FIRMLY UPHELD
THROUGHOUT THE COUNTRY, WITH THE EXCEPTION OF SOME
"TRESPASSING" BY "FORMER LIBERATION FIGHTERS".
DISINGENEOUS AS THE REPONSE IS, COMBERBACH HAD
REPEATEDLY ASKED THE HOME AFFAIRS MINSTRY FOR A LIST
OF ALL THE INCIDENTS TO WHICH THE POLICE HAD TAKEN
APPROPRIATE ACTION SO THAT HE COULD FORWARD IT TO THE
USG FOR OUR GOOD CONSIDERATION, BUT TO DATE HAD
RECEIVED NO SUCH DATA.

THE FOREIGN EXCHANGE MESS AND DEVALUING
--------------

== ON DEVALUATION, HE TOLD US THAT A POLICY DECISION
HAD BEEN MADE TO DEVALUE, THOUGH THE TIMING, AND THE
AMOUNT, OF THE SHIFT HAD NOT YET BEEN DETERMINED, BUT
RULED OUT THE POSSIBILITY OF A FLOATING EXCHANGE
RATE. HE FURTHER TOLD US THAT IT WAS WITH THIS IN
MIND THAT THE FINANCE MINSTER MAKONI HAD MET RECENTLY
WITH SOME OF THE MAIN PLAYERS ON THE FOREIGN EXCHANGE
SCENE. THESE INCLUDED THE COMMERCIAL BANKS, BUREAUS
DE CHANGE AND SOME OF THE LEADING EXPORTERS (THESE IN
THE COMPANY OF MINSITER OF STATE FOR SECURITY,
NICHOLAS GOCHE), TO INFORM THEM THAT THIS TIME

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ACTION AF-00

INFO LOG-00 AID-00 CIAE-00 COME-00 CTME-00 INL-00 USNW-00
DODE-00 DOTE-00 SRPP-00 DS-00 EB-00 EUR-00 EXIM-01
E-00 FAAE-00 FBIE-00 VC-00 FRB-00 H-01 TEDE-00
INR-00 INSE-00 IO-00 ITC-01 JUSE-00 LAB-01 L-00
AC-01 NSAE-00 NSCE-00 OIC-02 OMB-01 OPIC-01 PA-00
PM-00 PRS-00 ACE-00 P-00 SCT-00 SP-00 SSO-00
SS-00 STR-00 TRSE-00 T-00 USIE-00 PMB-00 DSCC-00
PRM-01 DRL-02 G-00 SAS-00 /012W
-------------- D76E86 270558Z /22
P 270540Z MAR 01
FM AMEMBASSY HARARE
TO SECSTATE WASHDC PRIORITY 8511
INFO NSC WASHDC PRIORITY
SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
USDOC WASHDC
DEPT OF TREASURY WASHDC

C O N F I D E N T I A L SECTION 02 OF 02 HARARE 001124

SIPDIS

STATE FOR AF/S, AF/EPS, EB/IFD/ODF, EB/TPP/ODC
TREASURY FOR ED BARBER, BARAK HOFFMAN
USDOC FOR 2037 ERIC HENDERSON
STATE PASS USTR/RWHITTAKER
NSC FOR SENIOR AFRICA DIRECTOR JFRAZER
LONDON FOR CGURNEY
PARIS FOR BISA WILLIAMS

CONFIDENTIAL

PAGE 02 HARARE 01124 02 OF 02 270558Z
E.O. 12958: DECL: 03/26/11
TAGS: ETRD EFIN PREL PHUM PGOV ZI
SUBJECT: INDUSTRY PERMSEC BRIEFS US ON A RANGE OF
ISSUES: AGOA; DEVALUATION; AND TALKS WITH SOUTH
AFRICA

EVERYONE INVOLVED MUST STICK AND PLAY TOGETHER, AND
NOT ALLOW THE PARALLEL OR THE BLACK MARKET TO GET TOO
FAR AWAY FROM THE OFFICIAL RATE. MAKONI'S MESSAGE
WAS THAT "WE WILL NOT PLAY CHASE AFTER JOHNNY" IN
TERMS OF THE OPERATIVE EXCHANGE RATE, AS HAS BEEN THE
CASE OF LATE, SAID THE PERMSEC. COMBERBACH FURTHER
EXPLAINED THAT HIS GOVERNMENT MADE A DISTINCTION
BETWEEN A PARALLEL AND A BLACK MARKET FOR FOREIGN
CURRENCY. THE FORMER, WHICH QUOTED A RATE SLIGHTLY
ABOVE THE OFFICIAL ONE, WAS TOLERABLE AS A PRESSURE
VALVE. THE LATTER, WHERE FOREX STARVED PEOPLE PAID
AN EXCHANGE RATE FO UP TO (RECENTLY) 120 ZIMBABWE
DOLLARS TO THE U.S. DOLLAR, IS VIEWED BY SOME ZANU-PF
POLITBURO MEMBERS AS ECONOMIC SABOTAGE, CARRIED OUT
BY PRE-LIBERATION MINDED INDIVIDUALS INTERESTED IN
PERSONAL GAIN OR DAMAGE TO THE ECONOMY. IF THIS TYPE
OF THINKING PREVAILS, HE TOLD US, THEN IT COULD GET
VERY MESSY WITH THE POLICE OR OTHERS BROUGHT IN TO
ENFORCE EXCHANGE REGULATIONS, ELIMINATE FOREIGN
CURRENCY ACCOUNTS OR SEIZE ASSETS.

THE SOUTH AFRICANS
--------------

== ON THE SUBJECT OF THE RECENTLY HELD SOUTH
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PAGE 03 HARARE 01124 02 OF 02 270558Z
AFRICAN/ZIMBABWEAN MINISTERIAL MEETINGS, COMBERBACH
TOLD US THAT HE DID NOT HAVE MUCH TO OFFER IN THE WAY
OF HARD FACTS OR PARTICULARS, BUT SAID THAT THE TALKS
WERE VERY FRANK. HIS EXPLANATION FOR THE LACK OF
DATA WAS THAT HIS MINISTER, AND MINISTER MAKONI OF
FINANCE, HAD MORE THAN TWO HOURS OF TALKS WITH ONLY
MINISTER MANUEL OF SOUTH AFRICA, FOLLOWED BY A
PRIVATE DINNER OF THE THREE. HE LAMENTED THE LACK OF
INTER-MINISTERIAL COMMUNICATION REFERRING TO MEETING
BETWEEN THE AGRICULTURE MINISTER AND HIS COUNTERPART,
AND THE ENERGY MINISTER AS WELL, NONE OF THE CONTENT
OF WHICH GOT SHARED AMONGST ALL THE GOZ PLAYERS.

== COMBERBACH TOLD US THAT THE SOUTH AFRICANS WERE
VERY AWARE OF THE DYNAMICS OF THE POLITICAL SITUATION
HERE, AND AS IS THE CASE WITH MANY OF THE NEIGHBORS,
SYMPATHIZE WITH THE PREDICAMENT OF THE MUGABE
GOVERNMENT. ALL OF THEM REALIZE THAT A BREAK WITH
THE PAST HAS TO BE MADE, AND UNDERSTAND THAT THIS
WILL BE A DIFFICULT PROCESS, BUT DO NOT WANT TO
SUFFER UNNECESSARY COLLATERAL DAMAGE IN THE PROCESS.
HE POINTED OUT THAT SOUTH AFRICA HAD LAID ITS CARDS
ON THE TABLE AT THE ONSET OF THE MEETING, TELLING THE
ZIMBABWEANS THAT: A) FOREIGN DIRECT INVESTMENT IS
DOWN SEVERELY IN SOUTH AFRICA AND INDEED WAS
INSUFFICIENT FOR THE NEEDS OF THE ECONOMY, A
DEVELOPMENT THEY BLAME ON REGIONAL "CONTAGION" (READ
ZIMABWE, THE CONGO, MOZAMBIQUE FLOODING AND TERM
EXTENSIONS IN NAMIBIA AND ZAMBIA); B) THAT CAPITAL
FLIGHT FROM SOUTH AFRICA IS ACCELERATING (BLAMED ON
THE SAME "CONTAGION"); AND, C) THAT ALL THE MAJOR
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PAGE 04 HARARE 01124 02 OF 02 270558Z
DONOR COUNTRIES INCLUDING THE U.S., THE EU AND
BRITAIN WERE TURNING UP THE HEAT ON SOUTH AFRICA TO
DEAL MORE EFFECTIVELY WITH ZIMABBWE.

== ON THE SUBJECT OF THE MBEKI/MUGABE MEETING,
(REFTEL REFERS), HE TOO HAD HEARD THAT IT MIGHT OCCUR
AT THE END OF THIS WEEK ON MBEKI'S TRIP BACK FROM
CUBA, BUT NO HARD ANNOUNCEMENT HAD BEEN MADE YET.

COMMENT
--------------


3. (C) COMBERBACH REALIZES THAT HIS EFFORTS AT
BAILING ARE INSUFFICIENT FOR THE WATER VOLUME COMING
INTO THE HOLD, BUT PUSHES ON OUT OF PROFESSIONAL
DEDICATION AND PATRIOTISM. HE SMELLS MORE TROUBLE
AHEAD, AND WE PLACE HIGH REGARD IN HIS EXPERIENCE AND
PROGNOSTICATION SKILLS. THOUGH HE WAS HONEST WITH
US, WE BELIEVE HE WOULD HAVE BEEN MORE FORTHCOMING
AND SPECIFIC HAD NOT A MEMBER OF HIS STAFF BEEN IN
ATTENDANCE, BUT HIS FRANK ADMISSION THAT PASSION
OVERULES THOUGHT IN NATIONAL LEADERSHIP IS VALID. THE
VISIT ALLOWED US TO HEAR A REFRESHING IF LONELY VOICE
OF REASON. END COMMENT.

IRVING

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