INDUSTRY PERMSEC BRIEFS US ON A RANGE OF

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. CONFIDENTIAL PAGE 03 HARARE 01124 01 OF 02 270600Z 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 CONFIDENTIAL 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 CONFIDENTIAL CONFIDENTIAL PTO3424 PAGE 01 HARARE 01124 02 OF 02 270558Z 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 CONFIDENTIAL 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 CONFIDENTIAL 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 CONFIDENTIAL >