THE FINANCE PERMSEC FEEDS US THE GOVERNMENT

C O N F I D E N T I A L HARARE 000750 SIPDIS STATE FOR AF, AF/S, AF/EPS, EB/IFD/ODF, EB/TPP/ODC TREASURY FOR ED BARBER, AND BARAK HOFFMAN USDOC FOR 2037/ERIC HENDERSON STATE PASS USTR/RWHITTAKER NSC FOR SENIOR AFRICA DIRECTOR JFRAZER LONDON FOR CHARLES GURNEY PARIS FOR BISA/WILLIAMS CONFIDENTIAL PAGE 02 HARARE 00750 141406Z NAIROBI FOR PFLAUMER E.O. 12958: DECL: 07/05/11 TAGS: ECON EFIN PREL PINR ZI SUBJECT: THE FINANCE PERMSEC FEEDS US THE GOVERNMENT LINE CLASSIFIED BY CHARGE D' AFFAIRES EARL IRVING, REASON 1.5 (B),(D) REF: 00 HARARE 6566 ¶1. (C) ON FEBRUARY 13 NICHOLAS NCUBE, PERMANENT SECRETARY - MINISTRY OF FINANCE, PAID A CALL ON US AT SIPDIS OUR INVITATION TO DISCUSS ECONOMIC AND POLITICAL DEVELOPMENTS, AND THE BILATERAL RELATIONSHIP. WE KNOW NCUBE WELL, AS HE HAS BEEN A DEPENDABLE AND SOLID EMBASSY INTERLOCUTOR FOR OVER A DECADE THROUGHOUT HIS STRING OF GOVERNMENT POSITIONS. IN THIS VEIN NCUBE SAT DOWN AND ASKED, "WHAT DO YOU THINK OF US?" CHARGE INFORMED HIM FRANKLY AND DIRECTLY OF THE VERY SERIOUS CONCERNS WE HAVE FOR THE MULTITUDE OF NEGATIVE DEVELOPMENTS OCCURRING WITH DIRECT GOVERNMENT SUPPORT AND BACKING. WE ADVISED HIM THAT TOLERANCE THRESHOLDS ARE BEING OVERWHELMED, AND THAT SIMULTANEOUS ATTACKS ON THE JUDICIARY, THE INDEPENDENT PRESS AND THE LEADERSHIP OF THE OPPOSITION PARTY ARE CAUSING SEVERE DAMAGE TO ZIMBABWE'S STANDING AND NATIONAL CHARACTER. NCUBE TOOK OUR MESSAGE IN WITH LITTLE OR NO REBUTTAL AND ADMITTED THAT HIS COUNTRY HAS EXCEEDINGLY GOOD AIM WHEN IT COMES TO SELF-INFLICTED WOUNDS. CONFIDENTIAL PAGE 03 HARARE 00750 141406Z ¶2. (C) ON THE FINANCE MINISTRY'S OPERATIONS AND DOMESTIC ECONOMIC CONDITIONS NCUBE, TO OUR DISAPPOINTMENT, FED US A STRAIGHTFORWARD VERSION OF THE GOVERNMENT LINE. HE BOASTED THAT GOZ JANUARY RECEIPTS WERE ABOVE BUDGET, PARTIALLY DUE TO THE VERY HEFTY FEE INCREASES THEY HAVE BEEN PUSHING ACROSS THE BOARD (FROM SPEEDING TICKETS TO BIRTH CERTIFICATE FEES TO PHOTOCOPIES FOR THE PUBLIC). HE FURTHER CLAIMED THAT TOTAL GOVERNMENT SPENDING WAS "GOOD", AND EVEN PROCLAIMED THAT THE DEFENSE MINISTRY WAS WITHIN ITS BUDGET, DESPITE THE 50 PERCENT CUT (IN REAL TERMS) IT SUFFERED IN THE 2001 BUDGET (REFTEL). HOW THIS COULD BE THE CASE, ESPECIALLY IN LIGHT OF THE ADDITIONAL TROOPS SENT TO THE CONGO AFTER THE KABILA ASSASSINATION, WAS NOT FORTHCOMING FROM THE PERMSEC. ¶3. (C) HE ADMITTED TO DIFFICULTIES IN CARRYING OUT PRIVATIZATION, CITING AS AN EXAMPLE THE PROCLAIMED INABILITY OF THE RESPONSIBLE MINISTRY (READ AGRICULTURE) TO FIND THE SHARE CERTIFICATES NEEDED TO SELL OFF THE GOZ'S MAJORITY STAKE IN COTTCO (A PARTIALLY-PRIVATIZED PARASTATAL INVOLVED IN COTTON PRODUCTION AND SALES). HE LAMENTED THAT THE STOCK MARKET PRICE WAS DROPPING OF LATE, AND JOKED THAT HE HAD THREATENED TO MAKE UP ANY LOSSES CAUSED BY THE DELAY FROM THE MINISTRY'S OWN BUDGET. NCUBE ALSO TOLD US THAT THE NEW CASH PAYMENT SYSTEM INSTALLATION (DESIGNED TO PREVENT MINISTRIES FROM SPENDING MORE THAN THEIR BUDGET ALLOCATION) WAS GOING WELL, WITH EDUCATION, AGRICULTURE, FINANCE AND THE CENTRAL CONFIDENTIAL PAGE 04 HARARE 00750 141406Z PAYMENTS OFFICE ALREADY ONLINE. COMING UP NEXT WAS FOREIGN AFFAIRS, DEFENSE AND THE PRESIDENT'S OFFICE. THE FINANCE MINISTRY PLACES GREAT FAITH IN THE ABILITY OF THE SYSTEM TO CONTROL OVERSPENDING, THOUGH WE WILL RESERVE OUR JUDGMENT UNTIL WE SEE WHAT COMES OF WELL- CONNECTED MINISTERS' VISITS TO THE PRESIDENT'S OFFICE, TO PLEA FOR THAT SPECIAL, EXTRA, ONE-TIME-ONLY ALLOCATION. ¶4. (C) COMMENT: NCUBE LISTENED CLOSELY AND WE HAVE NO DOUBT THAT HE WILL COMMUNICATE OUR MESSAGE BOTH TO MANAGEMENT AT HIS MINISTRY AND TO THE ORAL NETWORK OF HIS GOVERNMENT COLLEAGUES. HIS BLASE PRESENTATION OF WHAT CAN ONLY BE CHARITABLY DESCRIBED AS HALF-TRUTHS WAS A LETDOWN, BUT IT MIMICKED WHAT HIS BOSS, SIMBA MAKONI, HAD DONE DURING HIS RECENT WASHINGTON VISIT. WE WILL KEEP THE CHANNELS OPEN, AND WILL ONLY BELIEVE FISCAL CONTROL SUCCESS WHEN WE SEE IT. END COMMENT. IRVING CONFIDENTIAL >