Economy Slides Further

UNCLAS HARARE 001070 SIPDIS SENSITIVE STATE FOR AF/S and AF/EX NSC FOR SENIOR AFRICA DIRECTOR JFRAZER USDOC FOR 2037 DIEMOND PASS USTR FLORIZELLE LISER TREASURY FOR ED BARBER AND C WILKINSON STATE PASS USAID FOR MARJORIE COPSON ¶E. O. 12958: N/A TAGS: ECON ETRD EINV PGOV ZI SUBJECT: Economy Slides Further ¶1. (SBU) Summary: Zimbabwe's free-falling economy has taken a turn for the worse. Fuel, electricity and even bank notes are becoming scarcer. Business leaders who laid hopes on the GOZ's economic reform process a few months ago are increasingly joining the Movement for Democratic Change (MDC)'s call for a "final push." End Summary. De-Industrialization Continues -------------- ¶2. (SBU) Incredible as it sounds, Harare's fuel lines have grown longer, often reaching 4 kilometers. In many rural areas, motorized transport is dying out, leaving Zimbabweans to hike as far as 30 kilometers for food purchases or donations. There are workers whose monthly salary will not cover a single disposable razor from South Africa. The Reserve Bank lacks funds for imported ink and paper to print new bank notes. Several banks have stopped servicing cash withdrawals. Others are limiting withdrawals to US$ 35 or stacks of Z$ 50 notes (worth about 2 U.S. cents each/bring a shopping cart). Even parastatal Air Zimbabwe is toying with no longer accepting newly-worthless Zimdollars. ¶3. (SBU) Other than the export and financial sectors, which are still above-water, the business community is in deep despair. Even the GOZ's relaxing of most price controls last week failed to inspire optimism. Businessmen cite the GOZ's corruption, botched normalization of fuel prices and inability to rescue an imploding infrastructure. (The Transportation/Communications PermSec told us most of the National Railway of Zimbabwe's locomotives are sidelined due to lack of spare parts.) Business reps now consider the GOZ incapable of guiding economic reform and are gradually joining the MDC's calls for a "final push" that would end Robert Mugabe's 23-year rule. Comment -------------- ¶4. (SBU) This seems to represent a sea change in business attitudes over the past months. The latest 65 percent devaluation of the Zimdollar was a painful blow for many, who have now abandoned hope that the GOZ can liberalize economics but ignore politics. While they would not welcome additional 2-3 day stayaways, businessmen seem willing to swallow even an indefinite stayaway if it ends this ordeal. Sullivan