LABOR'S ULTIMATUM RUNS OUT, UNSPECIFIED RESPONSE

UNCLAS HARARE 001621

SIPDIS

SENSITIVE NOFORN

STATE FOR AF/S, DRL
NSC FOR SENIOR AFRICA DIRECTOR JFRAZER


E. O. 12958: N/A
TAGS: ECON ELAB PGOV ZI
SUBJECT: LABOR'S ULTIMATUM RUNS OUT, UNSPECIFIED RESPONSE
YET TO BE ANNOUNCED


SENSITIVE BUT UNCLASSIFIED. NOT FOR INTERNET POSTING.

1.(SBU) Summary. The Zimbabwe Congress of Trade Unions
(ZCTU) declared on July 29, 2003, that it would give the GOZ
a fourteen-day time period to provide relief from the
ongoing cash crisis, after which the labor unions would
respond with unspecified action. Despite the GOZ's
unfocused attempts to deal with the symptoms rather than the
genesis of the problem, the fourteen days passed with the
situation deteriorating rather than improving. The
ultimatum expired on August 12, and the newspaper headlines
on August 13 and 14 speculated about another ZCTU-led
stayaway. But while the ZCTU has clearly committed itself
to action, it is unclear what shape that action will take.
The most radical step might be for the ZCTU to call on
regional allies, such as the Congress of South African Trade
Unions (COSATU),to increase pressure and force a response.
End summary.

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NO RELIEF IN SIGHT
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2. (U) The cash crisis continues unabated. Zimbabweans
continue to queue at banks for as little as Z $5,000 to
$10,000 per person (US $1 to $2 at current parallel market
rates). The GOZ, while announcing improbable remedies --
changing the color of the largest banknote (now worth US
$.10) to persuade more consumers to bank their old money, or
issuing pseudo-travelers' checks for single-use transactions
-- seems powerless to resolve the crisis. Nobody believes
that the government can replace 2/3 of the banknotes in
circulation (up to Z $120 billion) within sixty days, and
some shops are not even accepting the new travelers' checks.
Given the dominance of the black market in some sectors,
such as fuel, and the requirement for cash in other sectors,
such as transport costs, non-cash remedies can only address
a small part of the problem.

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ZCTU OBLIGED TO FOLLOW THROUGH
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3. (SBU) The ZCTU remains concerned about the
disproportionate impact of the cash crisis on its
constituency -- those workers still fortunate enough to have
formal employment, but struggling at the lower end of the
income scale. Its attempts to urge the GOZ to resolve the
problem were improbable at best, but now that the government
has failed to improve the situation, the ZCTU is compelled
to act. Despite headline banners that scream new mass
action is imminent, the ZCTU remains close-mouthed about its
plans. ZCTU officials concede that another futile stayaway
would be counter-productive, and that more drastic action
will eventually be necessary. A meeting of the National
Council is scheduled for August 23, at which time they will
decide what action to take, and action is likely to follow
within a week.


4. (SBU) One potential wild-card response is for ZCTU to
call on COSATU to join forces in closing the border posts
between Zimbabwe and South Africa. COSATU has indicated
publicly that it is willing to do so, as it has done in the
past with Swaziland and Lesotho, but it has stated privately
to ZCTU officials that it will only do so if invited by
ZCTU. Other rumors within the labor circles claim that SA
president Thabo Mbeki may be willing for COSATU to be the
"spontaneous" actor in such an endeavor, which will both
increase pressure on Zimbabwe to put its economic house in
order, but leave Mbeki with publicly clean hands.

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COMMENT
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5. (SBU) The ZCTU leadership is painfully aware that
continued attempts to call stayaways, particularly when
there is no resultant improvement, are a waste of
organization. The challenge will be for the ZCTU to respond
with something so effective, and so unexpected, that the GOZ
will be forced to respond. Several days of closed borders,
particularly when Zimbabwe is so critically dependent upon
road-based trade with SA, could well be the best tactic.

Whitehead