GOZ Still Scapegoats Exporters

UNCLAS HARARE 002149

SIPDIS

SENSITIVE

STATE FOR AF/S
NSC FOR SENIOR AFRICA DIRECTOR JFRAZER
USDOC FOR 2037 DIEMOND
TREASURY FOR OREN WYCHE-SHAW
PASS USTR FLORIZELLE LISER
STATE PASS USAID FOR MARJORIE COPSON


E. O. 12958: N/A
TAGS: ECON EINV PGOV ZI
SUBJECT: GOZ Still Scapegoats Exporters

Ref: Harare 2140


1. (SBU) Summary: The GOZ continues to blame export firms
for its foreign exchange shortage. If today's lead story
in the official press is a curtain-raiser for the
November 20 budget speech, the Mugabe administration may
kill what's left of Zimbabwe's once hearty export sector.
End summary.

The "Root Cause" of Economic Problems
--------------

2. (U) Today's Herald announces that the GOZ is forming a
forex taskforce to account for leakage of export taxes.
The GOZ believes "the root cause of [present] economic
problems [is] the unaccountability of foreign currency by
exporters." GOZ hardliners are angered that so many
exporters are failing to remit 50 percent of revenue to
the Reserve Bank for exchange at the official rate,
currently one-seventh of the market rate. The article
argues that better policing of exporters will bring more
forex to the Reserve Bank, enabling energy parastatal
ZESA and oil parastatal NOCZIM to acquire forex from the
Reserve Bank at the official rate. "Rather than having
the two companies depend on the parallel market," the
article continues, "there is a growing feeling in
Government that managing to get foreign currency at the
official rate is the solution." Finally, the article
takes a few obligatory swipes at the Reserve Bank for
failing to collect forex from exporters. Information
Minister Jonathan Moyo and Agriculture Minister Joseph
Made - both hardliners - are on the new taskforce.
Tellingly, the Reserve Bank has been left off.

Comment
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3. (SBU) We have no doubt that many exporters are
sheltering earnings from the GOZ's oppressive tax regime
- and that Reserve Bank is turning a blind-eye to this
practice. Reserve Bank officials realize that rigid
enforcement of the 50 percent exchange requirement
saddles firms with an outrageous inefficiency, further
crippling an export sector that has shrunk from US$2.2
billion to 1.4 billion since 2000. The GOZ's own data
contradict an assertion of the article's unnamed GOZ
spokesman that "all available evidence indicates that
this economy is generating more foreign currency today
than it did three years ago." (Tobacco revenue, the
largest forex earner, is down about two-thirds, according
to GOZ statistics.) The Herald's heavy-fisted story
signals that hardliners - who favor interventionism and
distrust the private sector - are trying to gain the
upper hand against moderates, part of a widening schism
in GOZ economic philosophy (ref). Both hardliners and
moderates want to shape the upcoming November 20 budget
speech. (The Herald reports that the new taskforce will
release its findings in three weeks, just in time for the
2004 budget.)

Sullivan