Mugabe to Restructure Economic Team

UNCLAS HARARE 002184

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: Mugabe to Restructure Economic Team

Refs: a) Harare 2140 b) Harare 2149


1. (SBU) Summary: In a clear indication that hardliners
are winning out over Finance Ministry and Reserve Bank
(RBZ) moderates (refs a/b),President Mugabe has
announced his intent to shake up his economic team. It
also suggests the November 20 budget speech will offer
Zimbabwe's beleaguered private sector scant relief. End
summary.


2. (U) Mugabe's remarks closely paralleled recent
comments by cabinet hardliners Jonathan Moyo and Joseph
Made:

- Forex Shortage. Mugabe continued to blame parallel
market traders for creating a forex shortage. In some of
his strongest language to date, he said the "black market
. . . is run and supported by a mercenary breed of wily
and selfish merchants, a breed that neither sows nor
sweats."

- Targeted U.S. and EU sanctions. Mugabe referred to
"the vicious campaign led by Britain and her allies" as
another main reason for the economic downturn.

- Land Reform. Mugabe hinted that Zimbabwe's chaotic
land redistribution was not over: "Fast track was just a
phase . . . within a broader and ongoing land reform
program. Its conclusion is therefore not the end of land
reform." He lashed out again at white farmers who "hope
that Zimbabwe will be their colony again. It will not.
Never, ever!"

Comment
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3. (SBU) The GOZ's departure from reality is becoming
more pronounced. It routinely mischaracterizes U.S. and
EU targeted sanctions as broad trade restrictions,
fabricates burgeoning numbers of foreign visitors to
Zimbabwe and will not acknowledge that the official
exchange rate of Z$824:US$1 is merely a GOZ subsidy for
certain services. (Only on the parallel market is
currency freely exchanged.)


4. (SBU) The private sector had been hoping against hope
that a positive sign would emerge from the November 20
budget speech: devaluation, formal end to land reform,
return of exchange bureaux, higher revenue retention for
exporters (currently 50 percent). Mugabe's remarks not
only stymie these hopes, they weaken the impact of recent
GOZ reforms. By lashing out so fervently against the
black market, for example, Mugabe ensures that oil
companies will think twice about selling fuel at market
rates (counteracting Energy Ministry assurances that they
may do so).


5. (SBU) It is also probable that Mugabe will replace
several RBZ and Finance moderates with hardliners.
Finance Minister Herbert Murerwa appears to be through.
Hardline Justice Minister Patrick Chinamasa has already
been standing in for him, a snub to moderate Finance
Deputy Chris Kuruneri, who criticized remarks by
Agriculture Minister Made last week (ref a).

Sullivan