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Identifier
Created
Classification
Origin
03HARARE781
2003-04-23 10:06:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Harare
Cable title:  

Zimbabwe's Fuel Hikes: Why No Leadership?

Tags:   ECON  EPET  PGOV  EINV  ETRD  ZI 
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						UNCLAS HARARE 000781 

SIPDIS

SENSITIVE

STATE FOR AF/S
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 EPET PGOV EINV ETRD ZI
SUBJECT: Zimbabwe's Fuel Hikes: Why No Leadership?

Ref: Harare 779



1. (SBU) Summary: A week after raising fuel prices 3-
fold, President Mugabe has offered no rationale or
counsel to a shell-shocked populace. The aging Marxist
seems unable to verbalize the case for economic
orthodoxy. End Summary.



2. (U) Each day, this economy becomes more surreal. Many
locals now pay more for commuting than they earn. They
are understandably irate, a sentiment that labor groups
have tried to channel into this week's mass action (ref).
The man-on-the-street cannot fathom how the Government
can now triple the fuel price - after doubling it in
January.

Underproducing, Not Overpaying


--------------------------




3. (U) Though unspoken, the case for fuel hikes is
straight-forward. Zimbabweans can no longer afford
imports like petroleum. But they are not overpaying for
fuel; they are underproducing to be able to purchase what
they used to in the global marketplace.



4. (U) This is a policy-induced state. Through fast-
track land reform, the GOZ has decimated commercial
agriculture, the traditional source of most export
revenue. Through other export-unfriendly policies -
taxing, at one point, over 90 percent of export revenue -
the GOZ has similarly crippled mining and manufacturing
exports. (Bad governance also deprives Zimbabwe's highly
developed textile sector of African Growth and
Opportunity Act benefits.) Through retail price controls
- often well below production costs - the GOZ pushed non-
exporters to the brink.

Comment


--------------------------




5. (SBU) The GOZ does not want to blame low productivity
for high transport costs, lest Zimbabweans question the
policies that caused their poverty. Furthermore, the GOZ
is ideologically uneasy defending the partial restoration
of macroeconomic sensibility. So it offers no official
defense of a policy shift that has thrust most
Zimbabweans into confusion and despair. The GOZ's
strategy of silently raising fuel prices in successive
increments has not lessened the political fall-out -
compounded by its failure to coordinate increases in fuel
prices with increases in bus fares or wages. At a time
when people yearn for a roadmap, there is no leadership.
President Mugabe's Independence Day address and
subsequent interview instead claimed that things are a
bit tough now but will soon improve.



6. (SBU) Opposition and labor leaders are fanning this
popular wrath. That's politics. Yet they realize the
nearly-broke GOZ has little choice but to cut its
preposterous fuel subsidy. As governing party, the
Movement for Democratic Change would no doubt act the
same (though perhaps softening the blow through better
coordination with labor and more international support).
To fully eliminate the GOZ subsidy - a luxury the
Government can ill afford with minimal foreign exchange
cover - fuel will have to become even more expensive.

Sullivan