RBZ Governor Addresses U.S. Firms

UNCLAS HARARE 000767 SIPDIS SENSITIVE STATE FOR AF/S NSC FOR SENIOR AFRICA DIRECTOR JFRAZER USDOC FOR AMANDA HILLIGAS TREASURY FOR OREN WYCHE-SHAW PASS USTR FLORIZELLE LISER STATE PASS USAID FOR MARJORIE COPSON ¶E. O. 12958: N/A TAGS: ECON EAID BTIO EINV PGOV PTER ZI SUBJECT: RBZ Governor Addresses U.S. Firms Ref: Harare 682 ¶1. (U) Summary: Reserve Bank (RBZ) Governor Gideon Gono met May 6 with 30 representatives from U.S. multinationals. He offered few insights beyond his April 21 policy statement, but underscored RBZ vigilance in policing commercial activity. End Summary. ¶2. (U) In this session organized by the American Business Association of Zimbabwe, Gono said the following to U.S. companies: - He will need to make more frequent policy statements than the two-per-year that had become typical under his predecessor. (April's address followed his first by only four months.) - Gono is prepared to interfere in any sector for the sake of Zimbabwe's economic health. This generally means selectively chasing down corruption. He appears to be turning from the financial to insurance sector. - The RBZ will continue to allow anyone to sell foreign exchange through authorized banks at the auction (or floor) rate. However, the RBZ will investigate sales of US$10,000 or more. Gono expressed fear exporters would under-invoice clients abroad to dodge Zimbabwe's 25 percent retention requirement, then exchange proceeds in anonymous cash transactions. The governor also raised concerns about money laundering to finance terror or other nefarious activity. - Gono continues to pin hopes on tapping into transfers from Zimbabweans abroad, claiming one-third of the population has emigrated. He stated that foreign exchange redemptions were about US$1.5 million per day in the first days of the no-questions-asked policy. - Once forex inflows improve, Gono would like to offer more than US$8 million at twice-weekly auctions. For the time-being, the RBZ would continue to direct "inflows to priority sectors." - The RBZ governor reiterated his desire to restore relations with the international community, especially the International Monetary Fund. He expressed gratitude for U.S. food and HIV/AIDS assistance. - He praised the African Growth and Opportunity Act (AGOA),explaining he had been following AGOA since its embryonic beginnings in 1997. (Note: In recent months, Post has made a concerted effort to raise the profile of AGOA, making Zimbabweans aware of what they are missing out on.) ¶3. (SBU) In private conversations with the Ambassador, Gono claimed not to know of the GOZ cabinet decision two days prior to cancel an FAO crop assessment and said that he knew the likely maize crop was closer to 800,000 metric tones than the 1.7 million claimed by the Agriculture Minister. He also padded his reputation as all-purpose fix-it man by claiming to have intervened successfully against the Ministry of Education's shutdown of many private schools due to unapproved fee hikes. Further, he said he was considering an appeal by Vice President Msika to secure presidential intervention against the Government's seizure of Kondozi Farm (ref). Comment -------------- ¶4. (U) The GOZ is still fighting market forces, particularly on currency exchange. Unwilling to face market realities, it shut several dozen private schools this week over increased fees. The GOZ's predisposition to dictate rates and prices to the private sector still makes an economic rebound unlikely. Sullivan