MINISTER SUGGESTS TAKEOVER OF WHITE FIRMS

C O N F I D E N T I A L SECTION 01 OF 02 HARARE 001292

SIPDIS

AF/S FOR B. NEULING
STATE PASS USAID FOR M. COPSON
NSC FOR SENIOR AFRICA DIRECTOR C. COURVILLE
TREASURY FOR J. RALYEA AND B. CUSHMAN
USDOC FOR ROBERT TELCHIN

E.O. 12958: DECL: 09/15/2015
TAGS: ECON EFIN PGOV PHUM ZI
SUBJECT: MINISTER SUGGESTS TAKEOVER OF WHITE FIRMS

Classified By: Ambassador Christopher Dell under Section 1.4 b/d

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Summary
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1. (SBU) Transport and Communications Minister Chris
Mushohwe told the Confederation of Zimbabwe Industries (CZI)
at its September 7-9 annual congress that the GOZ could
decide to take over all white-owned and controlled firms.
His remarks, reported in the international press, sent a
shudder through some international banks invested in
white-owned Zimbabwean firms. While his assertion was
delivered with contemptuous disregard for Zimbabwe,s
investment climate, a more businesslike element is also at
play in the government, and its countervailing influence will
probably outweigh political theatrics for now on this issue.
End Summary.

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Threatened Takeover of White Firms
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2. (U) Addressing the CZI,s September 7-9 annual congress,
Transport and Communications Minister Chris Mushohwe
suggested that the GOZ could undertake efforts to take over
all white-owned and controlled firms. The press reported him
saying, &Most of these companies do not want to give us
equity. We might decide to take over these companies just
like we did during the land reform exercise.8

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Alarm Bells Ring Among Bankers
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3. (SBU) An executive of Zimbabwe Leaf Tobacco, a subsidiary
of Universal Corporation, a Richmond Virginia-based tobacco
merchant/processor and major buyer in the local tobacco
market, on September 14 related to Econoff the immediate and
detrimental effect of the widely reported remark. His
company,s finance department was in a spin trying to respond
to and placate its three international banks. The banks had
read Mushohwe,s comment in the international media and
contacted the company to register their concern and seek
clarification of the situation on the ground. The
Minister,s remarks jeopardized Zimbabwe Leaf Tobacco,s
international credit facilities, said the executive, in an
already difficult business climate. The company, which runs
the world,s third largest tobacco processing plant in
Zimbabwe, is struggling to survive in the face of a
two-thirds contraction in tobacco production since 2000.


4. (SBU) On a personal note, the executive, a
fifth-generation white Zimbabwean, expressed his commitment
to the country but admitted that, since fast-track land
reform, he had packed a trunk of key personal belongs for a
quick departure and had secured visas for Australia for
himself and his family as a "just in case." He said he lived
a quiet family life and didn,t pay close attention to the
ranting of government officials such as Mushohwe, but &it
could happen, anything is possible8.


5. (SBU) The Chief Financial Officer of NMB Bank, Zimbabwe,s
first indigenous-owned bank, commented to econoff on
September 14 that, in issues of politics and sovereignty, the
government didn,t care about how its remarks affected the
market. If the GOZ is treated like a renegade, it will act
as a renegade, said the CFO, an ethnic Indian and second
generation Zimbabwean. He called Mushohwe,s remarks a wild
statement but he added there was also a more businesslike
element at play in the government in the guise of the Reserve
Bank Governor and the Minister of Finance.

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CZI: &Don,t Take it Seriously8
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6. (SBU) Florence Sachikonye, Vice President of the
Confederation of Zimbabwe Industries, confirmed the press had
reported Mushohwe,s remarks accurately. She told econoff,
however, it had failed to relate the context of the remarks.
She said Mushohwe was responding in the heat of the moment
and in a defensive situation to the question of why not a
single white executive was present at the congress.
Sachikonye,s advice to econoff was &don,t take it
seriously at this stage.8 Congress delegates reacted to
Mushohwe,s speech with grumbles and murmurs of disapproval,
according to the local press report.

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Comment
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7. (C) Mushohwe,s remarks fit with the GOZ,s stated
priority to "indigenize" more of the economy - a euphemism
for moving private sector assets increasingly under ruling
party control. However, this apparently off-the-cuff
statement was not likely cleared by higher authority.
Moreover, countervailing interests in the government -
reflected in GOZ priority on avoiding IMF expulsion, for
example - for now will likely prevail over wilder threats and
political theatrics.


8. (C) Mushohwe's provocation nonetheless is significant.
First, his comments are consistent with the kind of posturing
encouraged by Mugabe's own views and further undermine the
country's failing investment climate, even if the GOZ doesn't
follow through. In addition, the impetus for indigenization
will grow as the ruling party's patronage system comes under
increasing stress. Indeed, with indigenization of the
agricultural sector in its final phases and not yielding
hoped-for dividends, ongoing GOZ rhetoric suggests that
mining and tourism are the next sectors in its sights, with
occasional talk, as here, of indigenizing the broader economy
over the longer run.
DELL