VIEWS FROM BULAWAYO

C O N F I D E N T I A L SECTION 01 OF 03 HARARE 001446

SIPDIS

AF/S FOR BNEULING
NSC FOR SENIOR AFRICA DIRECTOR C. COURVILLE
USDOC FOR ROBERT TELCHIN
TREASURY FOR J. RALYEA, B. CUSHMAN
PASS USTR FOR FLORIZELLE LISER
STATE PASS USAID FOR MARJORIE COPSON AND ERIC LOKEN

E.O. 12958: DECL: 12/31/2009
TAGS: ECON EFIN ETRD PGOV PHUM PREL ZI MDC
SUBJECT: VIEWS FROM BULAWAYO

REF: A)HARARE 1269 B)HARARE 1405 C)HARARE 1421

Classified By: Ambassador Chris W. Dell for reason 1.4 b/d

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Summary
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1. (C) Zimbabwe Desk Officer and PolOff visited Bulawayo,
Zimbabwe's second largest city, October 14 and 15. Eric
Bloch, a local economist, detailed his insider's
understanding that the GOZ had sourced its US$120 million
arrears payment to the IMF solely through "voluntary"
payments. In discussing the on-going debate over the
impending Senate elections, opposition Movement for
Democratic Change (MDC) Secretary for Legal Affairs David
Coltart and MDC Bulawayo Mayor Japhet Ndabeni-Ncube both
stated the need for the party to identify and remove
infiltrators and opportunists to survive. Businessman and
exporter to the U.S. Jyotirdhar Laxmidas suggested that local
industry could not survive another three years of economic
decline. End Summary

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Local Economist on Payment to the IMF, South African Loan
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2. (C) Bloch, a self-described friend of Reserve Bank of
Zimbabwe (RBZ) Governor Gideon Gono, and member of Gono,s
RBZ Advisory Committee, said 37 separate sources
"voluntarily" provided the $120 million arrears payment to
the IMF in late August (Ref A) in a complicated deal applying
various exchange rates and terms for later access to foreign
currency. Bloch claimed he had seen the names and amounts:
three "non-eastern" embassies (US$27 million),11
international NGOs (US$36 million),and 23 companies (US$57
million). Bloch confirmed that Hippo Valley Estates was one
of the sources, and maintained the company had provided the
funds voluntarily. (Note: Hippo Valley Estates declared in a
public notice in September that the RBZ had forced/forced it
to surrender US$2.68 million from its foreign currency
account on trumped up charges of exchange regulations
violations. The RBZ did approve embassies with an offer to
pay a 40 percent "bonus" on forex exchanged at the GOZ's
official rate and we cannot rule out that some may have taken
up the offer.)


3. (C) Citing various GOZ and SAG sources close to, but not
necessarily involved in, the loan negotiation between the two
countries, Bloch said Mugabe had rejected the SAG's initial
12 political conditions. Mugabe had subsequently sought help
from China, Dubai, and Iran, but had come out virtually empty
handed. Mugabe then went back to the South Africans and got
some of the conditions (unspecified) dropped. However,
negotiations were still stalled over some of the remaining
political conditions, including: dropping all charges against
MDC President Tsvangirai; negotiations with the MDC on a
political solution that would guarantee Mugabe,s freedom
from prosecution, synchronize the Parliamentary and
Presidential elections, and create a national unity
government that would oversee internationally monitored
elections.


4. (C) Bloch claimed the South Africans were also pressing
for a Commission of Inquiry to investigate Operation Restore
Order and wanted compensation for seized South African-owned
farms. If the GOZ breached the terms of the agreement, South
Africa was threatening a travel ban on all GOZ Ministers and
Deputy Ministers as well as all ZANU-PF Politburo and Central
Committee members. In addition, South Africa had negotiated
with Malawi, Botswana, Mozambique, and Zambia to impose the
same travel ban.

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Local MDC Leaders on Senate Impasse
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5. (C) Coltart said the MDC must either shed its pro-GOZ
infiltrators and other opportunists or split in two and
disappear. He suggested that some of Morgan Tsvangirai's top
advisors had been compromised. Ndabeni-Ncube expressed a
similar opinion. Coltart said he was incredulous at
Tsvangirai's reaction to the National Council's vote to

SIPDIS
participate in the election. He had expected Tsvangirai to
state his opposition but then abide by the decision. The
largely minority Ndebele population of Bulawayo and the two
Matebeleland provinces had worked hard to get rid of ZANU-PF
politicians and did not want them back by default. While
there were compelling reasons not to participate, the party
had to respect the National Council's decision.
Ndabeni-Ncube agreed, noting that the Matabeleland provinces
were going forward with candidate selection.


6. (C) Coltart added that Tsvangirai's attempt to override
the party's decision had shaken his faith in the man as a
leader and made him wonder whether Tsvangirai himself had
somehow been compromised. When pressed on this point,
however, he quickly backed away saying "I still have faith in
Morgan". Ndabeni-Ncube said that the MDC leader had lost
credibility; he suggested Tsvangirai would end up alone if he
tried to overrule the will of the majority. (Comment:
Outside of Matableland, the majority of MDC supporters appear
to favor a boycott, which we believe could give Tsvangirai
the upper hand in the argument over whether his actions are
democratic.)

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Business Leader Blues
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7. (C) Laxmidas of TAG International, a clothing manufacturer
that exports to the U.S., cited his own factory,s experience
as proof that Bulawayo industry could not wait out another
three years for economic conditions to improve. His factory
was operating at 40 percent capacity and would have reduced
its workforce from 220 in 2002 to 66 by January 2006. That
said, he noted that he had recently met with some Cape Town
businessmen who were contemplating local property acquisition
at fire sale prices in preparation for the post-Mugabe
period.

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Comment
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8. (C) Bloch's take on the source of the IMF payment largely
contradicts our and other Embassies reports of alleged RBZ
misappropriation of company foreign currency accounts and we
are frankly skeptical. We are also skeptical with regard to
Bloch's information on South Africa's loan conditions. We
would love to believe SAG conditions include Mugabe's
departure, but doubt Mbeki would go so far to force change in
Zimbabwe.


9. (C) Coltart and Ndabeni-Ncube's assertions of infiltration
within the MDC are not new and their take on Tsvangirai's
"anti-democratic" behavior is self-serving and partly a
reflection of the MDC's ability to compete successfully
against ZANU-PF in Matebeleland. The reality is that MDC
participation would give legitimacy to a powerless and
temporary body created to help solve ZANU-PF's own internal
power struggle, and in which the MDC would be lucky to win 15
seats. However, the bulk of those seats would be in
Matabeleland and would be won by Coltart and Ndabeni-Ncube,s
political allies. Reports in today's Financial Gazette claim
that 10 of 12 provincial party structures under pressure from
the grassroots, as well as the ZCTU, have now come out in
favor of Tsvangirai's call for a boycott, demonstrating the
extent to which he is in touch with popular sentiment and
conversely the isolation of the other MDC elites.
DELL