MBEKI CONFIRMS SOUTH AFRICA CONSIDERING BAILOUT

C O N F I D E N T I A L PRETORIA 002948

SIPDIS

DEPT FOR AF/S B. NEULING AND K. GAITHER, EB/IFD, EB/OMA
LONDON, PARIS, BRUSSELS FOR AFRICA WATCHERS

E.O. 12958: DECL: 07/24/2015
TAGS: PREL PHUM KDEM ECON ZI SF KFIN
SUBJECT: MBEKI CONFIRMS SOUTH AFRICA CONSIDERING BAILOUT
LOAN TO ZIMBABWE

REF: PRETORIA 2854

Classified By: Charge d'Affaires Jeff Hartley
Reasons 1.4(b) and (d)


1. (U) Summary. Following a three-day cabinet retreat,
President Mbeki confirmed publicly that South Africa was
considering lending Zimbabwe funds to pay its IMF arrears.
Mbeki said that intense discussions with the Government of
Zimbabwe on a bailout had not been concluded, and that some
conditions would apply. On the report of the UN special
envoy, Mbeki said that the SAG would "act on the
recommendations . . . with the UN, our own people, and the
Government of Zimbabwe." He avoided criticizing the GOZ's
Operation Restore Order, but welcomed UN engagement in
helping "Zimbabwe solve the problem it faces." End summary.


2. (U) Speaking at a July 24 press conference following a
three-day Cabinet lekgotla (retreat),President Mbeki
confirmed publicly that South Africa was considering lending
Zimbabwe funds to pay its IMF arrears in a last ditch effort
to keep the IMF from expelling Zimbabwe. Mbeki said that
Pretoria did not want Zimbabwe to collapse since South Africa
would "inherit all of the consequences" of that collapse.


3. (U) Mbeki argued that expelling Zimbabwe from the IMF
would further isolate the country and be "counterproductive"
to change. He suggested that "members of the IMF executive
board" share his view. On the question of paying Zimbabwe's
IMF debt, Mbeki said that "it may well be that in the end we
are going to come to the decision that South Africa takes on
a portion of the debt."


4. (SBU) Mbeki said that discussions with the Government of
Zimbabwe on the bailout loan have not been concluded. He did
not explicitly describe South Africa's conditions for a loan,
which we understand are still being contemplated, but hinted
at some of his thinking.

-- The reform of the Zimbabwean Reserve Bank and monetary
system would be a "very important element" of the solution.

-- Any agreement must be an "inclusive one, taking on the
broad interests and concerns of all Zimbabweans."

-- The bailout would be discussed with the MDC, once the
discussions with the GOZ were more developed.


5. (U) On the report of the UN Special Envoy on Human
Settlement Issues in Zimbabwe, Mbeki said that the SAG would
"act on the recommendations . . . with the UN, our own
people, and the Government of Zimbabwe." He avoided
criticizing the GOZ's Operation Restore Order, but welcomed
UN engagement in helping "Zimbabwe solve the problem it
faces." Mbeki said he would meet with the South African
Council of Churches again to discuss the South African
humanitarian response.


6. (U) The formal press release from the Cabinet lekgotla
touched on Zimbabwe only briefly: "On the issue of
developments in Zimbabwe, the lekgotla reaffirmed SA's
principled position to assist the people of that country in
finding a solution to the socio-economic and political
challenges that they face."


7. (C) Comment: South Africa's priority in Zimbabwe seems to
be first and foremost stability, ensuring that the crisis
does not spill over its border. Pretoria will try to
leverage its bailout for Zimbabwe to achieve economic, and to
a lesser extent political, reform, but we do not believe that
the SAG will impose (and enforce) the kind of conditions that
will lead to dramatic reversals in ZANU-PF's policies. South
Africa wants Mugabe gone, but through peaceful,
constitutional change in a stable political environment. The
proposed bailout loan is driven more by the desire to
maintain regional stability than getting Mugabe out of power.
End comment.
HARTLEY