C O N F I D E N T I A L SECTION 01 OF 02 HARARE 001280

SIPDIS

SIPDIS

AF/S FOR S. HILL
NSC FOR SENIOR AFRICA DIRECTOR B. PITTMAN

E.O. 12958: DECL: 10/24/2016
TAGS: ECON PGOV PREL ZI
SUBJECT: LOOK EAST "SUCCESSES" FALL FLAT

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

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Summary
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1. (C) In the GOZ's most recent flirtation with countries to
its east, state-controlled media on October 10 reported that
a Russian delegation had signed memorandums of understanding
(MOUs) with the GOZ totaling US$300 million. South African
journalists checking into the contracts, however, could not
find evidence that the Russian company involved was
legitimate and a GOZ official privately told us the visitors
put the breaks on any investment due to the lack of
investment guarantees. Would-be Russian investors appear to
have come to the same conclusion as the Chinese who,
according to a ruling party parliamentarian, recently told
the GOZ to follow their model, and deregulate the market and
embrace reform. End Summary.

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GOZ Signs MOUs With Briefcase Company?
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2. (U) A delegation of 48 Russian businesspersons and
journalists visited Zimbabwe in early October, and on October
10 reportedly signed several MOUs worth US$300 million with
the GOZ. Trumpeting the agreements, the state-controlled
Herald newspaper said the Russian investment company Rusavia
Trade would build a commuter rail link between Harare and the
nearby dormitory town of Chitungwiza, construct a freight
terminal at the Harare international airport, improve two
airfields near Victoria Falls, and develop a coalfield near
Hwange.


3. (U) Subsequent investigations by South African
journalists, however, have shown that the Russian company
that signed the MOUs appears to be little more than a
briefcase company. Phone numbers for the company distributed
at a Harare press conference were inoperable and Russian
business insiders contacted by the journalists had never
heard of the company.


4. (C) Meanwhile, Deputy Reserve Bank of Zimbabwe Governor
Nick Ncube ) a fluent Russian-speaker who was involved in
the visit - told the DCM in early October that in previous
negotiations reputable Russian investors had insisted on
investment guarantees before sinking large sums of money into
Zimbabwe. Since the GOZ had been unwilling to provide such
guarantees, no investment had been forthcoming. Ncube
conceded that the delegation's visit would also amount to
little.

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Chinese Limit Aid, Quietly Press For Reform
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5. (C) ZANU-PF MP Walter Mzembi on October 4 told econoff
that he had just returned from China as part of a GOZ
delegation seeking financial assistance. The Chinese,
however, refused to offer any loans and instead pressed the
Zimbabweans to reform. Mzembi said the message from their
Chinese interlocutors was to follow China,s example and
embark on free market-oriented reforms. The ruling party
legislator said he was impressed with the manner in which
China had "copied the West" and agreed that the GOZ needed to
embrace reforms.

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Comment
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HARARE 00001280 002 OF 002




6. (C) For some time, the GOZ has been touting its "Look
East" policy as part of an economic rescue strategy. The
Russian MOU is but the latest example of the government's
smoke and mirrors that has included several announced but
unexecuted MOUs with investors from the "East." Instead,
Chinese, Russian, Korean, Indian and other Asian investors,
like investors from the rest of the world, have wisely
avoided the grossly mismanaged Zimbabwean economy in favor of
more reform-minded countries in the region and elsewhere.
Despite GOZ claims to the contrary, the bottom-line is that
the "Look East" policy has failed to attract foreign capital.
This only further scuttles the GOZ's most recent recovery
plan to bring in US$2.5 billion in investment, which some GOZ
officials have publicly conceded has been a failure.


7. (C) Mzembi's account is the first indication we have seen
that the Chinese Government is pressing Zimbabwe on reforms.
It is a welcome development but would of course have more
impact if the Chinese (and the Russians for that matter) were
to join the international community's calls for change here.
That said, despite the mutual talk of comradeship and the
political cover China provides the GOZ, neither it nor any
other "Eastern" country will act to bail out the GOZ.
DELL