GOZ UNVEILS YET ANOTHER VACUOUS RECOVERY PLAN

C O N F I D E N T I A L SECTION 01 OF 03 HARARE 000493

SIPDIS

SIPDIS

AF/S FOR B. NEULING
NSC FOR SENIOR AFRICA DIRECTOR C. COURVILLE
STATE PASS TO USAID FOR M. COPSON AND E.LOKEN
TREASURY FOR J. RALYEA AND B. CUSHMAN
COMMERCE FOR BECKY ERKUL

E.O. 12958: DECL: 01/12/2016
TAGS: ECON EAGR EFIN PGOV ASEC ZI
SUBJECT: GOZ UNVEILS YET ANOTHER VACUOUS RECOVERY PLAN

REF: HARARE 0469

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

--------------
Summary
--------------


1. (C) Long on grand targets, undefined "quick-win
strategies," and unrealistic time frames for recovery,
Zimbabwe's latest economic recovery plan falls woefully short
on substance. The four priority areas outlined in the
National Economic Development Priority Programme (NEDPP)
announced on April 19 are: unrealistically ambitious crop
yields to be achieved by certain targeted farmers; foreign
exchange generation from "friendly countries;" mobilization
of savings via strategic partnerships for parastatals; and
investment generation, again, primarily from "friendly
countries." Driving NEDPP at the apex of a hierarchy of new
public-private taskforces, committees and councils is the
Zimbabwe National Security Council, chaired by President
Mugabe. Analysts are generally skeptical of the focus on
quick fixes and the program's glaring lack of substance. We
see no indication that the GOZ is ready to end its command
control economic policy. End Summary.

--------------
Ambitious Macroeconomic Targets...
--------------


2. (SBU) The NEDPP aims to stabilize the economy within six
to nine months through the implementation of "quick-win
strategies" in four priority areas:
- food security and increased agricultural production;
- foreign exchange generation;
- increased savings; and
- enhanced investments
For details of the "quick-win strategies," the NEDPP policy
paper refers readers to another vacuous paper, the October
2005 Ministry of Economic Development's "Vision 2020 and
Strategies and Priorities for the Medium/Long Term
Transformation of the Economy" (e-mailed to AF/S).


3. (SBU) The NEDPP lists macroeconomic targets for 2006
including GDP growth of 1-2 percent (after eight years of
contraction),end-year inflation of 230-250 percent (down
from today's official and still rising rate of 913 percent),
agricultural and mining sector growth of 9 and 15 percent
respectively (up from 12 and 11 percent contraction in 2005),
and "usable" reserves of US$20 million (up from US$3.8
million in 2005).


4. (SBU) The program targets specific crops and aims to
identify and support "capable farmers." The NEDPP's key crop
projections for 2006, however, are in some cases as much as
double independent estimates. In the agriculture sector, the
recovery program is heavy on new institutions and a
commitment to revamp and strengthen the very bodies that have
failed it so horrifically in the past: the Agriculture and
Rural Development Authority (ARDA) and the Grain Marketing
Board (GMB).


5. (U) To generate foreign exchange, the NEDPP calls for

HARARE 00000493 002 OF 003


mobilization of "inflows" and support from "friendly
countries and financial institutions... especially from the
Far East and the Middle East countries." The resuscitation
of closed and distressed companies will stem the contraction
of the manufacturing sector (7 percent in 2005),according to
the program. The tourism sector will target the Far East as
a major source of foreign exchange. (Note: Arrivals from
Asia were 54 percent off 2004 figures last year; arrivals
from China/Hong Kong were down 72 percent.)


6. (U) Increased savings will come from mobilization of
"micro-savings" (Note: Most working Zimbabweans now earn less
than the official poverty datum level),and from
restructuring the most moribund parastatals and securing
strategic alliances for them with undisclosed partners.
Foreign direct investment will flow from "emerging giants
such as China, India, Singapore and South Korea, which
according to recent statistics have large holdings of
international reserves." At the program launch, Reserve Bank
of Zimbabwe Governor Gono asserted that US$2.5 billion in FDI
would flow into Zimbabwe within 90 days.

--------------
Structure of the NEDPP
--------------


7. (U) The Zimbabwe National Security Council (ZNSC),chaired
by President Mugabe, is at the apex of the NEDPP, driving its
coordination and implementation. Under the ZNSC and
interacting with the private sector is the National Economic
Recovery Council (NERC),chaired by Vice President Mujuru and
made up of selected Cabinet Ministers and representatives of
the private sector. Reporting to the NERC is the Technical
Committee, chaired by the Chief Secretary in the Office of
the President and Cabinet. The Technical Committee supports
the NERC and oversees seven public-private taskforces
(reftel),responsible for:
- agriculture coordination, input supply and food security;
- domestic and international resource mobilization;
- human skills identification, deployment and retention;
- Look East promotion and implementation of programmes;
- import substitution and value addition
- foreign exchange mobilization and use;
- Small and Medium Enterprises promotion and distressed
companies rehabilitation

--------------
But All Show and No Substance
--------------


8. (C) World Bank Lead Economist in Zimbabwe Sudhir Chitale
related to econoff on April 26 his view that the NEDPP was
"much worse" than any in a long litany of previous recovery
programs. Economic analyst John Robertson acknowledged to
econoff on April 27 that the 78-paragraph policy statement
(e-mailed to AF/S) accurately identified the effects of
Zimbabwe's economic distress. In blaming "international
sanctions" and the absence of a "shared national vision," it
failed, however, to get the causes right. He described the
NEDPP as "wishful thinking that has been dressed up to look
like accomplishment, or soon-to-be accomplished fact." In
the program's spotlight on public-private taskforces,
Robertson discerned a GOZ strategy of disarming critics while

HARARE 00000493 003 OF 003


setting the private sector up to be blamed for eventual
failures.


9. (C) Pattison Sithole, President of the Confederation of
Zimbabwe Industries (which is coordinating the NEDPP
secretariat),and member of the NEDPP taskforce on foreign

SIPDIS
exchange mobilization, told econoff on April 26 that the
committees were now in "crunch time," and had narrowed the
priority issues to the exchange rate, subsidies, and
parastatal revival. According to Sithole, they were "even
looking at land." He said that a once-off devaluation of the
Zimbabwean dollar would not be "good enough," as the rigid
exchange policy was also at the root of the subsidy problem.
He also commented that the "top man got cold feet" in January
when the currency had depreciated too fast and too far.


--------------
Comment
--------------


10. (C) Private industry (at least those business leaders who
are not beholden to the GOZ) is not impressed with the
program; nor are we. In fact, the "plan" in the NEDPP
amounts to little more than a statement of far-fetched
wishes, or what Oscar Wilde once called "the triumph of hope
over experience." We agree with Sithole's assessment that
once the committees zero in on the key issues of exchange
rate policy, subsidies, parastatal support, and land, it
really is "crunch time". We see no indication that the GOZ
is ready to end its command control economic policy, let
alone address the underlying problems of misgovernance. In
fact, the NEDPP public-private partnerships appear simply to
be pushing the private sector to make old GOZ policies
finally work. Similarly, the call for a "shared national
vision" sounds more like a call for the private sector to
join in the GOZ's national vision rather than a genuine
participatory process aimed at coming up with new ideas.
Furthermore, as long as the "top man" chairs the Council that
will drive implementation of economic reform, we see this new
program, announced with great fanfare, as just one more in a
series of failed turnaround plans entirely lacking in
substance.
DELL