ZIM NOTES 11-7-2008

UNCLAS SECTION 01 OF 03 HARARE 001013

AF/S FOR B. WALCH
ADDIS ABABA FOR USAU
ADDIS ABABA FOR ACSS
NSC FOR SENIOR AFRICA DIRECTOR B.PITTMAN
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COMMERCE FOR BECKY ERKUL

SIPDIS

E.O.12958: N/A
TAGS: PGOV PREL ASEC PHUM ECON ZI

SUBJECT: ZIM NOTES 11-7-2008

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1. SUMMARY
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Topics of the week:

- SADC Extraordinary Summit on Deck...
- Mugabe Congratulates Obama...
- Global Fund "diversion" goes public...
- Cholera Outbreak Continues...
- Civil Service Corruption Rampant...
- WOZA Women Released on Bail...
- Visiting American Surgical Team in Limbo...
- ZBC Bars U.S. Embassy from U.S. Election Panel...
- Government Suspends Duty on Agricultural Inputs...
- RBZ Introduces New Notes and Raises Withdrawal Limits...
- Air Zimbabwe Now Servicing Tehran...
- Zimbabwean Ivory Sold...
- Gold Sector Starts Closing Down Mines...

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2. Price Movements-Exchange Rate
and Selected products
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Parallel rate for cash more than doubled to Z$180,000:US$1

Check rate skyrocketed to Z$100 trillion:US$1 against inter-bank
average of Z$770:US$1

Bread on the parallel market rose to Z$250,000

Sugar rose to $360,000/2kg

Petrol and diesel went up to Z$240,000/liter

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On the Political/Social Frot
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3. SADC Extraordinary Summit on Deck... The SADC extraordinary
summit on Zimbabwe is scheduled to be held on November 9 in
Johannesburg. All 15 SADC heads of states have been invited, but
Tanzania's Kikwete and Botswana's Khama are not expected due to
other commitments.


4. Mugabe Congratulates Obama... Friday's The Herald contains a
statement from President Robert Mugabe congratulating Barack Obama
on his victory and expressing desire for improved U.S.-Zimbabwe
relations. An op-ed in Thursday's The Herald, entitled "Obama's
victory an inspiration to many," also congratulated Obama, but
blamed President Bush and sanctions, specified as the Zimbabwe
Democracy and Economic Recovery Act (ZDERA),for Zimbabwe's economic
predicament. It expressed hope for better relations with the U.S.
and noted that "Our quarrel is with the British."


5. Global Fund "diversion" goes public... The New York Times broke
the story on the Reserve Bank's "diversion" of over US$7 million
that was donated to Zimbabwe by the Global Fund for AIDS, TB, and
Malaria. On November 6, the government mouthpiece The Herald
declared Zimbabwe would pay the money back within seven days and
quoted Reserve Bank Governor Gideon Gono as saying that only "cheap
minds" would suggest the money was used to buy tractors and TVs for
the judiciary. On November 7 The Herald reported that the RBZ on
November 6 provided the Global Fund with proof the funds had been
repaid. Post is seeking confirmation.


6. Cholera Outbreak Continues... A cholera outbreak continues in
the Harare high-density suburb of Budiriro, as the WHO confirmed 210

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cases and 20 deaths as of Wednesday. Harare City Health has agreed
to "super-chlorinate" shallow wells in Budiriro, and an outbreak
taskforce-including UNICEF, WHO, NGO partners, and the GOZ's Civil
Protection Unit and Ministry of Health-is meeting daily to
coordinate a response. Water is being delivered daily throughout
the suburbs by UNICEF, a robust health and hygiene promotion
campaign is in process, and the Budiriro Polyclinic has been set up
as a cholera treatment center.


7. Civil Service Corruption Rampant... Another indication of
Zimbabwean decay is the endemic corruption within the Zimbabwean
civil service, resulting in a near total collapse of government
controls over passports and official documents. Civil servants,
whose salaries have been eroded to practically nothing by
hyperinflation, have become not only susceptible, but dependent on
bribes and kickbacks for basic subsistence. As a result, government
controls over passport applications and civil documents have
disappeared and fraudulent document vendors have become widespread.
See Harare 996.


8. WOZA Women Released on Bail... After three weeks in jail, Women
of Zimbabwe Arise leaders Jenni Williams and Magodonga Mahlangu were
granted bail by the High Court on November 4. Leaving jail, they
shared horrific stories of worsening conditions and food shortages
that plague Zimbabwe's prisons.


9. Visiting American Surgical Team in Limbo... The volunteer
medical team providing free cleft lip and palate operations to
individuals with facial deformities is "on temporary hold" due to
failure to procure much-needed medical supplies. Jenifer Trubenbach,
coordinator of Operation of Hope told journalists that the team is
having difficulties procuring drugs locally for conducting the
operations.


10. ZBC Bars U.S. Embassy from U.S. Election Panel... The
Zimbabwean Broadcasting Corporation withdrew an invitation to have a
U.S. Embassy official on its televised panel on U.S. elections this
week saying "their equipment needed servicing." The producer of the
program later told PAS that their CEO was pressured from above not
to go ahead with the program "if a U.S. Embassy official is on
board." The debate went ahead with local panelists.

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On the Economic and Business Front
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11. Government Suspends Duty on Agricultural Inputs... In a
desperate move to augment meager local production, the government
announced three statutory instruments suspending import duties on
certain agricultural inputs such as seed, fertilizers, gum shoes and
rain coats. While welcome news for farmers, it may be a case of too
little too late given that the 2008/09 planting season is already
underway.


12. RBZ Introduces New Notes and Raises Withdrawal Limits... In
keeping with precedent, this week the Reserve Bank of Zimbabwe
introduced a Z$100,000 note (US$0.56 at the cash rate of
Z$180,000:US$1),a Z$500,000 note (US$2.78) and a Z$1,000,000
(US$5.56) note. The move comes in conjunction with an increase in
daily cash withdrawal limits from Z$50,000 and Z$10,000 to Z$500,000
and Z$1,000,000 for individuals and companies respectively. Given
the prevailing hyper-inflationary environment, the new limits are
likely to become inadequate almost immediately.


13. Air Zimbabwe Now Servicing Tehran... According to state media,
Air Zimbabwe has inked a deal with Iran allowing the airline five
weekly flights to Tehran. The Iranian deal is supposedly
representative of the GOZ's "look east" policy designed to increase

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trade between Zimbabwe and Middle Eastern and Asian countries.


14. Zimbabwean Ivory Sold... On November 3, Zimbabwe sold 3.5 tons
of ivory for over US$450,000, with the money purportedly earmarked
for the country's cash-strapped wildlife authority. Last year, the
Convention on International Trade in Endangered Species (CITES)
ruled that Botswana, Namibia, South Africa and Zimbabwe could sell
some 97 tons of stockpiled ivory to approved Japanese and Chinese
buyers.


15. Gold Sector Starts Closing Down Mines... According to the
Chamber of Mines, Zimbabwe's largest gold mining group, Metallon,
has suspended operations at five of its mines forcing more than
3,500 employees (14% of total gold mining jobs) to go on forced
leave. The sector is short of working capital due to the US$30
million they are owed by the RBZ. According to the Chamber of
Mines, these problems are not unique to gold as Bindura Nickel is
also facing serious problems.

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Quote of the Week
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16. "The question is, for how long shall Tsvangirai urinate in our
faces and tell us it's raining?" Caesar Zvayi, Senior Asst. Editor
for The Herald, November 3, 2008.


DHANANI