ZIM NOTES 12-05-2008

UNCLAS SECTION 01 OF 04 HARARE 001082

AF/S FOR B. WALCH
ADDIS ABABA FOR USAU
ADDIS ABABA FOR ACSS
NSC FOR SENIOR AFRICA DIRECTOR B.PITTMAN
TREASURY FOR D. PETERS
STATE PASS TO USAID FOR L.DOBBINS AND E.LOKEN
COMMERCE FOR BECKY ERKUL

SIPDIS

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

SUBJECT: ZIM NOTES 12-05-2008

--------------

1. SUMMARY
--------------

Topics of the week:

- A Week of Turmoil on Harare's Streets...
- Civic Leader Abducted...
- MDC Denies Reports of a Deal within Days...
- ZANU-PF Conference Not to Discuss Replacing Mugabe...
- Odinga and Tutu Speak Out...
- Cholera Crisis Continues...
- Minister of Health Candid in Asking for Help...
- SADC Tribunal Rules in Favor of White Farmers...
- New Notes Unveiled and Cash Withdrawal Limits Upped...
- Goods Immediately Repriced - Gono Condemns Basic Economics...
- Gono Dismisses Senior Managers of Some Local Banks...
- ... While Siphoning Money from Share Transfers
- Government Removes Duty on Basic Commodities...

--------------

2. Price Movements-Exchange Rate
and Selected products
--------------

Parallel rate for cash rose five-fold to Z$10,000,000:US$1

Check rate shot up to Z$1quintillion:US$1 against inter-bank average
of Z$100,330:US$1

Bread on the parallel market went up to Z$6,000,000

Sugar rose to Z$45,000,000/2kg

Petrol and diesel rose to Z$4,000,000/liter

--------------
On the Political/Social Front
--------------


3. A Week of Turmoil on Harare's Streets... A surge of military
riots and civic protests unsettled Harare and other urban centers
this week as civil society groups demanded relaxed cash withdrawal
policies and political reform, while soldiers vented their
frustrations. On November 27 and 28 and Dec1, soldiers smashed
storefronts, beat-up bank employees, and clashed with police after
being denied cash withdrawals by downtown Harare banks. See Harare

1060. Meanwhile, the Zimbabwe Congress of Trade Unions (ZCTU)
staged peaceful protests in the low thousands throughout the
country, demanding that members be able to access their cash. Other
civil society organizations including the National Constitutional
Assembly collaborated with the ZCTU protest, in addition to staging
their own demonstration. Security forces responded by arresting and
beating numerous activists. More than 70 ZCTU members were arrested
throughout the country, with only about 20 released so far.


4. Civic Leader Abducted... Jestina Mukoko, director of the
Zimbabwe Peace Project (ZPP),which monitors delivery of food
assistance and violence throughout the country, was seized from her
home at 5 AM on December 3 by armed men driving unmarked vehicles.
Her whereabouts are unknown. At week's end, a ZPP field officer was
arrested in Nyanga. The whereabouts of 14 MDC officials and a baby
abducted in Banket in Mashonaland West on October 30 are still
unknown.


5. MDC Denies Reports of a Deal within Days... South African
spokesman Themba Maseko announced yesterday that ZANU-PF and the MDC
would sign Amendment 19 within days, paving the way for a new

HARARE 00001082 002 OF 004


government. Our information is to the contrary. There are still
issues within the draft Amendment 19 agreed to by negotiators last
week in South Africa that need to be resolved by the
principals-Zimbabwean president Robert Mugabe, and MDC presidents
Morgan Tsvangirai and Arthur Mutambara. Tsvangirai is outside of
Zimbabwe with no planned return, so it is uncertain when these
discussions could take place. Furthermore, an MDC official told us
that the MDC would not agree to officially publish Amendment 19-and
begin the 30 day public comment period-until outstanding issues such
as the allocation of ministries had been resolved. See Harare

1073.


6. ZANU-PF Conference Not to Discuss Replacing Mugabe... Replacing
Mugabe is one issue that will not be discussed at ZANU-PF's annual
conference scheduled for December 10-14. ZANU-PF spokesman and
political commissioner Elliot Manyika explained that only a full
ZANU-PF congress could discuss leadership changes under party rules.
The next full congress will be held at the end of 2009.


7. Odinga and Tutu Speak Out... After a meeting with MDC leader
Morgan Tsvangirai in Nairobi on Thursday, Kenyan foreign minister
Raila Odinga told the BBC that "Power-sharing is dead in Zimbabwe
and will not work with a dictator who does not really believe in
power sharing." Odinga added, "It's time for African governments to
take decisive action to push him out of power." Also on Thursday,
South African Archbishop Desmond Tutu told a Dutch television
station with regard to Zimbabwean president Robert Mugabe, "I think
now that the world must say, "You have been responsible with your
cohorts for gross violations, and you are going to face indictment
in the Hague unless you step down." Tutu went on to say that Mugabe
should be removed by military force if he did not step down.


8. Cholera Crisis Continues... On December 4, the UN's Office for
the Coordination of Humanitarian Affairs reported that they had
conservatively identified 12,700 suspected cases of cholera leading
to 571 deaths since the outbreak of the disease. Other groups
suggest the fatality number likely exceeds 1,000. Currently, nine
out of 10 provinces have been affected, and outbreaks are still not
under control in multiple locations, including the Harare suburb of
Budiriro. The WHO-lead health cluster has been ill-equipped to
handle the magnitude of the outbreak, but donors and UN agency
efforts are ramping up. USAID is in the process of releasing
additional funding to help combat the cholera emergency in Zimbabwe.
These funds will supplement the ongoing US$4 million emergency
water, sanitation, and hygiene programs that USAID is already
implementing in Zimbabwe. USAID has also deployed a team of experts
to Zimbabwe to work alongside the international community.


9. Minister of Health Candid in Asking for Help... Minister of
Health David Parirenyatwa assembled an emergency meeting on December
3 of senior government officials, donors-including UNICEF, WHO, and
UNDP-some embassy officials, and NGOs to discuss the worsening water
delivery and cholera situation. Parirenyatwa was
uncharacteristically forthright in admitting the severity of the
problem and the need for external help. The minister also asked for
pledges and surprisingly said that he appreciated ongoing USAID and
DFID efforts. The spirit of inclusivity was marred when
Parirenyatwa asked MDC Secretary for Welfare Kerry Kay to leave.
The WHO recommended establishing a "command and control center"
involving donors and local officials.


10. SADC Tribunal Rules in Favor of White Farmers... On November
28, the SADC Tribunal meeting in Windhoek made its final ruling in
the case of Michael Campbell and 77 other white Zimbabweans who had
their farms seized or were issued eviction orders through the
government's land reform program. The ruling stated that the GOZ
must provide fair compensation for the expropriated properties and
desist from any further acquisition efforts. Unfazed by the

HARARE 00001082 003 OF 004


judgment, security chief and land-reform architect Didymus Mutasa
said that the Tribunal must have been "daydreaming" and that
Zimbabwe would not abide by the ruling.

--------------
On the Economic and Business Front
--------------


11. New Notes Unveiled and Cash Withdrawal Limits Upped... The
Reserve Bank of Zimbabwe (RBZ) introduced new Z$10 million (US$1 at
today's cash rate of Z$10 million:US$1),Z$50 million (US$5) and
Z$100 million (US$10) notes on Thursday, December 4, and raised the
weekly cash withdrawal limits to Z$500 million beginning next
Friday. RBZ Governor Gono also declared that beginning December 18,
employees that produced a pay-slip would be able to withdraw Z$10
billion a month and after January 12, 2009, their entire paycheck.
The changes came in response to a petition by ZCTU leaders a day
after the trade union held protests throughout the country. The
upward revision amended Gono's decision to raise withdrawal limits
to Z$100 million, which was insufficient to satisfy ZCTU.


12. Goods Immediately Repriced - Gono Condemns Basic Economics...
As the new notes circulated in large quantities throughout Harare
and other cities, many shopkeepers quickly closed their doors to
reprice their wares. The new denominations caused the parallel
market cash rate to collapse from around Z$2 million to between Z$7
million and Z$10 million. Gono's response was to condemn businesses
for unjustifiably raising the prices of goods each time new currency
denominations are introduced.


13. Gono Dismisses Senior Managers of Some Local Banks... Gono
fired the CEOs and senior managers of CFX Bank, NMB Bank, and ZABG
for "flouting bank regulations" by issuing new higher denominations
a day ahead of their officially scheduled release on December 4.
The RBZ issued a total of Z$80 trillion in new notes to banks on
December 3, and later that evening a significant portion was already
in the hands of street money dealers.


14. ... While Siphoning Money from Share Transfers. According to
online newspaper the Zimbabwe Times, Gono and a Harare businessman,
Mohammed I Mohammed, are using Remo Investment Brokers in Harare to
siphon millions of U.S. dollars through share transfers into
Ravenscourt Corporation's account at Habib Bank in London. Although
Ravenscourt is reportedly registered in the UK, there are no records
of its operations in London. According to the report, Ravenscourt
won a lucrative contract to import fuel into Zimbabwe, alongside the
state-owned National Oil Company of Zimbabwe, even though other
private companies are barred from importing fuel directly.


15. Government Removes Duty on Basic Commodities... Gono told a
recent meeting of the National Economic Consultative Forum-a
consortium of government, the private sector and labor groups-that
he has scrapped import taxes on basic commodities to increase
supplies ahead of the Christmas and New Year holidays. He told the
meeting that the surrender rate for sales of exported goods to the
RBZ would be reduced from 25 to 15 percent, and the exchange rate
shifted to the rate used by the United Nations.

--------------
Gono Quotes of the Week
--------------

16. Gono's statements this week fluctuated from sympathetic to
irate to optimistic:

- "Please have a heart and protect the interest of consumers."

- "Any manufacturer, wholesaler, retailer or service provider
caught hiking prices without the approval of the commission will

HARARE 00001082 004 OF 004


face the full wrath of the law."

- "We must not despair, good times are coming. No winter lasts
forever... summer is coming."


DHANANI