ZIM NOTES 12-12-2008

UNCLAS SECTION 01 OF 03 HARARE 001122 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 12-12-2008 -------------- ¶1. SUMMARY -------------- Topics of the week: - PF-ZAPU Revitalizing Party... - MDC Holds Strategy Meeting... - Manyika's Death an Accident?... - ZANU-PF Conference Delayed... - Mugabe Says Cholera Stopped... - Zimbabwe to be Discussed at UNSC... - EU Adds 11 Names to Sanctions List... - Harare Sends Team to Investigate Plot in Botswana... - Government Orders Retailers to Reduce Prices... - New Z$200 Million Note Issued and Cash Withdrawal Limits Raised... - Wheat Crop Abysmal; Maize to Follow... - Zimbabwe Introduces Fuel Tax... - Survival of Stockbrokers Threatened... - Fall In Platinum Prices Hits Zimplats... -------------- ¶2. Price Movements-Exchange Rate and Selected products -------------- Parallel rate for cash rose seven-fold to Z$70,000,000:US$1 Check rate came down to Z$10 quadrillion:US$1 against inter-bank average of Z$226,955:US$1 Bread on the parallel market went up to Z$80,000,000 Sugar rose to Z$100,000,000/2kg Petrol and diesel rose to Z$100,000,000/liter -------------- On the Political/Social Front -------------- ¶3. PF-ZAPU Revitalizing Party... The former liberation party PF-ZAPU is holding a conference in Bulawayo on December 13 and 14 to establish the party's political structures. PF-ZAPU declared it was breaking away from ZANU-PF in November and has already publicly nullified the 1987 Unity Accords that merged the two independence parties. See Harare 1115. ¶4. MDC Holds Strategy Meeting... The MDC met in Gaborone this week to discuss strategy. Subsequently, MDC negotiators Tendai Biti and Elton Mangoma met with South African facilitators to discuss Amendment 19. There have been no discussions on outstanding issues such as the equitable distribution of ministries. See Harare 1117. ¶5. Manyika's Death an Accident?... ZANU-PF political commissar Elliot Manyika died in a car accident last Saturday when his car suffered a blown tire. In rumor-driven Zimbabwe there is considerable speculation that this was not in fact an accident. Manyika was close to Emmerson Mnangagwa and was viewed as a hardliner who was attempting to reform ZANU-PF party structures in support of Mnangagwa. Perhaps not coincidentally, his two immediate predecessors died under similar circumstances. Border Gezi died on April 28, 2001 when his car skidded of the road. Moven Mahachi died on May 26, 2001 when his Range Rover also went off the road. ¶6. ZANU-PF Conference Delayed... Party leaders announced that the ZANU-PF annual conference scheduled for December 10-14 has been HARARE 00001122 002 OF 003 delayed due to the recent death of Manyika. The conference is now expected to be postponed until December 19. Despite the party's explanation for the delay, there is speculation that a lack of funds is the real cause of the postponement. ¶7. Mugabe Says Cholera Stopped... In a speech on December 11 memorializing Manyika's death, Mugabe stated that the cholera epidemic had been halted. Meanwhile, the UN has said that cholera fatalities are approaching 800 with numerous undiagnosed deaths indicating the actual number likely exceeds 1,000 and rising. Mugabe's mistaken or deliberately deceptive statement may have been the cause for the denial of visas to a French team of disease specialists who had intended to aid in cholera treatments and prevention. ¶8. Zimbabwe to be Discussed at UNSC... British Prime Minister Gordon Brown indicated that he had spoken with UN Secretary General Ban Ki-moon who told him that the UNSC could meet as early as December 15 to discuss the deteriorating situation in Zimbabwe. Brown said that Zimbabwe faced a "humanitarian emergency of colossal proportions." ¶9. EU Adds 11 Names to Sanctions List... Following a growing chorus from world leaders calling for Mugabe to go, the EU added 11 names to their Zimbabwean sanctions list that freezes assets and bars travel to Europe. The statement also indicated further sanctions could be imposed depending on events in Zimbabwe. The new names, described by British foreign secretary David Miliband as "middle-ranking members of the regime" were added to 168 others on the list. ¶10. Harare Sends Team to Investigate Plot in Botswana... For the second time in two weeks, Zimbabwe has sent a team of investigators into Botswana to uncover evidence of a purported plot to train Zimbabwean dissidents and members of the opposition in tactics that would lead to the government's overthrow. Botswanan president Ian Khama has been outspoken that the charges were trumped up by ZANU-PF and invited SADC to assemble its own investigations team to dispel the accusation. -------------- On the Economic and Business Front -------------- ¶11. Government Orders Retailers to Reduce Prices... The chairman of the National Incomes and Prices Commission, Godwills Masimirembwa, ordered retailers on December 9 to reduce prices of basic commodities to their December 3 levels because the increases were "not cost based." The wave of price increases that coincided with the introduction of new higher denomination bank notes last week was caused by a fivefold fall in the cash value of the Zimbabwe dollar. It is not yet clear how the order will be enforced in light of the empty shelves and public outcry that accompanied enforced price controls in July 2007. ¶12. New Z$200 Million Note Issued and Cash Withdrawal Limits Raised... The Reserve Bank of Zimbabwe introduced a new Z$200 million (Under US$3 at today's cash rate of Z$70 million:US$1) note and increased the weekly cash withdrawal limit to Z$500 million. In anticipation of the increase, lines started forming at banks around 8 pm on December 11. Although higher cash withdrawal limits and the higher denomination bank notes have previously cut bank lines, the effect is temporary as prices quickly rise. ¶13. Wheat Crop Abysmal; Maize to Follow... Total production for the 2008 wheat crop was 38,933 metric tons (MT) which reflected an average yield of 1.2 MT/hectare. These figures are the lowest recorded for wheat production since 1980. The GOZ has also only HARARE 00001122 003 OF 003 distributed 5,445 MTs of maize seed out of a specified goal of 12,500 MTs. The humanitarian community distributed an additional 838 MTs of maize seed and/or fertilizer to about 330,000 households. ¶14. Zimbabwe Introduces Fuel Tax... The GOZ introduced a fuel tax to raise funds for the Zimbabwe National Road Administration to fund road maintenance. The formula for determining the tax rate is a complex function of quantities imported and the invoiced purchase and shipping costs when the fuel arrives in Mutare. The tax will increase fuel prices to motorists at a time when world oil prices are falling. In view of the government's widening deficit, there is no guarantee that the money will go towards road maintenance. ¶15. Survival of Stockbrokers Threatened... There has been no recent trading activity on the Zimbabwe Stock Exchange since reserve bank governor Gono introduced punitive measures against stockbrokers and banks that traded on unfunded checks. Most stockbrokers are busy counting their losses as a number of them were either victims of fraudulently drawn bank checks or were affected by the market's collapse. ¶16. Fall In Platinum Prices Hits Zimplats... Zimplats Holdings Limited expects to post a loss for the second half of 2008 because of the 65 percent fall in global platinum prices from a peak of US$2,300 per ounce in March to US$817 per ounce by December 9, 2008. The company said it would have to borrow in order to complete the first phase of the expansion of its Ngezi mine because it failed to generate enough cash flow for the project. -------------- Quote of the Week -------------- ¶17. "This is a bad deal: a very bad deal. I wonder where these guys were when they signed this deal. Perhaps they were in a stinking toilet. But even a stinking toilet stops smelling if you stay in it for a long time." Political analyst John Makumbe on the power-sharing agreement. DHANANI