ZIM NOTES 7-25-2008

UNCLAS SECTION 01 OF 03 HARARE 000637 AF/S FOR S.HILL ADDIS ABABA FOR USAU ADDIS ABABA FOR ACSS NSC FOR SENIOR AFRICA DIRECTOR B.PITTMAN TREASURY FOR J.RALYEA AND T.RAND 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 7-25-2008 -------------- ¶1. SUMMARY -------------- Topics of the week: - MOU Signed, Talks Started... - Over a Quarter of MDC MPs Targeted... - EU Expands Sanctions List... - SADC Tribunal Rules Against Zimbabwe on Land... - State Media Tone Down Rhetoric... - Zim Journalist Wins CNN Award... - Holding Mugabe Accountable... - Looming Cash Shortage... - Cargill's Cotton Caught in Cash Crunch... - Another EU Company under Boycott Pressure... - Nickel Production Down... - Zimbabwe International Book Fair Cancelled... -------------- -------------- ¶2. Price Movements-Exchange Rate and Selected Products -------------- -------------- Parallel rate for cash inched up to Z$110 billion:US$1 against inter-bank average of Z$49 billion:US$1 Bank transfer rate shot to Z$780 billion:US$1; official rate: Z$$30,000:US$1 Bread on the parallel market Z$150 billion vs. controlled price of Z$400 million Sugar steady at Z$300 billion/2kg vs. controlled price of Z$8 million/2kg Cooking oil rose to Z$180 billion/750ml vs. controlled price of Z$9.3 million/750ml Petrol and diesel shot to Z$190 billion/liter vs. controlled price of Z$60,000/liter -------------- On the Political/Social Front -------------- ¶3. MOU Signed, Talks Started - Robert Mugabe, Morgan Tsvangirai, and Arthur Mutambara signed a Memorandum of Understanding on July 21 laying out a framework for inter-party negotiations that started in South Africa on July 24. Reaction to the MOU has varied. While it has generated significant buzz, some actors in the MDC and Zimbabwean civil society remain deeply pessimistic. See Harare 625 and 628. ¶4. Over a Quarter of MDC MPs Targeted - Since March 29, a dozen MDC legislators have been charged with crimes; others were on police "wanted lists" or held without charge. Since signing of the MOU, it appears the MP hunt has been called off, but many MPs-elect still fear returning home/facing trial. See Harare 622. ¶5. EU Expands Sanctions List - The European Union this week added 37 people and entities to its targeted sanctions list. While most of the new names are members of the military involved in election-related violence, the list also includes Peter Chingoka, the Chairman of Zimbabwe Cricket, and two hate-mongering journalists associated with the state-sponsored newspaper The Herald. ¶6. SADC Tribunal Rules Against Zimbabwe on Land - On July 18, the SADC Tribunal in Namibia ruled that the GOZ had violated the body's HARARE 00000637 002 OF 003 December 2007 injunction against the harassment or eviction of several dozen white farmers. The farmers are contesting the seizure of their property under fast-track land reform. Prosecutions of farmers for contravening eviction orders slowed down starting in mid-May, but there has been no letup in disruptions on the ground. The Tribunal's authorizing legislation provides that once its orders have been breached the matter is turned over to the SADC Secretariat for appropriate action. The next SADC Summit, at which action could be taken, will be on August 15 under South Africa's chairmanship. See Septel. ¶7. State Media Tone Down Rhetoric - State media rolled back hate speech against Morgan Tsvangirai and the MDC this week; they even referred to Tsvangirai for the first time as "the opposition leader." A senior journalist at The Herald told us the paper had edited out a diatribe against Tsvangirai and the MDC by the First Lady at the launch of an orphans project this week. Attacks, however, on the U.S./EU for their targeted sanctions persisted. ¶8. Zim Journalist Wins CNN Award - Despite the GOZ's refusal to grant him a license to cover news, Hopewell Rugoh Chin'ono last week won the prestigious CNN-sponsored African Journalist of the Year competition for an uncompromising documentary on Zimbabwe's struggle against HIV-AIDS: "Pain in My Heart." The documentary beat 1911 entries from across Africa. Chin'ono has been filing news footage, including a recent interview with Ambassador McGee, undercover to international news agencies. ¶9. Holding Mugabe Accountable - !Enough and Impunity Watch issued a discussion paper this week that highlights the legal options available to hold President Robert Mugabe accountable for various international crimes. www.enoughproject.org/files/reports/july_zim_ 2.pdf. ¶10. Readings on Transitional Governments - The Center for Contemporary Conflict's January 2006 "Strategic Insights" focused on transitional governments. It looked at variety of experiences, including from Kosovo, Liberia, East Timor, and El Salvador. See www.ccc.nps.navy.mil/si/archiveDate.asp#vol5i ssue1. -------------- On the Economic and Business Front -------------- ¶11. Looming Cash Shortage - Hyperinflation is driving demand for cash as problems of bank connectivity, the quadrillions and quintillions, and transaction lag discourage the use of debit cards, checks and bank transfers. Barter is on the rise, along with price indexing to a stable currency, or outright dollarization. Banks are still getting their daily cash requirement from the Reserve Bank, but the disruption in the supply of banknote paper combined with hyperinflation presage an imminent shortage. The GOZ has responded with some unsustainable stopgap measures, including introduction of a new Z$100 billion note this week. See Harare 627. ¶12. Cargill's Cotton Caught in Cash Crunch - Cargill has been unable to access enough cash to buy up its contracted cotton crop for the past three weeks. In the meantime, better connected competitors are moving in to exploit the company's distress in a sector notorious for side-marketing. ¶13. Another EU Company under Boycott Pressure - Media pressure is mounting on the small Austrian security software company Jura JSP to suspend the provision of security software to Zimbabwe's banknote printer. Similar pressure compelled Germany's Giesecke & Devrient to end delivery of banknote paper earlier this month. ¶14. Nickel Production Down - Bindura Nickel Corporation (BNC) HARARE 00000637 003 OF 003 reported production down 37% in the year ending March 31. Weaker nickel prices, the RBZ's stranglehold on earned foreign exchange, skills flight, and aged equipment dampened results. The unviable inter-bank exchange rate and spiraling inflation will likely continue to hurt performance, although BNC is opening a new mine this year. Nickel was Zimbabwe's fourth largest mineral export last year. US$30.8 million worth of Zimbabwe nickel went to the U.S. in 2007, according to TradStats Express. That amount is over 40% of Zimbabwe's US$71.8 million in exports to the U.S. in 2007. ¶15. Zimbabwe International Book Fair Cancelled - Economic conditions and the loss of support from international sponsors have forced cancellation of this year's ZIBF. A major publishing event in Africa since 1983, its demise is a significant blow to the African publishing industry, not to mention one more sign of Zimbabwe's decline. MCGEE