ZIM NOTES AUGUST 8, 2008

UNCLAS SECTION 01 OF 02 HARARE 000675 SIPDIS AF/S FOR G. GARLAND ADDIS ABABA FOR USAU ADDIS ABABA FOR ACSS NSC FOR SENIOR AFRICA DIRECTOR B.PITTMAN TREASURY FOR D.PETERS AND T.RAND STATE PASS TO USAID FOR L.DOBBINS AND E.LOKEN COMMERCE FOR BECKY ERKUL E.O.12958: N/A TAGS: PGOV PREL ASEC PHUM ECON EAGR EFIN EMIN ZI SUBJECT: ZIM NOTES AUGUST 8, 2008 -------------- ¶1. SUMMARY -------------- Topics of the week: - Negotiations Continuing - OFDA Director Visit - Price Controls Re-Imposed on Tourism - Coins No Remedy for Cash Shortage - Scramble for Alternative Banknote Supplier - "Homegrown Solutions" - the Fuel Couponization of Zimbabwe's Economy - Corrigendum - Cartoon of the Week - No Comment... -------------- -------------- ¶2. Price Movements-Exchange Rate and Selected products -------------- -------------- Parallel rate for cash shot to Z$350billion ($35 revalued):US$1 against inter-bank average of Z$9 (revalued):US$1 Bank transfer rose to Z$850 billion ($85 revalued):US$1; official rate unchanged Bread on the parallel market rose to Z$250 billion ($25 revalued) Sugar steady at Z$350 billion (Z$35 revalued)/2kg Cooking oil rose to Z$300 billion (Z$30 revalued)/750ml Petrol and diesel more than doubled to Z$540 billion (Z$54 revalued)/liter -------------- On the Political/Social Front -------------- ¶3. Negotiations Continuing...South African president Thabo Mbeki is expected in Harare August 9 or 10 to facilitate one-on-one talks between Zimbabwean president Robert Mugabe and MDC president Morgan Tsvangirai. The principal unresolved issue is the distribution of power between Mugabe as president and Tsvangirai as prime minister. Other issues include the transitional constitution, the size of cabinet and allocation of ministries, the future role of the security chiefs, and the nature and extent of amnesty. If an agreement is reached, it is expected to be signed next week. See Harare 661, 669, 674. ¶4. OFDA Director Visit... USAID's Director of the Office of U.S. Foreign Disaster Assistance (OFDA),Ky Luu, visited Harare, Zimbabwe July 29-31 to consult with humanitarian organizations, UN agencies, donor representatives, and Zimbabwean citizens regarding the crisis in the country. The timing of his trip was particularly opportune, as Zimbabwe's humanitarian community has been operating under a restrictive and threatening environment in the post-March 29 election period. Luu's interactions and analysis led to a statement released by USAID Administrator Fore calling on the GOZ to rescind its ban on NGO field activities and create conditions suitable for humanitarian organizations to resume work safely and constructively. USAID is discussing a series of moves toward a strategic plan of action on the humanitarian situation. See Harare 663, and for Fore's statement, go to: http://www.usaid.gov/press/releases/2008/ps08 0731.html -------------- Economic and Business News HARARE 00000675 002 OF 002 -------------- ¶5. Price Controls Re-Imposed on Tourism... In a hastily arranged meeting this week to explain the reintroduction of price controls in the tourism sector, the chairman of the National Incomes and Pricing Commission (NIPC),Goodwills Masimirembwa, accused players of profiteering through the use of the bank-transfer exchange rate rather than the agreed inter-bank rate in pricing products and services. The President of the Zimbabwe Council for Tourism, Chipo Mutasa, expressed disappointment, highlighting the industry's position at the tail end of the value chain and its consequent inability to control costs. Masimirembwa proposed a new system whereby players would apply individually for price increases so that the NIPC could identify "pockets of abuse" in the value chain. ¶6. Coins No Remedy for Cash Shortage... The reintroduction of coins that had been taken out of circulation in 2006, and the introduction of some new coins (highest denomination Z$2.5 billion old value), are likely to fuel the growth in money supply further--in the short term, at least. We learned that the Reserve Bank provided Cargill with Z$100 quadrillion (old value) solely in coins this week to meet the company's cash purchases of cotton. ¶7. There is an apparent shortage of cash in the economy. Most banks do not have enough resources and securities to enable them to get sufficient cash from the RBZ every day. Unable to meet their customers' demand for cash, the banks still have long lines at their branches every day. ¶8. Scramble for Alternative Banknote Supplier... Having lost its regular supplier of banknote paper and issued a new revalued currency in a hyperinflationary environment, the GOZ is scrambling to locate an alternate secure paper supplier. See Harare 672. ¶9. "Homegrown Solutions" - the Fuel Couponization of Zimbabwe's Economy... Already widely traded as a stable-even appreciating-shadow currency as the value of the local currency swoons, the GOZ approved use of BP and Caltex fuel coupons at an inaugural private "Auction by Barter" today where "executive vehicles," trucks and other vehicles will go under the hammer under the auctioneer's slogan "Tough Times - New Ideas!" ¶10. Corrigendum... Last week's ZimNotes on the FEWSNet Executive Overview of Food Security should have read that Zimbabwe's national cereal deficit is "just over one million metric tons," not "just over one metric ton." -------------- No Comment -------------- ¶11. August 1, 2008 The Herald: "The Reserve Bank of Zimbabwe has donated ... for the sitting judges (of the High Court)...16 top of the range Mercedes Benz E 280 ... 32-inch plasma screen televisions and a full set of satellite dishes each .... Apart from the top-of-the-range Mercedes Benz, the judges also have utility vehicles which include Toyota IMV and Isuzu trucks, courtesy of the Central Bank. (Master of the High Court) Mr. Nyatanga said it was not desirable for judges to drive Mercedes in rough terrain going to their farms." MCGEE