ZIM NOTES 8-15-2008

UNCLAS SECTION 01 OF 03 HARARE 000699 AF/S FOR G. GARLAND 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 8-15-2008 -------------- SUMMARY -------------- ¶1. Topics of the Week: - Talks Break Off... - Tsvangirai's Travel to SADC Summit Interrupted... - French and Swedish Charges Threatened... - Botswana Deports Zimbabwean Journalist... - Soaring Inflation... - Tobacco Deliveries Lagging... - "Zimbabwe - Beyond Tomorrow"... -------------- -------------- ¶2. Price Movements-Exchange Rate and Selected Products -------------- -------------- Parallel rate for cash shot to Z$950billion ($95 revalued):US$1 Bank transfer soared to Z$2 trillion ($200 revalued):US$1 against inter-bank average of Z$16 (revalued):US$1; Bread on the parallel market trebled to Z$800 billion ($80 revalued); Sugar doubled to Z$750 billion (Z$75 revalued)/2kg; Cooking oil rose to Z$350 billion (Z$35 revalued)/750m;l Petrol and diesel quadrupled to Z$2.2 trillion (Z$220 revalued)/liter -------------- On the Political/Social Front -------------- ¶3. Talks Break Off... Negotiations between ZANU-PF and the MDC broke off this week over failure to reach an agreement on the allocation of executive power. MDC president Morgan Tsvangirai is insisting he be head of government with full executive power as prime minister, while Zimbabwean president Robert Mugabe wants to retain power over the security forces and foreign ministry. Tsvangirai and Mugabe are both expected to present their cases to the SADC Summit in South Africa this weekend. With negotiators from all sides present, it is likely negotiations will resume in South Africa. See Harare 678 and 676. ¶4. Tsvangirai's Travel to SADC Summit Interrupted... Zimbabwean officials seized passports and travel documents of Tsvangirai, MDC secretary-general Tendai Biti, and MP-elect and MDC shadow foreign minister Eliphas Mukonoweshuro at the Harare international airport on August 14 as the trio prepared to travel to South Africa for the SADC Summit. The documents were returned several hours later and the three subsequently traveled. With Tsvangirai expected in South 
Africa, it does not appear that government actions were directed by high-level officials. Nevertheless, the incident understandably ruffled MDC feathers. Biti was quoted by the Zimbabwe Independent as stating that the talks with ZANU-PF were a "farce and a sham." George Sibotshiwe told The Independent that the incident reflected ZANU-PF's lack of sincerity. See Harare 684. HARARE 00000699 002 OF 003 ¶5. French and Swedish Charges Threatened... Apparent ZANU-PF officials threatened the French and Swedish Charges d'Affaires who were at the Rainbow Towers Hotel in Harare Tuesday evening to ascertain the status of the negotiations. The officials told the Charges they could not be present in the hotel, site of the negotiations, since they were not journalists, and demanded they leave. To avoid escalating the situation, the diplomats left. The officials followed them to their cars, swore at them, accused them of imperialistic meddling, and threatened to beat them. To emphasize their point, they kicked the cars before the two Charges drove away. The French and Swedish embassies plan to send a diplomatic note protesting the incident; typically, the GOZ does not respond to such protests. ¶6. Botswana Deports Zimbabwean Journalist... Botswana last week deported Caesar Zvayi, a Zimbabwean journalist who had been employed for several months as a media studies lecturer at the University of Botswana. Before beginning work in Botswana, Zvayi had been the Political and Features editor for The Herald, the Zimbabwean government mouthpiece, where he had been an unabashed Mugabe supporter and critic of the U.S. His deportation was apparently the result of protests from journalists within Botswana who were critical of his unbalanced journalistic stance at The Herald. President Mugabe's Spokesperson, George Charamba, condemned the deportation. He described Zvayi as a "fearless writer" and said he was free to return home and "do what he does best." -------------- On the Economic and Business Front -------------- ¶7. Soaring Inflation... With inflation estimated at over 40 million percent and ever-rising transactions demand for cash, the Reserve Bank of Zimbabwe (RBZ) raised the daily cash withdrawal limit from Z$200 (US$5.70) to Z$300 (US$8.57) on August 8. Today the new limit is worth only US$3.16 thanks to the unprecedented rate of depreciation of the Zimbabwe dollar on the parallel cash market from Z$35 to Z$95:US$1 in one week. Demand for foreign exchange continues to far outstrip supply, fueled, in particular this week, by the RBZ itself. Our bank contacts told us that RBZ runners had been out in full force buying up forex in Harare's informal cash market. ¶8. Tobacco Deliveries Lagging... Growers have delivered only 36.3 million kg of tobacco to Harare's auction floors, down from 53.7 million kg at the same time last year. It appears the largest growers are holding back some crop in expectation that the deeply undervalued inter-bank exchange rate at which they are paid will improve if there is a political breakthrough. Even with late deliveries, this year's crop of the country's top agricultural forex earner could be considerably lower than the official estimate. While the GOZ continues to put the crop at 75 million kg, merchants have told us that production could be as low as 55 million kg. Production peaked at over 200 million kg before fast-track land reform. ¶9. "Zimbabwe - Beyond Tomorrow"... The American Business Association of Zimbabwe's (ABAZ) annual BFIF-supported "Just Business" economic forum will take place on August 21. International speakers are flying in to address economic reform and recovery in Zimbabwe. Among the presenters are Dr John Panzer of the World Bank, Dr Mbui Wagacha of the African Development Bank and Prof Caio Megale of Sao Paulo, Brazil. This year, representatives of USAID's Southern African Global Competitiveness Hub in Gaborone, Botswana will discuss the potential benefits of AGOA eligibility to Zimbabwe's exporters. The Trade Hub reps will also hold breakaway workshops specifically on textile and apparel exports to the U.S. under AGOA, and on the export of processed and semi-processed food. HARARE 00000699 003 OF 003 MCGEE