ZIM NOTES 8-22-2008

UNCLAS SECTION 01 OF 04 HARARE 000715 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 8-22-2008 -------------- ¶1. SUMMARY -------------- Topics of the week: - Negotiations Stall Again... - SADC Communiques... - Parliament to Convene... - Violence Continues... - MDC and Donors Meet... - Magistrate Court Dismisses Case Against MDC MP... - WOZA Arrests... - "Zim's inflation not that bad"... - Exchange Rate Movements... - The Herald price doubles... - Mobile Phone Tariffs Up by over 1,000 Percent... - Levy On Generators... -------------- -------------- ¶2. Price Movements-Exchange Rate and Selected Products -------------- -------------- Parallel rate for cash rose slightly to Z$1 trillion ($100 revalued): US$1. Bank transfer soared to Z$5.5 trillion ($550 revalued): US$1. Against inter-bank average of Z$22 (revalued): US$1. Bread on the parallel market trebled to Z$2.5 trillion ($250 revalued). Sugar more than doubled to Z$2.5 trillion (Z$250 revalued)/2kg. Cooking oil more than doubled to Z$800 billion (Z$80 revalued)/750ml. Petrol and diesel are steady at Z$2.2 trillion (Z$220 revalued)/liter. -------------- On the Political/Social Front -------------- ¶3. Negotiations Stall Again... Continuing talks between MDC and ZANU-PF on the margins of the SADC Summit in South Africa failed to overcome the impasse over the allocation of executive power. ZANU-PF insisted that Mugabe have a share of executive power, including authority over the security forces, while the MDC and Tsvangirai insisted that Tsvangirai be head of government with Mugabe occupying a ceremonial role. South African president Thabo Mbeki will continue as facilitator of negotiations, backed up by the SADC Troika of Swaziland (chair),Angola, and Mozambique. After the summit, Tsvangirai went to Botswana and Kenya to rally support. He is due back in Harare this weekend to prepare for the opening of Parliament on August 25. See Harare 703 ¶4. SADC Communiques... The SADC Summit issued two communiques at the end of the Summit. The final communique of the Heads of State and Government was signed by representatives of all SADC members except Botswana, whose president Ian Khama boycotted the Summit in protest against the presence of Zimbabwean president Robert Mugabe. It dealt with a panoply of regional issues. With respect to Zimbabwe, the communique "noted the outcomes of the Extraordinary Summit of the Organ held during the course of the summit and reaffirmed its commitment to work with the people of Zimbabwe in order to overcome the challenges they are facing." The communique HARARE 00000715 002 OF 004 of the Extraordinary Summit of the Organ of Heads of State and Government focused exclusively on Zimbabwe and was signed by all SADC countries, including Botswana. It commended Mbeki in his role as facilitator of the ZANU-PF-MDC negotiations and encouraged him to continue. It "expressed strong opinion that documents as contained in the Facilitator's Report reflect the framework, spirit and purpose of the SADC and AU Resolutions. In view of that, they are a good basis for a global agreement." It "encouraged and appealed to the parties to sign any outstanding agreements and conclude the negotiations as a matter of urgency" and "recognized that while negotiations are continuing, it may be necessary to convene Parliament to give effect to the will of the people as expressed in the Parliamentary elections held on 29 March 2008." ¶5. Parliament to Convene... Despite the continued lack of a political settlement between MDC and ZANU-PF, Mugabe announced Parliament would convene and select a Speaker and Deputy Speaker on August 25, with Mugabe formally opening Parliament the next day. The MDC has indicated it will be present on the 25th for the swearing- in of parliamentarians and the election of a speaker. The party has also indicated it will not attend the ceremonial convening of parliament as it would view the convening as a violation of the Memorandum of Understanding that forms the basis for negotiations and as recognition of Mugabe. MDC Secretary General Tendai Biti issued a statement saying that convening parliament was paramount to "decapitating" the talks. See Harare 711 ¶6. Violence Continues... There are credible reports of some violence and intimidation in rural areas, Manicaland and Mashonaland in particular. While there has been a notable reduction in beatings and injuries since the June 27 election, and a further reduction since the signing of the Memorandum of Understanding on July 21, fear and intimidation continue in rural areas. Notably, food is increasingly being used as a political tool as the ban on non-governmental organizations and food distribution programs continue. See Harare 712 ¶7. MDC and Donors Meet... International donors and the World Bank met with MDC leaders to discuss the most urgent needs to address the humanitarian crisis and economic stabilization. Through donor consultation and internal planning, the MDC is preparing the groundwork to rapidly address Zimbabwe's development needs, should it achieve power as a result of the ongoing negotiations. See Harare 709 ¶8. Magistrate Court Dismisses Case Against MDC MP... MDC MP-elect for Marondera Central in Mashonaland East province, Ian Kay, is a free man after a magistrate threw out state charges leveled against him for allegedly inciting violence in his constituency. Kay was arrested at the height of the State-sponsored violence against the MDC in May and spent two weeks in police custody. He was subsequently granted bail but has been on remand ever since. Human Rights Watch issued a report this week highlighting political persecution in Zimbabwe, including Kay's case. ¶9. WOZA Arrests... Nine members of Women of Zimbabwe Arise (WOZA) were arrested on August 13 and charged with malicious damage to property for painting "love" and other slogans on roads near Bulawayo. All were released on the 16th; two pleaded guilty to an additional charge of being a public nuisance on the 19th. This week WOZA also launched a report in South Africa, entitled 'Counting the Cost of Courage: Trauma Experiences of Women Human Rights Defenders in Zimbabwe'. -------------- On the Economic and Business Front -------------- HARARE 00000715 003 OF 004 ¶10. "Zim's inflation not that bad"... trumpets the banner headline of the Friday business section of the government mouthpiece The Herald. The article goes on to say that "there is nothing wrong with cutting of zeros from the local unit, as many times as possible until the intended results are achieved." According to data from the government's Central Statistical Office (CSO),the year-on-year rate of inflation as measured by changes in the consumer price index rose from 2.2 million percent in May to 11.2 million percent in June 2008; the month-on-month rate rose from 406 percent to 839 percent. However, a leading private sector inflation study put the y-o-y figure in June at 23 million percent and in the hundreds of millions percent in July on the back of supply side rigidities and the increase in money supply used to fund the Reserve Bank's quasi-fiscal activities. In addition, rising costs from the depreciating local unit are forcing retailers to increase prices almost daily. ¶11. Exchange Rate Movements... During the week under review, the Zimbabwe dollar stabilized somewhat on the parallel cash market but continued to slide on the parallel bank transfer market. Cash shortages resurfaced thanks to the low withdrawal limit of Z$300 per day (roughly US$3). As a result, most transactions were channeled to the parallel transfer market where the rate went from Z$200:US$1 to Z$550:US$1. We expect the margin between the parallel cash and transfer rates to continue to widen as long as cash remains short in the market and people resort to transfers to carry out transactions. However, on Friday August 22, the Reserve Bank increased the daily cash withdrawal limit to $500 from $300 with immediate effect for both individuals and companies. This is the third time in a month that the RBZ has reviewed the daily cash withdrawal limits. ¶12. The Herald price doubles... Zimpapers, publisher of The Herald, increased the cover price by 100% to $100 from $50. Group CEO Justin Mutasa said the company had no choice but to increase prices to absorb the new prices of newsprint. ¶13. Mobile Phone Tariffs Up by over 1,000 Percent... Mobile telecommunications companies increased tariffs by over 1,000 percent this week; the last tariff increase occurred a month ago. ¶14. Levy On Generators... In a surprise move, the GOZ introduced a levy on generators for domestic or industrial use. All generators must now be inspected and approved by the Zimbabwe Electricity Regulatory Commission for fees ranging from US$5 to US$100 depending on their size. The introduction of the levy comes at a time of frequent electric power outages due to coal supply shortages to the Hwange thermal power plant. -------------- Quotes of the Week -------------- ¶15. In The Herald, August 16: Zanu-PF Minister of State for National Security Didymus Mutasa on MDC-T claims that Zanu-PF is enticing its MPs with bribes: "I do not think the party would stoop so low and do such things" ¶16. On Australian Broadcasting Corporation Radio National's Saturday Extra, August 16: MDC-M leader Arthur Mutambara when asked if the proposed power sharing agreement between Mugabe, Tsvangirai, and himself could be a trap: "I have a question. Do you think I am stupid? When you ask that question you think we are foolish and we are very offended that you think we are that stupid. We are smarter than the Australians, we are smarter than the Americans, we went to better schools than most HARARE 00000715 004 OF 004 of these leaders in America, in Britain and in Australia. I am coming out of Oxford. None of your prime ministers can challenge me intellectually. So how do you patronize me and tell me that I'm going to be hoodwinked by Mugabe. You are doubting my intelligence. Shame on you." ¶17. In the same interview, featured on the front page of The Herald on August 21, Mutambara further commented: "It (the West) can go to hell. Who are you? Do we judge your elections in Australia? Do we judge your elections and your agreements in America and Europe?" MCGEE