ZIM NOTES 9-12-08

UNCLAS SECTION 01 OF 03 HARARE 000832 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 9-12-08 -------------- ¶1. SUMMARY -------------- Topics of the week: - Mugabe and Tsvangirai Reach Deal... - Last Two MDC MPs Released on Bail... - USG-Funded NGOs Resuming Field Operations... - Canada Imposes Sanctions on Zimbabwe... - Cholera Outbreak in Crowded Township... - Reserve Bank Allows Some Formal Dollarization... - Maize Seed Shortage Threatens Crop... - World Bank Rates Zimbabwe One of the Least Investor-Friendly Countries... - Zimbabwe's Protracted Arrears to the IFIs... - Inflation Factoid... -------------- -------------- ¶2. Price Movements-Exchange Rate and Selected Products -------------- -------------- Parallel rate for cash doubled to Z$550:US$1 Bank transfer rose seven-fold to Z$35000:US$1 against inter-bank average of Z$50:US$1 Bread on the parallel market rose to Z$800 Sugar doubled to Z$1000/2kg Petrol and diesel rose by two thirds to Z$800/liter -------------- On the Political/Social Front -------------- ¶3. Mugabe and Tsvangirai Reach Deal... After four days of mediation, President Mugabe and MDC leader Tsvangirai appeared to strike a power sharing deal last night. As described, the deal includes the creation of a Council of Ministers (COM) that will formulate policy and is chaired by Tsvangirai. Implementation of policy will reside with the Cabinet, which will continue to report to Mugabe with Tsvangirai as deputy. According to press reports, the agreement also creates a National Security Council chaired by Mugabe with Tsvangirai again as his deputy, along with the Minister of Defense, Home Affairs, and possibly others. Of the 31 Ministries (that constitute Cabinet and the COM),ZANU-PF will appoint 15, MDC-T will appoint 13, and MDC-M has the remaining 3. Uncertainty remains over how the ministries will be divided. The deal is scheduled to be formally signed Monday morning. See Harare 828. ¶4. Last Two MDC MPs Released on Bail... Following a High Court ruling yesterday, the remaining two MDC MPs were released on bail. The MPs Pearson Mungofa of Highfield and Bednock Nyaude of Bindura South had been granted bail last week, but were not released at the time because the state appealed against the move. ¶5. USG-Funded NGOs Resuming Field Operations... Partners are in high gear, obtaining field level approvals from local authorities to resume operations. Meanwhile, WFP and C-SAFE received approval from the Ministry of Social Welfare for their food delivery programs. In addition, the Ministry has agreed to registration protocols to identify food aid beneficiaries. C-SAFE will undertake a pilot registration program in Kadoma next week and then registrations will quickly begin in other areas. C-SAFE began school feeding this week throughout all of its districts, and has obtained approval from all district authorities to implement the Safety Net Program. Given HARARE 00000832 002 OF 003 registration requirements and logistics, no food is likely to be distributed via either C-SAFE's Safety Net Program or WFP's Vulnerable Group Feeding Program until mid to late October. Non-food aid partners supported by the USG are also ramping up operations, including Oxfam and Mercy Corps. ¶6. Canada Imposes Sanctions on Zimbabwe... The Canadian Foreign Ministry announced sanctions against Zimbabwe on September 4 on the basis of the regime's violation of human rights and "perversion of a legitimate democratic process," according to Foreign Affairs Minister David Emerson. The sanctions include a ban on the export of arms, freezing the assets of top Zimbabwean officials, and prohibiting Zimbabwean aircraft from flying over or landing in Canada. Emerson made clear that the sanctions would not affect the Zimbabwean people and that Canada would continue to provide humanitarian assistance to Zimbabwe. ¶7. Cholera Outbreak in Crowded Township... Eight people have died and 23 have been hospitalized following an outbreak of cholera in one of Harare's crowded townships. The outbreak occurred last week in Chitungwiza, a township of approximately a million people in Harare's southern outskirts that suffers from broken sewers. Zimbabwe has suffered several cholera outbreaks in recent years following the collapse of infrastructure due to the country's political and economic crisis. USAID is responding through its implementing partners by stocking retail outlets and clinics with water purification tablets and promoting hygienic practices. -------------- On the Economic and Business Front -------------- ¶8. Reserve Bank Allows Some Formal Dollarization... Amid widespread informal dollarization of the economy, RBZ Governor Gono announced the licensing of foreign exchange wholesale and retail shops, plus service stations, allegedly to increase the availability of basic good and improve manufacturers' capacity utilization, but certainly also in the hope of filling the government's forex coffers. He also reduced the foreign exchange surrender requirement on exporters and announced new price support for the gold sector. We questioned the timing of the announcement and don't expect the initiative to put the country on a sustainable recovery path. See Harare 786 and 822. ¶9. Maize Seed Shortage Threatens Crop... Zimbabwe is heading into the summer planting season about one third short of needed seed maize. The past year's seed maize crop was poor. On top of that, price controls have deterred farmers from growing the crop and delivering it to the formal market. A seed house senior executive told us the 2008/09 commercial maize harvest could be the smallest since independence. See Harare 821. ¶10. World Bank Rates Zimbabwe One of the Least Investor-Friendly Countries... The World Bank Group's Doing Business 2009 report ranked Zimbabwe a dismal 158 out of 181 countries surveyed, down from 152 a year ago. See http://www.doingbusiness.org/. ¶11. Zimbabwe's Protracted Arrears to the IFIs... At end-June 2008 Zimbabwe owed the IMF about US$137 million; its total arrears to the international financial institutions came to about US$1.1 billion. The IMF Executive Board took note in July of Zimbabwe's poor cooperation on policies and payments and recommended maintaining the suspension of Zimbabwe's voting rights and its ineligibility to access IMF resources. See http://www.imf.org/external pp/longres.aspx?id=4277. ¶12. Inflation Factoid... Zimbabwe's highest-denomination Z$500 note, worth US$33 on the street at its issuance six weeks ago, HARARE 00000832 003 OF 003 fetches only 90 US cents on the same market today. -------------- Quote of the Week -------------- ¶13. An EU diplomat speaking on the deal, reported in the Zimbabwe Independent of September 12: "We will see, the devil is in the details---we will see on Monday how the power is shared and if the opposition has more than a symbolic role." MCGEE