ZIM NOTES 10-17-2008

UNCLAS SECTION 01 OF 03 HARARE 000937 AF/S FOR B. WALCH ADDIS ABABA FOR USAU ADDIS ABABA FOR ACSS NSC FOR SENIOR AFRICA DIRECTOR B.PITTMAN TREASURY FOR D. PETERS 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 10-17-2008 -------------- ¶1. SUMMARY -------------- Topics of the week: - Talks Stall... - Parliament Opens, Talks Continue... - Masvingo Governor Blocks Humanitarian Aid... - 2 Protests; 13 Arrests; over 29 Injured... - Poor Water Management... - Zims Continue to go South... - Check Rate Replaces Transfer Rate And Falls Even Faster... - New Z$50,000 Note Introduced as Local Currency Becomes Worthless... - What Sanctions?... - Cotton Production Falls... - Companies Struggle... -------------- ¶2. Price Movements-Exchange Rate and Selected products -------------- Parallel rate for cash rose to Z$20,000:US$1 Check rate (see note below) increased nearly ten-fold to Z$40,000,000:US$1 against inter-bank average of Z$209:US$1 Bread on the parallel market tripled to Z$30,000 Sugar rose to $20,000/2kg Petrol and diesel quadrupled to Z$40,000/liter Note: Due to the suspension of the Real-Time Gross Settlement system by the Reserve Bank of Zimbabwe on October 3, Post will now be reporting on the unofficial check transfer rate that individuals and entities are using to make non-cash payments. -------------- On the Political/Social Front -------------- ¶3. Talks Stall... After a week of talks, mediated by former South African president Thabo Mbeki, talks between ZANU-PF and the MDC appear to have stalled. The MDC, which initially insisting on leading the finance and home affairs ministries, demanded an expanded discussion on the allocation of all ministries. ZANU-PF and Mugabe were ready to concede finance but dug their heels over other MDC demands. See Harare 932. ¶4. Parliament Opens, Talks Continue... Parliament reconvened on October 14. Addressing priorities such as Amendment 19 (incorporating the September 15 agreement),a budget, establishment of committees, and drafting of a new constitution, await the completion of an agreement between ZANU-PF and the MDC. See Harare ¶933. ¶5. Masvingo Governor Blocks Humanitarian Aid... Newly-appointed Masvingo governor Titus Maluleke addressed a meeting of NGOs on October 13 and announced new rules for NGO operations. These rules contradict national level policies, and, according to one NGO country director, "if implemented would certainly reinforce patrimonial, patriarchal, ZANU-PF party power structures." The new rules require that NGOs receive authorization from provincial, district, and traditional authorities, generally controlled by ZANU-PF, to operate; they also give traditional leaders the HARARE 00000937 002 OF 003 exclusive authority to designate recipients. We have learned that the same rules will also be applied in Manicaland province. The donor community will coordinate its response. ¶6. 2 Protests; 13 Arrests; over 29 Injured... Two protests this week resulted in police beatings and arrests. On Tuesday, Zimbabwe National Students Union (ZINASU) led approximately 200 students to Parliament to present a petition listing concerns about the current state of the education system in Zimbabwe. When they tried to present the petition, police refused the students entry and began beating them until they dispersed. Four were arrested and released after paying a fine; another 26 were injured by police who used excessive force, according to medical staff. On Thursday, Women of Zimbabwe Arise (WOZA) led a march of 200 women in Bulawayo to government offices, demanding a declaration of a national disaster and immediate food aid for all. Riot police disrupted the protest by beating the women - breaking one woman's finger - and arrested a total of nine women. As of Friday morning, only WOZA leaders Jenni Williams and Magodonga Mahlangu remained in jail; police continue to deny their lawyer access. See Harare 934. ¶7. Poor Water Management... Crumbling infrastructure and mismanagement continues to wreak havoc on Zimbabwe's water supply. For instance, the cholera mortality rate in Chitungwiza is more than ten-times the level needed to declare an emergency. See Harare 919. ¶8. Zims Continue to go South... The South African Consul in Harare told us that his office approves about 90% of the approximately 2000 visa applications it receives daily, despite a high rate of fraudulent documents. See Harare 928. -------------- On the Economic and Business Front -------------- ¶9. Check Rate Replaces Transfer Rate And Falls Even Faster... Since the RBZ suspended the inter-bank transfer system two weeks ago, alleging that it was fueling depreciation of the Zimbabwe dollar, and in light of the ongoing cash shortage, transactions have shifted to personal or bank checks. The surging check volume is challenging the capacity of banks' outdated clearing equipment causing backlogs in the payments system. Moreover, the check rate has plunged from Z$3.5 million:US$1 a week ago to Z$40 million:US$1 on October 17, 2008. NGO operations have been threatened by the RBZ's policy to halt RTGS transactions. Although a clarification has allowed for intra-bank RTGS transactions, many NGOs need to transfer money from foreign accounts to local vendors, who often do not have foreign accounts. ¶10. New Z$50,000 Note Introduced as Local Currency Becomes Worthless... The RBZ issued a new Z$50,000 note this week; in line with recent practice, it also raised the maximum daily cash withdrawal limit from Z$20,000 to Z$50,000. The new note is worth only US$2.50 at the cash rate of Z$20,000:US$1 and it is worthless at the check rate of Z$40 million:US$1. ¶11. What Sanctions?... Zimbabwe-US bilateral trade figures for 2008 show Zimbabwe to be back in surplus after having slipped into deficit in 2007 for the first time in a decade. Bilateral trade amounted to $135 million in the first 8 months of the year. ¶12. Cotton Production Falls... Seed cotton production dropped from 253,000 MT last year to 223,000 MT in 2007/08, well short of the forecast 300,000 MT, according to the Cotton Growers Association (CGA). Rampant side-marketing of the product by growers added to a general atmosphere of lawlessness, exacerbated by election-period unrest in rural areas. The CGA has been unable to push a regulatory framework for the industry through Cabinet. In the meantime, the HARARE 00000937 003 OF 003 number of cotton contracting companies scenting forex earnings has exploded to include parastatals bereft of any agriculture experience, like the Zimbabwe Electricity Supply Authority (ZESA). ¶13. Companies Struggle... Sales volumes were down by 36% at hard-liquor giant African Distillers and revenue down 84% in the year to end-June. Econet Wireless Holdings reported similarly dismal results, with revenue down by 30% in the first half of 2008 primarily due to sub-economic state-controlled tariffs. Founded by self-exiled maverick businessman Strive Masiyiwa, Econet nevertheless is on the expansion warpath, having grown its subscriber base by 40% in one year and with sights set on increasing market share by another 30% to 1.2 million subscribers by 2/09. -------------- Quote of the Week -------------- ¶14. Morgan Tsvangirai, addressing 10-20,000 supporters at a rally on October 12: "We won the elections on 29 March. Mugabe, the loser in that election, cannot pretend to be magnanimous to the MDC by 'allocating' us ministries when it is us who have been benevolent enough to given him the Presidency as a way of national healing and rebirth" MCGEE