ZIM NOTES 03-20-2009

UNCLAS SECTION 01 OF 03 HARARE 000248 AF/S FOR B. WALCH ADDIS ABABA FOR USAU ADDIS ABABA FOR ACSS NSC FOR SENIOR AFRICA DIRECTOR STATE PASS TO USAID FOR L.DOBBINS AND J. HARMON COMMERCE FOR ROBERT TELCHIN SIPDIS E.O.12958: N/A TAGS: PGOV PREL ASEC PHUM ECON ZI SUBJECT: ZIM NOTES 03-20-2009 -------------- ¶1. SUMMARY -------------- Topics of the week: - New Government Making Progress, But Still Lacks Unity... - Conspiracy Theorists Continue to Blame U.S. for Accident... - Minister Matinenga Takes The Witness Stand... - MDC Members Remain Behind Bars For Post-Funeral Violence... - Giving Up On O Level Exams? - Poor Students Must Pay To Apply For Free Tuition... - Finance Minister Slashes Budget... - Air Zimbabwe Struggling... - Telephone Tariffs Reduced, But Still Too High... - IMF Sees Some Economic Stabilization; Audits RBZ... - Kimberley Process Team Visits Diamond Sites... - Business and IMF Concerned About Wage Expectations... -------------- On the Political/Social Front -------------- ¶2. New Government Making Progress, But Still Lacks Unity... Despite some progress towards a reduction in political violence and a slight opening of democratic space, significant roadblocks within government remain, including the continued tenure of Reserve Bank Governor Gideon Gono and Attorney General Johannes Tomana. In addition, a lack of technical and human capacity within the ministries limits government's ability to effectively implement policies. MDC Ministers of Water Sam Nkomo (See Harare 239) and Economic Development Elton Mangoma (See Harare 240),confirmed the dire financial situation within their ministries and progress in navigating the new political dynamics. For an in-depth look, see Harare 226. ¶3. Conspiracy Theorists Continue to Blame U.S. for Accident... Allegations that the U.S. is somehow responsible for the tragic car accident that injured Prime Minister Morgan Tsvangirai and killed his wife Susan continue in the local media. The state-sponsored media also continues to sing the ZANU-PF song calling for an end to sanctions. See Harare 233. Also this week, Gideon Theron, the vice president of the outspoken Commercial Farmers Union, which represents mostly white commercial farmers, was arrested on charges of obstructing justice after he was taking pictures of the scene of the accident. Theron lives nearby and arrived on the scene before police, raising suspicions about his alleged role. On March 20, The Herald ran a full page article calling for an inquiry into the U.S., UK, and CFU role in the crash. ¶4. Minister Matinenga Takes The Witness Stand... Minister of Constitutional and Parliamentary Affairs Minister and MDC legislator Eric Matinenga appeared in a Mutare court on 19 March 2009. He is accused of inciting violence during the run-up to last year's June presidential elections. ¶5. MDC Members Remain Behind Bars For Post-Funeral Violence... During Susan Tsvangirai's funeral, ZANU-PF youths in Buhera allegedly burned down the home of an MDC supporter who was attending the funeral on March 11. In retaliation, a group of 15 MDC supporters allegedly burned down houses of several ZANU-PF supporters. After the arrest of the MDC supporters, 14 of the 15 Qsupporters. After the arrest of the MDC supporters, 14 of the 15 were denied bail on March 18; only a breastfeeding mother was set free. Separately, 13 MDC members in Murambinda were granted bail by a Mutare magistrate; they are accused of extortion after asking ZANU-PF members who stole poultry during the run-up to the June 27 runoff to return their property. The ZANU-PF members accused of theft were never arrested. HARARE 00000248 002 OF 003 ¶6. Giving Up On O Level Exams? Minister of Education Coltart decreed that given the time lost from school closures in 2008, high schools should start enrolling and teaching Advanced Level students regardless of the fact that Ordinary Level exam results from 2008 are not yet out. In effect this policy decision means students will begin advanced level subjects before knowing if they passed the previous levels and is an open admission that ZIMSEC will not have the 2008 exam results out any time soon. ¶7. Poor Students Must Pay To Apply For Free Tuition... The University of Zimbabwe announced on March 11 that students wishing to join their "cadetship scheme" should first pay a steep $150 application fee. Under the scheme, low-income students are granted fre tuition in exchange for a period of required government employment after graduation -------------- On the Economic and Business Front -------------- ¶8. Finance Minister Slashes Budget... MDC-T Minister of Finance Tendai Biti announced a revised 2009 budget of US$ 1 billion, down from the Acting Minister's January 2009 budget of US$1.9 billion. In another shot at RBZ's Governor Gono, Biti called for all public revenue to be directed and remitted to Treasury, and announced the elimination of the 5% tax on sales in foreign currency and the foreign currency surrender requirement-both of which had been payable to the RBZ. Recurrent expenditure accounts for 80.7% of the budget with capital and net lending to parastatals and local authorities accounting for the remainder. For the first time in years, there is an allowance (US$16.7 million) for interest payment on foreign debts. Revenues are dominated by taxes on goods and services. Biti also announced a reduction in customs duties to a flat rate of 40%. Royalties and taxes on mining houses will be reviewed upwards to offset loss of revenue from surrender requirements. ¶9. Air Zimbabwe Struggling... Zimbabwe's national air carrier has become a drain on the government, requiring continuous transfusions of capital from the Reserve Bank to maintain safe aircraft. While privatizing the airline could ensure it success, there is no indication that change is on the horizon. See Harare 228 ¶10. Telephone Tariffs Reduced, But Still Too High... According to the Postal and Telecommunications Regulatory Authority of Zimbabwe (POTRAZ),all telephone tariffs will be reduced by 25 to 40 percent pending the completion of a thorough review of tariffs. Zimbabwe's telephone tariffs were very low up to the end of 2008, then rose significantly above those charged within the region in January 2009 when service providers were licensed to charge in foreign currency. Despite this reduction, the new tariffs are still above the regional average largely due to the continued use of an old analog billing system that is not based on the units actually used. ¶11. IMF Sees Some Economic Stabilization; Audits RBZ... Halfway Q11. IMF Sees Some Economic Stabilization; Audits RBZ... Halfway through its Article IV mission, the IMF told us that the Zimbabwe economy contracted 14 percent in 2008. On the positive side, dollarization has stopped hyperinflation in its tracks and the IMF projected revenue between US$900 million and US$ one billion in ¶2009. The mission chief told diplomats that the GOZ urgently needed financial support to ensure social cohesion and support economic recovery, but such assistance was beyond the scope of the IMF to deliver due to arrears. Two days into its audit of the Reserve Bank, IMF staff told us they had determined "significant fiduciary risk." See Harare 232 ¶12. Kimberley Process Team Visits Diamond Sites... A Kimberley HARARE 00000248 003 OF 003 Process team is in Zimbabwe this week visiting diamond sites. Murowa Diamonds, a member of the Rio Tinto Group of Companies which has lobbied hard to prevent the suspension of Zimbabwe from the Kimberley Process and to prevent sanctioning of the Minerals Marketing Corporation of Zimbabwe (MMCZ) by the EU, told us the company flew the team to the Murowa mine for a tour, then on to the disputed Chiadzwa diamond field in Manicaland. Murowa executives agreed to brief us on the KP visit next week. The GOZ denies random killings by government agents in Chiadzwa despite significant evidence to the contrary. ¶13. Business and IMF Concerned About Wage Expectations... In a roundtable arranged by the American Business Association of Zimbabwe (ABAZ) for the IMF mission this week, business representatives wailed about pressure from employees to pay US dollar wages far higher than businesses can afford. The IMF representatives found it "very worrying" that Zimbabweans used South Africa as their benchmark in wage demands, noting that Zimbabwe had a per capita income of less than US$1/day. IMF staff commented that wages here should be a fraction of those in South Africa. -------------- Quote of the Week -------------- ¶14. "Ask not what other nations can do, but what Zimbabweans can do for themselves." -- Deputy Prime Minister Arthur Mutambara, speaking at the launch of the Short-Term Economic Recovery Plan (STERP). DHANANI