ZIM NOTES 01-30-2009

UNCLAS SECTION 01 OF 03 HARARE 000075

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 ROBERT TELCHIN

SIPDIS

E.O.12958: N/A
TAGS: PGOV PREL ASEC PHUM ECON ZI

SUBJECT: ZIM NOTES 01-30-2009

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1. SUMMARY
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Topics of the week:

- MDC-T to Vote Today on Whether to Join Government...
- EU Expands Sanctions List...
- Cholera Deaths Continue...
- Farm Invasions Continue Despite Tribunal Ruling and BIPPAs...
- Still No Resolution to Abduction Cases...
- Teachers Don't Show...
- GOZ Introduces Wildly Optimistic Budget...
- Tobacco Output Well Below Target...
- More Strikes Looming as Collective Bargaining Period Approaches...
- Companies Devise Survival Strategies...
- Zimbabwe's U.S. Dollar Inflation High But Falling...
- Economic Tidbit of the Week...

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2. Price Movements-Exchange Rate
and Selected products
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Note: The near universal dollarization of the Zimbabwean economy has
obviated the need and relevancy of tracking prices in local currency.
In the absence of reliable government-provided economic data, Post is
currently evaluating more useful methods of gaining economic insights
into Zimbabwe.

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On the Political/Social Front
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3. MDC-T to Vote Today on Whether to Join Government... Following
the recommendation by the SADC Extraordinary Summit on January 26
that ZANU-PF and te two MDC factions form a government as soon as
possible, the MDC-T National Council will meet on January 30 to
determine if they will endorse the SADC resolution. While the MDC-T
issued a statement following the Summit that the SADC recommendations
fell "far short" of their expectations, after gaining some
concessions on the appointment of governorships, the composition of
the proposed National Security Council, and promises to revisit the
issues of other senior appointments, political violence, and
ministerial allocations, prime minister-designate Morgan Tsvangirai
appears to favor a deal. See Harare 70


4. EU Expands Sanctions List... The European Union stepped up
pressure on the Mugabe government on January 26 by adding the names
of 27 individuals and 36 companies to the list of persons and
entities that are banned from travelling to EU countries and whose
assets have been frozen by European financial institutions. Some of
the newly-named individuals with close ties to the government include
John Bredenkamp, "Billy" Rautenbach, and family members of ZANU-PF
regime members who had been previously named. The EU also declared
support for an investigation into illicit diamond sales in Zimbabwe.


5. Cholera deaths continue... As of January 29, the cholera outbreak
had caused 3,161 deaths, with 60,400 suspected cases reported,
according to the UN World Health Organization (WHO). For the week of
January 18 to 24, WHO noted that while cholera cases continued to
increase, cholera deaths and the overall case fatality rate (CFR)
decreased from the previous week. The institutional CFR, measuring
only cholera deaths in health facilities, declined to 1.3 percent for
Qonly cholera deaths in health facilities, declined to 1.3 percent for
the week, likely indicating further improvements in case management
at cholera treatment centers. Ambassador McGee visited the UN
Children's Fund warehouse in Harare on January 29 to officially hand
over hygiene supplies funded by USAID's Office of U.S. Foreign
Disaster Assistance (USAID/OFDA),including 400 metric tons of soap,

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10 million water treatment tablets, 30,000 water containers, and
30,000 buckets.


6. Farm Invasions Continue Despite Tribunal Ruling and BIPPAs... The
few remaining commercial farmers in Zimbabwe continue to report
incidences of harassment and land invasions as the government
continues to implement the controversial land reform program first
begun in 2000. Neither a favorable ruling by a SADC Tribunal
declaring Zimbabwe's actions in violation of its SADC treaty
obligations, nor Bilateral Investment Promotion and Protection
Agreements between Zimbabwe and foreign nations have protected
commercial farmers. See Harare 072.


7. Still No Resolution to Abduction Cases... Human Rights crusader
Jestina Mukoko is due in the High Court on January 30 where lawyers
are pushing for her release on bail, pending a still unscheduled
hearing in the Supreme Court on the legality of her abduction.
Numerous court cases have been delayed, as court clerks join other
poorly paid civil servants in unofficial strikes. Of the 21 abductees
who have appeared in police custody, only two have been released to
date-Tawanda Bvumo and two-year-old Nigel Mutemagau. 15 have
testified that they were tortured in state custody. 11 are still
missing.


8. Teachers Don't Show... Only a handful of government schools
admitted students this week despite the government's mandate that
schools open on January 27. The closures were caused by a nationwide
boycott by the two major teachers unions, the Progressive Teachers
Union of Zimbabwe and the Zimbabwe Teachers Association, who are
demanding that their members be paid in foreign currency. The few
government schools that did open had worked out arrangements with
parents who paid between US$100 and US$200 in tuition for the term.
The private trust schools-which charge far more-were all opened this
week.

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On the Economic and Business Front
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9. GOZ Introduces Wildly Optimistic Budget... Acting Minister of
Finance Patrick Chinamasa introduced a US$1.9 billion budget to
Parliament on January 29, amid jeering from opposition MPs. The
Minister proposed a range of market liberalization measures. He also
proposed the use of multiple currencies alongside the Zimbabwe dollar
as the solution to Zimbabwe's runaway inflation. However, it is
unclear how the GOZ can raise enough foreign exchange in taxes to
achieve a balanced budget. Given that most companies have succumbed
to the harsh economic environment, and over 90 percent of production
is now done by the informal sector, it is difficult to see how the
dollarization will succeed. Much depends on donor support. Overall,
the budget is long on intentions but short on how to achieve the
targets. See Harare 061.


10. Tobacco Output Well Below Target... Chinamasa revealed in
yesterday's budget that tobacco output for the 2007/08 season fell to
Qyesterday's budget that tobacco output for the 2007/08 season fell to
a mere 45 million kg-well below the targeted 73 million kg, and down
from the 2000 peak of 237 million kg despite massive financial
support from the Reserve Bank of Zimbabwe.


11. More Strikes Looming as Collective Bargaining Period
Approaches... With the pervasive dollarization of the economy,
workers are demanding salary payments in foreign currency. A growing
number of employees have joined the strike bandwagon that started
with teachers and health workers. National Railways of Zimbabwe
employees began a "go slow" a month ago; they were joined by postal
service workers on January 21 and Zimbabwe National Water Authority
employees the following day. Workers from the Apex Council
representing public servants are considering taking industrial action

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against government for failing to agree on payment of salaries in
foreign currency. Given the dire shortage of foreign exchane,
Zimbabwe is likely to witness widespread strikes in the short term.


12. Companies Devise Survival Strategies... In an effort to reduce
costs and remain viable, agricultural manufacturer, Chemco Holdings,
is rationalizing its business units and shutting down remote retail
outlets. Its latest financial results reflect a 40 percent real
decline in business activity in 2008. Meanwhile, Dunlop Zimbabwe
Limited and National Tyre Services, both owned by Apollo Tires of
India, have announced plans to merge as a way of hedging against the
negative operating environment and offering increased value to
shareholders.


13. Zimbabwe's U.S. Dollar Inflation High But Falling... The use of
foreign currency alongside the Zimbabwe dollar improved the
availability of goods in recent months, but prices were sky high for
much of 2008. Private estimates put the U.S. dollar annual inflation
rate in Zimbabwe at between 60 and 100 percent. In recent weeks U.S.
dollar prices for goods have begun to fall as dollarization of the
economy introduced more competition.


14. Economic Tidbit of the Week: A mother of a student enrolled in
a government school reported that the full school uniform for her
primary school-aged child was US$250 this term. Last term the cost
was the equivalent of US$75.

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Quote of the Week
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15. "The time to go is now, we are ready to give you a golden
handshake if you will quit." -- Kenyan Prime Minister Raila Odinga
speaking on January 29 about Mugabe, while at the World Economic
Forum in Davos, Switzerland.


MCGEE