Identifier
Created
Classification
Origin
09HARARE828
2009-10-16 08:58:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Harare
Cable title:
FEAR OF EXPROPRIATION SCUTTLES SHOPRITE DEAL
how-toVZCZCXRO1686 OO RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN DE RUEHSB #0828/01 2890858 ZNR UUUUU ZZH O 160858Z OCT 09 ZDK FM AMEMBASSY HARARE TO RUEHC/SECSTATE WASHDC IMMEDIATE 5026 INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE RUEATRS/DEPT OF TREASURY WASHDC RUEHAR/AMEMBASSY ACCRA 3091 RUEHDS/AMEMBASSY ADDIS ABABA 3203 RUEHRL/AMEMBASSY BERLIN 1632 RUEHBY/AMEMBASSY CANBERRA 2466 RUEHDK/AMEMBASSY DAKAR 2835 RUEHKM/AMEMBASSY KAMPALA 3251 RUEHNR/AMEMBASSY NAIROBI 5698 RUEAIIA/CIA WASHDC RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK RHMFISS/EUCOM POLAD VAIHINGEN GE RHEFDIA/DIA WASHDC RUEHGV/USMISSION GENEVA 2385 RHEHAAA/NSC WASHDC
UNCLAS SECTION 01 OF 02 HARARE 000828
SENSITIVE
SIPDIS
AF/S FOR B.WALCH
ADDIS ABABA FOR USAU
ADDIS ABABA FOR ACSS
STATE PASS TO USAID FOR J.HARMON AND L.DOBBINS
STATE PASS TO NSC FOR SENIOR AFRICA DIRECTOR M.GAVIN
E.O. 12958: N/A
TAGS: ECON EFIN ZI
SUBJECT: FEAR OF EXPROPRIATION SCUTTLES SHOPRITE DEAL
Ref: Harare 776
UNCLAS SECTION 01 OF 02 HARARE 000828
SENSITIVE
SIPDIS
AF/S FOR B.WALCH
ADDIS ABABA FOR USAU
ADDIS ABABA FOR ACSS
STATE PASS TO USAID FOR J.HARMON AND L.DOBBINS
STATE PASS TO NSC FOR SENIOR AFRICA DIRECTOR M.GAVIN
E.O. 12958: N/A
TAGS: ECON EFIN ZI
SUBJECT: FEAR OF EXPROPRIATION SCUTTLES SHOPRITE DEAL
Ref: Harare 776
1. (SBU) Summary: Uncertainty over property rights continues to
scare away foreign investors. A USD 167 million partnership deal
between South African retail giant Shoprite and OK Zimbabwe Limited
has stalled. The main reason could be concerns raised by the GOZ's
seizure of another firm and its failure to conclude a bilateral
investment agreement with South Africa. While many local companies
are starting to invest again, Zimbabwe's investment climate remains
unattractive for outsiders. End summary.
--------------
OK Keeps Mum
--------------
2. (SBU) Discussions between Zimbabwean retailer OK and South
African retail giant Shoprite for an equity partnership arrangement
appear to have stalled. A Shoprite official was quoted in the South
African press saying that the company decided to put its investment
plans in Zimbabwe on hold due to "socio-economic and political
uncertainty." OK's management, meanwhile, has declined to comment.
Chief operating officer Albert Katsande told us that the company
could not make public statements until after publication of its
half-year results. Nevertheless, Katsande believes nothing had
changed.
--------------
Asset Seizures Cause Uncertainty
--------------
3. (SBU) The chief executive officer of the Zimbabwe Stock Exchange
(ZSE),Emmanuel Munyuki, suspects that Shoprite was unhappy with the
GOZ's seizure of Kingdom Meikles Africa Limited (KMAL) under the
sweeping authority of an anti-corruption statute (reftel). The GOZ's
intervention in what had been an internal dispute at KMAL revived
fears over property rights and the safety of foreign investments in
Zimbabwe. Apart from the many GOZ-sponsored farm invasions over the
past decade, several other episodes have also highlighted the
fragility of property rights in Zimbabwe. In 2004 the GOZ took over
Shabanie and Mashaba Mines but never quite explained why. And last
week the central bank briefly froze the accounts of Nestle Zimbabwe
following after the company stopped buying milk from a farm owned by
Grace Mugabe.
--------------
Who's Afraid of BIPPA?
--------------
4. (SBU) Munyuki also said that the GOZ's continuing delay in
signing a bilateral investment promotion and protection agreement
(BIPPA) with South Africa also influenced Shoprite's decision. The
draft BIPPA text, negotiated long ago, would include a guarantee of
South Africans' security of tenure on agricultural land. The GOZ has
recently sought to re-negotiate this provision. GOZ foot-dragging
over an agreement meant to protect new and old investments against
expropriation has sent the wrong signals about Zimbabwe's desire to
attract foreign direct investment.
--------------
Comment
--------------
5. (SBU) Zimbabwe's bid to get foreign investment will be more
successful once it implements mutually reinforcing economic and
political reforms. While there has been much progress on fiscal
Qpolitical reforms. While there has been much progress on fiscal
policy, the GOZ needs to do much more to protect property rights and
uphold the rule of law. Continuous harassment of businesses for
political ends (or self-enrichment) will continue to scare away
foreign investors. Shoprite already owns one store in Bulawayo. The
HARARE 00000828 002 OF 002
company understands political risk in Zimbabwe and may be unwilling
to increase its exposure.
PETTERSON
SENSITIVE
SIPDIS
AF/S FOR B.WALCH
ADDIS ABABA FOR USAU
ADDIS ABABA FOR ACSS
STATE PASS TO USAID FOR J.HARMON AND L.DOBBINS
STATE PASS TO NSC FOR SENIOR AFRICA DIRECTOR M.GAVIN
E.O. 12958: N/A
TAGS: ECON EFIN ZI
SUBJECT: FEAR OF EXPROPRIATION SCUTTLES SHOPRITE DEAL
Ref: Harare 776
1. (SBU) Summary: Uncertainty over property rights continues to
scare away foreign investors. A USD 167 million partnership deal
between South African retail giant Shoprite and OK Zimbabwe Limited
has stalled. The main reason could be concerns raised by the GOZ's
seizure of another firm and its failure to conclude a bilateral
investment agreement with South Africa. While many local companies
are starting to invest again, Zimbabwe's investment climate remains
unattractive for outsiders. End summary.
--------------
OK Keeps Mum
--------------
2. (SBU) Discussions between Zimbabwean retailer OK and South
African retail giant Shoprite for an equity partnership arrangement
appear to have stalled. A Shoprite official was quoted in the South
African press saying that the company decided to put its investment
plans in Zimbabwe on hold due to "socio-economic and political
uncertainty." OK's management, meanwhile, has declined to comment.
Chief operating officer Albert Katsande told us that the company
could not make public statements until after publication of its
half-year results. Nevertheless, Katsande believes nothing had
changed.
--------------
Asset Seizures Cause Uncertainty
--------------
3. (SBU) The chief executive officer of the Zimbabwe Stock Exchange
(ZSE),Emmanuel Munyuki, suspects that Shoprite was unhappy with the
GOZ's seizure of Kingdom Meikles Africa Limited (KMAL) under the
sweeping authority of an anti-corruption statute (reftel). The GOZ's
intervention in what had been an internal dispute at KMAL revived
fears over property rights and the safety of foreign investments in
Zimbabwe. Apart from the many GOZ-sponsored farm invasions over the
past decade, several other episodes have also highlighted the
fragility of property rights in Zimbabwe. In 2004 the GOZ took over
Shabanie and Mashaba Mines but never quite explained why. And last
week the central bank briefly froze the accounts of Nestle Zimbabwe
following after the company stopped buying milk from a farm owned by
Grace Mugabe.
--------------
Who's Afraid of BIPPA?
--------------
4. (SBU) Munyuki also said that the GOZ's continuing delay in
signing a bilateral investment promotion and protection agreement
(BIPPA) with South Africa also influenced Shoprite's decision. The
draft BIPPA text, negotiated long ago, would include a guarantee of
South Africans' security of tenure on agricultural land. The GOZ has
recently sought to re-negotiate this provision. GOZ foot-dragging
over an agreement meant to protect new and old investments against
expropriation has sent the wrong signals about Zimbabwe's desire to
attract foreign direct investment.
--------------
Comment
--------------
5. (SBU) Zimbabwe's bid to get foreign investment will be more
successful once it implements mutually reinforcing economic and
political reforms. While there has been much progress on fiscal
Qpolitical reforms. While there has been much progress on fiscal
policy, the GOZ needs to do much more to protect property rights and
uphold the rule of law. Continuous harassment of businesses for
political ends (or self-enrichment) will continue to scare away
foreign investors. Shoprite already owns one store in Bulawayo. The
HARARE 00000828 002 OF 002
company understands political risk in Zimbabwe and may be unwilling
to increase its exposure.
PETTERSON