Zimbabwe: Doing Business Zimbabwe-style

C O N F I D E N T I A L SECTION 01 OF 02 HARARE 000105 SIPDIS AF/S FOR BRIAN WALCH NSC FOR SENIOR AFRICA DIRECTOR MICHELLE GAVIN ADDIS FOR USAU E.O. 12958: DECL: 2020/02/16 TAGS: EINV ECON PREL PGOV ZI SUBJECT: Zimbabwe: Doing Business Zimbabwe-style REF: HARARE 116 CLASSIFIED BY: Charles A. Ray, Ambassador, STATE, EXEC; REASON: 1.4(B),(D) ¶1. (SBU) A recent conversation with businessman Kumbirai Katsande illuminated the difficulties of doing business in Zimbabwe. Katsande is the past president of the Zimbabwe Business Council and the current head of the Confederation of Zimbabwean Industries. He is the Managing Director of Ariston Holdings Ltd., which has major horticultural and tea interests, and the Chairman of NestlC) Zimbabwe Ltd. ¶2. (C) Katsande described how Ariston came to give up land to High Court Judge Ben Hlatshwayo. In 2002, Hlatshwayo, in defiance of an order from his own Court, seized a white commercial farm in the agriculturally productive area of Banket, about 100 kilometers northwest of Harare. The farm was near the Mugabe rural home. In 2009, the farm caught the eye of First Lady Grace Mugabe, who apparently wanted it for her son from her first marriage. She ordered Hlatshwayo off the land. He countered with a lawsuit but, unsurprisingly, no judge was willing to hear the case. The powers that be persuaded Hlatshwayo to leave his 600-hectare farm and promised him another. He found another farm and demanded the white owner leave. He then received a call from Minister of Local Government, Urban and Rural Development Ignatius Chombo, a patron of the owner, who told him to desist and look for another. He did. This time he got a call from Minister of Lands and Rural Resettlement Herbert Murerwa, who had a relationship with the owner, Hlatshwayo moved on. He finally came to land owned by Ariston Holdings which, under pressure, agreed to cede him land. Katsande said Ariston was a bit miffed that Hlatshwayo's original farm was 600 hectares and he demanded 900 from Ariston. They ultimately negotiated. ¶3. (C) Last year, in the wake of an international outcry, NestlC) Zimbabwe, which had been buying milk from Grace Mugabe's dairy farm, decided to stop. After he and NestlC) workers were threatened, Katsande contacted President Robert Mugabe's office. He was told Mugabe had asked Minister of Industry Welshman Ncube to handle the matter, and that the government would not interfere with NestlC). Katsande then learned that Reserve Bank of Zimbabwe Governor Gideon Gono had frozen NestlC) accounts. He contacted Gono, who said he was acting on Mugabe's behalf. Katsande convinced him to call Mugabe. He did and backed off. Katsande was subsequently contacted separately by Minister of Youth and Indigenization Saviour Kasukuwere and Minister of State in the President's Office Didymus Mutasa, both of whom threatened him if he didn't resume buying milk from the first lady. He told them to contact Ncube. Ncube convinced them that Mugabe had left the matter with him, and told them that he (Ncube) was not going to force NestlC) to buy milk from Grace Mugabe. NestlC) has resumed operations and is not buying milk from Grace Mugabe. ¶4. (SBU) We talked to Katsande just after Kasukuwere had issued new indigenization regulations (Ref). He said despite difficulties, NestlC) had a large investment in Zimbabwe and was going to invest an additional US$10 to US$15 million. But it was going to make other major investments in Botswana and Mozambique which would have been made in Zimbabwe but for the unsettled political situation. ¶5. (C) Finally, Katsande told us about a legal dispute of Ariston involving tea estates in Chipinge. War veterans tried to take over some of Ariston's land and a legal case ensued. Ultimately, the Supreme Court, in a decision signed by the Chief Justice, ruled in Ariston's favor. But squatting war veterans refused to leave the estates. When Ariston contacted the police, it was told that farm invasions were a political matter and the police would therefore not act. Katsande paid a visit to the local police commissioner in Chipinge and was told the same thing. Katsande pointed out to the HARARE 00000105 002 OF 002 police commissioner that the Chief Justice belonged to ZANU-PF and that the judgment in the legal case was therefore political. He then threatened to bring an action for contempt against her personally for defying an order of the Chief Justice if police did not remove the war veterans within three days. They did. -------------- COMMENT -------------- ¶6. (C) Katsande's experiences demonstrate the difficulties of doing business in Zimbabwe. ZANU-PF's abuse of power echoes throughout the economy and the party's influence will certainly inhibit economic recovery. Investors not yet active in Zimbabwe generally understand this and accordingly choose to do business elsewhere. Foreign companies already here - like NestlC),Chevron, Implats, and others - will at most hedge their bets in existing operations but not make major new commitments until Mugabe and the likes of Kasukuwere have been forced from office. Consider, for example, the continuing malevolent influence of Reserve Bank Governor Gideon Gono. Even though the central bank no longer has the means to disrupt the economy as it did during Zimbabwe's hyperinflation, the very fact that Gono is still on the payroll frightens anyone who might consider a financial commitment that lasts more than a week. On Zimbabwe's current trajectory, Katsande will have more amusing anecdotes for us next year. END COMMENT. RAY