Cablegate: Zimbabwe Industry Appeals for Relief

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS HARARE 000111

SIPDIS

SENSITIVE

STATE FOR AF/S AND AF/EX
NSC FOR SENIOR AFRICA DIRECTOR JFRAZER
USDOC FOR 2037 DIEMOND
PASS USTR ROSA WHITAKER
TREASURY FOR ED BARBER AND C WILKINSON
USAID FOR MARJORIE COPSON

E. O. 12958: N/A
TAGS: EFIN ECON ZI
SUBJECT: Zimbabwe Industry Appeals for Relief

Ref: 02 Harare 2821

Sensitive but unclassified.

1. (SBU) Summary: In rare unison, Zimbabwean
industrialists have urged the GOZ to abandon its
impractical economic policies. The situation is critical
enough that one firm is actually cautioning investors to
avoid its shares. It is unclear whether President Mugabe
will heed the industrialists' call. End Summary.

2. (SBU) The productive sector has urgently advocated
devaluation of the official exchange rate and relaxation
of government intervention in the economy. Meeting most
recently with Finance Minister Herbert Murerwa on January
14, 50 of Zimbabwe's most prominent businessmen stressed
that they are faced with only two options at this point -
- bankruptcy or the black market. They believe there is
no way for most businesses to survive while adhering to
2003 budget's draconian constraints (ref). The
Confederation of Zimbabwe Industries (CZI) and several
industry groups had already submitted a plan in writing
to the Finance Ministry and Reserve Bank calling for
market-friendly solutions but couched in the most non-
threatening tone.

Will He Listen?
---------------
3. (SBU) The question, of course, is whether these pleas
will resonate with President Mugabe. Opinions differ.
Barbican (a commercial bank) CEO Mthuli Ncube is
skeptical, noting that Mugabe and his inner circle still
believe they are at war with the United Kingdom and
cannot budge on ideological principles. Ncube considers
Murerwa a powerless Finance Minister. In contrast, PG
Industries (a glass manufacturer and exporter to the
U.S.) CEO Gerald Mujaji feels Mugabe may finally
appreciate industry's dire predicament. Mujaji believes
Mugabe may feel less threatened by a weakened opposition
Movement for Democratic Change (MDC) and compromise on
devaluation for certain sectors. The CEO also hopes
Mugabe will realize that many black-owned businesses are
at risk.

Comment
-------
4. (SBU) Many industrialists are unwilling to return to
pre-Christmas production levels, only to operate at
losses. Those that make a profit will do so by flaunting
the law, a line many businesses still do not want to
cross. How futile is their plight? Consider mining firm
Rio Tinto, which has been running ads in local papers
cautioning shareholders that "recent monetary policy
directives have rendered the company unviable." Until the
GOZ alters its policies, Rio Tinto's directorate
officially discourages "dealing in the company's shares."

Sullivan

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