Cablegate: Zim Notes 09-19-2008

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R 220732Z SEP 08
FM AMEMBASSY HARARE
TO RUEHC/SECSTATE WASHDC 3468
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHUJA/AMEMBASSY ABUJA 2082
RUEHAR/AMEMBASSY ACCRA 2310
RUEHDS/AMEMBASSY ADDIS ABABA 2429
RUEHRL/AMEMBASSY BERLIN 0944
RUEHBY/AMEMBASSY CANBERRA 1707
RUEHDK/AMEMBASSY DAKAR 2062
RUEHKM/AMEMBASSY KAMPALA 2483
RUEHNR/AMEMBASSY NAIROBI 4915
RHEHAAA/NSC WASHDC
RHMFISS/EUCOM POLAD VAIHINGEN GE
RUEHGV/USMISSION GENEVA 1578
RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK
RHEFDIA/DIA WASHDC
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 03 HARARE 000862

AF/S FOR G.GARLAND
ADDIS ABABA FOR USAU
ADDIS ABABA FOR ACSS
NSC FOR SENIOR AFRICA DIRECTOR B.PITTMAN
TREASURY FOR J.RALYEA AND T.RAND
STATE PASS TO USAID FOR L.DOBBINS AND E.LOKEN
COMMERCE FOR BECKY ERKUL

SIPDIS

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

SUBJECT: ZIM NOTES 09-19-2008

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1. SUMMARY
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Topics of the week:

- Mugabe and Tsvangirai sign deal
- Mugabe Retains Significant Power
- Tsvangirai Briefs Diplomats on Challenges
- MDC and ZANU-PF Reactions to the Deal Differ Sharply
- Students Arrested
- Labor Leaders' Case Referred to Supreme Court
- Zim Dollar Appreciates Following Signing Of Agreement
- Another Step Toward Dollarization
- SADC Tribunal Dismisses Black Zim Farmers Land Claim
- Gono Issues New Z$1,000 Note and Increases Withdrawal Limit
- Mostly Miserable Company Results Through June

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2. Price Movements-Exchange Rate and Selected Products
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Parallel rate for cash appreciated to Z$480:US$1

Bank transfer appreciated slightly to Z$45,000:US$1 against
inter-bank average of Z$97:US$1

Bread on the parallel market rose to Z$1,200

Sugar is steady at $1,000/2kg

Petrol and diesel rose to Z$1,000/liter

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On the Political/Social Front
-----------------------------

3. Mugabe and Tsvangirai sign deal... In a ceremony attended by
other African leaders, President Robert Mugabe and Prime Minister
Morgan Tsvangirai signed their power sharing agreement on September
15 in Harare. Tsvangirai gave a concise speech discussing
Zimbabwe's future and how to address the economic and social crises.
In contrast, Mugabe spoke for nearly an hour as he outlined the
(external) sources of Zimbabwe's ills. See Harare 833.

4. Mugabe Retains Significant Power... In the new power-sharing
deal, Mugabe retains many of his executive powers such as chairing
the National Security Council and the Cabinet, the ability to
appoint the two Vice Presidents, 15 of the 31 members of Cabinet,
and 8 senators. As Prime Minister, Morgan Tsvangirai's power
centers on his chairmanship of the Council of Ministers and
overseeing policy formulation. Arthur Mutambara is now a Deputy
Prime Minister. See Harare 842.

5. Tsvangirai Briefs Diplomats on Challenges... In a briefing to
the diplomatic corps on September 19, Tsvangirai described the
contentious negotiation process and stalled allocation of
ministries. With Mugabe scheduled to leave for the UNGA, little
progress is expected in the near term. Tsvangirai also raised the
prospect of having to go back to South Africa or SADC to get support
for an equitable share. See Harare 855.

6. MDC and ZANU-PF Reactions to the Deal Differ Sharply... There is
considerable optimism about the agreement among MDC supporters.
While cautious, they are hopeful the deal will lead to tangible
quality-of-life benefits. Zimbabwean and South African trade unions
were not as optimistic and have criticized the agreement, and
ZANU-PF insiders are engaged in a scramble to retain lucrative posts

HARARE 00000862 002 OF 003

and influence. Significant questions remain as to how the deal will
work and how the new government will function. See Harare 837, 840,
842, 843, and 854.

7. Students Arrested... 10 students at Bindura University were
arrested on September 16 while protesting university fee increases
(from $8000 to $30,000). The students were charged with criminal
nuisance, fined $2000 and released after spending one night in
jail.

8. Labor Leaders' Case Referred to Supreme Court... The freedom of
speech case involving Zimbabwe Congress of Trade Unions' Secretary
General Wellington Chibebe and President Lovemore Matombo will be
heard by the Supreme Court on December 5. The two were arrested and
accused of "communicating falsehoods" and "inciting the public to
rise against the government" after a speech on May 1. As a
condition of bail, granted on May 19, they were barred from
addressing any political gathering until the matter is finalized.

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On the Economic and Business Front
----------------------------------

9. Zim Dollar Appreciates Following Signing Of Agreement... The
Zimbabwe dollar appreciated somewhat on the foreign exchange market
with the bank transfer rate moving from about Z$50,000:US$1 a week
ago to Z$45,000:US$1 by September 18, 2008. Zimbabwe dollar cash
also appreciated from Z$550:US$1 to Z$480:US$1 over the same period.
The appreciation largely reflects market anticipation of
significant foreign currency inflows following the signing of the
power-sharing agreement. Given the current political stalemate and
donors' wait-and-see attitude, the appreciation is likely to be
short lived.

10. Another Step Toward Dollarization... The Reserve Bank of
Zimbabwe this week authorized exporters, with RBZ approval, to pay
salaries in foreign currency to employees with "critical skills."

11. SADC Tribunal Dismisses Black Zim Farmers Land Claim... The
SADC regional tribunal dismissed the complaint of over 300 black
Zimbabweans that, because of the Tribunal's interim restraining
order in the Campbell case contesting seizure of white-owned farms,
they could not move onto land allocated to them by the GOZ. The
ruling judge said the applicants had not exhausted their legal
options in Zimbabwe, and called the application frivolous and an
abuse of process.

12. Gono Issues New Z$1,000 Note and Increases Withdrawal Limit...
In view of skyrocketing inflation, the RBZ issued a new Z$1,000 note
(about US$2 at today's cash rate) and doubled the daily cash
withdrawal limit to Z$1,000. Indicating a worsening cash shortage,
banks are no longer getting their desired daily cash allocation from
the RBZ.

13. Mostly Miserable Company Results Through June...

- In interim results to June 30, 2008, Hwange Colliery Company
reported a 19% drop in total coal sales from 1,069,890 MT in H1 2007
to 862,393 MT.

- Furniture giant TEDCO announced in the same reporting period
turnover down 85% and a push into higher-margin markets in South
Africa close to the Zimbabwe border.

- Dairibord's exports in the same period were up 23% but raw milk
intake fell by 39%, indicating one reason why milk products
disappeared from Zimbabwe's shelves this year.

HARARE 00000862 003 OF 003

- National Foods reported milling volumes down 61% in the reporting
year; the volume of oil processed was down 86%; the stock feed plant
operated at 3.2% capacity; and of the company's fleet of 143
vehicles, 113 were out of service due to shortages of spares and
tires.

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Quote of the Week - On the same page?
-------------------------------------

President Robert Mugabe, addressing the ZANU-PF Central Committee on
September 17: "Anyhow here we are, still in a dominant position
which will enable us to gather more strength, as we move into the
future. We remain in the driving seat." The Herald, Thursday
September 18, Pg 2.

Prime Minister Morgan Tsvangirai referring to his relationship with
Mugabe in a radio interview on September 17: "I'm quite certain his
commitment to the agreement is unquestionable... at a personal
level, we don't have a strained relationship." The Herald, Thursday
September 18, Pg 2.

DHANANI

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