Cablegate: Zim Notes 10-10-2008

VZCZCXRO4845
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSB #0918/01 2880623
ZNR UUUUU ZZH
R 140623Z OCT 08
FM AMEMBASSY HARARE
TO RUEHC/SECSTATE WASHDC 3557
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHUJA/AMEMBASSY ABUJA 2098
RUEHAR/AMEMBASSY ACCRA 2349
RUEHDS/AMEMBASSY ADDIS ABABA 2467
RUEHRL/AMEMBASSY BERLIN 0977
RUEHBY/AMEMBASSY CANBERRA 1745
RUEHDK/AMEMBASSY DAKAR 2100
RUEHKM/AMEMBASSY KAMPALA 2521
RUEHNR/AMEMBASSY NAIROBI 4953
RHEHAAA/NSC WASHDC
RHMFISS/EUCOM POLAD VAIHINGEN GE
RUEHGV/USMISSION GENEVA 1616
RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK
RHEFDIA/DIA WASHDC
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 03 HARARE 000918

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 BECKY ERKUL

SIPDIS

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

SUBJECT: ZIM NOTES 10-10-2008

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1. SUMMARY
-----------

Topics of the week:

- Tsvangirai Suspends Talks...
- Teachers Unions Call for Cancellation of Exams...
- Mock Hostage Situation on YouTube...
- Inflation Gallops--Even By Official Standards...
- Zimbabwe Dollar Depreciates Sharply Despite New Policies...
- Dire Payment Situation, a Further Blow to the Economy...
- Macroeconomic Instability Undermines Export Competitiveness...
- ZSE Scaling New Heights...

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2. Price Movements-Exchange Rate
and Selected products
---------------------------------

Parallel rate for cash nearly tripled to Z$12,000:US$1

Check rate (see note below) was Z$3,500,000:US$1 against inter-bank
average of Z$185:US$1

Bread on the parallel market more than doubled to Z$10,000

Sugar shot up to $15,000/2kg

Petrol and diesel climbed to Z$10,000/liter

Note: Due to the suspension of the Real-Time Gross Settlement system
by the Reserve Bank of Zimbabwe on October 3, Post will now be
reporting on the unofficial check transfer rate that individuals and
entities are using to make non-cash payments.

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

3. Tsvangirai Suspends Talks... Prime minister designate and MDC-T
president Morgan Tsvangirai suspended ministerial talks with ZANU-PF
on October 9, citing the need for the reengagement of mediator and
former South African president, Thabo Mbeki. Tsvangirai also called
for the involvement of SADC and the AU to reaffirm their commitment
as the deal's guarantors. Tsvangirai made clear that the MDC-T
intends to negotiate the division of ministries collectively, as he
disputed that only Finance and Home Affairs were still being
contested. A statement released yesterday by Tsvangirai charges
ZANU-PF with negotiating in bad faith and using hate speech,
political discrimination, and trumped-up charges to divide the
country. See Harare 915.

4. Teachers Unions Call for Cancellation of Exams... Both the
Progressive Teachers Union of Zimbabwe (PTUZ) and the Zimbabwe
Teachers' Association called for the cancellation of public
examinations this year because students are unprepared following a
two month teacher's strike, lack of materials, and disruptions
caused by elections-related violence. Cancelling the exams would
force several million children to repeat the school year. "For the
record, there was no meaningful learning and teaching in 2008 and
all examination classes are not prepared," Takavafira Zhou, leader
of the PTUZ, told journalists.

5. Mock Hostage Situation on YouTube... A new five minute video
simulating a hostage situation of prominent Zimbabwean officials wa
recently posted to YouTube. The morbidly humorus video ends with
the beheading of a cardboard ut-out of Gideon Gono after a litany

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of charges against him are raised. The "Survivor-style" show will
accept internet votes on who should be beheaded next from a cast
including Mugabe, Mbeki, Mutambara, Chihuri, and Chiwenga. Go to
http://www.youtube.com/
watch?v=K_aJzqOhtWY to view the video.

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

6. Inflation Gallops--Even By Official Standards... According to
The Herald of October 9, Zimbabwe's year-on-year rate of inflation
rose sharply from just over 11 million percent in June to 231
million percent in July 2008, with the month-on-month rate rising
from 839.3 percent to a massive 2,600 percent over the same period.
According to the Central Statistical Office, bread and cereals were
the main drivers of inflation in July as producers had to rely on
importing the ingredients.

7. Zimbabwe Dollar Depreciates Sharply Despite New Policies... The
local currency continued to depreciate massively on the parallel
market despite Gono's policies of suspending all bank transfers to
curtail parallel market activities. People quickly replaced bank
transfers with checks and, as of October 9, the unofficial Zimbabwe
dollar check rate had depreciated by over 99.9 percent from
Z$70:US$1 on August 1 to US$3,500,000:US$1 while the cash rate fell
by 99.9 percent from Z$15:1 to Z$12,000 :US$1 over the same period.

8. Dire Payment Situation, a Further Blow to the Economy...
Hyperinflation is rapidly eroding the value of the new Z$20,000 note
introduced recently to quell unrest over cash availability. The
suspension of inter-bank transfers on October 3, cash shortages, the
low purchasing power of cash, plus empty shelves that render debit
cards in local currency useless have all exacerbated the payment
situation. In light of the lag in clearing checks, vendors who
accept checks are likely to jack up their prices faster than ever.
For their part, banks anticipate that their outdated check clearing
systems will be unable to handle the expected volume of checks. See
Harare 914.

9. Macroeconomic Instability Undermines Export Competitiveness...
Our response to a USITC request details the deteriorating road, rail
transport, electric power generation and distribution, and
telecommunications networks in Zimbabwe. Despite these limitations,
firms regarded Zimbabwe's macroeconomic instability as the greatest
constraint on their export competitiveness. See Harare 898.

10. ZSE Scaling New Heights... Activity on the Zimbabwe Stock
Exchange continues to soar despite significant falls in most world
markets due to the current credit crunch. Although there was a lull
following the lopping off of 10 zeros on August 1, and the reduction
in the payment period from 7 to 3 days, the market has rebounded
since then. The recent suspension of bank transfers in preference
for checks has driven up prices to reflect the time required for
checks to clear. As a result, the benchmark industrial index rose
by a whopping 5,127,920 percent between August 1 and October 9,
while the mining index rose by 5,080,116 percent over the same
period.

-----------------
Quote of the Week
-----------------

11. Zimbabwe Independent columnist Chido Makunike in an article
published this week. "ZANU-PF is a revolutionary party. When it
wants to eat its own children, it will just accuse them of smelling
like goats."

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DHANANI

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