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

091341Z Jan 02


                           UNCLASSIFIED     PTQ8457

PAGE 01        HARARE  00081  01 OF 06  091619Z 
ACTION AF-00    

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      INR-00   ITC-01   LAB-01   L-00     VCE-00   AC-01    NSAE-00  
      NSCE-00  OES-01   OMB-01   OPIC-01  PC-01    ACE-00   SP-00    
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      DRL-02   G-00     NFAT-00  SAS-00     /011W
                  ------------------5555CA  091637Z /38    
FM AMEMBASSY HARARE
TO SECSTATE WASHDC 0675
INFO SOUTHERN AFRICAN DEVELOPMENT COMMUNITY

UNCLAS SECTION 01 OF 06 HARARE 000081 
 
SIPDIS 
 
STATE PASS USTR FOR LESLIE YANG/G. BLUE 
STATE FOR AF/S, AF/EPS, EB/MTA/STA/M. ENIS 
 
E.O. 12958: N/A 
 
TAGS: ETRD ECON EFIN ZI
SUBJECT: ZIMBABWE 2002 NATIONAL TRADE ESTIMATE REPORT 
SUBMISSION 
 
REFS: A) STATE (01) 201265, B) STATE (01) 213042,C) 
 
STATE 02034 

 
¶1. BELOW FIND OUR SUBMISSION OF THE 2002 ZIMBABWE 
CHAPTER FOR THE NATIONAL TRADE ESTIMATE REPORT.  PER 
REF A INSTRUCTIONS WE HAVE MADE NO CHANGES TO THE 
TRADE DATA IN THE FIRST PARAGRAPH, LEAVING THE UPDATE 
TO USTR. 
 
¶2.  BEGIN TEXT OF ZIMBABWE NTE 2002 CHAPTER. 
 
TRADE SUMMARY 
 
IN 2000, THE U.S. TRADE DEFICIT WITH ZIMBABWE DECLINED 
TO $59 MILLION, A DECREASE OF $14 MILLION FROM THE 
1999 DEFICIT. U.S. MERCHANDISE EXPORTS TO ZIMBABWE IN 
2000 TOTALED $53 MILLION, A DECREASE OF $7 MILLION 
FROM 1999. ZIMBABWE WAS THE UNITED STATES' 134TH 
LARGEST EXPORT MARKET IN 2000. U.S. MERCHANDISE 
IMPORTS FROM ZIMBABWE WERE $112 MILLION, DOWN $20 
MILLION FROM 1999. 
 
THE STOCK OF U.S. FOREIGN DIRECT INVESTMENT IN 
ZIMBABWE WAS APPROXIMATELY $128 MILLION IN 2001, A 
FIGURE UNCHANGED FROM THE PREVIOUS YEAR. HOWEVER WE 
POINT OUT THAT ZIMBABWE'S RECENT, SERIOUS ECONOMIC 
PROBLEMS WOULD LIKELY MAKE THE MARKET VALUE MUCH 
LOWER, AND HARD CURRENCY SHORTAGES AND THE EXISTENCE 
OP BOTH OPPICIAL AND PARALLEL FOREIGN EXCHANGE MARKETS 
COULD CAUSE DIFFICULTY AND POSSIBLE FURTHER 
DEVALUATION OF ANY REPATRIATED INVESTMENT VALUES. 
 
IMPORT POLICIES 
                       UNCLASSIFIED 
 
PAGE 03        HARARE  00081  01 OF 06  091619Z 
 
ZIMBABWE'S ECONOMY, INCLUDING ITS TARIFF REGIME, BEGAN 
A TRANSITION IN 1991 FROM A HIGHLY CONTROLLED, 
MARXIST-MODELED, STATIST SYSTEM TO A MORE OPEN, 
MARKET-BASED ECONOMIC SYSTEM. DURING THE FIRST PHASE 
OF ITS STRUCTURAL ADJUSTMENT PROGRAM, WHICH ENDED IN 
1995, ZIMBABWE ABOLISHED QUANTITATIVE RESTRICTIONS IN 
FAVOR OF A TARIFF-BASED TRADING SYSTEM. IN EARLY 1996, 
ZIMBABWE UNDERTOOK A COMPREHENSIVE REVIEW AND 
RATIONALIZATION OF ITS TARIFF POLICIES AND RATES WITH 
SUBSTANTIAL WORLD BANK INPUT AND THE COOPERATION OF 
THE CONFEDERATION OF ZIMBABWE INDUSTRIES (CZI). A NEW 
TARIFF REGIME, EFFECTIVE MARCH 1, 1997, LOWERED DUTIES 
ON RAW MATERIALS AND OTHER INPUTS IN AN EFFORT TO 
REMOVE MOST CASES OF THE PREVIOUS ANOMALY WHERE THERE 
WERE HIGHER DUTIES ON RAW MATERIALS THAN ON FINISHED 
PRODUCTS. RAW MATERIALS NOW INCUR A DUTY RATE OF FIVE 
TO 15 PERCENT, THOUGH ADDITIONAL IMPORT SURCHARGES ARE 
VERY LIKELY TO BE APPLIED. 
 
PROBABLY THE MOST SIGNIFICANT CURRENT BARRIER TO NEW 
OR ONGOING TRADE OR IMPORTS TO ZIMBABWE IS THE VERY 
POOR BALANCE OF PAYMENTS SITUATION, AND THE RESULTANT 
SEVERE HARD CURRENCY SHORTAGE. THE CAUSES ARE MYRIAD: 
DECLINING GDP (IN REAL TERMS); HIGH INFLATION (THAT 
HAS RECENTLY EXCEEDED 100 PERCENT); AN OVERVALUED 
PEGGED CURRENCY; AN UNSUSTAINABLY HIGH GOVERNMENT 
BUDGET DEFICIT (ESTIMATED TO BE ABOUT 25 PERCENT OF 
GDP FOR 2000, AND 15 PERCENT FOR 2001); OVERALL POOR 
EXPORT AND DOMESTIC INVESTMENT PERFORMANCE THAT IS 
EXPECTED TO WORSEN; THREATS TO THE COUNTRY'S CORE 
                       UNCLASSIFIED 
 
PAGE 04        HARARE  00081  01 OF 06  091619Z 
COMMERCIAL FARMING SECTOR; CONTINUED AND SPREADING 
CORRUPTION; AND CONTINUED FUEL AND OTHER KEY INPUT 
SHORTAGES (CAUSED BY THE LACK OF FOREIGN CURRENCY). 
ECONOMIC CONDITIONS ARE EXPECTED TO DETERIORATE 
FURTHER BEFORE THEY IMPROVE, AND A TURNAROUND WOULD 
LIKELY NEED TO BE PROCEEDED BY A RESUMPTION OF 
POSITIVE WORKING RELATIONS WITH THE INTERNATIONAL 
DONOR AND MULTILATERAL LENDING COMMUNITY. 
TARIFFS AND DUTIES 
 
IN RESPONSE TO THE SIGNIFICANT DETERIORATION OF 
ZIMBABWE'S ECONOMY AND AS A PRECURSOR TO THE 
IMPOSITION OF A VALUE-ADDED-TAX (VAT) REGIME, WHICH 
HAS BEEN DELAYED FOR THE PAST 18 MONTHS AND THE TIMING 
OF WHICH IS STILL UNCERTAIN, THE GOVERNMENT OF 
ZIMBABWE HAS BEEN WORKING ON FINALIZING A NEW TARIFF 
AND IMPORT DUTY SCHEDULE.  IN ADDITION, IN MID-2001, A 
NEW REVENUE AUTHORITY OF ZIMBABWE WAS CREATED THAT 
FO 
LDED TOGETHER THE REVENUE-COLLECTING SECTIONS OF THE 
CUSTOMS BUREAU AND THE TAX BUREAU.  THE NEW AUTHORITY 
DID NOT BRING ON BOARD ALL THE OLD PERSONNEL, AND THE 
PRESENCE OF NEW AND INEXPERIENCED STAFF HAS RESULTED 
IN NEW PROBLEMS FOR IMPORTERS, THOUGH THESE SHOULD BE 
REDUCED WITH TIME. 
 
                       UNCLASSIFIED 
 
                           UNCLASSIFIED     PTQ8458 
 
PAGE 01        HARARE  00081  02 OF 06  091619Z 
ACTION AF-00 
 
INFO  LOG-00   AID-00   EVG-00   CEA-01   CIAE-00  COME-00  CTME-00 
      INL-00   DODE-00  ITCE-00  DOTE-00  SRPP-00  EB-00    EXME-00 
      E-00     FAAE-00  UTED-00  VC-00    FRB-00   H-01     TEDE-00 
      INR-00   ITC-01   LAB-01   L-00     VCE-00   AC-01    NSAE-00 
      NSCE-00  OES-01   OMB-01   OPIC-01  PC-01    ACE-00   SP-00 
      SSO-00   SS-00    STR-00   TEST-00  TRSE-00  USIE-00  FMP-00 
      EPAE-00  DRL-02   G-00     NFAT-00  SAS-00     /011W 
                  ------------------5555CE  091637Z /38 
R 091341Z JAN 02 
FM AMEMBASSY HARARE 
TO SECSTATE WASHDC 0676 
INFO SOUTHERN AFRICAN DEVELOPMENT COMMUNITY 
 
UNCLAS SECTION 02 OF 06 HARARE 000081 
 
SIPDIS 
 
STATE PASS USTR FOR LESLIE YANG/G. BLUE 
STATE FOR AF/S, AF/EPS, EB/MTA/STA/M. ENIS 
 
E.O. 12958: N/A 
 
TAGS: ETRD ECON EFIN ZI
 
SUBJECT: ZIMBABWE 2002 NATIONAL TRADE ESTIMATE REPORT 
SUBMISSION 
 
DUE TO THE SLIDE OF THE ZIMBABWE DOLLAR AGAINST 
                       UNCLASSIFIED 
 
PAGE 02        HARARE  00081  02 OF 06  091619Z 
FOREIGN CURRENCIES WHICH BEGAN IN AUGUST 1998, THE 
GOVERNMENT INCREASED IMPORT TARIFFS ACROSS THE BOARD 
IN SEPTEMBER 1998 FROM 20 TO 100 PERCENT.  IN MID-2001 
SOME OF THESE WERE ROLLED BACK, PRIMARILY AT THE 
URGING OF INDUSTRY, THOUGH THE EXISTENCE OF DIFFERENT 
AND SOMETIMES CONFLICTING TARIFF SCHEDULES CAUSES 
DISAGREEMENT. GENERALLY THE HIGHER DUTIES ARE APPLIED 
TO LUXURY ITEMS AND GOODS FOR WHICH DOMESTICALLY 
PRODUCED SUBSTITUTES EXIST. THE LIST OF TARGETED GOODS 
STILL INCLUDES FURNITURE, BICYCLES, MOTOR VEHICLES, 
ELECTRICAL AND ELECTRONIC GOODS, SHOES, CARPETS AND 
BUILDING MATERIALS. 
 
AT PRESENT, TARIFFS AND DUTIES AS PRESENTED IN THE 
CUSTOMS AND EXCISE AMENDMENT NOTICE NUMBER 12 OF 1998 
ARE STILL IN EFFECT, THOUGH SOME AMENDMENTS HAVE BEEN 
MADE AND FURTHER CHANGES HAVE BEEN PROMISED. 
REPRESENTATIVE EXAMPLES INCLUDE: 
 
     DUTY ON EDIBLE VEGETABLES INCREASED FROM 40 
TO 60 PERCENT TO 60 TO 80 PERCENT; 
     DUTY ON CEREAL FLOURS INCREASED FROM 30 TO 
60 PERCENT; 
     DUTY ON PREPARED CEREALS INCREASED FROM 40 
TO 80 PERCENT; 
     DUTIES ON FRUIT JUICES AND AERATED WATER 85 
AND 82.5 PERCENT RESPECTIVELY, WITH A Z$LO/LITER 
(ABOUT 18 U.S. CENTS AT CURRENT EXCHANGE RATES) 
AND 22.5 PERCENT EXCISE DUTY RESPECTIVELY; 
     DUTY ON IMPORTED WINES 95 PERCENT DUTY AND 
Z$2.50/LITER (ABOUT 4 U.S. CENTS AT CURRENT 
                       UNCLASSIFIED 
 
PAGE 03        HARARE  00081  02 OF 06  091619Z 
EXCHANGE RATES) EXCISE TAX; 
     DUTY ON CIGARETTES 100 PERCENT DUTY AND 80 
PERCENT EXCISE TAX; 
     DUTY ON PERFUME 80 PERCENT, UP FROM 40 
PERCENT; 
     DUTY ON FOOTWEAR INCREASED FROM 30 TO 65 
PERCENT; 
     CERAMIC PRODUCTS ARE CHARGED 80 PERCENT 
DUTY, UP FROM 40 PERCENT; 
     AIR CONDITIONING UNITS PREVIOUSLY AT ZERO 
NOW INCUR 40 TO 90 PERCENT DUTY AND A SURCHARGE OF 
Z$200/UNIT; 
     DUTY ON PASSENGER MOTOR VEHICLES (BUSES) 
SEATING 20 OR MORE PERSONS INCREASED FROM 25 TO 50 
PERCENT, WHILE ON VEHICLES SEATING 19 OR LESS 
(MINIBUSES) THE DUTY ROSE FROM 40 TO 80 PERCENT; 
     DUTY ON TOYS INCREASED FROM 30 TO 70 
PERCENT; 
     DUTY ON PLASTIC OR WOODEN FURNITURE 
INCREASED TO 80 PERCENT FROM 40 PERCENT. 
 
DUTIES ON WHAT ARE CONSIDERED LUXURY GOODS THAT CAN BE 
MANUFACTURED LOCALLY HAVE INCREASED ON AVERAGE BY 100 
PERCENT. A TARIFF COMMISSION HAS BEEN FORMED TO LOOK 
AT CASES WHERE LOCAL MANUFACTURERS HAVE BEEN 
DISADVANTAGED BY THE NEW TARIFF REGIME, THOUGH IT 
MEETS ONLY MONTHLY AND HAS A LARGE AND GROWING 
BACKLOG. 
 
EFFECTIVE ON OCTOBER 2, 1998, ALL TARIFFS ON IMPORTED 
GOODS HAVE ALSO BEEN CHARGED A 15 PERCENT IMPORT 
                       UNCLASSIFIED 
 
PAGE 04        HARARE  00081  02 OF 06  091619Z 
SURCHARGE, REGARDLESS OF CLASSIFICATION. A NARROW 
EXEMPTION FROM THE TAX EXISTS FOR CAPITAL GOODS, SUCH 
AS MANUFACTURING EQUIPMENT AND INTERMEDIATE GOODS THAT 
ARE SUBJECT TO FURTHER PROCESSING AND RE-EXPORT. 
 
PERIODIC INSTANCES OF CORRUPTION AND A LACK OF UNIFORM 
APPLICATION OF THE LAW BY CUSTOMS OFFICIALS CONTINUE 
TO CONCERN IMPORTERS AND USERS OF IMPORTED GOODS OR 
COMPONENTS. 
 
RELEVANT TAX AND DUTY CHANGES INCLUDED IN THE 2001 
BUDGET ANNOUNCEMENT INCLUDE: 
 
      REDUCTION OF SALES TAX ON COMMERCIAL 
VEHICLES FROM 25 TO 15 PERCENT; 
      THE CORPORATE TAX RATE IS REDUCED FROM 35 TO 
30 PERCENT PLUS HIV/AIDS LEVY OF THREE PERCENT, 
AND FROM 35 TO 25 PERCENT FOR MINING COMPANIES; 
      EFFECTIVE JANUARY 1, 2001, CAPITAL GOODS 
IMPORTED BY THE MINING SECTOR FOR A FIVE-YEAR 
EXPLORATION PHASE ARE EXEMPT FROM IMPORT AND SALES 
TAXES; 
      A 20 PERCENT AIRCRAFT LEASING EXCISE TAX WAS 
SCRAPPED, AND IMPORT DUTIES ON AIRCRAFT SPARE 
PARTS DROP TO ZERO (TO BENEFIT TOURISM); 
 
                       UNCLASSIFIED 
 
                           UNCLASSIFIED     PTQ8459 
 
PAGE 01        HARARE  00081  03 OF 06  091619Z 
ACTION AF-00 
 
INFO  LOG-00   NP-00    AID-00   CEA-01   CIAE-00  COME-00  CTME-00 
      DODE-00  ITCE-00  DOTE-00  SRPP-00  EB-00    EXME-00  E-00 
      FAAE-00  UTED-00  VC-00    FRB-00   H-01     TEDE-00  INR-00 
      ITC-01   LAB-01   L-00     VCE-00   AC-01    NSAE-00  NSCE-00 
      OES-01   OMB-01   OPIC-01  PC-01    ACE-00   SP-00    IRM-00 
      SSO-00   SS-00    STR-00   TEST-00  TRSE-00  USIE-00  FMP-00 
      EPAE-00  DRL-02   G-00     NFAT-00  SAS-00     /011W 
                  ------------------5555D4  091637Z /38 
R 091341Z JAN 02 
FM AMEMBASSY HARARE 
TO SECSTATE WASHDC 0677 
INFO SOUTHERN AFRICAN DEVELOPMENT COMMUNITY 
 
UNCLAS SECTION 03 OF 06 HARARE 000081 
 
SIPDIS 
 
STATE PASS USTR FOR LESLIE YANG/G. BLUE 
STATE FOR AF/S, AF/EPS, EB/MTA/STA/M. ENIS 
 
E.O. 12958: N/A 
 
TAGS: ETRD ECON EFIN ZI
 
SUBJECT: ZIMBABWE 2002 NATIONAL TRADE ESTIMATE REPORT 
SUBMISSION 
 
      DUTY ON IMPORTED BICYCLES DROPPED FROM 40 TO 
20 PERCENT; 
                       UNCLASSIFIED 
 
PAGE 02        HARARE  00081  03 OF 06  091619Z 
      EXCISE DUTY ON SOFT DRINKS REDUCED FROM 25 
TO 15 PERCENT, AND EXCISE DUT 
Y ON IMPORTED BEER 
REDUCED FROM 80 TO 60 PERCENT; 
      TO PROMOTE EXPORTS, COMPANIES GAIN 
TRANSFERABLE DUTY-FREE CERTIFICATES BASED ON 10 
PERCENT OF THE U.S. VALUE OF INCREMENTAL EXPORTS 
IN 2001 AND 2002, USING 1999 AS THE BASE YEAR. 
 
GOVERNMENT PROCUREMENT 
 
ZIMBABWEAN LAW PROVIDES FOR NON-DISCRIMINATORY 
GOVERNMENT PROCUREMENT PRACTICES, INCLUDING FULL 
TRANSPARENCY IN THE TENDER PROCESS. THE GOVERNMENT OF 
ZIMBABWE'S TENDER BOARD IS REQUIRED TO INVITE BIDS 
FROM BOTH LOCAL AND INTERNATIONAL ENTITIES FOR ANY 
PURCHASE IN EXCESS OF Z$800,000 
 
(APPROXIMATELY $14,500). NOTWITHSTANDING THIS POSITIVE 
LEGAL ENVIRONMENT, U.S. FIRMS AND VARIOUS NATIONAL 
GOVERNMENTS, INCLUDING THOSE OF THE UNITED STATES, 
JAPAN, GREAT BRITAIN, FRANCE, BELGIUM AND ITALY, HAVE 
VOICED STRONG COMPLAINTS ABOUT THE LACK OF 
TRANSPARENCY AND FAIRNESS IN GOVERNMENT TENDERS. 
MULTILATERAL INSTITUTIONS HAVE ALSO CRITICIZED THE 
GOVERNMENT TENDERING PROCESS AND CALLED FOR CHANGES. 
ZIMBABWE IS NOT A 
SIGNATORY TO THE WTO AGREEMENT ON GOVERNMENT 
PROCUREMENT. 
 
IN TWO PROMINENT TENDERS, THE CONTRACT AWARDS WERE 
                       UNCLASSIFIED 
 
PAGE 03        HARARE  00081  03 OF 06  091619Z 
BASED ON FACTORS OTHER THAN COST, RESULTING IN LOCAL 
SUPPLIERS BEING ACCEPTED OVER FOREIGN SUPPLIERS WITH 
SUBSTANTIALLY LOWER BIDS. DESPITE THE BOARD'S 
REQUIREMENT TO INVITE TENDERS FOR ANY PROJECT IN 
EXCESS OF THE Z$800,000 THRESHOLD, ZIMBABWE CONTINUES 
TO USE SOLE-SOURCING FOR A NUMBER OF MAJOR CONTRACTS, 
IN PARTICULAR PURCHASES BY THE MINISTRY OF DEFENSE AND 
CONTRACTS WITH THE RESERVE BANK OF ZIMBABWE TO PRINT 
PAPER MONEY AND MINT COINS. 
 
IN AN EFFORT TO ENCOURAGE INDIGENOUS BUSINESSES, 
ZIMBABWE MAINTAINS QUOTAS ON CERTAIN SERVICES AND 
WHICH ARE RESERVED FOR ZIMBABWEAN FIRMS. 
 
INTELLECTUAL PROPERTY RIGHTS PROTECTION 
 
SINCE INDEPENDENCE, ZIMBABWE HAS JOINED SEVERAL 
INTERNATIONAL PATENT AND TRADEMARK CONVENTIONS. IT IS 
A MEMBER OF THE WORLD INTELLECTUAL PROPERTY 
ORGANIZATION, AND IS A SIGNATORY TO THE PARIS 
CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY 
(STOCKHOLM TEXT), AND THE BERNE CONVENTION FOR THE 
PROTECTION OF LITERARY AND ARTISTIC WORKS (ROME TEXT). 
HOWEVER, SOME ENFORCEMENT PROBLEMS EXIST. AUDIO AND 
VIDEOCASSETTE PIRACY IS THE MOST WIDESPREAD 
INTELLECTUAL PROPERTY ISSUE IN ZIMBABWE, THOUGH THE 
VOLUMES INVOLVED ARE RELATIVELY SMALL. WHILE SOFTWARE 
BOOTLEGGING UNDOUBTEDLY OCCURS BY USERS, PIRATED 
SOFTWARE IS RARELY SOLD COMMERCIALLY. 
 
SERVICES BARRIERS 
                       UNCLASSIFIED 
 
PAGE 04        HARARE  00081  03 OF 06  091619Z 
 
ALTHOUGH THE BAN ON LOCAL FOREIGN CURRENCY-DENOMINATED 
BANK ACCOUNTS (KNOWN AS FCAS) WAS LIFTED IN OCTOBER 
1999 AT THE IMF'S URGING, ZIMBABWE'S SEVERE HARD 
CURRENCY SHORTAGE HAS CAUSED A VERY SUBSTANTIAL 
BUILDUP IN PUBLIC AND PRIVATE EXTERNAL ARREARS, 
ESTIMATED AT OVER US$1 BILLION AT YEAR-END 2001. THE 
LACK OF HARD CURRENCY HAS NEGATIVELY IMPACTED ALL 
SECTORS OF THE ECONOMY, WITH PARTICULAR EMPHASIS ON 
THE MANUFACTURING AND MINING SECTORS, THAT REQUIRE 
SUBSTANTIAL AMOUNTS OF IMPORTED COMPONENTS OR 
SUPPLIES. THE PROSPECT OF CONTINUED FOREIGN CURRENCY 
SHORTAGES AND A PEGGED EXCHANGE RATE RAISES THE 
POSSIBILITY THAT ADDITIONAL CONTROLS OR RESTRICTIONS 
MAY BE PLACED ON SUCH ACCOUNTS, MAKING OPERATIONS 
TOUGHER FOR INDUSTRY AND ALL IMPORTERS AND EXPORTERS. 
 
WORLD-CLASS PROFESSIONAL SERVICES (CONSULTANCY, 
ACCOUNTING, LEGAL AND OTHERS) ARE GENERALLY AVAILABLE 
WITHIN THE COUNTRY. HOWEVER, THE RECENT ECONOMIC 
DETERIORATION AND CONSEQUENT SLIDES IN DISPOSABLE 
INCOME AND STANDARDS OF LIVING, AND POLITICAL VIOTENCE 
AND INVASIONS OF PRIVATE PROPERTY HAVE CAUSED A MARKED 
INCREASE IN THE RATES OF EMIGRATION OF PROFESSIONALS 
AND THE TECHNICALLY QUALIFIED. THIS HAS CAUSED 
 
                       UNCLASSIFIED 
 
                           UNCLASSIFIED     PTQ8461 
 
PAGE 01        HARARE  00081  04 OF 06  091619Z 
ACTION AF-00 
 
INFO  LOG-00   NP-00    AID-00   CEA-01   CIAE-00  COME-00  CTME-00 
      INL-00   USNW-00  DODE-00  ITCE-00  DOTE-00  SRPP-00  EB-00 
      EXME-00  E-00     FAAE-00  UTED-00  VC-00    FRB-00   H-01 
      TEDE-00  INR-00   IO-00    ITC-01   LAB-01   L-00     VCE-00 
      AC-01    NSAE-00  NSCE-00  OES-01   OMB-01   OPIC-01  PC-01 
      ACE-00   SP-00    IRM-00   SSO-00   SS-00    STR-00   TEST-00 
      TRSE-00  USIE-00  FMP-00   EPAE-00  DRL-02   G-00     NFAT-00 
      SAS-00   SWCI-00    /011W 
                  ------------------5555DD  091638Z /38 
R 091341Z JAN 02 
FM AMEMBASSY HARARE 
TO SECSTATE WASHDC 0678 
INFO SOUTHERN AFRICAN DEVELOPMENT COMMUNITY 
 
UNCLAS SECTION 04 OF 06 HARARE 000081 
 
SIPDIS 
 
STATE PASS USTR FOR LESLIE YANG/G. BLUE 
STATE FOR AF/S, AF/EPS, EB/MTA/STA/M. ENIS 
 
E.O. 12958: N/A 
 
TAGS: ETRD ECON EFIN ZI
 
SUBJECT: ZIMBABWE 2002 NATIONAL TRADE ESTIMATE REPORT 
SUBMISSION 
 
RECRUITMENT PROBLEMS FOR EMPLOYERS. 
                       UNCLASSIFIED 
 
PAGE 02        HARARE  00081  04 OF 06  091619Z 
 
IN 1999, SOME SOFTWARE COMPANIES ENCOUNTERED 
DIFFICULTIES WITH THE IMPORTATION OF PROGRAMS 
CONTAINING EXTENSIVE GRAPHICS, AS ZIMBABWE CUSTOMS 
DEEMED THEM TO BE ENTERTAINMENT PROGRAMS (SUBJECT TO 
AN 80 PERCENT DUTY) AND NOT COMPUTER SOFTWARE (SUBJECT 
TO A 15 PERCENT DUTY). THERE ARE CURRENTLY NO TRADE 
RESTRICTIONS ON ELECTRONIC COMMERCE 
. 
 
INVESTMENT BARRIERS 
 
THE GOVERNMENT HAS LIFTED SOME OF ITS MOST ONEROUS 
RESTRICTIONS ON FOREIGN INVESTMENT. IT PERMITS PRE- 
INDEPENDENCE INVESTORS TO REMIT 100 PERCENT OF 
DECLARED DIVIDENDS AND NO LONGER IMPOSES RESTRICTIONS 
ON LOCAL BORROWING. IN SEPTEMBER 1995, THE RESERVE 
BANK OF ZIMBABWE (RBZ) BEGAN LIBERALIZING BLOCKED 
ACCOUNTS, ALLOWING REPATRIATION OF CERTAIN BLOCKED 
FUNDS (PROFITS AND DIVIDENDS ACCRUED ON PRE-1993 
INVESTMENTS, CORPORATE FUNDS IN GOVERNMENT OF ZIMBABWE 
EXTERNAL BONDS, AND ACCOUNTS WITH AUTHORIZED DEALERS). 
DUE TO ZIMBABWE'S ONGOING FINANCIAL CRISIS, THERE IS 
SERIOUS CONCERN THAT THE GOVERNMENT MAY RESORT TO A 
RE-IMPOSITION OF FOREIGN EXCHANGE RESTRICTIONS OR A 
FORMAL, FIXED RATE FOREIGN EXCHANGE REGIME, AND 
CURRENTLY 40 PERCENT OF ALL EXPORT PROCEEDS MUST BE 
GIVEN OVER TO THE CENTRAL BANK FOR EXCHANGE AT THE 
OFFICIAL RATE. 
 
IN ADDITION, IN LATE 2001 THE GOVERNMENT IMPOSED PRICE 
                       UNCLASSIFIED 
 
PAGE 03        HARARE  00081  04 OF 06  091619Z 
CONTROLS ON A WIDE RANGE OF STAPLES AND COMMODITIES. 
(THE LIST INCLUDES: MAIZE MEAL; SUGAR; COOKING OIL; 
FLOUR; BEEF AND POULTRY; SOAP; FERTILIZER; CEMENT; 
CROP SEEDS; AND PARAFFIN.)  THE CONTROLS, WHICH CAUSE 
PRODUCTION LOSSES FOR MOST MANUFACTURERS, HAVE 
RESULTED IN SHORTAGES OF THESE STAPLES AND 
DISINVESTMENT IN SOME SECTORS, SUCH AS POULTRY AND 
BEEF PRODUCTION. 
 
ZIMBABWE IS A SIGNATORY TO THE FOLLOWING 
INVESTOR/INVESTMENT PROTECTION TREATIES: THE 
MULTILATERAL INVESTMENT GRANTEE AGENCY (MIGA), THE 
INTERNATIONAL CONVENTION POR THE SETTLEMENT OF 
INVESTMENT DISPUTES; NEW YORK CONVENTION ON THE 
ENPORCEMENT OP FOREIGN ARBITRAL AWARDS; AND THE UNITED 
NATIONS CONVENTION ON INTERNATIONAL TRADE LAW. 
 
ROADBLOCKS TO FOREIGN INVESTMENT ARE PERVASIVE 
FOREIGN-OWNED BUSINESSES HAVE CITED INSTANCES OF 
CORRUPTION AS A SERIOUS AND TROUBLESOME PROBLEM, 
PARTICULARLY DURING STARTUP, EXPANSION OR TRANSFER OF 
ASSETS. BOTH NEW AND EXISTING INVESTORS HAVE 
ENCOUNTERED DELAYS AND A LACK OF TRANSPARENCY IN 
OBTAINING INVESTMENT TRANSFER APPROVAL FROM THE 
RESERVE BANK OF ZIMBABWE. THERE HAVE ALSO BEEN 
PROTRACTED DELAYS AND A LACK OF TRANSPARENCY ON THE 
PART OF GOVERNMENT IN APPROVING WORK PERMITS FOR 
EXPATRIATE REPRESENTATIVES OF OVERSEAS FIRMS. 
APPLICANTS HAVE DESCRIBED THE PROCESS AS DIFFICULT, 
TIME-CONSUMING, AND AT TIMES, ARBITRARY. IN ONE 
EXAMPLE, A SENIOR EXECUTIVE OF A MAJOR U.S. 
                       UNCLASSIFIED 
 
PAGE 04        HARARE  00081  04 OF 06  091619Z 
CORPORATION WAS DENIED RENEWAL OF HIS WORK PERMIT ON 
THE BASIS OF HIS AGE (63). THE U.S. HAS HAD SOME 
SUCCESS IN OBTAINING FAVORABLE REVIEWS IN SUCH CASES. 
 
INVESTMENT PROMOTION 
 
NEW FOREIGN INVESTMENT INTO ZIMBABWE, EXCLUDING EXPORT 
PROCESSING ZONE PROJECTS, HAVE TO BE APPROVED BY THE 
ZIMBABWE INVESTMENT CENTER (ZIC). IN ADDITION, BRANCH 
OPERATIONS REQUIRE APPROVAL FROM THE MINISTRY OF 
JUSTICE'S REGISTRAR OF COMPANIES, AND FOREIGN 
INVESTMENT IN EXISTING COMPANIES MAY REQUIRE RESERVE 
BANK APPROVAL. 
 
HARSH ECONOMIC CONDITIONS AND UNCERTAINTY HAVE CAUSED 
A 63 PERCENT SLIDE IN APPROVED INVESTMENT APPLICATIONS 
IN 1999 OVER THE PRIOR YEAR, FROM Z$60.3 BILLION TO 
Z$22.5 BILLION (ABOUT US$590 MILLION AT CURRENT 
RATES). ACTUAL INVESTMENT IN ANY GIVEN YEAR MAY BE 
CONSIDERABLY LESS THAN WHAT MAY BE INDICATED BY 
APPROVED INVESTMENT APPLICATIONS. 
 
EXPORT PROCESSING ZONES (EPZ) AND CERTAIN RELATED TAX 
CONCESSIONS COULD BOOST FOREIGN INVESTMENT, BUT A 
NUMBER OF FACTORS HAVE LIMITED THEIR SUCCESS. BENEFITS 
INCLUDE A FIVE-YEAR TAX HOLIDAY, DUTY-FREE IMPORTATION 
 
                       UNCLASSIFIED 
 
                           UNCLASSIFIED     PTQ8464 
 
PAGE 01        HARARE  00081  05 OF 06  091620Z 
ACTION AF-00 
 
INFO  LOG-00   AID-00   CEA-01   CIAE-00  COME-00  CTME-00  DODE-00 
      ITCE-00  DOTE-00  SRPP-00  EB-00    EXME-00  E-00     FAAE-00 
      UTED-00  VC-00    FRB-00   H-01     TEDE-00  INR-00   ITC-01 
      LAB-01   L-00     VCE-00   AC-01    NSAE-00  NSCE-00  OES-01 
      OMB-01   OPIC-01  PC-01    ACE-00   SP-00    IRM-00   SSO-00 
      SS-00    STR-00   TEST-00  TRSE-00  USIE-00  FMP-00   EPAE-00 
      DRL-02   G-00     NFAT-00  SAS-00     /011W 
                  ------------------5555F0  091638Z /38 
R 091341Z JAN 02 
FM AMEMBASSY HARARE 
TO SECSTATE WASHDC 0679 
INFO SOUTHERN AFRICAN DEVELOPMENT COMMUNITY 
 
UNCLAS SECTION 05 OF 06 HARARE 000081 
 
SIPDIS 
 
STATE PASS USTR FOR LESLIE YANG/G. BLUE 
STATE FOR AF/S, AF/EPS, EB/MTA/STA/M. ENIS 
 
E.O. 12958: N/A 
 
TAGS: ETRD ECON EFIN ZI
 
SUBJECT: ZIMBABWE 2002 NATIONAL TRADE ESTIMATE REPORT 
SUBMISSION 
 
OF RAW MATERIALS, NO TAX LIABILITY FROM CAPITAL GAINS 
ARISING FROM THE SALE OF PROPERTY FORMING PART OF THE 
                       UNCLASSIFIED 
 
PAGE 02        HARARE  00081  05 OF 06  091620Z 
INVESTMENT IN DESIGNATED PROCESSING ZONES, AND DUTY- 
FREE IMPORTATION OF CAPITAL EQUIPMENT FOR USE IN THE 
EPZ. A TRADE PERFORMANCE MANDATE REQUIRES ELIGIBLE 
COMPANIES TO EXPORT AT LEAST 80 PERCENT OF OUTPUT. THE 
EPZ AUTHORITY, OPERATIONAL SINCE EARLY 1996, HAS 
APPROVED APPLICATIONS FOR 105 COMPANIES TO OPERATE IN 
MORE THAN A DOZEN ZONES. JUST OVER HALF OF THESE 
PROJECTS ARE OPERATIONAL, WITH THE OTHERS SLOWED OR 
HALTED BY THE ECONOMIC DOWNTURN 
. THE NEW ENTITIES ARE 
ALSO ENCOUNTERING DIFFICULTIES IN CONNECTING TO 
TELECOMMUNICATIONS SERVICES, WATER AND ELECTRIC 
UTILITIES. PROBLEMS CONTINUE TO ARISE WITH THE 
DEPARTMENT OF CUSTOMS, WHICH FREQUENTLY CHARGES 
DESIGNATED COMPANIES DUTIES ON EXEMPTED INPUTS AND 
EQUIPMENT. 
 
FOR COMPANIES LISTED ON THE ZIMBABWE STOCK EXCHANGE 
(ZSE), UP TO 40 PERCENT OF OUTSTANDING SHARES MAY BE 
FOREIGN-HELD, WITH A 10 PERCENT CAP FOR ANY SINGLE 
FOREIGN HOLDER. SEVERAL COMMERCIAL AND MERCHANT BANKS 
AND BROKERAGE FIRMS OFFER COMPREHENSIVE ADVISORY 
SERVICES ON THE DOMESTIC AND REGIONAL MARKETS. WORK 
AND PERMANENT RESIDENCE PERMITS ARE AVAILABLE TO 
INVESTORS WHO BRING IN SPECIFIED AMOUNTS OF FOREIGN 
CAPITAL. WITHHOLDING TAXES APPLY TO ALL WAGES, 
SALARIES, INTEREST, DIVIDENDS AND CAPITAL GAINS 
ACCRUING IN ZIMBABWE. 
 
OTHER BARRIERS 
 
                       UNCLASSIFIED 
 
PAGE 03        HARARE  00081  05 OF 06  091620Z 
LAND REFORM 
 
ZIMBABWE IS CURRENTLY ENGAGED IN AN AGGRESSIVE, 
CHAOTIC LAND OCCUPATION AND RESETTLEMENT PROGRAM THAT 
HAS ECONOMIC CONSEQUENCES THAT HAVE NOT BEEN FULLY 
REALIZED. FOR EXAMPLE, FOR THE FIRST TIME SINCE THE 
1991/1992 DROUGHT THE COUNTRY IS PRESENTLY 
EXPERIENCING SHORTAGES OF THE STAPLE MAIZE, AT LEAST 
PARTLY DUE TO THE LAND INVASIONS, AND THE PROSPECTS 
FOR THE NEXT GROWING SEASON ARE DIRE FOR BOTH FOOD 
CROPS AND EXPORT CROPS.  WHILE THE REDISTRIBUTION OF 
LARGE COMMERCIAL FARMS TO THE LANDLESS AND SMALL-SCALE 
INDIGENOUS FARMERS HAS LONG BEEN A STATED GOAL OF THE 
ZIMBABWEAN GOVERNMENT, NO SUSTAINED IMPLEMENTATION HAD 
OCCURRED UNTIL THE GOVERNMENT'S LOSS OF A 
CONSTITUTIONAL REFERENDUM VOTE AND THE SUBSEQUENT 
CAMPAIGN FOR THE PARLIAMENTARY ELECTIONS IN THE FIRST 
HALF OF 2000. BECAUSE THE GOVERNMENT HAS PROCEEDED 
WITH ITS "FAST TRACK" LAND RESETTLEMENT PROGRAM 
WITHOUT BENEFIT OF A TRANSPARENT, COHERENT PLAN, AND 
IN DEFIANCE OF ORDERS BY THE SUPREME COURT INSTRUCTING 
COMPLIANCE WITH THE LAW, INTERNATIONAL AND DONOR 
ASSISTANCE FOR LAND REFORM IS NOW SUSPENDED FOR THE 
MOST PART. (PAYMENT ARREARS BY ZIMBABWE HAVE ALSO 
CAUSED SUSPENSION OF SOME DONOR PROGRAMS.) RECENT 
COURT DECISIONS BY AN EXPANDED AND RECONSTITUTED 
SUPREME COURT "LEGALIZING" THE LAND RESETTLEMENT 
PROCESS HAS NOT CONVINCED THE DONOR COMMUNITY THAT 
THEY SHOULD RE-ENGAGE ON THIS ACTIVITY. A COOPERATIVE 
PATH FORWARD AT THE TIME OF THIS REPORT IS DIFFICULT 
TO DISCERN, AS IS THE OUTCOME AND LONG-TERM IMPACTS OF 
                       UNCLASSIFIED 
 
PAGE 04        HARARE  00081  05 OF 06  091620Z 
THE CURRENT, POLITICALLY-DRIVEN PROGRAM. 
 
PRIVATIZATION 
 
THE DONOR COMMUNITY AND THE MULTILATERAL FINANCIAL 
INSTITUTIONS AGREE THAT ZIMBABWE'S RECORD ON 
PRIVATIZATION HAS BEEN POOR. SUSTAINED PRESSURE BY 
THESE OUTSIDE GROUPS HAS BROUGHT FEW RESULTS BECAUSE 
THE GOVERNMENT DID NOT HAVE A WELL-DEFINED 
PRIVATIZATION PROGRAM TO GOVERN THE PROCESS. THE IMF 
HAS MADE PROGRESS ON PRIVATIZATION A CONDITION FOR THE 
RENEWAL OF ITS RELATIONSHIP, BUT CONTINUED DELAYS ARE 
EXPECTED. 
 
AS PART OF THE ONGOING COMMERCIALIZATION/PRIVATIZATION 
PROGRAM, ALL PARASTATALS MUST NOW PAY TAXES AND 
DECLARE DIVIDENDS. RECENT GOVERNMENT BUDGETS HAVE ALL 
CONTAINED A PROVISION FOR THE RAISING OF SUBSTANTIAL 
FUNDS FROM GOVERNMENT ASSET SALES THROUGH 
PRIVATIZATION, BUT RESULTS HAVE CONSISTENTLY FALLEN 
FAR SHORT AND GIVEN CURRENT ECONOMIC CONDITIONS AND 
THE FINANCIAL STATE OF MOST OF THE PARASTATALS IT IS 
DIFFICULT TO SEE HOW THIS RECORD WILL BE TURNED 
AROUND. 
 
                       UNCLASSIFIED 
 
                           UNCLASSIFIED     PTQ8465 
 
PAGE 01        HARARE  00081  06 OF 06  091620Z 
ACTION AF-00 
 
INFO  LOG-00   AID-00   CEA-01   CIAE-00  COME-00  CTME-00  INL-00 
      DODE-00  ITCE-00  DOTE-00  SRPP-00  EB-00    EXME-00  E-00 
      FAAE-00  UTED-00  VC-00    FRB-00   H-01     TEDE-00  INR-00 
      ITC-01   LAB-01   L-00     VCE-00   AC-01    NSAE-00  NSCE-00 
      OES-01   OMB-01   OPIC-01  CAEX-01  PC-01    ACE-00   SP-00 
      SSO-00   SS-00    STR-00   TEST-00  TRSE-00  USIE-00  FMP-00 
      EPAE-00  DRL-02   G-00     NFAT-00  SAS-00     /012W 
                  ------------------5555FA  091638Z /38 
R 091341Z JAN 02 
FM AMEMBASSY HARARE 
TO SECSTATE WASHDC 0680 
INFO SOUTHERN AFRICAN DEVELOPMENT COMMUNITY 
 
UNCLAS SECTION 06 OF 06 HARARE 000081 
 
SIPDIS 
 
STATE PASS USTR FOR LESLIE YANG/G. BLUE 
STATE FOR AF/S, AF/EPS, EB/MTA/STA/M. ENIS 
 
E.O. 12958: N/A 
 
TAGS: ETRD ECON EFIN ZI
 
SUBJECT: ZIMBABWE 2002 NATIONAL TRADE ESTIMATE REPORT 
SUBMISSION 
 
A CENTRAL PROBLEM IN THE PRIVATIZATION EFFORT HAS BEEN 
THE ABSENCE OF A SINGLE ORGANIZATIONAL ENTITY WITH 
                       UNCLASSIFIED 
 
PAGE 02        HARARE  00081  06 OF 06  091620Z 
OVERALL RESPONSIBILITY FOR THE DESIGN AND 
IMPLEMENTATION OF THE PROGRAM, AND THE NEED TO BALANCE 
THIS WITH PARTICIPATION OF LOCAL INVESTORS LACKING 
CAPITAL. IN 2001 THE GOVERNMENT APPROVED AND SET UP AN 
INDEPENDENT UNIT, BASED IN THE PRESIDENT'S OFFICE, 
THAT IS CHARGED WITH IDENTIFYING PUBLIC ENTERPRISES TO 
BE PRIVATIZED AND EXPEDITING THE SALES PROCESS. 
PROGRESS SINCE SETUP HAS, HOWEVER, BEEN DISAPPOINTING. 
ZIMBABWE HAS PRIVATIZED SEVERAL OF ITS AGRICULTURAL 
MARKETING BOARDS. THE COTTON COMPANY OF ZIMBABWE 
(COTTCO), FORMERLY THE COTTON MARKET 
ING BOARD) AND 
DAIRIBOARD OF ZIMBABWE (FORMERLY THE DAIRY MARKETING 
BOARD) WERE PRIVATIZED IN 1997 THROUGH SHARE FLOATS ON 
THE HARARE STOCK EXCHANGE. THE ZIMBABWE GOVERNMENT 
RETAINED A 25 PERCENT INTEREST IN COTTCO AND A 40 
PERCENT INTEREST IN DAIRIBOARD. IN THE LAST QUARTER OF 
1999, THE RAINBOW TOURISM GROUP, A PARASTATAL INVOLVED 
IN TOURISM WAS PRIVATIZED WITH THE GOVERNMENT 
RETAINING A 30 PERCENT EQUITY SHARE. THE GROUP OWNS 
SEVERAL HOTELS, THE HARARE INTERNATIONAL CONFERENCE 
CENTER, AND A TRANSPORTATION COMPANY. 
 
A STATED GOAL OF PRIVATIZATION IN ZIMBABWE HAS BEEN TO 
INCREASE BLACK OWNERSHIP OF THE NATION'S COMMERCIAL 
ASSETS. THE NATIONAL INVESTMENT TRUST (NIT) WAS SET UP 
TO FACILITATE THE PARTICIPATION OF THE ECONOMICALLY 
DISADVANTAGED INDIGENOUS POPULATION IN THE 
PRIVATIZATION PROCESS, THOUGH FUNDS BUDGETED FOR THIS 
PURPOSE HAVE NEVER BEEN ADEQUATE. AS AN AD HOC 
SOLUTION, THE GOVERNMENT FORCED POSTAL WORKERS AND THE 
                       UNCLASSIFIED 
 
PAGE 03        HARARE  00081  06 OF 06  091620Z 
NATIONAL SOCIAL SECURITY FUND TO BUY AND HOLD SHARES 
ON ITS BEHALF. ON SEVERAL OCCASIONS, CRITICS HAVE 
ASSERTED THAT THE IMPLEMENTATION OF THE GOVERNMENT'S 
PRIVATIZATION/INDIGENIZATION POLICY HAS BEEN SLOW, 
UNEVEN, AND TENDS TO FAVOR GOVERNMENT FRIENDS AND 
RULING PARTY ALLIES AT THE EXPENSE OF INDEPENDENT 
BLACK ENTREPRENEURS. U.S. FIRMS ALSO HAVE COMPLAINED 
ABOUT OFFICIAL ATTEMPTS TO DICTATE THEIR CHOICE OF 
LOCAL PARTNERS (AS REQUIRED IN MANY RESERVED SECTORS) 
UNDER THE GUISE OF THE GOVERNMENT'S INDIGENIZATION 
POLICY. 
 
END TEXT OF NTE 2002 CHAPTER. 
 
¶3. DRAFTER'S CONTACT DETAILS: MARK PROKOP, 
ECON/COMMERCIAL CHIEF 
TEL: (263-4) 250-594 OR 5, EXT. 206, EMAIL: 
PROKOPMS@STATE.GOV 
 
SULLIVAN 
 
                       UNCLASSIFIED 
 
>