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P 030834Z NOV 06
FM AMEMBASSY HARARE
TO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY PRIORITY
RUEHC/SECSTATE WASHDC PRIORITY 0765
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
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RUEHAR/AMEMBASSY ACCRA 1210
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RUEHBS/USEU BRUSSELS
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RHEHAAA/NSC WASHDC
RUCNDT/USMISSION USUN NEW YORK 1578
RUEKJCS/JOINT STAFF WASHDC
RUEHC/DEPT OF LABOR WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEFDIA/DIA WASHDC//DHO-7//
RUCPDOC/DEPT OF COMMERCE WASHDC
RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK//DOOC/ECMO/CC/DAO/DOB/DOI//
RUEPGBA/CDR USEUCOM INTEL VAIHINGEN GE//ECJ23-CH/ECJ5M//

UNCLAS SECTION 01 OF 04 HARARE 001317 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
AF/S FOR S.HILL 
NSC FOR SENIOR AFRICA DIRECTOR B. PITTMAN 
STATE PASS TO USAID FOR M. COPSON AND E.LOKEN 
TREASURY FOR J. RALYEA AND T. RAND 
COMMERCE FOR BECKY ERKUL 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ETRD PGOV ZI
SUBJECT: BFIF FUNDING CATALYZES PRIVATE SECTOR DISCUSSIONS 
ON TURNAROUND 
 
REF: HARARE 00057 
 
------------ 
Summary 
------------ 
 
¶1.  (SBU)  On October 5, the newly-energized American 
Business Association of Zimbabwe (ABAZ), generously supported 
by the Business Facilitation and Incentive Fund (BFIF), held 
a high-profile day-long economic forum under the theme "Just 
Business" to identify and deliberate over the key economic 
policy reforms needed to right Zimbabwe,s course.  The event 
also received major support from over a dozen private 
companies.  It was attended by more than 300 business people. 
 However, despite the efforts of forum organizers, only a few 
government officials were present.  The forum featured a 
series of keynote presentations by speakers from countries 
that have undergone political and economic recovery, as well 
as presentations by local private sector leaders and 
academics.  Looking ahead, ABAZ is planning to take key 
messages from the forum directly to government officials and 
parliamentarians in workshops chaired by member company 
executives.  End Summary 
 
------------------------------------------- 
BFIF Support Spurs Business Group to Action 
------------------------------------------- 
 
¶2.  (U)  On October 5, the American Business Association of 
Zimbabwe, supported generously by the State Department's 
Business Facilitation and Incentive Fund (BFIF) and fourteen 
leading companies including  PricewaterhouseCoopers and 
British Airways, held a high-profile day-long economic forum 
under the theme "Just Business" at Harare's premier 
convention facility, the Celebration Center.  The forum was 
designed to be the first step in initiating a national-level 
private-sector led discussion about the key economic policy 
reforms needed to right Zimbabwe's course.  The organizing 
committee drew together speakers from Brazil, South Africa 
and Malawi, as well as local private sector leaders and a 
prominent U.S. academic to engage in constructive discussion 
of the way forward for the Zimbabwean economy. 
 
¶3.  (U) Over 300 delegates, including several dozen CEOs, 
managing directors and finance directors of major Zimbabwean 
companies and financial institutions, attended the 
proceedings and a gala closing cocktail reception hosted by 
Stanbic Bank at the Ambassador,s residence.  However, 
although ABAZ organizers invited GOZ officials, only a few, 
including Reserve Bank of Zimbabwe (RBZ) Deputy Governor 
Nicolas Ncube, were in attendance.  Former Finance Minister 
Simba Makoni, who is a ZANU-PF Politburo member as well as a 
businessman and farmer, attended in his private capacity. 
 
--------------------------------------------- ----- 
An International Perspective from Keynote Speakers 
--------------------------------------------- ----- 
 
¶4.  (U)  Keynote speaker and best-selling South African 
author Chantell Ilbury opened the forum by showing delegates 
how to use scenario planning to assess "The Game" that 
 
HARARE 00001317  002 OF 004 
 
 
Zimbabwe was in.  She walked delegates through Zimbabwe,s 
strengths and advantages, the country,s "playing field," and 
the "Rules of the Game" that apply to all: rule of law, 
stability of government, respect for property rights, freedom 
of speech; and the "aspirational rules" for a winning game: 
maintaining a high standard of education, a strong work 
ethic, an economy made up of large and small enterprises, the 
ability of entrepreneurs to mobilize capital, social harmony, 
and the ambition to look outward and be a global player. 
Cautioning against "winner-take-all thinking," she stressed 
the need for compromise and "win-win" via second-choice 
strategies for all stakeholders, including government. 
 
¶5.  (U)  The forum's second keynote speaker, prize-winning 
Brazilian economist Dr. Caio Megale, reviewed Brazil's long 
and eventually successful battle with hyperinflation, and 
drew universal lessons, including the need for strong 
political will to enact tough reforms.  Dr. Megale described 
how Brazil,s anti-inflation technocrats had weathered the 
political storm surrounding reforms in what he called a 
political "bunker" created by Brazil's leaders.  Harare's 
Independent newspaper published an in-depth interview with 
Megale on October 12. 
 
¶6.  (U)  World Bank consultant and civil engineer Robert 
Geddes graphically described Zimbabwe's deteriorating 
infrastructure and stressed that the longer the economic 
decline, the longer it will take to rebuild Zimbabwe's 
infrastructure, once Africa's finest.  Geddes was joined on 
the podium by education expert Jameson Timba, who focused on 
how to revive Zimbabwe's excellence in education. 
 
--------------------------------------------- ------------ 
Property Rights and Resuscitating the Agricultural Sector 
--------------------------------------------- ------------ 
 
¶7.  (U)  A further highlight of the forum was visual evidence 
presented by Salem College Professor of Economics Craig 
Richardson on the cost of destroying property rights in the 
agricultural sector.  Using satellite photos of abutting 
commercial and communal properties, he demonstrated that 
those who owned their own land had greater incentives to 
maintain and enhance that land.  Richardson argued that all 
citizens should hold secure property rights to prevent land 
degradation and provide collateral for land improvements. 
Joining Richardson in the session, business consultant and 
former Eisenhower Fellow Kenias Mafukidze described the dire 
effects of a collapsed agricultural sector on Zimbabwe's 
manufacturing industry. 
 
--------------------------------------------- ------- 
Macroeconomic Stabilization, The Equity Market, Good 
Governance 
--------------------------------------------- ------- 
 
¶8.  (SBU)  Dr. Matthews Chikaonda, former Finance Minister 
and Reserve Bank Governor of Malawi and now CEO of Press 
Corporation, said Malawi had looked to Zimbabwe as a model 
for economic reform in the mid 1990s.  He explained how the 
government of his day had managed the political fallout of 
the economic austerity measures that eventually stabilized 
 
HARARE 00001317  003 OF 004 
 
 
the economy by exercising political will, political courage 
and by defending reserve bank independence.  With Makoni and 
Ncube sitting in the front row, he reminded the delegates 
that a country could not print its way out of an "economic 
mess" - it had to address the fundamental causes of the 
problem. 
 
¶9.  (U)  Turning to interest rate risk, Finhold's principal 
economist and former International Visitor Best Doroh 
emphasized the need for more predictable, credible and 
sustainable interest rate management, the phasing out of 
subsidized lending schemes, and the creation of a vibrant 
secondary market with a variety of money market instruments. 
Imara Asset Management CEO John Legat described the huge 
potential of the region,s equity markets, and the Zimbabwe 
Stock Exchange's (ZSE) role as an inflation hedge thanks to 
its large institutional investor base.  He noted that return 
on equity on the ZSE had been 127 percent in US dollar terms 
in the past year to September 2006.  The presentations ended 
with recommendations by Judge Thabani Jali and Anton Van Wyk 
of PriceWaterhouseCoopers South Africa for ensuring good 
public and corporate governance. 
 
¶10.  (U)  Closing the forum, Richardson reviewed the main 
economic challenges facing Zimbabwe.  He concluded that 
Zimbabwe was not terminally ill; each and every one of the 
"fixes" discussed during the forum could be implemented, and 
many could be introduced fairly quickly. 
 
---------- 
Next steps 
---------- 
 
¶11.  (SBU)  ABAZ has received extremely positive feedback 
from delegates, who are asking "what next?"  As a first step, 
ABAZ plans to circulate the proceedings widely to delegates 
and interested parties and seek press coverage of excerpts of 
the presentations.  In fact, they are preparing a packet of 
information on the conference, including the presentations 
for President Mugabe at the request of his office.  The 
packages will also include longer papers - thought pieces - 
that speakers were encouraged to provide along with their 
presentations. 
 
¶12.  (SBU)  In the medium-term, ABAZ has begun to synthesize 
key forum messages for direct presentation to government 
officials.  They plan to hold a series of workshops led by 
member company executives for parliamentary portfolio 
committees, various GOZ economic task forces, government 
officials, and other policy making or policy influencing 
bodies.  Longer-term, the ABAZ executive committee has 
expressed interest in institutionalizing the "Just Business" 
private sector economic forum as an annual business event in 
Zimbabwe that would serve to reinforce the private sector 
message to the GOZ on the need for reform. 
 
------- 
Comment 
------- 
 
¶13.  (SBU)  The forum was an important step forward for ABAZ, 
 
HARARE 00001317  004 OF 004 
 
 
which found its voice and established itself as a potential 
catalyst in convincing the Zimbabwean business community to 
bring pro-reform pressure to bear on the GOZ.  In that 
regard, it was disappointing but not unexpected that so few 
high-level GOZ officials attended the forum.  However, we 
believe ABAZ is on the right track in its plans to engage the 
government at the parliamentary and task force levels.  The 
presentations by prominent international speakers stimulated 
discussion in the business community and also drew press 
attention.  Although the forum did not present novel economic 
ideas, it began a process * to include follow-on workshops 
* that will put Zimbabwe-specific solutions on the table for 
the day when the "political will and the political courage to 
reform" - to borrow from Dr. Chikaonda,s prescription for 
turnaround - emerge. As such, it plays a useful role as an 
additional vehicle for talking - and planting ideas ) about 
the shape of the post-Mugabe future in Zimbabwe. 
DELL