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UNCLAS SECTION 01 OF 05 HARARE 000078 
 
SIPDIS 
 
AF/S FOR S.HILL 
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 November 16, 2007 
 
 
¶1.  The Embassy Harare Political/Economic Section began producing 
Zim Notes in July, 2007 to present a perspective on current events 
in Zimbabwe.  Suggestions are always welcome. If you would like to 
receive Zim Notes by email, as well, please contact Frances Chisholm 
at chisholmfm@state.gov. Distribution is restricted to U.S. 
government employees. 
 
¶2.  Parallel rate for cash nearly doubled to ZW$6.3 million:US$1; 
the bank transfer rate fell to Z$6million vs. official exchange rate 
of: ZW$$30,000:US$1 
Sugar on the parallel market rose to Z$5 million/2kg vs. controlled 
price of Z$247,000/2kg 
Cooking oil rose to Z$9.5 million/750ml vs. controlled price of 
Z$440,000/750ml 
Petrol and diesel more than doubled to Z$10 million and Z$9 
million/liter respectively vs. Z$60,000/liter at controlled price 
 
----------------------------- 
On the Political/Social Front 
----------------------------- 
¶3. Police Respond with Violence to "Freedom March". . . Police used 
tear gas and violence to disrupt the MDC Tsvangirai factions' 
"Freedom March" in Harare on January 23.  On the morning of the 
event, at about 4:00 am, police dragged MDC leader Morgan Tsvangirai 
from his home and interrogated him at police headquarters for 
several hours about plans for the march.  The MDC reported 14 
marchers, including MDC national organizing secretary Elias Muduzi 
were arrested and released later that evening after paying a fine; 
more than 15 supporters were treated for injuries.  Several 
political observers noted that the government's harsh response to 
the march was indicative of Mugabe's true intentions in regard to 
the SADC talks and the chances for free and fair elections. 
 
The MDC had called for the march and rally to press the government 
for food and jobs, free and fair elections, and a new constitution. 
Police initially gave permission on January 18, but later rescinded 
the approval on January 21 based on unspecified "intelligence" that 
the opposition had other "sinister motives."  The MDC challenged the 
decision in court, and less than an hour before the planned start 
time on January 23, a magistrate ruled that the MDC could hold the 
rally, but upheld the denial to march citing public security 
concerns.  In defiance of the ban, about 200 opposition supporters 
set out from MDC headquarters in the city center for the rally 
location as hundreds more quickly joined in.  Police descended on 
the group within a few blocks with tear gas and batons.  There w ere 
running clashes between marchers and police over a six block area 
for about 30 minutes.  An estimated 1,000 supporters eventually 
gathered in a field near the rally location where they sang songs, 
danced, and listened to a speech from Tsvangirai.  A large 
contingent of riot police observed the event from a distance.  The 
group peacefully dispersed after about an hour.  See Harare 0067 for 
details. 
 
¶4.  Elections On Track For The End Of March. . .  President Mugabe 
is expected to set a date for nominations soon.  Elections must be 
scheduled between 21 and 45 days of that date; we assume they will 
take place on March 28 or March 29.  We understand that Simba 
Makoni, speculated about as a possible rival to Mugabe, has told 
Mugabe he will not oppose him.  SADC negotiations have apparently 
broken down after Mugabe rebuffed MDC demands that a new 
constitution be implemented before elections and that elections be 
postponed.  The MDC is considering whether or not to boycott 
elections, given what it sees as an unlevel playing field, but we 
expect they will decide to contest.  See Harare 70 and 71 for more 
details. 
 
¶5.  Parliament Adjourns As Election Countdown Begins. . . 
Parliament adjourned this week until April 8.  President Mugabe will 
now need to issue proclamations dissolving parliament, enacting the 
 
HARARE 00000078  002 OF 005 
 
 
final constituency and ward boundaries and setting dates for 
nominations and polling.  Before adjourning, both the House of 
Assembly and Senate passed the National Incomes and Prices Amendment 
Bill, which extends the life of the National Incomes and Prices 
Commission; the Bill now awaits presidential assent.  The 
parliamentary Legal Committee gave the Mines and Minerals Amendment 
Bill the green light, but it did not go through both houses before 
the adjournment.  The Bill includes provisions to pass majority 
ownership of mines to indigenous Zimbabweans.  If President Mugabe 
dissolves parliament for elections in March, the Bill will lapse and 
need to be re-introduced and gazetted under a newly elected 
parliament. 
 
¶6.  Supreme Court Rules On Land Seizure Case. . .  The Zimbabwe 
Supreme Court ruled this week against Michael Campbell, a white 
farmer who was contesting the seizure of his farm.  Campbell had 
also appealed to the SADC Tribunal in Windhoek which issued an 
interim order on December 13 enjoining the Zimbabwean government 
from interference with his land until a ruling (still pending) by 
the Tribunal on the merits of the case.  At the time of the Tribunal 
hearing, the Government of Zimbabwe pledged to abide by the 
Tribunal's ultimate decision.  Nevertheless, after the ruling by the 
Supreme Court, Didymus Mutasa, Minister of Lands, Land Reform, and 
Resettlement, said he would allow eviction of Campbell from his 
farm. 
 
¶7.  Ambassador Visits Bulawayo. . . On his first trip to Bulawayo 
(Zimbabwe's second largest city) from January 17-19, Ambassador 
McGee met city leaders and heard about the worsening crisis in 
delivery of essential services, especially clean water.  He also met 
with leading opposition political figures and civil society leaders 
to gauge attitudes toward upcoming elections. A media roundtable 
allowed him to articulate U.S. policy toward Zimbabwe and U.S. 
principles for reengagement.  In addition, he visited USAID 
humanitarian assistance projects and a Self-Help funded project for 
orphans and vulnerable children.  He attended a reception for alumni 
of the International Visitor and Fulbright Programs and a Public 
Affairs Section-sponsored concert at a local high school, in 
addition to meeting U.S. citizens living in the area. See Harare 
0045 on the political pulse in Bulawayo 
 
¶8.  Flooding Continues. . . The UN and the GOZ's Civil Protection 
Unit (CPU) report that 10,000 people have been affected by flooding 
since mid-December.  The CPU issued a flood alert for Muzarabani and 
Dande communal lands in Mashonaland Central province in the 
expectation of new flooding from the Zambezi River Valley caused by 
the backflow of water from the Cahora Bassa dam.  Flooding has 
destroyed crops, with losses in Muzarabani estimated at 3000 
hectares each for cotton, maize, and sorghum.  Water-borne diseases 
are spiking, but appear controllable.  In anticipation of further 
heavy rains and flooding, four stand-by rapid assessment teams have 
been formed, each comprised of technical experts from government 
local authorities, UN agencies and NGOs.  A regional flash appeal is 
being prepared for the floods.  See Harare 0041. 
 
¶9.  Bulawayo Gets Water But Can't Treat It . . . The good news is 
that heavy rainfall has filled Bulawayo's nearly dry reservoirs to 
almost 75 percent capacity.  The bad news is that the Bulawayo City 
Council has a critical shortage of chemicals with which to treat 
that water, with only two days' worth of aluminum sulphate 
remaining.  Stakeholders from government, local authorities, UN 
agencies, NGOs, and the private sector will meet next week to 
discuss the situation.  Before the UNICEF-coordinated humanitarian 
response can phase out, attention must focus on the provision of 
water treatment chemicals and information education campaigns 
regarding the safe use of untreated water at a household level. 
 
¶10.  USAID Begins DG Sector Assessment . . .  A team led by 
Professor Michael Bratton of Michigan State University began work on 
 
HARARE 00000078  003 OF 005 
 
 
a democracy and governance (DB) sector assessment in Harare this 
week.  The team, including a DG specialist from USAID Washington and 
political scientists from the University of Zimbabwe, will pursue 
three principal areas of inquiry:  1) analysis of the current 
political, economic and social issues that characterize the country, 
leading to the identification of key problems relating to the 
transition to democracy; 2) analysis of important political actors - 
their interests, resources, and actions-leading to identification of 
both allies and opponents of democratic reform; and 3) analysis of 
the institutional arenas that are important to further understanding 
the key democracy and governance problems and the relevant actors. 
Taken together, these analytical steps will permit the development 
of a democracy and governance strategy for the U.S. Mission to 
address the problems identified in step one by working with the 
actors and institutions identified in steps two and three. 
 
¶11.  Cross-Border Trading Essential For Survival. . .  About 96,300 
MT of maize, rice, and beans were traded across Zimbabwe's borders, 
a 10% increase in the April-November 2007 period compared to the 
same period last year, according to a report on Southern Africa's 
food trading patterns by the Famine Early Warning System Network. 
Maize accounted for 83% of this regional trade.  Zimbabwe continued 
importing maize this year (304,000MT) to offset poor domestic 
production, and 99% of imports came from Malawi.  There was very 
little informal bean trade to Zimbabwe, with no changes in the 
volume traded (6,733MT) in the whole region in this period compared 
to the same period last season.  However, data on informally traded 
rice indicate that Zimbabwe was the largest importer in the period 
April-November 2007, accounting for 35% of traded rice or 3,048 MT, 
of which 81% was imported from Zambia. 
 
--------------------------------------------- ---- 
On the Economic and Business front 
--------------------------------------------- ---- 
 
¶12.  New Twist to Cash Shortage. . .  Finance Minister Mumbengegwi 
and Reserve Bank Governor Gono ordered bank chief executives to 
clear up queues at banks within a week or face unspecified action 
from the authorities.  This followed the RBZ's assertion that it was 
stuck with stacks of cash that commercial banks were not collecting, 
resulting in the prevailing cash shortage.  According to the 
authorities, banks are diverting depositors' funds into speculative 
activities on the stock market and foreign currency parallel market. 
 Threatening to close some banks, Mumbengegwei stated that he would 
not devalue the Zimbabwe dollar until speculative activities stop 
and production increases.  However, he did not specify how this will 
be achieved with the value of the currency held constant at its 
present grossly overvalued official exchange rate. 
 
Governor Gono took the unprecedented step of conducting journalists, 
bankers and the business community on a tour of the vaults to show 
that cash was available.  However, what he failed to tell them was 
that, for banks to collect the cash from the RBZ, they need to cover 
the amount with security in the form of treasury bills.  Under the 
current circumstances in which deposits are drying up for lack of 
confidence in the banking system, the market has been characterized 
by huge daily shortages averaging around Z$120 trillion over the 
past two days.  Banks have had to borrow from the RBZ at very high 
rates to meet cash withdrawals by the public, putting some banks at 
risk of failure in the medium term.  See Harare 0044 for more on the 
cash shortage. 
 
¶13.  *The Zimbabwe Dollar Takes A Battering . . .  In the past week 
the Zim dollar depreciated by nearly 50% on the parallel cash 
market; the bank transfer rate also fell by about 20% but then 
bounced back to Z$6 million:US$1.  The depreciation early in the 
week on both markets reflected the upturn in demand for forex 
following the re-opening of businesses after the Christmas break 
(see Harare 0044).  However, Reserve Bank Governor Gono's statement 
 
HARARE 00000078  004 OF 005 
 
 
on January 23 that the RBZ had installed an electronic system to 
monitor currency movements in both local and offshore accounts also 
frightened people out of the transfer market, resulting in the 
appreciation of the transfer rate to well below the cash rate.  We 
learned from a senior RBZ official that the monitoring system is not 
new; it has been in operation in Zimbabwe for some time now to 
monitor large transfers. As this information filters into the 
market, we expect the transfer rate to depreciate to above the cash 
rate once again. 
 
¶14.  Regional Power Blackout Underlines Zimbabwe's Power Woes. . . 
Power blackouts across the region this week have underlined the 
precarious state of Zimbabwe's regional and domestic power supply. 
South Africa no longer exports power to Zimbabwe, according to the 
Zimbabwe Electric Supply Authority (ZESA); supply from the DRC is 
erratic; HCB in Mozambique is holding Zimbabwe on a tight leash, and 
Zimbabwe must meet its new power export obligation to Namibia. 
Domestically the Hwange thermal plant continues to struggle with 
coal supply and the national grid is increasingly subject to 
vandalism.  The short- and medium-term outlook for meeting 
Zimbabwe's power needs, even in the face of a sharply contracting 
economy, is gloomy.  See Harare 0073 for details. 
 
¶15.  Air Zimbabwe Raises Fares Again...  Hardly two months after 
more than doubling its fares, Air Zimbabwe raised them again by an 
average of 300% with effect from January 23.  A round trip economy 
class ticket to Beijing, for example, went from Z$1,145,400,000 
(about US$200 at the parallel market) to Z$4,515,400,000 (about 
US$750).  With domestic airfares 800 percent below cost, it had 
become cheaper to fly business class than travel by bus, according 
to Air Zimbabwe's CEO, with tax payers meeting the difference 
through subsidies.  As a result, the parastatal was operating at an 
unsustainable loss.  The new fares are still about 50% below those 
of other regional airlines.  We predict another increase just around 
the corner. 
 
¶16.  Hunyani Holdings Ltd Hurting. . . Symptomatic of the state of 
industry, paper and packaging giant Hunyani Holdings Ltd released a 
set of disappointing results for the year ended October 31, 2007. 
Its turnover (up 15,455%) failed to keep pace with the rate of 
inflation.  Analysts attributed the poor performance to Zimbabwe's 
fixed and overvalued foreign exchange rate, regulated prices, and 
hyperinflation.  Moreover, the deteriorating macroeconomic 
environment weakened domestic demand for corrugated products while a 
lower tobacco crop in Malawi added to the negative effect of the 
overvalued Zimbabwe dollar on exports.  The flexible division did 
not do well either, due to the shortage of foreign exchange for 
inputs and boiler problems at the mill which reduced timber 
throughout.  Output declined by 18% during the year under review and 
the company did not declare a dividend. 
 
¶17.  Ambassador Begins Outreach to Business Community...  Ambassador 
McGee challenged the business community to be more energetic in 
bringing about peaceful change in Zimbabwe in a speech to the 
American Business Association of Zimbabwe (ABAZ) on January 17.  See 
Harare 0047 for details. 
 
¶18.  Embassy Stretched Thin In Service Delivery...  The free-fall in 
Harare's public service delivery is severely taxing the embassy's 
ICASS budgets and staffing, which State Department workload data 
show to be the leanest in Africa despite Harare's unprecedented rate 
of peacetime collapse.  This week's prolonged power outage left 
Public Affairs' shared high-rise offices without water or 
electricity, requiring emergency set-up of temporary PAS offices on 
our cramped chancery compound.  All other embassy facilities have 
stand-alone generators, many of which run 24/7.  Most of the 
embassy's water is now supplied from wells on our properties, 
although many of the wells have gone dry as more Harare residents 
tap into the water table at an estimated rate of 100 new wells per 
 
HARARE 00000078  005 OF 005 
 
 
week.  Our fuel and water trucks are now in operation seven days a 
week, 12 hours a day.