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RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSB #0163/01 0630459
ZNR UUUUU ZZH
R 030459Z MAR 08
FM AMEMBASSY HARARE
TO RUEHC/SECSTATE WASHDC 2534
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHUJA/AMEMBASSY ABUJA 1861
RUEHAR/AMEMBASSY ACCRA 1792
RUEHDS/AMEMBASSY ADDIS ABABA 1918
RUEHRL/AMEMBASSY BERLIN 0497
RUEHBY/AMEMBASSY CANBERRA 1195
RUEHDK/AMEMBASSY DAKAR 1552
RUEHKM/AMEMBASSY KAMPALA 1974
RUEHNR/AMEMBASSY NAIROBI 4405
RUEHGV/USMISSION GENEVA 1045
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHDC
RHEHAAA/NSC WASHDC
RHMFISS/EUCOM POLAD VAIHINGEN GE
RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK

UNCLAS SECTION 01 OF 04 HARARE 000163 
 
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 02-29-2008 
 
 
¶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. 
 
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Price Movements-Exchange Rate and Selected Products 
--------------------------------------------- ------ 
 
¶2. *Parallel rate for cash soared to ZW$20million:US$1; 
Bank transfer rate: Z$25million; 
Official rate: ZW$$30,000:US$1 
Sugar rose to Z$20million/2kg vs. controlled price of 
Z$8million/2kg 
Cooking oil rose to Z$22million/750ml vs. controlled price of 
Z$9.3million/750ml 
**Petrol and diesel more than doubled to Z$30million/liter vs. 
controlled price of Z$60,000/liter 
 
----------------------------- 
On the Political/Social Front 
----------------------------- 
 
 
¶3.  25,000 Attend MDC Rally...  MDC (Movement for Democratic Change) 
President Morgan Tsvangirai launched his presidential campaign on 
February 23 in the picturesque Eastern Highlands city of Mutare 
located in Manicaland province Q the ancestral home of both 
Tsvangirai and rival presidential hopeful Simba Makoni.  The 
 
SIPDIS 
Tsvangirai faction was pleased that local police allowed the crowd 
 
SIPDIS 
to move from the bus and train stations to the rally site without 
incident.  Tsvangirai addressed an enthusiastic crowd of 25,000 
blaming the governmentQs disastrous economic policies for destroying 
ZimbabweQs once booming economy and leaving millions of its citizens 
unemployed and hungry.  The former labor leader acknowledged the 
need for assistance from the international community to bring about 
an economic recovery, but also said Zimbabweans must count on 
themselves.  Upon hearing about the size and success of the rally, 
Mugabe reportedly said Qwhere is Makoni, I thought he was going to 
take some of TsvangiraiQs support. 
 
¶4.  With this weekQs release of its manifesto and policy papers, the 
MDC Tsvangirai faction is in full campaign mode.  During the week, 
Tsvangirai went on Qwalk-aboutsQ in the high density suburbs of 
 
SIPDIS 
Harare, talking with residents about his ideas for addressing the 
Qunprecedented levels of poverty, unemployment and hunger. 
Tsvangirai told us there are plans for more rallies in the cities 
 
SIPDIS 
and towns; they are also rolling out a Qnetworking campaign 
strategy for the rural areas. 
 
¶5.  Makoni Launches Rallies This Weekend...  Independent 
presidential hopeful Simba Makoni, the former Finance Minister who 
was recently expelled from ZANU-PF for challenging Mugabe for 
president, will officially launch his campaign this weekend at 
rallies in Bulawayo on March 1 and Harare the next day.  With a 
rising sun representing a new dawn in Zimbabwe as his formation 
symbol, Makoni has generated great interest around the country with 
his last minute entry into the race.  Anecdotal reports suggest 
large numbers of potential voters registered to vote immediately 
after his announcement, but skepticism still remains among voters 
about his motives and authenticity.  What also remains to be seen is 
whether disgruntled ZANU bigwigs come out in his support. 
 
¶6.  A Run-Off Presidential Election Could Be In the Cards... 
Zimbabwe is abuzz with the idea of a possible run-off in the 
upcoming presidential polls.  With Simba Makoni throwing his hat in 
the ring along with Mugabe and MDC opposition leader Morgan 
 
HARARE 00000163  002 OF 004 
 
 
Tsvangirai, there are now three viable candidates contesting for 
 
SIPDIS 
State House.  The Electoral Act states that the successful 
presidential candidate must receive a majority of the total number 
of valid votes cast Q i.e., at least 50 percent plus one vote.  If 
that does not occur, a run-off election must be held within 21 days 
between the top two candidates.  If the second election results in a 
tie, Parliament sits as an electoral college to decide between the 
two candidates by secret ballot and without debate.  In the 2002 
presidential election, Tsvangirai secured 42 percent of the votes, 
with the majority of these being in the urban areas, against 
MugabeQs 56 percent which was predominantly in the rural areas. 
With nearly 3 million votes cast in the 2002 contest which was 
blatantly stolen from Tsvangirai by rigging, the difference between 
Mugabe and Tsvangirai was only about 425,000 votes.  Many political 
analysts believe a run-off will only come into play if ZANU 
break-away Makoni is able to lure some of MugabeQs rural support. 
 
¶7.  Teachers Out On Strike, Again...  Following on the heels of the 
abduction and brutal attack on nine Progressive TeachersQ Union of 
Zimbabwe (PTUZ) members by ZANU-PF youths last week, Zimbabwe 
TeachersQ Association (ZIMTA) on February 28 called for teachers to 
go on a full-scale strike until a minimum monthly salary of ZW$3.5 
billion (US$140 at the parallel bank transfer rate) and other 
demands are met.  ZIMTA, representing 55,000 of the roughly 110,000 
teachers in the country, told us that teachers were angry with 
rumors that military and police received large bonuses ahead of 
elections while the government has failed to make good on teachers 
retention allowances, as agreed in January.  The strike comes at a 
volatile time as teachers - influential opinion makers in 
communities - sit at home disgruntled, and parents scramble to deal 
with idle children as elections approach.  Moreover, teachers 
normally serve as the bulk of poll workers during elections.  ZIMTA 
said the Zimbabwe Elections Commission (ZEC) had yet to contact the 
teachers to serve as poll workers, but if and when it does, the 
labor group would QunofficiallyQ encourage its members not to 
participate in light of the labor action.  Morgan Tsvangirai told us 
that ZEC faces a real problem if they choose to by-pass the 
disgruntled teachers or if teachers make themselves unavailable. 
One would then expect to see plain-clothed military and police 
serving as poll workers on Election Day Q which would be a violation 
of the amended Electoral Act. 
 
¶8.  USAID DAA Franklin Moore Visits Zimbabwe Programs... Starting 
his Washington posting by visiting field operations, USAID Deputy 
Assistant Administrator for Africa Franklin Moore spent three days 
in Zimbabwe meeting with civil society leadership, discussing 
strategy with the donor community, and monitoring programs.  A 
former resident of Zimbabwe, Moore expressed surprise at the drastic 
decline in the state of the infrastructure and of the economy. 
Joined by USAID's Director of the Office for Southern African 
Affairs Eric Loken, Moore discussed the political future with 
opposition party leader Morgan Tsvangirai and other heads of civil 
society organizations.  Moore attended a Prayer Breakfast with civil 
society leaders; toured a New Start HIV counseling and testing 
center and the office of the Counseling Services Unit; visited Joint 
Initiative project sites in Chitungwiza related to shelter, 
education, and livelihoods support; and met with a leading 
economist, banker, and business people representing the private 
sector and agrarian sector to learn more about the state of the 
economy.  In separate discussions, USAID partners raised linkage 
between humanitarian and development programs and potential ways to 
alter some relief strategies to help sustain the livelihoods of 
beneficiaries.  Moore and Loken are joining Ambassador McGee and 
USAID Mission Director Karen Freeman at the SADC region Heads of 
Mission Conference in Cape Town this week, where Zimbabwe is a 
featured topic of discussion. 
 
¶9.  QThe HeraldQ Publishes U.S. AmbassadorQs Op-ed On Voting 
Rights...  The GOZ-controlled QThe HeraldQ newspaper surprised us 
 
HARARE 00000163  003 OF 004 
 
 
and published, unabridged, on February 25 an opinion piece by 
Ambassador McGee urging Zimbabweans to exercise their voting rights 
in the forthcoming elections.  But it also ran a half page piece in 
the same issue titled, QU.S. interest in ZimQ elections baffling, 
noting that QArtists, be they musicians, painters, sculptors or 
writers, thrive on the skill of concealing messages in their 
artworks,Q  and stating that the opinion piece had an Qalarmist, 
vague and sometimes condemnatory manner.Q  In addition, it carried a 
full page diatribe the next day headlined "U.S. Enemy of Zim 
Democracy."  See full editorial at http://harare.usembassy.gov. 
 
-------------------------- 
Economic and Business News 
-------------------------- 
 
¶10.  *The Zimbabwe Dollar Continues To Swoon...  The local currency 
continued to depreciate sharply on the parallel market with the cash 
rate falling from Z$6million to Z$20 million:US$ in February while 
the bank transfer rate dropped from Z$7million to Z$25 million:US$. 
The Reserve Bank of Zimbabwe continues to drive the market as it 
struggles to raise foreign exchange by any means. 
 
¶11.  ZECO Listing Lifts Zimbabwe Stock Exchange...  ZECO Holdings, 
an engineering and construction company, listed on the ZSE at four 
times its initial public offer price.  ZECO Holdings was set up 
recently to consolidate the ownership of Delward and Crittal-Hope, 
both owned by Native Investments which, in turn, is owned by the 
former ZANU-PF chairman for Mashonaland West, Phillip Chiyangwa. 
Native Investments had an 82.58 percent stake before the listing and 
now controls 66.05 percent of the new company.  The performance 
followed a surprisingly successful IPO which was oversubscribed by 
1.5 times, brushing aside negative sentiments arising from worsening 
economic fundamentals and the companyQs link with Chiyangwa. 
 
¶12.  ZECO's performance has lifted the whole market, which, in 
addition, is being driven by surplus conditions on the money market 
as well as the run in the parallel exchange rate.  ZSE market 
capitalization is now $67.6 quadrillion (US$2.68 billion at the 
parallel bank transfer rate); industrials are up 171.2 percent this 
year.  Satisfied with his first IPO, Chiyangwa promised to come back 
to the stock market to take another of his companies - Pinnacle 
Property Holdings - public. 
 
¶13.  **Price Spikes As Fuel Supply Tightens...  Many Caltex service 
stations did not receive fuel deliveries this week, but fuel was 
available at Direct Fuel Import (DFI) service stations at 
US$1.25-US$1.30 per liter (roughly US$5/gallon).  The QZimbabwe 
IndependentQ reported today that fuel shortages are looming as 
government has started stocking diesel and petrol for the election 
campaign and the National Oil Company of Zimbabwe (NOCZIM) has been 
directed to hold on to the fuel they have imported on behalf of 
private companies. 
 
¶14.  Grim Results From Mining And Construction Sectors...  RioZim 
recorded a significant decline in minerals production and real 
earnings during the second half of 2007.  Production at the Renco 
gold mine, the Empress Nickel Refinery, and Murowa Diamonds fell 
sharply while coal from the Sengwa Colliery held steady.  Adverse 
factors included an unrealistically low gold support price, the 
continued failure by the Reserve Bank to pay the foreign currency 
component of gold deliveries (which consequently compromised 
RioZimQs ability to discharge its foreign liabilities), power 
outages and an inconsistent supply of oxygen, as well as an 
uncompetitive exchange rate.  Moreover, RioZim was not spared the 
problem of skills flight which is crippling production at most 
mining houses.  According to the Chamber of Mines, this factor is 
set to lead to a further decline in minerals production until 
working conditions and remuneration improve. 
 
 
HARARE 00000163  004 OF 004 
 
 
¶15.  At the manufacturing arm of Murray and Roberts Zimbabwe, one of 
ZimbabweQs leading construction and engineering companies, capacity 
utilization fell to 10-15 percent in the second half of 2007.  Price 
controls and water and power cuts played havoc with production, 
according to CEO Canada Malunga at an analyst briefing this week. 
Looking ahead, M and R is focusing on toll manufacturing.  On the 
construction side, analysts concur that the short to medium term 
outlook for the company is grim and only an economic recovery will 
revive operations.  Imara Asset Management noted that the scope for 
the repair of roads, water pipes and the sewer system alone presents 
vast opportunities that the company could exploit.  But these 
capital-intensive projects would most probably have to be funded 
from external sources and these sources will remain elusive until 
the political situation stabilizes. 
 
¶16.  Quote Of The Week From Murray and Roberts CEO Canada Malunga At 
AnalystsQ Briefing This Week: 
 
QEveryday we are recruiting to train new students from Harare 
Polytech, Bulawayo Polytech, UZ (University of Zimbabwe) and NUST 
(National University of Science and Technology) but also losing 
trained people each day.  In other words we have diversified into 
tertiary education... there are also employees who come for less 
than three months and leave for Botswana, just to have Murray and 
Roberts on their CVs. 
 
DHANANI