VZCZCXRO4955
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSB #0204/01 0741059
ZNR UUUUU ZZH
R 141059Z MAR 08
FM AMEMBASSY HARARE
TO RUEHC/SECSTATE WASHDC 2585
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHUJA/AMEMBASSY ABUJA 1871
RUEHAR/AMEMBASSY ACCRA 1812
RUEHDS/AMEMBASSY ADDIS ABABA 1936
RUEHRL/AMEMBASSY BERLIN 0515
RUEHBY/AMEMBASSY CANBERRA 1213
RUEHDK/AMEMBASSY DAKAR 1570
RUEHKM/AMEMBASSY KAMPALA 1992
RUEHNR/AMEMBASSY NAIROBI 4423
RHEHAAA/NSC WASHDC
RHMFISS/EUCOM POLAD VAIHINGEN GE
RUEHGV/USMISSION GENEVA 1063
RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK
RHEFDIA/DIA WASHDC

UNCLAS SECTION 01 OF 03 HARARE 000204 
 
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 
CIA WASHDC 
 
SIPDIS 
 
E.O.12958: N/A 
TAGS: PGOV PREL ASEC PHUM ECON ZI
 
SUBJECT: Zim Notes - March 14, 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. 
 
----------------------------------- 
Price Movements: 
Exchange Rate and Selected products 
----------------------------------- 
 
¶2.  Parallel rate for cash: ZW$30million:US$1; bank transfer rate: 
Z$40 million; official rate: ZW$$30,000:US$1 
 
Sugar soared to Z$40 million/2kg vs. controlled price of 
Z$8million/2kg 
 
Cooking oil climbed to Z$40million/750ml vs. controlled price of 
Z$9.3million/750ml 
 
Petrol and diesel inched up to Z$38million/liter vs. controlled 
price of Z$60,000/liter 
 
----------------------------- 
On the Political/Social Front 
----------------------------- 
 
¶3.  SADC Election Observers Arrive...The vanguard of what is 
expected to be a 120-member SADC observation mission arrived in 
Harare this week.  The head of the mission, Angolan Foreign Minister 
Joao de Miranda, in the face of Western concerns about Zimbabwe's 
capacity to hold a free and fair election, expressed optimism about 
the elections and said Western critics were wrong.  Western 
diplomats, invited to the SADC observer launch on March 11 at a 
local hotel, were less than impressed with the beginning of the 
mission.   On arriving for the launch, they were told de Miranda was 
not yet in Zimbabwe and were asked to return the following morning; 
de Miranda was a no show the next day, as well.  An NGO 
representative told us she had spoken to the mission about voter 
registration problems, the inadequate number of polling stations, 
and ongoing violence and intimidation.  She reported the observers 
appeared disinterested. 
 
¶4.  Election Pay Raise...President Robert Mugabe announced that on 
Monday he had signed a "new salary schedule of big salaries" for 
teachers, many of whom are on strike, and civil servants.  He did 
not specify the increases.  Mugabe is pulling out all the stops in 
advance of elections in an attempt to demonstrate ZANU-PF can 
deliver. 
 
¶5.  Mugabe Claims Solomon Mujuru's Support...The Herald's banner 
headline on Thursday was "Gen Solomon Mujuru Disowns Makoni."  In 
the accompanying article, Mugage said he had talked to Mujuru who 
had sworn his allegiance.   While we believe the conversation to be 
true (see Harare 197), there is reason to believe that Mujuru 
supports Makoni and is deceiving Mugabe.  See Harare 200. 
 
¶6.  ZESN Observers To Be Accredited...The Zimbabwe Electoral Support 
Network announced on March 13 that the Ministry of Justice had 
issued a letter of invitation for accreditation of its 11,800 
observers.  We understand there will be about 8,200 polling 
stations, so ZESN should be able to have at least one observer at 
each station. 
 
-------------------------- 
Economic and Business News 
-------------------------- 
 
HARARE 00000204  002 OF 003 
 
 
 
¶7.  Business Nervous About Indigenization Bill Despite Government's 
Softened Message...  The announcement that the Indigenization and 
Economic Empowerment Act had been signed by Mugabe and officially 
published last week sent shudders through the business community. 
Many observers thought the Bill had died a procedural death when it 
was not announced 21 working days after arriving at the President's 
desk on 15 November, but Mugabe appears to have held the Bill back 
as an election tool.  The responsible minister, Paul Mangwana, tried 
to calm fears at a press conference where he said the 51 percent of 
shares would be purchased by indigenous Zimbabweans without 
government interference.  He said the government would only set a 
timetable for the transfer of shares and would not get involved in 
setting prices or determining buyers.  Nonetheless, international 
businessmen said privately at a lunch hosted by the Ambassador that 
their companies would close their Zimbabwean branches rather than 
turn over management of their operations and brand. White Zimbabwean 
business people fear that the Bill could devastate their remaining 
assets that are held as companies.  The Bill still has to be enacted 
by statutory instrument. 
 
 
¶8.  Gold Support Price Reviewed Upward...  The Reserve Bank of 
Zimbabwe increased the gold support price from Z$100 million per 
gram to Z$700 million per gram effective March 1, 2008.  According 
to a public notice issued in The Herald of March 12, 2008, the 
upward review is designed to improve the operational viability of 
gold producers. The new price translates into an increase per ounce 
from US$71 to US$497, still a far cry from the world gold price of 
close to US$1,000/ounce.  With inflation around 300,000%, we expect 
the sevenfold increase to erode quickly in US dollar terms. 
 
¶9.  Two CEO's Arrested For Violating Price Controls...  The chief 
executive officer of Blue Ribbon Foods was arrested early this week 
on allegations of flouting the National Incomes and Pricing 
Commission Act by overcharging for flour. According to the 
allegations, Blue Ribbon Foods sold flour to another company at Z$2 
billion to Z$5 billion per ton when the controlled price for the 
commodity at the time was Z$600 million per ton.  The arrest came on 
the heels of the arrest last week of the chief executive officer of 
National Foods on charges of breaching the same Act.  The CEO of a 
third major food company told the Ambassador this week, "We're all 
guilty; it's just a question of who they want to come after."  The 
controlling interests behind the first two food companies are widely 
regarded to be in the Mujuru camp. 
 
¶10.  Two-Tier Pricing For Hotel Accommodation...  The National 
Incomes and Pricing Commission (NIPC) has come up with a two-tier 
pricing structure under which civil servants (but not parastatal 
employees), will pay just under half the rate paid by other guests 
for accommodation at Zimbabwe's hotels and lodges.  According to the 
chairman of the NIPC, the two-tier pricing structure was proposed by 
the industry.  Although the NIPC believes the new system will clear 
some of the confusion bedeviling the tourism industry, it is likely 
to encourage cheating as guests seek to secure favorable room 
rates. 
 
¶11.  Two More Sets Of Weak Corporate Results, And One Winner... 
Notwithstanding strong demand for the company's products, African 
Distillers Limited turned in subdued results to December 2007, due 
to shortages of bottles, other raw materials, and foreign exchange. 
Moreover, power outages, price controls, and coal and fuel shortages 
resulted in revenues rising by a paltry 58,175 percent in 2007. 
 
Border Timbers Limited recorded worse results, with turnover growth 
of only 28,800% for the six months to December 2007 largely due to 
operational problems arising from severe disruption of electricity 
supplies, fires that destroyed 540 hectares of forest, and labor 
 
HARARE 00000204  003 OF 003 
 
 
shortages.  Revenue growth was well below the rate of inflation. 
 
On the other hand, RBZ quasi-fiscal spending on agricultural 
implements and firm export sales drove Zimplow's earnings up a 
massive 368,784% in the six months to December 2007.  CEO Tony 
Rowland told analysts that total volumes were up 56%; local volume 
soared 75% while exports were 38% higher and accounted for 56% of 
total volumes but only 49% of turnover as a result of the misaligned 
exchange rate. 
 
MCGEE