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R 051141Z MAY 08
FM AMEMBASSY HARARE
TO RUEHC/SECSTATE WASHDC 2865
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHUJA/AMEMBASSY ABUJA 1953
RUEHAR/AMEMBASSY ACCRA 1962
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RUEHDK/AMEMBASSY DAKAR 1718
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RHEHAAA/NSC WASHDC
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RUEHGV/USMISSION GENEVA 1223
RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK
RHEFDIA/DIA WASHDC

UNCLAS SECTION 01 OF 03 HARARE 000397 
 
SIPDIS 
 
AF/S FOR S.HILL 
ADDIS ABABA FOR USAU 
ADDIS ABABA FOR ACSS 
NSC FOR SENIOR AFRICA DIRECTOR B.PITTMAN 
TREASURY FOR D.PETERS 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 EAGR EFIN ZI
 
SUBJECT: Zim Notes 5/2/2008 
 
 
------------- 
¶1.  SUMMARY 
------------- 
 
Topics of the week: 
- Presidential Election Results Still Pending 
- MDC Reconciliation 
- Violence Continues 
- Winter School Term Begins 
- Ambassador Warns Perpetrators of Violence 
- SADC Tribunal Sets Date To Hear White Zimbabwean 
  Farmers' Case 
- HIFA 2008 Kicks Off 
- RBZ Governor Liberalizes Exchange Rate 
- Rate Of Inflation Reaches Half Million Percent 
- Tobacco Auctions Start 
- Gold Production Falls Further 
- Poor Start to Winter Wheat Season 
 
--------------------------------- 
¶2.  Price Movements-Exchange Rate 
and Selected Products 
--------------------------------- 
 
Parallel rate for cash ZW$120 million:US$1 
 
Bank transfer rate shot to: Z$220 million 
Interbank determination of "official" exchange rate re-introduced 
(under clarification) 
 
Sugar fell to Z$350 million/2kg vs. controlled price of 
Z$8million/2kg 
 
Cooking is steady at Z$350 million/750ml vs. controlled price of 
Z$9.3million/750ml 
 
Petrol and diesel rose to Z$160 million/liter vs. controlled price 
of Z$60,000/liter 
 
------------------------------ 
On the Political/Social Front 
------------------------------ 
 
¶3.  Presidential Election Results Still Pending...  Over four weeks 
after elections, the Zimbabwe Electoral Commission (ZEC) has begun 
verification of presidential election results.  The process is 
expected to take several days.  The Herald reported that Tsvangirai 
will be announced the winner with over 47 percent of the vote. 
After results are announced, the ZEC will presumably set a date for 
a runoff election within 21 days.  The MDC, claiming that Tsvangirai 
in fact won over 50 percent of the vote (obviating the requirement 
for a runoff), and noting that the current climate of violence would 
make an election difficult, if not impossible, has indicated it will 
not participate in a runoff. 
 
¶4.  MDC Reconciliation...  Despite media reports to the contrary, 
the two factions of the MDC have not reunited.  In a diplomatic 
briefing this week, Welshman Ncube, Mutambara faction secretary 
general, stated that his faction would back Tsvangirai if a runoff 
is held.  Further cooperation would be subject to negotiation. 
 
¶5.  Violence Continues...  ZANU-PF-directed violence continues 
unabated throughout Zimbabwe.  To date, approximately 15 people have 
been killed, over 120 persons admitted to hospitals, and over 500 
persons have received treatment.  There are increasing reports of 
the authorities preventing victims accessing treatment. 
 
¶6.  Winter School Term Begins...  In addition to pervasive 
 
HARARE 00000397  002 OF 003 
 
 
psychological and physical trauma inflicted on ordinary Zimbabweans, 
The Financial Gazette reported this week that a number of schools 
had failed to open due to intimidation and violence against 
teachers.  Many teachers served as ZEC supervisory officials in 
polling stations.  In addition, hyperinflation has rendered the 
March salary increases for teachers meaningless.  The Ministry of 
Education and many school heads have appealed to anyone with O level 
or A level passes to apply to be temporary teachers to relieve the 
shortage.  This year's O level examination results saw a sharp 
decline in the country's pass rates in all subjects. 
 
¶7.  Ambassador Warns Perpetrators of Violence...  Ambassador McGee 
told the press this week that senior army officers deployed in the 
10 provinces and whose names featured repeatedly on affidavits of 
victims of violence would be closely watched.  "We are looking and 
taking note of the people responsible for the violence.  Out of the 
500 cases that I have seen, only one has been attributed to the MDC 
as aggressor.  We have affidavits; we have the names of the 
perpetrators. We know the perpetrators and there will be justice at 
the end of the day."  Thursday's The Financial Gazette gave 
front-page coverage to the story. 
¶8.  SADC Tribunal Sets Date To Hear White Zimbabwean Farmers' 
Case...  The case before the Southern African Development Community 
(SADC) Tribunal in which white former commercial farmers are seeking 
to halt compulsory land acquisition in Zimbabwe is set to resume in 
Windhoek on May 28.  In late March the Tribunal granted the farmers 
interim relief against eviction, however it did not protect them 
from a new spate of post-election farm invasions. 
 
¶9.  HIFA 2008 Kicks Off...  The Harare International Festival of the 
Arts (HIFA) 2008, "The Art of Determination," kicked off this week 
before an audience of several thousand with a politically charged 
opening that attacked President Mugabe (and got away with it). 
Other performances range from popular music to opera and drama; 
several shows have political components.  Also of note was a reading 
by Zimbabwean author Peter Godwin who has been barred from entering 
the country for years.  His sister Georgina, also in exile for 
starting an independent radio station, returned as well to 
co-present some shows.  HIFA continues through Sunday with dozens of 
performances by artists from around the world. 
 
----------------------------------- 
On the Economic and Business Front 
---------------------------------- 
 
¶10.  RBZ Governor Liberalizes Exchange Rate...  In his 2008 
First-Quarter Monetary Policy Statement (MPS) on April 30, Reserve 
Bank of Zimbabwe (RBZ) Governor Gono partially liberalized the 
exchange rate by introducing a "willing buyer-willing seller" 
concept to be administered by authorized dealers, and depending on a 
priority list determined by the RBZ.  While not equivalent to 
adopting a fully-fledged floating system, it is likely to make 
exporting more profitable in Zimbabwe dollar terms.  In addition, 
Gono raised the RBZ's accommodation rates to control credit 
creation.  However, the quasi-fiscal activities of the central bank 
in the form of deeply subsidized BACOSSI and ASPEF funding for 
industry and agriculture, as well as the introduction of a Z$300 
trillion Strategic Products Price Controls Mitigation Fund, will 
continue to fuel money supply growth and, with it, inflation. 
Reflecting this, the stock market soared to new heights this week. 
 
¶11.  Rate Of Inflation Reaches Half Million Percent...  The April 
y-o-y inflation figures of a leading local supermarket chain ranged 
from 490,000-500,000% for food, 535,000% for clothing and textiles, 
and 610,000% for house wares. 
 
¶12.  Tobacco Auctions Start...  At mid-week, the tobacco auction 
floors finally opened after government awarded farmers a generous 
 
HARARE 00000397  003 OF 003 
 
 
support price for every US dollar earned.  Rodney Ambros, CEO of the 
Zimbabwe Tobacco Association, told us that the MPS was also a shot 
in the arm for the industry.  Banks were seeking to clarify details 
of the new exchange rate regime, but the industry expected a "viable 
package" of both support price and flexible exchange rate that would 
cushion against hyperinflation; they also welcomed the extension of 
deeply subsidized ASPEF funding into the next growing season.  The 
RBZ still has not settled its forex arrears to the growers but 
Ambros said farmers would deliver their crop on good faith and 
quickly, as most of them had commercial bank overdrafts to pay off, 
and the RBZ had never failed to eventually meet its payment 
obligations to tobacco growers.  Ambros estimated this year's crop 
at 70 million kg.  In 2007, the tobacco crop (63 million kg) made up 
17% of export shipments, according to the RBZ, down from 18% in 
¶2006. 
¶13.  Gold Production Falls Further...  The Herald reported figures 
from the Chamber of Mines this week that showed gold production at a 
record low level of 295.7 kg in March, down from 746.8 kg in the 
same month last year.  Publicly traded Falgold Zimbabwe issued a 
lackluster report for 15 months to December 31, 2007 reflecting 
shrinking production, spiraling inflation, power outages, frequent 
breakdowns, and an unviable exchange rate; the company is carrying 
out minimal exploration. The RBZ's failure to release US dollar 
revenue to gold producers is a major constraint on production. 
 
¶14.  Poor Start to Winter Wheat Season...  A shortage of inputs in 
all provinces is hindering preparation for the winter wheat crop, 
according to the FAO-supported Agriculture Coordination Working 
Group.  The Ministry of Agriculture has set a target of planting 
70,000 ha, but as of April 24, only 1,350 ha had been prepared and 
350 ha planted.  The recommended timeframe for wheat planting is 
mid-April to mid-May.  The Working Group reported seed availability 
at 7,900MT against a requirement of 7,000MT; 7,000MT of compound D 
fertilizer was available against a requirement of 35,000MT (20%) and 
about 3,000MT of top dressing was on hand against a requirement of 
28,000MT (11%). 
The Working Group also reported on the second round of a national 
crop and livestock assessment undertaken by the Ministry of 
Agriculture.  The summer crop harvest was drastically reduced by 
poor rainfall distribution.  Maize seed was available late, and 
there were critical shortages of fuel, fertilizers, chemicals and 
labor throughout the season.  Highlights: 
--The maize production was 49% of last season's production. 
--Small grains production was 78% of last season's production. 
--Maize and small grains production is enough to cover 28% of 
national requirements. 
--The national average maize yield was the lowest recorded since 
¶1980. 
--The highest yield was recorded among large-scale commercial 
farmers; average yield in the communal areas was less than 1/10th of 
the large-scale commercial farmers' yield. 
The Working Group concluded that unless the macro-level issues of 
poor timing, centrally-controlled markets, and an environment of 
limited resources are addressed and resolved, the same problems are 
likely to occur in the next growing season. 
 
MCGEE