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RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSB #0490/01 1581138
ZNR UUUUU ZZH
R 061138Z JUN 08
FM AMEMBASSY HARARE
TO RUEHC/SECSTATE WASHDC 2993
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHUJA/AMEMBASSY ABUJA 1987
RUEHAR/AMEMBASSY ACCRA 2030
RUEHDS/AMEMBASSY ADDIS ABABA 2151
RUEHRL/AMEMBASSY BERLIN 0693
RUEHBY/AMEMBASSY CANBERRA 1428
RUEHDK/AMEMBASSY DAKAR 1786
RUEHKM/AMEMBASSY KAMPALA 2207
RUEHNR/AMEMBASSY NAIROBI 4638
RHEHAAA/NSC WASHDC
RHMFISS/EUCOM POLAD VAIHINGEN GE
RUEHGV/USMISSION GENEVA 1293
RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK
RHEFDIA/DIA WASHDC
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 04 HARARE 000490 
 
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 
 
E.O.12958: N/A 
TAGS: PGOV PREL ASEC PHUM ECON EAGR EFIN EMIN ZI
SUBJECT: ZIM NOTES June 6, 2008 
 
 
--------------- 
¶1.  SUMMARY 
--------------- 
 
Topics of the week: 
 
- U.S. Diplomats, Staff, Detained and Harassed By Police 
- Gov Suspends Field Operations of All NGOs 
- United Opposition Unlikely 
- Public Unenthusiastic About GNU 
- Senior MDC Officials Released 
- Violence Spurs Internal Displacement 
- Youth Movements Consolidate Election Efforts 
- Labor Leader Elected To ILO Governing Board 
- Local Currency Plunges at Record Rate 
- Annual Inflation Breaching Two Million Percent 
- Chamber of Mines Reviews Industry Performance 
- Air Zim Paying Retention Bonus 
- Poor Outlook for Winter Wheat Crop 
- More Dismal Corporate Results 
 
--------------------------------------------- --------- 
¶2.  Price Movements-Exchange Rate and Selected products 
--------------------------------------------- --------- 
 
Parallel rate for cash diverged further at ZW$1.5 billion:US$1 from 
inter-bank average of Z$990 million:US$1 
 
Bank transfer rate jumped to Z$2 billion:US$1; official rate: 
ZW$$30,000: US$1 
 
Sugar soared to Z$1.4 billion/2kg vs. controlled price of Z$8 
million/2kg 
 
Cooking oil jumped to Z$2 billion/750ml vs. controlled price of 
Z$9.3 million/750ml 
 
Petrol and diesel rose to Z$1.3 billion/liter vs. controlled price 
of Z$60,000/liter 
 
----------------------------- 
On the Political/Social Front 
----------------------------- 
 
¶3.  U.S. Diplomats, Staff, Detained and Harassed By Police...  On 
June 5, five U.S. diplomats and two locally employed staff, 
accompanied at times by British diplomats, were detained and 
harassed by government security forces, officials, and their 
supporters, in violation of the Vienna Convention during a 
pre-election assessment trip in Mashonaland Central province. 
Despite having followed the usual diplomatic procedures of 
notification, two vehicles carrying Mission staff were detained for 
more than four hours by police.  Mission is closely monitoring the 
impact of this incident on the local community and is using public 
and private diplomatic tools to refute regime propaganda and condemn 
the governmentQs illegal actions. 
 
¶4.  Gov Suspends Field Operations Of All NGOs...  Following the 
suspension last week of CAREQs humanitarian food aid operations 
pending investigations of the NGOQs Qpolitical activitiesQ (see 
Harare 475), on June 4, Minister of Public Service, Labor and Social 
Welfare Nicholas Goche suspended all NGO field operations until 
further notice, claiming that a number of them were in breach of the 
terms and conditions of their registration. 
 
¶5.  United Opposition Unlikely...  In separate briefings, MDC 
presidential candidate Morgan Tsvangirai and former independent 
candidate Simba Makoni discussed violence, the June 27 runoff, and 
their perspectives on a government of national unity (GNU). 
 
HARARE 00000490  002 OF 004 
 
 
Significant differences in their views indicate that a united 
opposition will not be immediately achieved.  Both deplored ongoing 
violence, but Tsvangirai laid the blame fully at the feet of ZANU-PF 
while Makoni stated that both parties were to blame.  Both men 
called for a GNU to be convened as soon as possible, but v8Q8blic Unenthusiastic About GNU...  Approximately 100 
Zimbabweans crowded into a discussion sponsored by the Mass Public 
Opinion Institute on the prospects for a GNU on May 29.  Nearly 
everyone in attendance spoke out against the continuing and growing 
violence and questioned the motivation to discuss a GNU.  Several 
pointed out that Zimbabwe already had a failed GNU - the merger of 
rival liberation parties ZAPU and ZANU that formed ZANU-PF. 
Regardless, talk of a GNU continues in the local press with little 
publicized criticism of the idea. 
 
¶7.  Senior MDC Officials Released... The list of MDC officials 
fighting legal battles continues to grow.  Morgan Tsvangirai was 
detained on June 3 - allegedly on charges of "drawing a large 
crowd."  Notably, today's The Herald claims he was never arrested. 
MDC leader Arthur Mutambara was arrested on June 1 in connection 
with a scathing article he wrote in April criticizing MugabeQs 
government as Qimbecilic;Q he was released on bail two days later. 
Newly elected MDC MP Eric Matinenga was released from police custody 
on June 4 - having spent 5 days in jail - after the magistrate 
dismissed charges that he paid MDC youths to perpetrate violence 
against ZANU-PF supporters.  Another newly elected MDC MP, Iain Kay, 
was released on bail on June 4 after spending 8 days in jail. 
 
¶8.  Violence Spurs Internal Displacement...  Independent 
international organizations estimate that as many as 20-30 thousand 
Zimbabweans have been displaced due to electoral violence since the 
March 29 elections, with many more likely unreported.  Access to 
areas impacted by the violence remains severely limited by the 
ruling partyQs systematic campaign to control voting in rural areas. 
 See Harare 486. 
 
¶9.  Youth Movements Consolidate Election Efforts...  Seventeen 
Zimbabwean youth organizations are joining forces to launch a 
get-out-the-vote campaign ahead of the June 27 presidential runoff. 
In addition, they estimate that they have several thousand 
volunteers prepared to act as election observers or agents and that 
they will be able to reach even the most remote polling places. 
They are coordinating their efforts with the MDC to provide 
nationwide coverage by MDC-friendly observers and agents, in 
contrast to the uncoordinated efforts during the March 29 election 
which left some polling places with several observers and others 
with none.  See also Harare 487 on the Zimbabwe Election Support 
NetworkQs (ZESN) runoff plans. 
 
¶10.  Labor Leader Elected To ILO Governing Board...  The Zimbabwe 
Congress of Trade Unions (ZCTU) 1st Vice-President Lucia Matibenga 
was elected to serve as one of 56 members of the governing body of 
the International Labor Organization (ILO) at its ongoing annual 
conference in Geneva.  Meanwhile, Zimbabwe is set to answer charges 
of contravening ILO Conventions 87 and 98 which deal with freedom of 
association and collective bargaining rights.  Matibenga drew 
international attention when she was arrested and beaten by police 
after a peaceful labor rally in 2006. 
 
-------------------------- 
Economic and Business News 
--------------------------- 
 
¶11.  Local Currency Plunges at Record Rate...  The Zimbabwe dollar 
is trading at Z$1.5 billion:US1$ on the street today, having fallen 
 
HARARE 00000490  003 OF 004 
 
 
56% in value in the past week and 93% since partial liberalization 
of the foreign exchange market in early May.  While the divergence 
between the street and inter-bank rates narrowed immediately 
following the loosening of policy, it has since widened, with the 
latter exchange rate now about two thirds of the street rate.  The 
local currency is expected to continue to fall in value as long as 
inflationary expectations remain extremely high. 
 
¶12.  Annual Inflation Breaching Two Million Percent...  The swoon in 
value of the Zimbabwe dollar is propelling prices into the 
stratosphere.  A leading supermarket chain calculated the 
year-on-year rate of increase in the price of its food-heavy basket 
at about 1,350,000% in May and the monthly increase at about 470%. 
Another leading company that uses broader based and 
income-differentiated baskets put the year-on-year rate in May at 
between 1,880,000% and 2,680,000% and the month-on-month rate at 
334%. 
 
¶13.  Chamber of Mines Reviews Industry Performance...  At its AGM on 
May 30, Jack Murehwa, outgoing President of the Chamber of Mines 
said that the mining industry was the countryQs largest foreign 
currency generator; it contributed about 6% to ZimbabweQs GDP, up 
from 4.5% in the 1990s despite declining performance since 2000.  He 
applauded both the recent replacement of the gold support price with 
the international gold price, and the redemption of 35% of forex 
earnings at an exchange rate that is now SQmz4:@rk closely with government as 
the causes of the industryQs malaise. 
 
¶14.  Air Zim Paying Retention Bonus... A senior Air Zimbabwe 
aircraft engineer told us on the visa line that the troubled state 
airline had begun paying senior staff a retention bonus of 
US$1,000/month in addition to regular salaries/benefits. 
 
¶15.  Poor Outlook for Winter Wheat Crop...  The Financial Gazette 
reported today figures from the Agriculture Ministry that showed 
that less than half the area planted to winter wheat in 2007 had 
been planted this season.  A second consecutive poor crop will put 
immense pressure on the treasury to close the wheat deficit with 
costly imports. 
 
¶16.  More Dismal Corporate Results... 
 
- Mutare Board & Paper Mill reported poor results thanks to the 
collapse of local paper demand. The controlled price of newsprint, 
in particular, weighed down the companyQs 6-monthly results. 
 
- National Tyre Services Limited reported declining sales, 
increasing operating costs, and competition from informal and other 
small businesses that provide cheaper tires.  Nevertheless, analysts 
recommend the counter as an economic recovery play, as the company 
FQqgU.g@QQs debt-free, has a quality brand, and a country-wide service 
network. 
 
- PG Industries noted a 35% drop in volumes across the board in the 
past reporting year.  The Group manufactures and distributes glass, 
wood, boards, doors and related building materials and value-added 
products for the furniture, automotive and building industries.  It 
is shifting its focus to the export market for long-term survival. 
 
- OK Zimbabwe reported revenue down 46% over the past reporting 
year; the supermarket chain lost 50% of its stock at the onset of 
price controls one year ago this month. 
 
- Econet Wireless HoldingsQs turnover was down 35% in the past 
reporting year on the back of unviable tariffs and the soaring cost 
of energy, staff, and maintenance.  Econet has 60% of ZimbabweQs 
 
HARARE 00000490  004 OF 004 
 
 
mobile network market. 
 
MCGEE