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RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK
RHEFDIA/DIA WASHDC
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 03 HARARE 000554 
 
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 27, 2008 
 
--------------- 
¶1.  SUMMARY 
--------------- 
 
Topics of the week: 
 
- MDC Pulls Out of Election Run-Off 
- Tsvangirai Takes Refuge in Dutch Embassy 
- Fallout from Raid on Opposition IDPs 
- Biti and Matinenga Released from Jail 
- As Abductions, Beatings, and Unlawful DetenQQ s@f62Qx 
- Mining Sector Top Forex Earner 
 
--------------------------------------------- ---------- 
¶2.  Price Movements-Exchange Rate and Selected Products 
--------------------------------------------- ---------- 
 
Parallel rate for cash more than doubled again to Z$18 billion:US$1 
against inter-bank average of Z$10.6 billion:US$1 
 
Bank transfer rate doubled to Z$3.9 trillion:US$1; official rate: 
Z$$30,000: US$1 
 
Bread more than doubled on the parallel market to Z$8 billion vs. 
controlled price of Z$400 million 
 
Sugar trebled to Z$25 billion/2kg vs. controlled price of Z$8 
million/2kg 
 
Cooking oil doubled to Z$15 billion/750ml vs. controlled price of 
Z$9.3 million/750ml 
 
Petrol and diesel climbed to Z$17 billion/liter vs. controlled price 
of Z$60,000/liter 
 
----------------------------- 
On the Political/Social Front 
----------------------------- 
 
¶3.  MDC Pulls Out of Election Run-Off...  MDC president Morgan 
Tsvangirai announced on June 20 that he would not participate in the 
run-off election due to ongoing violence which made an election 
impossible.  Nevertheless, the GOZ decided to proceed with the June 
27 election. 
 
¶4.  Tsvangirai Takes Refuge in Dutch QmQp>cn}of the chancery.  See Harare 
¶548. 
 
¶5.  Fallout from Raid on Opposition IDPs...  MDC supporters and 
their families displaced by political violence remain homeless in 
Harare following the June 23 raid on opposition headquarters' 
Harvest House in which 30 people were seized by police and over 
2,000 fled.  Hundreds of IDPs have since sought refuge at NGO 
offices, churches, and the U.S. and South African embassies.  On 
June 25, an estimated 300 IDPs were allowed onto the South African 
Embassy grounds after armed riot police arrived outside the mission. 
 They were allowed to spend the night and remain on the site today. 
 
¶6.  Despite the ban on NGO operations, informal networks amongst 
civil society actors, UN organizations and diplomatic missions are 
attempting to provide aid to the many IDPs requesting shelter, food 
 
HARARE 00000554  002 OF 003 
 
 
and supplies.  However, formalized, systematic and coordinated 
assistance, including a lead UN agency and a centralized reception 
center, remains unavailable, severely impacting those who are still 
in danger of seizure by GOZ security forces.  International 
organizations appear to fear the repercussions of publicly assisting 
opposition aligned IDPs.  See Harare 533. 
 
¶7.  Biti and Matinenga Released from Jail...  The high court granted 
MDC Secretary General Tendai Biti bail on June 26 after his arrest 
on June 12 on four counts, including treason.  Tsvangirai had said 
on June 25 that Biti's release was a prerequisite to negotiations. 
MDC MP-elect Eric Matinenga was also released on bail on the same 
day.  WOZA's Jenni Williams and Magodonga Mahlangu, however, remain 
in Chikurubi women's prison pending their high court hearing on July 
¶3.  See Harare 512 and 532. 
 
¶8.  ...As Abductions, Beatings, and Unlawful Detentions Continue... 
Mayemureyi Munhuri, the MDC Senator-elect for Chimanimani, and her 
husband were abducted at gunpoint from their home on June 24.  She 
was one of 33 abducted in Manicaland province that day.  Abednico 
Bhebhe, MP-elect for Nkayi, and Robert Rabson, Senator-elect for 
Nkayi, have been detained without charges in Nkayi since June 18, as 
police ignore a court order demanding they be brought to court. 
Lawyer Ernest Jena, who represents MDC activists, was abducted from 
his office in Bindura by suspected ZANU- PF members on the morning 
of June 23; his whereabouts are unknown.  Magistrate Felix Mawadza 
was beaten up by youths in ZANU- PF garb as he walked out of a 
supermarket in Bindura on June 23.  His "crime" was to have granted 
bail to MDC supporters charged with politically motivated violence. 
A local NGO has released two reports documenting post-election 
violence: http://www.kubatana.net/html/archive/hr/ 
080519zpp.asp?sector=HR 
and 
http://www.kubatana.net/html/archive/hr/ 
080625zpp.asp?sector=HR 
 
¶9.  Criticism of Zimbabwe Grows... The SADC troika of Tanzania, 
Angola, and Swaziland met on June 25 and issued a communique 
criticizing the GOZ's plans to proceed with the June 27 election. 
At his 90th birthday party in London, Nelson Mandela condemned the 
"tragic failure of leadership" in Zimbabwe.  The British Foreign 
Office took the unusual step of revoking the knighthood Mugabe had 
received in 1994.  In another symbolically important move, Cricket 
South Africa, a long time defender of Zimbabwe, finally broke ties 
with the Zimbabwe Cricket Union on June 23.  The England and Wales 
Cricket Board also broke ties and canceled a tour by the Zimbabwean 
team set for next year. 
 
¶10.  Making Ends Meet (or not) as a Civil Servant...  A ministry 
director with a doctoral degree in his highly technical agricultural 
specialty and decades of work experience allowed us a peek at his 
June pay stub:  He took home Z$23 billioQ|7Q&\+|hicle for Z$700 
million, which was less than US$1 dollar at the time.  He survives 
on consultancy work in South Africa and Zambia but admitted that his 
greatest regret was not having emigrated years ago. 
 
-------------------------- 
Economic and Business News 
-------------------------- 
 
¶11.  Manufacturing Sector Totters On As Conditions Worsen... 
Zimbabwe's manufacturing sector is gasping to keep afloat in the 
face of foreign exchange shortages, hyperinflation and constant 
power outages.  Although exporting firms benefited from the partial 
liberalization of the foreign exchange market, complementary 
measures to sustain the reform effort have not followed.  Indeed, 
 
HARARE 00000554  003 OF 003 
 
 
firms have raised concerns over their inability to increase prices 
in line with rising costs; the National Incomes and Pricing 
Commission (NIPC) refuses to entertain any requests for price 
reviews.  In fact, it made several new entries this week to the list 
of price-controlled items.  A contact at the Confederation of 
Zimbabwe Industries told us that some firms, strategizing over their 
future, had taken a wait-and-see attitude, hoping for an improvement 
after the election.  The bottom line is how much longer firms are 
prepared to produce at a loss. 
 
¶12.  Stock Exchange Roars... The Zimbabwe Stock Exchange (ZSE) 
continues to defy the gloom that otherwise characterizes the 
economy, as investors hunt for bargains in the face of little or no 
other viable investment opportunities. The precipitous fall in the 
external value of the Zimbabwe dollar has also spurred the market. 
Moreover, money market rates yield ludicrously negative real 
returns, and the poor macroeconomic environment has made it 
virtually impossible to engage in capital investment.  The ZSE is 
the only place where returns have outpaced the rate of inflation. 
The benchmark industrial index has risen by 767,687 percent since 
the beginning of this year and by a whopping 36,396,356.9 percent on 
a y-o-y basis to June 25, 2008.  The mining index's y-o-y rate of 
growth is even higher at 77,919,460.8 percent.  These rates are well 
above estimates of around 4 million percent inflation for mid-June 
¶2008.  As long as macroeconomic fundamentals remain weak, activity 
on the ZSE will continue pushing the local bourse into uncharted 
territory. 
 
¶13.  Mining Sector Top Forex Earner...  Mining earned Zimbabwe US$1 
billion in 2007 and contributed about 6 percent to GDP; it is the 
source of more than 30 percent of all foreign currency inflow.  The 
six largest earners from 2001-2007 were, in descend)Mm>QOjSQS. 
 
¶14.  Zimplats Shuts Down...  After a gang of youth militia last week 
forced its way onto the mine grounds and compelled workers to march 
and chant ZANU-PF slogans, Zimbabwe Platinum Mines shut down its 
operations at Ngezi in the run-up to the election.  Its Selous 
metallurgical plant remains open.  A member of the Board of 
Directors told us that the company was reviewing its multi-million 
dollar expansion plan. 
 
MCGEE