VZCZCXRO1622
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSB #0601/01 1900824
ZNR UUUUU ZZH
R 080824Z JUL 08
FM AMEMBASSY HARARE
TO RUEHC/SECSTATE WASHDC 3155
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHUJA/AMEMBASSY ABUJA 2007
RUEHAR/AMEMBASSY ACCRA 2128
RUEHDS/AMEMBASSY ADDIS ABABA 2248
RUEHRL/AMEMBASSY BERLIN 0786
RUEHBY/AMEMBASSY CANBERRA 1525
RUEHDK/AMEMBASSY DAKAR 1883
RUEHKM/AMEMBASSY KAMPALA 2304
RUEHNR/AMEMBASSY NAIROBI 4735
RHEHAAA/NSC WASHDC
RHMFISS/EUCOM POLAD VAIHINGEN GE
RUEHGV/USMISSION GENEVA 1394
RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK
RHEFDIA/DIA WASHDC
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 03 HARARE 000601 
 
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 7-3-2008 
 
----------- 
¶1.  SUMMARY 
----------- 
Topics of the week: 
 
- Mugabe won... 
- State of Negotiations... 
- African Media Experts Slam Media Environment... 
- Lead Complainants in SADC Tribunal Farm Case Abducted, Beaten... 
- USAP Students Earn Over US$5 Million in Scholarships... 
- Inflation Soars... 
- Supply of Bank Note Paper Halted... 
- Expanding Asset Bubble... 
- Bread-A Luxury... 
- People's Shops-No Panacea for the Multifarious Poor... 
- Newspaper Price Decontrolled... 
- IMF Advice to Zimbabwe... 
- Erratum... 
 
--------------------------------- 
¶2.  Price Movements-Exchange Rate 
and Selected products 
--------------------------------- 
 
Parallel rate for cash climbed to Z$26 billion:US$1 against 
inter-bank average of Z$14.3 billion:US$1 
 
Bank transfer rate is Z$70 billion:US$1; official rate: 
Z$$30,000:US$1 
 
Bread on the parallel market more than doubled to Z$20 billion vs. 
controlled price of Z$400 million 
 
Sugar doubled to Z$50 billion/2kg vs. controlled price of Z$8 
million/2kg 
 
Cooking oil trebled to Z$50 billion/750ml vs. controlled price of 
Z$9.3 million/750ml 
 
Petrol and diesel doubled to Z$35 billion/liter vs. controlled price 
of Z$60,000/liter 
 
----------------------------- 
On the Political/Social Front 
----------------------------- 
 
¶3.  Mugabe won...  Reacting to Zimbabwean president Robert Mugabe's 
claimed victory in the June 27 runoff election both the Pan African 
Parliament (PAP) observer group and the SADC observer group issued 
statements that the pre-electoral environment precluded free and 
fair elections (PAP) and that the election did not reflect the will 
of the Zimbabwean people (SADC).  The African Union (AU) group said 
that the election did not meet AU standards.  See Harare 573. 
 
¶4.  State of Negotiations...  See Harare 582, 583 and 585 for the 
two MDC factions' take on negotiations with ZANU-PF. 
 
¶5.  African Media Experts Slam Media Environment...  African media 
experts found freedom of expression severely constrained in Zimbabwe 
during their June 8-13 visit here.  The experts, drawn from renowned 
freedom of expression groups from across Sub-Saharan Africa, noted 
that the media operated under tremendous pressure and harassment 
from the state and security agents, as well as from youth militia, 
ZANU PF supporters, and war veterans.  They confirmed state-owned 
media bias and the wide use of hate language.  They also noted that 
many journalists exercised self-censorship, depriving the public of 
crucial voter information.  Full report at 
www.zimonline.co.za/Article.aspx?ArticleId=33 88 
 
HARARE 00000601  002 OF 003 
 
 
 
¶6.  Lead Complainants in SADC Tribunal Farm Case Abducted, Beaten... 
 On June 27, thugs abducted and beat Mike Campbell, his spouse, and 
son-in-law, until 66-year old Mrs. Campbell agreed that the family 
would withdraw its land case from the SADC Tribunal.  The Campbells 
and several dozen other white commercial farmers are seeking to halt 
compulsory land acquisition in Zimbabwe.  Responding to the 
brutality, which was widely reported in the international press, 
Police chief spokesperson Wayne Bvudzijena said the perpetrators 
were "not political," but rather common criminals taking advantage 
of the presidential run-off. 
 
¶7.  USAP Students Earn Over US$5 Million in Scholarships... 
Nineteen highly talented, economically-disadvantaged local students 
in the Embassy's United States Student Achievers Program 
(www.usapglobal.org) have earned over US$5 million in financial aid 
offers to attend top colleges in the US on full scholarship, 
including Amherst, Brown, Connecticut College, Harvard, Mount 
Holyoke, Penn, Reed, St Lawrence, Vassar, Williams and Yale. 
 
---------------------------------- 
On the Economic and Business Front 
---------------------------------- 
 
¶8.  Inflation Soars...  Zimbabwe's year-on-year rate of inflation 
reached dizzying heights in June, underpinned by the continued 
increase in the rate of growth in money supply as well as shortages 
of basic commodities.  Figures leaked from the Central Statistical 
Office put the year-on-year rate of inflation for the period to June 
20, 2008 at over 9 million percent, while the month-on-month rate 
was 862 percent.  However, reliable private sector estimates put 
inflation in June at just above 50 million percent for high- and 
middle-income earners.  In response, the RBZ raised its overnight 
accommodation rates this week from 6,500% and 7,500% to 8,500% and 
9,500% for secured and unsecured borrowings respectively.  The 
measure is unlikely to yield the desired effect, as few companies 
will borrow at such rates.  Government borrowing--the main driver of 
the explosion in money supply--is likely to continue in the absence 
of a credible reform program. 
 
¶9.  Supply of Bank Note Paper Halted...  In a related development, 
the German bank note printer Giesecke & Devrient stopped supplying 
Zimbabwe with bank note paper this week.  In a press statement on 
July 1, the company said the move, effective immediately, was in 
response to an official request from the German government and to 
calls for sanctions on Zimbabwe by the EU.  We expect this 
development to result in a decline in the rate of increase in 
currency in circulation, which is likely to lead to cash shortages. 
Not coincidentally, the cash and bank transfer exchange rates 
diverged sharply this week, and long bank queues reappeared even 
after the RBZ increased the daily cash withdrawal limit from Z$25 
million (roughly US$1) to Z$100 billion.  True to form, RBZ Governor 
Gono blithely announced that "appropriate measures and strategies" 
were in place to protect business from any adverse affects of the 
paper stoppage. 
 
¶10.  Expanding Asset Bubble...  The Zimbabwe Stock Exchange (ZSE) 
broke all records again this week.  The benchmark industrial index 
rose by over 75 percent while the mining index rose by about 90 
percent in a bubble fuelled by the continued rapid depreciation of 
the currency on the street and very unfavorable yields on the money 
market. 
 
¶11.  Bread-A Luxury...  Zimbabwe's bread shortage grew dire this 
week as bakers began giving up their struggle to remain profitable 
under price controls, depleted wheat stocks, and rising input 
prices.  Lobels, the country's second largest bread manufacturer, 
shut down production this week, and the largest baker's ovens have 
 
HARARE 00000601  003 OF 003 
 
 
been cold for the past two days. 
 
¶12.  People's Shops-No Panacea for the Multifarious Poor...  In the 
past two weeks the GOZ opened numerous "People's Shops," allegedly 
to provide ordinary Zimbabweans access to staples at sub-economic 
controlled prices.  The goods are otherwise only available at 
exorbitant prices on the parallel market.  In Harare's high-density 
satellite of Chitungwiza, the People's Shops are reportedly bumping 
civil servants and war veterans to the head of the line and allowing 
them to buy in bulk, while all other sales are capped at Z$5 
billion.  Some of the items have found their way onto the parallel 
market.  Operating at irregular hours, long lines of expectant 
shoppers wrap around the shops.  In some cases this week, customers 
have had to show red ink on their finger-proof that they voted-to 
shop. 
 
¶13.  Newspaper Price Decontrolled...  In a move to save the 
newspaper industry from collapse, the GOZ scrapped newspaper price 
controls.  The price of the Financial Gazette jumped from Z$800 
million to Z$20 billion; The Herald shot to Z$8 billion from Z$200 
million. 
 
¶14.  IMF Advice to Zimbabwe...  In its June 30, paper "The Balance 
of Payments Impact of the Food and Fuel Price Shocks on Low-Income 
African Countries: A Country-by-Country Assessment," the one-page 
assessment of Zimbabwe stated that price controls on food items lead 
to shortages and to higher rather than lower inflation, and the 
current practice of distributing government imported fuel 
practically for free leads to rent-seeking and corruption. Full 
report available at 
www.imf.org/external/np/pp/eng/2008/063008a.p df. 
 
¶15.  Erratum...  Flummoxed by the proliferating zeros, regrettably 
we misreported the bank transfer rate of exchange in the last two 
editions of ZimNotes: it was Z$19 billion:US$1 on June 20 and Z$39 
billion:US$1 on June 27. 
 
DHANANI