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R 211541Z JUL 08
FM AMEMBASSY HARARE
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RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHUJA/AMEMBASSY ABUJA 2020
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RHEHAAA/NSC WASHDC
RHMFISS/EUCOM POLAD VAIHINGEN GE
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RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK
RHEFDIA/DIA WASHDC
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 03 HARARE 000623 
 
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 7-18-2008 
 
----------- 
¶1.  SUMMARY 
----------- 
 
Topics of the Week: 
 
- MOU on Hold 
- UN Briefs Donors on Re-Opening NGO Operations, Return of IDPs 
- Zim Delegation Walks out of SADC Tribunal Hearing 
- EU to Widen Sanctions 
- South Africa Continues Deporting Zimbabweans 
- ZBC Bans Politically Incorrect Programs 
- The Zimbabwean Crippled under New Tax 
- Mugabe Launches Commodities Supply Program 
- RBZ Concedes Inflation in the Millions 
- Hyperinflation Raises Demand for Cash; Shortages Expected 
- Air Zim Fares Swing from Cheap to Exorbitant 
- Penury and the Police 
- China Cleared to Purchase Zimbabwe Ivory 
- Corrigendum 
 
--------------------------------------------- ---------- 
¶2.  Price Movements-Exchange Rate and Selected Products 
--------------------------------------------- ---------- 
 
Parallel rate for cash doubled to Z$90billion:US$1 against 
inter-bank average of Z$28 billion:US$1. 
 
Bank transfer rate more than trebled to Z$450 billion:US$1; official 
rate: Z$$30,000:US$1. 
 
Bread on the parallel market more than doubled to Z$120 billion vs. 
controlled price of Z$400 million. 
 
Sugar rose to Z$300 billion/2kg vs. controlled price of Z$8 
million/2kg. 
 
Cooking oil inched up to Z$100 billion/750ml vs. controlled price of 
Z$9.3 million/750ml. 
 
Petrol and diesel more than doubled to Z$120 billion/liter vs. 
controlled price of Z$60,000/liter. 
 
----------------------------- 
On the Political/Social Front 
----------------------------- 
 
¶3.  MOU on Hold -  ZANU-PF, the MDC, and South African mediators 
drafted an MOU last week that establishes a framework for 
negotiations between ZANU-PF and the two MDC factions.  A July 16 
signing had been planned, but MDC president Morgan Tsvangirai 
indicated he would not sign unless an AU mediator was present with 
South African president Thabo Mbeki in the negotiations.  AU 
commission chairperson Jean Ping was due in South Africa today to 
discuss the negotiations with Mbeki and a possible role for the AU. 
Once the MOU is signed, negotiations are contemplated by the MOU to 
last two weeks.  With ZANU-PF insisting it lead a government of 
national unity, and the MDC insisting on a transitional government 
led by Tsvangirai, there is scant room for optimism.  See Harare 
621, 607, 605. 
 
¶4.  UN Briefs Donors on Re-Opening NGO Operations, Return of IDPs - 
The UN briefed donors this week on its strategy to persuade the GOZ 
to lift the blanket suspension on NGO operations and resume 
humanitarian assistance.  On the internally displaced persons 
crisis, government officials have impeded teams sent to assess 
whether areas of IDP origin were propitious for return. 
Nevertheless, the UN expected it could facilitate return for most of 
 
HARARE 00000623  002 OF 003 
 
 
the IDPs.  Looking ahead, protecting humanitarian interventions from 
political manipulation could grow increasingly difficult.  See 
Harare 615. 
 
¶5.  Zim Delegation Walks out of SADC Tribunal Hearing -  On July 17, 
the Zimbabwe delegation walked out of the politically charged SADC 
Tribunal in Windhoek after failing to prevent the Tribunal from 
agreeing to hear the white farmer's contempt charge against the GOZ. 
 The charge is based on the GOZ's failure to comply with an Interim 
Relief Order issued by the Tribunal in December 2007 prohibiting the 
GOZ from evicting any farmers involved until the Tribunal ruled on 
the merits of the case.  Since the June election, violence by ruling 
party thugs against farmers involved in the case has increased.  The 
Tribunal has adjourned to consider its judgment. 
 
¶6.  EU to Widen Sanctions -  European Union countries are expected 
to agree on July 22 to widen sanctions on Zimbabwe, including more 
travel bans, measures against companies propping up the regime, and 
asset freezes on persons involved in election violence. 
 
¶7.  South Africa Continues Deporting Zimbabweans - On July 11, the 
UN High Commission for Refugees implored the South African 
government to halt the deportations of Zimbabweans, many of whom 
would seek asylum if they could reach the asylum office in Pretoria. 
 In the 40 days prior, South Africa had deported some 17,000 
Zimbabweans.  Since 2000, South Africa has only granted asylum to 
710 Zimbabweans, while rejecting over 4,000; 62,000 cases are 
pending. 
 
¶8.  ZBC Bans Politically Incorrect Programs -  Independent film 
producers got a slap in the face on July 15, when Zimbabwe 
Broadcasting Holdings Acting CEO Happison Muchechetere told them the 
state broadcaster will not accept politically incorrect programs. 
In a meeting with the producers, Muchechetere also said ZBC would 
shun advertisers who were seeking a political agenda.  ZBC violated 
SADC Principles and Norms on Democratic Elections by failing to 
provide news and current affairs coverage of the opposition MDC in 
the run up to the June presidential election, an omission noted by 
the election observers. 
 
¶9.  The Zimbabwean Crippled under New Tax -  The 40 percent "luxury 
tax" on foreign newspapers imposed by the GOZ last month is 
crippling the UK-based and strongly pro-opposition The Zimbabwean 
newspaper.  Editor and Publisher Wilf Mbanga said taxes now amount 
to 70 percent of the total cost of the newspaper.  Mbanga said the 
newspaper is paying the GOZ Sterling 37,000 (about US$75,000) every 
week in taxes. 
 
---------------------------------- 
On the Economic and Business Front 
---------------------------------- 
 
¶10.  Mugabe Launches Commodities Supply Program -  President Mugabe 
formally launched the Basic Commodities Supply Enhancement Program 
on July 15 with an assortment of locally produced and imported goods 
for distribution at a subsidized price.  The Herald reported that 
the imports were financed with the help of Russian/Ukrainian 
investors and a Namibian company.  National Foods provided trucks 
and warehouses for the goods.  Having apparently learnt nothing from 
the disastrous effects of last year's price controls, Mugabe 
promised no more price increases and threatened offenders with 
imprisonment.  In a rare admission of the unsustainability of the 
importation program, RBZ Governor Gono, who bankrolled the 
initiative, stated that local producers will be financed to produce 
goods.  Since Gono is likely to create the money for the exercise, 
there is no end in sight to hyperinflation in Zimbabwe. 
 
¶11.  RBZ Concedes Inflation in the Millions -  RBZ Governor Gono 
 
HARARE 00000623  003 OF 003 
 
 
revealed this week that the annual rate of inflation, already the 
highest in the world, hit 2.2 million percent in June.  The GOZ had 
not announced any inflation figures since putting the rate at around 
165,000 percent for February.  The GOZ's flawed methodology uses the 
controlled prices of goods, but because the goods cannot be found at 
those prices, the rate sharply lags private sector estimates that 
take actual transaction prices into account. 
 
¶12.  Hyperinflation Raises Demand for Cash; Shortages Expected - 
Hyperinflation has rendered the use of debit cards and checks almost 
irrelevant as point of sale systems can't cope with trillions and 
merchants are charging commissions of up to 50 percent on checks 
that take time to clear.  Barter trade is increasing and cash-rich 
businesses have begun to offer notes at a 10-20 percent premium. 
The Z$100 billion (just over a US$1) daily bank withdrawal limit is 
artificially drying up the cash supply--our bank contacts tell us 
that the RBZ is still meeting all their daily cash requirements. 
Nevertheless, retailers are anticipating a cash shortage also due to 
the disruption in supply of bank note paper to Zimbabwe.  One 
supermarket chain told us their revenue ratio of cash to checks and 
debit cards had shifted recently from 65/35 to 20/80.  To cope, some 
retailers are unveiling in-store debit cards to ease transactions 
and get faster access to funds. 
 
¶13.  Air Zim Fares Swing from Cheap to Exorbitant -  Usually lagging 
inflation for weeks if not months in its airfares, Air Zimbabwe 
caught up last week, and with a vengeance.  The round trip airfare 
to London shot from Z$21 trillion on July 13 (about US$420 at the 
time) to Z$150 trillion the next day (US$2,500 on July 14, but 
US$1,600 today), all fees included.  In comparison, South African 
Airways cheapest return fare on the same route is about US$1,400. 
Air Zimbabwe introduced international fares payable only in foreign 
currency a few months ago, but reversed the policy within two weeks 
under accusations that it violated exchange control laws. 
 
¶14.  Penury and the Police -  A police Assistant Inspector and 
Embassy contact told us that his take home salary in June was Z$180 
billion.  That's worth US$2 today and was about US$35 in mid June on 
the parallel market. 
 
¶15.  China Cleared to Purchase Zimbabwe Ivory -  A meeting of the 
Convention for International Trade in Endangered Species (CITES) 
agreed that China could bid for up to 108 tons of ivory collected 
from culls and natural deaths and offered for sale by Botswana, 
Namibia, South Africa and Zimbabwe.  CITES judged that China had put 
sufficient measures in place to regulate sales and crack down on the 
illegal domestic trade. 
 
¶16.  Corrigendum -   Contrary to our Zim Note of last week that 
ZANU-PF's campaign of violence had reportedly resulted in the deaths 
of two MDC parliamentarians-elect, no MPs-elect have been confirmed 
murdered. 
 
 
DHANANI