VZCZCXRO8197
PP RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSB #0982/01 3031515
ZNR UUUUU ZZH
P 291515Z OCT 08
FM AMEMBASSY HARARE
TO RUEHC/SECSTATE WASHDC PRIORITY 3637
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHUJA/AMEMBASSY ABUJA 2111
RUEHAR/AMEMBASSY ACCRA 2396
RUEHDS/AMEMBASSY ADDIS ABABA 2516
RUEHBY/AMEMBASSY CANBERRA 1792
RUEHDK/AMEMBASSY DAKAR 2147
RUEHKM/AMEMBASSY KAMPALA 2572
RUEHNR/AMEMBASSY NAIROBI 5000
RUEAIIA/CIA WASHDC
RUEHGV/USMISSION GENEVA 1665
RHEHAAA/NSC WASHDC
RHMFISS/JOINT STAFF WASHDC
RUEHC/DEPT OF LABOR WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHEFDIA/DIA WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK
RUZEHAA/CDR USEUCOM INTEL VAIHINGEN GE

UNCLAS SECTION 01 OF 04 HARARE 000982 
 
SENSITIVE 
SIPDIS 
 
AF/S FOR B. WALCH 
AF/EPS FOR ANN BREITER 
NSC FOR SENIOR AFRICA DIRECTOR B. PITTMAN 
STATE PASS TO USAID FOR L.DOBBINS AND E.LOKEN 
TREASURY FOR D. PETERS 
COMMERCE FOR BECKY ERKUL 
ADDIS ABABA FOR USAU 
ADDIS ABABA FOR ACSS 
 
E.O. 12958: N/A 
TAGS: ECON PGOV ASEC PHUM EAID ZI
SUBJECT: BARELY COPING IN ZIMBABWE,S ECONOMIC MELTDOWN 
 
REF: A. HARARE 904 
     ¶B. 07 HARARE 504 
 
------- 
SUMMARY 
------- 
 
¶1. (SBU) Zimbabweans are coping under hyperinflation and in 
the face of a near worthless currency by tightening their 
belts, relying on food aid, seeking informal work 
opportunities within the distortions and contradictions of 
the economy, and through emigration and remittances.  Over 
4/5 of all jobs in Zimbabwe are now in the informal economy, 
where people scratch out a generally meager income under poor 
working conditions.  Informal trading in food, goods, and 
foreign exchange is on the rise, but formal employment as 
well, especially at the low end of the pay scale, often 
offers the opportunity to "make deals" on company time and 
get a free meal and other non-cash perks.  Formal employment 
also presents opportunities to pilfer and, in some 
businesses, conclude shady deals for kickbacks.  In this 
starkly deteriorating economic situation, the willingness to 
make ends meet by any means, legal, ethical, or not, is 
increasingly common.  When things finally come right in 
Zimbabwe, a new reform-minded government will face the 
considerable challenge of overturning this woeful legacy of 
the waning years of the Mugabe regime and inculcating anew 
respect for the law.  END SUMMARY. 
 
--------------------------------------- 
Still "Making a Plan" - Belt Tightening 
--------------------------------------- 
 
¶2. (U) One and a half years ago we reported (Ref B) the ways 
in which Zimbabweans' "make a plan" mentality was cushioning 
the population from economic freefall.  Today variations of 
belt tightening, income augmentation, and external support 
are still the main coping mechanisms, but in a much harsher 
economic environment. 
 
¶3. (SBU) Labor economist Godfrey Kanyenze, Director of the 
Labor and Economic Development Research Institute of 
Zimbabwe, described to us some of the austerity measures that 
people are imposing on themselves.  Thousands of people in 
Harare's high-density outlying neighborhoods, for example, 
depart home on foot or, if they are lucky, by bicycle, for 
both formal and informal employment as early as 3 a.m. to 
save bus fare.  The shortest commute by bus costs the 
equivalent of nearly USD 50 cents one way, which would 
consume an entire day's wage at the low end of the pay scale. 
 Eating only one meal a day of traditional food (boiled maize 
meal and green vegetables, occasionally with beans) has 
become common in urban as well as rural areas.  The macabre 
joke is to speak of being on the "0-0-1" diet, i.e. no 
breakfast, no lunch, only dinner. 
 
¶4. (SBU) For rural households, the FAO Agriculture 
Coordination Working Group reported on September 25, 20008 
coping by gardening, cross border trading, barter trading 
(but on worsening terms of trade for maize grain), vending, 
gold panning, providing casual labor that is compensated with 
maize grain or other cereals, and by selling small livestock. 
 In a survey of nutrition carried out in July 2008, the local 
Food and Nutrition Council found that one third of households 
 
HARARE 00000982  002 OF 004 
 
 
were eating only one or less meals per day. People in rural 
areas were increasingly subsisting on wild fruits, roots and 
caterpillars, which econoff observed during a visit to a 
mining area 50 km south of Zvishavane in Midlands province 
earlier this month.  While there are certainly limits to the 
resiliency of the poorest segments of the rural and urban 
population, and Zimbabwe might be close to fully exploiting 
that resiliency, Kanyenze reminded econoff of the 
population's record of innovativeness in the face of extreme 
adversity. He recalled how during the war in the 1970s many 
Zimbabweans were forced to subsist for years in "protected 
villages." 
 
¶5. (U) A further critical coping mechanism for the destitute 
is humanitarian assistance in the form of food aid.  We 
estimated (Ref A) that about 50 percent of the population of 
Zimbabwe will receive food aid over the next eight months. 
 
--------------------------------------------- ----- 
Income Augmentation - The Growing Informal Economy 
--------------------------------------------- ----- 
 
¶6. (SBU)  Kanyenze commented that the economy's very 
distortions and contradictions also created new survival 
opportunities, primarily in informal employment.  He referred 
to two ILO issues papers (Nrs. 32 and 33) on employment in 
Zimbabwe published this year that found that just over 4/5 of 
all jobs in Zimbabwe were in the informal economy.  The jobs, 
in general, provided extremely low cash income and poor 
working conditions, and did not offer adequate social 
protection.  Consistent with the fact that over half of 
Zimbabwe's population lives in rural areas, the ILO found 
that about 78 percent of informal workers toiled in 
agriculture. 
 
¶7. (SBU) Along with the spike, especially in urban areas, in 
the number of informal vendors who, for example, sit 
patiently along a roadside behind a small pyramid of tomatoes 
or a bottle of cooking oil, or exchange money in downtown 
Harare, the formally employed generally also work informally 
while on the job, or moonlight in second jobs.  A crucial 
factor in staying at a poorly paid job is often the access it 
affords to a functioning telephone or to internet access at 
company expense, and the wide circle of contacts to whom to 
sell and barter goods during the work day.  John Battershell 
of Cargill Cotton Zimbabwe told us despairingly that most of 
his staff in Harare spent more time managing personal 
business than working for Cargill. 
 
¶8. (SBU) Albert Katsande, Chief Operating Officer of the OK 
Zimbabwe supermarket chain, told us the only reason his 
company's lowest paid workers showed up for work was the 
perks of the job and the opportunity to "make deals."  For 
example, OK served its employees a free meal, which was 
generally their main or only meal of the day.  It also 
allowed staff to buy 10kg of sugar a month on credit, which 
they "spun and burned" (as in burning CDs) into more worth 
through sale and barter, often during work hours.  They 
repaid the debt in deeply depreciated Zimbabwe dollars. 
Katsande said that highly tradable goods, such as diapers and 
cigarettes, were the first products to disappear off the 
supermarket shelves, bought by employees, only to be resold 
on the black market.  Such trade was also a means of gaining 
foreign exchange to pay residential rents, nearly all of 
 
HARARE 00000982  003 OF 004 
 
 
which, in both high- and low-density neighborhoods of Harare, 
are now payable solely in hard currency.  Rent for a single 
room in a high-density area of Harare ranges between R100 and 
R200 (roughly US$10-20). 
 
¶9. (SBU) Many employers top up the minimum wage with food 
packs.  Shepherd Chinyerere, a manager at Southern Roses, 
Zimbabwe's largest rose exporter, told econoff that the 
company paid laborers less than the equivalent of US$1/day 
but gave them free on-site accommodation, free transport into 
the city, and monthly packs of food staples. 
 
------------------------ 
Survival Trumps Scruples 
------------------------ 
 
¶10. (SBU) Kanyenze added that crime, ranging from petty to 
hard core, had become another survival tactic.  Formal 
employment, for example, offered a worker the opportunity to 
pilfer.  At the high-income end, Edgar Nyamupingidza, Head of 
Group Risk at Kingdom Financial Holdings Ltd, told us that 
controlling white-collar crime at the bank had become an 
unprecedented challenge in the face of contracting real 
salaries.  Pressure on professional staff to support large 
extended families was immense and driving more and more 
employees to undertake shady bank deals for kickbacks.  Spar 
Marketing Director Andy Holderness told us how friendly bank 
contacts could provide certain favored corporate and private 
customers with deeply negative short-term loans on days when 
the bank ended in surplus and faced the alternative of having 
the surplus locked away at zero percent interest for 90 days. 
 With the right bank contact, and using one's home as 
collateral, one could earn thousands of U.S. dollars in a 
cycle of short-term borrowing, exchanging for forex, and 
repaying in depreciated local currency. 
 
¶11. (SBU) To preserve value, Zimbabweans quickly exchange 
their local earnings for food, goods or tradable assets, or 
for foreign currency cash as a reliable store of wealth.  The 
local stock exchange, which has risen several hundred 
trillion percent this year, serves, for now at least, as 
another income preserving inflation hedge, especially in 
light of the low cash withdrawal limit.  Further illustrating 
the innovative bend of Zimbabweans in coping with 
hyperinflation, CABS CEO Kevin Terry explained to econoff how 
depositors had been exploiting the immense difference between 
the foreign exchange rate for cash and for electronic 
transfers (RTGS).  When Terry explained the scheme to us on 
October 6, the cash rate was Z$4,500 and the RTGS rate was 
Z$1.2 million:USD, presenting a huge arbitrage opportunity. 
 
¶12. (SBU) A further scheme making the rounds as a way to 
bypass the strict daily cash withdrawal limit of less than 
US$1 equivalent is to get certified by a medical doctor as 
having a serious ailment that requires an urgent and 
expensive prescription, and then apply to the Reserve Bank 
for approval to withdrawal enugh cash to pay for the 
prescription. Why a physician might be persuaded to certify a 
fake illnessbecame clear when a government-employed 
obstetriian-gynecologist shared with us her October pay stub 
showing a take home pay of Z$76,000*the equivalent today of 
about US$1.50. Kanyenze commented that in Zimbabwe 
"corruption out of greed8 had evolved into "corruption out 
of need.8 
 
HARARE 00000982  004 OF 004 
 
 
 
------------------------------------------ 
Emigration and the Lifeline of Remittances 
------------------------------------------ 
 
¶13. (SBU) Emigration has been a further coping mechanism and 
social safety valve throughout the last decade of economic 
decline and political turmoil.  The last census of 2002 put 
the population at 11.6 million, but some observers estimate 
that it could be as low as 8 million today, primarily due to 
emigration.  Kanyenze said that the ensuing flow of 
remittances from emigrants was crucial to sustaining 
households.  Echoing Nyamupingidza's observation of the 
pressure on the gainfully employed, he said it was a crime in 
Zimbabwe culture not to support one's extended family, 
whether as one of the lucky few to earn a fair salary in 
country or from the Diaspora.  It is widely thought that 
about half the households in Zimbabwe have direct access to 
remittances.  The supermarket chains are taking a close look 
at the extent of foreign currency in circulation in Zimbabwe 
as they judge the foreign exchange spending power of their 
customers and consider how many outlets to dollarize (for a 
steep forex fee).  Against that background, Katsande 
estimated that Zimbabweans in South Africa sent home 
R300-500/month (roughly US$30-50), or, from the U.K., the 
U.S. dollar equivalent of about Sterling 50/month (approx 
US$78). In his view, the preponderance of small notes 
changing hands indicated that remittances averaged less than 
US$100/month per transfer. 
 
------- 
COMMENT 
------- 
 
¶14. (SBU) As the ILO studies indicate, as the economy tips 
from formal to informal, the vast majority of Zimbabweans may 
have "made a plan," but the living that this docile 
population is eking out is increasingly miserable.  What 
alarms us particularly in comparing today's coping mechanisms 
with those that we reported 1 1/2 years ago, is Zimbabweans' 
growing disdain for the law.  From the low-level criminality 
of Kanyenze's "corruption out of need," to the "corruption 
out of greed" looting at the top of the pyramid, unscrupulous 
behavior pervades this previously remarkably law-abiding 
society.  A new reform-minded government will face the 
challenge of turning the clock back on this particularly 
lamentable aspect of the Mugabe legacy and inculcating anew 
respect for the law. 
 
MCGEE