VZCZCXRO4006
OO RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSB #0478/01 1600857
ZNR UUUUU ZZH
O 090857Z JUN 09
FM AMEMBASSY HARARE
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4585
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHAR/AMEMBASSY ACCRA 2879
RUEHDS/AMEMBASSY ADDIS ABABA 2998
RUEHRL/AMEMBASSY BERLIN 1437
RUEHBY/AMEMBASSY CANBERRA 2261
RUEHDK/AMEMBASSY DAKAR 2628
RUEHKM/AMEMBASSY KAMPALA 3046
RUEHNR/AMEMBASSY NAIROBI 5487
RUEAIIA/CIA WASHDC
RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK
RHMFISS/EUCOM POLAD VAIHINGEN GE
RHEFDIA/DIA WASHDC
RUEHGV/USMISSION GENEVA 2170
RHEHAAA/NSC WASHDC

UNCLAS SECTION 01 OF 03 HARARE 000478 
 
SENSITIVE 
SIPDIS 
 
AF/S FOR B. WALCH 
DRL FOR N. WILETT 
ADDIS ABABA FOR USAU 
ADDIS ABABA FOR ACSS 
STATE PASS TO USAID FOR J. HARMON AND L. DOBBINS 
STATE PASS TO NSC FOR SENIOR AFRICA DIRECTOR MICHELLE GAVIN 
TREASURY FOR D. PETERS 
COMMERCE FOR ROBERT TELCHIN 
 
E.O. 12958: N/A 
TAGS: ECON ETRD XA PGOV PREL ASEC PHUM ZI
SUBJECT: ZIMBABWEAN BUSINESS LEADERS SEEK CREDIT NOT 
ASSISTANCE 
 
------- 
SUMMARY 
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¶1. (SBU) Zimbabwean business leaders briefed Congressional 
delegation Payne on May 31 on challenges facing their 
respective industries.  Commonalities from the presentations 
included the need for access to international credit lines, 
improved local governance, and stable delivery of utilities. 
In contrast to meetings with GOZ officials and other sectors 
of Zimbabwe's civil society, these business leaders were not 
asking for foreign aid or budgetary assistance, but rather 
the opportunity to access credit and markets, and compete on 
a free-market basis in a normal business environment.  Help 
from the USG in these areas would go a long way in 
stimulating Zimbabwe's economic recovery.  END SUMMARY. 
 
----------------------------------------- 
Local Businesses Seek Level Playing Field 
----------------------------------------- 
 
¶2.  (SBU) On May 31, a Congressional delegation led by 
Representative Donald Payne, Chairman of the House 
Subcommittee on Africa and Global Health, met with business 
leaders in Harare to discuss the state of industry and the 
challenges it is facing.  Jeremy Youmans, Finance Director of 
the leading clothing manufacturer Paramount Group and 
Chairman of the Zimbabwe Clothing Manufacturers Association, 
discussed his company's lack of access to credit for trade 
finance and for re-capitalization, as well as poor public 
utility service.  He also explained that Zimbabwe's exclusion 
from the African Growth and Opportunity Act (AGOA) shut the 
textile and apparel sector out of the U.S. market, whereas 
other regional competitors )- including Chinese firms that 
had bought South African garment manufacturers -- benefited 
from their AGOA membership.  (NOTE: Zimbabwe is the only 
country in Southern Africa not eligible for AGOA.  END NOTE.) 
 Youmans also lamented Zimbabwe not having access to the 
USAID Trade Hub in Gaborone or to AGOA trade fairs. 
 
¶3.  (SBU) Youmans was nevertheless optimistic and stressed 
the value creation that garment manufacturing brought 
developing countries -- Zimbabwe in particular.  He said that 
the "cotton chain" or value stream leading from cotton 
growers to garment producers added 938 percent value to the 
economy.  Zimbabwe had traditionally captured that entire 
chain as cotton is grown, made into yarn, dyed, and then 
manufactured and cut into completed garments here.  However, 
since 2000, capacity in textiles in Zimbabwe has fallen by 
two-thirds and by over half in clothing manufacturing. 
Youmans was adamant that his business did not need 
assistance, just market access and the opportunity to produce 
in highly efficient large volumes. 
 
--------------------------------- 
Indian Firms Undercutting Cargill 
--------------------------------- 
 
¶4.  (SBU) Priscilla Mutembwa, Managing Director of Cargill 
Cotton Zimbabwe, was discouraged by the lack of regulation 
QCotton Zimbabwe, was discouraged by the lack of regulation 
and rule of law in the cotton-growing sector in Zimbabwe. 
Cargill -- the largest U.S. firm in Zimbabwe -- provides 
small-scale outgrowers with fertilizer and seed, and in turn, 
the farmers sell their crop via a contract at a set price to 
Cargill.  However, farmers side-market their crop to large 
Indian firms that are able to offer these farmers two to 
three times that price because they did not provide farmers 
 
HARARE 00000478  002 OF 003 
 
 
with inputs.  It is not cost effective for Cargill to pursue 
small farmers for breach of contract.  Mutembwa also lamented 
the collapse in government-funded extension services to small 
growers, and the need to introduce Bio-technology cotton seed 
in Zimbabwe to improve yield. 
 
------------------------------ 
Micro-Finance Sector Drying Up 
------------------------------ 
 
¶5.  (SBU) Virginia Sibanda of Micro King, a provider of 
micro-finance loans, said the number of micro-finance 
institutions had dried up from 358 to only six remaining 
firms in Zimbabwe.  This has had a dramatic effect on poor 
and rural communities that cannot access other types of 
loans.  Sibanda stressed the need to resuscitate the local 
micro-finance firms with the help of larger and long-term 
viable iternational financial institutions.  She called for 
a shift in donor focus from humanitarian aid to economic 
empowerment by accessing capital at market rates. 
 
----------------------------- 
Zimbabwe Not the Same Country 
----------------------------- 
 
¶6.  (SBU) Kumbirayi Katsande, President of the Confederation 
of Zimbabwe Industries (CZI), was positive about the new 
government's attitude towards the business sector.  He said 
government leaders were listening to industry and 
incorporating input into monetary and regulatory policy.  His 
vision was to raise Zimbabwe's productive capacity from the 
current 30 percent to 50 percent in the next 12 months, but 
recognized that good governance would be critical.  (COMMENT: 
Some observers say capacity utilization is still under 20 
percent.  END COMMENT.)  Governance needed to be addressed 
via the constitution drafting process that began recently. 
Katsande concluded by stating that Zimbabwe was "not the same 
country it was six months ago." 
 
--------------------------------------------- -- 
Governance and Capital Also Needed in Mining... 
--------------------------------------------- -- 
 
¶7.  (SBU) The mining sector was represented by Greg Sebborn, 
a member of the board of directors of Zimbabwe's largest 
platinum mining firm, Zimplats, as well as consultant to 
African Consolidated Resources (ACR), the U.K.-listed firm 
that lost its diamond mining rights in Chiadzwa to the 
government.  Sebborn reinforced the issue that Zimbabwe had 
the wherewithal to independently raise its economy through 
the country's diverse mineral wealth, but concern about 
governance was inhibiting investment. 
 
¶8.  (SBU) Security of tenure in mining needed to be 
established so international firms would feel confident about 
injecting capital to refurbish equipment and expand 
operations.  He spoke about vagaries surrounding 
indigenization requirements that aim for local investors to 
own a majority stake in businesses.  He also mentioned that 
the GOZ flouted mining titles, which was likely a reference 
Qthe GOZ flouted mining titles, which was likely a reference 
to the nationalization of ACR's diamond claim in 2006. 
 
----------- 
...Tourism 
----------- 
 
¶9.  (SBU) Shingi Munyeza, CEO of leading Zimbabwean hotelier, 
 
HARARE 00000478  003 OF 003 
 
 
African Sun, and chairman of the Zimbabwe Tourism Authority 
(ZTA), discussed how the sector could quickly return to the 
16 to 20 percent growth rate achieved in the late 1990s. 
Zimbabwe's abundant wildlife and natural beauty gave it 
substantial tourism resources.  However, perception was the 
culprit of the freefall in tourism, according to Munyeza.  He 
said the tourist perception of Zimbabwe had become focused on 
security problems, moral objections, cholera concerns, human 
rights abuses, and bad governance.  These problems had to be 
addressed by good governance and by marketing the changes 
occurring in the country.  Additionally, Zimbabwe needed 
capital to improve the delivery of utilities, most 
importantly supplying the country with stable electricity 
supplies. 
 
--------------------- 
...and Retail Sectors 
--------------------- 
 
¶10.  (SBU) The retail sector is being hurt by a lack of 
discretionary income in what was formerly the middle class, 
according to Themba Ndebele, CEO of the retail chain 
Truworths and Vice President of the Retail Association of 
Zimbabwe.  Ndebele referred to Zimbabwe as a subsistence 
economy where people only had sufficient income to put food 
on the table.  Government has always been the largest 
employer in Zimbabwe, and civil servants traditionally 
accounted for 40 percent of consumer spending.  However, the 
USD$100 per month allowance to civil servants is insufficient 
to allow for discretionary spending.  Retailers also require 
access to international trade finance because local banks are 
unable to provide any capital.  This will allow retailers to 
source foreign products and raw materials at competitive 
prices which will facilitate exports and create savings they 
can pass on to local consumers. 
 
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COMMENT 
------- 
 
¶11.  (SBU) The business representatives appeared upbeat and 
determined to drive Zimbabwe's economic recovery if given the 
chance.  Refreshingly, they were not seeking assistance from 
the U.S., but merely access to capital at competitive rates 
and access to markets.  They also recognized that Zimbabwe's 
inclusive government held the responsibility for improving 
the regulatory environment, raising the country's 
international image, and boosting the delivery of essential 
utilities.  Any support that the USG can provide to the 
business sector directly, whether in the form of credit 
guarantees, assistance to business associations in bolstering 
their lobbying ability, or improved access to market 
information for exports, will certainly be seized and used to 
stimulate the economy.  END COMMENT. 
 
¶12.  (U) This cable has not been cleared by Congressman 
Payne.  END NOTE. 
 
MCGEE