VZCZCXRO1686
OO RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSB #0828/01 2890858
ZNR UUUUU ZZH
O 160858Z OCT 09 ZDK
FM AMEMBASSY HARARE
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5026
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUEHAR/AMEMBASSY ACCRA 3091
RUEHDS/AMEMBASSY ADDIS ABABA 3203
RUEHRL/AMEMBASSY BERLIN 1632
RUEHBY/AMEMBASSY CANBERRA 2466
RUEHDK/AMEMBASSY DAKAR 2835
RUEHKM/AMEMBASSY KAMPALA 3251
RUEHNR/AMEMBASSY NAIROBI 5698
RUEAIIA/CIA WASHDC
RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK
RHMFISS/EUCOM POLAD VAIHINGEN GE
RHEFDIA/DIA WASHDC
RUEHGV/USMISSION GENEVA 2385
RHEHAAA/NSC WASHDC

UNCLAS SECTION 01 OF 02 HARARE 000828 
 
SENSITIVE 
SIPDIS 
 
AF/S FOR B.WALCH 
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 M.GAVIN 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ZI
SUBJECT: FEAR OF EXPROPRIATION SCUTTLES SHOPRITE DEAL 
 
Ref: Harare 776 
 
¶1. (SBU) Summary: Uncertainty over property rights continues to 
scare away foreign investors. A USD 167 million partnership deal 
between South African retail giant Shoprite and OK Zimbabwe Limited 
has stalled. The main reason could be concerns raised by the GOZ's 
seizure of another firm and its failure to conclude a bilateral 
investment agreement with South Africa. While many local companies 
are starting to invest again, Zimbabwe's investment climate remains 
unattractive for outsiders. End summary. 
 
------------ 
OK Keeps Mum 
------------ 
 
¶2. (SBU) Discussions between Zimbabwean retailer OK and South 
African retail giant Shoprite for an equity partnership arrangement 
appear to have stalled. A Shoprite official was quoted in the South 
African press saying that the company decided to put its investment 
plans in Zimbabwe on hold due to "socio-economic and political 
uncertainty." OK's management, meanwhile, has declined to comment. 
Chief operating officer Albert Katsande told us that the company 
could not make public statements until after publication of its 
half-year results. Nevertheless, Katsande believes nothing had 
changed. 
 
-------------------------------- 
Asset Seizures Cause Uncertainty 
-------------------------------- 
 
 
¶3. (SBU) The chief executive officer of the Zimbabwe Stock Exchange 
(ZSE), Emmanuel Munyuki, suspects that Shoprite was unhappy with the 
GOZ's seizure of Kingdom Meikles Africa Limited (KMAL) under the 
sweeping authority of an anti-corruption statute (reftel). The GOZ's 
intervention in what had been an internal dispute at KMAL revived 
fears over property rights and the safety of foreign investments in 
Zimbabwe.  Apart from the many GOZ-sponsored farm invasions over the 
past decade, several other episodes have also highlighted the 
fragility of property rights in Zimbabwe. In 2004 the GOZ took over 
Shabanie and Mashaba Mines but never quite explained why.  And last 
week the central bank briefly froze the accounts of Nestle Zimbabwe 
following after the company stopped buying milk from a farm owned by 
Grace Mugabe. 
 
---------------------- 
Who's Afraid of BIPPA? 
---------------------- 
 
¶4. (SBU) Munyuki also said that the GOZ's continuing delay in 
signing a bilateral investment promotion and protection agreement 
(BIPPA) with South Africa also influenced Shoprite's decision. The 
draft BIPPA text, negotiated long ago, would include a guarantee of 
South Africans' security of tenure on agricultural land. The GOZ has 
recently sought to re-negotiate this provision. GOZ foot-dragging 
over an agreement meant to protect new and old investments against 
expropriation has sent the wrong signals about Zimbabwe's desire to 
attract foreign direct investment. 
 
------- 
Comment 
------- 
 
¶5. (SBU) Zimbabwe's bid to get foreign investment will be more 
successful once it implements mutually reinforcing economic and 
political reforms. While there has been much progress on fiscal 
Qpolitical reforms. While there has been much progress on fiscal 
policy, the GOZ needs to do much more to protect property rights and 
uphold the rule of law. Continuous harassment of businesses for 
political ends (or self-enrichment) will continue to scare away 
foreign investors.  Shoprite already owns one store in Bulawayo. The 
 
HARARE 00000828  002 OF 002 
 
 
company understands political risk in Zimbabwe and may be unwilling 
to increase its exposure. 
 
PETTERSON