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FM AMEMBASSY HARARE
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RUEHNR/AMEMBASSY NAIROBI 0042
RHEHAAA/NSC WASHDC
RUEAIIA/CIA WASHDC

C O N F I D E N T I A L SECTION 01 OF 02 HARARE 000009 
 
SIPDIS 
 
FROM THE AMBASSADOR FOR ASSISTANT SECRETARY CARSON AND NSC 
DIRECTOR GAVIN 
 
E.O. 12958: DECL: 01/07/2020 
TAGS: PREL PGOV EFIN ETTC ZI
SUBJECT: RECOMMENDATION ON RESPONDING TO ZIMBABWE FINANCE 
MINISTER BY DE-LISTING BANKS 
 
REF: 09 HARARE 987 
 
Classified By: Ambassador Charles A. Ray for reasons 1.4 (b) & (d). 
 
¶1. (C) SUMMARY: Finance Minister Tendai Biti sent me a letter 
requesting that three banks be removed from Treasury's 
sanctions list.  I recommend that we honor Biti's request. 
The information available to me indicates that these three 
banks no longer have any role in supporting Mugabe.  This 
would cost us little while working to the advantage of 
reformers who stick their necks out to bring democracy back 
to Zimbabwe, and it would serve to undercut and weaken 
ZANU-PF rhetoric regarding sanctions.  If we believe that 
sanctions give us leverage, now is the time to use it.  END 
SUMMARY. 
 
¶2. (SBU) On January 4 I received a letter from Biti 
requesting changes in the list of specially designated 
nationals (SDNs) that are targets of USG financial 
restrictions.  The letter, dated December 29, names three 
state-owned banks as candidates for de-listing: the 
Infrastructure Development Bank of Zimbabwe (IDBZ), Agribank, 
and ZB Bank and Building Society (ZB). 
 
¶3. (SBU) Biti argues that de-listing these banks will support 
his economic reforms.  As SDNs these banks cannot conduct 
transactions with U.S. banks and are therefore "unable to 
undertake normal treasury operations.  This has resulted in 
the slow pace of some Government projects and programmes." 
The letter also notes that "these banking institutions are 
owned by the Government of Zimbabwe and are apolitical as 
reflected by their shareholding."  The GOZ owns 85 percent of 
IDBZ, 100 percent of Agribank, and 26 percent of ZB. 
 
¶4. (SBU) IDBZ has been in business since 2005, when the GOZ 
established it for the purpose of financing construction of 
roads, dams, utilities, and other infrastructure.  The bank 
has been largely inactive due to a lack of funding -- the 
hyperinflation wiped out its initial capitalization of 1 
trillion Zimbabwe dollars.  All members of the IDBZ board are 
GOZ appointees.  The current chief executive officer is 
Charles Chikaura, a former deputy governor of the Reserve 
Bank of Zimbabwe (RBZ) with no known political affiliation. 
Chikaura left the RBZ when Gideon Gono became governor in 
¶2003. 
 
¶5. (SBU) Agribank's main line of business is lending to 
small-scale farmers, including those cultivating communal 
land.  In many rural areas, Agribank is the only source of 
financial services.  Shareholding in Agribank is split evenly 
between the Ministries of Finance and Agriculture.  Agribank 
is led by a 10-member board of directors consisting of three 
executive directors and seven non-executive directors.  The 
executive directors are either Ministry of Finance officials 
or appointed by them.  Two of the seven non-executive 
directors are civil servants, one from each of the two 
ministries.  One non-executive director, Wilson Nyabonda, is 
a member of the Zimbabwe Commercial Farmers Union (ZCFU). 
Some members of the ZCFU have benefited from Mugabe's land 
reform program.  Another non-executive director, Sij Biyam, 
has publicly supported politicians who oppose Mugabe.  The 
other three non-executive directors are independent 
professionals with no apparent political affiliations. 
Qprofessionals with no apparent political affiliations. 
 
¶6. (C) ZB's largest shareholder is the National Social 
Security Authority (NSSA), which holds 42 percent of the 
bank's equity.  The Ministry of Finance controls 25 percent 
of ZB shares, Old Mutual Life Assurance owns a 5 percent 
stake, and the remaining shares are held by ZB employees and 
the public.  NSSA is a GOZ-sponsored pension fund supported 
by contributions from the wages of private-sector employees. 
NSSA's board chairman is Albert Nau, a politically 
unaffiliated business professional who previously chaired the 
ZB board.  The current chairman of ZB's board is Bothwell 
Nyajeka, an insurance executive known to be politically 
independent.  Nyajeka replaced Richard Hove, a ZANU-PF 
politburo member who died last year.  But even when Hove 
chaired the ZB board, there was no evidence of political 
interference in the bank's operations.  Post's LES economic 
 
HARARE 00000009  002 OF 002 
 
 
specialist previously held management positions at ZB and 
reports that the bank's credit committee, of which he was a 
member, has always made decisions exclusively based on 
commercial considerations. 
 
¶7. (C) As noted reftel, I presume that OFAC has classified 
information to support designation of the three banks Biti 
wants de-listed.  I have received no response to my request 
for such information.  All of the information available to me 
locally indicates that these banks are professionally managed 
and commercially driven entities.  Agribank and ZB have 
provided candid responses to all of our requests for 
information, including closely held lists of their most 
important banking clients. 
 
¶8. (C) Biti's letter is an echo of my most recent 
conversation with him (reftel).  The motivation behind his 
request is not to throw ZANU-PF a bone, but rather to see USG 
policies adjust to the new circumstances in Zimbabwe.  Biti 
would like to see these three banks in a position to 
contribute to Zimbabwe's economic recovery.  Like all 
commercial banks in Zimbabwe, Agribank and ZB sustained 
severe financial losses during the hyperinflation.  But now, 
as the banking system recovers, these two banks' status as 
SDNs impedes recapitalization.  Biti would like to sell a 
portion of the GOZ's stake in both banks, but this is not 
practical while they are SDNs. 
 
¶9. (C) I believe it is in our interest to honor Biti's 
request.  ZANU-PF no longer has the means to abuse these 
three banks.  The only risk in removing them from the SDN 
list is that Mugabe may get the incorrect impression that we 
are loosening the screws on him and his cronies.  But that 
will be their problem, not ours, and it would serve to weaken 
the impact of ZANU-PF's continuing rhetoric regarding 
sanctions and their economic impact. 
 
¶10. (C) There is, I sincerely believe, far greater risk for 
us in ignoring Biti's request.  Biti, his MDC colleagues, and 
other brave Zimbabweans are in a high-stakes, long-term 
struggle to restore democracy to their country.  We should 
not miss opportunities to help them "chip away at the fascist 
dictatorship," as Biti likes to put it.  De-listing these 
three banks will, at no cost to us, let Biti push his reform 
agenda a few inches forward and further bolster his standing 
as the most effective minister in the transitional 
government.  Ignoring his request, by contrast, will leave us 
with the untenable status quo of our current sanctions 
policy, which has so far had no effect on Mugabe's actions. 
If we believe sanctions give us leverage, now is the time to 
use it to Biti's advantage, and perhaps be an impetus at some 
point for further moves in a positive direction. 
 
RAY