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Viewing cable 08HARARE18, Zim Notes January 11, 2008

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Reference ID Created Released Classification Origin
08HARARE18 2008-01-11 10:30 2011-08-24 16:30 UNCLASSIFIED Embassy Harare
VZCZCXRO9669
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSB #0018/01 0111030
ZNR UUUUU ZZH
R 111030Z JAN 08
FM AMEMBASSY HARARE
TO RUEHC/SECSTATE WASHDC 2370
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHUJA/AMEMBASSY ABUJA 1813
RUEHAR/AMEMBASSY ACCRA 1717
RUEHDS/AMEMBASSY ADDIS ABABA 1843
RUEHRL/AMEMBASSY BERLIN 0443
RUEHBY/AMEMBASSY CANBERRA 1120
RUEHDK/AMEMBASSY DAKAR 1477
RUEHKM/AMEMBASSY KAMPALA 1899
RUEHNR/AMEMBASSY NAIROBI 4327
RHEHAAA/NSC WASHDC
RHMFISS/EUCOM POLAD VAIHINGEN GE
RUEHGV/USMISSION GENEVA 0970
RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK
RHEFDIA/DIA WASHDC
UNCLAS SECTION 01 OF 03 HARARE 000018 
 
SIPDIS 
 
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 January 11, 2008 
 
1.  The Embassy Harare Political/Economic Section began producing 
Zim Notes in July, 2007 to present a perspective on current events 
in Zimbabwe.  Suggestions are always welcome. If you would like to 
receive Zim Notes by email, as well, please contact Frances Chisholm 
at chisholmfm@state.gov. Distribution is restricted to U.S. 
government employees. 
 
2.  Parallel rate for cash: ZW$2.5 million:US$1; For bank transfers: 
Z$4.5 million; Official rate: ZW$$30,000:US$1 
Sugar on the parallel market fell to Z$2.6 million/2kg vs. 
controlled price of Z$247,000/2kg 
Cooking oil on the parallel market rose to Z$9 million/750ml vs. 
controlled price of Z$440,000/750ml 
Petrol rose to Z$3.6 million/liter vs. Z$60,000/liter at controlled 
price 
 
----------------------------- 
On the Political/Social Front 
----------------------------- 
3.  Countdown to Elections...  SADC talks are stalled over ZANU-PF's 
refusal to postpone elections and implement an agreed-upon draft 
constitution before elections.  Faced with an uneven electoral 
playing field (delimitation of new constituencies favoring ZANU-PF 
and obstacles in registering new voters), continuing political 
intimidation, and difficulties in organizing for a March election, 
the MDC has considered a boycott of the elections which it fears may 
serve to legitimize Mugabe in the likely event he wins.  But it 
appears the two MDC factions will contest the elections, which 
probably will take place on March 29, as a coalition. 
 
4.  Indigenization and Empowerment Bill...  Dead?...  The 
Indigenization and Empowerment Bill passed by parliament in October 
2007, appears to have died a natural death as a result of President 
Mugabe's failure to sign it within the statutorily prescribed time. 
The Bill sparked heated debate when it was first introduced in 
August.  It mandates over time 51% indigenous ownership of 
businesses.  We understand the controversial Bill was transmitted to 
Mugabe on November 15th 2007.  There is speculation that he declined 
to sign it now because he feared the reeling economy could not 
withstand yet another shock.  The government will undoubtedly 
revisit this subject. 
 
5.  Hefty Raise Ends Judicial Strike...  Magistrates, prosecutors 
and other court staff head back to work after a three-month strike 
for better pay and working conditions.  State media reported that 
the government raised salaries by 2,200% to between ZW$460 million 
and ZW$1 billion (about US$180 - US$400 at the parallel market 
rate).  The lowest paid magistrate previously earned ZW$20 million 
per month.  The strike brought the judicial system to a halt across 
the country as nearly all court cases were delayed, and pretrial 
detainees languished in Zimbabwe's overcrowded remand prisons. 
Prior to the strike, there was already a reported backlog of 350,000 
cases in the judicial system. 
 
6.  Teachers Get 1,000% Pay Raise... The government also opened the 
wallet for teachers who had threatened to remain home when the next 
school term starts on January 15.  The lowest paid teacher's base 
salary went from ZW$15 million to ZW$150 million (about US$6 to 
US$60).  A Progressive Teacher's Union of Zimbabwe (PTUZ) 
representative said that while the increase will help struggling 
teachers in the short-term, it is not nearly enough given 
deteriorating economic conditions.  PTUZ plans a new round of 
consultative sessions with members.  The government may have bought 
a few weeks of labor peace, but it faces additional labor actions in 
coming months as the increasingly restive civil servants, including 
doctors and nurses, continue to press for wages that keep up with 
galloping inflation. 
 
7.  Ag Workers Get A Raise, Too... The National Employment Council 
 
HARARE 00000018  002 OF 003 
 
 
(NEC) for Agriculture and its social partners (including the farm 
workers union and the farmers unions) agreed to a wage increase 
starting December 1.  The lowest paid worker in general agriculture 
received a 300% increase in the monthly wage to ZW$10 million (about 
US$4 on the parallel market), in horticulture a 414% increase to 
ZW$18.5 million (about US$8), and in timber a 414 percent increase 
to ZW$19.5 million.  Hyperinflation, however, will quickly erode the 
value of these slim increases, and commercial farmer tell us that 
the labor shortage is acute, at least at these wages. 
 
8.  Deteriorating Water and Sanitation Situation...  The water and 
sanitation situation in urban areas of Zimbabwe is rapidly 
declining, with the potential for severe public health consequences. 
 While the primary focus of humanitarian water, sanitation, and 
hygiene assistance to date has been on Bulawayo, there are reports 
of increased incidences of diarrhea in Harare's high-density 
suburbs.  The number of diarrhea cases in both cities is considered 
manageable for now, but close monitoring is needed.  Contingency 
supplies are in place to handle a small-to-moderate size 
diarrhea-related outbreak in one or two urban areas, with full 
stocks to address a large-scale crisis to be in place by the end of 
January.  Next steps, including mid-to-long term strategies to 
address water, sanitation, and health concerns, are being considered 
by the UN, GOZ, and donors, including USAID. See Harare 0009 
 
--------------------------------------------- ---- 
On the Economic and Business front 
--------------------------------------------- ---- 
9.  Cash Crunch Continues...  Despite the introduction of new, 
higher-denominated bearer checks on December 31 intended to solve 
the cash crisis that has gripped Zimbabwe since early November, the 
cash shortage is still severe and widespread.  A survey of the banks 
in downtown Harare this week found longer queues forming outside 
most bank branches in the early hours of the day than a week ago, 
reflecting the growing transaction demand for cash arising from a 
rate of inflation rate that ended the year as high as 130,000% 
according to one respected private report.  While the RBZ is 
apparently reluctant to increase the money supply and fuel inflation 
further by injecting liquidity, it's clear that the amount of cash 
in circulation is still woefully inadequate to satisfy transaction 
needs. 
 
10.  Zimbabwe - One of World's Best-Performing Stock Exchanges - 
Even In Real Terms...  The Zimbabwe Stock Exchange (ZSE) was one of 
the best performing stock markets in the world in real terms in 2007 
despite the sharply deteriorating state of the economy.  The mining 
and industrial indices recorded staggering increases of 619,656% and 
332,258% respectively between January 2 and December 31, 2007. 
Robust demand came from both institutional and individual investors 
seeking a hedge against inflation.  Foreign investors have also 
started to return to the ZSE, attracted by the significant discounts 
arising from undervalued Zimbabwean assets following years of 
under-investment.  Almost all industrial and mining counters 
recorded huge increases on the year.  The stampede into equity is 
likely to persist amid unrelenting economic instability. 
 
11.  More Land Put Under Crops This Summer...  The FAO-led 
Agriculture Coordination Working Group reported the following 
agricultural season highlights as of December 14, 2007: 
-- Total land area prepared for planting: about 1,149,407 ha 
-- Area put under crops: 944,528 ha compared to 681,348 ha in the 
same period last year 
-- 475,901 ha planted to maize as compared to 361,497 ha in same 
period last season 
-- About 39,417 ha of tobacco planted; 66% of the targeted 60,000 
ha 
-- An estimated 123,396 ha of cotton planted (90,953 ha same time 
last year) 
-- Area planted to small grains: around 153,495 ha (75,407 ha same 
 
HARARE 00000018  003 OF 003 
 
 
time last year) 
-- Area planted to small grains: around 153,495 ha (75,407 ha same 
time last year) 
 
12.  December Rains Break Record, And It's Still Pouring... 
December was the wettest month in the country's 127 year history of 
recorded rainfall patterns according to Zimbabwe's Meteorological 
Services Department.  Preliminary reports from the Government's 
Civil Protection Unit indicate that over 8,000 people in Zimbabwe 
have been affected by floods so far, and approximately 25 deaths 
have been attributed to flooding.  More rain is forecast over much 
of the country in the next days.  USAID's Famine Early Warning 
System Network (FEWSNET) predicts a "low to moderate" tilt in the 
odds for less than average rainfall for the remainder of season. 
 
13.  Rainfall to date has caused extensive waterlogging of fields, 
but it is too early to ascertain the full impact on national food 
production.  Nevertheless, there are indications that late planting, 
lack of top dressing to compensate for leaching, and the incessant 
rains will affect yields, despite increased land put under 
cultivation this season. 
 
14.  Quote of the Week, from the Financial Gazette of January 10-16. 
 John Worsley Worswick, chief executive officer of Justice for 
Agriculture (JAG), on the outlook for this growing season:  "It will 
be the mother of all disasters" 
 
MCGEE