Air Zimbabwe paid engineers a retention bonus

Air Zimbabwe paid senior staff a retention bonus of US$1 000- a fortune at the time because of the exchange rate that had gone haywire- in addition to their regular salaries and benefits, according to a senior aircraft engineer.

The national airline was operating at a loss at the time and was charging fares that were lower than bus fares.

It was charging as little as US$25 for a trip to London.

Full cable:

Viewing cable 08HARARE490, ZIM NOTES June 6, 2008

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VZCZCXRO3010

RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN

DE RUEHSB #0490/01 1581138

ZNR UUUUU ZZH

R 061138Z JUN 08

FM AMEMBASSY HARARE

TO RUEHC/SECSTATE WASHDC 2993

INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE

RUEHUJA/AMEMBASSY ABUJA 1987

RUEHAR/AMEMBASSY ACCRA 2030

RUEHDS/AMEMBASSY ADDIS ABABA 2151

RUEHRL/AMEMBASSY BERLIN 0693

RUEHBY/AMEMBASSY CANBERRA 1428

RUEHDK/AMEMBASSY DAKAR 1786

RUEHKM/AMEMBASSY KAMPALA 2207

RUEHNR/AMEMBASSY NAIROBI 4638

RHEHAAA/NSC WASHDC

RHMFISS/EUCOM POLAD VAIHINGEN GE

RUEHGV/USMISSION GENEVA 1293

RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK

RHEFDIA/DIA WASHDC

RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 04 HARARE 000490

SIPDIS

AF/S FOR S.HILL

ADDIS ABABA FOR USAU

ADDIS ABABA FOR ACSS

NSC FOR SENIOR AFRICA DIRECTOR B.PITTMAN

TREASURY FOR D.PETERS AND T.RAND

STATE PASS TO USAID FOR L.DOBBINS AND E.LOKEN

COMMERCE FOR BECKY ERKUL

E.O.12958: N/A

TAGS: PGOV PREL ASEC PHUM ECON EAGR EFIN EMIN ZI

SUBJECT: ZIM NOTES June 6, 2008

—————

¶1. SUMMARY

—————

Topics of the week:

– U.S. Diplomats, Staff, Detained and Harassed By Police

– Gov Suspends Field Operations of All NGOs

– United Opposition Unlikely

– Public Unenthusiastic About GNU

– Senior MDC Officials Released

– Violence Spurs Internal Displacement

– Youth Movements Consolidate Election Efforts

– Labor Leader Elected To ILO Governing Board

– Local Currency Plunges at Record Rate

– Annual Inflation Breaching Two Million Percent

– Chamber of Mines Reviews Industry Performance

– Air Zim Paying Retention Bonus

– Poor Outlook for Winter Wheat Crop

– More Dismal Corporate Results

——————————————— ———

¶2. Price Movements-Exchange Rate and Selected products

——————————————— ———

Parallel rate for cash diverged further at ZW$1.5 billion:US$1 from

inter-bank average of Z$990 million:US$1

Bank transfer rate jumped to Z$2 billion:US$1; official rate:

ZW$$30,000: US$1

Sugar soared to Z$1.4 billion/2kg vs. controlled price of Z$8

million/2kg

Cooking oil jumped to Z$2 billion/750ml vs. controlled price of

Z$9.3 million/750ml

Petrol and diesel rose to Z$1.3 billion/liter vs. controlled price

of Z$60,000/liter

—————————–

On the Political/Social Front

—————————–

¶3. U.S. Diplomats, Staff, Detained and Harassed By Police… On

June 5, five U.S. diplomats and two locally employed staff,

accompanied at times by British diplomats, were detained and

harassed by government security forces, officials, and their

supporters, in violation of the Vienna Convention during a

pre-election assessment trip in Mashonaland Central province.

Despite having followed the usual diplomatic procedures of

notification, two vehicles carrying Mission staff were detained for

more than four hours by police. Mission is closely monitoring the

impact of this incident on the local community and is using public

and private diplomatic tools to refute regime propaganda and condemn

the governmentQs illegal actions.

¶4. Gov Suspends Field Operations Of All NGOs… Following the

suspension last week of CAREQs humanitarian food aid operations

pending investigations of the NGOQs Qpolitical activitiesQ (see

Harare 475), on June 4, Minister of Public Service, Labor and Social

Welfare Nicholas Goche suspended all NGO field operations until

further notice, claiming that a number of them were in breach of the

terms and conditions of their registration.

¶5. United Opposition Unlikely… In separate briefings, MDC

presidential candidate Morgan Tsvangirai and former independent

candidate Simba Makoni discussed violence, the June 27 runoff, and

their perspectives on a government of national unity (GNU).

HARARE 00000490 002 OF 004

Significant differences in their views indicate that a united

opposition will not be immediately achieved. Both deplored ongoing

violence, but Tsvangirai laid the blame fully at the feet of ZANU-PF

while Makoni stated that both parties were to blame. Both men

called for a GNU to be convened as soon as possible, but v8Q8blic Unenthusiastic About GNU… Approximately 100

Zimbabweans crowded into a discussion sponsored by the Mass Public

Opinion Institute on the prospects for a GNU on May 29. Nearly

everyone in attendance spoke out against the continuing and growing

violence and questioned the motivation to discuss a GNU. Several

pointed out that Zimbabwe already had a failed GNU – the merger of

rival liberation parties ZAPU and ZANU that formed ZANU-PF.

Regardless, talk of a GNU continues in the local press with little

publicized criticism of the idea.

¶7. Senior MDC Officials Released… The list of MDC officials

fighting legal battles continues to grow. Morgan Tsvangirai was

detained on June 3 – allegedly on charges of “drawing a large

crowd.” Notably, today’s The Herald claims he was never arrested.

MDC leader Arthur Mutambara was arrested on June 1 in connection

with a scathing article he wrote in April criticizing MugabeQs

government as Qimbecilic;Q he was released on bail two days later.

Newly elected MDC MP Eric Matinenga was released from police custody

on June 4 – having spent 5 days in jail – after the magistrate

dismissed charges that he paid MDC youths to perpetrate violence

against ZANU-PF supporters. Another newly elected MDC MP, Iain Kay,

was released on bail on June 4 after spending 8 days in jail.

¶8. Violence Spurs Internal Displacement… Independent

international organizations estimate that as many as 20-30 thousand

Zimbabweans have been displaced due to electoral violence since the

March 29 elections, with many more likely unreported. Access to

areas impacted by the violence remains severely limited by the

ruling partyQs systematic campaign to control voting in rural areas.

See Harare 486.

¶9. Youth Movements Consolidate Election Efforts… Seventeen

Zimbabwean youth organizations are joining forces to launch a

get-out-the-vote campaign ahead of the June 27 presidential runoff.

In addition, they estimate that they have several thousand

volunteers prepared to act as election observers or agents and that

they will be able to reach even the most remote polling places.

They are coordinating their efforts with the MDC to provide

nationwide coverage by MDC-friendly observers and agents, in

contrast to the uncoordinated efforts during the March 29 election

which left some polling places with several observers and others

with none. See also Harare 487 on the Zimbabwe Election Support

NetworkQs (ZESN) runoff plans.

¶10. Labor Leader Elected To ILO Governing Board… The Zimbabwe

Congress of Trade Unions (ZCTU) 1st Vice-President Lucia Matibenga

was elected to serve as one of 56 members of the governing body of

the International Labor Organization (ILO) at its ongoing annual

conference in Geneva. Meanwhile, Zimbabwe is set to answer charges

of contravening ILO Conventions 87 and 98 which deal with freedom of

association and collective bargaining rights. Matibenga drew

international attention when she was arrested and beaten by police

after a peaceful labor rally in 2006.

————————–

Economic and Business News

—————————

¶11. Local Currency Plunges at Record Rate… The Zimbabwe dollar

is trading at Z$1.5 billion:US1$ on the street today, having fallen

HARARE 00000490 003 OF 004

56% in value in the past week and 93% since partial liberalization

of the foreign exchange market in early May. While the divergence

between the street and inter-bank rates narrowed immediately

following the loosening of policy, it has since widened, with the

latter exchange rate now about two thirds of the street rate. The

local currency is expected to continue to fall in value as long as

inflationary expectations remain extremely high.

¶12. Annual Inflation Breaching Two Million Percent… The swoon in

value of the Zimbabwe dollar is propelling prices into the

stratosphere. A leading supermarket chain calculated the

year-on-year rate of increase in the price of its food-heavy basket

at about 1,350,000% in May and the monthly increase at about 470%.

Another leading company that uses broader based and

income-differentiated baskets put the year-on-year rate in May at

between 1,880,000% and 2,680,000% and the month-on-month rate at

334%.

¶13. Chamber of Mines Reviews Industry Performance… At its AGM on

May 30, Jack Murehwa, outgoing President of the Chamber of Mines

said that the mining industry was the countryQs largest foreign

currency generator; it contributed about 6% to ZimbabweQs GDP, up

from 4.5% in the 1990s despite declining performance since 2000. He

applauded both the recent replacement of the gold support price with

the international gold price, and the redemption of 35% of forex

earnings at an exchange rate that is now SQmz4:@rk closely with government as

the causes of the industryQs malaise.

¶14. Air Zim Paying Retention Bonus… A senior Air Zimbabwe

aircraft engineer told us on the visa line that the troubled state

airline had begun paying senior staff a retention bonus of

US$1,000/month in addition to regular salaries/benefits.

¶15. Poor Outlook for Winter Wheat Crop… The Financial Gazette

reported today figures from the Agriculture Ministry that showed

that less than half the area planted to winter wheat in 2007 had

been planted this season. A second consecutive poor crop will put

immense pressure on the treasury to close the wheat deficit with

costly imports.

¶16. More Dismal Corporate Results…

– Mutare Board & Paper Mill reported poor results thanks to the

collapse of local paper demand. The controlled price of newsprint,

in particular, weighed down the companyQs 6-monthly results.

– National Tyre Services Limited reported declining sales,

increasing operating costs, and competition from informal and other

small businesses that provide cheaper tires. Nevertheless, analysts

recommend the counter as an economic recovery play, as the company

FQqgU.g@QQs debt-free, has a quality brand, and a country-wide service

network.

– PG Industries noted a 35% drop in volumes across the board in the

past reporting year. The Group manufactures and distributes glass,

wood, boards, doors and related building materials and value-added

products for the furniture, automotive and building industries. It

is shifting its focus to the export market for long-term survival.

– OK Zimbabwe reported revenue down 46% over the past reporting

year; the supermarket chain lost 50% of its stock at the onset of

price controls one year ago this month.

– Econet Wireless HoldingsQs turnover was down 35% in the past

reporting year on the back of unviable tariffs and the soaring cost

of energy, staff, and maintenance. Econet has 60% of ZimbabweQs

HARARE 00000490 004 OF 004

mobile network market.

MCGEE

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