Air Zimbabwe was losing $4 million a month

Air Zimbabwe was losing US$4 million every month and could not meet its operating costs, its then chief executive Peter Chikumba told the Parliamentary Portfolio Committee on Transport and Infrastructure.

The airline was operating at 40 percent capacity and had a foreign debt of US$28 million.

This did not include the US$50 million to suppliers of its Chinese MA60s aircraft.

The Civil Aviation Authority of Zimbabwe was reported to be US$150 million in the red.

Full cable:

Viewing cable 09HARARE467, ZIM NOTES 06-05-09

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COMMERCE FOR BECKY ERKUL

E.O.12958: N/A

TAGS: PGOV PREL ASEC PHUM EAGR ECON EFIN ZI

SUBJECT: ZIM NOTES 06-05-09

—————————-

SUMMARY – Topics of the week

—————————-

– Some Issues Resolved, SADC Asked to Help

– Another MDC MP Charged With Rape

– The Herald Spins Secretary ClintonQs Comments

– Political Violence Resurface

– Not Your Average American Farm

– WOZA Trial Start

– 2 Protest Marches, 0 Arrests

– Germans Announce Humanitarian-Plus Package

– More Indications of Return to Economic Normalcy

– Government Urged to Get Mining Policy Right

– Cereal Shortage Projected for 2009/10

– Business Uptick

– But Credit Scarce

– Air Zimbabwe Struggling

– Quote of the Week

—————————–

On the Political/Social Front

—————————–

¶1. Some Issues Resolved, SADC Asked to Help… On May 21 Prime

Minister Morgan Tsvangirai announced the three parties had

resolved some of the outstanding issues, including governorships,

permanent secretaries, and ambassadorships. However, Reserve Bank

Governor Gideon Gono and Attorney General Johannes Tomana continue

to be sticking points, and the MDC-T

has called on SADC to review their appointments. See Harare 431.

¶2. Another MDC MP Charged With Rape… Kwekwe Central MP Blessing

Chebundo was arrested on May 19 on accusations of raping a

13-year-old girl in January. Chebundo has been an MP since 2000 and

is a member of the MDC executive council. At least two other MDC MPs

have been arrested on rape charges in the last year; none of the

cases have held up in court. Separately, MP Mathias Mlambo remains

in jail in Chipinge pending a bail hearing that was rescheduled from

May 15 for May 22.

¶3. The Herald Spins Secretary ClintonQs Comments… In an interview

earlier this week with South AfricaQs SABC news, Secretary of State

Hillary Clinton said that MugabeQs departure would be Qin the best

interests of everyone.Q The ZANU-PF mouthpiece paper, The Herald,

put a positive spin on the story with a front-page article titled

QU.S. acknowledges GovernmentQs progress.Q The article included the

SecretaryQs remark that QweQre encouraged by the new unity

governmentQ but omitted her quote on Mugabe.

¶4. Political Violence Resurfaces… ZANU-PF supporters attacked MDC

followers in two separate incidents this week. In Bulawayo, 15 MDC

youths were arrested after ZANU-PF youths attempted to violently

block elections to the Provincial Youth Council. ZANU-PF youths

expected to win numerous seats to the Youth Council, officially part

of a youth advisory council to government, but reportedly launched a

violent campaign to stop the election when they realized they were

outnumbered and likely to lose. Riot police arrived at the

Mhlanlandlela government complex where the fighting broke out and

arrested 15 MDC youths. Separately, about 60km north of Harare,

several MDC supporters were taken from their homes on May 18 and

beaten by suspected CIO operatives after attending a memorial

Qbeaten by suspected CIO operatives after attending a memorial

service. One victim was hospitalized for his injuries. The service

commemorated the one year anniversary of a brutal incident of

election violence in May 2008 that killed five MDC supporters.

After the ceremony on May 16, 2009, a suspected CIO agent ordered

everyone who had attended to surrender their MDC t-shirts.

HARARE 00000467 002 OF 003

¶5. Not Your Average American Farm… Senate President Edna Mazongwe

recently seized a productive multi-million-dollar-a-year citrus farm

in central Zimbabwe and has reportedly turned the farm over to her

daughter, who is an American citizen by birth. During the violent

seizure, several farm workers were seriously injured, including one

who was shot in the knee. See Harare430.

¶6. WOZA Trial Starts… On May 19, eight women and two lawyers with

Zimbabwe Lawyers for Human Rights (ZLHR) faced trial for

allegedly disturbing the peace on February 10. All were arrested in

downtown Harare during Women of Zimbabwe Arise (WOZA)Qs annual

ValentineQs Day march. During the trial, police Superintendent

Lawrence Chinhengo testified that none of the

women were hit when they were arrested because officers QdidnQt have

time.Q The trial will continue on May 28.

¶7. 2 Protest Marches, 0 Arrests… On Monday, over 1000 members of

Women of Zimbabwe Arise (WOZA) and Men of Zimbabwe Arise (MOZA) held

a march in Bulawayo to articulate their demands from the

transitional government. On Tuesday in Harare, 50 lawyers marched to

the Ministry of Justice to present a petition to Minister Chinamasa

to protest government-sponsored intimidation and harassment of

lawyers. The protest followed the arrest of Alec Muchadehama, who

was granted US$100 bail on May 15. To both groupsQ pleasant

surprise, police did not interfere and no one was arrested in either

march.

¶8. Germans Announce Humanitarian-Plus Package… On May 19, Germany

announced 10 million eurosQ5 million for water and

sanitation, 2 million for human rights, conflict, and

democratization, and 3 million for other projectsQin new support to

Zimbabwe. The water and sanitation assistance will include

infrastructure repair in urban centers. Also this week, various

newspapers have reported that the World Bank has approved US$22

million in small grants for Zimbabwe. The World Bank has refuted the

report.

————————–

Economic and Business News

————————–

¶9. More Indications of Return to Economic Normalcy… British

American Tobacco (BAT) noted that the local market has moved

back from QstickQ sales of individual cigarettes that prevailed in

the last couple of years to the Qpack marketQ in an early indication

of slightly rising disposable income. In a further signal of the

return of normalcy, several oil companies are recalling their fuel

coupons, as fuel is now adequately and legally available for hard

currency cash. Fuel coupons had become a surrogate currency as the

Zimbabwe dollar swooned in value last year.

¶10. Government Urged to Get Mining Policy Right… Presenters at a

conference organized by the Chamber of Mines of Zimbabwe

on May 7 urged government to implement prudent policies to attract

investment in mining and restore the sector to its former position

Qinvestment in mining and restore the sector to its former position

of contributing close to 7 percent to GDP and over half of total

exports. Speakers advocated pursing indigenization through joint

ventures with foreign investors rather than through legislation.

However, even under good policies, ZimbabweQs mining industry faces

the immense constraint of electric power shortages. See Harare 417.

¶11. Cereal Shortage Projected for 2009/10… Preliminary results

from the Crop and Food Supply Assessment Mission (CFSAM)

conducted by FAO, WFP, and the Ministry of Agriculture from May 3-11

reveal a cereal shortage of 0.47 MT for 2009/2010 (based on a

population of 12 million). Field work confirms an estimated national

HARARE 00000467 003 OF 003

yield of 1.51 million MT of maize and small grains, short of the

projected requirement of 2.18 million MT. Although seed houses are

well stocked, there are few buyers due to lack of liquidity

especially in the A2 and large-scale farming sector. On the positive

side, maize cereal prices have dropped

from $.50/ kg a few months ago to $0.12 to $0.23/kg. The final CFSAM

report will be released in early June.

¶12. Business Uptick… CFI Holdings reported improved availability

and falling prices of stock feed since the liberalization of grain

marketing. Capacity utilization at its major miller Victoria Foods

has crept up to 30 percent with the wheat line running at 50

percent; at its stock feed manufacturer Agrifoods, capacity

utilization is 24 percent and rising. Cement manufacturer Lafarge is

running at 70 percent capacity, up from 62 percent last year with

output evenly split between exports and domestic sales. Retention of

100 percent of export

proceeds and the end of price controls hugely benefitted the group.

However, the liquidity crunch continues to suppress demand.

¶13. But Credit Scarce… Working capital remains scarce as

individuals and companies fail to maintain significant bank account

balances due to a lack of disposable income/reserves, as well as

weak confidence in the banking sector. The Zimbabwe

Independent reported today that the bulk of bank deposits in

Zimbabwe, which total only US$263 million, was only available

short-term at a time when industry sorely needs long-term credit.

¶14. Air Zimbabwe Struggling… The national airline is incurring

US$4 million in losses every month and cannot meet its operating

costs, according to Air Zimbabwe CEO Peter Chikumba in oral evidence

before the Parliamentary Portfolio Committee on

Transport and Infrastructure. The airline, operating at 40 percent

capacity, has a foreign debt of US$28 million, not counting US$50

million to suppliers of its Chinese MA60s aircraft. The Civil

Aviation Authority of Zimbabwe is reported to be US$150 million in

the red.

¶15. Quote of the Week:

QOn several occasions, the distinguished minister (Tendai Biti) has

accused me of killing this economy through printing money…I have

suffered and continue to suffer abuse and ridicule at a time when

you as prime minister have been telling the nation that by-gones are

by-gones and that we need to move forward

— Reserve Bank Governor Gideon GonoQs plea to Prime Minister Morgan

Tsvangirai in a 15-page letter dated May 11 in

which he also asked for immunity from future prosecution. On May 21,

TsvangiraiQs office said they had never received the

letter, which was first published in the Zimbabwe Times. The entire

letter is at: http://

www.thezimbabweindependent.com/index.php/loca l/

22666-biti-has-personal-vendetta-againsts-me- gono

MCGEE

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