Finance Minister Tendai Biti demonetised the Zimbabwe dollar in his mid-year budget for 2009 and said he would buy all balances held by the financial sector for an estimated US$6 million.
The minister said he was “putting a tombstone on the grave of the Zimbabwe dollar”.
He also increased the budget from US$1 billion to US$1.361 billion and suspended duty on capital goods and pure raw materials in an effort to boost production.
Biti said the government was phasing out allowances for civil servants and was now paying them salaries.
Full cable:
Viewing cable 09HARARE596, ZIM NOTES 07-17-2009
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|
Reference ID |
Created |
Released |
Classification |
Origin |
VZCZCXRO1265
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSB #0596/01 2010659
ZNR UUUUU ZZH
R 200659Z JUL 09
FM AMEMBASSY HARARE
TO RUEHC/SECSTATE WASHDC 4728
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHUJA/AMEMBASSY ABUJA 2345
RUEHAR/AMEMBASSY ACCRA 2951
RUEHDS/AMEMBASSY ADDIS ABABA 3068
RUEHRL/AMEMBASSY BERLIN 1497
RUEHBY/AMEMBASSY CANBERRA 2331
RUEHDK/AMEMBASSY DAKAR 2698
RUEHKM/AMEMBASSY KAMPALA 3116
RUEHNR/AMEMBASSY NAIROBI 5559
RHEHAAA/NSC WASHDC
RHMFISS/EUCOM POLAD VAIHINGEN GE
RUEHGV/USMISSION GENEVA 2246
RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK
RHEFDIA/DIA WASHDC
UNCLAS SECTION 01 OF 03 HARARE 000596
AF/S FOR B. WALCH
ADDIS ABABA FOR USAU
ADDIS ABABA FOR ACSS
NSC FOR SENIOR AFRICA DIRECTOR
STATE PASS TO USAID FOR L.DOBBINS AND J. HARMON
COMMERCE FOR ROBERT TELCHIN
SIPDIS
E.O.12958: N/A
TAGS: PGOV PREL ASEC PHUM ECON ZI
SUBJECT: ZIM NOTES 07-17-2009
———–
¶1. SUMMARY
———–
Topics of the week:
– Constitutional Process Stumbles On…
– MDC-T MP Suspended from Parliament…
– ZANU-PF Ministers Implicated in Poaching Scandal…
– Finance Minister Discusses Chiadzwa in Fiscal Assessment…
– Top Security Chiefs Sued Over Abductions…
– Budget Raised in Mid-Term Review…
– Biti Unveils Measures to Increase Production…
– Concessions Made to Strengthen Banking Sector…
– Government to Sell Portion of Air Zimbabwe…
– Indian Firm Invests in Ginnery and Oil Refinery…
—————————–
On the Political/Social Front
——————————
¶2. Constitutional Process Stumbles On… The two-day All
Stakeholder’s Conference concluded successfully on July 14 after
getting off to a rocky start the day before when riot police were
called in to assert control following a disturbance caused by
ZANU-PF youth groups and orchestrated by President Mugabe’s nephew
and ZANU-PF MP Patrick Zhuwao, Youth Minister Saviour Kasukuwere,
and war veteran leader Joseph Chinotimba. MDC activist Patrick
Danga was arrested by the police while restraining Zhuwao and is
still detained at Harare Central police station. Despite the
chaotic events, the constitutional process remains on track. The
Conference may have been salvaged by a warning issued by Prime
Minister Tsvangirai to President Mugabe that the MDC would consider
pulling out of the inclusive government if ZANU-PF sabotaged the
path towards a new Constitution. See Harare 588.
¶3. MDC-T MP Suspended from Parliament… Zimbabwe’s Parliament has
suspended an MDC-T legislator from the House of Assembly after he
received a 10-month prison sentence for allegedly obstructing
justice. Mathias Matewu Mlambo from Chipinge West was issued a
letter by the long-tenured and ZANU-PF-aligned Clerk of Parliament,
Austin Zvoma, informing him not to attend Parliament nor execute any
of his official duties. Under Zimbabwean law sitting MPs do not
lose their functional authorities upon conviction if their case is
on appeal; however, by not providing the Clerk with proof of his
appeal, Mlambo opened the door to his suspension. The Speaker of
Parliament is confident his office can overrule the suspension.
Mlambo is one of three MDC-T MPs who are appealing convictions the
party believes are trumped-up and politically motivated. See Harare
¶585.
¶4. ZANU-PF Ministers Implicated in Poaching Scandal… Defense
Minister Emmerson Mnangagwa and Minister of Media and Information
Webster Shamu were implicated in a poaching operation by a Chinese
national who was caught with six rhino horns at a police roadblock.
Press reports indicated that the two government ministers run their
poaching operations from HKK Safaris, a conservancy Shamu co-owns
with South African businessman, Charles Davy. MDC efforts to
inquire into the case revealed that the police superintendent who
was in charge of the investigation had been transferred from his
Qwas in charge of the investigation had been transferred from his
posting at Bulawayo Central police station to a rural outpost in
Mashonaland Central province.
¶5. Finance Minister Discusses Chiadzwa in Fiscal Assessment…
Minister of Finance, Tendai Biti (MDC-T) briefly touched on the
topic of Chiadzwa diamonds while addressing the mining sector in his
fiscal address to Parliament on July 17. Biti said that the
government would comply with all of the recent Kimberley Process
Certification Scheme (KPCS) recommendations to avoid suspension. He
also share that Mines Minister Obert Mpofu had sent the KP a letter
HARARE 00000596 002 OF 003
confirming their commitment to compliance. Foremost among the KPCS
recommendations was the elimination of military control over the
area.
¶6. Top Security Chiefs Sued Over Abductions… Zimbabwean
political activists and a journalist abducted last year by State
agents are suing two Cabinet ministers and a handful of security
chiefs in Zimbabwe’s High Court for a combined US$19.2 million in
damages. The lawsuit charges that they were unlawfully abducted,
detained and deprived of their liberty. The 15 plaintiffs are
demanding US$1.2 million each. The suit seeks compensation from the
co-Ministers of Home Affairs, Kembo Mohadi and Giles Mutsekwa,
Justice Minister Patrick Chinamasa, then Security Minister Didymus
Mutasa, Police Commissioner-General Augustine Chihuri, Prisons
Commissioner Paradzai Zimondi, and Central Intelligence Organization
Director-General Happyton Bonyongwe.
———————————–
On the Economic and Business Front
———————————-
¶7. Budget Raised in Mid-Term Review… Finance Minister Tendai
Biti, revised upwards the 2009 Budget from US$1 billion to US$1.361
billion primarily due to an expected increase in unconfirmed donor
support. He announced that the majority of these funds will go
towards raising civil servant salaries. Consequently, later this
month civil servants will begin receiving salaries in lieu of the
US$100 monthly allowances they began getting in March. While
expected to be higher than the allowances, average salary figures
were not announced. The Zimbabwe Independent newspaper, estimated
that the average salary might only amount to US$140 per month. The
GOZ also expects to be able to trim payroll numbers by carrying out
an audit intended to eliminate “ghost workers”.
¶8. Biti Unveils Measures to Increase Production… In a move
designed to increase capacity utilization, Biti suspended import
duties on capital goods and pure raw materials and cut those on
intermediate goods from 15 to 10 percent. He also removed import
duties on fuel, replacing it with an excise duty of US20 cents and
US16 cents per liter for petrol and diesel. He alluded to
additional tax changes that will be announced in the 2010 Budget
Statement due at the end of November 2009.
¶9. Concessions Made to Strengthen Banking Sector… In an effort
to improve market liquidity, Biti scrapped the five percent tax on
bank profits and promised to review a possible cut of the current 10
percent bank reserve requirement. He also proposed to de-monetize
the Zimbabwe dollar by purchasing all balances held with the
financial sector at an estimated cost of US$6 million. This will
effectively put an end to the use of the Zimbabwe dollar as money,
or in Biti’s words, “putting a tombstone on the grave of the
Zimbabwe dollar.”
¶10. Government to Sell Portion of Air Zimbabwe… The Financial
Gazette (July 16, 2009) reports that the GOZ is planning to sell 60
percent of the national airline for an estimated US$750 million to
Qpercent of the national airline for an estimated US$750 million to
an un-named private operator. If the deal goes through, the money
will be used to replenish Air Zimbabwe’s depleted fleet. (Comment:
The loss-making airline does not have the assets to justify even a
fraction of this purported valuation.)
¶11. Indian Firm Invests in Ginnery and Oil Refinery… An Indian
firm has invested US$4 million into a ginnery and oil refinery
factory in Glendale, 40 km north of Harare. According to the
managing director, the firm will operate at 50 percent capacity and
will manufacture 500,000 liters of cooking oil by year end. The
ginnery plant is already operational at a rate of 60 tons of lint a
day.
—————–
HARARE 00000596 003 OF 003
Quote of the Week
—————–
¶12. “We are doing what we did in June, winning.” “We are doing
away with the Prime Minister.” “Zimbabwe is liberated with blood.”
– Slogans chanted by ZANU-PF youth and war veterans during the chaos
of the first day of the All-Stakeholder’s Conference on July 13.
DHANANI
(37 VIEWS)
