Business said there was no hope until Mugabe was gone

A number of business leaders, way back in 2005, said they saw no hope for Zimbabwe until President Robert Mugabe was gone because they did not believe that any cabinet under Mugabe would enact more reasonable exchange rate or land reform policies.

They said that politicians from the ruling Zimbabwe African National Union-Patriotic Front who enriched themselves by accessing foreign exchange at the official rate or handpicking the best farms were incapable of advocating a floating exchange rate or overseeing an independent audit of land reform.

Some of their colleagues, however, disagreed saying that they hoped that Mugabe would appoint a more pragmatic post election cabinet and permit significant devaluation.

The business leaders were speaking at a round-table organised by the United States embassy, two weeks before the March 2005 parliamentary elections.

Full cable:

Viewing cable 05HARARE457, BUSINESSMEN WANT RAPID POST-ELECTION CHANGES

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This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L SECTION 01 OF 02 HARARE 000457

SIPDIS

AF/S FOR BNEULING

EB/IFD FOR FCHISHOLM

NSC FOR SENIOR AFRICA DIRECTOR C. COURVELLE, D. TEITELBAUM

TREASURY FOR OREN WYCHE-SHAW, STATE PASS USAID FOR MARJORIE

COPSON

ALL AFRICAN DIPLOMATIC POSTS

E.O. 12958: DECL: 12/31/2009

TAGS: ETRD PGOV ZI ECON EINV

SUBJECT: BUSINESSMEN WANT RAPID POST-ELECTION CHANGES

Classified By: Ambassador Christopher Dell for reasons 1.4 b/d

——-

Summary

——-

¶1. (C) Summary: Participants at the Embassy’s March 17

business roundtable agreed that Reserve Bank (RBZ) Governor

Gideon Gono had further damaged the economy since taking

office on December 1, 2003 with his emphasis on state control

of the economy. They disagreed whether more market-oriented

policies would prevail after the March 31 parliamentary

elections. Some participants said the GOZ would likely

devalue the zimdollar, which could help business conditions.

However, others noted that without changes to the underlying

policies, a devaluation would likely spur further

depreciation in the zimdollar and a corresponding spike in

inflation. Most participants expressed skepticism that

President Mugabe would curb economic intervention, undertake

an objective audit of land reform and replace

under-performing farmers, or appoint competent ministers to

his cabinet. They encouraged the U.S. and other donors to

use their leverage to press for more liberal economic

policies. End Summary.

————

Participants

————

¶2. (C) The roundtable, moderated by the Charge d’Affaires,

bought together participants from the economy,s main

sectors. Agriculture: Cargill Managing Director John

Battershell, Anglo-American CEO James Maphosa and independent

farmer Wilson Nyabonda. Mining: Zimplats CEO Greg Sebborn

and Maphosa. Manufacturing: Colgate-Palmolive MD Davis

Kenyama. Tourism: Rainbow Tourism CEO Chipo Mtasa.

Financial Services: Zimbabwe Allied Banking Group (ZABG)

Finance/Administration Director Pricilla Mutembwa.

——————————————— ——

Some Still Hope for Better Post-Election Conditions

——————————————— ——

¶3. (C) None of the participants were unabashedly optimistic

about future GOZ economic policy. However, the local heads

of Rainbow Tourism, Cargill, Zimplatts along with the

independent farmer expressed guarded hope that Mugabe would

appoint a more pragmatic post-election cabinet. Several of

the businesspeople also suggested Mugabe would permit a

significant devaluation that could help improve the

competitiveness of Zimbabwe,s exports.

¶4. (C) Nyabonda, currently Zimbabwe’s largest tobacco farmer,

said he and other farmers were lobbying for a special

exchange rate of Z$10,000-12,000:US$ vice the official rate

of Z$6,000:US$. (N.B. Nyabonda purchased his farm in the

mid-90,s, before the start of fast-track land reform and the

seizure of white-owned farms.) Nyabonda said the tobacco

selling-season would open April 5. If the GOZ had not

instituted a general devaluation or set up a special rate for

farmers shortly after the election, he predicted that tobacco

farmers would begin smuggling their tobacco out of the

country for sale, rather than sell it at a loss to the state.

¶5. (C) Nyabonda also said he expected the GOZ to undertake an

audit of farms resettled under the GOZ’s fast-track land

reform and replace under-performing beneficiaries with other

aspiring farmers. He argued that the division of large

formerly white-owned farms into many smaller units was not

working ) “only one of ten farms has irrigation and power”

) and that the GOZ would have to find a way to turn these

smaller farms into “sustainable units.”

——————————————–

While Others Have Given Up Until Mugabe Goes

——————————————–

¶6. (C) By contrast, the Anglo-American, Colgate-Palmolive and

ZABG representatives were skeptical that any cabinet under

Mugabe would enact more reasonable exchange rate or land

reform policies. They maintained that politicians from the

ruling ZANU-PF who enriched themselves by accessing foreign

exchange at the official rate or handpicking the best farms

were incapable of advocating a floating exchange rate or

overseeing an independent audit of land reform.

¶7. (C) Anglo-American CEO Maphosa said the business community

“overestimated the success of (RBZ Governor) Gono” while

Kenyama and others criticized the central banker for

bolstering government control of the economy. There was no

general agreement on whether Gono would personally favor

market solutions but all agreed that Mugabe would have fired

him, as he had former Finance Minister Simba Makoni, had he

proposed more liberal policies. In that regard, Rainbow

Tourism CEO Mtasa warned that a devaluation, absent more

liberal underlying economic policies, would only cause

further zimdollar depreciation on the parallel market and

would likely cause 2005 inflation to spiral out of control.

¶8. (C) Maphosa, Kenyama and Zimplatts CEO Sebborn predicted

serious post-election shortages of food and fuel as well

other imported commodities. They said the government would

have to appeal for international food assistance after the

election. They also confirmed that many in the GOZ believed

that if the March 31 elections were given a clean bill of

health by South Africa and the Southern African Development

Community (SADC), the west would bless them as well, leading

to renewed support from the IMF and other IFIs.

¶9. (C) The Charge said the U.S. would respond positively to

an appeal for food aid; we did not use food as a political

tool, but that renewed IMF lending was a distant prospect at

best and would depend on a resolution of Zimbabwe,s

political crisis. Several participants said the donor

community should use its leverage to press for more market

friendly policies. In that regard, Sebborn noted that his

company was prepared to invest US$2 billion but had

inexplicably yet to receive a green light from the GOZ.

(N.B., by comparison, the country exported only US$1.7

billion last year and attracted less than US$10 million in

foreign direct investment.)

——–

Comment

——–

¶10. (C) RBZ Governor Gono,s honeymoon is over.

Industrialists are increasingly demanding that Gono implement

the market-oriented policies the central banker has

frequently praised and promised. The GOZ, with or without

Gono, will clearly have to move quickly following the

elections on a variety of economic fronts: food insecurity,

fuel shortages, and the exchange rate being the most

prominent. It remains to be seen whether the GOZ under

Mugabe will be capable of embracing more liberal economic

policies or will choose to rely on continued state control.

The latter would be a recipe for further rapid economic

deterioration.

Dell

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