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.
Viewing cable 05HARARE457, BUSINESSMEN WANT RAPID POST-ELECTION CHANGES
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
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
ALL AFRICAN DIPLOMATIC POSTS
E.O. 12958: DECL: 12/31/2009
SUBJECT: BUSINESSMEN WANT RAPID POST-ELECTION CHANGES
Classified By: Ambassador Christopher Dell for reasons 1.4 b/d
¶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.
¶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.)
¶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