Chiyangwa arrested

ZANU-PF Chinhoyi MP Phillip Chiyangwa was arrested for his alleged involvement in an expanding embezzlement scandal involving ENG Capital Management.

The company was caught up in the crackdown on the financial sector by new central bank governor Gideon Gono who said his market-friendly proposals have unleashed a “shrill” cacophony of covert memos and emissaries to President Robert Mugabe.

He was not sure whether Mugabe would continue to grant him wide latitude to tame Zimbabwe’s imploding economy.

Full cable:

Viewing cable 04HARARE59, CENTRAL BANKER MEETS GROWING HOSTILITY

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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 000059

SIPDIS

STATE FOR AF/S

TREASURY FOR OREN WYCHE-SHAW

STATE PASS USAID FOR MARJORIE COPSON

STATE PASS USDOC FOR AMANDA HILLIGAS

E.O. 12958: DECL: 01/01/2008

TAGS: ECON EFIN ETRD PGOV ZI

SUBJECT: CENTRAL BANKER MEETS GROWING HOSTILITY

Classified By: Econchief William Weissman, Reason: 1.5 (b,d).

¶1. (C) Summary: Drenched in palpable exasperation, Reserve

Bank (RBZ) Governor Gideon Gono says his market-friendly

proposals have unleashed a “shrill” cacophony of covert memos

and emissaries to President Mugabe. He is uncertain whether

Mugabe will continue to grant him wide latitude to tame

Zimbabwe’s imploding economy. If Gono can one day point to a

genuine turnaround, he will want to enlist the support of the

International Monetary Fund (IMF) and donor countries. End

Summary.

¶2. (C) Gono underscored his goals and challenges during an

hour-long session with Amb Sullivan. Highlights follow:

– Combat Enemies of Reform. Dissent and sabotage have

suffused the universal acclaim that greeted Gono’s Dec. 18

policy statement. He singled out the Ministry of Finance –

including Minister Herbert Murerwa – as antagonists. He

showed us a confidential denunciation penned by a Ministry

official, intended for Mugabe but leaked to Gono. One

ZANU-PF higher-up even traveled to Malaysia, where Mugabe has

been vacationing, to complain of the Governor’s policy. At

the same time, members of both the governing ZANU-PF and

opposition MDC have said Gono is targeting their economic

support base. (Note: Police arrested ZANU-PF Chinoyi MP

Philip Chiyangwa over the weekend for his alleged involvement

in an expanding embezzlement scandal involving ENG Capital

Management.)

– Patch Government/Business Ties. Gono believes he is

uniquely qualified to mend this rift. His close relationship

with Mugabe affords him more cover than past “reformers.”

Gono bragged that ex-Finance Minister Simba Makoni asked him

in a private lunch on the day of the Dec 18 address how he

gets away with demanding twice as much as Makoni had in 2002

– causing the former Minister’s dismissal.

– Restore Zimbabwe’s International Borrowing Credibility.

Gono wants to rebuild the country’s relationship with the

IMF, World Bank and donor countries. However, the Governor

wants first to log a record of accomplishment. Gono claims

Mugabe was taken aback when he told the President he should

meet with the next visiting IMF delegation. “We owe them

money. We cannot afford to be arrogant,” he alleges to have

said to the President. While Amb Sullivan emphasized the

importance of progress on political reconciliation and civil

liberties as well as economic reform, the ZANU-PF partisan

Gono argued the MDC should adopt a less confrontational

stance, focusing on future rather than past elections.

(Comment: We suspect he favors reconciliation through

national unity instead of multiparty democracy.)

– Involve All Stakeholders. Gono says he consulted broadly

with economists, the IMF, labor reps and business leaders in

devising his policy statement. In fact, he specifically

cited three prominent white economic commentators – John

Robertson, Erich Block and Tony Hawkins – whom the State

media frequently belittles.

Comment

——-

¶3. (C) Did the politically-atuned Gono overstate his

commitment to reform and rapprochement with the West for our

benefit? We don’t know, and we will ultimately judge him by

actions rather than words or amiability.

¶4. (C) Still, it’s worth pointing out what he’s done since

taking office on Dec 1. Gono cut the RBZ’s credit line for

insolvent financial institutions, potentially returning some

credibility to the banking sector. He enunciated his new

economic policy at length without blaming Zimbabwe’s ills on

Western “sanctions.” He appointed a well-rounded, pragmatic

group of Zimbabweans to the Advisory Board that will oversee

the new currency auctions (commencing this week), including

Bloch, Tobacco Association President Duncan Miller, Standard

Chartered CEO Washington Matsaira, Rio Tinto CEO John Nixon

and Indigenous Commercial Farmers Union Chief Davison Mugabe

– persons known and respected by the Embassy – as well as

several high GOZ officials (but excluding hard-liners in the

mold of Jonathan Moyo or Joseph Made). He turned back until

a later stage President Mugabe’s request for Malaysian

central bank advisors, arguing that there’s no quick fix and

Zimbabweans must come to terms with the problems they caused.

Gono has, in short, surpassed our initial modest

expectations, but we’re still in the first inning of a long

game.

¶5. (C) Without doubt, the dynamics of GOZ economic

policymaking are in flux. We don’t know where the

center-of-gravity will end up, but given this Government’s

current track record, it can’t hurt to roll the dice. While

the Finance Ministry was once the main GOZ voice for

pragmatism (perhaps until Makoni’s exit in 2002), most top

Ministry officials are now large land reform beneficiaries

(in one form or another) with vested interests in the status

quo. Gono’s speech reached well beyond monetary policy,

visibly wrestling bureaucratic turf away from that Ministry.

This is especially humbling for a Ministry whose own best

shot at reform – the National Economic Recovery Program

(NERP) – proved an embarrassing travesty that led to

Zimbabwe’s IMF expulsion. But it remains to be seen whether

Mugabe will continue to back an RBZ Governor whose polices

run counter to “anti-imperialist” demagoguery – and whether

Gono has what it takes to carry on the fight for economic

reform.

SULLIVAN

(321 VIEWS)