Econet on expansion warpath

Econet, the country’s largest mobile phone network, was on an expansion warpath in 2008 growing its subscriber base by 40 percent and increasing market share by 30 percent to 1.2 million subscribers though revenue was down by 30 percent in the first half of the year.

Other companies were not doing well during that period which was the worst in the history of Zimbabwe with sales at hard-liquor giant African distillers going down by 36 percent and revenue down by 84 percent.

Full cable:

Viewing cable 08HARARE937, ZIM NOTES 10-17-2008

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R 200800Z OCT 08

FM AMEMBASSY HARARE

TO RUEHC/SECSTATE WASHDC 3579

RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE

RUEHUJA/AMEMBASSY ABUJA 2101

RUEHAR/AMEMBASSY ACCRA 2364

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RUEHRL/AMEMBASSY BERLIN 0992

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RHEHAAA/NSC WASHDC

RHMFISS/EUCOM POLAD VAIHINGEN GE

RUEHGV/USMISSION GENEVA 1631

RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK

RHEFDIA/DIA WASHDC

RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 03 HARARE 000937

AF/S FOR B. WALCH

ADDIS ABABA FOR USAU

ADDIS ABABA FOR ACSS

NSC FOR SENIOR AFRICA DIRECTOR B.PITTMAN

TREASURY FOR D. PETERS

STATE PASS TO USAID FOR L.DOBBINS AND E.LOKEN

COMMERCE FOR BECKY ERKUL

SIPDIS

E.O.12958: N/A

TAGS: PGOV PREL ASEC PHUM ECON ZI

SUBJECT: ZIM NOTES 10-17-2008

———–

¶1. SUMMARY

———–

Topics of the week:

– Talks Stall…

– Parliament Opens, Talks Continue…

– Masvingo Governor Blocks Humanitarian Aid…

– 2 Protests; 13 Arrests; over 29 Injured…

– Poor Water Management…

– Zims Continue to go South…

– Check Rate Replaces Transfer Rate And Falls Even Faster…

– New Z$50,000 Note Introduced as Local Currency Becomes

Worthless…

– What Sanctions?…

– Cotton Production Falls…

– Companies Struggle…

———————————

¶2. Price Movements-Exchange Rate

and Selected products

———————————

Parallel rate for cash rose to Z$20,000:US$1

Check rate (see note below) increased nearly ten-fold to

Z$40,000,000:US$1 against inter-bank average of Z$209:US$1

Bread on the parallel market tripled to Z$30,000

Sugar rose to $20,000/2kg

Petrol and diesel quadrupled to Z$40,000/liter

Note: Due to the suspension of the Real-Time Gross Settlement system

by the Reserve Bank of Zimbabwe on October 3, Post will now be

reporting on the unofficial check transfer rate that individuals and

entities are using to make non-cash payments.

—————————–

On the Political/Social Front

—————————–

¶3. Talks Stall… After a week of talks, mediated by former South

African president Thabo Mbeki, talks between ZANU-PF and the MDC

appear to have stalled. The MDC, which initially insisting on

leading the finance and home affairs ministries, demanded an

expanded discussion on the allocation of all ministries. ZANU-PF

and Mugabe were ready to concede finance but dug their heels over

other MDC demands. See Harare 932.

¶4. Parliament Opens, Talks Continue… Parliament reconvened on

October 14. Addressing priorities such as Amendment 19

(incorporating the September 15 agreement), a budget, establishment

of committees, and drafting of a new constitution, await the

completion of an agreement between ZANU-PF and the MDC. See Harare

¶933.

¶5. Masvingo Governor Blocks Humanitarian Aid… Newly-appointed

Masvingo governor Titus Maluleke addressed a meeting of NGOs on

October 13 and announced new rules for NGO operations. These rules

contradict national level policies, and, according to one NGO

country director, “if implemented would certainly reinforce

patrimonial, patriarchal, ZANU-PF party power structures.” The new

rules require that NGOs receive authorization from provincial,

district, and traditional authorities, generally controlled by

ZANU-PF, to operate; they also give traditional leaders the

HARARE 00000937 002 OF 003

exclusive authority to designate recipients. We have learned that

the same rules will also be applied in Manicaland province. The

donor community will coordinate its response.

¶6. 2 Protests; 13 Arrests; over 29 Injured… Two protests this

week resulted in police beatings and arrests. On Tuesday, Zimbabwe

National Students Union (ZINASU) led approximately 200 students to

Parliament to present a petition listing concerns about the current

state of the education system in Zimbabwe. When they tried to

present the petition, police refused the students entry and began

beating them until they dispersed. Four were arrested and released

after paying a fine; another 26 were injured by police who used

excessive force, according to medical staff. On Thursday, Women of

Zimbabwe Arise (WOZA) led a march of 200 women in Bulawayo to

government offices, demanding a declaration of a national disaster

and immediate food aid for all. Riot police disrupted the protest

by beating the women – breaking one woman’s finger – and arrested a

total of nine women. As of Friday morning, only WOZA leaders Jenni

Williams and Magodonga Mahlangu remained in jail; police continue to

deny their lawyer access. See Harare 934.

¶7. Poor Water Management… Crumbling infrastructure and

mismanagement continues to wreak havoc on Zimbabwe’s water supply.

For instance, the cholera mortality rate in Chitungwiza is more than

ten-times the level needed to declare an emergency. See Harare 919.

¶8. Zims Continue to go South… The South African Consul in Harare

told us that his office approves about 90% of the approximately 2000

visa applications it receives daily, despite a high rate of

fraudulent documents. See Harare 928.

———————————-

On the Economic and Business Front

———————————-

¶9. Check Rate Replaces Transfer Rate And Falls Even Faster…

Since the RBZ suspended the inter-bank transfer system two weeks

ago, alleging that it was fueling depreciation of the Zimbabwe

dollar, and in light of the ongoing cash shortage, transactions have

shifted to personal or bank checks. The surging check volume is

challenging the capacity of banks’ outdated clearing equipment

causing backlogs in the payments system. Moreover, the check rate

has plunged from Z$3.5 million:US$1 a week ago to Z$40 million:US$1

on October 17, 2008. NGO operations have been threatened by the

RBZ’s policy to halt RTGS transactions. Although a clarification

has allowed for intra-bank RTGS transactions, many NGOs need to

transfer money from foreign accounts to local vendors, who often do

not have foreign accounts.

¶10. New Z$50,000 Note Introduced as Local Currency Becomes

Worthless… The RBZ issued a new Z$50,000 note this week; in line

with recent practice, it also raised the maximum daily cash

withdrawal limit from Z$20,000 to Z$50,000. The new note is worth

only US$2.50 at the cash rate of Z$20,000:US$1 and it is worthless

at the check rate of Z$40 million:US$1.

¶11. What Sanctions?… Zimbabwe-US bilateral trade figures for

2008 show Zimbabwe to be back in surplus after having slipped into

deficit in 2007 for the first time in a decade. Bilateral trade

amounted to $135 million in the first 8 months of the year.

¶12. Cotton Production Falls… Seed cotton production dropped from

253,000 MT last year to 223,000 MT in 2007/08, well short of the

forecast 300,000 MT, according to the Cotton Growers Association

(CGA). Rampant side-marketing of the product by growers added to a

general atmosphere of lawlessness, exacerbated by election-period

unrest in rural areas. The CGA has been unable to push a regulatory

framework for the industry through Cabinet. In the meantime, the

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number of cotton contracting companies scenting forex earnings has

exploded to include parastatals bereft of any agriculture

experience, like the Zimbabwe Electricity Supply Authority (ZESA).

¶13. Companies Struggle… Sales volumes were down by 36% at

hard-liquor giant African Distillers and revenue down 84% in the

year to end-June. Econet Wireless Holdings reported similarly

dismal results, with revenue down by 30% in the first half of 2008

primarily due to sub-economic state-controlled tariffs. Founded by

self-exiled maverick businessman Strive Masiyiwa, Econet

nevertheless is on the expansion warpath, having grown its

subscriber base by 40% in one year and with sights set on increasing

market share by another 30% to 1.2 million subscribers by 2/09.

—————–

Quote of the Week

—————–

¶14. Morgan Tsvangirai, addressing 10-20,000 supporters at a rally

on October 12: “We won the elections on 29 March. Mugabe, the loser

in that election, cannot pretend to be magnanimous to the MDC by

‘allocating’ us ministries when it is us who have been benevolent

enough to given him the Presidency as a way of national healing and

rebirth”

MCGEE

(86 VIEWS)