Fear marred US sponsored business conference

Several members of the American Business Association of Zimbabwe and companies with United States interest told organisers of a business forum organised by ABAZ in October 2007 that they had declined even the lowest level of sponsorship because of fear of recrimination by the government.

PricewaterhouseCoopers, which was the primary sponsor of the 2006 forum, and US tobacco giant AllianceOne, explicitly requested no public recognition of any sort for their financial support of the event.

According to a diplomatic cable released by Wikileaks, 26 companies exhibited at the mini-trade fair that was run concurrently with the forum but apart from Econet, which is owned by exiled businessman Strive Masiyiwa, which offered free GPRS service to all delegates, none of the companies appeared to use the forum as an opportunity to win new business.

“Their intent for the most part was to show solidarity with the vision of the American Business Association of Zimbabwe: ‘to promote optimum conditions for business to make maximum contributions to economic growth in Zimbabwe’,” the cable says.

It says despite the strong financial sponsorship by major companies and the United States State Department’s Business Facilitation and Incentive Fund, the forum made a loss of US$2 5000.

It said the loss was primarily due to two factors: no-shows of pre-registered delegates and the sharp depreciation in value of sponsorship money during planning.

Full cable:

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UNCLAS SECTION 01 OF 05 HARARE 001002

SIPDIS

SENSITIVE

SIPDIS

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

TREASURY FOR J. RALYEA AND T.RAND

COMMERCE FOR BECKY ERKUL

EEB/EX GAYLE GRAY

EEB/CBA DENNIS WINSTEAD

E.O. 12958: N/A

TAGS: ECON EINV PGOV ZI

SUBJECT: BFIF FUNDING ONCE AGAIN CATALYZES PRIVATE SECTOR

DISCUSSIONS ON TURNAROUND

REF: A. HARARE 0964

¶B. HARARE 0951

¶C. HARARE 0657

¶D. HARARE 0598

¶E. 2006 HARARE 01317

¶1. (U) This is an action request. Please see paragraph 13.

——-

Summary

——-

¶2. (SBU) On October 2, for the second consecutive year, the

American Business Association of Zimbabwe (ABAZ), generously

supported by the Business Facilitation and Incentive Fund

(BFIF) and the private sector, held a high-profile day-long

economic forum under the theme “Just Business” to identify

and deliberate over solutions to Zimbabwe’s economic

problems. Presentations by speakers from the World Bank,

academia, government and business focused on two subjects:

other developing countries’ experience in taming

hyperinflation; and the importance of secure property rights

in creating wealth and attracting investment. About 220

delegates attended the forum and accompanying mini-trade fair

at which 26 companies found the courage, in an

anti-business/anti-American climate, to exhibit under the

banner of an American association. Due to unforeseen

circumstances, the event made a small loss. Post is seeking

early FY08 BFIF funding to close the gap and enable ABAZ to

continue its outreach. Looking ahead, ABAZ intends to

disseminate the proceedings to the media, take key messages

directly to government officials and parliamentarians, and

begin a series of workshops on the South African experience

with black economic empowerment as an alternative to the

indigenization policy now under discussion. End Summary

——————————————-

BFIF Support Spurs Business Group to Action

——————————————-

¶3. (U) On October 2, the American Business Association of

Zimbabwe, supported generously by the State Department’s

Business Facilitation and Incentive Fund (BFIF) and by 12

leading companies as primary sponsors, including Stanbic

Bank, RioTinto and Murowa Diamonds, held a high-profile

day-long economic forum under the theme “Just Business” at

Harare’s premier convention facility, the Celebration Center.

This was a sequel to last year’s forum (Ref E) that opened

up a private sector-led public discussion about the key

economic policy reforms needed to right Zimbabwe’s course.

This year, in an especially daunting anti-business,

anti-American climate (Ref C), the organizing committee drew

on speakers from Zambia, the U.K. and the U.S. to engage in

constructive discussion of the way forward for the Zimbabwean

economy.

——————————————— ————–

Macroeconomic Stabilization ) Lessons From Around The World

——————————————— ————–

¶4. (U) Opening the forum was Dr. Kapil Kapoor, the World

Bank’s country manager in Zambia and former deputy country

manager in Zimbabwe. He reviewed Zimbabwe’s deteriorating

economic and social indicators and described the experiences

of 24 countries with hyperinflation between 1980 and 2005.

He pointed out that high inflation could last as long as 48

months (Zaire in 1991-1994), then described three key

HARARE 00001002 002 OF 005

elements of successful economic stabilization: up-front large

fiscal adjustment, including elimination of quasi-fiscal

activities; monetary adjustment with a focus on price

stability and the establishment of monetary credibility

through central bank independence; and exchange rate

adjustment, again, up-front and close to the prevailing

parallel market rate. The measures should be accompanied by

social safety nets for vulnerable people and policy reforms

to remove microeconomic distortions (civil service reform,

agricultural reform, etc.). Kapoor summarized that

front-loaded programs were more successful in gaining

credibility and taming inflationary expectations than a

gradual approach; positive stabilization results could be

achieved quickly; and about half of the cases examined had

official external financing similar to that of Zimbabwe (4

percent of GDP) and no IMF program at the outset. In all

cases, private capital flows tended to follow stabilization.

¶5. (U) Widely regarded as the most effective speaker of the

day, elder statesman, Vice Chancellor of the University of

Zambia, and former Governor of the Reserve Bank of Zambia in

the 1990s, Dr. Jacob Mwanza recounted one failed Zambian

policy after another during Zambia’s 25-year long pursuit of

a socialist development model. His recitation of past price

and foreign exchange controls, empty foreign currency

coffers, falling production, record-breaking sovereign debt

and budget deficits in Zambia, eerily echoed the Zimbabwe

situation today. The cornerstone of Zambia’s reforms as it

embraced a capitalist development model consisted of the

privatization of state-owned entities, freeing up the prices

of goods and services, repealing the Exchange Control Act,

allowing the market to determine exchange rates, and civil

service reform. Mwanza also described Zambia’s successes in

diversifying the economy beyond its core copper industry into

agriculture and tourism, and the strong growth, foreign

reserves, and trade balance that Zambia now enjoyed, along

with low inflation.

¶6. (U) Professor Steve Hanke of Johns Hopkins University

presented on “Overcoming Hyperinflation ) Possible

Solutions” in an audiovisual recording, as he was unable to

attend the forum in person. Having served as advisor to an

impressive list of governments in Latin America, the Balkans

and former Soviet Union, he drew upon his forthcoming book

“Zimbabwe: Hyperinflation to Growth,” and zeroed in on the

pros, cons and mechanics of exchange rate stabilization using

dollarization or currency boards.

——————————————— ————–

Property Rights and Resuscitating the Ag and Mining Sectors

——————————————— ————–

¶7. (SBU) Craig Richardson, Professor of Economics at Salem

College in North Carolina, returned to the ABAZ forum this

year to address “Property Rights and their Implications for

Investment and Economic Growth.” Once again, he showed

striking visual evidence of the cost of destroying property

rights in the agricultural sector. Using satellite photos of

abutting commercial and communal properties, he demonstrated

that those who owned their own land had greater incentives to

maintain and enhance it. Using examples of strengthened

property rights in Tanzania and Niger, Richardson argued that

all citizens should hold secure property rights to prevent

land degradation and gain collateral for land improvements.

On the margins of the event, we arranged meetings for Prof

Richardson with leaders of the Confederation of Zimbabwe

Industries (CZI), the Commercial Farmers’ Union (CFU), the

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Horticultural Promotion Council, and the Compensation

Coalition. In the expectation that Prof. Richardson would

continue to publish articles on property rights in Zimbabwe,

as he did after last year’s visit, we also arranged visits

for him to commercial, communal and resettled farms over the

course of his six-day stay.

¶8. (U) Closing the forum was Dr. Andrew Mackenzie, chief

executive of diamonds and minerals at Rio Tinto, which owns

77.8 percent of Zimbabwe’s Murowa diamond mine. He recalled

Zimbabwe’s bygone strength as an African mining country,

mining legislation that he said was once the best in Africa,

and the strong infrastructure that supported the industry in

Zimbabwe. Mackenzie called attention to Rio Tinto’s

leadership in respecting the rights of traditional people and

its foundation membership of the Kimberley Process. Striking

in Mackenzie’s slides was Rio Tinto’s net investment in

developing the Murowa site and the size of the monetary

benefits to Zimbabwe in wages paid, payments to the

state-owned Minerals Marketing Corporation of Zimbabwe

(MMCZ), withholding taxes, corporate taxes, royalties,

dividends and payments to local suppliers. Mackenzie did not

neglect to describe Rio Tinto’s more than 50 years of

financial and social investment in Zimbabwe. He also

emphasized Rio Tinto’s endorsement of broad-based economic

empowerment and local partnerships in its South African

operations, while also advocating for risk protection for

local investors.

——————————————— ———–

U.S.-Friendly Companies Wave the Flag at Mini-Trade Fair

——————————————— ———–

¶9. (SBU) Despite strong anti-business/anti-U.S. rhetoric in

the state-owned press and government circles in the months

ahead of the event, 26 companies exhibited at the

concurrently held mini-trade fair. The exhibitors

represented a range of U.S. or U.S.-affiliated companies

(Cargill, Chevron, Schweppes, Ernst & Young, Deloitte,

Western Union, Pioneer Seed, among others), companies with

significant U.S. investment or shareholding (Imara Asset

Management, Murowa Diamonds), and also several small or

U.S.-friendly local companies (PSI condom distributor,

Econet, The Independent local newspaper, several electronics

distributors). Except for the aggressive young mobile

telephone company Econet, owned by Zimbabwe exile Strive

Masiyiwa, which offered free GPRS service to all delegates,

none of the companies appeared to use the forum as an

opportunity to win new business; their intent for the most

part was to show solidarity with the vision of the American

Business Association of Zimbabwe: “to promote optimum

conditions for business to make maximum contributions to

economic growth in Zimbabwe.”

————————

But Others – Intimidated

————————

¶10. (SBU) Dishearteningly, PricewaterhouseCoopers (PWC),

which was the primary sponsor of last year’s forum, and U.S.

tobacco giant AllianceOne, explicitly requested no public

recognition of any sort for their financial support of the

event. Similarly, numerous ABAZ members and other companies

with U.S. interests told the organizers that they declined

even the lowest level of sponsorship out of fear of

recrimination by government. The Independent was only able

to secure two advertisers for its supplement on the forum,

HARARE 00001002 004 OF 005

but Group Chief Executive Officer Raphael Khumalo, who

attended the forum, told econoff on October 26 that he had no

regrets about sponsoring the event and looked forward to

publishing excerpts of the proceedings in the weekly

newspaper. PWC senior partner Tinashe Rwodzi told econoff on

November 7 that in reviewing the event, which he attended,

PWC decided it had erred in not lending greater public

support.

——————————————— ———–

A Multitude of Challenges in a Strained Business Climate

——————————————— ———–

¶11. (U) About 220 delegates, including CEOs, managing

directors and finance directors of major Zimbabwean companies

and financial institutions, attended the forum and a gala

closing cocktail reception hosted by ABAZ at the Ambassador’s

residence. Unfortunately, the Forum occurred the morning

after an unscheduled Mid-Year Monetary Policy Statement by

Reserve Bank of Zimbabwe Governor Gono (Ref B), which

probably accounted for the especially high number of

pre-registered delegates ) 70 (for whom catering had been

ordered) ) who did not attend the forum. Apart from Deputy

Minister of Agriculture David Chapfika, no high-level GOZ

officials attended although ABAZ extended complimentary

invitations to two dozen GOZ ministers, deputies and

permanent secretaries.

¶12. (SBU) Despite strong financial sponsorship by major

companies and BFIF (Ref A), the Just Business forum closed

its books US$2,500 in the red. The loss was primarily due to

two factors: no-shows of pre-registered delegates (ABAZ has

not been able to collect the registration fee from these

registrants); and the sharp depreciation in value of

sponsorship money during planning. The Zimbabwe dollar

depreciated 78 percent on the parallel market from July 1 to

October 1, unbalancing the budget which included unavoidable

foreign currency denominated expenses.

————–

Action Request

————–

¶13. (SBU) Since last year’s event, ABAZ has approved a

constitution, hired a professional secretariat and begun to

collect modest dues. However, the Association has not yet

built up reserves that enable it to meet a financial

shortfall. In support of the Association’s role as a

catalyst in convincing the Zimbabwean business community to

pressure the GOZ for reform, and in light of the “Just

Business” track record under extremely taxing circumstances,

post requests US$2,500 from FY08 BFIF funds to pay the

outstanding balance.

———-

Next steps

———-

¶14. (SBU) ABAZ took a leap forward in establishing its

identity as a business organization at the forefront of

public discussion on economic reform. It also strengthened

the well-chosen “Just Business” brand and began to

institutionalize the “Just Business” private sector economic

forum as an annual business event in Zimbabwe. Delegates

commended the substance of the presentations and the superb

networking opportunity. Looking ahead, ABAZ plans to

circulate the forum proceedings widely to delegates,

HARARE 00001002 005 OF 005

interested parties and GOZ officials, and place excerpts of

the presentations in the press.

¶15. (SBU) Emboldened by positive feedback, ABAZ is also

reaching out to its members in the financial and mining

sectors to sponsor a series of workshops on South Africa’s

experience with black economic empowerment. As long as

President Mugabe has not signed the Indigenization and

Economic Empowerment Bill (Ref D) into law and parliament has

not passed enabling legislation, ABAZ sees value in focusing

public attention on the more investor-friendly black

empowerment policies of South Africa as an indigenization

alternative. The Association is also riding the momentum of

a successful event by shoring up its numbers and its

financial strength in a new membership drive.

——-

Comment

——-

¶16. (SBU) As democratic space shrinks in Zimbabwe, we believe

that business organizations such as ABAZ and fora like “Just

Business” have a significant role to play in bringing

pro-reform pressure to bear on the GOZ and planting ideas

about the shape of the post-Mugabe future in Zimbabwe.

Clearly, the deteriorating economic and business climate made

it harder this year for an association that starts with “the

A word” to win the necessary sponsorship and pack a

conference hall. In the planning phase, during the worst

weeks of the price taskforce crackdown, it was also a

struggle for ABAZ to convince prominent international

speakers to travel to Zimbabwe to describe other troubled

economies, embrace of economic reform. But the young

business association, not intimidated, is tenaciously

developing its voice, forging ahead, growing its membership,

and leaving a footprint in reform minded circles. The

US$10,500 BFIF grant was money well spent and we hope that

EB/CBA will give our request for top-up funding to cover the

financial shortfall generous consideration.

DHANANI

(93 VIEWS)