From cheap to exorbitant

Air Zimbabwe, struggling to catch up with spiralling inflation, increased its fares in July 2008 with a return trip to London shooting up from Z$21 trillion to Z$150 trillion.

This was reported to be an increase from US$420 to US$2 500 but the amount was in reality much lower because the local currency was depreciating sometimes three times a day.

South African Airways’ cheapest return fare on the same route was about US$1 400.

Air Zimbabwe introduced international fares payable only in foreign currency but reversed the policy within two weeks after accusations that it was violating exchange control laws.

Full cable:

Viewing cable 08HARARE623, ZIM NOTES 7-18-2008

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VZCZCXRO2608

RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN

DE RUEHSB #0623/01 2031541

ZNR UUUUU ZZH

R 211541Z JUL 08

FM AMEMBASSY HARARE

TO RUEHC/SECSTATE WASHDC 3199

RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE

RUEHUJA/AMEMBASSY ABUJA 2020

RUEHAR/AMEMBASSY ACCRA 2162

RUEHDS/AMEMBASSY ADDIS ABABA 2281

RUEHRL/AMEMBASSY BERLIN 0813

RUEHBY/AMEMBASSY CANBERRA 1558

RUEHDK/AMEMBASSY DAKAR 1916

RUEHKM/AMEMBASSY KAMPALA 2337

RUEHNR/AMEMBASSY NAIROBI 4768

RHEHAAA/NSC WASHDC

RHMFISS/EUCOM POLAD VAIHINGEN GE

RUEHGV/USMISSION GENEVA 1427

RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK

RHEFDIA/DIA WASHDC

RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 03 HARARE 000623

AF/S FOR S.HILL

ADDIS ABABA FOR USAU

ADDIS ABABA FOR ACSS

NSC FOR SENIOR AFRICA DIRECTOR B.PITTMAN

TREASURY FOR J.RALYEA AND T.RAND

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 7-18-2008

———–

¶1. SUMMARY

———–

Topics of the Week:

– MOU on Hold

– UN Briefs Donors on Re-Opening NGO Operations, Return of IDPs

– Zim Delegation Walks out of SADC Tribunal Hearing

– EU to Widen Sanctions

– South Africa Continues Deporting Zimbabweans

– ZBC Bans Politically Incorrect Programs

– The Zimbabwean Crippled under New Tax

– Mugabe Launches Commodities Supply Program

– RBZ Concedes Inflation in the Millions

– Hyperinflation Raises Demand for Cash; Shortages Expected

– Air Zim Fares Swing from Cheap to Exorbitant

– Penury and the Police

– China Cleared to Purchase Zimbabwe Ivory

– Corrigendum

——————————————— ———-

¶2. Price Movements-Exchange Rate and Selected Products

——————————————— ———-

Parallel rate for cash doubled to Z$90billion:US$1 against

inter-bank average of Z$28 billion:US$1.

Bank transfer rate more than trebled to Z$450 billion:US$1; official

rate: Z$$30,000:US$1.

Bread on the parallel market more than doubled to Z$120 billion vs.

controlled price of Z$400 million.

Sugar rose to Z$300 billion/2kg vs. controlled price of Z$8

million/2kg.

Cooking oil inched up to Z$100 billion/750ml vs. controlled price of

Z$9.3 million/750ml.

Petrol and diesel more than doubled to Z$120 billion/liter vs.

controlled price of Z$60,000/liter.

—————————–

On the Political/Social Front

—————————–

¶3. MOU on Hold – ZANU-PF, the MDC, and South African mediators

drafted an MOU last week that establishes a framework for

negotiations between ZANU-PF and the two MDC factions. A July 16

signing had been planned, but MDC president Morgan Tsvangirai

indicated he would not sign unless an AU mediator was present with

South African president Thabo Mbeki in the negotiations. AU

commission chairperson Jean Ping was due in South Africa today to

discuss the negotiations with Mbeki and a possible role for the AU.

Once the MOU is signed, negotiations are contemplated by the MOU to

last two weeks. With ZANU-PF insisting it lead a government of

national unity, and the MDC insisting on a transitional government

led by Tsvangirai, there is scant room for optimism. See Harare

621, 607, 605.

¶4. UN Briefs Donors on Re-Opening NGO Operations, Return of IDPs –

The UN briefed donors this week on its strategy to persuade the GOZ

to lift the blanket suspension on NGO operations and resume

humanitarian assistance. On the internally displaced persons

crisis, government officials have impeded teams sent to assess

whether areas of IDP origin were propitious for return.

Nevertheless, the UN expected it could facilitate return for most of

HARARE 00000623 002 OF 003

the IDPs. Looking ahead, protecting humanitarian interventions from

political manipulation could grow increasingly difficult. See

Harare 615.

¶5. Zim Delegation Walks out of SADC Tribunal Hearing – On July 17,

the Zimbabwe delegation walked out of the politically charged SADC

Tribunal in Windhoek after failing to prevent the Tribunal from

agreeing to hear the white farmer’s contempt charge against the GOZ.

The charge is based on the GOZ’s failure to comply with an Interim

Relief Order issued by the Tribunal in December 2007 prohibiting the

GOZ from evicting any farmers involved until the Tribunal ruled on

the merits of the case. Since the June election, violence by ruling

party thugs against farmers involved in the case has increased. The

Tribunal has adjourned to consider its judgment.

¶6. EU to Widen Sanctions – European Union countries are expected

to agree on July 22 to widen sanctions on Zimbabwe, including more

travel bans, measures against companies propping up the regime, and

asset freezes on persons involved in election violence.

¶7. South Africa Continues Deporting Zimbabweans – On July 11, the

UN High Commission for Refugees implored the South African

government to halt the deportations of Zimbabweans, many of whom

would seek asylum if they could reach the asylum office in Pretoria.

In the 40 days prior, South Africa had deported some 17,000

Zimbabweans. Since 2000, South Africa has only granted asylum to

710 Zimbabweans, while rejecting over 4,000; 62,000 cases are

pending.

¶8. ZBC Bans Politically Incorrect Programs – Independent film

producers got a slap in the face on July 15, when Zimbabwe

Broadcasting Holdings Acting CEO Happison Muchechetere told them the

state broadcaster will not accept politically incorrect programs.

In a meeting with the producers, Muchechetere also said ZBC would

shun advertisers who were seeking a political agenda. ZBC violated

SADC Principles and Norms on Democratic Elections by failing to

provide news and current affairs coverage of the opposition MDC in

the run up to the June presidential election, an omission noted by

the election observers.

¶9. The Zimbabwean Crippled under New Tax – The 40 percent “luxury

tax” on foreign newspapers imposed by the GOZ last month is

crippling the UK-based and strongly pro-opposition The Zimbabwean

newspaper. Editor and Publisher Wilf Mbanga said taxes now amount

to 70 percent of the total cost of the newspaper. Mbanga said the

newspaper is paying the GOZ Sterling 37,000 (about US$75,000) every

week in taxes.

———————————-

On the Economic and Business Front

———————————-

¶10. Mugabe Launches Commodities Supply Program – President Mugabe

formally launched the Basic Commodities Supply Enhancement Program

on July 15 with an assortment of locally produced and imported goods

for distribution at a subsidized price. The Herald reported that

the imports were financed with the help of Russian/Ukrainian

investors and a Namibian company. National Foods provided trucks

and warehouses for the goods. Having apparently learnt nothing from

the disastrous effects of last year’s price controls, Mugabe

promised no more price increases and threatened offenders with

imprisonment. In a rare admission of the unsustainability of the

importation program, RBZ Governor Gono, who bankrolled the

initiative, stated that local producers will be financed to produce

goods. Since Gono is likely to create the money for the exercise,

there is no end in sight to hyperinflation in Zimbabwe.

¶11. RBZ Concedes Inflation in the Millions – RBZ Governor Gono

HARARE 00000623 003 OF 003

revealed this week that the annual rate of inflation, already the

highest in the world, hit 2.2 million percent in June. The GOZ had

not announced any inflation figures since putting the rate at around

165,000 percent for February. The GOZ’s flawed methodology uses the

controlled prices of goods, but because the goods cannot be found at

those prices, the rate sharply lags private sector estimates that

take actual transaction prices into account.

¶12. Hyperinflation Raises Demand for Cash; Shortages Expected –

Hyperinflation has rendered the use of debit cards and checks almost

irrelevant as point of sale systems can’t cope with trillions and

merchants are charging commissions of up to 50 percent on checks

that take time to clear. Barter trade is increasing and cash-rich

businesses have begun to offer notes at a 10-20 percent premium.

The Z$100 billion (just over a US$1) daily bank withdrawal limit is

artificially drying up the cash supply–our bank contacts tell us

that the RBZ is still meeting all their daily cash requirements.

Nevertheless, retailers are anticipating a cash shortage also due to

the disruption in supply of bank note paper to Zimbabwe. One

supermarket chain told us their revenue ratio of cash to checks and

debit cards had shifted recently from 65/35 to 20/80. To cope, some

retailers are unveiling in-store debit cards to ease transactions

and get faster access to funds.

¶13. Air Zim Fares Swing from Cheap to Exorbitant – Usually lagging

inflation for weeks if not months in its airfares, Air Zimbabwe

caught up last week, and with a vengeance. The round trip airfare

to London shot from Z$21 trillion on July 13 (about US$420 at the

time) to Z$150 trillion the next day (US$2,500 on July 14, but

US$1,600 today), all fees included. In comparison, South African

Airways cheapest return fare on the same route is about US$1,400.

Air Zimbabwe introduced international fares payable only in foreign

currency a few months ago, but reversed the policy within two weeks

under accusations that it violated exchange control laws.

¶14. Penury and the Police – A police Assistant Inspector and

Embassy contact told us that his take home salary in June was Z$180

billion. That’s worth US$2 today and was about US$35 in mid June on

the parallel market.

¶15. China Cleared to Purchase Zimbabwe Ivory – A meeting of the

Convention for International Trade in Endangered Species (CITES)

agreed that China could bid for up to 108 tons of ivory collected

from culls and natural deaths and offered for sale by Botswana,

Namibia, South Africa and Zimbabwe. CITES judged that China had put

sufficient measures in place to regulate sales and crack down on the

illegal domestic trade.

¶16. Corrigendum –   Contrary to our Zim Note of last week that

ZANU-PF’s campaign of violence had reportedly resulted in the deaths

of two MDC parliamentarians-elect, no MPs-elect have been confirmed

murdered.

DHANANI

(30 VIEWS)