Gono said the government had agreed to compensate white farmers

Central bank governor Gideon Gono said his monetary policy statement of May 2005 was a clear indication that Zimbabwe was prepared to play by global economic rules, including honouring bilateral investment agreements and was prepared to negotiate compensation with commercial farmers who had lost land during the land reform programme.

He said the compensation would, however, only be for improvements. His discussion with the Commercial Farmers Union and the Justice for Agriculture had established a baseline figure of US$4 billion in compensation claimed.

He had also successfully argued in favour of inviting back commercial farmers with badly needed skills.

Gono said that the next target of the government crackdown would be on the farms, where the government could not, for instance, allow squatters to take over coffee plantations and tear them up to grow maize to the detriment of the national economy.

He said this was part of a larger government plan to restore agricultural productivity, including through completion of many irrigation projects, as the foundation for rebuilding the economy.

Full cable:

Viewing cable 05HARARE760, GONO LAYS IT ON THICK

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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 000760

SIPDIS

DEPT FOR U/S BURNS; AF A/S NEWMAN/DAS WOODS; OVP FOR

NULAND; NSC FOR ABRAMS, COURVILLE;

E.O. 12958: DECL: 05/27/2015

TAGS: ECON ETRD PGOV PHUM PREL ZI

SUBJECT: GONO LAYS IT ON THICK

Classified By: Classified by Ambassador Dell, reasons 1.4 (b) (d)

——-

Summary

——-

¶1. (C) Reserve Bank Governor Gideon Gono told the Ambassador

June 1 that the GOZ wanted western financial assistance and

better relations with the U.S. and the UK. The GOZ was

prepared to play by global economic rules, including honoring

bilateral investment agreements, and was prepared to

negotiate compensation with commercial farmers who lost land

as a result of GOZ,s land reform policies. The Ambassador

responded that the GOZ,s recent crack down on the informal

economy was sending a different message and that we would

respond appropriately to positive GOZ policy changes )

political as well as economic. That said, we were prepared

to provide food assistance if needed and requested. End

Summary.

——————-

RBZ Monetary Policy

——————-

¶2. (C) Gono said the business community might have complained

publicly that the devaluation of the Zimdollar to 9000 was

insufficient but privately they were thanking him (N.B. The

parallel rate has held steady this week at roughly 25,000.

This reflects the lack of trading activity in light of the

government crack down on the informal sector rather than

increased confidence in the Zimdollar.) With the subsidies

he had established, Gono claimed Zimbabwean exporters would

once more be competitive internationally. However, he would

have been able to consider a steeper devaluation if he had

greater reserves or international financial support. To that

end, Gono said his May 19 presentation had a message in it

for the international community, including the IMF, which was

due in Harare next week for Article Four consultations:

Zimbabwe would once more play by the global economic rules.

This meant adhering to bilateral investment agreements, not

just with respect to land but for all investments.

¶3. (C) Gono said it also meant that the GOZ had agreed &in

principle,8 at his instigation, to compensate commercial

farmers who had lost their land as part of the land reform

program. The compensation would be limited to improvements

to the land. His discussions with various farmer,s unions,

including Justice for Agriculture (JAG) and the Commercial

Farmer,s Union (CFZ), had established a baseline figure of

USD 4 billion in compensation claimed. Gono said this would

be the starting point for negotiations, though obviously the

GOZ,s resources were much less. He added that he had also

successfully argued in favor of inviting back commercial

farmers with badly needed skills. In that regard, Gono noted

that the next target of the government crack down would be on

the farms, where the government could not, for instance,

allow squatters to take over coffee plantations and tear them

up to grow maize to the detriment of the national economy.

This was part of a larger GOZ plan to restore agricultural

productivity, including through completion of many irrigation

projects, as the foundation for rebuilding the economy.

———————–

Operation Restore Order

———————–

¶4. (C) The Ambassador said the U.S. welcomed greater emphasis

on agricultural productivity, which could indeed be the

foundation of economic recovery in Zimbabwe. However, we saw

little evidence that Zimbabwe was embracing global economic

rules or sound economic policies. The events of the past two

weeks, especially the attack on the informal economy, seemed

to us to be courting economic meltdown. Gono said

three-quarters of the cabinet had agreed the day before that

Operation Restore Order had gone too far. He personally felt

that it could have been conducted with &more finesse.8 The

GOZ was now reassessing the importance of the informal sector

and would look for ways to regulate it rather than destroy

it.

————–

U.S. Relations

————–

¶5. (C) Gono said the GOZ also had a message for the U.S. The

GOZ wanted the U.S. to use its influence with the UK to

facilitate a rapprochement. Zimbabwe wanted to turn a page

in its relations with the UK and let bygones-be-bygones.

Zimbabwe also wanted better relations with the U.S. Gono

said without U.S. support there was no chance that the IMF or

other global financial institutions would provide economic

assistance. The Ambassador responded that U.S. policy was

not based on past events but on current policies and that we

would respond positively to positive changes in GOZ behavior

) political and economic. He added that there was no chance

we would support IMF assistance absent those policy changes;

in fact we would likely vote again in July to expel Zimbabwe

from the organization since the GOZ had not used its two six

month &reprieves8 to embrace a sound approach.

—————

Food Assistance

—————

¶6. (C) The Ambassador said regardless of our differences with

the GOZ, the U.S. would respond if Zimbabwe needed food

assistance this year. While we would not play politics with

food, our support was not unconditional. The GOZ would have

to formally ask for assistance at an authoritative level,

though this need not be public. It would also have to be

fully transparent about what was needed, including full

disclosure with respect to stocks and imports. Finally, we

would not allow the GOZ to politicize distribution and would

insist that international NGOS be involved. Gono promised to

relay this to other GOZ officials.

——-

Comment

——-

¶7. (C) In an effort to make sense of this meeting, our report

is probably overly coherent. In fact, Gono was rambling,

disjointed and defensive in the hour-long conversation. He

spent most of the time talking about side issues and

irrelevancies, attempting to portray his policies as sound

and effective. They are neither. He also seemed at pains to

distance himself from the excesses of GOZ economic policies,

especially the recent crack down, while still claiming

authorship of those policies and implying that his status as

the preeminent GOZ economic decision maker remains intact.

In fact, he is clearly diminished in stature, especially

compared to Joyce Mujuru, whose presence at his May 19

announcement didn,t mark political support so much as the

new pecking order.

DELL

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