Gono says fast track land reform is over

Central bank governor Gideon Gono said on 27 January 2005 the fast track land reform programme was over and the government would have “zero tolerance for disruptive activities on land”.

Gono devalued the Zimbabwe dollar but only for gold producers from Z$6 151 to Z$8 692 to the US$. The controlled exchange rate remained at Z$5 900 and the diaspora rate at Z$6 200.

The Zimbabwe dollar was trading at between Z$9 000 and Z$10 000 on the parallel market.

Gono said that he wanted a devaluation to stimulate all exports, but was constrained by political pressures.

Full cable:

Viewing cable 05HARARE176, RBZ: GOLD EXPORTERS GET DEVALUATION; FAST-TRACK

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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 HARARE 000176

SIPDIS

STATE FOR AF/S

USDOC FOR ROBERT TELCHIN

TREASURY FOR OREN WYCHE-SHAW

PASS USTR FLORIZELLE LISER

STATE PASS USAID FOR MARJORIE COPSON

E.O. 12958: DECL: 12/13/2014

TAGS: EFIN ETRD PGOV ECON EINV ZI

SUBJECT: RBZ: GOLD EXPORTERS GET DEVALUATION; FAST-TRACK

LAND REFORM “OVER”

Classified By: Classified by Ambassador Christopher Dell

under Section 1.4 e/g

———–

Summary

———–

¶1. (C) The highlight of Reserve Bank (RBZ) Governor Gideon

Gono,s January 26 address to the nation on the country,s

economy was the announcement that he had devalued the

zimdollar from Z$ 6,151 to 8,692:US$ for gold producers.

However, he left in place the controlled exchange rate of Z$

5900:US$ for all other exporters as well as the Z$6,200

“Diaspora” rate for non-exporters. The Central Banker also

said the GOZ would address violations of bilateral investment

agreements that occurred during fast-track land reform.

——————-

New Gold Rate

——————-

¶2. (C) In his quarterly televised address to the nation on

the state of the economy, Gono announced the new rate for

gold exporters. However, as is standard practice in

Zimbabwe, he couched the “gold support price” in a Z$/gram

ratio, rather than more customary US$/oz terms. As a result,

businessmen, bankers and economists with whom we spoke were

initially unaware of how deep the devaluation for that sector

had been. When Econoff commented on the devaluation to

Gono,s advisor Millicent Mombeshora, she smiled and said,

“we don,t talk about ounces of gold here.” The different

measures are designed to make it difficult for local

commentators compare local and international gold prices,

obscuring the inherent exchange rate.

—————————

No New Diaspora Rate

—————————-

¶3. (C) Other than disclosing this new support price for gold,

Gono,s fifth address was uneventful. It was the first time

Gono spoke to the nation without raising the Disapora rate )

the price that the RBZ buys dollars from non-exporters –

which is currently Z$ 6200:US$. Most parallel market trading

took place in the Z$9,000-10,000:US$ range last week,

according to our industry sources. The Reserve Bank Governor

set ambitious goals of US$ 3.1 billion exports in 2005 and

US$ 4 billion in 2006, up from this year,s US$ 1.7 billion

and reminiscent of mid-1990s levels. In follow-up remarks to

the diplomatic community on Jan. 27, Gono confided that he

wanted a devaluation to stimulate all exports, but was

constrained by political pressures for now.

¶4. (C) In his address, Gono acknowledged that the GOZ

violated bilateral investment agreements in its seizure of

some foreign-owned properties during fast-track land reform.

He insisted the GOZ would “examine individual cases of . . .

violations beginning this year, with a view to redressing

anomalies found.” (N.B., while the GOZ has expropriated

seven Amcit properties without due process or compensation,

the U.S. and Zimbabwe do not have a bilateral investment

agreement.) In remarks to diplomats a day later, Gono said

that “fast track land reform is over” and that the GOZ would

now have “zero tolerance for disruptive activities on land.”

———–

Comment

———–

¶5. (C) Gono’s declared policy goals are inherently

contradictory – he cannot simultaneously maintain an

artificially strong zimdollar (as his principal tool for

curbing inflation) and stimulate export growth. He has been

signaling for some time that after elections – now set for

March 31 – the exchange rate will be eased. It is difficult

to judge whether Gono’s announcement of fast track land

reform’s end to the diplomatic community is authoritative.

Land reform is outside his nominal portfolio, but Gono is

increasingly seen as the de facto prime minister. What is

clear is that Gono recognizes that the GOZ needs to refurbish

its credentials on respecting property rights and

international accords, if it is to have any hope of

attracting FDI in the future.

DELL

(24 VIEWS)