Government starts buying votes for 2005

In what appeared to be a deliberate move to appease voters ahead of the 2005 parliamentary elections, the government started ensuring the availability and affordability of politically sensitive goods and services such as maize-meal, fuel and school fees.

It reduced the price of maize from Z$2 000 a kg to Z$1 200 which was below the input price.

Central bank governor Gideon Gono said he had sufficient foreign currency for fuel and was devoting 40 percent of the country’s forex to oil firms.

The government also announced that it was permitting only one private school, nationwide, to increase fees for the third term.

Full cable:

Viewing cable 04HARARE1532, Elections: GOZ Accelerates Populist Economic

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This record is a partial extract of the original cable. The full text of the original cable is not available.

130910Z Sep 04

UNCLAS SECTION 01 OF 02 HARARE 001532

SIPDIS

STATE FOR AF/S

USDOC FOR AMANDA HILLIGAS

TREASURY FOR OREN WYCHE-SHAW

PASS USTR FLORIZELLE LISER

STATE PASS USAID FOR MARJORIE COPSON

¶E. O. 12958: N/A

TAGS: ECON ETRD EINV PGOV ZI

SUBJECT: Elections: GOZ Accelerates Populist Economic

Measures

¶1. As expected, the GOZ has recently begun to devote

increasing, and disproportionate, resources to ensuring

the availability and affordability of politically

sensitive goods and services such as maize-meal, fuel and

educational expenses. In time-honored fashion, the GOZ

expects to pad its share of the vote by providing more

accessible food, transport and schooling (in addition to

more direct methods such as harassment, intimidation, and

biased media coverage). Zimbabwe cannot, of course,

afford these economic policies, whose implementation will

prove economically counterproductive over the long haul

and damage prospects for economic revival.

————

Buying Votes n

————

Maize

—–

¶2. Maize-meal is far and away Zimbabweans’ main food

staple. In the past week, its price has dropped from Z$

2,000 (US$.36) to Z$1,200 (US$.21)/kg. This is the

direct result of the parastatal Grain Marketing Board

(GMB) providing an increased subsidy to wholesalers to

bring down the price. The subsidy is now on the order of

35 percent of the price of maize-meal.

Petrol

——

¶3. After service stations ran dry over the weekend of

September 4-5, Reserve Bank (RBZ) Governor Gideon Gono

took to the airwaves to assure the population that he had

provided sufficient foreign exchange to importers to

ensure adequate supplies of petrol in the future. Gono

revealed publicly for the first time that the RBZ was

devoting about 40 percent of its forex to oil firms.

Fuel has been among the most politically sensitive goods

in Zimbabwe. The opposition Movement for Democratic

Change (MDC) recruited many new members in the hours-long

lines of the 2001 shortages and in the economy’s near

stand-still in late 2002 after Libya stop providing

discounted fuel.

School Fees

———–

¶4. The GOZ announced on the front page of the September 6

State-run “Herald” that it was permitting only one

private school nationwide to raise fees for the third

term, which for most schools began September 7. Schools

were required to keep fees at last year’s rates. By

keeping down tuition, the GOZ argues it is opening up

these formerly white enclaves to more black families.

Nonetheless, inflation has added about 50 percent to the

cost of school fees since the beginning of the last term

in May.

————————

Longer-Term Consequences

————————

¶5. The GOZ has given no indication it will revert to the

disastrous sub-market price controls it imposed in mid-

¶2003. At that time, retailers refused to restock most

items, since wholesale costs often exceeded controlled

prices. Still, even these more limited controls, aimed

at boosting the ruling party’s electoral fortunes, are

costly, market-distorting and in the long-term,

counterproductive and unsustainable.

¶6. With maize-meal, for instance, the subsidized price

now barely beats input costs (seed/fertilizer/tillage),

acting as a disincentive to production. The decision to

devote a large percentage of Zimbabwe’s available foreign

exchange to supporting fuel imports will also have

adverse economic effects. Importers of other goods will

have to settle for more expensive parallel-market forex,

making their businesses less viable. Finally, private

schools are dramatically cutting salaries and services as

a result of price controls, inducing still more teachers

and affluent families to leave Zimbabwe. Ultimately, the

country may pay a hefty price for Zanu-PF’s

electioneering.

Dell

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