Industry asks: Will Mugabe listen?

Zimbabwe’s industrialists called on the government to abandon its impractical economic policies at the beginning of 2003 but wondered whether President Robert Mugabe would listen.

The industrialists advocated devaluation of the official exchange rate and relaxation of government intervention in the economy.

They told Finance Minister Herbert Murerwa that they faced only two options- bankruptcy or the black market.

Barbican chief executive officer Mthuli Ncube was sceptical that Mugabe would listen pointing out that Mugabe and his inner circle still believed that they were at war with the United Kingdom and could not budge on ideological principles.

Ncube considered Murerwa a powerless Finance Minister.

PG Industries chief executive officer Gerald Mujaji, however, believed that Mugabe might finally appreciate industry’s dire predicament and also realise that many black-owned businesses were at risk.

Full cable:

Viewing cable 03HARARE111, Zimbabwe Industry Appeals for Relief

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

UNCLAS HARARE 000111

SIPDIS

SENSITIVE

STATE FOR AF/S AND AF/EX

NSC FOR SENIOR AFRICA DIRECTOR JFRAZER

USDOC FOR 2037 DIEMOND

PASS USTR ROSA WHITAKER

TREASURY FOR ED BARBER AND C WILKINSON

USAID FOR MARJORIE COPSON

¶E. O. 12958: N/A

TAGS: EFIN ECON ZI

SUBJECT: Zimbabwe Industry Appeals for Relief

Ref: 02 Harare 2821

Sensitive but unclassified.

¶1. (SBU) Summary: In rare unison, Zimbabwean

industrialists have urged the GOZ to abandon its

impractical economic policies. The situation is critical

enough that one firm is actually cautioning investors to

avoid its shares. It is unclear whether President Mugabe

will heed the industrialists’ call. End Summary.

¶2. (SBU) The productive sector has urgently advocated

devaluation of the official exchange rate and relaxation

of government intervention in the economy. Meeting most

recently with Finance Minister Herbert Murerwa on January

14, 50 of Zimbabwe’s most prominent businessmen stressed

that they are faced with only two options at this point –

– bankruptcy or the black market. They believe there is

no way for most businesses to survive while adhering to

2003 budget’s draconian constraints (ref). The

Confederation of Zimbabwe Industries (CZI) and several

industry groups had already submitted a plan in writing

to the Finance Ministry and Reserve Bank calling for

market-friendly solutions but couched in the most non-

threatening tone.

Will He Listen?

—————

¶3. (SBU) The question, of course, is whether these pleas

will resonate with President Mugabe. Opinions differ.

Barbican (a commercial bank) CEO Mthuli Ncube is

skeptical, noting that Mugabe and his inner circle still

believe they are at war with the United Kingdom and

cannot budge on ideological principles. Ncube considers

Murerwa a powerless Finance Minister. In contrast, PG

Industries (a glass manufacturer and exporter to the

U.S.) CEO Gerald Mujaji feels Mugabe may finally

appreciate industry’s dire predicament. Mujaji believes

Mugabe may feel less threatened by a weakened opposition

Movement for Democratic Change (MDC) and compromise on

devaluation for certain sectors. The CEO also hopes

Mugabe will realize that many black-owned businesses are

at risk.

Comment

——-

¶4. (SBU) Many industrialists are unwilling to return to

pre-Christmas production levels, only to operate at

losses. Those that make a profit will do so by flaunting

the law, a line many businesses still do not want to

cross. How futile is their plight? Consider mining firm

Rio Tinto, which has been running ads in local papers

cautioning shareholders that “recent monetary policy

directives have rendered the company unviable.” Until the

GOZ alters its policies, Rio Tinto’s directorate

officially discourages “dealing in the company’s shares.”

Sullivan

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