Mpofu says government will go after economic saboteurs

Industry and International Trade Minister Obert Mpofu said the government owned Zimbabwe Development Corporation would take over private businesses engaged in economic sabotage.

He also said the government would open People’s Shops throughout the country within 40 days.

The People’s Shops were to provide basic commodities aimed at very low-income earners and disadvantaged groups.

Full cable:

Viewing cable 08HARARE92, Zim Notes February 1, 2008

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C O R R E C T E D COPY TEXT PARA 14

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

E.O. 12958: N/A

TAGS: PGOV PREL ASEC PHUM ECON ZI

SUBJECT: Zim Notes February 1, 2008

¶1. The Embassy Harare Political/Economic Section began producing

Zim Notes in July, 2007 to present a perspective on current events

in Zimbabwe. Suggestions are always welcome. If you would like to

receive Zim Notes by email, as well, please contact Frances Chisholm

at chisholmfm@state.gov. Distribution is restricted to U.S.

government employees.

¶2. Price Movements-Exchange Rate and Selected products:

Parallel rate for cash: ZW$6.2 million:US$1; Bank transfer rate:

Z$7million; Official rate: ZW$$30,000:US$1

Sugar steady at Z$5 million/2kg vs. controlled price of

Z$247,000/2kg

Cooking oil rose to Z$13 million/750ml vs. controlled price of

Z$440,000/750ml

Petrol and diesel steady at Z$10 and Z$9 million/liter respectively

vs. Z$60,000/liter at controlled price

—————————–

On the Political/Social Front

—————————–

¶3. Elections Set For March 29 As Parliament Dissolves… President

Mugabe declared March 29 as the election date in a Presidential

Proclamation issued on January 24. Mugabe, who had ignored calls by

the opposition and c)[)AQgKFQMarch. Mugabe’s unilateral declaration comes

as a slap in the face to President Mbeki’s mediation effort to

resolve the political impasse between the ruling party and

opposition.

¶4. Public Universities Closed Until After Elections… In a move to

impede the organizing capabilities of the politically active student

movement heading into elections, the government has ordered public

universities throughout the country, including University of

Zimbabwe, Midlands State University and National University of

Science and Technology, not to reopen until after elections

scheduled for March 29. The Universities were set to start the new

term in early February.

¶5. U.S. Treasury Hits Two More Regime Insiders With Sanctions…

Treasury’s Office of Foreign Assets Control (OFAC) announced on

January 30 that ZANU-PF MP Leo Mugabe, the nephew of President

Mugabe, and Central Intelligence Organization (CIO) Director

Happyton Bonyongwe were added to the financial sanctions list for

their roles in “aiding Mugabe’s efforts to cripple Zimbabwe,

including through violence and intimidation.” OFAC also added ZIDCO

Holdings, a ZANU-PF financial holding company, as well as ZANU-PF’s

publishing arm, Jongwe Printing and Publishing Company, aka

Printflo. The action means that any bank accounts or other

financial assets found in the U.S. belonging to these individuals or

entities may be seized. In addition, U.S. citizens are forbidden

from doing business with them.

¶6. Removal Of The Post Of Executive Mayor Signed Into Law…

President Mugabe has signed into law the Local Government Laws

Amendment Act which effectively eliminates the post of Executive

Mayor. Since the post was created in 1995 the MDC has won the

mayoral seats in most urban areas. Many of these mayors have found

it difficult to operate effectively due to interference from the

central government. The new law is a move to reduce MDC influence

in urban areas while at the same time creating greater ZANU-PF

presence.

¶7. Simon Mann Loses Appeal Against Extradition Order… Zimbabwean

High Court Judge Justice Rita Makarau dismissed an appeal by Briton

Simon Mann to stop his extradition to Equatorial Guinea to face

charges of plotting a coup. Mann, who denies the charges, argued

that he would face severe torture and not be afforded a fair trial

in Equatorial Guinea. Mann, who has finished serving his full

sentence after he was convicted in 2004 for breaching Zimbabwe’s

immigration and firearms laws, will now lodge an appeal against this

ruling to the Supreme Court.

¶8. Can You Hear Me Now?… Widespread power outages temporarily

shut down GOZ-owned NetOne and privately-owned Econet mobile

providers last week. Both company’s cellular towers have backup

generators or batteries to cover short-term brownouts, but the

duration and frequency of rolling power blackouts have been

exceeding their battery and diesel storage capacity. Landline

service by GOZ-owned TelOne also frequently collapses when power

cuts shut down entire exchanges. This week Harare’s Highlands

exchange ran out of fuel after running on generator for five days,

disrupting fixed-line service to thousands of residences and

businesses. Embassy staff is not immune to the trouble; 25 to 30

percent of Embassy personnel haven’t had reliable residential phone

service for weeks or months.

¶9. Information Blackout Threatens As Elections Approach… Access

to information in the run-up to the election is likely to be

severely hampered by a worsening shortage of newsprint owing to

production challenges at Mutare Board and Paper Mill. The newsprint

monopolist has not been producing to full capacity since a fire in

June 2007. Recent power outages and forex shortages add to the

woes. This week newspapers reduced their print run and copy size in

reaction; the Financial Gazette, for example, received only one

third of its required newsprint. Publishers of the opposition

Zimbabwe Independent and The Standard told PAS that they had enough

newsprint in stock to last until late February and they have begun

approaching donors for assistance. The independent press fears that

government intervention may be geared towards ensuring that only

government-controlled media remain operational.

—————————

Economic and Business News

—————————

¶10. Gono Presents Monetary Policy Statement… Highlights of RBZ

Governor Gono’s MPS of January 31 were: a 10 percentage point

reduction in statutory reserves; the effective devaluation to

Z$525,000:US$ from Z$270,000 on the retained 32.5% portion of

exporters’ proceeds (the official exchange rate remains unchanged);

an increase in the RBZ’s overnight accommodation rate to 1,200% and

1,600% for secured and unsecured lending; and a tenfold increase in

the gold support price. Gono said that year-on-year inflation stood

at 26,470% in November; broad money supply (M3) was growing at

24,463% in October compared with 1,638% in January, 2007; and he

recommended that the National Income and Pricing Commission (NIPC)

confine its operations to the three controlled and 16 monitored

products, and not concern itself with tourism products, air travel,

entertainment, beer and other product prices. He said NIPC should

exercise “extreme caution” to ensure price control does not

“degenerate into yet another unintended catastrophic blitz

exercise.”

¶11. Looming Bank Liquidity Crisis… Zimbabwe’s banking sector is

facing a liquidity crisis that has arisen out of a patchwork of

misguided monetary policies and their disastrous consequences:

onerous statutory reserve requirements, punitive overnight

accommodation rates, hyperinflation, rapid informalization of the

economy and the accompanying erosion of banks’ deposit base and

customer confidence, and, most recently, a breakdown in the bank

transfer system that has ground real-time transfers to a crawl. In

addition, the RBZ’s deeply concessionary facilities have dried up

banks’ commercial lending lines and driven some of them into

non-traditional and illegal activities that have begun to catch up

with them. For details, see Harare 0091.

¶12. Bubble Bursts On Zimbabwe Stock Exchange… After a year of

spectacular performance in real terms, the ZSE bubble has burst

under heavy selling by profit takers. Most counters have suffered

heavy losses. In addition to profit taking of the past three weeks,

the cash shortage as well as breakdown of the bank transfer system

has meant that most buying and selling orders through brokers could

not be executed. In addition, as noted above, some errant banks

that had taken positions on the ZSE with the aim of boosting returns

found themselves in liquidity trouble and had to sell under pressure

from the RBZ. These factors, together with the rise in short-term

money market interest rates, have resulted in a significant decline

in trading. The industrial and mining indices fell by 25.1% and

8.5% respectively from January 4-25.

¶13. Civil Servants Get Another Raise, Some Teachers Continue

Strike… In what will be the second increase in less than a month,

the GOZ has agreed to raise civil servant salaries by 120%. (They

got a 1,000% increase in January.) Although the agreement is not

yet public, the lowest paid teacher reportedly will now earn a total

package of ZW$550 million (about US$88) up from ZW$250 million

(about US$40). The new salary is less than one-third of the ZW$1.7

billion that the Progressive Teachers’ Union of Zimbabwe has

demanded. A PTUZ rep told us that a stay-away called on January 24

has been hampered by a circular from the “governmen4w

jYQQQ(As Expected)… Government promises of a

record crop yield this summer will not be met, Agriculture Minister

Rugare Gumbo admitted on January 25. In October, the GOZ had

declared “the mother of all agricultural seasons” that would reverse

the record of poor food production, break the economic crisis, and

restore economic prosperity. “The season has not been as

spectacular as we had expected,” Gumbo admitted last week. He

conceded for the first time that the GOZ had failed to supply enough

fertilizer to farmers, but he also blamed heavy rains. He urged

farmers to use traditional fertilizers – cattle dung and the soil of

anthills – in place of imported fertilizer.

¶15. Government To Go After Economic Saboteurs… Industry and

International Trade Minister Obert Mpofu said last week that the

Zimbabwe Development Corporation (ZDC) will be used to seize control

of private businesses engaging in “economic sabotage.” Mpofu tasked

the newly appointed ZDC board to select “a few entities, which will

need to be (taken over and) resuscitated on a sustainable basis.”

Mpofu said that a number of companies which were currently under

parastatals, would fall under ZDC. Olivine Industries, until

recently majority-owned by HJ Heinz, would immediately fall under

ZDC from the Industrial Development Corporation (IDC). ZDC will

also within the next 40 days open People’s Shops countrywide after

cabinet last week approved the concept. The People’s Shops will

provide basic commodities aimed at very low-income earners and

disadvantaged groups.

MCGEE

(29 VIEWS)