ZANU-PF Chinhoyi MP Phillip Chiyangwa was arrested for his alleged involvement in an expanding embezzlement scandal involving ENG Capital Management.
The company was caught up in the crackdown on the financial sector by new central bank governor Gideon Gono who said his market-friendly proposals have unleashed a “shrill” cacophony of covert memos and emissaries to President Robert Mugabe.
He was not sure whether Mugabe would continue to grant him wide latitude to tame Zimbabwe’s imploding economy.
Full cable:
Viewing cable 04HARARE59, CENTRAL BANKER MEETS GROWING HOSTILITY
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C O N F I D E N T I A L SECTION 01 OF 02 HARARE 000059
SIPDIS
STATE FOR AF/S
TREASURY FOR OREN WYCHE-SHAW
STATE PASS USAID FOR MARJORIE COPSON
STATE PASS USDOC FOR AMANDA HILLIGAS
E.O. 12958: DECL: 01/01/2008
SUBJECT: CENTRAL BANKER MEETS GROWING HOSTILITY
Classified By: Econchief William Weissman, Reason: 1.5 (b,d).
¶1. (C) Summary: Drenched in palpable exasperation, Reserve
Bank (RBZ) Governor Gideon Gono says his market-friendly
proposals have unleashed a “shrill” cacophony of covert memos
and emissaries to President Mugabe. He is uncertain whether
Mugabe will continue to grant him wide latitude to tame
Zimbabwe’s imploding economy. If Gono can one day point to a
genuine turnaround, he will want to enlist the support of the
International Monetary Fund (IMF) and donor countries. End
Summary.
¶2. (C) Gono underscored his goals and challenges during an
hour-long session with Amb Sullivan. Highlights follow:
– Combat Enemies of Reform. Dissent and sabotage have
suffused the universal acclaim that greeted Gono’s Dec. 18
policy statement. He singled out the Ministry of Finance –
including Minister Herbert Murerwa – as antagonists. He
showed us a confidential denunciation penned by a Ministry
official, intended for Mugabe but leaked to Gono. One
ZANU-PF higher-up even traveled to Malaysia, where Mugabe has
been vacationing, to complain of the Governor’s policy. At
the same time, members of both the governing ZANU-PF and
opposition MDC have said Gono is targeting their economic
support base. (Note: Police arrested ZANU-PF Chinoyi MP
Philip Chiyangwa over the weekend for his alleged involvement
in an expanding embezzlement scandal involving ENG Capital
Management.)
– Patch Government/Business Ties. Gono believes he is
uniquely qualified to mend this rift. His close relationship
with Mugabe affords him more cover than past “reformers.”
Gono bragged that ex-Finance Minister Simba Makoni asked him
in a private lunch on the day of the Dec 18 address how he
gets away with demanding twice as much as Makoni had in 2002
– causing the former Minister’s dismissal.
– Restore Zimbabwe’s International Borrowing Credibility.
Gono wants to rebuild the country’s relationship with the
IMF, World Bank and donor countries. However, the Governor
wants first to log a record of accomplishment. Gono claims
Mugabe was taken aback when he told the President he should
meet with the next visiting IMF delegation. “We owe them
money. We cannot afford to be arrogant,” he alleges to have
said to the President. While Amb Sullivan emphasized the
importance of progress on political reconciliation and civil
liberties as well as economic reform, the ZANU-PF partisan
Gono argued the MDC should adopt a less confrontational
stance, focusing on future rather than past elections.
(Comment: We suspect he favors reconciliation through
national unity instead of multiparty democracy.)
– Involve All Stakeholders. Gono says he consulted broadly
with economists, the IMF, labor reps and business leaders in
devising his policy statement. In fact, he specifically
cited three prominent white economic commentators – John
Robertson, Erich Block and Tony Hawkins – whom the State
media frequently belittles.
Comment
——-
¶3. (C) Did the politically-atuned Gono overstate his
commitment to reform and rapprochement with the West for our
benefit? We don’t know, and we will ultimately judge him by
actions rather than words or amiability.
¶4. (C) Still, it’s worth pointing out what he’s done since
taking office on Dec 1. Gono cut the RBZ’s credit line for
insolvent financial institutions, potentially returning some
credibility to the banking sector. He enunciated his new
economic policy at length without blaming Zimbabwe’s ills on
Western “sanctions.” He appointed a well-rounded, pragmatic
group of Zimbabweans to the Advisory Board that will oversee
the new currency auctions (commencing this week), including
Bloch, Tobacco Association President Duncan Miller, Standard
Chartered CEO Washington Matsaira, Rio Tinto CEO John Nixon
and Indigenous Commercial Farmers Union Chief Davison Mugabe
– persons known and respected by the Embassy – as well as
several high GOZ officials (but excluding hard-liners in the
mold of Jonathan Moyo or Joseph Made). He turned back until
a later stage President Mugabe’s request for Malaysian
central bank advisors, arguing that there’s no quick fix and
Zimbabweans must come to terms with the problems they caused.
Gono has, in short, surpassed our initial modest
expectations, but we’re still in the first inning of a long
game.
¶5. (C) Without doubt, the dynamics of GOZ economic
policymaking are in flux. We don’t know where the
center-of-gravity will end up, but given this Government’s
current track record, it can’t hurt to roll the dice. While
the Finance Ministry was once the main GOZ voice for
pragmatism (perhaps until Makoni’s exit in 2002), most top
Ministry officials are now large land reform beneficiaries
(in one form or another) with vested interests in the status
quo. Gono’s speech reached well beyond monetary policy,
visibly wrestling bureaucratic turf away from that Ministry.
This is especially humbling for a Ministry whose own best
shot at reform – the National Economic Recovery Program
(NERP) – proved an embarrassing travesty that led to
Zimbabwe’s IMF expulsion. But it remains to be seen whether
Mugabe will continue to back an RBZ Governor whose polices
run counter to “anti-imperialist” demagoguery – and whether
Gono has what it takes to carry on the fight for economic
reform.
SULLIVAN
(321 VIEWS)
