South Africa had paid Zimbabwe the last tranche of the R300 million that it had pledged to the inclusive government, but it was not in a position to give Finance Minister Tendai Biti an additional R1 billion that he had requested.
South African treasury official Neil Cole said the money had originally been meant for salaries of civil servants but he understood that it had been used on municipal infrastructure in Harare and Bulawayo, and on health and education programmes.
Cole said Biti had requested an additional R1 billion of budget support but he dismissed the amount as a non-starter saying Pretoria might consider a smaller package of R300-500 million.
He said treasury would, however, need an auditor’s assurance that the initial R300 million had been properly spent before any further amount could be disbursed.
Full cable:
Viewing cable 09PRETORIA1824, SOUTH AFRICA PLANNING NEW ASSISTANCE TO ZIMBABWE
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Reference ID |
Created |
Released |
Classification |
Origin |
INFO LOG-00 EEB-00 AID-00 CIAE-00 COME-00 INL-00 DODE-00
DOTE-00 DS-00 FAAE-00 FBIE-00 VCI-00 H-00 TEDE-00
INR-00 LAB-01 L-00 MOFM-00 MOF-00 VCIE-00 NSAE-00
ISN-00 NSCE-00 OMB-00 NIMA-00 PA-00 PM-00 GIWI-00
PRS-00 P-00 ISNE-00 FMPC-00 SP-00 EPAE-00 IIP-00
SCRS-00 PMB-00 DSCC-00 PRM-00 DRL-00 G-00 NFAT-00
SAS-00 FA-00 SWCI-00 PESU-00 SEEE-00 /001W
R 081520Z SEP 09
FM AMEMBASSY PRETORIA
TO SECSTATE WASHDC 9543
INFO SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
AMEMBASSY HARARE
DEPT OF TREASURY WASHINGTON DC
C O N F I D E N T I A L PRETORIA 001824
STATE PASS USAID FOR MARJORIE COPSON AND LORIE DOBBINS
E.O. 12958: DECL: 09/10/2019
SUBJECT: SOUTH AFRICA PLANNING NEW ASSISTANCE TO ZIMBABWE
Classified By: Economic Counselor Terri Robl, reasons 1.4 (b) and (d)
¶1. (C) Summary: South Africa has given R300 million ($40
million) of budget support to Zimbabwe’s Finance Ministry
since the formation of the Government of National Unity in
Harare. Pretoria is now weighing a Finance Ministry request
for additional support of R1,000 million ($134 million). The
South African Reserve Bank is preparing a R500 million ($67
million) facility for use by South African banks making
commercial loans in Zimbabwe. Agreement on a Bilateral
Investment Treaty between South Africa and Zimbabwe may be
near. South Africa believes donors should drop their
opposition to full IFI re-engagement in Zimbabwe. The South
African National Treasury is open to the idea of
consultations with USAID regarding Zimbabwe programs. End
Summary.
————–
Bucks for Biti
————–
¶2. (C) South Africa is getting ready to give additional
financial assistance to the Government of Zimbabwe, according
to South African National Treasury Chief Director (African
Economic Integration) Neil Cole. Cole met last week with
Deputy Economic Counselor and Political Officer.
¶3. (C) Cole said that South Africa recently delivered the
third and final tranche of the R300 million ($40 million)
budget support package that was put together earlier this
year to support the fledgling Government of National Unity
(GNU) in Zimbabwe. According to Cole, the money was
originally intended to pay for the salaries of civil
servants. In reality, it was spent on municipal
infrastructure in Harare and Bulawayo, and on health and
education programs. Cole acknowledged that budget support is
a risky option for donors — he called it a “leap of faith.”
He argued, however, that Pretoria had no choice but to show
support for Zimbabwean Finance Minister Tendai Biti. He said
the money helped Biti “get through a very difficult period.”
Note: South Africa also furnished R300 million of seeds and
other agricultural goods to Zimbabwe in late 2008/early 2009.
End Note.
————————————–
Brother, Can You Spare A Billion Rand?
————————————–
¶4. (C) Biti has now asked for an additional R1,000 million
($134 million) of budget support from South Africa. Cole
dismissed this amount as a “non-starter” in the current
budget climate, but he thought it likely Pretoria would agree
to a smaller package of R300-500 million ($40-67 million).
First, however, National Treasury will need an auditor’s
assurance that the initial 300 million has been properly
spent. Cole explained that the South African embassy in
Harare is “too understaffed to keep track of our money.”
———————————
Money for Banks, Other Assistance
———————————
¶5. (C) Cole also said that the South African Reserve Bank
(SARB) is negotiating a R500 million ($67 million) loan to
the Reserve Bank of Zimbabwe (RBZ). According to Cole, this
money will be drawn down by South African banks making
commercial loans in Zimbabwe. He explained that the RBZ had
to be included in the program as SARB lacks legal authority
to make loans to private banks outside of South Africa,
whereas SARB can make loans to foreign central banks. Cole
stressed that the RBZ will be nothing more than a conduit
between SARB and the private banks, with no say in the
disposition of the R500 million. “(Former Finance Minister)
Qdisposition of the R500 million. “(Former Finance Minister)
Trevor Manuel was adamant that the RBZ not be involved at
all, but it turned out to be legally necessary,” he said.
¶6. (C) Cole downplayed media reports that the Development
Bank of Southern Africa (DBSA) (a SAG-owned development
finance institution) might get deeply involved in Zimbabwean
assistance. He said that DBSA’s inability to make
concessional loans in Zimbabwe would limit its role as a
lender.
¶7. (C) Cole confirmed that a Bilateral Investment Treaty
(BIT) between South Africa and Zimbabwe has been negotiated
and is now being reviewed by the Zimbabwean cabinet. He said
that progress on the BIT has been delayed by disagreements
over clauses that would permit South Africans to make
retroactive expropriation claims. Note: An official at
Business Unity South Africa recently told Deputy Economic
Counselor that Trade and Industry Minister Rob Davies plans
to lead a large business delegation to Harare for a BIT
signing ceremony once the Zimbabwean cabinet blesses the
text. She had the impression that agreement on the BIT was
imminent. End Note.
—————-
The Donors’ Role
—————-
¶8. (C) Cole acknowledged that so far the SAG is not
coordinating with other donors on Zimbabwe assistance, apart
from occasional meetings with DFID. He welcomed the
opportunity to consult with USAID on Zimbabwe programs.
¶9. (C) Asked what donors should do next in Zimbabwe, Cole
said the U.S. and others should abandon their opposition to
full re-engagement by the IMF, World Bank, and AfDB. Once
financial support from the IFIs is a possibility, South
Africa would help Zimbabwe pay off its arrears, he told us.
At the same time, Cole said that he personally supports the
retention of targeted sanctions on ZANU-PF leaders, at least
for the time being. “This pressure is still helpful,” he
explained.
——-
Comment
——-
¶10. (C) South Africa takes credit for brokering the
political agreement and subsequent GNU in Zimbabwe. A GNU
failure would reflect badly on Pretoria’s diplomacy and
result in further problems, such as refugee flows, for South
Africa and the region. Restoring economic growth in Zimbabwe
is thus a key element of South Africa’s strategy to support
the GNU and “normalize” Zimbabwe. Pretoria is likely to
continue with assistance programs in spite of the tough
budget climate.
GIPS
(95 VIEWS)
