Pretoria bails out Biti

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

If you are new to these pages, please read an introduction on the structure of a cable as well as how to discuss them with others. See also the FAQs

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

TAGS: EAID ECON EFIN PGOV SF

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)