SADC Troika fails to break deadlock

The Southern African Development Community’s troika on politics, defence and security, failed to break the deadlock over the allocation of ministries between the Zimbabwe African National Union- Patriotic Front and the Movement for Democratic Change.

The two parties had for more than a month failed to agree on how to share the ministries of Home Affairs, Local Government, Finance and Foreign Affairs, since the signing of the Global Political Agreement on 15 September.

The MDC wanted all four ministries because ZANU-PF had already taken over most key ministries. ZANU-PF did not want to surrender Home Affairs in particular.

The mediator, former South African President Thabo Mbeki, had given Finance to the MDC and suggested that the two parties should share Home Affairs.

Full cable:

Viewing cable 08HARARE991, ZIM NOTES 10-31-2008

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UNCLAS SECTION 01 OF 03 HARARE 000991

AF/S FOR B. WALCH

ADDIS ABABA FOR USAU

ADDIS ABABA FOR ACSS

NSC FOR SENIOR AFRICA DIRECTOR B.PITTMAN

TREASURY FOR D. PETERS

STATE PASS TO USAID FOR L.DOBBINS AND E.LOKEN

COMMERCE FOR BECKY ERKUL

SIPDIS

E.O.12958: N/A

TAGS: PGOV PREL ASEC PHUM ECON ZI

SUBJECT: ZIM NOTES 10-31-2008

———–

¶1. SUMMARY

———–

Topics of the week:

– SADC Troika Fails to Break Deadlock…

– Parliament adjourns until November 11…

– Civil Society Critical of Agreement, Constitutional Reform…

– Without Doctors or Nurses, Public Hospitals Stop – Admitting

Patients…

– Cholera Outbreaks Continue…

– Global Fund wraps up in-country audit…

– Heartbreak in the Heartland…

– Public Universities to Start November 3…

– Barely Coping in the Economic Meltdown…

– Industry Backs Pro-Market Reform…

– Gold Production Crisis…

– Zeros Return With a Vengeance…

– Government Increases Tax-Free Income Threshold…

———————————

¶2. Price Movements-Exchange Rate

and Selected products

———————————

Parallel rate for cash nearly doubled to Z$95,000:US$1

Check rate skyrocketed to Z$145,000,000,000:US$1 against inter-bank

average of Z$620:US$1

Bread on the parallel market doubled to Z$150,000

Sugar rose to $200,000/2kg

Petrol and diesel declined to Z$75,000/liter

—————————–

On the Political/Social Front

—————————–

¶3. SADC Troika Fails to Break Deadlock… Despite 13 hours of

meetings with the SADC Troika (Politics, Defense and Security) on

Monday October 27, implementation of the September 15 agreement

remains elusive. Hundreds of Zimbabweans attempting to demonstrate

outside the venue were rebuffed by riot police armed with tear gas

and batons. At least two dozen were injured. Police arrested 47

and released them that night after paying a fine. The Troika is

calling for an extraordinary SADC summit to address the Zimbabwe

crisis; it is expected to take place within the next two weeks. See

Harare 966, 968 and 974.

¶4. Parliament adjourns until November 11… In the continued

absence of a deal, MPs have gone home until November 11 when they

will take up a motion to investigate election related violence. See

Harare 980.

¶5. Civil Society Critical of Agreement, Constitutional Reform…

Civil society leaders held a public forum on October 30 where they

questioned how civil society could play a role in monitoring a

power-sharing agreement, since it is still nonexistent. Privately,

one leader shared his skepticism of any constitutional reform

process. See Harare 970.

¶6. Without Doctors or Nurses, Public Hospitals Stop Admitting

Patients… The three major public hospitals in the Harare area –

Parirenyatwa, Harare Central, and Chitungwiza – have been reduced to

empty shells. Starting around October 23 Parirenyatwa and Harare

HARARE 00000991 002 OF 003

Central began discharging nearly all of their patients, as doctors

and nurses refused to come to work.   Medical professionals are

angry not only about their paltry salaries but because they are

tired of the lack of supplies that leaves them helpless to do

anything but watch patients die.

¶7. Cholera Outbreaks Continue… The UN estimates at least 120

cholera-related deaths have occurred this year, including about 30

since the end of August. The Harare high-density suburb of Budiriro

is presently of greatest concern, as 55 cases and 4 deaths were

reported there this week. Indicative of poor monitoring and

reporting, the Budiriro outbreak began on October 14, but was only

reported on the 27th.

¶8. Global Fund wraps up in-country audit… The Global Fund’s

Inspector General and the Lead of the Audit Team will debrief the GF

Executive Director this week and a full report will be available in

December. The audit confirmed that the Reserve Bank of Zimbabwe’s

financial procedures handling GF monies were neither transparent nor

appropriate. Over US$7 million of Global Fund resources intended to

provide life saving medical care to thousands of Zimbabweans was

diverted for other purposes by the Reserve Bank of Zimbabwe since

November 2007. Zimbabwe’s Round 8 application for US$500 million

has been provisionally approved after technical review and will go

to the GF Board for review in the near future. See Harare 981.

¶9. Heartbreak in the Heartland… Last week we visited Gweru and

Masvingo, in Zimbabwe’s once-rich farmlands, as part of our election

outreach and to get a sense of life in the heartland. Increasingly,

everyone from the vegetable vendor to the landlord demands foreign

currency, putting the squeeze on Zimbabweans. See Harare 985.

¶10. Public Universities to Start November 3… The Minister of

Education announced universities will open their doors on November

3, although residence halls remain closed and professors do not have

salary packages. For a complete overview on the crumbling education

system, see Harare 988.

———————————-

On the Economic and Business Front

———————————-

¶11. Barely Coping in the Economic Meltdown… Zimbabweans are

tightening their belts, relying on food aid, finding new informal

work opportunities within the distortions and contradictions of the

economy, emigrating, and sending back remittances. What alarms us

particularly in comparing today’s coping mechanisms with those of

1-1/2 years ago is the rise in disdain for the law as “corruption

out of need” joins “corruption out of greed.” See Harare 982.

¶12. Industry Backs Pro-Market Reform… At its annual congress

this week, the Confederation of Zimbabwe Industries (CZI) resolved

to advise government to implement pro-market policies to revive the

ailing manufacturing sector. Noting the negative effects of the

Reserve Bank of Zimbabwe’s (RBZ) interventions, and in an

encouraging sign of possible activism by the country’s leading

business organization, it called for the Bank to revert to its core

business and desist from quasi-fiscal (i.e. off-budget) spending.

It also resolved to send a delegation to President Mugabe to advise

him of the dire food situation, and to become more engaged in the

design of economic policies.

¶13. Gold Production Crisis… According to the CEO of Central

African Gold, Greg Hunter, speaking at an investment conference in

Johannesburg, Zimbabwe’s gold sector is in a crisis primarily

because of pricing distortions. He calculated that the

RBZ-determined buying price of gold is only US 60 cents per ounce

compared to the international market price of around US$850 per

HARARE 00000991 003 OF 003

ounce. Moreover, on October 26, the Chamber of Mines announced that

the RBZ was US$30 million in arrears to gold producers, which held

up investment in capital projects and exploration.

¶14. Zeros Return With a Vengeance… The 10 zeros that were lopped

off when the Zimbabwe dollar was redenominated on August 1, 2008,

have reappeared with a vengeance thanks to hyperinflation and the

continued excess demand for foreign exchange. Using the cash

exchange rate, the Zimbabwe dollar lost 99.9999% of its value in the

last three months while the Old Mutual Implied Rate, at US$890.1

billion:US$1, breached its pre-revaluation high of Z$676.1

billion:US$1 this week. In response to the return of the zeros,

most banks and service providers are removing between 6 and 12 zeros

to enable their systems to cope. In view of these developments and

the lack of other investment opportunities, activity on the Zimbabwe

Stock Exchange continues to push record levels nearly every day.

¶15. Government Increases Tax-Free Income Threshold… Against this

backdrop, the GOZ raised the tax-free income threshold from Z$15,000

(about US 16 cents at the cash rate) to Z$200,000 (US$2.10) per

month with effect from October 1. Those earning above Z$4 million

(US$42.10) per month will be taxed at the highest rate of 47.5%.

Bracket creep will make the benefits short lived.

—————–

Quote of the Week

—————–

¶16. Just look at how young our Secretary for Information is and how

old Robert Mugabe is.” MDC Secretary General, Tendai Biti in an

October 27 press conference, referring to the generational gap

between MDC’s 30-year-old Nelson Chamisa and the 84-year-old Robert

Mugabe.

MCGEE

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