Simba Makoni says we will not play chase after Johnny

Former Finance Minister Simba Makoni told banks, bureaus de change and leading exporters that a policy to devalue the Zimbabwe dollar had been agreed but this time everyone involved must stick and play together and not allow the parallel or black market to get too far away from the official rate.

Makoni is said to have told the businessmen during a tour with State Security Minister Nicholas Goche that “We will not play chase after Johnny” in terms of the operative exchange rate, as has been the case of late.

The permanent secretary in the Ministry of Industry and International Trade Stewart Comberbach said that the government made a distinction between a parallel and a black market for foreign currency.

The parallel market, which quoted a rate slightly above the official one, was tolerable as a pressure valve but the black market, where forex starved people paid exorbitant rates was viewed by some in the Zimbabwe African National Union-Patriotic Front politburo as economic sabotage carried out by pre-liberation minded individuals interested in personal gain or damaging the economy.

Comberbach said if this type of thinking prevailed then things could get very messy with the police or others brought in to enforce exchange regulations, eliminate foreign currency accounts or seize assets.

Comberbach was briefing United States embassy officials on the need for Zimbabwe to be included on the United States’ Africa Growth and Opportunity Act facility which offered preferential tariffs to African exporters.

Full cable:

Viewing cable 01HARARE1124, INDUSTRY PERMSEC BRIEFS US ON A RANGE OF

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270540Z Mar 01

CONFIDENTIAL     PTQ3533

PAGE 01       HARARE 01124 01 OF 02 270600Z

ACTION AF-00

INFO LOG-00   AID-00   CIAE-00 COME-00 CTME-00 INL-00   USNW-00

DODE-00 DOTE-00 SRPP-00 DS-00   EB-00   EUR-00   EXIM-01

E-00     FAAE-00 FBIE-00 VC-00   FRB-00   H-01     TEDE-00

INR-00   INSE-00 IO-00   ITC-01   JUSE-00 LAB-01   L-00

AC-01   NSAE-00 NSCE-00 OIC-02   OMB-01   OPIC-01 PA-00

PM-00   PRS-00   ACE-00   P-00     SCT-00   SP-00   SSO-00

SS-00   STR-00   TRSE-00 T-00     USIE-00 PMB-00   DSCC-00

PRM-01   DRL-02   G-00    SAS-00     /012W

——————D76EE9 270600Z /22

FM AMEMBASSY HARARE

TO SECSTATE WASHDC PRIORITY 8510

INFO NSC WASHDC PRIORITY

SOUTHERN AFRICAN DEVELOPMENT COMMUNITY

USDOC WASHDC

DEPT OF TREASURY WASHDC

C O N F I D E N T I A L SECTION 01 OF 02 HARARE 001124

SIPDIS

STATE FOR AF/S, AF/EPS, EB/IFD/ODF, EB/TPP/ODC

TREASURY FOR ED BARBER, BARAK HOFFMAN

USDOC FOR 2037 ERIC HENDERSON

STATE PASS USTR/RWHITTAKER

NSC FOR SENIOR AFRICA DIRECTOR JFRAZER

LONDON FOR CGURNEY

PARIS FOR BISA WILLIAMS

CONFIDENTIAL

PAGE 02       HARARE 01124 01 OF 02 270600Z

E.O. 12958: DECL: 03/26/11

TAGS: ETRD EFIN PREL PHUM PGOV ZI

SUBJECT: INDUSTRY PERMSEC BRIEFS US ON A RANGE OF

ISSUES: AGOA; DEVALUATION; AND TALKS WITH SOUTH

AFRICA

CLASSIFIED BY ECON/COMM OFFICER MARK PROKOP, REASON

1.5 (B), (D)

REFS: A) CAPETOWN 405

¶1. (C) SUMMARY: ON MARCH 26 CHARGE AND ECONOFF MET

WITH STEWART COMBERBACH, PERMANENT SECRETARY AT THE

MINNISTRY OF INDUSTRY AND INTERNATIONAL TRADE IN AN

INFORMAL MEETING TO DISCUSS CURRENT EVENTS AND

DEVELOPMENTS.   THE PERMSEC, WITH WHOM WE ENJOY FRANK

AND HONEST DIALOGUE TOUCHED, UNPROMPTED, ON A BROAD

RANGE OF TIMELY AND NOTEWORTHY TOPICS. THE MAIN

POINTS ARE: THAT ZIMBABWE RETAINS HOPE THAT IT WILL

BE ABLE TO QUALIFY FOR THE BENEFITS OF THE AFRICAN

GROWTH AND OPPORTUNITY ACT (AGOA); THAT POLICY

AGREEMENT TO DEVALUE HAS OCCURRED THOUGH WHEN AND BY

HOW MUCH IS YET UNKNOWN; AND THAT THE DIALOGUE WITH

THE SOUTH AFRICANS WAS SUBSTANTIVE AND FRANK, THOUGH

IT IS PREMATURE TO WANT TO SEE CHANGES OR BENEFITS.

THE PERMSEC DID NOT HAVE HARD DATA ON A MEETING DATE

FOR THE MBEKI/MUGABE MEETING, AND WANTS TO MAINTAIN

AN ACTIVE DIALOGUE WITH THE U.S. END SUMMARY.

¶2. (C) HIS DISTILLED OBSERVATIONS ARE PROVIDED BELOW

IN BULLET FORMAT.

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PAGE 03       HARARE 01124 01 OF 02 270600Z

THE AFRICAN GROWTH AND OPPORTUNITY ACT

————————————–

== IS AGOA FOR ZIMBABWE DEAD? BASED ON CONVERSATIONS

HELD LAST YEAR WITH FORMER DAS WHITNEY SCHNEIDMANN

AND USTR’S ROSA WHITTAKER, COMBERBACH WAS UNDER THE

IMPRESSION THAT THERE EXISTS A CERTAIN LATITUDE IN

THE INTERPRETATION OF THE ACT’S DEMOCRACY AND HUMAN

RIGHTS HURDLES SET OUT IN THE ACT’S LANGUAGE. IN

OTHER WORDS, IF ZIMBABWE CAN BE SEEN AS MAKING

PROGRESS TOWARDS IMPROVING ITS RULE OF LAW STANCE AND

RESPECT FOR PROPERTY RIGHTS, IS IT SUFFICIENT TO GET

THE TRADE BENEFITS OF THE ACT? WE POINTED OUT THAT

THIS WAS NOT AN INTERPRETATION WE WERE FAMILIAR WITH,

ALSO NOTING THAT RECENT DEVELOPMENTS, SUCH AS THE

OFFICIAL REACTIONS TO BOTH THE CMAG VISIT PROPOSAL

AND THE RECEPTION GIVEN THE INTERNATIONAL BAR

ASSOCIATION DELEGATION TENDED TO MOVE ZIMBABWE’S CASE

FURTHER BACK, RATHER THAN AHEAD. THE PERMSEC WANTS

TO KEEP THE DIALOGUE OPEN ON THE MATTER, WITH THE

INTERLOCUTORS HE KNOWS AND WITH THOSE REPRESENTING

THE NEW ADMINSTRATION. AS THE EMBASSY IN WASHINGTON

HAD NO ONE CAPABLE OF HANDLING THE DIALOGUE,

COMBERBACH ASKED FOR CONTACT INFORMATION OF VARIOUS

AMERICAN OFFICIALS SO HE COULD DO IT HIMSELF.

== TIED TO THE PRECEDING POINT, COMBERBACH EXPLAINED

THAT HE HAD COMMUNICATED ZIMBABWE’S AGOA

REQUIREMENTS’ PROBLEM TO HIS COUNTERPART AT THE

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PAGE 04       HARARE 01124 01 OF 02 270600Z

MINISTRY OF HOME AFFAIRS. HE RELATED TO US, WITHOUT

MUCH ENTHUSIASM, THE RESPONSE HE RECEIVED, WHICH WAS

THAT THE RULE OF LAW IS BEING FIRMLY UPHELD

THROUGHOUT THE COUNTRY, WITH THE EXCEPTION OF SOME

“TRESPASSING” BY “FORMER LIBERATION FIGHTERS”.

DISINGENEOUS AS THE REPONSE IS, COMBERBACH HAD

REPEATEDLY ASKED THE HOME AFFAIRS MINSTRY FOR A LIST

OF ALL THE INCIDENTS TO WHICH THE POLICE HAD TAKEN

APPROPRIATE ACTION SO THAT HE COULD FORWARD IT TO THE

USG FOR OUR GOOD CONSIDERATION, BUT TO DATE HAD

RECEIVED NO SUCH DATA.

THE FOREIGN EXCHANGE MESS AND DEVALUING

—————————————

== ON DEVALUATION, HE TOLD US THAT A POLICY DECISION

HAD BEEN MADE TO DEVALUE, THOUGH THE TIMING, AND THE

AMOUNT, OF THE SHIFT HAD NOT YET BEEN DETERMINED, BUT

RULED OUT THE POSSIBILITY OF A FLOATING EXCHANGE

RATE. HE FURTHER TOLD US THAT IT WAS WITH THIS IN

MIND THAT THE FINANCE MINSTER MAKONI HAD MET RECENTLY

WITH SOME OF THE MAIN PLAYERS ON THE FOREIGN EXCHANGE

SCENE. THESE INCLUDED THE COMMERCIAL BANKS, BUREAUS

DE CHANGE AND SOME OF THE LEADING EXPORTERS (THESE IN

THE COMPANY OF MINSITER OF STATE FOR SECURITY,

NICHOLAS GOCHE), TO INFORM THEM THAT THIS TIME

CONFIDENTIAL

CONFIDENTIAL     PTO3424

PAGE 01       HARARE 01124 02 OF 02 270558Z

ACTION AF-00

INFO LOG-00   AID-00   CIAE-00 COME-00 CTME-00 INL-00   USNW-00

DODE-00 DOTE-00 SRPP-00 DS-00   EB-00   EUR-00   EXIM-01

E-00     FAAE-00 FBIE-00 VC-00   FRB-00   H-01     TEDE-00

INR-00   INSE-00 IO-00   ITC-01   JUSE-00 LAB-01   L-00

AC-01   NSAE-00 NSCE-00 OIC-02   OMB-01   OPIC-01 PA-00

PM-00   PRS-00   ACE-00   P-00     SCT-00   SP-00   SSO-00

SS-00   STR-00   TRSE-00 T-00     USIE-00 PMB-00   DSCC-00

PRM-01   DRL-02   G-00     SAS-00     /012W

——————D76E86 270558Z /22

P 270540Z MAR 01

FM AMEMBASSY HARARE

TO SECSTATE WASHDC PRIORITY 8511

INFO NSC WASHDC PRIORITY

SOUTHERN AFRICAN DEVELOPMENT COMMUNITY

USDOC WASHDC

DEPT OF TREASURY WASHDC

C O N F I D E N T I A L SECTION 02 OF 02 HARARE 001124

SIPDIS

STATE FOR AF/S, AF/EPS, EB/IFD/ODF, EB/TPP/ODC

TREASURY FOR ED BARBER, BARAK HOFFMAN

USDOC FOR 2037 ERIC HENDERSON

STATE PASS USTR/RWHITTAKER

NSC FOR SENIOR AFRICA DIRECTOR JFRAZER

LONDON FOR CGURNEY

PARIS FOR BISA WILLIAMS

CONFIDENTIAL

PAGE 02       HARARE 01124 02 OF 02 270558Z

E.O. 12958: DECL: 03/26/11

TAGS: ETRD EFIN PREL PHUM PGOV ZI

SUBJECT: INDUSTRY PERMSEC BRIEFS US ON A RANGE OF

ISSUES: AGOA; DEVALUATION; AND TALKS WITH SOUTH

AFRICA

EVERYONE INVOLVED MUST STICK AND PLAY TOGETHER, AND

NOT ALLOW THE PARALLEL OR THE BLACK MARKET TO GET TOO

FAR AWAY FROM THE OFFICIAL RATE. MAKONI’S MESSAGE

WAS THAT “WE WILL NOT PLAY CHASE AFTER JOHNNY” IN

TERMS OF THE OPERATIVE EXCHANGE RATE, AS HAS BEEN THE

CASE OF LATE, SAID THE PERMSEC. COMBERBACH FURTHER

EXPLAINED THAT HIS GOVERNMENT MADE A DISTINCTION

BETWEEN A PARALLEL AND A BLACK MARKET FOR FOREIGN

CURRENCY. THE FORMER, WHICH QUOTED A RATE SLIGHTLY

ABOVE THE OFFICIAL ONE, WAS TOLERABLE AS A PRESSURE

VALVE. THE LATTER, WHERE FOREX STARVED PEOPLE PAID

AN EXCHANGE RATE FO UP TO (RECENTLY) 120 ZIMBABWE

DOLLARS TO THE U.S. DOLLAR, IS VIEWED BY SOME ZANU-PF

POLITBURO MEMBERS AS ECONOMIC SABOTAGE, CARRIED OUT

BY PRE-LIBERATION MINDED INDIVIDUALS INTERESTED IN

PERSONAL GAIN OR DAMAGE TO THE ECONOMY. IF THIS TYPE

OF THINKING PREVAILS, HE TOLD US, THEN IT COULD GET

VERY MESSY WITH THE POLICE OR OTHERS BROUGHT IN TO

ENFORCE EXCHANGE REGULATIONS, ELIMINATE FOREIGN

CURRENCY ACCOUNTS OR SEIZE ASSETS.

THE SOUTH AFRICANS

——————

== ON THE SUBJECT OF THE RECENTLY HELD SOUTH

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PAGE 03       HARARE 01124 02 OF 02 270558Z

AFRICAN/ZIMBABWEAN MINISTERIAL MEETINGS, COMBERBACH

TOLD US THAT HE DID NOT HAVE MUCH TO OFFER IN THE WAY

OF HARD FACTS OR PARTICULARS, BUT SAID THAT THE TALKS

WERE VERY FRANK. HIS EXPLANATION FOR THE LACK OF

DATA WAS THAT HIS MINISTER, AND MINISTER MAKONI OF

FINANCE, HAD MORE THAN TWO HOURS OF TALKS WITH ONLY

MINISTER MANUEL OF SOUTH AFRICA, FOLLOWED BY A

PRIVATE DINNER OF THE THREE. HE LAMENTED THE LACK OF

INTER-MINISTERIAL COMMUNICATION REFERRING TO MEETING

BETWEEN THE AGRICULTURE MINISTER AND HIS COUNTERPART,

AND THE ENERGY MINISTER AS WELL, NONE OF THE CONTENT

OF WHICH GOT SHARED AMONGST ALL THE GOZ PLAYERS.

== COMBERBACH TOLD US THAT THE SOUTH AFRICANS WERE

VERY AWARE OF THE DYNAMICS OF THE POLITICAL SITUATION

HERE, AND AS IS THE CASE WITH MANY OF THE NEIGHBORS,

SYMPATHIZE WITH THE PREDICAMENT OF THE MUGABE

GOVERNMENT. ALL OF THEM REALIZE THAT A BREAK WITH

THE PAST HAS TO BE MADE, AND UNDERSTAND THAT THIS

WILL BE A DIFFICULT PROCESS, BUT DO NOT WANT TO

SUFFER UNNECESSARY COLLATERAL DAMAGE IN THE PROCESS.

HE POINTED OUT THAT SOUTH AFRICA HAD LAID ITS CARDS

ON THE TABLE AT THE ONSET OF THE MEETING, TELLING THE

ZIMBABWEANS THAT: A) FOREIGN DIRECT INVESTMENT IS

DOWN SEVERELY IN SOUTH AFRICA AND INDEED WAS

INSUFFICIENT FOR THE NEEDS OF THE ECONOMY, A

DEVELOPMENT THEY BLAME ON REGIONAL “CONTAGION” (READ

ZIMABWE, THE CONGO, MOZAMBIQUE FLOODING AND TERM

EXTENSIONS IN NAMIBIA AND ZAMBIA); B) THAT CAPITAL

FLIGHT FROM SOUTH AFRICA IS ACCELERATING (BLAMED ON

THE SAME “CONTAGION”); AND, C) THAT ALL THE MAJOR

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PAGE 04       HARARE 01124 02 OF 02 270558Z

DONOR COUNTRIES INCLUDING THE U.S., THE EU AND

BRITAIN WERE TURNING UP THE HEAT ON SOUTH AFRICA TO

DEAL MORE EFFECTIVELY WITH ZIMABBWE.

== ON THE SUBJECT OF THE MBEKI/MUGABE MEETING,

(REFTEL REFERS), HE TOO HAD HEARD THAT IT MIGHT OCCUR

AT THE END OF THIS WEEK ON MBEKI’S TRIP BACK FROM

CUBA, BUT NO HARD ANNOUNCEMENT HAD BEEN MADE YET.

COMMENT

——-

¶3. (C) COMBERBACH REALIZES THAT HIS EFFORTS AT

BAILING ARE INSUFFICIENT FOR THE WATER VOLUME COMING

INTO THE HOLD, BUT PUSHES ON OUT OF PROFESSIONAL

DEDICATION AND PATRIOTISM. HE SMELLS MORE TROUBLE

AHEAD, AND WE PLACE HIGH REGARD IN HIS EXPERIENCE AND

PROGNOSTICATION SKILLS. THOUGH HE WAS HONEST WITH

US, WE BELIEVE HE WOULD HAVE BEEN MORE FORTHCOMING

AND SPECIFIC HAD NOT A MEMBER OF HIS STAFF BEEN IN

ATTENDANCE, BUT HIS FRANK ADMISSION THAT PASSION

OVERULES THOUGHT IN NATIONAL LEADERSHIP IS VALID. THE

VISIT ALLOWED US TO HEAR A REFRESHING IF LONELY VOICE

OF REASON. END COMMENT.

IRVING

CONFIDENTIAL

>

(14 VIEWS)