Zimbabwe biggest liability on AfDB books

The President of the African Development Bank Donald Kaberuka told diplomats in Harare, four months after the formation of the inclusive government, that Zimbabwe was the biggest liability on the AFDB books.

He said that the AFDB was providing Zimbabwe technical assistance in the form of US$6 million to the Ministry of Finance and would soon provide Finance Minister Tendai Biti with a senior advisor.

The AFDB was also working with the World Bank on Zimbabwe’s arrears. The bank was willing to offer US$100 million of its own money and could accept contributions from donors for arrears clearance when the time comes.

He, however, told the diplomats that it was not yet time for full-scale re-engagement with Zimbabwe.

Kaberuka said that local bankers had expressed scepticism that the inclusive government either would not hold or that there would be policy reversals.

Full cable:

Viewing cable 09HARARE488, AFRICAN DEVELOPMENT BANK: NOT YET TIME TO REENGAGE

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VZCZCXRO6554

RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN

DE RUEHSB #0488/01 1621507

ZNR UUUUU ZZH

R 111507Z JUN 09

FM AMEMBASSY HARARE

TO RUEHC/SECSTATE WASHDC 4597

INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE

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RUEHAR/AMEMBASSY ACCRA 2884

RUEHDS/AMEMBASSY ADDIS ABABA 3003

RUEHRL/AMEMBASSY BERLIN 1440

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RHMFISS/EUCOM POLAD VAIHINGEN GE

RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK

RHEFDIA/DIA WASHDC

RUEAIIA/CIA WASHDC

RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 02 HARARE 000488

SENSITIVE

SIPDIS

AIDAC

AF/S FOR B. WALCH

ADDIS ABABA FOR USAU

ADDIS ABABA FOR ACSS

NSC FOR SENIOR AFRICA DIRECTOR MICHELLE GAVIN

NSC FOR CPRATT

TREASURY FOR D. PETERS

STATE PASS TO USAID FOR LDOBBINS AND JHARMON

COMMERCE FOR BECKY ERKUL

AFR/SA FOR ELOKEN, LDOBBINS, BHIRSCH, JHARMON

AA/AFR FOR MOORE

OFDA/W FOR ACONVERY, CCHAN, LPOWERS, KMARTIN

FFP/W FOR JBORNS, ASINK, LPETERSEN

PRETORIA FOR HHALE, PDISKIN, SMCNIVEN

GENEVA FOR NKYLOH

ROME FOR USUN FODAG FOR RNEWBERG

BRUSSELS FOR USAID PBROWN

E.O. 12958: N/A

TAGS: EAID EFIN EAGR PREL PGOV PHUM ASEC ZI

SUBJECT: AFRICAN DEVELOPMENT BANK: NOT YET TIME TO REENGAGE

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SUMMARY

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¶1. (SBU) Ambassadors and aid agency heads attended a briefing by

African Development Bank (AFDB) President Donald Kaberuka on June 9.

Kaberuka, who we met just after the COMESA summit in Victoria Falls,

related his impressions of Zimbabwe and the content of various

meetings with political and business leaders during his visit.

During meetings with both Prime Minister Morgan Tsvangirai and

President Robert Mugabe, the leaders touted the new arrangement as

workable. Kaberuka said that investors will continue to be

skeptical about Zimbabwe until further changes have been achieved.

Finally, he advised that the time has not come for full-scale

reengagement. END SUMMARY.

—————————–

Message to the Private Sector

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¶2. (SBU) Donald Kaberuka, President of the African Development Bank

was in Harare on June 9 following the recent Common Market of

Eastern and Southern Africa (COMESA) meeting in Victoria Falls,

Zimbabwe. During our meeting on June 9 with Kaberuka and

representatives from the UK, Germany, Netherlands, Sweden, Denmark

and France, Kaberuka said that his message to the Zimbabweans at the

COMESA meeting focused on the importance of creating business

confidence as a means of creating economic growth.

—————————-

Mugabe and Tsvangirai Upbeat

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¶3. (SBU) Kaberuka also told us of his discussions with both

President Mugabe and Prime Minister Tsvangirai regarding the

prospects of the inclusive government and land reform.

Unsurprisingly, Tsvangirai was upbeat and said that the government

is working. He acknowledged unresolved issues and appealed to

Kaberuka to advocate for international engagement.

¶4. (SBU) Mugabe also told Kaberuka that the inclusive government is

working, but described it as a temporary arrangement. On land, the

president said, “this is nothing new.” He told Kaberuka that the

government would allow people to take possession of their land as

part of the land reform. Mugabe also cited an alleged ongoing land

audit and repeated his claim that the government will not allow land

for prestige purposes. (COMMENT: Although the need for a land audit

was cited in the September 15 Global Political Agreement (GPA), no

progress towards an audit has yet been made. In fact, many of the

recent farm seizures have been led by ZANU-PF leaders who have

already received one or more farms. END COMMENT.)

¶5. (SBU) When Kaberuka noted the international skepticism of the

Q5. (SBU) When Kaberuka noted the international skepticism of the

GPA, Mugabe commented that those who are skeptical “have always

been.” Kaberuka reiterated to Mugabe that international support

will not increase substantially until further progress towards

fulfilling the GPA has been achieved.

HARARE 00000488 002 OF 002

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AFDB Programs and Concerns

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¶6. (SBU) Turning to Zimbabwe’s financial woes, Kaberuka said that

Zimbabwe is the biggest liability on the AFDB books. He outlined

the Bank’s current programs in country and said the AFDB will

establish an in-country presence as soon as possible, in addition to

bank staff already in Harare based at the Ministry of Finance.

7 (SBU) The AFDB is currently providing Zimbabwe technical

assistance in the form of US$6 million to the Ministry of Finance

and will soon provide Finance Minister Tendai Biti with a senior

advisor. In addition, the bank is providing assistance for water

and sanitation systems in coordination with UNICEF.

¶8. (SBU) The AFDB is also working with the World Bank on Zimbabwe’s

arrears. Kaberuka told us the AFDB is willing to offer US$100

million of its own money and could accept contributions from donors

for arrears clearance when the time comes. Kaberuka noted that this

process took 18 months in Liberia but more recently the clearance of

Cote d’Ivoire’s arrears took just six months due largely to a

contribution from the French. Kaberuka was very clear that budget

support was “a long way off” and noted that the Bank’s

recently-approved short-term strategy would not be expanded any time

soon.

¶9. (SBU) Kaberuka further related that local bankers had expressed

skepticism that the inclusive government either won’t hold or that

there will be policy reversals. Until further political and

economic change is achieved and is seen as irreversible, investors

will continue to steer clear of Zimbabwe’s troubled economy.

¶10. (SBU) In closing, Kaberuka told donors, “the time has not come

for full scale reengagement.”

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COMMENT

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¶11. (SBU) As in previous meetings and his public statements,

Mugabe’s comments to Kaberuka clearly indicate that the intransigent

leader sees the current arrangement as a short-term deal. Mugabe

remains stuck in the past and is not thinking about long-term

development. In contrast, Tsvangirai remains focused on the future.

In the present, however, the business environment remains

unappealing to private investors. As Kaberuka says, it remains

clear that neither donors nor businesses can reengage with further

assistance or investment until further change has been achieved.

END COMMENT.

MCGEE

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