US embassy cable - 00HARARE2952

C O N F I D E N T I A L SECTION 01 OF 02 HARARE 002952 
 
SIPDIS 
 
STATE FOR AF, AF/S, AF/EPS, EB/IFD/ODF 
TREASURY FOR ED BARBER, GRACE SONE 
USDOC FOR ERIC HENDERSON 
STATE PASS USTR/RWHITTAKER 
NSC FOR SENIOR AFRICA DIRECTOR GAYLE SMITH 
 
E.O. 12958: DECL: 06/02/10 
TAGS: EFIN, PGOV, ZI 
SUBJECT: BARCLAYS BANK MANAGING DIRECTOR ON 
                       CONFIDENTIAL 
 
PAGE 02        HARARE  02952  01 OF 02  021047Z 
ZIMBABWE'S WOES AND OUTLOOK 
 
CLASSIFIED BY ECON/COMM OFFICER MARK PROKOP, REASONS 
1.5 (B), (D) 
 
REF: HARARE 2817 
 
1.  (C) ON JUNE 1 AMBASSADOR AND ECONOFF MET WITH 
ISAAC TAKAWIRA, MANAGING DIRECTOR OF BARCLAYS BANK, 
AND WHOM WE REGARD AS AN EXCELLENT, WELL CONNECTED 
AND INFORMED INTERLOCUTOR, TO DISCUSS ZIMBABWE'S 
SITUATION AND OUTLOOK.  THE BANKER OPENED HIS SERIOUS 
DIALOGUE BY STATING HOW WORRIED HE WAS ABOUT THE 
CONSEQUENCES, BOTH INTERNAL AND INTERNATIONALLY, OF 
THE LAND ISSUE AND RESETTLEMENT PROCESS AS CURRENTLY 
BEING HANDLED BY GOVERNMENT.  CALLING IT A DISASTER, 
HE STATED IT WAS NOT WELL THOUGHT OUT AND WOULD 
NEGATIVELY AFFECT AGRICULTURAL PRODUCTIVITY, LEAVE 
THE RESETTLED POPULACE MORE DESTITUTE IN THE FUTURE, 
AND DESTROY THE CHANCES OF INTERNATIONAL SUPPORT FOR 
THE PROGRAM.  (COMMENT: TAKAWIRA IS ALSO A LARGE- 
SCALE TOBACCO FARMER IN HIS OWN RIGHT, EMPLOYING 2000 
FARM WORKERS.  HIS PROPERTY HAS NOT BEEN AFFECTED BY 
THE RECENT INVASIONS.  CLOSELY AFFILIATED WITH THE 
RULING PARTY AND MOVING AT EASE IN THE HIGHEST RANKS 
OF THE GOVERNMENT IS LIKELY A CONTRIBUTING FACTOR TO 
THIS.  TOBACCO FARMING GIVES TAKWIRA A GOOD SENSE OF 
THE SENTIMENT OF A SIZABLE SEGMENT OF THE POPULACE. 
END COMENT.) 
 
2.  (C) THE MANAGING DIRECTOR ALSO TOLD US THAT HIS 
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PAGE 03        HARARE  02952  01 OF 02  021047Z 
BANK WAS RELATIVELY WELL-POSITIONED REGARDING ITS 
EXPOSURE TO THE FARMING INDUSTRY, WHICH IS SUFFERING 
ITS WORSE FINANCIAL CRISIS SINCE INDEPENDENCE.  WHEN 
HE TOOK OVER THE HELM IN 1992, BARCLAY'S FARM-LENDING 
BOOK CONSTITUTED 39 PERCENT OF TOTAL LOANS.  TODAY 
THAT FIGURE IS DOWN TO 19 PERCENT AND IS HEAVILY 
RESERVED AGAINST.  THE SHRINKAGE WAS DUE TO HIS 
DECISION EIGHT YEARS AGO TO WRITE NO NEW FARM 
BUSINESS, AS HE KNEW EVEN BACK THEN THAT THE 
UNRESOLVED LAND ISSUE WAS A MAJOR PROBLEM WAITING TO 
HAPPEN.  THOUGH HIS PRESCIENCE WAS VINDICATED, HIS 
SENSE OF SHAME AND LOSS AT WHAT HAS OCCURRED WAS 
EVIDENT AND HEARTFELT.  THE BULK OF THE BANK'S 
BUSINESS THESE DAYS IS LENDING TO CORPORATES, WITH 
SUCH LOANS MAKING UP 65 TO 70 PERCENT OF THE TOTAL. 
 
3.  (C) TAKAWIRA ALSO TOLD US THAT HE HAD RECENTLY 
POINTED OUT TO THE ATTORNEY GENERAL A POTENTIAL 
PROBLEM WITH THE LAND ACQUISITION PROGRAM AS 
CURRENTLY STRUCTURED.  HE FURTHER EXPLAINED THAT THE 
COMPENSATION PROCEDURES IN THE JUST-SIGNED 
LEGISLATION WOULD PAY THE FARMERS IN IOU'S (25 
PERCENT OF THE VALUE OF IMPROVEMENTS ON SEIZURE, 25 
PERCENT TWO YEARS LATER AND THE BALANCE FOUR OR FIVE 
YEARS OUT, SEE REFTEL A) WHICH ONLY CARRY A 25 
PERCENT INTEREST RATE.  HIS BANK'S LOWEST RATE IS 
CURRENTLY 60.5 PERCENT, AND A COURT CASE WOULD SURELY 
DECIDE FOR THE PLAINTIFFS THAT THEY WERE 
UNDERCOMPENSATED AND DIRECT THE GOZ TO PAY MARKET 
RATES.  THIS LEGALLY CHALENGABLE DISPARITY WOULD ONLY 
MAKE A BAD PROGRAM WORSE, HE OPINED. 
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4.  (C) ON THE ELECTIONS, TAKAWIRA REVEALED A 
PERSONAL BELIEF THAT THE OPPOSITION MOVEMENT FOR 
DEMOCRATIC CHANGE (MDC) PARTY MAY DO MUCH BETTER IN 
THE POLLS THAN IS WIDELY ASSUMED.  HE POINTEDLY TOLD 
US STORIES OF CONVERSATIONS HE RECENTLY HAD WITH 
RELATIVES OF HIS (AN UPPER RANK MILITARY OFFICER AND 
TWO ELDERLY AUNTS), AS WELL AS THE SENTIMENT OF HIS 
2000 FARM WORKERS.  SUCCINCTLY PUT, HIS MESSAGE WAS 
THAT THESE DAYS EVERYONE IN THE COUNTRY IS FOR ZANU- 
PF -- UP UNTIL ELECTION DAY.  AN 80 OR 90 SEAT MDC 
WIN WOULD NOT SURPIRSE HIM, AND HE ASKED OUR 
ASSURANCE THAT WE WOULD SUPPORT THE NEW GOVERNEMNT 
WERE THIS TO OCCUR. 
 
5.  (C) ON OTHER TOPICS, NOTABLY THE FOREX SHORTAGE, 
HE CONFIRMED THAT MANY COMMERCIAL OPERATIONS WERE ON 
THE VERGE OF SHUTDOWN DUE TO THEIR INABILITY TO PAY 
INTERNATIONAL SUPPLIERS OR EVEN THEIR PARENT 
COMPANIES.  FOR THE PAST FOUR MONTHS THE ZIMBABWEAN 
COMPANIES HAD BEEN LIVING ON THE CREDIT AND SUPPORT 
OF THEIR HISTORIC FRIENDS AND RELATIONS, BUT THESE 
ARE ABOUT EXHAUSTED, WITH DIRE CONSEQUENCES.  AS A 
SINGLE EXAMPLE HE CITED ZIMBABWE'S LARGEST GOLD 
PRODUCER WHICH CURRENTLY OPERATES EIGHT MINES, BUT 
 
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                           CONFIDENTIAL     PTQ1174 
 
PAGE 01        HARARE  02952  02 OF 02  021047Z 
ACTION AF-00 
 
INFO  LOG-00   NP-00    AID-00   CEA-01   CIAE-00  CTME-00  DODE-00 
      ANHR-00  SRPP-00  DS-00    EB-00    EXIM-01  E-00     VC-00 
      FRB-00   H-01     TEDE-00  INR-00   IO-00    ITC-01   L-00 
      VCE-00   AC-01    NSAE-00  OMB-01   OPIC-01  PA-00    PM-00 
      PRS-00   ACE-00   P-00     SP-00    IRM-00   SSO-00   STR-00 
      USIE-00  FMP-00   PMB-00   DSCC-00  DRL-02   G-00     NFAT-00 
      SAS-00     /009W 
                  ------------------5E49E8  021047Z /38 
O 021050Z JUN 00 
FM AMEMBASSY HARARE 
TO SECSTATE WASHDC IMMEDIATE 6196 
INFO SOUTHERN AFRICAN DEVELOPMENT COMMUNITY 
NSC WASHDC 
USDOC WASHDC 
DEPTTREAS WASHDC 
 
C O N F I D E N T I A L SECTION 02 OF 02 HARARE 002952 
 
SIPDIS 
 
STATE FOR AF, AF/S, AF/EPS, EB/IFD/ODF 
TREASURY FOR ED BARBER, GRACE SONE 
USDOC FOR ERIC HENDERSON 
STATE PASS USTR/RWHITTAKER 
NSC FOR SENIOR AFRICA DIRECTOR GAYLE SMITH 
 
E.O. 12958: DECL: 06/02/10 
TAGS: EFIN, IBRD, PGOV, ZI 
SUBJECT: BARCLAYS BANK MANAGING DIRECTOR ON 
                       CONFIDENTIAL 
 
PAGE 02        HARARE  02952  02 OF 02  021047Z 
ZIMBABWE'S WOES AND OUTLOOK 
 
WHICH IS BEING FORCED TO CLOSE SIX OF THEM DUE THE 
HARD CURRENCY SHORTAGE.  "WITHOUT THESE HARD CURRENCY 
EXPORTS THE DOWNWARD SPIRAL JUST ACCELERATES" HE 
CONFIDED, "AND I WAKE UP NOW EVERYDAY WORRYING HOW WE 
ARE GOING TO SOLVE OUR PROBLEM."  TOURISM IS ANOTHER 
DISASTER HE STATED, WITH THE OPERATIONS OF SMALL, 
INDEPENDENT AND OFTEN BLACK OPERATORS CLOSED DOWN AS 
IF THE COUNTRY WERE THREATENED BY WAR.  RESTORING 
THINGS WILL TAKE A LONG, LONG TIME HE MUSED AT OUR 
DEPARTURE, AND THINGS WILL NEVER BE AS BEFORE, HE 
CONCLUDED. 
 
MCDONALD 
 
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