US embassy cable - 03HARARE1955

UNCLAS SECTION 01 OF 02 HARARE 001955 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR AF/S 
NSC FOR SENIOR AFRICA DIRECTOR JFRAZER 
USDOC FOR 2037 DIEMOND 
TREASURY FOR OREN WYCHE-SHAW 
PASS USTR FLORIZELLE LISER 
STATE PASS USAID FOR MARJORIE COPSON 
 
E. O. 12958: N/A 
TAGS: ECON, EINV, PGOV, ZI 
SUBJECT: Masvingo Splinters into Dual Economies 
 
1. (SBU) Summary: Despite both an apparent end to the 3- 
year drought and relative harmony between local ZANU-PF 
and MDC parties, Zimbabwe's southern Masvingo province 
faces tough economic times ahead.  Only those with access 
to U.S. dollars are doing well.  The rest often depend on 
outside food assistance and unsustainably cheap basic 
services such as education and electricity.  End Summary. 
 
2. (SBU) That, at least, is our compressed impression 
after 2-days interacting with the City of Masvingo's 
mayor, key administrators, NGO reps and, beyond city 
limits, some of the Province's poorer rural inhabitants. 
We do not believe life will get much better for small 
farmers even with the drought's passing.  Admittedly, the 
GOZ's fast-track land reform seems to have decongested 
overcrowded communal areas.  Yet existing and resettled 
communal farmers lack inputs - and collateral to borrow 
for inputs.  Most upsettingly, it appears the region is 
unraveling into parallel U.S. dollar and local economies. 
 
Clean Streets, Functioning Gas Pumps 
------------------------------------ 
3. (SBU) On the surface, Masvingo is a bastion of 
political cordiality.  Mayor Alois Chaimiti boasted of 
constructive relations between his MDC and the local ZANU- 
PF, a view seconded by other interlocutors.  ZANU-PF 
Politburo member Eddison Zvobgo may have undermined his 
own party in provincial politics by staking out 
independent positions, opening a window for the MDC 
alternative.  Locals agree the MDC administration has 
done a commendable job of improving services and tidying 
up the city.  Masvingo residents can also buy gas at a no- 
wait, well-stocked service station, a rarity in today's 
Zimbabwe.  An indigenous EXOR station has successfully 
drawn on connections to sell fuel openly at market 
prices, about 50 percent above the GOZ-controlled rate. 
 
4. (SBU) But Masvingo's economy is at least as blighted 
as those elsewhere in the country.  Foreign visitors to 
the Great Zimbabwe ruins, a major tourist attraction, are 
down from an annual 220,000 in 2000 to a projected 20,000 
this year.  5-year old Westview Industrial Park, 
Masvingo's best hope to establish an industrial base, has 
yet to attract a single foreign investor. 
 
5. (SBU) The man-on-the-street is hurting badly.  Over 
the past year, prices have risen roughly in lockstep with 
an 8-fold devaluation in the Zimdollar (from Z$691 to 
5650:US$1).  A residential lot that cost Z$300,000 a year 
ago now sells for Z$4,000,000.  School fees have risen 
from Z$1,300 to Z$10,000, leaded fuel from Z$69 to 1,700. 
Meanwhile, salaries have merely gone up 2-4 fold.  That 
means the only people buying real estate, pushing 
shopping carts, fertilizing land and filling gas tanks 
are those with a USD source - generally through forex- 
pegged salaries, export-revenue or remissions.  USD- 
holders also deal with conventional banks rather than 
savings-and-loans, where lines for cash withdrawals have 
been interminable. 
 
Comment 
------- 
6. (U) The chasm between USD and local economies is 
rapidly broadening, reminiscent of the perpetual duality 
under many Soviet-style governments.  When the two 
economies merge, fatuity abounds.  A driver whose 
employer dollarizes may earn more than an executive whose 
firm does not.  Annual tuition at a private Masvingo 
school runs US$5, a round of golf just 12 cents.  But 
visit a Masvingo supermarket and you pay U.S.-level 
prices.  High inflation (currently 427 percent 
annualized) assures that Zimdollar-earners will continue 
to lose buying power. 
 
7. (SBU) We also observed - and affix as appendage to 
this report - that modest forex assistance goes a long 
way in this economy.  A US$3,500 grinding mill purchased 
through the Ambassador's Self-Help Program saved an 
almost 100-year-old school with 456 pupils from pending 
closure.  US$7,000 brought running water to another rural 
school and the surrounding community of 2,000 - 
triggering effusive praise from Foreign Minister Stan 
Mudenge at last October's inauguration ceremony. 
 
Sullivan