US embassy cable - 03HARARE2091

UNCLAS HARARE 002091 
 
SIPDIS 
 
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, EPET, EINV, PGOV, ZI 
SUBJECT: GOZ has no money for fuel 
 
1. Summary:  Oil parastatal NOCZIM has been unable to 
import fuel for GOZ purposes over the past week.  End 
summary. 
 
2. The fuel shortage is affecting Zimbabweans in a 
variety of ways: 
 
- The National Railway of Zimbabwe (NRZ), a critical cog 
in the country's economic infrastructure, has cancelled 
most departures.  This increases freight and passenger 
transport costs 3-5 fold. 
 
- After boarding a flight, Air Zimbabwe told its Saturday 
morning passengers bound for Bulawayo/Victoria Falls that 
it had no fuel.  They had to wait hours until the 
beleaguered carrier could borrow fuel from another 
airline. 
 
- NOCZIM has cut fuel supplies for commuter vans, the 
GOZ's method of subsidizing public transport.  With few 
vans running, morning and afternoon commutes to high- 
density suburbs can take 3-4 hours.  Embassy national 
employees report they must sometimes settle for rides 
with dozens of others in cargo beds of trucks.  Desperate 
commuters literally beg motorists for rides, occasionally 
blocking traffic. 
 
Comment 
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3. Since Libya's TAMOIL halted shipments to Zimbabwe last 
year, NOCZIM has been unable to offer subsidized fuel to 
commercial and retail customers.  Until last week, 
however, the GOZ had managed to keep subsidized fuel 
flowing to parastatals and, to a lesser degree, commuter 
vans.  The latest shortages may mean the GOZ is 
experiencing greater difficulties making purchases in 
hard currency, a consequence of falling export revenue. 
GOZ policy discourages exports by requiring firms to 
convert half their revenue at the official rate, a 
current 43 percent effective tax.  Land reform has also 
taken its toll on export earnings from tobacco and other 
crops. 
 
4. The GOZ has generally prohibited parastatals from cost 
recovery for services.  Mostly, this policy stems from 
the GOZ's unwillingness to recognize the zimdollar's 
market exchange rate.  The unsupported official rate 
represents only 15 percent of the zimdollar's market 
value.  Therefore, charges for international phone calls, 
railway service and electricity are well below parastatal 
cost.  The GOZ has subsidized these public services 
through export revenue, cheap borrowing (interest rates 
are over 300 percent negative) and donations (especially, 
fuel from Libya and electricity from South Africa). 
It's been a losing battle, and the GOZ has thus far 
directed parastatals to cut services rather than price 
them at or above cost. 
 
Sullivan