US embassy cable - 03HARARE2149

UNCLAS HARARE 002149 
 
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: GOZ Still Scapegoats Exporters 
 
Ref:  Harare 2140 
 
1. (SBU) Summary: The GOZ continues to blame export firms 
for its foreign exchange shortage.  If today's lead story 
in the official press is a curtain-raiser for the 
November 20 budget speech, the Mugabe administration may 
kill what's left of Zimbabwe's once hearty export sector. 
End summary. 
 
The "Root Cause" of Economic Problems 
------------------------------------- 
2. (U) Today's Herald announces that the GOZ is forming a 
forex taskforce to account for leakage of export taxes. 
The GOZ believes "the root cause of [present] economic 
problems [is] the unaccountability of foreign currency by 
exporters."  GOZ hardliners are angered that so many 
exporters are failing to remit 50 percent of revenue to 
the Reserve Bank for exchange at the official rate, 
currently one-seventh of the market rate.  The article 
argues that better policing of exporters will bring more 
forex to the Reserve Bank, enabling energy parastatal 
ZESA and oil parastatal NOCZIM to acquire forex from the 
Reserve Bank at the official rate.  "Rather than having 
the two companies depend on the parallel market," the 
article continues, "there is a growing feeling in 
Government that managing to get foreign currency at the 
official rate is the solution."  Finally, the article 
takes a few obligatory swipes at the Reserve Bank for 
failing to collect forex from exporters.  Information 
Minister Jonathan Moyo and Agriculture Minister Joseph 
Made - both hardliners - are on the new taskforce. 
Tellingly, the Reserve Bank has been left off. 
 
Comment 
------- 
3. (SBU) We have no doubt that many exporters are 
sheltering earnings from the GOZ's oppressive tax regime 
- and that Reserve Bank is turning a blind-eye to this 
practice.  Reserve Bank officials realize that rigid 
enforcement of the 50 percent exchange requirement 
saddles firms with an outrageous inefficiency, further 
crippling an export sector that has shrunk from US$2.2 
billion to 1.4 billion since 2000.  The GOZ's own data 
contradict an assertion of the article's unnamed GOZ 
spokesman that "all available evidence indicates that 
this economy is generating more foreign currency today 
than it did three years ago."  (Tobacco revenue, the 
largest forex earner, is down about two-thirds, according 
to GOZ statistics.)  The Herald's heavy-fisted story 
signals that hardliners - who favor interventionism and 
distrust the private sector - are trying to gain the 
upper hand against moderates, part of a widening schism 
in GOZ economic philosophy (ref).  Both hardliners and 
moderates want to shape the upcoming November 20 budget 
speech.  (The Herald reports that the new taskforce will 
release its findings in three weeks, just in time for the 
2004 budget.) 
 
Sullivan