US embassy cable - 03HARARE2261

UNCLAS SECTION 01 OF 02 HARARE 002261 
 
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, EFIN, EINV, PGOV, ZI 
SUBJECT: Central Banker Gono: What to Expect 
 
 
1. (SBU) Summary:  Gideon Gono's assiduously-crafted 
image as Zimbabwe's star businessman/negotiator will not 
survive his Reserve Bank tenure.  The economy he's about 
to steward is a sliver of its former self.  Initially, we 
expect Gono to quietly advocate market-oriented policies 
through his personal relationship with President Mugabe 
and penchant for backroom deals.  When that fails - as we 
believe it will - Gono will face his toughest dilemma, 
whether to take his dissent public (like former Finance 
Minister Simba Makoni) or cower in private (like the 
present Finance Minister Herbert Murerwa and former 
Reserve Bank Governor Leonard Tsumba).  In the end, he 
must sacrifice either his insider privilege or public 
repute. End Summary. 
 
The Job No One Wanted 
--------------------- 
2. (SBU) Gono foresaw this Faustian bargain and did all 
he could to avoid the Governorship.  After six months of 
Gono's bobbing and weaving, Mugabe at last pinned him 
down.  Since then, the incoming Reserve Bank chief has 
made the best of his appointment, casting himself as a 
business wunderkind called into service to rescue his 
country. 
 
3. (SBU) In contrast, most local businesspeople consider 
Gono a ZANU-PF crony who built an empire on sweetheart 
deals.  As the unofficial banker of Mugabe and the ruling 
ZANU-PF, Gono has traded low interest (and bad risk) 
loans for preferential deals.  Local bankers dismiss his 
acclaimed turnaround of Commercial Bank of Zimbabwe (CBZ) 
as smoke-and-mirrors.  Nonetheless, Zimbabwe Broadcasting 
Corporation (which he chairs) and Financial Gazette 
(which he owns) tout it as Zimbabwe's Herculean business 
feat. 
 
Not the Worst Choice 
-------------------- 
4. (SBU) Our contacts with Gono lead us to believe he 
understands why the GOZ's interventionist economic policy 
is not working, and that only material gain makes 
producers produce.  Unlike many ZANU-PF hardliners 
enthralled by the Cuban "economic miracle," Gono has 
instead pointed to the Malaysia as the model to emulate. 
He is also a skilled negotiator who brokered a complex 
fuel deal with the Libya's Tamoil in 2001.  It took the 
Libyans a year to realize Gono had swindled them into 
sending free fuel. 
 
5. (SBU) At one point, Gono showed us a "strictly private 
and confidential" paper he prepared for Mugabe.  It may 
give some indication of his slant as central bank chief. 
Gono bends over backward to massage Mugabe's ego and 
couch his proposals in the least-threatening manner:  "If 
any parts or sections of the document are found to be 
offensive to anybody or out of line with political and 
economic thinking in the Government, I apologize." 
While no reader would mistake Gono's prescriptions for 
those of the IMF, they beat the present policy melange 
hands-down.  He calls for a more realistic exchange rate, 
though the GOZ should still "manage the process and not 
leave it to the market."  Gono argues that the GOZ should 
stabilize the political environment, grant resettled 
farmers title-deed, provide more incentives for exporters 
and "get Zimbabwe/UK relations back on course." 
 
Comment 
------- 
6. (SBU) From what we know of Gono, we believe he will 
align with GOZ moderates and push for more commonsensical 
economics.  But can he succeed where a sharper-witted 
administrator like ex-Finance Minister Simba Makoni 
failed?  The rosiest scenario says maybe, since Gono can 
take his case around GOZ hardliners and directly to 
Mugabe.  Furthermore, he can turn the Financial Gazette 
into the Reserve Bank's publicity organ - a potential 
counterweight to Information Minister Jonathan Moyo's use 
of State media. 
 
7. (SBU) Unfortunately, we consider it more likely Gono 
will back down when confronted by Mugabe and his more 
militant ministers.  Better than anyone, Gono understands 
that GOZ connections made - and can break - his empire. 
Bluntly put, we predict Gono will decide it's better to 
be rich than right, falling in line behind other weak- 
kneed GOZ malcontents.  But conformity to bad policy has 
its price:  The economy's continued recession will 
finally shatter Gono's public persona as Zimbabwe's 
turnaround artist. 
 
Sullivan