US embassy cable - 04HARARE59

C O N F I D E N T I A L SECTION 01 OF 02 HARARE 000059 
 
SIPDIS 
 
STATE FOR AF/S 
TREASURY FOR OREN WYCHE-SHAW 
STATE PASS USAID FOR MARJORIE COPSON 
STATE PASS USDOC FOR AMANDA HILLIGAS 
 
E.O. 12958: DECL: 01/01/2008 
TAGS: ECON, EFIN, ETRD, PGOV, ZI 
SUBJECT: CENTRAL BANKER MEETS GROWING HOSTILITY 
 
 
Classified By: Econchief William Weissman, Reason: 1.5 (b,d). 
 
 1. (C) Summary: Drenched in palpable exasperation, Reserve 
Bank (RBZ) Governor Gideon Gono says his market-friendly 
proposals have unleashed a "shrill" cacophony of covert memos 
and emissaries to President Mugabe.  He is uncertain whether 
Mugabe will continue to grant him wide latitude to tame 
Zimbabwe's imploding economy.  If Gono can one day point to a 
genuine turnaround, he will want to enlist the support of the 
International Monetary Fund (IMF) and donor countries.  End 
Summary. 
 
2. (C) Gono underscored his goals and challenges during an 
hour-long session with Amb Sullivan.  Highlights follow: 
 
- Combat Enemies of Reform.  Dissent and sabotage have 
suffused the universal acclaim that greeted Gono's Dec. 18 
policy statement.  He singled out the Ministry of Finance - 
including Minister Herbert Murerwa - as antagonists.  He 
showed us a confidential denunciation penned by a Ministry 
official, intended for Mugabe but leaked to Gono.  One 
ZANU-PF higher-up even traveled to Malaysia, where Mugabe has 
been vacationing, to complain of the Governor's policy.  At 
the same time, members of both the governing ZANU-PF and 
opposition MDC have said Gono is targeting their economic 
support base. (Note: Police arrested ZANU-PF Chinoyi MP 
Philip Chiyangwa over the weekend for his alleged involvement 
in an expanding embezzlement scandal involving ENG Capital 
Management.) 
 
- Patch Government/Business Ties.  Gono believes he is 
uniquely qualified to mend this rift.  His close relationship 
with Mugabe affords him more cover than past "reformers." 
Gono bragged that ex-Finance Minister Simba Makoni asked him 
in a private lunch on the day of the Dec 18 address how he 
gets away with demanding twice as much as Makoni had in 2002 
- causing the former Minister's dismissal. 
 
- Restore Zimbabwe's International Borrowing Credibility. 
Gono wants to rebuild the country's relationship with the 
IMF, World Bank and donor countries.  However, the Governor 
wants first to log a record of accomplishment.  Gono claims 
Mugabe was taken aback when he told the President he should 
meet with the next visiting IMF delegation.  "We owe them 
money.  We cannot afford to be arrogant," he alleges to have 
said to the President.  While Amb Sullivan emphasized the 
importance of progress on political reconciliation and civil 
liberties as well as economic reform, the ZANU-PF partisan 
Gono argued the MDC should adopt a less confrontational 
stance, focusing on future rather than past elections. 
(Comment: We suspect he favors reconciliation through 
national unity instead of multiparty democracy.) 
 
- Involve All Stakeholders.  Gono says he consulted broadly 
with economists, the IMF, labor reps and business leaders in 
devising his policy statement.  In fact, he specifically 
cited three prominent white economic commentators - John 
Robertson, Erich Block and Tony Hawkins - whom the State 
media frequently belittles. 
 
Comment 
------- 
3. (C) Did the politically-atuned Gono overstate his 
commitment to reform and rapprochement with the West for our 
benefit?  We don't know, and we will ultimately judge him by 
actions rather than words or amiability. 
 
4. (C) Still, it's worth pointing out what he's done since 
taking office on Dec 1.  Gono cut the RBZ's credit line for 
insolvent financial institutions, potentially returning some 
credibility to the banking sector.  He enunciated his new 
economic policy at length without blaming Zimbabwe's ills on 
Western "sanctions."  He appointed a well-rounded, pragmatic 
group of Zimbabweans to the Advisory Board that will oversee 
the new currency auctions (commencing this week), including 
Bloch, Tobacco Association President Duncan Miller, Standard 
Chartered CEO Washington Matsaira, Rio Tinto CEO John Nixon 
and Indigenous Commercial Farmers Union Chief Davison Mugabe 
- persons known and respected by the Embassy - as well as 
several high GOZ officials (but excluding hard-liners in the 
mold of Jonathan Moyo or Joseph Made).  He turned back until 
a later stage President Mugabe's request for Malaysian 
central bank advisors, arguing that there's no quick fix and 
Zimbabweans must come to terms with the problems they caused. 
 Gono has, in short, surpassed our initial modest 
expectations, but we're still in the first inning of a long 
game. 
 
5. (C) Without doubt, the dynamics of GOZ economic 
policymaking are in flux.  We don't know where the 
center-of-gravity will end up, but given this Government's 
current track record, it can't hurt to roll the dice.  While 
the Finance Ministry was once the main GOZ voice for 
pragmatism (perhaps until Makoni's exit in 2002), most top 
Ministry officials are now large land reform beneficiaries 
(in one form or another) with vested interests in the status 
quo.  Gono's speech reached well beyond monetary policy, 
visibly wrestling bureaucratic turf away from that Ministry. 
This is especially humbling for a Ministry whose own best 
shot at reform - the National Economic Recovery Program 
(NERP) - proved an embarrassing travesty that led to 
Zimbabwe's IMF expulsion.  But it remains to be seen whether 
Mugabe will continue to back an RBZ Governor whose polices 
run counter to "anti-imperialist" demagoguery - and whether 
Gono has what it takes to carry on the fight for economic 
reform. 
SULLIVAN