US embassy cable - 01HARARE743

C O N F I D E N T I A L SECTION 01 OF 02 HARARE 000743 
 
SIPDIS 
 
DEPT FOR AF/EPS, AF/S, EB/IFD/ODF 
USDOC FOR 2037/ERIC HENDERSON 
TREASURY FOR ED BARBER, BARAK HOFFMAN 
NSC FOR SENIOR AFRICA DIRECTOR JFRAZER 
LONDON FOR CGURNEY 
PARIS FOR BISA WILLIAMS 
DEPT PASS USTR FOR ROSA WHITAKER 
 
E. O. 12958: DECL: 02/13/06 
TAGS: ECON, EAGR, EAID, PGOV, PREL, ZI, Land Reform 
SUBJECT: ZIMBABWE'S PRIVATE SECTOR INITIATIVE; A 
COMPLIMENTARY LAND RESETTLEMENT PLAN 
                       CONFIDENTIAL 
 
 
PAGE 02        HARARE  00743  01 OF 02  131436Z 
 
CLASSIFIED BY CHARGE D' AFFAIRES EARL IRVING FOR REASONS 
1.5 (B/D) 
 
1.  (C) SUMMARY: THE PRIVATE SECTOR INITIATIVE (PSI) IS AN 
ALTERNATE LAND ACQUISITION, RESETTLEMENT AND DEVELOPMENT 
PLAN THAT IS BEING QUIETLY PROMOTED AS A COMPLEMENTARY 
APPROACH TO THE GOZ'S "FAST TRACK" PROGRAM.  IT CALLS FOR 
THE CREATION OF AN AGRICULTURAL CREDIT GUARANTEE BANK 
FUNDED BY COMMERCIAL BANKS, THE GOZ AND DONOR COUNTRIES. 
ITS AIM IS TO PURCHASE COMMERCIAL FARMS FROM WILLING 
SELLERS AT MARKET RATES (THE PROGRAM TARGET IS 200 FARMS), 
TO PAY FOR BOTH THE LAND AND IMPROVEMENTS, AND TO RESETTLE 
THE LAND WITH ABLE AND QUALIFIED INDIGENOUS FARMERS WHO 
WILL PURSUE COMMERCIAL AGRICULTURE ON A SMALL OR MEDIUM 
SCALE.  IT IS IMPORTANT TO NOTE THAT THE NEW OWNERS WOULD 
GET A TRANSFERABLE OWNERSHIP OR LEASEHOLD INTEREST IN THE 
PROPERTY ALONG WITH SUBSIDIZED FINANCING (A 20 YEAR, 15 
PERCENT FIXED MORTGAGE), AND WOULD HAVE TO PRODUCE AND 
MARKET A SALEABLE CROP.  THE TOTAL SIZE OF THE PROGRAM IN 
FINANCIAL TERMS IS ABOUT U.S. $40 MILLION DOLLARS (OR Z 
$2.25 BILLION) SPLIT AS FOLLOWS: U.S. $2 MILLION EQUIVALENT 
FROM LOCAL FINANCIAL INSTITUTIONS; U.S. $11 MILLION FROM A 
LONG-TERM GOZ BOND ISSUE; U.S. $7.3 MILLION FROM DONORS TO 
PAY FOR THE LAND (PERHAPS THE BRITISH?); AND ADDITIONAL 
DONOR CONTRIBUTIONS TOTALLING U.S. $21 MILLION.  WHILE THE 
PLAN IS WORTHWHILE AND BASED ON FREE-MARKET PRINCIPLES AND 
GEARED TO SUCCESSFUL LONG-TERM DEVELOPMENT, IT FACES 
NUMEROUS OBSTACLES, BOTH POLITICAL AND FINANCIAL.  FOR 
EXAMPLE: THE RULING PARTY NEEDS TO REORIENT ITS SUPPORT 
FROM SOCIALIST TO FREE-MARKET PRINCIPLES; THE DONORS HAVE 
                       CONFIDENTIAL 
 
PAGE 03        HARARE  00743  01 OF 02  131436Z 
TO COME ON BOARD IN A VERY BIG WAY; AND A DIVERSE GROUP OF 
STAKEHOLDERS NEEDS TO ADMINISTER THE PROGRAM WITH A FREE 
HAND AND WITHOUT GOZ INTERFERENCE AND CORRUPTION.  IN THE 
CURRENT AND FORESEEABLE NEAR TERM ENVIRONMENT, THE ODDS OF 
SUCH A CONFLUENCE ARE, IN OUR OPINION, QUITE SMALL.  END 
SUMMARY. 
 
---------------------------- 
WHO IS BEHIND THE INITIATIVE 
---------------------------- 
 
2.  (C) THE INITIATIVE WAS CONCEIVED AND IS BEING PROMOTED 
BY A COMMERCIAL BANKER (GREG BRACKENRIDGE, MANAGING 
DIRECTOR, STANBIC BANK ZIMBABWE) AND A COMMERCIAL FARMER 
(NICK SWANEPOEL, THE PRIOR COMMERCIAL FARMERS UNION (CFU) 
PRESIDENT WHO HAS BEEN DEEPLY INVOLVED IN THE LAND ISSUE 
SINCE BEFORE THE SEPTEMBER 1998 DONOR'S LAND CONFERENCE). 
IT AIMS TO PURCHASE AND RESETTLE A RELATIVELY SMALL AMOUNT 
OF LAND (200 FARMS V.S. THE GOVERNMENT'S CURRENT GOAL OF 
3,000, OR ABOUT 350,000 HECTARES V.S. THE GOZ GOAL OF 5 
MILLION) USING A SUBSIDIZED, COMMERCIALLY-DRIVEN FINANCE 
STRUCTURE.  THE PROGRAM INTENDS TO UTILIZE EXISTING 
AGRICULTURAL DEVELOPMENT AND SUPPORT TECHNIQUES THAT THE 
CFU HAS ALREADY SUCCESSFULLY APPLIED IN ITS OWN SMALL 
PROGRAMS AIMED AT HELPING INDIGENOUS FARMERS WORK THE LAND 
ON A COMMERCIAL BASIS (SUCH AS THE FARMER'S DEVELOPMENT 
TRUST). 
 
3.  (C) THE PROGRAM GOES AGAINST THE GOVERNMENT'S GRAIN IN 
THAT IT GIVES TITLE TO THE RESETTLED FARMERS (AND IN TURN 
GREATER POLITICAL AND ECONOMIC INDEPENDENCE), APPLIES THE 
                       CONFIDENTIAL 
 
PAGE 04        HARARE  00743  01 OF 02  131436Z 
SAME STANDARDS AND RULES TO ALL (I.E. THAT OF THE 
MARKETPLACE), REQUIRES PAYMENT FOR THE LAND BY THOSE WHO 
ACQUIRE IT, AND DEMANDS PERFORMANCE, RESULTS AND 
ACCOUNTABILITY OF THE NEW OCCUPANTS, WITH BANKRUPTCY AS THE 
ALTERNATIVE.  IN ESSENCE, IT ROLLS OUT ON A SMALL SCALE 
WHAT THE WHITE, ZIMBABWEAN COMMERCIAL FARMERS DO NOW. 
GIVEN THE GOVERNMENT'S USE OF THE LAND ISSUE TO ACHIEVE ITS 
POLITICAL AND POWER RETENTION GOALS, WE BELIEVE IT WILL BE 
DIFFICULT TO GET THE GOZ BACKING NEEDED FOR THE INITIATIVE 
TO BE SUCCESSFUL. 
 
---------------------------- 
THE STRUCTURE AND OBJECTIVES 
---------------------------- 
 
4. (SBU) THE PSI WOULD ESTABLISH AN INDEPENDENT 
AGRICULTURAL CREDIT-GUARANTEE AGENCY, SIMILAR TO OUR EX-IM 
BANK, THAT WOULD PROVIDE SUBSIDIZED FINANCING FOR LAND 
PURCHASES AND CREDIT BACKING TO THE COMMERCIAL BANKING 
SECTOR FOR ONGOING FARM FINANCING AND DEVELOPMENT.  ITS 
INITIAL BUDGET OF ZIM $2.25 BILLION (ABOUT U.S. $40 
MILLION) WOULD BE ABOUT TWO-THIRDS FINANCED OR PROVIDED BY 
 
                       CONFIDENTIAL 
 
                           CONFIDENTIAL     PTQ0618 
 
PAGE 01        HARARE  00743  02 OF 02  131436Z 
ACTION AF-00 
 
INFO  LOG-00   NP-00    AGRE-00  AID-00   ACQ-00   CIAE-00  DODE-00 
      DOTE-00  SRPP-00  DS-00    EB-00    FAAE-00  VC-00    TEDE-00 
      INR-00   L-00     VCE-00   DCP-01   NSAE-00  STR-00   DSCC-00 
      DRL-02   NFAT-00  SAS-00     /003W 
                  ------------------C513C1  131450Z /38 
R 131427Z FEB 01 
FM AMEMBASSY HARARE 
TO SECSTATE WASHDC 8224 
INFO USDOC WASHDC 
DEPTTREAS WASHDC 
NSC WASHDC 
SOUTHERN AFRICAN DEVELOPMENT COMMUNITY 
 
C O N F I D E N T I A L SECTION 02 OF 02 HARARE 000743 
 
SIPDIS 
 
DEPT FOR AF/EPS, AF/S, EB/IFD/ODF 
USDOC FOR 2037/ERIC HENDERSON 
TREASURY FOR ED BARBER, BARAK HOFFMAN 
NSC FOR SENIOR AFRICA DIRECTOR JFRAZER 
LONDON FOR CGURNEY 
PARIS FOR BISA WILLIAMS 
DEPT PASS USTR FOR ROSA WHITAKER 
 
E. O. 12958: DECL: 02/13/06 
TAGS: ECON, EAGR, EAID, PGOV, PREL, ZI 
SUBJECT: ZIMBABWE'S PRIVATE SECTOR INITIATIVE; A 
COMPLIMENTARY LAND RESETTLEMENT PLAN 
                       CONFIDENTIAL 
 
PAGE 02        HARARE  00743  02 OF 02  131436Z 
 
THE DONOR COMMUNITY.  THE GOZ WOULD FLOAT A BOND (RAISING 
U.S. $11 MILLION EQUIVALENT) AND PROVIDE AN OVERALL CREDIT 
GUARANTEE TO THE CREDIT AGENCY.  THE DONORS, IN ADDITION TO 
FUNDING, WOULD PROVIDE EXPERTISE AND SOME DEGREE OF 
STAFFING SUPPORT.  (EMBASSY COMMENT: THE WORTH OF A 
ZIMBABWEAN GOVERNMENT GUARANTEE THESE DAYS IS, AT BEST, 
QUESTIONABLE.  OTHERS HAVE POINTED OUT THAT THE GUARANTEE 
INSULATES THE PRIVATE FINANCIAL SECTOR FROM ANY POTENTIAL 
LOSSES, PROVIDING IT CAN BE DRAWN ON AND, THEREFORE, MAKES 
THIS AN ALL GAIN-NO PAIN EXERCISE FOR THE BANKERS.  END 
COMMENT.) 
 
5.  (SBU) THE OBJECTIVES, IN GENERAL TERMS, ARE TO ENSURE 
THAT AT A LEAST A PORTION OF THE CURRENT LAND RESETTLEMENT 
EXERCISE IS CONDUCTED ALONG CAPITALIST, FREE-MARKET 
PRINCIPLES, AND PROPERTY RIGHTS, INDIVIDUAL EMPOWERMENT AND 
RESPONSIBILITY, AND PROFIT AND LOSS FROM AGRICULTURAL 
OPERATIONS ALL APPLY.  THE INITIATIVES BACKER'S STATED 
GOALS ARE: 
 
= TO PROVIDE AND EFFICIENT CONDUIT FOR FUNDING LAND 
RESETTLEMENT AND DEVELOPMENT; 
= TO FUND THE RESETTLEMENT PROGRAMS IN AN EFFECTIVE, 
FISCALLY SOUND AND MACRO-ECONOMICALLY STABILIZING MANNER; 
= TO ENCOURAGE AND PROMOTE GOVERNMENT AND PRIVATE SECTOR 
SCHEMES IN ASSOCIATION WITH THE RESOURCES OF MULTILATERAL, 
BILATERAL AND NGO ORGANIZATIONS; 
= TO SUPPORT AGRICULTURAL RESETTLEMENT AND DEVELOPMENT AND 
PROVIDE A REAL ECONOMIC RETURN TO THE INVESTMENT. 
 
                       CONFIDENTIAL 
 
PAGE 03        HARARE  00743  02 OF 02  131436Z 
------- 
COMMENT 
------- 
 
6.  (C) IN THE CURRENT POLITICALLY-DRIVEN LAND-ISSUE 
ENVIRONMENT, WHERE DARK FORCES AND BEHIND-THE-SCENES 
MANEUVERINGS AND DEALS ARE COMMONPLACE, THE INITIATIVE IS 
AN ANOMALOUS ORPHAN.  ALTHOUGH MANY OF THE CFU'S MEMBERSHIP 
ARE STRONGLY AGAINST ANY NEGOTIATIONS WITH THE GOVERNMENT 
ON THE LAND ISSUE, A FORMER CFU PRESIDENT IS PROMOTING IT. 
THE OFFICIAL LINE ON THE GOVERNMENT SIDE, TOO, IS THAT 
NEGOTIATING WITH THE WHITE FARMERS IS TABOO.  THEREFORE, 
ANY REAL MOVEMENT ON THE INITIATIVE WILL TAKE PLACE BEHIND 
CLOSED DOORS.  IN ADDITION, THE PROPOSAL ENVISIONS THAT A 
BULK OF THE PLANNED FUNDING COME FROM THE DONORS (ABOUT 70 
PERCENT OF U.S. $41 MILLION).  GIVEN THE CURRENT 
ENVIRONMENT (CONTINUED VIOLENCE, ATTACKS ON THE JUDICIARY, 
SUSPENSION OF THE RULE OF LAW AND THE LIKE), AND THE STATE 
OF RELATIONS BETWEEN THE DONOR COMMUNITY AND ZIMBABWE, IT 
IS DIFFICULT TO SEE HOW SUCH FUNDING CAN OCCUR.  WE ALSO 
POINT OUT THAT THE ACREAGE OF THE PROGRAM IS LESS THAN 10 
PERCENT OF THE GOZ'S STATED ACQUISITION GOALS, AND FRANKLY 
ASK IF SUCH EFFORTS AT THE MARGIN ARE WORTH THE REQUIRED 
EFFORT?  WE HAVE BEEN TOLD, HOWEVER, THAT MOVEMENT CHANGING 
THE THRUST AND METHODOLOGY OF THE CURRENT FAST-TRACK LAND 
RESETTLEMENT PROGRAM MAY BE AFOOT AT THE HIGHEST LEVELS 
HERE, AND WE CAN ONLY HOPE THAT SOME MEASURES OF JUSTICE 
AND SANITY ARE REINTRODUCED.  IF THAT BECOMES THE CASE, 
PERHAPS THEN THE PRIVATE SECTOR INITIATIVE WILL BECOME MORE 
ATTRACTIVE AND DOABLE.  END COMMENT. 
 
                       CONFIDENTIAL 
 
PAGE 04        HARARE  00743  02 OF 02  131436Z 
IRVING 
 
                       CONFIDENTIAL 
 
>