US embassy cable - 04HARARE1217

UNCLAS HARARE 001217 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR AF/S 
USDOC FOR AMANDA HILLIGAS 
TREASURY FOR OREN WYCHE-SHAW 
PASS USTR FLORIZELLE LISER 
STATE PASS USAID FOR MARJORIE COPSON 
USDOL FOR ROBERT YOUNG 
STATE FOR MARINDA HARPOLE 
 
E. O. 12958: N/A 
TAGS: ELAB, EAID, BTIO, EINV, ECON, PGOV, ZI, Economic Situation 
SUBJECT: EMPLOYERS' VIEW OF WAGES AND ECONOMY 
 
1. (SBU) Summary:  On 22 July 2004, EconOff discussed 
wage negotiations and economic recovery with Mr. J. 
Mufukare of the Employers' Confederation of Zimbabwe 
(EMCOZ). Mufukare also related some interesting 
information about price controls and the Zimbabweans' 
character. Business is poor with no sign of either a 
recovery or mass action for change. End summary. 
 
2. (SBU)  Mufukare stated that only 3 of the 45 wage 
negotiation councils have reached quarterly wage 
agreements. The rest are negotiating or deadlocked 
awaiting arbitration. The new resultant wages range 
Z$450,000-Z$680,000/month (US$84.91-US$128.30). The 
negotiations are difficult but amicable as labor 
recognizes business's low costs needs and business 
recognizes labor's higher wages needs. 
 
3. (SBU) With most sectors performing very poorly, 
Mufukare saw no signs of an economic recovery. Mining is 
able to break even because of stable global gold, nickel, 
and platinum prices. But, rising labor costs and 
difficulty in securing foreign exchange are tightening 
their belts as well. Labor costs and lack of market 
elasticity has also hurt security guard firms. Business 
generally applauds Reserve Bank Governor Gideon Gono but 
insist that fiscal policy must fall in line too. The 
controlled exchange rate (especially the Z$824/US$1 
figure for exporters) and lack of foreign exchange access 
are strangling business. Many businesses purchase high- 
priced items just to preserve their money's value. 
 
4. (SBU) Business worries that President Mugabe's renewed 
emphasis on "economic empowerment" may signal coming 
indigenization of manufacturing companies, possibly with 
commerce not too far behind. Despite prior pronouncement 
without action, business fears GOZ will act this time. 
 
5. (SBU) Mufukare also informed EconOff that GOZ gazetted 
the price of a 10 kg bag of maize at Z$12,000 (US$2.26), 
below the Z$20,000 (US$3.77) market price. This marks the 
return of price controls, although businesses are 
ignoring it and GOZ is not enforcing it. GOZ may use the 
regulation to selectively prosecute and takeover 
businesses that violate the new regulation. As with any 
below market price control scheme, scarcity and 
skyrocketing black market prices will result. 
 
6. (SBU) Mufukare discussed the reasons for Zimbabweans' 
complacency. He described Zimbabweans as gambler-esque: I 
lost the last hand, but I might have better luck next 
time. This reasoning allows Zanu-PF to repeatedly offer 
land or businesses to the masses and then only give it to 
the privileged few. Zimbabweans also owe their first 
allegiance to themselves and their families. Zanu-PF is 
ruthlessly exploiting these characteristics with a game 
of divide and conquer: give a few people something and 
they will protect it against all others even to their own 
eventual ruin and those who do not have anything will 
support you in the hopes that they will one day be lucky. 
 
7. (SBU) COMMENT: Labor and employers agree: GOZ is the 
problem. Despite difficult wage negotiations, both labor 
and business stress their amicable nature. This reflects 
the need for political reform prior to sustainable 
economic recovery. With new price controls, people may 
yet again experience food shortages and exorbitant 
prices. GOZ cannot countenance the idea of allowing 
market forces to work- the desire for complete control is 
just too strong. 
 
8. (SBU) COMMENT (CONT'D): It is surprising to hear a 
Zimbabwean describe his own people as selfish and gambler- 
esque. This could explain the lack of public outcry over 
the drastic economic decline. It also suggests that the 
vast majority will not say enough is enough until they 
literally have nothing, including hope. 
 
SULLIVAN