US embassy cable - 04HARARE1620

UNCLAS HARARE 001620 
 
SIPDIS 
 
STATE FOR AF/S 
USDOC FOR AMANDA HILLIGAS 
TREASURY FOR OREN WYCHE-SHAW 
PASS USTR FLORIZELLE LISER 
STATE PASS USAID FOR MARJORIE COPSON 
 
SENSITIVE 
 
E. O. 12958: N/A 
TAGS: ECON, EAGR, ETRD, EINV, PGOV, ZI, Economic Situation 
SUBJECT: MANAGING A BUSINESS IN MUGABE'S SHADOW 
 
 
Sensitive but unclassified.  Not for Internet posting. 
 
Summary and Firms Represented 
----------------------------- 
1. (SBU) Seven prominent business leaders we recently 
assembled want the international community to provide 
Zimbabwe with balance-of-payments support.  However, they 
differ in assessments of the country's progress at 
reforming its economy and attracting foreign investment. 
 
2. (SBU) The Ambassador convened his first business 
roundtable Sept 22 with the new Confederation of Zimbabwe 
Industries (CZI) President and the local CEOs of six 
companies: manufacturer PG Industries, retailer OK, the 
Meikles Hotel, Barclays Bank, cotton-merchant Cottco, 
Murray & Roberts Construction. 
 
CEOs Agree Zimbabwe Needs Capital Infusion 
------------------------------------------ 
3. (SBU) The CZI and PG Industries representatives argued 
for the U.S. to reengage with Zimbabwe, which they define 
primarily as extending balance-of-payments (BOP) support. 
They urged the U.S. to recognize Reserve Bank (RBZ) 
Governor Gideon Gono's achievements to date and not 
"write off" Zimbabwe's business community.  Without both 
BOP support and foreign investment, they speculated that 
Gono's reform efforts will progress only so far. 
 
4. (SBU) The Cottco CEO took issue with his colleauges by 
posing a hypothetical question:  If roundtable 
participants suddenly came into US$ 1 million outside 
Zimbabwe, would they invest the funds abroad or transfer 
them into the country?  Only the PG Industries CEO 
suggested he would invest part of the US$ 1 million in 
Zimbabwe, underscoring - in the Cottco CEO's view - that 
Zimbabwe is uncompetitive as a foreign investment 
destination.  The Cottco rep, a net exporter, complained 
that Zimbabwe has shot itself in the foot, enacting rigid 
foreign exchange controls and disregarding property 
rights.  He and others argued for broad devaluation. 
 
As Usual, Discussion Turns to Politics 
-------------------------------------- 
5. (SBU) The Barclays CEO opined that the international 
community cares more about political than economic reform 
in Zimbabwe.  It is impossible for Gono to impress the 
world with economic management, she argued, unless the 
country also becomes less repressive and more democratic. 
At this, the PG Industries CEO joked that he and other 
businessmen were cowards for steering clear of politics. 
The Murray & Roberts CEO wondered how much progress on 
democracy and civil liberties it would take to placate a 
skeptical international community.  "What if next March's 
parliamentary elections were free and fair?," he asked 
rhetorically.  The PG Industries CEO expressed hope that 
the International Monetary Fund (IMF) could extend to 
Zimbabwe a token loan next January, when the lending body 
will vote on the country's expulsion, in exchange for 
certain demands, such as a partial devaluation or float 
of the zimdollar. 
 
Comment 
------- 
6. (SBU) We believe the sentiments of our roundtable 
participants are representative of Zimbabwe's business 
community.  They want a freer, more democratic Zimbabwe 
but are unwilling to put themselves or their firms at 
risk in order to fight for it.  Rather, they struggle to 
keep afloat businesses that support thousands of workers 
and the remnants of this once-highflying economy.  In 
sum, they hope for more flexibility from both the GOZ and 
the international community, but are largely bystanders 
to the process. 
 
Dell