US embassy cable - 05HARARE525

C O N F I D E N T I A L HARARE 000525 
 
SIPDIS 
 
AF/EX 
 
AF/S FOR BNEULING 
 
EB/IFD FOR FCHISHOLM 
 
NSC FOR SENIOR AFRICA DIRECTOR C. COURVELLE, D. TEITELBAUM 
 
TREASURY FOR OREN WYCHE-SHAW 
 
DEPT PLEASE PASS TO ALL AFRICAN DIPLOMATIC POSTS COLLECTIVE 
 
ALSO PASS TO USAID FOR MARJORIE COPSON 
E.O. 12958: DECL: 12/31/2009 
 
TAGS: ETRD, PGOV, ZI, ECON, EINV, Economic Policy 
SUBJECT: GOZ THREATENS NEW PRICE CONTROLS 
 
 
Classified By: Ambassador Christopher Dell for reasons 1.4 b/d 
 
 
1. (SBU) Summary: The GOZ's daily Herald led its April 6 
edition with an exhortation from Industry and Trade Minister 
Samuel Mumbengegwi to the private sector to rescind recent 
price hikes.  The Herald, as well as GOZ-aligned Mirror, 
echoed these warnings in Thursday's editorials.  A ZANU-PF 
official has also announced that the party's Women's League 
has drawn up a list of "profiteering" companies to seize 
control of.  Fearing an uncertain commercial environment and 
the reinstatement of price controls, which caused widespread 
product shortages in 2003, Zimbabweans have been aggressively 
stocking up on basic commodities.  End Summary. 
 
2. (C) Since it abandoned most price controls in mid-2003, 
the GOZ has monitored prices but has mostly allowed retailers 
to set them freely at any level.  Firms tell us the GOZ has 
reserved the right to approve price increases for a small 
number of products, such as soft drinks.  In these cases, 
companies renegotiate new prices with the Industry and Trade 
Ministry, resulting in temporary shortages while negotiations 
stall. 
 
3. (SBU) The Herald also said Secretary for Information and 
Publicity Nyasha Chikinya of the ruling ZANU-PF's Women's 
League has announced that her members were preparing to take 
over companies that created "artificial shortages."  The 
League has drawn up a list of companies to be seized, 
according to the front page article. 
 
4. (SBU) Thursday's editorials in the Herald and Mirror were 
similar, both alleging that the private sector is 
"profiteering" by having increased many prices 100 percent 
since the March 31 parliamentary elections.  The papers 
asserted that firms were creating shortages in order to boost 
prices, undermining the efforts of Reserve Bank (RBZ) 
Governor Gideon Gono to contain inflation. 
 
Comment 
------- 
5. (C) Recent price hikes result from a first quarter 
zimdollar depreciation of over 50 percent.  The parallel 
exchange rate, now used by most importers to purchase foreign 
exchange, fell during January-March from Z$10,000 to 
15,000:US$.  Few importers have been able to access forex 
through the RBZ's twice weekly auctions at the preferential 
Z$6,000:US$ rate. 
 
6. (C) Since inflation has already almost certainly eclipsed 
the 20-35 percent band for 2005 laid out by Central Banker 
Gono on January 26 and repeated in daily ZANU-PF campaign 
advertisements, it is possible the GOZ will begin to 
scapegoat private sector greed for its failure to keep 
inflation in check.  In any event, it appears the 
Gono-inspired era of relative goodwill between the RBZ and 
private sector is coming to an unceremonious end. 
Dell