US embassy cable - 05HARARE1292

C O N F I D E N T I A L SECTION 01 OF 02 HARARE 001292 
 
SIPDIS 
 
AF/S FOR B. NEULING 
STATE PASS USAID FOR M. COPSON 
NSC FOR SENIOR AFRICA DIRECTOR C. COURVILLE 
TREASURY FOR J. RALYEA AND B. CUSHMAN 
USDOC FOR ROBERT TELCHIN 
 
E.O. 12958: DECL: 09/15/2015 
TAGS: ECON, EFIN, PGOV, PHUM, ZI, Economic Policy 
SUBJECT: MINISTER SUGGESTS TAKEOVER OF WHITE FIRMS 
 
Classified By: Ambassador Christopher Dell under Section 1.4 b/d 
 
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Summary 
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1.  (SBU) Transport and Communications Minister Chris 
Mushohwe told the Confederation of Zimbabwe Industries (CZI) 
at its September 7-9 annual congress that the GOZ could 
decide to take over all white-owned and controlled firms. 
His remarks, reported in the international press, sent a 
shudder through some international banks invested in 
white-owned Zimbabwean firms.  While his assertion was 
delivered with contemptuous disregard for Zimbabwe,s 
investment climate, a more businesslike element is also at 
play in the government, and its countervailing influence will 
probably outweigh political theatrics for now on this issue. 
End Summary. 
 
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Threatened Takeover of White Firms 
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2.  (U) Addressing the CZI,s September 7-9 annual congress, 
Transport and Communications Minister Chris Mushohwe 
suggested that the GOZ could undertake efforts to take over 
all white-owned and controlled firms.  The press reported him 
saying, &Most of these companies do not want to give us 
equity.  We might decide to take over these companies just 
like we did during the land reform exercise.8 
 
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Alarm Bells Ring Among Bankers 
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3.  (SBU) An executive of Zimbabwe Leaf Tobacco, a subsidiary 
of Universal Corporation, a Richmond Virginia-based tobacco 
merchant/processor and major buyer in the local tobacco 
market, on September 14 related to Econoff the immediate and 
detrimental effect of the widely reported remark.  His 
company,s finance department was in a spin trying to respond 
to and placate its three international banks. The banks had 
read Mushohwe,s comment in the international media and 
contacted the company to register their concern and seek 
clarification of the situation on the ground.  The 
Minister,s remarks jeopardized Zimbabwe Leaf Tobacco,s 
international credit facilities, said the executive, in an 
already difficult business climate. The company, which runs 
the world,s third largest tobacco processing plant in 
Zimbabwe, is struggling to survive in the face of a 
two-thirds contraction in tobacco production since 2000. 
 
4. (SBU) On a personal note, the executive, a 
fifth-generation white Zimbabwean, expressed his commitment 
to the country but admitted that, since fast-track land 
reform, he had packed a trunk of key personal belongs for a 
quick departure and had secured visas for Australia for 
himself and his family as a "just in case."  He said he lived 
a quiet family life and didn,t pay close attention to the 
ranting of government officials such as Mushohwe, but &it 
could happen, anything is possible8. 
 
5. (SBU) The Chief Financial Officer of NMB Bank, Zimbabwe,s 
first indigenous-owned bank, commented to econoff on 
September 14 that, in issues of politics and sovereignty, the 
government didn,t care about how its remarks affected the 
market.  If the GOZ is treated like a renegade, it will act 
as a renegade, said the CFO, an ethnic Indian and second 
generation Zimbabwean.  He called Mushohwe,s remarks a wild 
statement but he added there was also a more businesslike 
element at play in the government in the guise of the Reserve 
Bank Governor and the Minister of Finance. 
 
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CZI: &Don,t Take it Seriously8 
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6. (SBU) Florence Sachikonye, Vice President of the 
Confederation of Zimbabwe Industries, confirmed the press had 
reported Mushohwe,s remarks accurately.  She told econoff, 
however, it had failed to relate the context of the remarks. 
She said Mushohwe was responding in the heat of the moment 
and in a defensive situation to the question of why not a 
single white executive was present at the congress. 
Sachikonye,s advice to econoff was &don,t take it 
seriously at this stage.8  Congress delegates reacted to 
Mushohwe,s speech with grumbles and murmurs of disapproval, 
according to the local press report. 
 
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Comment 
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7. (C) Mushohwe,s remarks fit with the GOZ,s stated 
priority to "indigenize" more of the economy - a euphemism 
for moving private sector assets increasingly under ruling 
party control.  However, this apparently off-the-cuff 
statement was not likely cleared by higher authority. 
Moreover, countervailing interests in the government - 
reflected in GOZ priority on avoiding IMF expulsion, for 
example - for now will likely prevail over wilder threats and 
political theatrics. 
 
8. (C) Mushohwe's provocation nonetheless is significant. 
First, his comments are consistent with the kind of posturing 
encouraged by Mugabe's own views and further undermine the 
country's failing investment climate, even if the GOZ doesn't 
follow through.  In addition, the impetus for indigenization 
will grow as the ruling party's patronage system comes under 
increasing stress.  Indeed, with indigenization of the 
agricultural sector in its final phases and not yielding 
hoped-for dividends, ongoing GOZ rhetoric suggests that 
mining and tourism are the next sectors in its sights, with 
occasional talk, as here, of indigenizing the broader economy 
over the longer run. 
DELL