US embassy cable - 05HARARE1446

C O N F I D E N T I A L SECTION 01 OF 03 HARARE 001446 
 
SIPDIS 
 
AF/S FOR BNEULING 
NSC FOR SENIOR AFRICA DIRECTOR C. COURVILLE 
USDOC FOR ROBERT TELCHIN 
TREASURY FOR J. RALYEA, B. CUSHMAN 
PASS USTR FOR FLORIZELLE LISER 
STATE PASS USAID FOR MARJORIE COPSON AND ERIC LOKEN 
 
E.O. 12958: DECL: 12/31/2009 
TAGS: ECON, EFIN, ETRD, PGOV, PHUM, PREL, ZI, Economic Situation, MDC 
SUBJECT: VIEWS FROM BULAWAYO 
 
REF: A)HARARE 1269 B)HARARE 1405 C)HARARE 1421 
 
Classified By: Ambassador Chris W. Dell for reason 1.4 b/d 
 
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Summary 
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1. (C) Zimbabwe Desk Officer and PolOff visited Bulawayo, 
Zimbabwe's second largest city, October 14 and 15.  Eric 
Bloch, a local economist, detailed his insider's 
understanding that the GOZ had sourced its US$120 million 
arrears payment to the IMF solely through "voluntary" 
payments.  In discussing the on-going debate over the 
impending Senate elections, opposition Movement for 
Democratic Change (MDC) Secretary for Legal Affairs David 
Coltart and MDC Bulawayo Mayor Japhet Ndabeni-Ncube both 
stated the need for the party to identify and remove 
infiltrators and opportunists to survive.  Businessman and 
exporter to the U.S. Jyotirdhar Laxmidas suggested that local 
industry could not survive another three years of economic 
decline.  End Summary 
 
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Local Economist on Payment to the IMF, South African Loan 
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2. (C) Bloch, a self-described friend of Reserve Bank of 
Zimbabwe (RBZ) Governor Gideon Gono, and member of Gono,s 
RBZ Advisory Committee, said 37 separate sources 
"voluntarily" provided the $120 million arrears payment to 
the IMF in late August (Ref A) in a complicated deal applying 
various exchange rates and terms for later access to foreign 
currency.  Bloch claimed he had seen the names and amounts: 
three "non-eastern" embassies (US$27 million), 11 
international NGOs (US$36 million), and 23 companies (US$57 
million).  Bloch confirmed that Hippo Valley Estates was one 
of the sources, and maintained the company had provided the 
funds voluntarily.  (Note: Hippo Valley Estates declared in a 
public notice in September that the RBZ had forced/forced it 
to surrender US$2.68 million from its foreign currency 
account on trumped up charges of exchange regulations 
violations.  The RBZ did approve embassies with an offer to 
pay a 40 percent "bonus" on forex exchanged at the GOZ's 
official rate and we cannot rule out that some may have taken 
up the offer.) 
 
3. (C) Citing various GOZ and SAG sources close to, but not 
necessarily involved in, the loan negotiation between the two 
countries, Bloch said Mugabe had rejected the SAG's initial 
12 political conditions.  Mugabe had subsequently sought help 
from China, Dubai, and Iran, but had come out virtually empty 
handed.  Mugabe then went back to the South Africans and got 
some of the conditions (unspecified) dropped.  However, 
negotiations were still stalled over some of the remaining 
political conditions, including: dropping all charges against 
MDC President Tsvangirai; negotiations with the MDC on a 
political solution that would guarantee Mugabe,s freedom 
from prosecution, synchronize the Parliamentary and 
Presidential elections, and create a national unity 
government that would oversee internationally monitored 
elections. 
 
4. (C) Bloch claimed the South Africans were also pressing 
for a Commission of Inquiry to investigate Operation Restore 
Order and wanted compensation for seized South African-owned 
farms.  If the GOZ breached the terms of the agreement, South 
Africa was threatening a travel ban on all GOZ Ministers and 
Deputy Ministers as well as all ZANU-PF Politburo and Central 
Committee members.  In addition, South Africa had negotiated 
with Malawi, Botswana, Mozambique, and Zambia to impose the 
same travel ban. 
 
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Local MDC Leaders on Senate Impasse 
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5. (C) Coltart said the MDC must either shed its pro-GOZ 
infiltrators and other opportunists or split in two and 
disappear.  He suggested that some of Morgan Tsvangirai's top 
advisors had been compromised.  Ndabeni-Ncube expressed a 
similar opinion.  Coltart said he was incredulous at 
Tsvangirai's reaction to the National Council's vote to 
 
SIPDIS 
participate in the election.  He had expected Tsvangirai to 
state his opposition but then abide by the decision.  The 
largely minority Ndebele population of Bulawayo and the two 
Matebeleland provinces had worked hard to get rid of ZANU-PF 
politicians and did not want them back by default.  While 
there were compelling reasons not to participate, the party 
had to respect the National Council's decision. 
Ndabeni-Ncube agreed, noting that the Matabeleland provinces 
were going forward with candidate selection. 
 
6. (C) Coltart added that Tsvangirai's attempt to override 
the party's decision had shaken his faith in the man as a 
leader and made him wonder whether Tsvangirai himself had 
somehow been compromised.  When pressed on this point, 
however, he quickly backed away saying "I still have faith in 
Morgan".  Ndabeni-Ncube said that the MDC leader had lost 
credibility; he suggested Tsvangirai would end up alone if he 
tried to overrule the will of the majority.  (Comment: 
Outside of Matableland, the majority of MDC supporters appear 
to favor a boycott, which we believe could give Tsvangirai 
the upper hand in the argument over whether his actions are 
democratic.) 
 
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Business Leader Blues 
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7. (C) Laxmidas of TAG International, a clothing manufacturer 
that exports to the U.S., cited his own factory,s experience 
as proof that Bulawayo industry could not wait out another 
three years for economic conditions to improve.  His factory 
was operating at 40 percent capacity and would have reduced 
its workforce from 220 in 2002 to 66 by January 2006.  That 
said, he noted that he had recently met with some Cape Town 
businessmen who were contemplating local property acquisition 
at fire sale prices in preparation for the post-Mugabe 
period. 
 
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Comment 
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8. (C) Bloch's take on the source of the IMF payment largely 
contradicts our and other Embassies reports of alleged RBZ 
misappropriation of company foreign currency accounts and we 
are frankly skeptical.  We are also skeptical with regard to 
Bloch's information on South Africa's loan conditions.  We 
would love to believe SAG conditions include Mugabe's 
departure, but doubt Mbeki would go so far to force change in 
Zimbabwe. 
 
9. (C) Coltart and Ndabeni-Ncube's assertions of infiltration 
within the MDC are not new and their take on Tsvangirai's 
"anti-democratic" behavior is self-serving and partly a 
reflection of the MDC's ability to compete successfully 
against ZANU-PF in Matebeleland.  The reality is that MDC 
participation would give legitimacy to a powerless and 
temporary body created to help solve ZANU-PF's own internal 
power struggle, and in which the MDC would be lucky to win 15 
seats.  However, the bulk of those seats would be in 
Matabeleland and would be won by Coltart and Ndabeni-Ncube,s 
political allies.  Reports in today's Financial Gazette claim 
that 10 of 12 provincial party structures under pressure from 
the grassroots, as well as  the ZCTU, have now come out in 
favor of Tsvangirai's call for a boycott, demonstrating the 
extent to which he is in touch with popular sentiment and 
conversely the isolation of the other MDC elites. 
DELL