US embassy cable - 05PRETORIA4436

C O N F I D E N T I A L SECTION 01 OF 02 PRETORIA 004436 
 
SIPDIS 
 
DEPT FOR AF/S B. NEULING, M. TABLER-STONE 
TREASURY FOR B. CUSHMAN 
 
E.O. 12958: DECL: 11/02/2015 
TAGS: PREL, ECON, ZI, SF 
SUBJECT: ZIMBABWE LOAN TALKS RESUME; AGREEMENT NEAR 
 
REF: A. PRETORIA 4375 
     B. PRETORIA 4071 
     C. PRETORIA 4024 AND PREVIOUS 
 
Classified By: Charge d'Affaires Jeff Hartley 
Reasons 1.4(b) and (d) 
 
1. (C) Summary.  Talks on the proposed South African loan to 
Zimbabwe resumed November 3 in Cape Town, according to ICG 
analyst Sydney Masamvu.  The two sides have agreed on the 
economic conditions, but are still negotiating the political 
terms.  Mugabe has reportedly given Reserve Bank Governor 
Gono some flexibility to negotiate political conditions, such 
as a promise to review repressive legislation and resume 
constitutional dialogue.  While there will be haggling over 
the loan's political conditions, we believe both sides want 
an agreement and could conclude a deal as soon as this 
weekend.  End Summary. 
 
2. (C) Zimbabwean Finance Minister Herbert Murerwa and 
Reserve Bank Governor Gideon Gono traveled to South Africa 
November 2 for negotiations on the proposed South African 
loan to Zimbabwe.  According to International Crisis Group 
(ICG) Analyst Sydney Masamvu, Murerwa and Gono began meetings 
with their South African counterparts, Finance Minister 
Trevor Manuel and Reserve Bank Governor Tito Mboweni, 
November 3 in Cape Town.  In a November 3 telcon, Gono told 
Masamvu that the Zimbabweans plan to remain in South Africa 
through November 6 and hope to conclude the talks in that 
timeframe.  Masamvu said that the two sides want to keep the 
talks secret, which is one reason they are holding them in 
Cape Town, instead of Pretoria.  (Note.  To date, the SAG has 
not announced the talks, nor has the South African press 
picked up the story.  Post has been unable to confirm the 
talks with Treasury officials, but has learned that National 
Treasury Chief Director for International Economics flew to 
Cape Town on November 3rd.  End Note.) 
 
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Conditionality 
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3. (C) Gono told Masamvu that the two sides have agreed on 
the economic conditions for the loan.  These include exchange 
rate reforms and "depolitization" of the Zimbabwe Reserve 
Bank.  Masamvu said that the economic terms generally mirror 
those pushed by the IMF, and that South Africa had been in 
contact with IMF staff to discuss appropriate conditionals. 
(Note: The SAG refuses to use the word "condition" to 
describe the loan terms, but this is in fact what they are 
imposing.  End Note.) 
 
4. (C) On political conditions, Gono told Masamvu that 
President Mugabe had given him some flexibility to address 
South Africa's key terms.  South Africa reportedly seeks the 
"normalization" of the political situation, which includes: 
(1) repeal of repressive legislation (the Access to 
Information and Protection of Privacy Act (AIPPA) and the 
Public Order and Security Act (POSA)); and, (2) 
constitutional dialogue with the opposition.  According to 
Masamvu, Mugabe gave Gono authority to guarantee to the South 
Africans that he would "review" repressive legislation in the 
near future, and would consider repealing AIPPA and removing 
the more repressive elements of POSA.  On the constitution, 
Gono planned to explain how the new Zimbabwean Senate and 
proposed harmonization of the election cycle would advance 
reform.  The GOZ would promise to seek an "appropriate 
platform" to discuss constitutional reform with all 
stakeholders, not just the opposition MDC party. 
 
5. (C) Early indications suggested that the South Africans 
were being "tough" on the political conditions, Gono told 
Masamvu November 3.  Masamvu speculated that Gono would be on 
the phone with Mugabe often during the negotiations. 
 
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Loan Amount 
----------- 
 
6. (C) Gono told Masamvu that the total loan amount is 
approximately $470 million, although the GOZ expected 
approximately $200 million in the first tranche.  Deputy FM 
Pahad told CDA October 28 that South Africa was negotiating a 
Rand 1.2 billion loan for Zimbabwe (approximately $180 
million) (Ref A).  (Comment: The R1.2 billion could refer to 
the first tranche.  End Comment.) 
 
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Comment 
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7. (C) We believe South Africa wants to conclude the talks 
and make the loan.  Stability in Zimbabwe remains a major 
preoccupation for the SAG, and it views the loan as a means 
to shore up Zimbabwe's collapsing economy, and at the same 
time advance political reform.  Mugabe's alleged 
"concessions" on political conditionals, such as his 
agreement to "review" AIPPA and POSA, seem vague, and South 
Africa will likely push for more specific commitments. 
However, both sides want to make a deal, and we suspect that 
they could find common ground as soon as this weekend.  End 
Comment. 
HARTLEY