US embassy cable - 03HARARE489

UNCLAS HARARE 000489 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR AF/S 
NSC FOR SENIOR AFRICA DIRECTOR JFRAZER 
USDOC FOR 2037 DIEMOND 
PASS USTR ROSA WHITAKER 
TREASURY FOR ED BARBER AND C WILKINSON 
STATE PASS USAID FOR MARJORIE COPSON 
 
E. O. 12958: N/A 
TAGS: ECON, EINV, ETRD, ZI, ENGR 
SUBJECT: Zimbabwe May Dollarize Energy 
 
1. (U) Summary: Another pillar of the GOZ's mind- 
withering, and failed, interventionist economic policies 
may crumble. Parastatal Zesa is negotiating U.S. dollar 
energy tariffs with selected exporters.  End summary. 
 
Differentiated Tariffs 
---------------------- 
2. (SBU) While recently touring Gweru and Kwekwe 
(Midlands), Econchief met with representatives of Sable 
Chemicals, Zimasco and Zimbabwe Alloys.  They are the 
country's 3 largest energy consumers, absorb 20 percent 
of national output and have endured power shedding in 
recent months.  Reps from Zimasco and Zim Alloys, both 
exporters, told us Zesa has just approached them about 
paying for energy in U.S. dollars.  The GOZ's recent 
"National Economic Revival Program" broaches the idea of 
some firms paying for energy in foreign exchange. 
Managers of non-exporter Sable said Zesa has not pitched 
them similar proposals.  The chemical company does not 
earn forex directly and could not stay in business if 
paying an international market price for power. 
 
3. (SBU) Even as forex-earners, Zimasco and Zim Alloys 
told us they balked at Zesa's request that they pay US 
3.8 cents per kilowatt hour.  Firms in Mozambique, 
Botswana, Zambia and South Africa pay under US 2.0 cents. 
The Zimasco plant manager said such rates "would blow us 
right out of the water."  Both miners could swallow a 
tariff equivalent to that in neighboring countries, a 5- 
fold increase over present Zimdollar-denominated rates, 
if Zesa guarantees them preferential service and a fair 
exchange rate. 
 
Comment 
------- 
4. (SBU) Over the long haul, energy prices that vary by 5- 
fold are unsustainable.  Nevertheless, both Eskom of 
South Africa and Hydro Cabora Basa of Mozambique have 
threatened to cut off energy exports, a potentially 
devastating blow to an ailing economy heavily dependent 
on imported power.  More importantly, it is mildly 
encouraging that the GOZ is finally thinking about fuel 
and energy in dollarized rather than self-delusive -- 
i.e., converted into Zimdollars at an unsupported 
official rate -- terms. 
 
Sullivan