US embassy cable - 03HARARE781

UNCLAS HARARE 000781 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR AF/S 
NSC FOR SENIOR AFRICA DIRECTOR JFRAZER 
USDOC FOR 2037 DIEMOND 
PASS USTR FLORIZELLE LISER 
TREASURY FOR ED BARBER AND C WILKINSON 
STATE PASS USAID FOR MARJORIE COPSON 
 
E. O. 12958: N/A 
TAGS: ECON, EPET, PGOV, EINV, ETRD, ZI 
SUBJECT: Zimbabwe's Fuel Hikes: Why No Leadership? 
 
Ref: Harare 779 
 
1. (SBU) Summary:  A week after raising fuel prices 3- 
fold, President Mugabe has offered no rationale or 
counsel to a shell-shocked populace.  The aging Marxist 
seems unable to verbalize the case for economic 
orthodoxy. End Summary. 
 
2. (U) Each day, this economy becomes more surreal.  Many 
locals now pay more for commuting than they earn.  They 
are understandably irate, a sentiment that labor groups 
have tried to channel into this week's mass action (ref). 
The man-on-the-street cannot fathom how the Government 
can now triple the fuel price - after doubling it in 
January. 
 
Underproducing, Not Overpaying 
------------------------------ 
3. (U) Though unspoken, the case for fuel hikes is 
straight-forward.  Zimbabweans can no longer afford 
imports like petroleum.  But they are not overpaying for 
fuel; they are underproducing to be able to purchase what 
they used to in the global marketplace. 
 
4. (U) This is a policy-induced state.  Through fast- 
track land reform, the GOZ has decimated commercial 
agriculture, the traditional source of most export 
revenue.  Through other export-unfriendly policies - 
taxing, at one point, over 90 percent of export revenue - 
the GOZ has similarly crippled mining and manufacturing 
exports.  (Bad governance also deprives Zimbabwe's highly 
developed textile sector of African Growth and 
Opportunity Act benefits.)  Through retail price controls 
- often well below production costs - the GOZ pushed non- 
exporters to the brink. 
 
Comment 
------- 
5. (SBU) The GOZ does not want to blame low productivity 
for high transport costs, lest Zimbabweans question the 
policies that caused their poverty.  Furthermore, the GOZ 
is ideologically uneasy defending the partial restoration 
of macroeconomic sensibility.  So it offers no official 
defense of a policy shift that has thrust most 
Zimbabweans into confusion and despair.  The GOZ's 
strategy of silently raising fuel prices in successive 
increments has not lessened the political fall-out - 
compounded by its failure to coordinate increases in fuel 
prices with increases in bus fares or wages. At a time 
when people yearn for a roadmap, there is no leadership. 
President Mugabe's Independence Day address and 
subsequent interview instead claimed that things are a 
bit tough now but will soon improve. 
 
6. (SBU) Opposition and labor leaders are fanning this 
popular wrath.  That's politics.  Yet they realize the 
nearly-broke GOZ has little choice but to cut its 
preposterous fuel subsidy.  As governing party, the 
Movement for Democratic Change would no doubt act the 
same (though perhaps softening the blow through better 
coordination with labor and more international support). 
To fully eliminate the GOZ subsidy - a luxury the 
Government can ill afford with minimal foreign exchange 
cover - fuel will have to become even more expensive. 
 
Sullivan