US embassy cable - 03HARARE1593

UNCLAS HARARE 001593 
 
SIPDIS 
 
STATE FOR AF/S and AF/EX 
NSC FOR SENIOR AFRICA DIRECTOR JFRAZER 
USDOC FOR 2037 DIEMOND 
PASS USTR FLORIZELLE LISER 
STATE PASS USAID FOR MARJORIE COPSON 
 
E. O. 12958: N/A 
TAGS: ECON, EINV, PGOV, ZI 
SUBJECT: Still Otherworldly Economic Policy 
 
1. Summary:  Past-week events affirm the GOZ is still 
committed to self-destructive economic policies.  We 
observe no GOZ reckoning of the economy's sorry state. 
End Summary. 
 
New Farm/Conservancy Acquisitions 
--------------------------------- 
2. Even while the so-called Utete Commission is 
supposedly producing a roadmap to straighten out land 
reform, the chaotic process lurches forward.  The GOZ 
continues to list new properties for acquisition.  Many 
new listings are nature conservancies, which hold zero 
potential for crop farming.  Meanwhile, political elites 
are scurrying to hide their multiple acquisitions behind 
relatives, protecting themselves from imposition of a one 
man/one farm policy. 
 
Banknote Shortage 
----------------- 
3. The Government continues to scapegoat any convenient 
group for its inflation-driven banknote shortage. 
Yesterday, the official press fingered Asian business 
owners.  The GOZ refuses to own up to the effects of 
inflation on the M1 supply and print larger bills. 
Instead, the Government wastes time and money producing 
useless new travelers checks in larger denominations with 
ridiculous fanfare.  Checks were the lead story in 
yesterday's Herald and subject of two - count `em - 
Herald commentaries today, insisting that checks are 
"ushering in a new era in the financial sector." 
 
Daft Propaganda 
--------------- 
4.  Yesterday's Herald also carried an article: "Zimbabwe 
Maintains Glitter as Investment Destination."  The piece 
rejoices: "The current trend indicates that Zimbabwe is 
one country which will produce positive figures this 
year."  FDI has declined from US$ 444 to 3 million in six 
years. 
 
Interest Rate Debate 
-------------------- 
5. President Mugabe and other GOZ thinkers still argue 
that the GOZ needs to reduce interest rates to spur 
growth. With real rates currently 300-percent negative 
and inflation spiraling out of control, this is economic 
heresy.  Zimbabweans' best investment remains borrowing 
and converting to forex. 
 
Please Don't Pay Us 
------------------- 
6. Exporters tell us they are urging foreign customers to 
withhold payment.   At present, half of export revenue 
must be exchanged with the Reserve Bank at Z$824:US$1, 
twenty percent of the Z$4200:US$1 market rate.  In hope 
the GOZ will boost this unreasonable official rate (it 
increased from Z$55 to 824:US$1 in February), exporters 
often stupefy customers by insisting that they delay 
payment. 
 
Comment 
------- 
7. As we have stated in the past, we do not believe the 
GOZ will embark on genuine economic reform until it comes 
to terms with the mass impoverishment its policies have 
wrought.  Many higher-ups admit to us privately that the 
Government is destroying the economy, but almost none are 
willing to confront Mugabe or go public. 
 
Whitehead