Doing business in Robert Mugabe’s Zimbabwe

A group of war veterans invade his corporate offices, down his liquor and force the chief operating officer to sit on the floor and chant pro-Zimbabwe African National Union-Patriotic Front slogans. When they are done they demand money for a taxi to return home.

This was part of the ordeal Albert Katsande had to go through when he was COO of one of the country’s then leading supermarket chains, OK, one of challenges he faced about doing business in Robert Mugabe’s Zimbabwe.

Others were price controls, imperious ministers, high inflation and shortages of fuel, electricity and cash.

Full cable:

Viewing cable 03HARARE2329, Weary retailer asks, what next?

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This record is a partial extract of the original cable. The full text of the original cable is not available.

020529Z Dec 03

UNCLAS SECTION 01 OF 02 HARARE 002329

SIPDIS

SENSITIVE

STATE FOR AF/S

NSC FOR SENIOR AFRICA DIRECTOR JFRAZER

USDOC FOR 2037 DIEMOND

TREASURY FOR OREN WYCHE-SHAW

PASS USTR FLORIZELLE LISER

STATE PASS USAID FOR MARJORIE COPSON

¶E. O. 12958: N/A

TAGS: ECON EFIN EINV ETRD PGOV ZI

SUBJECT: Weary retailer asks, what next?

¶1. (U) Summary: A major Zimbabwe retailer has just lived

through violent occupations, price controls, imperious

ministers, high inflation and shortages of fuel,

electricity and cash. Its Chief Operating Officer now

wonders what more the GOZ can throw at him. End Summary.

¶2. (SBU) The Embassy’s Economic/Commercial staff recently

called on COO Albert Katsande of OK, a leading Zimbabwe

supermarket/department store chain. Katsande cataloged

for us a litany of challenges he has faced, a daunting

statement about doing business in Robert Mugabe’s

Zimbabwe.

War Vets come to call

———————

¶3. (SBU) A gang of haggard War Vets invaded OK’s

corporate offices three years ago. As they lounged

around Katsande’s executive office, downing his liquor,

they forced the COO to sit on the floor and chant pro-

ZANU-PF (the ruling party) slogans. They demanded he

reinstate several dismissed employees, trying to extort

funds from him for “revolutionary causes.” When he

finally convinced them to depart, they demanded taxi fare

to return home. Over the next year, War Vets visited

Katsande several more times, threatening to take him to

ZANU-PF headquarters for interrogation. Police refused

to chase the War Vets away.

The price patrols

—————–

¶4. (SBU) By late-2002, the GOZ had imposed extensive

price controls. Unable to accept the diminished value of

its currency, the GOZ set many prices below cost. OK’s

Katsande had to decide whether to sell creatively-

repackaged goods, risking the GOZ’s wrath. The worst, he

recalls, were the so-called compliance cops. War vet,

police and Zimbabwe Federation of Trade (the GOZ’s labor

body) inspectors constantly harassed store managers,

insisting on bribes and sometimes hauling OK employees to

jail. War Vets even took over the Masvingo store for

several days (while looting the shelves).

Exchanges with the Minister

—————————

¶5. (SBU) In early 2003, Industry and Trade Minister

Samuel Mumbengegwi went shopping at an OK outlet and

complained to the manager that no sugar was on the

shelves. To avoid a riot inside the store, the manager

explained that OK would sell its limited supply of sugar

from the backdoor at 10:00am. At that point, local

police would arrive and control the mob of shoppers. An

enraged Mumbengegwi complained that it was illegal for OK

to keep a product off its shelves and threatened to

revoke the store’s operating license. Katsande finally

stepped in, but he could not make Mumbengegwi, a GOZ

hardliner, appreciate that OK was reluctant to market its

wares at a loss. It only sold the small amount of

controlled-price sugar it received each day.

Shoppers with no cash

———————

¶6. (SBU) By mid-year, Zimbabwe’s cash crisis was in full

swing, OK’s next great obstacle. The GOZ frequently

accused OK of hoarding banknotes. After a time, the

Reserve Bank required each OK store to submit a daily

listing of all cash taken in, a bookkeeping nightmare.

More and more shoppers paid with checks, which OK had

little choice but to accept. Katsande reports many

shoppers took advantage of banks’ fast (and sloppy) check

processing, submitting to OK checks that were unsupported

by funds. Overstretched banks were taking a full three

months to process checks. By the time OK could chase

down the bad-check writers, it didn’t matter if the

customer made good on the debt – inflation had eroded the

money’s value. While so-called “bearer checks” solved

the cash crisis, Katsande says the larger, less-protected

notes are generating a new rash of forgeries.

Mounting inflation

——————

¶7. (SBU) With inflation spiraling, OK now readjusts

prices each day. Every afternoon store managers are

required to data-enter new prices that become effective

at 8:00am the following morning. OK’s head office is

forced to take a new guess each day at the product’s

replacement cost, based on Zimbabwe’s devaluing currency

and increasingly inefficient infrastructure. (The fuel

crisis often prevents freight companies from moving goods

even short distances for days.)

Comment

——-

¶8. (SBU) It’s no small wonder that Zimbabwe’s investment

risk factor has hit stratospheric proportions. The

government encourages lawlessness; expects companies to

lose money; tolerates shortages of fuel, electricity,

water or cash; enacts policies that keep inflation

soaring and the zimdollar plunging. As OK’s saga

indicates, Zimbabwe’s business environment is not for the

fainthearted.

Sullivan

(33 VIEWS)

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