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Investors showing renewed interest in Zimbabwe

Investors were showing renewed interest in Zimbabwe due to the country’s abundant natural resources and well-educated populace way back in February 2010, according to a cable dispatched by United States ambassador to Zimbabwe Charles Ray ahead of a visit by a congressional delegation led by Gregory Meeks.

But they were generally remaining on the sidelines, concerned abou  political instability and absence of investment security.

The embassy, however, said the behaviour of President Robert Mugabe and ZANU-PF indicated that they were determined to play an obstructionist role, thwarting all Movement for Democratic Change attempts to fully implement the Global Political Agreement, while regrouping in anticipation of elections.

The delegation’s visit provided an opportunity to demonstrate US  commitment to democratic transition in Zimbabwe.

“You will be meeting with President Mugabe, Prime Minister Tsvangirai, and Minister of Finance Tendai Biti,” the embassy said.

“ With Mugabe, you will be able to reiterate the message that the US supports the Zimbabwean people, but that greater engagement, including assistance, depends on a demonstration of greater commitment to political reform and rule of law.

“With Tsvangirai, you can express support for his efforts to achieve democratic reform and encourage him to continue to press for full implementation of the GPA.

“With Biti, you can underscore the importance of fiscal responsibility and reiterated the importance of political reform as a predicate for increased US engagement and assistance.”

 

Full cable:

 

Viewing cable 10HARARE91, Welcome (back) to Zimbabwe – CODEL MEEKS/WATT Scenesetter

If you are new to these pages, please read an introduction on the structure of a cable as well as how to discuss them with others. See also the FAQs

Reference ID

Created

Released

Classification

Origin

10HARARE91

2010-02-09 14:33

2011-08-30 01:44

UNCLASSIFIED//FOR OFFICIAL USE ONLY

Embassy Harare

VZCZCXRO9774

OO RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN

DE RUEHSB #0091/01 0401433

ZNR UUUUU ZZH

O R 091433Z FEB 10

FM AMEMBASSY HARARE

TO RUEHC/SECSTATE WASHDC IMMEDIATE 0031

INFO SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE

RHEFDIA/DIA WASHINGTON DC

RHEHNSC/WHITE HOUSE NATIONAL SECURITY COUNCIL WASHINGTON DC

RHMCSUU/EUCOM POLAD VAIHINGEN GE

RUEAIIA/CIA WASHINGTON DC

RUEHBY/AMEMBASSY CANBERRA 0012

RUEHDS/AMEMBASSY ADDIS ABABA 0012

RUEHOT/AMEMBASSY OTTAWA

RUEHRL/AMEMBASSY BERLIN 0012

UNCLAS SECTION 01 OF 06 HARARE 000091

 

SENSITIVE

SIPDIS

AF/S FOR BRIAN WALCH

NSC FOR SENIOR AFRICA DIRECTOR MICHELLE GAVIN

 

E.O. 12958: N/A

TAGS: OREP PREL PGOV ZI

SUBJECT: Welcome (back) to Zimbabwe – CODEL MEEKS/WATT Scenesetter

 

————-

 

SUMMARY

 

————-

 

 

 

1. (SBU) U.S. Mission Zimbabwe welcomes CODEL Meeks/Watt and

their delegation. Your return visit comes at an important period

in Zimbabwe’s history, at the one-year anniversary of the entry

into government of the Movement for Democratic Change (MDC)

factions in February 2009 and the formation with ZANU-PF of a

coalition government. It is an opportunity to express support for

democratic reform in Zimbabwe and emphasize our expectations of the

government. While the power-sharing agreement between President

Mugabe’s ZANU-PF and the MDC is flawed and fragile, under the

coalition government the economy has stabilized after a lost decade

and there are signs of political change. Most noteworthy is that

Morgan Tsvangirai is Prime Minister, something that was virtually

inconceivable following the violence of the 2008 elections, and the

combined MDC factions now have an equal weight with ZANU-PF in

Parliament. Commissions — Media, Electoral, and Human Rights —

may be established in the near future. Also, despite delays, the

process of drafting a new constitution remains on track.

Disturbingly, however, Mugabe and ZANU-PF continue to drag their

heels on full implementation of the Global Political Agreement

(GPA). MDC governors have not yet been appointed, Deputy Minister

of Agriculture-designate Roy Bennett has not yet been sworn in, and

Reserve Bank of Zimbabwe (RBZ) Governor Gideon Gono and Attorney

General Johannes Tomana, appointed in violation of the GPA, remain

in office. The Attorney General’s office under Tomana has

selectively prosecuted MDC Members of Parliament (MPs) in an

apparent attempt to weaken what was an MDC majority in Parliament.

While violence has decreased, ZANU-PF structures remain in place in

parts of the country and there is continued intimidation of MDC

supporters. Invasions and disruptions of white-owned farms and

nature conservancies also continue.

 

 

 

2. (SBU) Investors are showing renewed interest in Zimbabwe due to

the country’s abundant natural resources and well-educated

populace. But so far they are generally remaining on the

sidelines, concerned about political instability and absence of

investment security. There is no land tenure — title to land

resides in the State and seizure of land is constitutional — and

the government has threatened to require 51 percent indigenous

ownership of businesses in all sectors.

 

 

 

3. (SBU) Donors, especially the U.S., provide large amounts of

humanitarian assistance, but are unwilling to reengage in direct

development assistance to the Government of Zimbabwe (GOZ) until

there is greater compliance with the GPA, particularly an end to

human rights violations and establishment of the rule of law. In

an effort to achieve greater compliance with the GPA, Tsvangirai

and the MDC have appealed to the Southern African Development

Community (SADC) and its designated Zimbabwe mediator, South

African President Jacob Zuma. Zuma has established a South African

facilitation team that has visited Zimbabwe several times and held

extensive talks with the three negotiating parties in an effort to

advance deadlocked negotiations. However, despite mediation

efforts, in late January ZANU-PF announced that they would not make

any further concessions unless the MDC succeeded in convincing

Western nations to remove sanctions.   Real change appears unlikely

until there are new elections, and this will probably occur in 2012

or 2013. END SUMMARY.

 

 

 

——————————————— ——————-

 

Despite Flawed Agreement, MDC Joins Government

 

——————————————— ——————-

 

HARARE 00000091 002 OF 006

 

 

4. (SBU) Presidential and Parliamentary elections took place on

March 29, 2008 and were relatively fair. The Tsvangirai (MDC-T)

and Mutambara (MDC-M) factions of the MDC combined won a

parliamentary majority. Tsvangirai may have won a majority in the

presidential vote, but after delaying the announcement of results

for almost a month, the Zimbabwe Electoral Commission announced he

was just short of the 50 percent of the vote necessary to claim

outright victory. In the run-up to the June 27, 2008 presidential

runoff election, ZANU-PF unleashed a campaign of violence against

MDC supporters. Tsvangirai ultimately withdrew his name and Mugabe

won a clearly flawed victory.

 

 

 

5. (SBU) The international community, including SADC countries,

refused to recognize Mugabe’s victory and grant him the legitimacy

he craved. Under pressure from SADC, and with the economy

imploding under inflation that ultimately reached over a

quadrillion percent, Mugabe entered into negotiations with the MDC.

The GPA was signed on September 15, 2008. For Mugabe, a coalition

government represented a way to shift responsibility to the MDC and

to gain legitimacy; for Tsvangirai, it presented an opportunity to

enter government, to stabilize the economy, and to help badly

affected Zimbabweans.

 

 

 

6. (SBU) While lofty in tone — the GPA called for an end to

violence, institution of the rule of law, and power sharing — the

agreement was scant as to detail and Tsvangirai spent the next five

months trying to negotiate with Mugabe as to the specifics of the

new government. During this period of negotiation, over 30 MDC

officials and members of civil society were abducted, tortured, and

prosecuted. (NOTE: Even after the formation of the new

government, many of these people are still being prosecuted,

although there is no evidence to support charges against them. END

NOTE.) Despite few gains in negotiations with Mugabe, Tsvangirai

and the MDC agreed to the passage of Constitutional Amendment 19

which incorporated the GPA and paved the way for the inauguration

of MDC officials and the establishment of the new government in

February, 2009.

 

 

 

———————————

 

Political Progress is Slow…

 

———————————

 

 

 

7. (SBU) Prior to the 2008 elections, it would have been difficult

to conceive that Morgan Tsvangirai would be Prime Minister of

Zimbabwe, that the MDC would have a majority in parliament, and

that the Speaker of the House of Assembly would be from the MDC.

The MDC is now in a position to influence the political and

economic trajectory of Zimbabwe, and Tsvangirai has been received

in the U.S., Europe, and Africa as a head of government.

Nevertheless, ZANU-PF is attempting to frustrate political progress

and the GPA remains unfulfilled.

 

 

 

8. (SBU) The GPA called for major appointments subsequent to its

signature to be made by Mugabe as President in consultation with

Tsvangirai as Prime Minister. Nevertheless, Mugabe without

consultation appointed Gono as Reserve Bank Governor and Tomana as

Attorney General. Finance Minister Tendai Biti of MDC-T has

largely marginalized Gono, whose source of power over the last

several years rested in his ability to print money; with the

abandonment of the Zimbabwe dollar and the usage of foreign

currency, principally the U.S. dollar, Gono’s wings have been

clipped. Gono remains a symbol, however, of economic mismanagement

 

HARARE 00000091 003 OF 006

 

 

and ZANU-PF patronage. Tomana has been largely responsible for the

selective prosecution of a number of MDC MPs. This is quite likely

part of a ZANU-PF strategy to weaken and perhaps overcome the MDC’s

parliamentary majority. Tsvangirai and the MDC have urged Mugabe

to comply with the GPA by dismissing both Gono and Tomana and

replacing them in consultation with Tsvangirai.

 

 

 

9. (SBU) Under the GPA, ZANU-PF and the MDC are supposed to divide

governorships, ministerial permanent secretaries, and

ambassadorships. The parties agreed that permanent secretaries and

ambassadors will remain in place and be replaced proportionally as

positions become open. The first five MDC ambassadors were named.

An agreement was reached months ago dividing governorships between

the parties, however Mugabe reneged on the deal.

 

 

 

10. (SBU) Roy Bennett, the MDC treasurer, returned from exile

after the formation of the new government. He was appointed to be

a Senator and designated by Tsvangirai as the Deputy Minister of

Agriculture. Bennett was arrested and charged with treason three

days after the new government was formed and released on bail a

month later. He is alleged to have illegally possessed weapons to

use against the government. Bennett’s trial is ongoing and Mugabe

has refused to swear him in as deputy minister despite the fact

that other government officials have been sworn in despite pending

charges.

 

 

 

11. (SBU) ZANU-PF structures, used to terrorize and intimidate MDC

supporters in the last election, remain in place in many rural

areas.

 

 

 

12. (SBU) Invasions and disruptions of farms and nature

conservancies continue to take place. These actions prevent

harvests and are inimical to tourism which is a key component of

economic growth in Zimbabwe.

 

 

 

—————————-

 

…But There is Progress

 

—————————-

 

 

 

13. (SBU) The GPA calls for an 18-month process to draft a new

constitution. This process is being guided by a committee of

Cabinet ministers, the Minister of Constitutional and Parliamentary

Affairs, and Parliament. Despite opposition from ZANU-PF (which

fears that completion of a new constitution will be a prelude to

early elections), and elements of civil society (who oppose a

political, as opposed to a civic-led process), it is proceeding,

albeit it at a slower than anticipated pace.

 

 

 

14. (SBU) The BBC is now operating openly — though there are

some pressures to self-censor — and there are possibilities that

independent daily newspapers will be allowed to publish in the

coming months.

 

 

 

15. (SBU) The MDC is present in government and in ministries it

controls is establishing policies and taking actions. In general,

it is seen by the public, which has never known post-independence

anything but a ZANU-led government, as a legitimate democratic

governing force.

 

HARARE 00000091 004 OF 006

 

 

———————————–

 

Reversing Economic Decline

 

———————————–

 

 

 

16. (SBU) Zimbabwe’s economy shrank across all sectors between

1999 and 2008; real GDP is estimated to have declined by over 40

percent. President Mugabe’s large unbudgeted payments in late 1997

to agitating veterans of the 1970s liberation war precipitated the

economic decline, and Zimbabwe’s costly military intervention in

the Democratic Republic of Congo in the late 1990s further

destabilized the economy. The disastrous fast-track land

redistribution exercise that began in 2000 and the implementation

of draconian price controls led to a sharp fall in food production

and exports. The collapse of the agricultural sector also harmed

Zimbabwe’s manufacturing sector, a second pillar of the economy

closely linked to agriculture. In addition, Zimbabwe’s pariah

status devastated the tourism industry. A fourth pillar of the

economy – the mining sector – was also hit hard by misguided

pricing, poor foreign exchange policies, and patronage abuse.

 

 

 

17. (SBU) Zimbabwe’s rate of inflation spiraled out of control as

the government turned to money creation to fund its spending.

Inflation is estimated to have peaked at an unprecedented level of

500 quadrillion percent in September 2008. In late 2008, the

Zimbabwe dollar virtually disappeared from circulation and the

pricing of goods and services shifted to foreign currency.

 

 

 

18. (SBU) Formal acceptance of dollarization by the government in

February 2009 finally stopped hyperinflation overnight and ushered

in macroeconomic stability. The adoption of a cash budget (monthly

expenses matching monthly revenue) by the new government put an end

to high deficits while dollarization provided a strong nominal

anchor for the control of inflation. Upon the new government’s

reengagement with the International Monetary Fund (IMF) in 2009,

the Fund approved the provision of limited technical assistance to

Zimbabwe.

 

 

 

19. (SBU) While the economy has begun to stabilize, the systematic

and ongoing attack on property rights, and reports that all

companies will be required to have 51 percent indigenous ownership,

have scared off investors. Today Zimbabwe, once the breadbasket of

southern Africa, is a deeply indebted country with a per capita GDP

of about US$1/day. The success of the new government’s economic

policies will depend on introducing further far-reaching reforms

that will spur production and attract support from international

donors and investors alike.

 

 

 

—————————-

 

Current U.S. Assistance

 

—————————-

 

 

 

20. (SBU) USAID’s current FY 2010 budget level for Zimbabwe

(excluding centrally-funded humanitarian assistance) is

approximately US$65 million. These funds support activities

related to democracy and governance, health, and the start-up of an

economic growth program. This funding level will enable the

Mission to begin to implement components of its recently approved

transition strategy for Zimbabwe.   In addition to the above

funding, USAID receives significant support from USAID’s Bureau for

 

HARARE 00000091 005 OF 006

 

 

Democracy, Conflict, and Humanitarian Assistance (USAID/DCHA) for

food and non-food humanitarian assistance and transition support.

FY 2010 funding from DCHA has not been confirmed; however, FY 2009

levels included US$160 million from the Office for Food for Peace

(USAID/FFP), US$31 million from the Office of Foreign Disaster

Assistance (USAID/OFDA), and US$4 million from the Office of

Transition Initiatives (USAID/OTI).

 

 

 

———————————————

 

Status of GOZ and Donor Community

 

———————————————

 

 

 

21. (SBU) Through an analytical Multi-Donor Trust Fund (MDTF), the

donor community, including the USG, has created a mechanism to

provide technical assistance to progressive-line ministries and the

Office of the Prime Minister to fill critical gaps. This mechanism

is intended to assist overwhelmed ministries to identify and

prioritize critical needs and to advise on policy reforms.

Coordination between the GOZ and the donor community is at a

nascent stage. Much work remains to improve coordination at all

levels and to educate the GOZ on aid effectiveness principles and

standard development practices. A programmatic trust fund is under

negotiation which would allow donors to jointly address critical

infrastructure needs such as water and sanitation.

 

 

 

————————————-

 

U.S. Policy and Reengagement

 

————————————-

 

 

 

22. (SBU) The U.S. and other donors form a very cohesive front

subscribing to a set of principles to guide reengagement with

Zimbabwe to ultimately include developmental assistance. These

principles include:

 

 

 

— Full and equal access to humanitarian assistance;

 

— Commitment to macroeconomic stabilization;

 

— Restoration of the rule of law, including enforcement of

contracts, an independent judiciary, and respect for property

rights;

 

— Commitment to the democratic process and respect for

internationally accepted human rights standards; and

 

— Commitment to timely free and fair elections with international

standards, and in the presence of international observers.

 

 

 

23. (SBU) Access to humanitarian assistance has improved, the

MDC-controlled finance ministry is working to achieve macroeconomic

stabilization, and a constitutional process called for by the GPA

is underway — a new constitution is a predicate to new elections.

 

 

 

 

24. (SBU) USAID is supporting the constitution-making process by

funding civil society organizations involved and by contributing to

a multi-donor effort spearheaded by UNDP. USAID resources in

support of those efforts amount to US$3 million and US$1 million,

respectively. Much remains to be done, however, in the area of

 

HARARE 00000091 006 OF 006

 

 

human rights and rule of law and the USG has signaled that greater

engagement and developmental assistance will depend on progress in

these areas. In the interim, and following the guidance of

President Obama from his meeting in June, 2009 with Prime Minister

Tsvangirai, we are putting in place “humanitarian plus” assistance

in the areas of health, education, and agriculture, including

credit guarantees.

 

 

 

—————

 

The Outlook

 

—————

 

 

 

25. (SBU) The behavior of Mugabe and ZANU-PF indicates that they

are determined to play an obstructionist role, thwarting all MDC

attempts to fully implement the GPA, while regrouping in

anticipation of elections . ZANU-PF is now conditioning further

GPA progress on the lifting of sanctions. While the MDC has long

argued that sanctions are out of their control, recent comments by

British Foreign Secretary Miliband to the effect that the UK would

consult with the MDC before altering its sanctions policy,

undermined that position. It now appears that the EU will lift

sanctions on some parastatals later this month.

 

 

 

26. (SBU) In light of ZANU-PF intransigence on the GPA, the MDC

appears close to declaring a deadlock and referring the issue to

SADC. If there is still no progress on GPA issues, the MDC may

begin a push for elections. The most likely scenario remains a

continuing and uneasy coalition between ZANU-PF and the MDC with

some economic progress and fitful and limited political reform.

Real political change would seem possible only after a new

election. Neither party, however, seems eager to advance elections

which are scheduled under the current constitution for 2013.

 

 

 

————————-

 

A Note on Your Visit

 

————————-

 

 

 

27. (SBU) Your visit provides an opportunity to demonstrate U.S.

commitment to democratic transition in Zimbabwe. You will be

meeting with President Mugabe, Prime Minister Tsvangirai, and

Minister of Finance Tendai Biti. With Mugabe, you will be able to

reiterate the message that the U.S. supports the Zimbabwean people,

but that greater engagement, including assistance, depends on a

demonstration of greater commitment to political reform and rule of

law. With Tsvangirai, you can express support for his efforts to

achieve democratic reform and encourage him to continue to press

for full implementation of the GPA. With Biti, you can underscore

the importance of fiscal responsibility and reiterated the

importance of political reform as a predicate for increased U.S.

engagement and assistance.

RAY

(14 VIEWS)

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