Gono turnd a blind eye on cheating exporters

The central bank was turning a blind eye to exporters who were refusing to surrender 50 percent of their export earnings to the Reserve Bank of Zimbabwe at the official exchange rate which was one-seventh of the market rate.

The United States embassy said Reserve Bank officials realised that rigid enforcement of the 50 percent exchange requirement saddled firms with an outrageous inefficiency, further crippling an export sector that had shrunk from US$2.2 billion to 1.4 billion since 2000.

Hardliners like Information Minister Jonathan Moyo and Agriculture Minister Joseph Made were angered by this failure which also provided cheap foreign currency to the favoured.

 

Full cable:

 

Viewing cable 03HARARE2149, GOZ Still Scapegoats Exporters

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Reference ID

Created

Released

Classification

Origin

03HARARE2149

2003-10-29 13:10

2011-08-30 01:44

UNCLASSIFIED//FOR OFFICIAL USE ONLY

Embassy Harare

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

 

291310Z Oct 03

UNCLAS HARARE 002149

 

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 EINV PGOV ZI

SUBJECT: GOZ Still Scapegoats Exporters

 

Ref: Harare 2140

 

1. (SBU) Summary: The GOZ continues to blame export firms

for its foreign exchange shortage. If today's lead story

in the official press is a curtain-raiser for the

November 20 budget speech, the Mugabe administration may

kill what's left of Zimbabwe's once hearty export sector.

End summary.

 

The "Root Cause" of Economic Problems

-------------------------------------

2. (U) Today's Herald announces that the GOZ is forming a

forex taskforce to account for leakage of export taxes.

The GOZ believes "the root cause of [present] economic

problems [is] the unaccountability of foreign currency by

exporters." GOZ hardliners are angered that so many

exporters are failing to remit 50 percent of revenue to

the Reserve Bank for exchange at the official rate,

currently one-seventh of the market rate. The article

argues that better policing of exporters will bring more

forex to the Reserve Bank, enabling energy parastatal

ZESA and oil parastatal NOCZIM to acquire forex from the

Reserve Bank at the official rate. "Rather than having

the two companies depend on the parallel market," the

article continues, "there is a growing feeling in

Government that managing to get foreign currency at the

official rate is the solution." Finally, the article

takes a few obligatory swipes at the Reserve Bank for

failing to collect forex from exporters. Information

Minister Jonathan Moyo and Agriculture Minister Joseph

Made - both hardliners - are on the new taskforce.

Tellingly, the Reserve Bank has been left off.

 

Comment

-------

3. (SBU) We have no doubt that many exporters are

sheltering earnings from the GOZ's oppressive tax regime

- and that Reserve Bank is turning a blind-eye to this

practice. Reserve Bank officials realize that rigid

enforcement of the 50 percent exchange requirement

saddles firms with an outrageous inefficiency, further

crippling an export sector that has shrunk from US$2.2

billion to 1.4 billion since 2000. The GOZ's own data

contradict an assertion of the article's unnamed GOZ

spokesman that "all available evidence indicates that

this economy is generating more foreign currency today

than it did three years ago." (Tobacco revenue, the

largest forex earner, is down about two-thirds, according

to GOZ statistics.) The Herald's heavy-fisted story

signals that hardliners - who favor interventionism and

distrust the private sector - are trying to gain the

upper hand against moderates, part of a widening schism

in GOZ economic philosophy (ref). Both hardliners and

moderates want to shape the upcoming November 20 budget

speech. (The Herald reports that the new taskforce will

release its findings in three weeks, just in time for the

2004 budget.)

 

Sullivan

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