He also scrapped the 5% tax on sales in foreign currency and the foreign currency surrender requirement-both of which had been payable to the Reserve Bank of Zimbabwe.
Biti, for the first time in years, made a provision of US$16.7 million for interest payment on foreign debts.
He announced a reduction in customs duties to a flat rate of 40% but said royalties and taxes on mining houses will be reviewed upwards to offset loss of revenue from surrender requirements.
Viewing cable 09HARARE248, ZIM NOTES 03-20-2009
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RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHUJA/AMEMBASSY ABUJA 2247
RUEHAR/AMEMBASSY ACCRA 2720
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RUEHRL/AMEMBASSY BERLIN 1296
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RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK
UNCLAS SECTION 01 OF 03 HARARE 000248
AF/S FOR B. WALCH
ADDIS ABABA FOR USAU
ADDIS ABABA FOR ACSS
NSC FOR SENIOR AFRICA DIRECTOR
STATE PASS TO USAID FOR L.DOBBINS AND J. HARMON
COMMERCE FOR ROBERT TELCHIN
SUBJECT: ZIM NOTES 03-20-2009
Topics of the week:
- New Government Making Progress, But Still Lacks Unity...
- Conspiracy Theorists Continue to Blame U.S. for Accident...
- Minister Matinenga Takes The Witness Stand...
- MDC Members Remain Behind Bars For Post-Funeral Violence...
- Giving Up On O Level Exams?
- Poor Students Must Pay To Apply For Free Tuition...
- Finance Minister Slashes Budget...
- Air Zimbabwe Struggling...
- Telephone Tariffs Reduced, But Still Too High...
- IMF Sees Some Economic Stabilization; Audits RBZ...
- Kimberley Process Team Visits Diamond Sites...
- Business and IMF Concerned About Wage Expectations...
On the Political/Social Front
¶2. New Government Making Progress, But Still Lacks Unity... Despite
some progress towards a reduction in political violence and a slight
opening of democratic space, significant roadblocks within
government remain, including the continued tenure of Reserve Bank
Governor Gideon Gono and Attorney General Johannes Tomana. In
addition, a lack of technical and human capacity within the
ministries limits government's ability to effectively implement
policies. MDC Ministers of Water Sam Nkomo (See Harare 239) and
Economic Development Elton Mangoma (See Harare 240), confirmed the
dire financial situation within their ministries and progress in
navigating the new political dynamics. For an in-depth look, see
¶3. Conspiracy Theorists Continue to Blame U.S. for Accident...
Allegations that the U.S. is somehow responsible for the tragic car
accident that injured Prime Minister Morgan Tsvangirai and killed
his wife Susan continue in the local media. The state-sponsored
media also continues to sing the ZANU-PF song calling for an end to
sanctions. See Harare 233. Also this week, Gideon Theron, the vice
president of the outspoken Commercial Farmers Union, which
represents mostly white commercial farmers, was arrested on charges
of obstructing justice after he was taking pictures of the scene of
the accident. Theron lives nearby and arrived on the scene before
police, raising suspicions about his alleged role. On March 20, The
Herald ran a full page article calling for an inquiry into the U.S.,
UK, and CFU role in the crash.
¶4. Minister Matinenga Takes The Witness Stand... Minister of
Constitutional and Parliamentary Affairs Minister and MDC legislator
Eric Matinenga appeared in a Mutare court on 19 March 2009. He is
accused of inciting violence during the run-up to last year's June
¶5. MDC Members Remain Behind Bars For Post-Funeral Violence...
During Susan Tsvangirai's funeral, ZANU-PF youths in Buhera
allegedly burned down the home of an MDC supporter who was attending
the funeral on March 11. In retaliation, a group of 15 MDC
supporters allegedly burned down houses of several ZANU-PF
supporters. After the arrest of the MDC supporters, 14 of the 15
Qsupporters. After the arrest of the MDC supporters, 14 of the 15
were denied bail on March 18; only a breastfeeding mother was set
free. Separately, 13 MDC members in Murambinda were granted bail by
a Mutare magistrate; they are accused of extortion after asking
ZANU-PF members who stole poultry during the run-up to the June 27
runoff to return their property. The ZANU-PF members accused of
theft were never arrested.
HARARE 00000248 002 OF 003
¶6. Giving Up On O Level Exams? Minister of Education Coltart
decreed that given the time lost from school closures in 2008, high
schools should start enrolling and teaching Advanced Level students
regardless of the fact that Ordinary Level exam results from 2008
are not yet out. In effect this policy decision means students will
begin advanced level subjects before knowing if they passed the
previous levels and is an open admission that ZIMSEC will not have
the 2008 exam results out any time soon.
¶7. Poor Students Must Pay To Apply For Free Tuition... The
University of Zimbabwe announced on March 11 that students wishing
to join their "cadetship scheme" should first pay a steep $150
application fee. Under the scheme, low-income students are granted
fre tuition in exchange for a period of required government
employment after graduation
On the Economic and Business Front
¶8. Finance Minister Slashes Budget... MDC-T Minister of Finance
Tendai Biti announced a revised 2009 budget of US$ 1 billion, down
from the Acting Minister's January 2009 budget of US$1.9 billion.
In another shot at RBZ's Governor Gono, Biti called for all public
revenue to be directed and remitted to Treasury, and announced the
elimination of the 5% tax on sales in foreign currency and the
foreign currency surrender requirement-both of which had been
payable to the RBZ. Recurrent expenditure accounts for 80.7% of the
budget with capital and net lending to parastatals and local
authorities accounting for the remainder. For the first time in
years, there is an allowance (US$16.7 million) for interest payment
on foreign debts. Revenues are dominated by taxes on goods and
services. Biti also announced a reduction in customs duties to a
flat rate of 40%. Royalties and taxes on mining houses will be
reviewed upwards to offset loss of revenue from surrender
¶9. Air Zimbabwe Struggling... Zimbabwe's national air carrier has
become a drain on the government, requiring continuous transfusions
of capital from the Reserve Bank to maintain safe aircraft. While
privatizing the airline could ensure it success, there is no
indication that change is on the horizon. See Harare 228
¶10. Telephone Tariffs Reduced, But Still Too High... According to
the Postal and Telecommunications Regulatory Authority of Zimbabwe
(POTRAZ), all telephone tariffs will be reduced by 25 to 40 percent
pending the completion of a thorough review of tariffs. Zimbabwe's
telephone tariffs were very low up to the end of 2008, then rose
significantly above those charged within the region in January 2009
when service providers were licensed to charge in foreign currency.
Despite this reduction, the new tariffs are still above the regional
average largely due to the continued use of an old analog billing
system that is not based on the units actually used.
¶11. IMF Sees Some Economic Stabilization; Audits RBZ... Halfway
Q11. IMF Sees Some Economic Stabilization; Audits RBZ... Halfway
through its Article IV mission, the IMF told us that the Zimbabwe
economy contracted 14 percent in 2008. On the positive side,
dollarization has stopped hyperinflation in its tracks and the IMF
projected revenue between US$900 million and US$ one billion in
¶2009. The mission chief told diplomats that the GOZ urgently needed
financial support to ensure social cohesion and support economic
recovery, but such assistance was beyond the scope of the IMF to
deliver due to arrears. Two days into its audit of the Reserve
Bank, IMF staff told us they had determined "significant fiduciary
risk." See Harare 232
¶12. Kimberley Process Team Visits Diamond Sites... A Kimberley
HARARE 00000248 003 OF 003
Process team is in Zimbabwe this week visiting diamond sites.
Murowa Diamonds, a member of the Rio Tinto Group of Companies which
has lobbied hard to prevent the suspension of Zimbabwe from the
Kimberley Process and to prevent sanctioning of the Minerals
Marketing Corporation of Zimbabwe (MMCZ) by the EU, told us the
company flew the team to the Murowa mine for a tour, then on to the
disputed Chiadzwa diamond field in Manicaland. Murowa executives
agreed to brief us on the KP visit next week. The GOZ denies random
killings by government agents in Chiadzwa despite significant
evidence to the contrary.
¶13. Business and IMF Concerned About Wage Expectations... In a
roundtable arranged by the American Business Association of Zimbabwe
(ABAZ) for the IMF mission this week, business representatives
wailed about pressure from employees to pay US dollar wages far
higher than businesses can afford. The IMF representatives found it
"very worrying" that Zimbabweans used South Africa as their
benchmark in wage demands, noting that Zimbabwe had a per capita
income of less than US$1/day. IMF staff commented that wages here
should be a fraction of those in South Africa.
Quote of the Week
¶14. "Ask not what other nations can do, but what Zimbabweans can do
for themselves." -- Deputy Prime Minister Arthur Mutambara, speaking
at the launch of the Short-Term Economic Recovery Plan (STERP).