Monday, April 28, 2014


E.O. 12958: N/A
SUBJECT: Zimbabwe Sets Racial Quota for Business Ownership

¶1. (SBU) SUMMARY: A Government of Zimbabwe (GOZ) minister from President Mugabe's ZANU-PF party has issued regulations meant to force "indigenization" of businesses. The new rules, published on February 5, say that any business worth US$500,000 or more must explain how it will "cede a controlling interest" to "indigenous Zimbabweans." The regulations are to take effect on March 1.

Existing businesses will have 45 days to submit their
indigenization plans. Failure to comply will be punishable by a
fine or up to five years' imprisonment. While the regulations
remove some of the uncertainties created by the thus-far unenforced
Indigenization and Economic Empowerment Act of 2007, they also
raise new questions. Prime Minister Tsvangirai and his Movement
for Democratic Change (MDC) oppose the regulations. This latest
indigenization scare is bound to put another dent in Zimbabwe's
battered reputation and give investors another reason to stay away.

¶2. (U) Statutory Instrument 21 of 2010, dated January 29 but
released on February 9 by Minister of Youth Development,
Indigenisation, and Empowerment Saviour Kasukuwere, says that every
business in Zimbabwe with an "asset value" of at least US$500,000
must submit an "indigenization implementation plan" to his
Ministry. The deadline for existing businesses is 45 days after
the regulations take effect on March 1. New businesses will have
60 days to submit a plan. The goal of each plan must be to
transfer within five years a controlling interest in the business
to indigenous Zimbabweans, who are defined in the Act to be any
person "disadvantaged by unfair discrimination on the grounds of
his or her race" before April 18, 1980, or the descendant of such a
person. A business need not submit an indigenization plan if it
can show that it does "development work," adds value to raw
materials for export, brings new technology or skills to Zimbabwe,
or will "achieve any other socially and economically desirable

¶3. (U) The regulations list 14 industries "reserved against foreign
investment." These include agriculture, transportation, retail and
wholesale trade, grain milling, advertising, bakeries, tobacco
processing, and milk processing. Given that the underlying
legislation explicitly provide for minority foreign ownership of
businesses, the regulations appear to have the effect of excluding
all foreign investment in the 14 designated industries. There are
also other ambiguities in the regulations. It is not clear whether
"asset value" is net or gross. And the regulations do nothing to
clarify the definition of an indigenous Zimbabwean, which does not
obviously include all black Zimbabweans or necessarily exclude
everyone who might be considered white or of some other race.
Another disturbing source of uncertainty is how the Minister may
choose to interpret the broad exemptions in the regulations. Nor
do the regulations spell out what might become of businesses that
do not meet the five-year indigenization deadline.

¶4. (SBU) So far there have been few public reactions from the
business community. One mining company has advised shareholders
that it is "studying" the regulations and noted that they provide
for future issuance of lower indigenization quotas for specific
industries. The Chamber of Mines, the mining companies' main
lobbying group, has long been engaged in discussions with the GOZ
on indigenization rules. Private reactions range from alarm to
resignation. One prominent businessman sees the issuance of the
regulations as a political ploy by Kasukuwere to curry favor with
Mugabe. In his view, the regulations do not have broad support
within ZANU-PF and are likely to be withdrawn or modified. But he
acknowledged that news of the regulations could have a devastating
effect outside the country on potential investors. Other business
contacts have expressed doubts about the capacity of the GOZ to
implement the regulations. If there is a high degree of compliance
with the reporting requirement, Kasukuwere's ministry could
collapse under an avalanche of paper. But that could also have the
effect of making enforcement all the more arbitrary.

¶5. (U) Press reports say Tsvangirai has called the regulations
"null and void" because they were not approved by the cabinet. His
MDC party released a statement on February 11 calling the statutory
instrument "provocative" and "a deliberate attempt to undermine the
country and its people." The MDC called on the GOZ to withdraw the

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¶6. (SBU) COMMENT: With ZANU-PF's popular support draining away,
release of the indigenization regulations now could be a move to
curry favor with the electorate. But sooner or later, the
indigenization law will give way to Stein's Law: "If something
cannot go on forever, it will stop." Until then, intermittent
indigenization scares will help keep Zimbabwe a high-risk zone for
lenders and investors, choking off the financing needed to rebuild
a battered economy. Zimbabwe's macroeconomic recovery is already
starting to look like a dead-cat bounce: the economy is better now
mainly because it could not have gotten worse. Investors and
lenders were already staying away in droves before Kasukuwere made
his move. Even if the just-issued indigenization rules disappear
or are watered down before March 1, Zimbabwe's battered reputation
will carry a new and lasting dent. If the rules stay in place,
prospects for meaningful economic growth this year will dim
significantly. END COMMENT.



E.O. 12958: N/A

REF: 10 STATE 10152

¶1. (U) Although statistics are not readily available, anecdotal
evidence shows increasing Chinese involvement in Zimbabwe's
economy. The trend became pronounced with the Government of
Zimbabwe's (GOZ) "Look East Policy" in 2003, through which it
sought to emphasize new ties with China in place of traditional
links to Europe and North America. Chinese enterprises are
noticeably active in the retail and construction sectors. One
local press report suggests that 80 percent of Chinese-owned
enterprises are in the retail sector. But Chinese construction
projects receive far more public attention - often negative. For
example, an eight-year-old plan involving Chinese contractors to
widen the highway between Harare and Bulawayo collapsed after only
20 kilometers of construction amid allegations of poor workmanship
and corruption.

¶2. (U) There has been significant Chinese investment in industrial
enterprises. In 2007 Sinosteel Corporation bought Zimasco
Consolidated Enterprises Limited, Zimbabwe's largest ferrochrome
producer. Zimasco suspended production in 2009. In 2004 the China
Building Material Industrial Corporation entered into a joint
venture with the Industrial Development Corporation of Zimbabwe to
establish the Sino-Zimbabwe Cement plant in Midlands Province.
Chinese firms also provided agricultural equipment worth millions
of dollars under the Reserve Bank of Zimbabwe's farm mechanization
program in order to show support for the GOZ's land reform program.
In 2009, Zimbabwean officials announced a multi-billion dollar
Chinese investment in platinum mining, but there is no evidence of
actual investment on this scale.

¶3. (U) The GOZ's severe fiscal constraints have put limits on
Chinese engagement. The GOZ is in arrears on its US$400 million in
official debt to China, and this has blocked access to lines of
credit reportedly worth as much as US$950 million. According to
GOZ figures, as of March 2009 Zimbabwe owed US$37.2 million to
China in unpaid principal and interest.

¶4. (SBU) There are no concrete examples of U.S.-China collaboration
in Zimbabwe. Ambassador Ray met with the Chinese ambassador who
indicated his desire to maintain a dialogue with the U.S. and other
Western countries. The principal aims of U.S. policy in Zimbabwe
are a return to democratic governance, restoration of the rule of
law, and protection of human rights. While China has remained
silent on these subjects, it has moved from sole support of ZANU-PF
to a more balanced approach and now has relationships with both
ZANU-PF and MDC-T. The Chinese embassy recently sponsored a golf
tournament in honor of Prime Minister Tsvangirai. While China
may share an interest with the U.S. in restoring Zimbabwe's
investment climate, progress in this area ultimately depends on
governance reforms.

C O N F I D E N T I A L SECTION 01 OF 02 HARARE 000105


E.O. 12958: DECL: 2020/02/16
SUBJECT: Zimbabwe: Doing Business Zimbabwe-style


CLASSIFIED BY: Charles A. Ray, Ambassador, STATE, EXEC; REASON:
1.4(B), (D)

¶1. (SBU) A recent conversation with businessman Kumbirai Katsande
illuminated the difficulties of doing business in Zimbabwe.
Katsande is the past president of the Zimbabwe Business Council and
the current head of the Confederation of Zimbabwean Industries. He
is the Managing Director of Ariston Holdings Ltd., which has major
horticultural and tea interests, and the Chairman of NestlC)
Zimbabwe Ltd.

¶2. (C) Katsande described how Ariston came to give up land to High
Court Judge Ben Hlatshwayo. In 2002, Hlatshwayo, in defiance of an
order from his own Court, seized a white commercial farm in the
agriculturally productive area of Banket, about 100 kilometers
northwest of Harare. The farm was near the Mugabe rural home. In
2009, the farm caught the eye of First Lady Grace Mugabe, who
apparently wanted it for her son from her first marriage. She
ordered Hlatshwayo off the land. He countered with a lawsuit but,
unsurprisingly, no judge was willing to hear the case. The powers
that be persuaded Hlatshwayo to leave his 600-hectare farm and
promised him another. He found another farm and demanded the white
owner leave. He then received a call from Minister of Local
Government, Urban and Rural Development Ignatius Chombo, a patron
of the owner, who told him to desist and look for another. He did.
This time he got a call from Minister of Lands and Rural
Resettlement Herbert Murerwa, who had a relationship with the
owner, Hlatshwayo moved on. He finally came to land owned by
Ariston Holdings which, under pressure, agreed to cede him land.
Katsande said Ariston was a bit miffed that Hlatshwayo's original
farm was 600 hectares and he demanded 900 from Ariston. They
ultimately negotiated.

¶3. (C) Last year, in the wake of an international outcry, NestlC)
Zimbabwe, which had been buying milk from Grace Mugabe's dairy
farm, decided to stop. After he and NestlC) workers were
threatened, Katsande contacted President Robert Mugabe's office.
He was told Mugabe had asked Minister of Industry Welshman Ncube to
handle the matter, and that the government would not interfere with
NestlC). Katsande then learned that Reserve Bank of Zimbabwe
Governor Gideon Gono had frozen NestlC) accounts. He contacted
Gono, who said he was acting on Mugabe's behalf. Katsande
convinced him to call Mugabe. He did and backed off. Katsande was
subsequently contacted separately by Minister of Youth and
Indigenization Saviour Kasukuwere and Minister of State in the
President's Office Didymus Mutasa, both of whom threatened him if
he didn't resume buying milk from the first lady. He told them to
contact Ncube. Ncube convinced them that Mugabe had left the
matter with him, and told them that he (Ncube) was not going to
force NestlC) to buy milk from Grace Mugabe. NestlC) has resumed
operations and is not buying milk from Grace Mugabe.

¶4. (SBU) We talked to Katsande just after Kasukuwere had issued
new indigenization regulations (Ref). He said despite
difficulties, NestlC) had a large investment in Zimbabwe and was
going to invest an additional US$10 to US$15 million. But it was
going to make other major investments in Botswana and Mozambique
which would have been made in Zimbabwe but for the unsettled
political situation.

¶5. (C) Finally, Katsande told us about a legal dispute of Ariston
involving tea estates in Chipinge. War veterans tried to take over
some of Ariston's land and a legal case ensued. Ultimately, the
Supreme Court, in a decision signed by the Chief Justice, ruled in
Ariston's favor. But squatting war veterans refused to leave the
estates. When Ariston contacted the police, it was told that farm
invasions were a political matter and the police would therefore
not act. Katsande paid a visit to the local police commissioner in
Chipinge and was told the same thing. Katsande pointed out to the

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police commissioner that the Chief Justice belonged to ZANU-PF and
that the judgment in the legal case was therefore political. He
then threatened to bring an action for contempt against her
personally for defying an order of the Chief Justice if police did
not remove the war veterans within three days. They did.




¶6. (C) Katsande's experiences demonstrate the difficulties of
doing business in Zimbabwe. ZANU-PF's abuse of power echoes
throughout the economy and the party's influence will certainly
inhibit economic recovery. Investors not yet active in Zimbabwe
generally understand this and accordingly choose to do business
elsewhere. Foreign companies already here - like NestlC), Chevron,
Implats, and others - will at most hedge their bets in existing
operations but not make major new commitments until Mugabe and the
likes of Kasukuwere have been forced from office. Consider, for
example, the continuing malevolent influence of Reserve Bank
Governor Gideon Gono. Even though the central bank no longer has
the means to disrupt the economy as it did during Zimbabwe's
hyperinflation, the very fact that Gono is still on the payroll
frightens anyone who might consider a financial commitment that
lasts more than a week. On Zimbabwe's current trajectory, Katsande
will have more amusing anecdotes for us next year. END COMMENT.



E.O. 12958: N/A




Mugabe Welcomes Codel Meeks/Watt...

Journalist thrown out of Mugabe/Codel meeting...

Diamond Drama Continues...

Zim Agrees to KP Monitor...

Court Orders Mining at Chiadzwa to Stop...

EU Extends Targeted Sanctions on Zimbabwe...

ZANU-PF Hijacks Civil Servants' Strike...

Police Arrest WOZA Members...

Mexican Journalist Arrested...

HRW Calls Gov't a "Failure"...

Rising Cost of Living Fuels Wage Demands...

Tobacco Selling Season Starts on High Note...

Companies Resort to Rights Issues...


On the Political and Social Front


¶2. Congressmen Gregory Meeks (D-NY), Melvin Watt (D-NC), Jack
Kingston (R-GA), and Bob Goodlatte (R-VA) visited Harare this week
and had a nearly two-hour long meeting with President Mugabe at
State House. The delegation also met with Finance Minister Tendai
Biti and visited a USAID-funded livelihoods project. Friday's
Herald featured a large photo of Congressman Meeks and Mugabe
shaking hands next to the headline "US pledges dialogue."

¶3. Freelance journalist (and correspondent of the Zimbabwe Times)
Nkosana Moyo was escorted by the CIO out of a meeting between
President Robert Mugabe and the visiting Congressional Delegation.
Moyo tried to record the proceedings of the meeting when the CIO
accosted him and took him out of State House. He told PAS that they
gave him a 20- 30 minute lecture about patriotism. "They told me I
should not be used by the Americans to demonize Zimbabwe, and took
all my details- address, phone numbers, next of kin, rural home-
and let me go," said Moyo. Moyo said he could not go back to State
house to cover meeting because "I was no longer a in a state of
mind to do anything."

¶4. Transcripts of closed-door hearings led by the parliamentary
committee on mines and energy have revealed probable corruption and
a lack of oversight in the troubled Chiadzwa diamond fields. The
committee, led by the ZANU-PF former Mining Minister Edward

HARARE 00000152 002 OF 004

Chindori-Chininga, has grilled senior leadership from the
parastatals Zimbabwe Mining Development Corporation (ZMDC) and the
Minerals Marketing Corporation of Zimbabwe (MMCZ) on their lack of
oversight of the two joint ventures operating in Chiadzwa, Mbada
Diamonds and Canadile Miners in several hearings this month. Mining
Minister Obert Mpofu is allegedly due to testify soon as well.

¶5. This week Zimbabwe agreed to allow a South African
industrialist with extensive diamond mining experience, Abbey
Chikane, to serve as the resident monitor for the Kimberley Process
Certification Scheme (KPCS) after several other potential monitors
were rejected. Chikane's appointment is the result of the KP work
plan developed in October 2009 at the KP Plenary in Namibia.
Chikane is to have "unfettered" access to Chiadzwa is will need to
approve of diamond shipments before they can be granted a KP

¶6. The Supreme Court has ruled that ZMDC and the MMCZ must stop
mining operations at Chiadzwa pending finalization of the ownership
dispute with African Consolidated Resources (ACR). Although ZMDC's
two partners, Mbada and Canadile, may remain on site, they have
been ordered to stop operations. In the meantime, the GOZ has
reportedly cancelled ACR's license to mine the Chiadzwa fields,
giving it up to March 10 to lodge an appeal. ACR contends the
cancellation is unlawful.

¶7. On February 16, the EU extended targeted sanctions on Zimbabwe
for another year and also removed six individuals (mostly deceased)
and nine companies from the list. Of note, sanctions were lifted on
Dumiso Dabengwa, a former ZANU-PF Minister of Home Affairs, who
left ZANU-PF two years ago to reform ZAPU. The EU justified the
extension on the lack of progress in the implementation of the GPA.
Although ZANU-PF dismissed the extension of the sanctions as a
non-event, it has nevertheless said it will not make any
concessions in the GPA talks until all the sanctions are removed.

¶8. Striking civil servants have said that ZANU-PF has hijacked the
strike for political reasons. Civil servants' representatives
reported that ZANU-PF was forcing teachers to join the strike. They
reported that in Masvingo province in southern Zimbabwe, ZANU-PF
and the CIO forced Victoria High School to close at gun point and
ordered the teachers to join the strike. The civil servants are
pressing the government to increase their $150 monthly wages to a
minimum of $630. The government has said it can only increase the
paltry wages by a further $16 because it has no money.

¶9. On February 17 the police arrested two members of Women of
Zimbabwe Arise (WOZA) in the eastern city of Mutare. One of the
women, Rose Rukwewo, is an elderly woman who suffers from hyper
tension. The police arrested the women at their homes for no
apparent reason other than to harass them after they had
participated in a WOZA protest march on February 16. Although the
police admitted they have no evidence to charge the women, they
insisted on detaining them for 48 hours--the maximum period the
police can hold a suspect in detention before they must appear in
court. The women were initially denied access to their lawyer for
several hours.

¶10. In Masvingo on February 12, police arrested a Mexican
journalist who was filming potential tourist sites. The journalist,

HARARE 00000152 003 OF 004

who was in a vehicle belonging to Minister of Tourism Walter Mzembi
(ZANU-PF) and who had a letter of authorization signed by Mzembi,
was held for several hours before being released after Mzembi's
personal intervention. Mzembi later fumed, "We cannot attract
tourists if we do not look at our law and order. [The journalist]
wanted to film for Mexican tourists ahead of the World Cup in South
Africa, but the first call I received once he got there was he was
at a police station. He has understood that we are in a transition
and we have said it will not happen again."

¶11. Human Rights Watch issued a harsh statement this week, calling
the inclusive government a "failure." According to HRW's Director,
Georgette Gagnon, "The transitional power-sharing government is a
sham. From a human rights perspective, nothing has changed for the
better. Robert Mugabe and ZANU-PF are still fully in control." HRW
went on to call for the government to begin preparations for
holding internationally supervised free, fair, and credible
elections that will lead to a legitimate and democratic government
with the political will to bring about change. An article in The
Economist this week also suggested early elections wouldn't be a
bad idea: ica/displayStory.cfm?s


On the Economic and Business Front


¶12. According to the Consumer Council of Zimbabwe (CCZ), the
average cost of a basket of goods for a family of six rose by about
seven percent from $488.11 in December 2009 to $520.53 in January
¶2010. The jump was attributed to an anticipated increase in civil
servants' salaries and high utility tariffs. To the extent that CCZ
figures are now the basis for determining minimum wages in the
public and private sectors, there will be more pressure for a
general rise in wages.

¶13. The opening of this year's tobacco selling season started on
February 9 amidst expecations of substantial growth in the quantity
sold. The Tobacco Industry Marketing Board (TIMB) projects sales
this year of 77 million kilograms, up from 56 million in 2009. The
TIMB cites favorable prices and an increase in the number of
farmers growing the crop as the main factors behind the increase.
The use of the out-grower schemes has attracted a lot of farmers
since they are well supported by tobacco merchants when compared to
other commercial crops.

¶14. Liquidity constraints in banks and the high cost of borrowing
have forced most companies to go for rights issues and private
placements to raise money for expansion projects. During the week
under review, for example, two publicly listed companies proposed
to raise a total of $40 million through both rights issues and
private placements.

¶15. "We know their attitude. They do not want anyone, any country
in the developing world to make any meaningful development
strides." -- President Robert Mugabe, referring to the West's
alleged efforts to block development in Africa, at the opening of

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the Pan-African Tourism Investment Summit in Harare, February 17,




E.O. 12958: N/A
SUBJECT: ZANU-PF Peacefully Protests Sanctions In Front Of U.S.



¶1. (U) A ZANU-PF organized group protested peacefully in downtown
Harare and in front of the U.S. Embassy on February 24. The
protesters, who were allegedly bused in from outside Harare,
shouted anti-sanctions slogans and appeared to have been paid at
ZANU-PF headquarters after the march ended. Although the group
reportedly intended to present petitions at the U.S. Embassy and at
the headquarters of the Movement for Democratic Change (MDC),
neither has received such a petition. The police escorted the
well-organized protesters but did not inform the Embassy in
advance. Police briefly detained and released one journalist.
There are no other reports of arrests or injuries. END SUMMARY.

March on the Embassy

¶2. (U) At around 10:30 local time, approximately 1,000 ZANU-PF
supporters gathered in downtown Harare for a protest march against
sanctions. According to the MDC, ZANU-PF brought the group to
Harare from nearby rural areas in buses and trucks. The protesters
wore t-shirts that said "sanctions are criminal" and carried
professional-looking posters with slogans such as "We will defeat
sanctions to realize your dreams," "Sanctions are catastrophic to
us," and "Pirate radio stations are stealing our sovereignty." The
group chanted anti-sanctions and pro-ZANU-PF slogans as it was
escorted by police through town.

¶3. (U) At approximately 11:00 the group arrived on Herbert Chitepo
Avenue, about a block east of the chancery. The crowd, following
directions from its leaders, peacefully marched in front of the
Embassy, pausing for about three minutes to boo, pump fists, and
sing ZANU-PF songs. The group also shouted anti-American and
anti-U.S. government slogans, directing some of their comments at
our locally employed guard force. The comments included: "Don't
you want land? What are you getting from the Americans?"; "We know
where you live, we shall get you one by one"; "We want war with
you Americans we are not afraid of you"; "Charles Ray must go, he
is responsible for sanctions"; "You are responsible for our
problems." After jeering for a few moments, the crowd peacefully
moved down the street. While stopped in front of the chancery, a
few in the group attempted to stand on barricades in front of the
entrance but stopped when told to do so by Zimbabwean police.

¶4. (SBU) After moving away from the Embassy, the group returned to
ZANU-PF's headquarters, where it appeared protesters entered the
building in turns, possibly to receive payment for participating.
Although it was rumored throughout the day that the group was going
to present petitions at the Embassy and at MDC headquarters
downtown, no one submitted a petition at either location.
Beginning at approximately 15:00, the group was loaded into buses
in downtown Harare. It appeared that some of the protesters
commandeered some public transport, but the crowds quickly
dissipated when it began to rain heavily.

¶5. (SBU) Although the police succeeded in ensuring the march in
front of the Embassy was peaceful, no one in the Embassy received
advance notice of the protest. The Embassy only learned of it at
10:45 from a civil society contact who heard about it from an MDC
official. The Embassy is still without regular protection by the
Zimbabwean police (reftel).

Journalist Detained, Released

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¶6. (SBU) Before the march began, plainclothes police detained
freelance journalist Andrisson Manyere for about 15 minutes.
According to Manyere, the police objected to his taking photos
without having first sought permission from the police or ZANU-PF.
According to another journalist in the area, Manyere was
photographing the ZANU-PF youths scrambling for free t-shirts in
front of ZANU-PF's headquarters. Manyere was taken to the nearby
ZANU-PF headquarters building, where ZANU-PF officials and
officers of the Central Intelligence Organization recorded his
details and forced him to delete all of the photos from his camera.
(NOTE: Manyere has been a frequent target of the police. He was
arrested on January 18 in Harare while filming a march by Women of
Zimbabwe Arise. Manyere was abducted in December 2008 and held
incommunicado for several weeks by security agents who tortured
him. He remained in prison until April 2009 and still faces
charges of participating in bombings of police stations. END


¶7. (SBU) Today's protest came as a complete surprise, despite our
slowly improving communication with ZANU-PF and the police. Our
contacts in civil society, who usually hear of large events in
advance, were also caught off guard. Although the rhetoric
expressed by the protesters is nothing new, it is evidence that
ZANU-PF is once again exploiting rural youth to do its bidding,
using enticements of free food, t-shirts, and a trip to Harare.
This was one of the largest protests in Harare in recent memory and
the first to take place in front of the Embassy in at least three

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