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Cablegate: Tractor Sales Nearly Dead

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

UNCLAS HARARE 000625

SIPDIS

SENSITIVE

STATE FOR AF/S
NSC FOR SENIOR AFRICA DIRECTOR JFRAZER
USDOC FOR 2037 DIEMOND
PASS USTR ROSA WHITAKER
TREASURY FOR ED BARBER AND C WILKINSON
STATE PASS USAID FOR MARJORIE COPSON

E. O. 12958: N/A
TAGS: EAGR ECON EINV ETRD ZI
SUBJECT: Tractor Sales Nearly Dead


Sensitive but unclassified. Not for Internet posting.

1. (SBU) Summary: Zimbabwe's largest tractor dealer says
sales last year were off 98 percent from the late-1990s,
a measure of commercial agriculture's staggering
nosedive. Meanwhile, the GOZ is assisting an indigenous
firm to import cheap Renault tractors from India by
making foreign exchange available at the official rate of
Z$55:US$1. End summary.

5-Fold Price Increase
---------------------
2. (SBU) Bain Group Marketing Manager P.D. Hickman
recounted annual domestic sales of 1,500 tractors in the
late-1990s. Last year the sector sold just 40 units.
Bain Group both imports and manufactures tractors, having
maintained its approximate 50 percent market share
through the present turmoil. In a case of mega-sticker-
shock, the price of a top-of-the-line 300-horsepower
tractor has risen from Z$ 7 to 35 million in a little
over a year. For farmers who must sell at artificially-
low controlled prices, Hickman said it is no longer
possible to recoup investments in new equipment. At the
same time, white farmers dispossessed through the GOZ's
fast-track land reform have flooded the market with used
tractors at bargain-basement prices. (The GOZ forbids
the export of second-hand tractors.) The GOZ's
elimination of a 5 percent duty on imported agricultural
equipment in the 2003 budget has not offset the hefty
devaluation. The GOZ is trying to address this crisis by
enabling politically-connected indigenous firm Tanaka
Power to access foreign currency at official rates in
order to sell India-made Renault tractors for less than
10 percent of the market cost. It is not clear, however,
how much foreign exchange the cash-strapped GOZ will be
able to make available to Tanaka Power.

3. (SBU) Given its slow sales, Bain Group has fired half
its 620 workers, indirect employment casualties of land
reform. However, the company is still trying to cope by
exporting more and altering its product mix for recently
resettled farmers. Bain Group is selling increasing
amounts of ox-drawn implements to large-scale (A2)
settlers. But opportunities are limited since Hickman
estimates only a small number of A2 farmers are actually
tilling land and planting crops. (Representatives of the
Indigenous Commercial Farmers Union, whose ranks have
swelled with "new" farmers, tell us they estimate only 15
percent of present A2 beneficiaries will prove viable.)
At the same time, white Zimbabwean farmers starting over
in Zambia, Mozambique and Malawi are placing fresh orders
for Bain Group tractors and implements. Hickman said
this brand loyalty of emigrant Zimbabwean farmers is
helping the firm expand in these markets.

Comment
-------
4. (SBU) The fall in annual tractor sales epitomizes
commercial agriculture's decline. While most small-scale
resettled (A1) farmers could one day reach subsistence
levels in rainy years, there is no sign yet that new
commercial (A2) farmers will produce even a fraction of
their predecessors' output. Zimbabwe's loss in
employment and export revenue is enormous.

Sullivan

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