Cablegate: Despite Obstacles, Exxonmobil Stays Profitable

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

040700Z Nov 04





E. O. 12958: N/A
SUBJECT: Despite Obstacles, ExxonMobil Stays Profitable
in Zimbabwe

Sensitive but unclassified. Not for Internet posting.

1. (SBU) Summary: ExxonMobil's local managing director
says his firm is currently eking out a modest profit in
Zimbabwe, thanks to guaranteed supplies of foreign
exchange at the official rate. Still, the MD told us he
tussles regularly with corrupt ministers and micro-fuel
operators. End summary.

Forex Access Is Key
2. (SBU) ExxonMobil MD Nestor Ankiba, who has run the
company's Zimbabwe operations for about six months,
called on the Ambassador on Nov 3. The subsidiary has
many large commercial clients and over 80 service
stations. Ankiba is grateful that Reserve Bank (RBZ)
Governor Gideon Gono has guaranteed oil firms access to a
weekly US$8 million of foreign exchange at the official
rate (Z$5600:US$). Given this privileged access to
forex, ExxonMobil sold 45,000 barrels of fuel in October,
well beyond its 30,000 barrel/month break-even point but
significantly below its 150 barrels/month of 1999.

3. (SBU) Ankiba regrets, however, that Gono pressed the
six multinationals in September to form a consortium with
about 100 mostly tiny, local operators. Gono wants the
consortium to agree on a single supplier for fuel imports
and divide up the US$8 million of weekly forex among the
players. Following a 4-hour meeting with 100 operators
yesterday, an exasperated Ankiba claims it has become
impossible for the group to reach agreement on each
member's share of forex and imported fuel. Many smaller
firms - whom RBZ Governor Gono himself has publicly
dismissed by as "briefcase operators" - have neither fuel
depots nor trucks nor service stations, making them
little more than rent-seeking middlemen.

Corrupt Ministries
4. (SBU) Nevertheless, the small operators seem to have
the Government's ear. They are now lobbying for the
right to supply stations that belong to multinationals.
Ankiba bristles at this, since ExxonMobil would exercise
no quality control over fuel pumped from stations bearing
its logo. Ankiba complains that some government
officials have a financial stake in these small
operators. Others have asked him if ExxonMobil would
award them their own service station.

5. (SBU) Ankiba says he has warned government officials
that they will have to manage a steep price hike in the
run up to March's parliamentary elections. At a current
Z$3,800 (US$.67)/liter, Zimbabwe's leaded fuel is the
region's cheapest. (For anyone who sources foreign
currency through the parallel market, where the rate is
Z$8,500:US$, the price converts to just US$.44/liter.)
With recent world prices above US$50/barrel, Ankiba
believes local prices may reach Z$6,000 (US$ 1.07) in the
coming months.

6. (SBU) With parliamentary elections nearing, higher
fuel costs are bad news for the GOZ. Omnipresent lines
at gas stations are visible reminders of the country's
forex shortage and failed economic policies. That is the
main reason the fuel sector merits preferential treatment
at RBZ currency auctions. But keeping gas stations well
stocked will eat up more and more of the GOZ's limited
foreign exchange, while higher pump prices will make it
all that much tougher to hold inflation in check.


© Scoop Media

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