Air Zimbabwe goes into chicken business

The poultry business had become so lucrative at the height of the country’s economic crisis that Air Zimbabwe and the Civil Aviation Authority decided to get into the business and fly out day-old chicks to earn forex.

This was said by the managing director of Irvine’s Day Old Chicks, David Irvine, who seemed to be thriving on his connections with several of President Robert Mugabe’s top lieutenants.

Irvine was offering advice to central bank governor Gideon Gono to make his farm more profitable by reducing overcrowding and improving feed delivery.

He described Godwills Masimirembwa, then head of the National Income and Pricing Commission, as a “half-baked chicken farmer”.

Full cable:

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PP RUEHWEB

DE RUEHSB #0232/01 0871037

ZNY CCCCC ZZH

P 271037Z MAR 08

FM AMEMBASSY HARARE

TO RUEHC/SECSTATE WASHDC PRIORITY 2633

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C O N F I D E N T I A L HARARE 000232

SIPDIS

SIPDIS

AF/S FOR S. HILL

NSC FOR SENIOR AFRICA DIRECTOR B. PITTMAN

STATE PASS TO USAID FOR L.DOBBINS AND E.LOKEN

TREASURY FOR J. RALYEA AND T.RAND

COMMERCE FOR BECKY ERKUL

ADDIS ABABA FOR USAU

ADDIS ABABA FOR ACSS

E.O. 12958: DECL: 03/27/2018

TAGS: EAGR ECON ETRD PGOV ASEC ZI

SUBJECT: POULTRY AND PATRONAGE, HOW TO MAKE MONEY IN AN

ECONOMIC CRISIS

REF: 07 HARARE 0772

Classified By: Ambassador James D. McGee for reason 1.4 (d)

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SUMMARY

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¶1. (C) Econoffs met with David Irvine, Managing Director of

Irvine’s Day Old Chicks Ltd on March 19 to discuss the

business climate ahead of the elections. Irvine, who has

connections to a number of pro-Mugabe Ministers, is

exploiting all angles to procure the inputs needed to keep

his business going as he focuses on exports. He lamented

that business was very, very difficult now. Nonetheless,

Irvine’s is well-placed to take advantage of any economic

recovery. END SUMMARY.

——————–

Maize Shortages Bite

——————–

¶2.   (C) Despite Irvine’s political connections, Zimbabwe’s

declining economy has started to bite. Irvine’s plant is

operating at 75 to 80 percent of capacity because of a

shortage of maize. (NOTE: Eighty percent capacity utilization

is unusually high for a Zimbabwean business, many of which

are operating at only 10 percent capacity. END NOTE.) At the

time of the meeting, Irvine said he didn’t have enough maize

to process chicken feed. He had had to start importing maize

from Zambia, using his foreign exchange and paying for the

transportation in forex as well. Irvine related that his

situation was not unique. Labor Minister Nicholas Goche had

had only about 60 percent of his normal crop yield this year

and even Reserve Bank of Zimbabwe (RBZ) Governor Gono was

scrambling to find maize for his poultry farm.

————————-

Exploiting all the Angles

————————-

¶3.   (C) Irvine admitted using his political connections and

his supply of poultry products to keep his farm in business

and profitable. He gives the Zimbabwe Electricity Supply

Authority (ZESA) diesel fuel to fix electrical faults and

also gives the ZESA workers chickens and eggs so his

operation gets priority service during Zimbabwe’s frequent

power outages. He also buys Minister Goche’s entire maize

and soya crop, and the two are such close business partners

that they don’t do a formal accounting. Irvine has access to

Grain Marketing Board (GMB) maize at a deeply subsidized

price. Irvine also described how he made a deal with Land

Resettlement Minister Didymus Mutasa to lease the Irvine

family farms south of Harare to avoid losing them in

fast-track land reform. As Econoffs arrived, Irvine was

arranging to allow a ZANU-PF rally on one of his farms,

providing transportation and beef from his own herd for the

rally in addition to the location.

¶4.   (C) Irvine described his assistance to a number of

pro-Mugabe ministers who were in the poultry business. They

are apparently attracted by the potential to make quick

profits from exporting eggs and day-old chicks. Irvine had

recently visited Governor Gono’s chicken farm and offered his

advice and assistance to make it profitable by reducing

overcrowding and improving feed delivery. Enumerating other

examples of high-ranking pro-Mugabe individuals and

institutions that are discovering the potential profitability

of the poultry business, Irvine described Godwills

Masimirembwa, head of the National Income and Pricing

Commission (NIPC), as a “half-baked chicken farmer” and noted

that Air Zimbabwe and the Civil Aviation Authority of

Zimbabwe (CAAZ) have also decided to get into the business

and fly out day-old chicks to earn forex.

———————————–

Economy’s Distortions Still Hurting

———————————–

¶5.   (C) Since price controls tightened, Irvine has upped

its export of eggs from 50 percent in August 2007 when we

last met him (reftel) to 70 percent of production. In early

February he was able to negotiate a significant increase in

the price of eggs after writing to the Chief Secretary of the

Cabinet about the effect of the maize shortage on his ability

to supply the local market. According to Irvine, the Cabinet

was so worried about having adequate supplies of poultry and

eggs on the shop shelves in the run-up to the election that

it supported his request. Irvine explained that the

government paid no attention to post-election prices or

supply.

¶6. (C) Irvine claimed his business earned US$1 million in

revenue per month, up from US$750,000 when we last spoke.

Despite the increase in revenue and the fact that he still

gets to retain 90 percent of his forex earnings (rather than

the 65 percent most exporters are permitted by law), he was

still not investing in his Zimbabwe operations. He needed to

modernize his equipment, some of which had been around since

the 1960s, but claimed he simply didn’t have the resources to

invest. Irvine had begun to keep accounts in U.S. dollars

and found that his profitability in hard currency was

declining despite increasing Zimbabwe dollar profits and

sales growth. The growth couldn’t keep up with the sliding

exchange rate.

¶7. (C) Irvine did not think the economy could hold up on its

present path until the end of the year, but would gradually

dollarize. He claimed residential rentals were already

denominated in U.S. dollars – and not only for expats – and

many companies benchmarked their accounts in U.S. dollars as

well. He said that Zimbabwe would require the IMF’s help to

reduce inflation and Irvine recognized that money would need

to be poured into the railroads, roads and power grid to

start a recovery.

¶8. (C) Despite the sound management and profitability of

Irvine’s Day Old Chicks, Irvine recognized that eliminating

the economy’s distortions would weaken the company’s balance

sheet. He said that if he had to pay market prices for maize

and had to borrow at real interest rates, his prices would

have to rise and his sales would decline. He thought if the

company could make it through the initial pain of a recovery

period, it would return to profitability.

——-

COMMENT

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¶9. (C) It is ironic that Irvine has such a close relationship

to many pro-Mugabe, stalwart ZANU-PF ministers and that they

give special deals to this white family farming operation

with deep roots in the Ian Smith government. The two sides

are not natural allies, and Irvine seems to represent exactly

the type of farmer fast-track land reform would have

targeted. The two sides, however, are bound by a symbiotic

relationship. It appears to be of little concern to top

ZANU-PF officials that Irvine’s use of subsidized GMB maize

as feedstock and the export of most of the eggs and chicks

does little to reduce the scarcity of food in Zimbabwe.

Clearly money is more important than revolutionary rhetoric

to many of today’s ZANU-PF ministers. END COMMENT.

MCGEE

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