Gono has killed Bindura- general manager

Central bank governor Gideon Gono had killed Bindura Nickel Corporation by increasing import duty over 100-fold and raising electricity rates, the general manager Ranganai Chinamatira said in 2004.

As a result though the price of nickel was at a 20-year high, the company was only operating two of its four mines.

Chinamatira said at the exchange rate of Z$5 600 to US$1, Zimbabwe’s nickel exports could not compete with nickel from Botswana, Russia or China.

Bindura could also not access cheap funds from the central bank because Gono had excluded any companies that paid dividends to their shareholders.

Chinamatira believed Bindura shareholders would revolt if the company stopped paying them quarterly dividends.

Full cable:

Viewing cable 04HARARE1898, Nickel Exporter Using Just 2 of 4 Mines

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

UNCLAS HARARE 001898

SIPDIS

STATE FOR AF/S

USDOC FOR ROBERT TELCHIN

TREASURY FOR OREN WYCHE-SHAW

PASS USTR FLORIZELLE LISER

STATE PASS USAID FOR MARJORIE COPSON

SENSITIVE

¶E. O. 12958: N/A

TAGS: EMIN ECON ETRD EINV PGOV ZI

SUBJECT: Nickel Exporter Using Just 2 of 4 Mines

Sensitive but unclassified. Not for Internet posting.

¶1. (SBU) On a recent site visit to Bindura Nickel Corp

(BNC) in Mashonaland Central, General Manager R.

Chinamatira complained to us of Zimbabwe’s worsening

export climate. Even though nickel reached a 20-year

high on world markets this year, BNC is operating only

two of four mines. By increasing the import duty over

100-fold and raising electricity rates to double the

region’s average, Chinamatira said the Reserve Bank (RBZ)

has since last December “destroyed [BNC’s] cost

structure.” At the present Z$5600:US$ official exchange

rate, the GM argued that Zimbabwean nickel exports cannot

compete with nickel from Botswana, Russia or China.

¶2. (SBU) On top of the worsening export climate, BNC can

no longer access the RBZ’s productive sector loans at a

discounted 50 percent (versus 135 percent on open

markets). In his Oct 28 monetary policy statement, RBZ

Governor Gideon Gono disallowed firms that pay

shareholder dividends from seeking productive sector

loans. Chinamatira believes shareholders would revolt if

BNC ceased paying quarterly dividends.

¶3. (SBU) BNC is losing market share to Zimbabwe’s Rio

Tinto subsidiary, which does not mine nickel locally.

Although Rio Tinto merely refines imported nickel, the

rival has enjoyed the advantage of buying U.S. dollars at

the preferential official rate (Z$5600:US$), forty

percent below zimdollar’s parallel exchange rate

(Z$8500:US$), as well as lower cost structures in other

countries. Nickel extracted from BNC’s Zimbabwe mines

cannot compete with these imports, since Chinamatira

claims many of BNC’s costs reflect the parallel rate. He

argues BNC has had less luck than Rio Tinto buying U.S.

dollars through RBZ auctions and must source forex

through unofficial channels.

¶4. (SBU) Although BNC’s wages have tripled this year,

outpacing the official 209-percent inflation rate,

Chinamatira acknowledges that his workers have lost

buying power. “Is industry being subsidized by lower and

lower worker wages?” he asked rhetorically. Like many

firms, BNC has seen many of its skilled workers seek

greener pastures abroad. For his part, Chinamatira

insists that he enjoyed more discretionary buying power

when he apprenticed with BNC in 1990, just after college

graduation, than he now does as general manager.

¶5. (SBU) Comment: BNC tells a familiar story. With

inflation going up faster than the zimdollar goes down,

few of Zimbabwe’s exports can complete with imported

goods. In fact, many importers are having a banner year.

(U.S. imports during Jan-Sept are up 34 percent over the

same period in 2003.) By regional standards, Zimbabwe

has become a high-cost and uncompetitive producer. The

GOZ, however, shows no sign that it is concerned with the

continuing negative impact of its economic policies n

productive enterprises. Political considerations remain

paramount. The only question is how long the GOZ will

let its economic base deteriorate and how much damage

will be done before saner heads prevail.

Dell

(59 VIEWS)

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