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.
Viewing cable 04HARARE1898, Nickel Exporter Using Just 2 of 4 Mines
This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS HARARE 001898
STATE FOR AF/S
USDOC FOR ROBERT TELCHIN
TREASURY FOR OREN WYCHE-SHAW
PASS USTR FLORIZELLE LISER
STATE PASS USAID FOR MARJORIE COPSON
¶E. O. 12958: N/A
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.