Government urged to emphasise production over politics

The government was urged to emphasize production of tobacco ahead of politics for the economy to recover. Though this was said eight years ago it could equally apply today and in any sector and not just tobacco.

At the time tobacco had slumped to its lowest production from a peak of 240 million kgs. At its peak tobacco accounted for 20 percent of gross domestic product, 20 percent of employment, and 33 percent of exports.

These remarks were made by the president of the Zimbabwe Tobacco Association James de la Fargue who admitted that the land reform programme was irreversible but the government had to bring back stability to the farming sector.

De la Fargue said his main conduit to President Robert Mugabe was through Zimbabwe Reserve Bank governor Gideon Gono whom he said was the one senior government official who understood market economics.

“He had proven an honest interlocutor and an effective advocate. Gono had made tobacco a privileged sector, able to obtain foreign exchange from the bank with which to buy needed inputs,” De la Fargue was said to have told United States embassy officials.

But he acknowledged that Gono was one of the senior Zimbabwean officials most able to profit from the lack of convertibility and existence of a parallel currency market, and that the presence of such officials was fast becoming an impediment to reform.

Full cable:

Viewing cable 04HARARE1595, TOBACCO: PRODUCTIVITY OR POLITICS – CHOICE IS

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

C O N F I D E N T I A L SECTION 01 OF 02 HARARE 001595

SIPDIS

E.O. 12958: DECL: 09/23/2014

TAGS: EAGR EAID ECON PREL ZI

SUBJECT: TOBACCO: PRODUCTIVITY OR POLITICS – CHOICE IS

MUGABE’S

Classified By: AMBASSADOR CHRISTOPHER DELL FOR REASONS 1.5(B)

AND 1.5 (D)

¶1. (C) Summary: The Ambassador and DCM met

September 13 with James de la LaFargue and

Andrew Ferreira, President and Vice-President

respectively of the Zimbabwe Tobacco Association.

De la Fargue said tobacco could again become a

major export earner but for that to happen the

government had to restore stability to the

agricultural sector and bring to a close its land

reform policies. The Ambassador said that he was

interested in ideas about how the U.S. might help

agricultural production rebound. End Summary.

——————-

Zimbabwe,s Key Crop

——————-

¶2. (C) De la Fargue said tobacco had been the most

important cash crop in Zimbabwe. At its peak in

2000, tobacco had accounted for 20 percent of GDP,

20 percent of employment, and 33 percent of exports.

Production that year was 240 million kilograms.

By contrast, production this year would be more on

the order of 60-70 million kilograms. De la Fargue

said it was unlikely Zimbabwe would ever again produce

a crop like that of 2000 but that there was still scope

for Zimbabwe to at least double its production.

Zimbabwe still had a strong comparative advantage

In tobacco production: near ideal climate and soil

conditions.

¶3. (C) However, de la Fargue said for Zimbabwe to

realize its potential, the government had to make

the decision to emphasize production over politics

and put an end to the uncertainty created by its

approach to land reform. Tobacco was a crop

that required a heavy up front investment. Seedbeds

had to be laid 18 months in advance. His association

was now composed primarily of small growers. There were

roughly 1000 small tobacco growers, virtually all black,

and only around 500 larger commercial growers, of whom

roughly half were white Zimbabwean and the other half

black. For both groups, but especially for the former,

land security was the key to a rebound in production.

The smaller farmers needed a clear title to the land in

order to raise the capital needed to invest in tobacco

production.

————————-

Land Seizures Need to End

————————-

¶4. (C) The Ambassador said his impression was that

land reform was close to a fait accompli and was

certainly unlikely to be rolled back. He asked

de la Fargue for his views. De la Fargue said

land reform was probably irreversible but said the

insecurity caused by continuing land seizures had

become a principal obstacle to restored production.

His hope and expectation was that following next

spring,s parliamentary elections, President Mugabe

would decide to bring an end to land seizures and to

restore stability to the sector. If he did not and

the government continued to pursue radical policies

that hobbled the economy, the country would likely

see massive emigration.

¶5. (C) De la Fargue said the other major obstacle

to a rebound in production was the unresolved

compensation claims of farmers already dispossessed.

As long as ownership of the land was in doubt, so

was ownership of the crop, and this sort of uncertainty

would impede badly needed foreign investment. At this

point, the dispossessed farmers would likely accept

pennies on the dollar and had already accepted the

principal that they would not be compensated for the

land itself, but only for improvements they had made

to the farms. De la Fargue added that there were 4000

farmers to compensate with an estimated average claim of

US$500,000. Thus for a fraction of US$ 200 million, the

problem could be made to go away. However, the GOZ was

insisting that the UK foot the bill and the UK was

insisting the GOZ pay the farmers.

——————–

Dealing with the GOZ

——————–

¶6. (C) De la Fargue said his main conduit to Mugabe

was through Zimbabwe Reserve Bank (ZRB) President

Gideon Gono. Gono was the one senior GOZ official who

understood market economics. He had proven an honest

interlocutor and an effective advocate. Gono had made

tobacco a privileged sector, able to obtain foreign

exchange from the bank with which to buy needed inputs.

That said, de la Fargue acknowledged that Gono was one

of the senior Zimbabwean officials most able to profit

from the lack of convertibility and existence of a

parallel currency market, and that the presence of such

officials was fast becoming an impediment to reform.

——-

Comment

——-

¶7. (C) De la Fargue is the first interlocutors with whom

we,ve talked who put a price tag on compensation for the

farmers and the number he gave underscores how little it

would take, especially with private sector involvement,

to break one of the logjams on this issue.

Dell

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