Poultry producer used political patronage to survive

Poultry Producer Irvine’s Day Old Chicks used political patronage to survive using Labour Minister Nicholas Goche to evade price controls and central bank governor Gideon Gono to retain 90 percent of its export earnings.

This was disclosed to a United States embassy official by the company’s managing director David Irvine who was a close ally of former Rhodesian Prime Minister Ian Smith. Irvine served as a Member of Parliament during the Smith regime and was a cabinet minister up to independence.

Irvine said his company was producing 350 000 chicks a week, exporting 80 000 to Botswana every week.

His company was also the major supplier of chicks to Mozambique and Malawi and had begun exporting to Tanzania and Angola.

The company controlled 80 percent of the Zimbabwe market.

When the Price Control Task Force descended on his company, Irvine said he sought the help of Goche who was a major supplier of grain to the company.

He also said he had a special arrangement with central bank governor Gideon Gono to retain 90 percent of the company’s monthly US$750 000 export earnings.

At the time exporters were required to remit 40 percent of their foreign exchange earnings to the central bank.

Full cable:

Viewing cable 07HARARE772, POULTRY PRODUCTION AND PATRONAGE – COPING DURING

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PP RUEHDU RUEHMR RUEHRN

DE RUEHSB #0772/01 2411356

ZNY CCCCC ZZH

P 291356Z AUG 07

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RHMFISS/JOINT STAFF WASHDC

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RUEATRS/DEPT OF TREASURY WASHDC

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RUCPDOC/DEPT OF COMMERCE WASHDC

RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK//DOOC/ECMO/CC/DAO/DOB/DOI//

RUEPGBA/CDR USEUCOM INTEL VAIHINGEN GE//ECJ23-CH/ECJ5M//

C O N F I D E N T I A L SECTION 01 OF 03 HARARE 000772

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: 01/12/2016

TAGS: EAGR ECON ETRD PGOV ZI

SUBJECT: POULTRY PRODUCTION AND PATRONAGE – COPING DURING

ZIMBABWE’S PRICE CONTROL MADNESS

REF: HARARE 0598

Classified By: Deputy Pol/Econ Chief Frances Chisholm under Section 1.4

d.

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Summary

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¶1. (C) Irvine’s Day Old Chicks, Zimbabwe’s largest poultry

and egg producer, has managed to maintain full production and

profitability during the GOZ’s price control blitz thanks to

the combination of a highly cost-efficient, export-oriented

operation and cozy relations with top ruling-party officials,

including Reserve Bank of Zimbabwe (RBZ) Governor Gideon

Gono. Nevertheless, the owners of Irvine’s, a multi-million

dollar white family-owned business, are nervous about the

impending indigenization bill and working assiduously to stay

on the right side of government. Paradoxically, the

company’s founder was closely aligned with the Ian Smith

regime as Member of Parliament and Minister from the mid

1960s until independence. End Summary.

————————————–

Major Local Supplier and to the Region

————————————–

¶2. (U) Irvine’s Day Old Chicks, which produces about 350,000

chicks weekly for the domestic and export markets, is

Zimbabwe’s largest poultry producer. On August 23, at the

company’s modern plant located on the outskirts of Harare,

Managing Director David J. Irvine told econoff that his

family-owned company air freights 80,000 day-old chicks a

week to Botswana; in addition, Irvine’s is the main supplier

of chicks to Mozambique and Malawi, and recently began

exporting day-old chicks to Tanzania and Angola, as well.

Irvine’s imports its breeder stock from Cobb, a division of

Tyson Foods in the U.S. The poultry manager maintained he

had no competitors in breeder chickens in the region. In

eggs, Irvine’s controls 80 percent of the Zimbabwe market.

——————————————— ——–

Initially Not Spared Wrath of Price Control Taskforce

——————————————— ——–

¶3. (SBU) On July 3 the Price Control Task Force descended on

the Irvine plant accusing management of hoarding chickens and

eggs rather than selling them to the domestic market at the

controlled price. Two weeks later police returned and locked

up a senior executive for two days on charges of sabotage for

having shut the plant down for three days for repairs. “They

are paranoid about non-production,” said Irvine. He told

econoff that he then pursued “the political route” with key

ministers to secure a price increase. His primary contact

was Price Task Force member and Minister of Public Service,

Labour and Social Welfare Nicholas Goche, whose extensive

commercial farm is a major grain supplier to Irvine’s. (Goche

is also one of President Mugabe’s two negotiators in the

Pretoria talks.) While Irvine said that his highly efficient

plant could “live with” the new regulated price of whole

chickens that the GOZ announced last week, the price cut

backpedaling had failed to differentiate between whole

HARARE 00000772 002 OF 003

chickens and chicken parts, or to address the price of

day-old chicks. As a result, allegations of overcharging

were resurfacing.

——————————————— ———

Profit in Exports and “Special Deals” with GOZ Bigwigs

——————————————— ———

¶4. (C) Irvine’s has increased its egg exports from about one

third to one half of its production since the price control

blitz began. In a special arrangement with RBZ Governor

Gono, Irvine’s manages Gono’s chicken projects in return for

permission to retain 90 percent of the company’s monthly

US$750,000 export earnings. (RBZ regulations otherwise

require exporters to remit 40 percent of their foreign

exchange earnings to the RBZ at a small fraction of the

parallel exchange rate ) an effective steep export tax that

acts as a stranglehold on production.) Irvine said he had

recently declined, for the time being, an offer by Gono to

issue the company a permit to export frozen chicken. Adding

to the company’s special benefits, Irvine’s also has a

generous allocation of grain (“enough to build up stocks”)

from the Grain Marketing Board (GMB) at the GMB’s low, highly

subsidized, controlled prices.

¶5. (C) Irvine boasted that he was selling “spent breeders,”

that he otherwise would have frozen until the price frenzy

blew over, out the back door to a ZANU-PF bigwig (“she,s

high enough to protect me”) at twice the controlled price.

Passing through her hands, the chickens ended up on the

Harare black market at triple the controlled price.

¶6. (SBU) Internally, the company had reduced black-market

dealing by its own staff by supplying a package of chicken

and eggs to every employee weekly and prohibiting their

access to the company’s retail site next door; until these

measures were implmented, staff had been spending more time

at the company gate reselling poultry and eggs at up to five

times the controlled price than in the plant. Irvine added

that he had sharply cut retail outlet opening hours and only

opened under the protection of riot police to reduce the

incidence of injuries and property damage that the hungry

crowds had been causing.

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Seeking Friends in High Places

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¶7. (C) Irvine and his elderly father and company founder

William Irvine visited Dydimus Mutasa, Minister of State for

National Security and Lands, Land Reform and Resettlement, at

his rural home last month seeking protection from possible

takeover under the pending Indigenization Bill (reftel).

Irvine said Mutasa received the two businessmen warmly and

told them not to worry about the Bill, “it was just meant for

the mines, not for them.” The three then proceeded to

discuss investment possibilities in new agrobusiness projects

in Mutasa,s home province of Manicaland.

¶8. (SBU) Note: William Irvine was a Member of Parliament from

Salisbury from 1965 to 1980. During this period, he served

variously as Minister of Local Government, Minister of

HARARE 00000772 003 OF 003

Transportation and Power, and Minister of Agriculture. As an

MP in the early 1970s, he is known for having put forward the

failed Residential Property Owner’s Protection Act. The

legislation, a diluted form of South Africa’s Group Areas

Act, was intended to prevent non-whites, including domestic

workers, from living in low-density (i.e. white) suburbs. End

Note.

——-

Comment

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¶9. (C) For now, at least, Irvine’s appears to have worked

out enough sweetheart deals to avoid production losses during

the price crackdown. Apparently, the company has even come

out on top, propelled by a surge in exports that are further

sweetened by a particularly generous forex retention

allowance from fellow chicken farmer RBZ Governor Gono.

Being in bed with the devil could protect the family’s

multimillion dollar operation indefinitely – and win valuable

time for the company. But the uncertainty and risk inherent

in patronage deals must weigh heavy. Bidding econoff

farewell, Irvine pointed to a warm winter coat hanging on the

back of his office door, packed, he said, with his blood

pressure pills and “a lot of cash,” for the day when they

come to get him.

DHANANI

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