US embassy cable - 01HARARE1032

TWO MINING OPERATIONS AND A FOOTWEAR MANUFACTURER KEEP THEIR HEAD ABOVE WATER ONLY BY EXPORTING

Identifier: 01HARARE1032
Wikileaks: View 01HARARE1032 at Wikileaks.org
Origin: Embassy Harare
Created: 2001-03-15 15:24:00
Classification: UNCLASSIFIED
Tags: ECON EMIN ETRD KTDB ZI
Redacted: This cable was not redacted by Wikileaks.
This record is a partial extract of the original cable. The full text of the original cable is not available.



                           UNCLASSIFIED     PTO7497

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ACTION AF-00    

INFO  LOG-00   AID-00   CIAE-00  COME-00  CTME-00  DINT-00  DODE-00  
      DOEE-00  ITCE-00  SRPP-00  EB-00    ED-01    EXME-00  EUR-00   
      E-00     UTED-00  VC-00    FRB-00   H-01     TEDE-00  INR-00   
      IO-00    ITC-01   L-00     AC-01    NSAE-00  NSF-01   OES-01   
      OIC-02   OMB-01   OPIC-01  PM-00    PRS-00   ACE-00   SP-00    
      SSO-00   SS-00    STR-00   T-00     USIE-00  EPAE-00  PMB-00   
      G-00     SAS-00     /010W
                  ------------------D23CF0  151637Z /75    
FM AMEMBASSY HARARE
TO SECSTATE WASHDC PRIORITY 8442
INFO NSC WASHDC
SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
USDOC WASHDC
DEPT OF TREASURY WASHDC
DEPT OF INTERIOR WASHDC
AMEMBASSY NAIROBI 
UNCLAS HARARE 001032 
 
SIPDIS 
 
DEPT FOR AF/EPS, AF/S, EB/IFD/ODF, ED/ESC/ENR 
USDOC FOR 2037/ERIC HENDERSON 
TREASURY FOR ED BARBER, BARAK HOFFMAN 
NSC FOR SENIOR AFRICA DIRECTOR JFRAZER 
LONDON FOR CGURNEY 
PARIS FOR BWILLIAMS 
NAIROBI FOR PFLAUMER 
                       UNCLASSIFIED 
 
PAGE 02        HARARE  01032  151636Z 
STATE PASS USGS FOR GEORGE COAKLEY 
INTERIOR PASS BUREAU OF MINES 
DEPT PASS USTR FOR ROSA WHITAKER 
 
E.O. 12958: N/A 
TAGS: ECON, EMIN, ETRD, KTDB, ZI 
SUBJECT: TWO MINING OPERATIONS AND A FOOTWEAR MANUFACTURER 
KEEP THEIR HEAD ABOVE WATER ONLY BY EXPORTING 
 
REF: HARARE 711 
 
1. TO ASSESS BUSINESS AND OPERATING CONDITIONS OF LARGE 
EMPLOYERS LOCATED OUTSIDE THE CAPITAL CITY, ON MARCH 5-7 
EMBASSY ECONOMIC AND COMMERCIAL OFFICERS VISITED THREE 
BUSINESSES IN THE SOUTHERN MASVINGO PROVINCE OF ZIMBABWE. 
THE COMPANY/OPERATIONS WERE: 
 
=  RAILWAY BLOCK CHROMIUM MINE, SHURUGWE, 750 EMPLOYEES 
=  BATA SHOE MANUFACTURING, GWERU, 3500 EMPLOYEES 
=  SHABANI ASBESTOS MINE, ZVISHAVANE, 3800 EMPLOYEES 
 
ALL THE BUSINESSES ARE THE LARGEST EMPLOYERS IN THEIR AREA, 
AND BOTH MINES HAVE BEEN OPERATING FROM THE TURN OF THE LAST 
CENTURY.  ALL REPRESENT VERY SUBSTANTIAL INVESTMENTS, AND 
THEIR SHUTDOWN WOULD HAVE SEVERE NEGATIVE CONSEQUENCES WITH 
WIDE-RANGING RIPPLE EFFECTS.  ALL THREE OPERATIONS PROVIDE 
HOUSING, UTILITIES, EDUCATION AND MEDICAL FACILITIES FOR 
THEIR EMPLOYEES AND DEPENDENTS, AND HAVE SEEN THEIR OPERATING 
COSTS RISE AND MARGINS SLIP IN RECENT TIMES DUE TO HIGH 
DOMESTIC INFLATION.  THE FUEL SHORTAGE HAS ALSO NEGATIVELY 
IMPACTED THEIR OPERATIONS, ESPECIALLY THE MINES, WHICH HAVE 
                       UNCLASSIFIED 
 
PAGE 03        HARARE  01032  151636Z 
TO PROMISE AND PROVIDE FUEL TO THE NATIONAL RAILROAD TO 
SECURE SERVICE. 
 
-------------------------------- 
EXPORTING IS THE KEY TO SURVIVAL 
-------------------------------- 
 
2. MANAGEMENT AT ALL THREE OPERATIONS TOLD US THAT THE KEY TO 
THEIR VIABILITY IN TODAY'S HARSH ECONOMIC ENVIRONMENT IS 
THEIR EXPORT SALES, AND THE ABILITY TO CONTROL THE 
DISPOSITION OF A MAJORITY OF THE HARD CURRENCY THEY EARN. 
ALL THREE ARE PURELY PRIVATE-SECTOR OPERATIONS.  BOTH OF THE 
MINING COMPANIES ALLOCATE ABOUT 25 PERCENT OF THEIR TOTAL 
FOREIGN EXCHANGE EARNINGS TO GOVERNMENT PARASTATALS, 
PRIMARILY THE NATIONAL RAILROAD AND THE NATIONAL ELECTRICITY 
AUTHORITY (BOTH MINES ARE LARGE POWER CONSUMERS AND THE 
RAILROAD TRANSPORTS THE ORE AND THE COAL THEY NEED AS WELL AS 
THE FINISHED PRODUCT).  THEY DO SO ON A VOLUNTARY BASIS TO 
AVOID A GOVERNMENT DIRECTIVE THAT MIGHT ALLOCATE MORE OF 
THEIR EARNINGS, AND THEY WERE HORRIFIED BY THE SHORT-LIVED 
RESERVE BANK DIRECTIVE THAT SEIZED 100 PERCENT OF THEIR 
EXPORT EARNINGS FOR A FEW DAYS IN FEBRUARY (REFTEL).  THE 
EXPORT PERCENTAGES AND EARNINGS OF THE THREE ARE: 
 
=  FERRO-CHROME MINE, EXPORTS 100 PERCENT OF OUTPUT (ABOUT 15 
TONS/ANNUM OF REFINED CHROME), VALUE: ABOUT U.S. $5 MILLION 
AT CURRENT WORLD PRICES; 
=  BATA SHOES, EXPORTS AN AVERAGE 10 PERCENT OF BATA LABEL 
PRODUCTION (ABOUT 13 MILLION PAIRS/ANNUM) AND 100 PERCENT OF 
NIKE-LICENSED PRODUCTION (VOLUME NOT PROVIDED), VALUE 
OF BATA EXPORTS: ABOUT U.S. 4 MILLION (OFFICIAL RATES); 
                       UNCLASSIFIED 
 
PAGE 04        HARARE  01032  151636Z 
=  SHABANIE ASBESTOS MINE, EXPORTS 88 PERCENT OF OUTPUT 
(72,000 TONS/ANNUM OF FIBER), VALUE: ABOUT U.S. $30 MILLION 
 
3. THEREFORE, BASED ON THEIR ABILITY TO EXPORT AND COLLECT 
HARD CURRENCY, THEY HAVE BEEN ABLE TO SURVIVE, ALBEIT 
TENUOUSLY WITH HIGH DOMESTIC INFLATION AND LENDING RATES, 
REDUCED SUPPLIER CREDIT, THE GROWING GULF BETWEEN THE 
OFFICIAL AND UNOFFICIAL EXCHANGE RATE, AND CASH FLOW 
DIFFICULTIES.  IF THE GOVERNMENT REPEATS ITS GRAB OF HARD 
CURRENCY FROM EXPORTERS, OR ELIMINATES FOREIGN CURRENCY 
ACCOUNTS ALTOGETHER, THESE COMPANIES WILL CEASE OPERATIONS, 
AS HAS BEEN THE CASE OVER THE LAST YEAR WITH MANY OF 
ZIMBABWE'S GOLD PRODUCERS.  (COMMENT: GOLD PRODUCTION IN 2000 
WAS DOWN OVER 20 PERCENT FROM THE YEAR BEFORE, FROM 28 TONS 
TO ABOUT 22 TONS, IN LARGE PART DUE TO THE GOVERNMENT'S 
RELEASE OF ONLY 20 PERCENT OF THE HARD CURRENCY EARNED BY 
GOLD SALES TO THE MINING COMPANIES.  END COMMENT.)  THE LOSS 
OF OVER 8,500 JOBS WOULD BE TRAGIC FOR ZIMBABWE, AND FOR NOW 
THE MANAGEMENT OF ALL THREE COME TO WORK EVERY MORNING WITH 
ONLY ONE GOAL IN MIND -- SURVIVAL. 
 
IRVING 
 
                       UNCLASSIFIED 
 
> 

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