US embassy cable - 04HARARE1595

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, Land Reform, Agriculture 
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