US embassy cable - 04HARARE1819

UNCLAS HARARE 001819 
 
SIPDIS 
 
STATE FOR AF/S 
USDOC FOR ROBERT TELCHIN 
TREASURY FOR OREN WYCHE-SHAW 
PASS USTR FLORIZELLE LISER 
STATE PASS USAID FOR MARJORIE COPSON 
 
SENSITIVE 
 
E. O. 12958: N/A 
TAGS: ECON, ETRD, EINV, PGOV, ZI 
SUBJECT: Despite Obstacles, ExxonMobil Stays Profitable 
in Zimbabwe 
 
 
Sensitive but unclassified.  Not for Internet posting. 
 
1. (SBU) Summary:  ExxonMobil's local managing director 
says his firm is currently eking out a modest profit in 
Zimbabwe, thanks to guaranteed supplies of foreign 
exchange at the official rate.  Still, the MD told us he 
tussles regularly with corrupt ministers and micro-fuel 
operators. End summary. 
 
Forex Access Is Key 
------------------- 
2. (SBU) ExxonMobil MD Nestor Ankiba, who has run the 
company's Zimbabwe operations for about six months, 
called on the Ambassador on Nov 3.  The subsidiary has 
many large commercial clients and over 80 service 
stations.  Ankiba is grateful that Reserve Bank (RBZ) 
Governor Gideon Gono has guaranteed oil firms access to a 
weekly US$8 million of foreign exchange at the official 
rate (Z$5600:US$).  Given this privileged access to 
forex, ExxonMobil sold 45,000 barrels of fuel in October, 
well beyond its 30,000 barrel/month break-even point but 
significantly below its 150 barrels/month of 1999. 
 
3. (SBU) Ankiba regrets, however, that Gono pressed the 
six multinationals in September to form a consortium with 
about 100 mostly tiny, local operators.  Gono wants the 
consortium to agree on a single supplier for fuel imports 
and divide up the US$8 million of weekly forex among the 
players.  Following a 4-hour meeting with 100 operators 
yesterday, an exasperated Ankiba claims it has become 
impossible for the group to reach agreement on each 
member's share of forex and imported fuel.  Many smaller 
firms - whom RBZ Governor Gono himself has publicly 
dismissed by as "briefcase operators" - have neither fuel 
depots nor trucks nor service stations, making them 
little more than rent-seeking middlemen. 
 
Corrupt Ministries 
------------------ 
4. (SBU) Nevertheless, the small operators seem to have 
the Government's ear.  They are now lobbying for the 
right to supply stations that belong to multinationals. 
Ankiba bristles at this, since ExxonMobil would exercise 
no quality control over fuel pumped from stations bearing 
its logo.  Ankiba complains that some government 
officials have a financial stake in these small 
operators.  Others have asked him if ExxonMobil would 
award them their own service station. 
 
5. (SBU) Ankiba says he has warned government officials 
that they will have to manage a steep price hike in the 
run up to March's parliamentary elections.  At a current 
Z$3,800 (US$.67)/liter, Zimbabwe's leaded fuel is the 
region's cheapest.  (For anyone who sources foreign 
currency through the parallel market, where the rate is 
Z$8,500:US$, the price converts to just US$.44/liter.) 
With recent world prices above US$50/barrel, Ankiba 
believes local prices may reach Z$6,000 (US$ 1.07) in the 
coming months. 
 
Comment 
------- 
6. (SBU) With parliamentary elections nearing, higher 
fuel costs are bad news for the GOZ.  Omnipresent lines 
at gas stations are visible reminders of the country's 
forex shortage and failed economic policies.  That is the 
main reason the fuel sector merits preferential treatment 
at RBZ currency auctions.  But keeping gas stations well 
stocked will eat up more and more of the GOZ's limited 
foreign exchange, while higher pump prices will make it 
all that much tougher to hold inflation in check. 
 
Dell