US embassy cable - 04HARARE2082

C O N F I D E N T I A L SECTION 01 OF 02 HARARE 002082 
 
SIPDIS 
 
STATE FOR AF/S 
USDOC FOR ROBERT TELCHIN 
TREASURY FOR OREN WYCHE-SHAW 
PASS USTR FLORIZELLE LISER 
STATE PASS USAID FOR MARJORIE COPSON 
 
E.O. 12958: DECL: 12/13/2014 
TAGS: PGOV, EFIN, ECON, ETRD, EINV, ZI, Land Reform, Agriculture 
SUBJECT: ZIMBABWE,S SUGAR QUOTA 
 
Classified By: Classified by Charge d'Affaires Eric 
Schultz under Section 1.5 b/d 
 
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Summary 
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1. (C) Zimbabwe has a small U.S. sugar quota that has been 
fully filled in recent years.  In 2003-04, the first year 
that the GOZ,s land reform policies affected the sugar 
sector, we estimate that 25 percent of the quota may have 
come from resettled farms.  However, this year overall 
production has fallen dramatically, but especially on the 
resettled farms, and Zimbabwean Sugar Sales Association (ZSS) 
has developed a better system for separating the sugar by 
source.  The result is that sugar from resettled farms will 
comprise only 3 percent of the quota this year.  Moreover, in 
order to preserve the quota, the ZSS has offered to ensure 
that no sugar from resettled farms is included in the quota 
in future years. 
 
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Zimbabwean Sugar Production 
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2. (SBU)  Sugar cane is grown in Zimbabwe,s Chiredzi 
district in the southeastern &Lowveld.8  In recent years, 
the sugar sector produced 600,000-700,000 MT of sugar, of 
which Zimbabwe Sugar Sales (ZSS) - the industry association 
) exported about 250,000 MT.  Prior to the beginning of 
fast-track land reform in 2001, ZSS counted two large mills 
and 56 large-scale growers as members.  Although invasions of 
white-owned farms began in 2001, sugar plantations remained 
largely untouched until 2003.  Since then, there have been 
approximately 500 land reform beneficiaries (A2s) in the 
sugar sector.  However, many white farmers still control a 
portion of their farms and many A2s have not yet taken up 
their allotted plots. 
 
3. (SBU) Currently the primary producers are three groups: 
a) two South African multinational mills that also grow sugar 
themselves ) Hippo Valley and Triangle Estates; b) the 
remaining white farmers; and c) the black A2 farmers.  In 
terms of production, land reform has taken a heavy toll.  ZSS 
tells us that most A2s are absentee farmers who are 
inexperienced in cane production.  Through our conversations 
with ZSS and a number of farmers, we estimate that production 
this year will be 300,000-350,000 MT, about half the pre-land 
reform yearly output.  Of that total, the two multinational 
mills will grow about forty percent, while white and 
resettled black farmers will contribute approximately 35 and 
25 percent, respectively. 
 
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Zimbabwe,s Sugar Quota and Recent Trends 
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4. (C) As part of the U.S. commitment at the WTO Doha 
Development Round, the U.S. agreed to minimum sugar import 
quotas, including Zimbabwe,s relatively small 13,000 MT 
allotment.  Given domestic price constraints, ZSS tries to 
export as much sugar as it can and has routinely filled its 
annual quota for both the U.S. and the EU.  In 2003-04, we 
estimate that sugar produced by A2 farmers comprised as much 
as 25 percent of the U.S. quota.  This was primarily because 
the A2 farmers took over many white-owned farms after the 
crop was already in the ground.   They therefore produced a 
higher percentage of the overall sugar crop that year than 
will be the case this year, when the A2s lack of resources 
and experience have taken a toll.  ZSS estimates that 
Triangle, which will be the sole source of sugar for the U.S. 
quota this year, will receive less than three percent of its 
sugar from A2 farms.  ZSS General Manager Steve Frampton 
recently told us that in order to guarantee continuation of 
the quota, his association,s board of directors would be 
willing to ensure in future years that none of the sugar it 
exports to the U.S. comes from resettled farms. 
 
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Comment 
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5. (C) We recommend pursuing ZSS,s offer to export only 
sugar from deeded farms to the U.S. in future years.  This 
approach would enable us to preserve and tighten our policy 
of targeted sanctions and underscore the principle that land 
reform should only take place in a lawful and transparent 
manner.  Alternatively, eliminating the quota would, in 
addition to WTO ramifications, be counter-productive.  It 
would actually disadvantage the multi-nationals and the 
remaining white farmers, as well as those black farmers who 
acquired their land lawfully, who are already filling 97 
percent of the quota and could supply 100 percent if we 
pursue the ZSS offer. 
SCHULTZ