US embassy cable - 05HARARE872

C O N F I D E N T I A L HARARE 000872 
 
SIPDIS 
 
AF/S FOR BNEULING 
NSC FOR SENIOR AFRICA DIRECTOR C. COURVILLE 
USDOC FOR ROBERT TELCHIN 
TREASURY FOR OREN WYCHE-SHAW 
PASS USTR FOR FLORIZELLE LISER 
STATE PASS USAID FOR MARJORIE COPSON 
USDOL FOR ROBERT YOUNG 
 
E.O. 12958: DECL: 12/31/2009 
TAGS: EINV, ECON, PGOV, ZI, Agriculture, Economic Situation 
SUBJECT: OLIVINE STRUGGLING TO REMAIN OPERATIONAL 
 
Classified By: Charge d'affaires Eric T. Schultz a.i. for reason 1.4 d 
 
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Summary 
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1. (C) Olivine Managing Director Ian MacKenzie told PolOff on 
June 21 that his company was on the verge of shutting down 
large parts of its operations due to lack of foreign exchange 
and the country,s small soya and cotton crop.  As the single 
largest provider of bakers, fats, a shut down could also 
mean bread, margarine, and other shortages soon.  With the 
waste from oil extraction traditionally sold to pig and cow 
farmers as stock feed, a shut down could also mean a decline 
in feed supplies to already hard-hit farmers.  End Summary 
 
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Shut Down Looming 
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2. (C) MacKenzie said his company would run out of solvents 
for soya bean oil extraction on June 22 while the cotton oil 
extraction facility had been shut down for over a month. 
Soya bean oil, MacKenzie explained, was used for bakers, 
fats, margarine, and cooking oil.  Although Olivine recently 
purchased a month,s worth of solvent with Reserve Bank of 
Zimbabwe (RBZ)-supplied foreign exchange, MacKenzie lamented 
that the shipment would not arrive for two weeks. 
 
3. (C) In addition to lack of foreign exchange, MacKenzie 
said that low crop yields inhibited oil and other product 
production.  For example, this year,s national soya crop 
totaled approximately 55,000 metric tons while Olivine alone 
used to process 90,000 metric tons.  The cotton crop fared 
better at 144,000 metric tons, but was still half of the 
300,000 metric tons of previous years. 
 
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Consequences to Economy 
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4. (C) According to MacKenzie, the temporary shut down of his 
facility would result in shortages of breads, margarines, 
cooking oil, and other products as Olivine provided local 
businesses with 80 percent of their bakers, fats.  In 
addition, MacKenzie continued, pig and cow farmers relied in 
part upon oil extraction waste for animal stock feed.  Just 
this month, Olivine retrenched 232 contractors and 20 
permanent staff.  MacKenzie noted that a two-week shut down 
may not be noticed in the stores, but Olivine faced hard 
decisions about a permanent shut down, with severe 
consequences for the broader economy, absent greater access 
to foreign exchange.  MacKenzie confided that several South 
African inputs providers refused to extend further credit 
without at least partial payments for prior deliveries, 
payments Olivine could not make without foreign exchange. 
 
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Comment 
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5. (C) Yet another potential casualty of failed GOZ economic 
policies, Olivine is one of many companies here struggling to 
continue operations.  With companies in the formal sector 
contemplating shutdowns and the GOZ going after the informal 
economy, Zimbabwe faces a familiar question: how much longer 
can this go on before a total economic collapse occurs? 
SCHULTZ