US embassy cable - 03HARARE492

UNCLAS HARARE 000492 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR AF/S 
NSC FOR SENIOR AFRICA DIRECTOR JFRAZER 
USDOC FOR 2037 DIEMOND 
PASS USTR ROSA WHITAKER 
TREASURY FOR ED BARBER AND C WILKINSON 
STATE PASS USAID FOR MARJORIE COPSON 
 
E. O. 12958: N/A 
TAGS: ETRD, ECON, EINV, ZI 
SUBJECT: Zimbabwe's Ghost Exports: The Case of Fertilizer 
 
1. (SBU) Summary:  Top executives of Zimbabwe's sole 
ammonium nitrate producer charge GOZ officials and others 
are illegally exporting fertilizer, triggering shortages 
on the domestic market. End summary. 
 
A Trail of Illegal Exports 
-------------------------- 
2. (SBU) Although Sable Chemicals is producing 30 percent 
less ammonium nitrate than in 1999, the firm's CEO and 
production manager told us the quantity should be 
sufficient to cover present fertilizer needs of 
Zimbabwean farmers.  Since recently dispossessed 
commercial farmers used to account for 70 percent of 
fertilizer sales, demand has dropped precipitously.  Like 
many price-controlled items, however, much of the 
country's fertilizer is being illegally exported to 
neighboring countries. 
 
3. (SBU) The Sable officials said they started to track 
large amounts of Zimbabwe-produced fertilizer in Zambia 
after the GOZ took over the market in mid-2002.  The 
Government buys all domestic fertilizer at the controlled 
price of Z$ 30,000/ton, a net loss for the industry, then 
sells or distributes it on retail and commercial markets. 
The GOZ claims it became the country's fertilizer broker 
to ensure product availability for newly-resettled 
farmers.  But Zimbabwe is suffering an acute shortage 
while domestic fertilizer is showing up abroad.  In 
Zambia, for example, it fetches ZS 170,000/ton, almost 6- 
fold the controlled price. 
 
Comment 
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4. (SBU) Ironically, the Sable reps say they could earn a 
handsome profit exporting ammonium nitrate to Zambia. 
(Owing to "shortages," the GOZ does not allow the company 
to export.)  They estimate the fertilizer cost for 
Zambian farmers would run Z$ 100-120,000/ton, versus Z$ 
170,000 for clandestine exports.  And by earning foreign 
exchange through exports, Sable would be able to boost 
production. 
 
5. (SBU) This textbook case illustrates why price 
controls invariably lead to profiteering for the few and 
shortages for the many.  Fertilizer, of course, is but 
one of many leakages through Zimbabwe's robust informal 
sector. 
 
Sullivan