US embassy cable - 03HARARE625

UNCLAS HARARE 000625 
 
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: EAGR, ECON, EINV, ETRD, ZI 
SUBJECT: Tractor Sales Nearly Dead 
 
 
Sensitive but unclassified.  Not for Internet posting. 
 
1. (SBU) Summary: Zimbabwe's largest tractor dealer says 
sales last year were off 98 percent from the late-1990s, 
a measure of commercial agriculture's staggering 
nosedive.  Meanwhile, the GOZ is assisting an indigenous 
firm to import cheap Renault tractors from India by 
making foreign exchange available at the official rate of 
Z$55:US$1.  End summary. 
 
5-Fold Price Increase 
--------------------- 
2. (SBU) Bain Group Marketing Manager P.D. Hickman 
recounted annual domestic sales of 1,500 tractors in the 
late-1990s.  Last year the sector sold just 40 units. 
Bain Group both imports and manufactures tractors, having 
maintained its approximate 50 percent market share 
through the present turmoil.  In a case of mega-sticker- 
shock, the price of a top-of-the-line 300-horsepower 
tractor has risen from Z$ 7 to 35 million in a little 
over a year.  For farmers who must sell at artificially- 
low controlled prices, Hickman said it is no longer 
possible to recoup investments in new equipment.  At the 
same time, white farmers dispossessed through the GOZ's 
fast-track land reform have flooded the market with used 
tractors at bargain-basement prices.  (The GOZ forbids 
the export of second-hand tractors.)  The GOZ's 
elimination of a 5 percent duty on imported agricultural 
equipment in the 2003 budget has not offset the hefty 
devaluation.  The GOZ is trying to address this crisis by 
enabling politically-connected indigenous firm Tanaka 
Power to access foreign currency at official rates in 
order to sell India-made Renault tractors for less than 
10 percent of the market cost.  It is not clear, however, 
how much foreign exchange the cash-strapped GOZ will be 
able to make available to Tanaka Power. 
 
3. (SBU) Given its slow sales, Bain Group has fired half 
its 620 workers, indirect employment casualties of land 
reform.  However, the company is still trying to cope by 
exporting more and altering its product mix for recently 
resettled farmers.  Bain Group is selling increasing 
amounts of ox-drawn implements to large-scale (A2) 
settlers.  But opportunities are limited since Hickman 
estimates only a small number of A2 farmers are actually 
tilling land and planting crops.  (Representatives of the 
Indigenous Commercial Farmers Union, whose ranks have 
swelled with "new" farmers, tell us they estimate only 15 
percent of present A2 beneficiaries will prove viable.) 
At the same time, white Zimbabwean farmers starting over 
in Zambia, Mozambique and Malawi are placing fresh orders 
for Bain Group tractors and implements.  Hickman said 
this brand loyalty of emigrant Zimbabwean farmers is 
helping the firm expand in these markets. 
 
Comment 
------- 
4. (SBU) The fall in annual tractor sales epitomizes 
commercial agriculture's decline.  While most small-scale 
resettled (A1) farmers could one day reach subsistence 
levels in rainy years, there is no sign yet that new 
commercial (A2) farmers will produce even a fraction of 
their predecessors' output.  Zimbabwe's loss in 
employment and export revenue is enormous. 
 
Sullivan