POULTRY PRODUCTION AND PATRONAGE - COPING DURING

C O N F I D E N T I A L SECTION 01 OF 03 HARARE 000772

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AF/S FOR S. HILL
NSC FOR SENIOR AFRICA DIRECTOR B. PITTMAN
STATE PASS TO USAID FOR L.DOBBINS AND E.LOKEN
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COMMERCE FOR BECKY ERKUL
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E.O. 12958: DECL: 01/12/2016
TAGS: EAGR ECON ETRD PGOV ZI
SUBJECT: POULTRY PRODUCTION AND PATRONAGE - COPING DURING
ZIMBABWE'S PRICE CONTROL MADNESS

REF: HARARE 0598

Classified By: Deputy Pol/Econ Chief Frances Chisholm under Section 1.4
d.

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Summary
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1. (C) Irvine's Day Old Chicks, Zimbabwe's largest poultry
and egg producer, has managed to maintain full production and
profitability during the GOZ's price control blitz thanks to
the combination of a highly cost-efficient, export-oriented
operation and cozy relations with top ruling-party officials,
including Reserve Bank of Zimbabwe (RBZ) Governor Gideon
Gono. Nevertheless, the owners of Irvine's, a multi-million
dollar white family-owned business, are nervous about the
impending indigenization bill and working assiduously to stay
on the right side of government. Paradoxically, the
company's founder was closely aligned with the Ian Smith
regime as Member of Parliament and Minister from the mid
1960s until independence. End Summary.

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Major Local Supplier and to the Region
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2. (U) Irvine's Day Old Chicks, which produces about 350,000
chicks weekly for the domestic and export markets, is
Zimbabwe's largest poultry producer. On August 23, at the
company's modern plant located on the outskirts of Harare,
Managing Director David J. Irvine told econoff that his
family-owned company air freights 80,000 day-old chicks a
week to Botswana; in addition, Irvine's is the main supplier
of chicks to Mozambique and Malawi, and recently began
exporting day-old chicks to Tanzania and Angola, as well.
Irvine's imports its breeder stock from Cobb, a division of
Tyson Foods in the U.S. The poultry manager maintained he
had no competitors in breeder chickens in the region. In
eggs, Irvine's controls 80 percent of the Zimbabwe market.

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Initially Not Spared Wrath of Price Control Taskforce
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3. (SBU) On July 3 the Price Control Task Force descended on
the Irvine plant accusing management of hoarding chickens and
eggs rather than selling them to the domestic market at the
controlled price. Two weeks later police returned and locked
up a senior executive for two days on charges of sabotage for
having shut the plant down for three days for repairs. "They
are paranoid about non-production," said Irvine. He told
econoff that he then pursued "the political route" with key
ministers to secure a price increase. His primary contact
was Price Task Force member and Minister of Public Service,
Labour and Social Welfare Nicholas Goche, whose extensive
commercial farm is a major grain supplier to Irvine's. (Goche
is also one of President Mugabe's two negotiators in the
Pretoria talks.) While Irvine said that his highly efficient
plant could "live with" the new regulated price of whole
chickens that the GOZ announced last week, the price cut
backpedaling had failed to differentiate between whole

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chickens and chicken parts, or to address the price of
day-old chicks. As a result, allegations of overcharging
were resurfacing.

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Profit in Exports and "Special Deals" with GOZ Bigwigs
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4. (C) Irvine's has increased its egg exports from about one
third to one half of its production since the price control
blitz began. In a special arrangement with RBZ Governor
Gono, Irvine's manages Gono's chicken projects in return for
permission to retain 90 percent of the company's monthly
US$750,000 export earnings. (RBZ regulations otherwise
require exporters to remit 40 percent of their foreign
exchange earnings to the RBZ at a small fraction of the
parallel exchange rate ) an effective steep export tax that
acts as a stranglehold on production.) Irvine said he had
recently declined, for the time being, an offer by Gono to
issue the company a permit to export frozen chicken. Adding
to the company's special benefits, Irvine's also has a
generous allocation of grain ("enough to build up stocks")
from the Grain Marketing Board (GMB) at the GMB's low, highly
subsidized, controlled prices.


5. (C) Irvine boasted that he was selling "spent breeders,"
that he otherwise would have frozen until the price frenzy
blew over, out the back door to a ZANU-PF bigwig ("she,s
high enough to protect me") at twice the controlled price.
Passing through her hands, the chickens ended up on the
Harare black market at triple the controlled price.


6. (SBU) Internally, the company had reduced black-market
dealing by its own staff by supplying a package of chicken
and eggs to every employee weekly and prohibiting their
access to the company's retail site next door; until these
measures were implmented, staff had been spending more time
at the company gate reselling poultry and eggs at up to five
times the controlled price than in the plant. Irvine added
that he had sharply cut retail outlet opening hours and only
opened under the protection of riot police to reduce the
incidence of injuries and property damage that the hungry
crowds had been causing.

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Seeking Friends in High Places
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7. (C) Irvine and his elderly father and company founder
William Irvine visited Dydimus Mutasa, Minister of State for
National Security and Lands, Land Reform and Resettlement, at
his rural home last month seeking protection from possible
takeover under the pending Indigenization Bill (reftel).
Irvine said Mutasa received the two businessmen warmly and
told them not to worry about the Bill, "it was just meant for
the mines, not for them." The three then proceeded to
discuss investment possibilities in new agrobusiness projects
in Mutasa,s home province of Manicaland.


8. (SBU) Note: William Irvine was a Member of Parliament from
Salisbury from 1965 to 1980. During this period, he served
variously as Minister of Local Government, Minister of

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Transportation and Power, and Minister of Agriculture. As an
MP in the early 1970s, he is known for having put forward the
failed Residential Property Owner's Protection Act. The
legislation, a diluted form of South Africa's Group Areas
Act, was intended to prevent non-whites, including domestic
workers, from living in low-density (i.e. white) suburbs. End
Note.

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Comment
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9. (C) For now, at least, Irvine's appears to have worked
out enough sweetheart deals to avoid production losses during
the price crackdown. Apparently, the company has even come
out on top, propelled by a surge in exports that are further
sweetened by a particularly generous forex retention
allowance from fellow chicken farmer RBZ Governor Gono.
Being in bed with the devil could protect the family's
multimillion dollar operation indefinitely - and win valuable
time for the company. But the uncertainty and risk inherent
in patronage deals must weigh heavy. Bidding econoff
farewell, Irvine pointed to a warm winter coat hanging on the
back of his office door, packed, he said, with his blood
pressure pills and "a lot of cash," for the day when they
come to get him.
DHANANI