By african Confidential, Justice for agriculture
June 17, 2004
President Robert Mugabe is staking his people's future on the false claims of a bumper harvest. His Information Minister, Jonathan Moyo, parrots the line but fails to convince Zimbabweans. The state-owned and militarised Grain Marketing Board keeps international observers and journalists away from the almost empty grain silos. The opposition Movement for Democratic Change protests but it is ineffective. Bizarrely, two of the Mugabe government's key supporters come from the United States.
africa Confidential can reveal that Mugabe's government has secured financial backing from at least two american corporations, Sentry Financial International, and Dimon Incorporated. Dimon, the world's second largest tobacco-leaf trader, is a public corporation quoted on the New York Stock Exchange. Its backing of Mugabe goes well beyond the secret tobacco-for maize swap first reported in here (aC Vol. 45 No 9).
We have obtained a letter confirming the Sentry International's offer of credit worth US$700million, to fund Zimbabwe's imports of food and other goods. This letter, dated 15 November 2003, is from Jewel Bank and addressed to the GMB's acting Director, Colonel Samuel Muhvuti. It begins `The Jewel Bank is pleased to extend to you an offer of US$80 million for the importation of grains'. It goes on to explain the Sentry International is arranging finance with `security being provided by tobacco merchants' as part of the $700 million credit line. The secret deal will interest regulators south of the Limpopo: South africa's aBSa group has a big equity stake in Jewel Bank.
The collateral for the loan consists of foreign exchange earnings from Zimbabwe's tobacco crop. a separate document, under the letterhead of the Mashonaland Tobacco Company (formerly Dimon Zimbabwe), spells out the terms whereby the trader `has been granted permission by the relevant authorities to purchase tobacco directly from farmers without using the auction floor. This permission was granted to enable MTC to issue US dollar guarantees against which importation of maize and wheat by the GMB could commence.'
Industry sources say Dimon has been granted a preferential exchange rate, helping it to outbid rivals in local currency terms. Buying direct from growers enables Dimon to purchase the highest quality tobacco without competition. Financial and industry sources say Dimon channels its foreign currency earnings from tobacco sales into an offshore draw down facility that is available to Sentry, and used to finance grain imports to Zimbabwe.
The US$80 million from Sentry will buy US$55 million worth of maize at $270 a tonne, and $25million of wheat at $340 a tonne. The prices were fixed last November, when the price quoted for maize from South africa was $135 a tonne. Because the deal is secret and the GMB is under military control, the arrangement is not publicly accountable, and there is no control over any `middle-men' fees.
Gideon's goodwill
Gideon Gono, Governor of the Reserve Bank of Zimbabwe, knows all about it, as he was Chief Executive of Jewel Bank when the offer letter was sent. He declined to comment on the telephone about sensitive financial agreements. Perhaps he will have no more to say soon, during his goodwill tour to Britain and the USa--a trip designed, in part, to convince Zimbabweans overseas to channel their remittance through the Reserve Bank.
Half a dozen requests to interview Dimon's spokesman went unanswered. Sentry repeatedly responded `no comment' when asked about its dealings with Zimbabwe. When we asked Sentry's Vice President R. Kirk Heaton why Zimbabwe would be importing maize during a bumper harvest, he laughed and asked: `Do you believe that?'
The tobacco-for-maize deal is a small part of Sentry International's US$700 million loan facility, but may explain why Mugabe is confident that he can buy a `bumper harvest'. The tobacco-for-maize swap may possibly violate a US Executive Order (aC Vol. 45 No 10) imposing sanctions on Zimbabwe's political and business elite. The much larger US$700 million loan is legal, although we hear it worries some US Congressmen, who may call for greater Treasury scrutiny of the companies involved.
The Zimbabwe government has reacted to reports of the swap by denying its existence and repeating its line about the bumper harvest. agriculture Minister Joseph Made said the report was `false and mischievous'. Yet it is a fact that some 40,000 tonnes of maize were transported to Zimbabwe during april and May. Details of exports from and through South africa to Zimbabwe are publicly available online from the Sa Grain Information Service.
Most of the imported grain was purchased through the tobacco-for-maize swap, and goes into silos operated by the GMB, the sole authorised importer of maize and wheat. The rest of the imports were food aid. In the past the government has resented this large relief operations. During those two years, Mugabe did not once publicly mention the United Nations World Food Programme, which was feeding up to forty percent of the population. This week, when asked about it by Sky News, he gave a grudging response.
The WFP's memorandum of understanding with the government expires this year in June. Despite the President's comments it may linger on after that, but only to feed aIDS orphans and other particularly vulnerable groups. Recently, for the first time, the state-controlled media have directly attacked the UN's top official in Zimbabwe, J. Victor angelo. His inquiry about the welfare of workers displaced from commercial farms was described as an infringement of Zimbabwean sovereignty, a violation of the UN Charter and `racist'. Some diplomats in Harare say angelo has been unnecessarily mild in dealing with the Zimbabwe african National Union-Patriotic Front regime, but he has been, until now, the only interlocutor between donors and the government.
The decision to end all pretence of dialogue is based on Mugabe's recent political success. His ZaNU-PF candidates have won by-elections, even in former opposition strongholds such as Lupane. This has emboldened the President to risk promoting the fiction of a bumper harvest--with help from his american business friends.
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