FOR many years Zimbabwe’s export earnings have been dominated by raw commodities from primary industries such as mining and agriculture. History has shown that increasing raw output from these sectors outside of domestic value addition has not made much impact in terms of real economic transformation and job creation. Primary industries remain vulnerable to the vagaries of the volatile international market, which always does not favour raw commodity producers.
Given the reality of climate change and the growing environmental consciousness movements across the globe, commodity-based economies stand to suffer numerous shocks, which emphasises the need for such countries, including Zimbabwe, to swiftly diversify their economies.
According to ZimTrade, continued dominance of raw commodity exports has adverse effects on the economy. These are manifested in a large import bill on manufactured products, low export earnings and exportation of jobs to destination states.
Exporting raw materials essentially means there is no development of the country’s industrial base, ZimTrade chief executive officer, Mr Allan Majuru, has said.
The country must derive maximum benefit from its minerals domestically without compromising availability of these resources for future generations.
This is very critical as Zimbabwe seeks to modernise its economy and revive high value industries as part of a broader drive towards a middle income status by 2030. At the present moment the country is grappling acute foreign currency shortages mainly linked to subdued domestic production and over-reliance on imports, which continue to overshadow exports.
The country’s merchandise exports for the first quarter of 2019, for instance, grew by 15 percent from $886,1 million realised in first quarter of 2018, to reach $1,02 billion, according to a latest Treasury report. However, these exports were mainly dominated by gold (23 percent), flue-cured tobacco (23 percent), nickel mattes (17 percent) and nickel ores and concentrates (11 percent), ferrochrome, industrial diamonds, among others.
South Africa, United Arab Emirates, and Mozambique remain the country’s major export destinations, absorbing 51 percent, 17 percent and 8 percent, respectively, whilst other countries absorbed 19 percent.
A reflection on these statistics is significant in the context of measures being taken by Government and private sector to stabilise the economy, particularly the foreign exchange sector.
The Government’s Transitional Stabilisation Programme (TSP) already speaks to the need to attain a sustainable balance of payments position underpinned by increasing exports, particularly through focussing on value added exports.
The thrust is to value add and beneficiate more through processing and refining of minerals and linking these to the local manufacturing sector.
This strategy demands that the country takes advantage of opportunities arising from regional and international trade by positioning itself as a modern economy. Higher import substitution, thus, is required for goods and services, which can be produced domestically, taking advantage of the country’s resources. In addition, both Government and the private sector should curtail non-essential imports in view of foreign currency limitations.
Apparently Government appears to be cognisant of the fact that mineral resources are finite and that continual extraction leads to depletion. The seriousness of this matter was captured by President Mnangagwa last week when he stated that Government will, going forward, stop exports of raw minerals in pursuit of increased value addition and beneficiation.
He was officially commissioning the $62 million Unki Mines smelting plant in Shurugwi. The President in his address directed all mining companies to work towards increased value addition and beneficiation saying high value proceeds from the mining sector should anchor the economic modernisation agenda. While required steps are being taken in the platinum sector, Cde Mnangagwa expressed dismay with regards to diamonds, where 90 percent of the country’s gems are still being exported unprocessed.
“This should stop as we go forward. We must value-add our diamonds. The same goes for all the other minerals like chrome,” said President Mnangagwa.
The country is also exporting raw chrome and Government wants those mining chrome to work on value addition and beneficiation so that the country realises more from its minerals. In this context the President has applauded Anglo American Platinum, parent company to Unki Mines for commissioning the new smelter.
He said the new investment was expected to go a long way in transforming the country’s mining industry and increasing forex inflows. The new unit has already added 73 jobs to the 1,137 permanent staff and 1 089 contractors while more could be added in tandem with growing production.
“Investments such as this go a long way in facilitating the modernisation and industrialisation agenda as our country progresses towards becoming a middle-income economy by 2030,” said President Mnangagwa.
Mines and Mining Development Minister, Winston Chitando, has said the platinum sector alone, given its potential, should play a key role towards the realisation of Vision 2030.
While the platinum group of metals (PGMs) contain up to 10 different valuable minerals such as palladium, rhodium, iridium, osmium, and ruthenium, experts say Zimbabwe is prejudiced of high value earnings due to absence of a domestic refinery. All the country’s platinum mines, Mimosa, Zimplats and Unki, export their semi processed ore to South Africa for further refinery.
“The vision for the sector is very clear. It is to move and value-add, to concentrate and, working with platinum producers association, Zimbabwe should have its own base metal and precious metal refinery. That’s the vision. What we have witnessed today (at Unki) is a movement towards that vision,” he said.
PGMs are highly sought for a number of industrial processes, technologies and commercial applications. Their unique chemical and physical properties make PGMs an excellent raw material, catalyst and ingredient for manufacturing processes. In view of this Minister Chitando said his ministry was working hard to ensure that all the platinum concessions that were not at project stage start rolling and invest in domestic value addition.
“We would like to see what we are seeing here (at Unki) happening on each and every platinum concession. Where there is no clear path the use it or lose it principle will no doubt apply,” said the minister.
“What we have realised today gives us more impetus to ensure that all other commodities, all other minerals like chrome or lithium, have a very clear development plan… to extract and do value addition.”
Indeed beyond mineral extraction and processing, value added investments impact positively on other sectors such as transport, equipment manufacturing, geological services and educational research, among others.
The Unki case, thus, shows that Zimbabwe could leverage on diversified exports as a strategy to narrow the trade deficit and widen opportunities for increased foreign currency earnings. This, in addition to Government’s string of doing business reforms, would no doubt help to consolidate investor confidence.