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Zimbabwe wants value-added exports

Zimbabwe wants value-added exports

Image from Financial Times

Over the years, Zimbabwe's export earnings have come mainly from raw materials from primary industries such as mining and agriculture. Given the reality of climate change and the growing global environmental awareness movement, commodity-based economies will be hit by countless shocks, underscoring the need for these countries, including Zimbabwe, to rapidly diversify their economies.

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.

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.

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.

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.

"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.

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.

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.

It 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.

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