A renewed interest in Zimbabwe’s chances for economic resuscitation has arisen from the announcement that incentives for domestic mineral processing will be introduced.
As part of a larger African drive to optimise economic gains from natural resources, President Emmerson Mnangagwa has called for “bold decisions” to enhance mineral beneficiation and value addition. But will this action make Zimbabwe’s dire debt predicament worse or better?
One way or another, local processing can boost foreign exchange profits, stimulate economic growth, and create jobs. With the help of Chinese companies’ investments and its abundant reserves of lithium and platinum, Zimbabwe is well-positioned to benefit.
The mega-oil refinery in Nigeria and the new refinery in Ghana are two notable examples of value addition in the area.
However, if the government is unable to oversee the incentives properly, Zimbabwe›s debt issue can get worse.
Concerns regarding applying the incentives are raised by the nation’s history of economic mismanagement, corruption, and lack of openness.
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Currently, Zimbabwe’s excessive dependence on mining has not resulted in widespread economic advantages, even though the industry makes up a substantial proportion of the nation’s export revenue.
The bulk of Zimbabweans have been excluded from the wealth created for decades due to the extraction and export of raw commodities without sufficient value addition.
The country’s crushing external debt, which is currently over US$10 billion, makes this dilemma worse.
A few elite and foreign corporations have profited most from the export of raw minerals, while the general populace struggles with unemployment, poverty, and unstable economies.
This entails that mineral processing is an essential first step toward Zimbabwe’s economic recovery and debt relief.
Using abundant natural resources may boost economic growth, generate jobs, and raise export revenues.
There are examples of mineral processing strategies being implemented successfully all across the world.
For example, Chile’s economic expansion was greatly aided by the copper processing industry, which made Chile one of the richest countries in Latin America.
In a similar vein, Botswana’s economy has become one of the most stable in Africa thanks to the enormous cash generated by the country’s diamond processing business.
The iron ore processing sector in Australia has stimulated economic expansion, generating thousands of employment and increasing export revenue.
Zimbabwe may prioritise mineral processing and follow the lead set by these successful examples.
The enormous reserves of lithium, gold, and platinum in the nation, present a huge opportunity for value addition.
Zimbabwe can keep more value in its economy, bringing in more income and opening up job opportunities, by processing minerals domestically.
Consequently, the nation’s debt crisis will be lessened.
Plans for efficient mineral processing will also increase Zimbabwe’s competitiveness internationally, improve the balance of payments, and draw in foreign investment.
Plans for mineral processing can also diversify Zimbabwe’s economy and lessen its reliance on exports of primary commodities.
This will protect the nation’s economy against changes in the price of commodities globally.
Generally, in the entire African continent, the abundance of mineral resources offers a huge potential for economic expansion.
Numerous African nations have put policies and incentives in place to promote mineral processing to realize this potential fully. Nevertheless, several factors affect these programs’ likelihood of success.
Attracting investments in mineral processing requires a stable economic climate and efficient governance.
Nations with well-defined policies, regulations, and taxation systems foster investor confidence.
Government institutions’ accountability and transparency also reduce corruption risks.
For example, a stable economic climate has helped Ghana’s mining industry, drawing large investments.
Mineral processing also requires a sufficient infrastructure, which includes energy supplies, water resources, and transportation networks.
Infrastructure development investments lower costs and boost efficiency by facilitating the flow of goods and services.
Nigeria’s mining industry is now more competitive because of its efforts to modernize its transportation network
Investments in mineral processing are drawn by competitive incentives such as tax cuts, subsidies, and expedited licensing processes.
Fiscal policies should strike a balance between investor appeal and revenue growth.
Competitive incentives have helped Morocco’s mining industry draw large investments.
Best practices and technology transfer among African nations can be facilitated by regional collaboration and knowledge exchange.
The expansion of the mineral processing industry has been aided by the African Union’s initiatives to foster regional cooperation.
This means that a variety of factors, including market access, infrastructure development, human capital, technology, environmental and social concerns, incentives, and regional cooperation, are necessary for the plans and incentives designed to promote mineral processing in Africa to be successful.
If the nation wants to use its natural resources to boost economic growth, lower debt levels, and raise living conditions for its people, several obstacles must be overcome.
Zimbabwe’s antiquated infrastructure makes it difficult to accommodate higher processing capacities.
There is an urgent need to upgrade the nation’s transportation infrastructure, which includes the roads, trains, and ports.
The effective movement of raw materials to processing facilities and completed goods to markets will be hampered by this deficiency. Moreover, losses and inefficiencies will result from outdated storage facilities and equipment.
An additional obstacle to infrastructure development in Zimbabwe is the crippling energy problem.
The dangerously low capacity of the nation’s power generation system leads to frequent power outages and voltage variations.
The production and processing processes will be disrupted by this volatility, making the incentives useless.
Additionally, the energy issue raises production costs, which lowers the competitiveness of Zimbabwean goods on the international market.
The biggest danger to the incentives’ success is probably Zimbabwe’s long history of economic failure and corruption.
The nation’s history of nepotism, cronyism, and theft has damaged investor confidence and impeded economic expansion.
Corruption will keep the cycle of poor management going by diverting funds meant for energy solutions and infrastructure development into private wallets.
Furthermore, the impact of the incentives will be obscured by a lack of transparency and accountability, making it difficult to assess their success.
The government must maintain accountability, openness, and efficient incentive management to reduce these risks.
To reduce such dangers, it is essential to establish explicit policy frameworks. Clear and predictable norms and regulations will guarantee that investors are aware of the terms of participation.
This includes describing the requirements for eligibility, the application process, and the performance indicators.
Additionally, by eliminating bureaucratic discretion, clear policies will lessen the chance of corruption and favoritism.
The government may make sure that incentives are implemented consistently and fairly by codifying laws and regulations.
Infrastructure development must be funded to sustain the expansion of mineral processing.
To enable effective processing and shipment of minerals, Zimbabwe’s energy and transportation infrastructure needs to be significantly upgraded.
Because of Zimbabwe’s history of economic mismanagement and corruption, the country needs to take proactive steps to safeguard public resources.
The government should prioritise investments in renewable energy sources, such as solar and wind power, to reduce reliance on imported fuels.
It should also upgrade transportation networks, including roads, railways, and ports, to streamline the movement of goods and reduce costs.
This will not only benefit the mining sector but also stimulate broader economic growth.
The government should also establish transparent procurement processes, ensuring that contracts are awarded based on merit rather than cronyism.
Zimbabwe can reassure international partners and investors by showcasing its commitment to accountability.
A coordinated strategy is needed for incentive management to be effective.
To ensure smooth coordination between ministries and agencies and to supervise the implementation of incentives, the government should set up a specialised agency.
Conducting routine audits and reviews can aid in determining the efficacy of incentives and pinpointing opportunities for enhancement.
Zimbabwe should maximise the advantages of mineral processing incentives by cultivating a culture of accountability and transparency.
For Zimbabwe to use its mineral resources to boost economic growth, lower debt levels, and raise living conditions for its people, it has to tackle these issues.
The ability of the government to strike a balance between fiscal discipline, transparency, and economic growth will determine the initiative’s success.
*Artwell Dzobo is a policy analyst
These weekly articles are coordinated by Lovemore Kadenge, an independent consultant, managing consultant of Zawale Consultants (Private) Limited, past president of the Zimbabwe Economics Society and past president of the Chartered Governance and Accountancy Institute in Zimbabwe . Email- kadenge.zes@gmail.com or mobile No. +263 772 382 852