The Sunday News
- Continued from last week
Butlter Tambo
ZIMBABWE has one of the largest resources of the platinum group metals as well as aluminum, chromium, gold, iron ore, diamonds and large resources of several other minerals.
The country has virtually all the important minerals for diversified industrialisation, particularly iron.
However, all of its mineral wealth is being exported as ores, concentrates, alloys or metals with very little transformed into fabricated products.
The wholesale handing out of Zimbabwe’s mineral resources over the last three decades has cost the country millions of jobs, including those that could have been catalysed into other sectors.
In general, some foreign investors have tended to have a much better idea of the value of the mineral assets than the state itself.
Because of the lost decade of hyperinflation, not much mining exploration has been done since the late 1990s, therefore, no one really knows with certainty the exact quantities of minerals.
News from Chiadzwa that alluvial diamonds have almost run out at a time when the country has been allowed to sell its gems on the global markets is not encouraging at all for a country that hopes to live off its natural resources.
South Africa, for example, is the most mineral endowed country in the world with more than $2,5 trillion in mineral reserves.
The country is the world’s biggest producer of platinum, and a leading producer of gold, diamonds, base metals and coal.
According to Johnson Matthey, for the year 2013 South Africa was projected to produce 72 percent of the world’s platinum output of 4,12million ounces after losing an estimated 750 000oz in production from employee strikes, followed by Russia and Zimbabwe at 780 000oz and 400 000oz respectively. Despite being third globally, Zimbabwe only accounted for seven percent of global platinum production in 2013 (ZNCC 2013) and this shows that the country has not done any real exploration since the 1990s and so it does not have a quantified and measured data base of what it really owns in US$ terms that it can use to get loans that can be secured with mineral wealth like South Africa which has a quantified and known mineral reserve that gives it an urge over borrowings against a country like Zimbabwe.
Declining Mineral Prices Conspiring against Zimbabwean Economic Recovery
Declining mineral prices, with the exception of nickel are projected to continue decelerating in the outlook period.
Last year projections indicate a global average price decline of 4,2 percent.
Metal prices are at their lowest since mid-2009 and 45 percent below their April 2011 peaks.
The projected decline in mineral prices will have adverse implications on the recovery efforts in the mining sector, as well as the economy in general. Such avoidable misfortunes should then guide Government on expediting for instance, the setting up of a minerals beneficiation in platinum, gold, diamonds and other minerals in order to value add and realise more benefits from its natural resources.
Infrastructure
A well-developed transport and communications infrastructure network is a prerequisite for the access of less-developed communities to core economic activities and services.
Effective modes of transport, including quality roads, railroads, ports, and air transport, enable entrepreneurs to get their goods and services to market in a secure and timely manner and facilitate the movement of workers to the most suitable jobs.
Economies also depend on electricity supplies that are free of interruptions and shortages so that businesses and factories can work unimpeded.
Additionally, a solid and extensive telecommunications network allows for a rapid and free flow of information, which increases overall economic efficiency by helping to ensure that businesses can communicate and decisions are made by economic actors taking into account all available relevant information (Global Competitiveness Report 2012).
Government’s budgetary expenditure for the year as at 30 September 2013 revealed that only 8,7 percent of total expenditure went to capital expenditure while recurrent expenditure accounted for 85 percent of total expenditure.
This year 82 percent of the budget is set to be gobbled by salaries leaving only $798 million for capital projects.
Power generation
The most pressing issue under infrastructure is the need for power generation infrastructure as the country’s maximum electricity generation capacity is currently around 1 237MW against a peak demand of over 2 200MW, leaving a shortfall of about 44 percent.
Part of the shortfall is covered by imports but this is not sustainable given the financial constraints in the country.
Countries that are working on industrial expansion programme typically increase their power generating capacity at the rate of at least one additional power generating plant every 5 years. In the case of Zimbabwe, the last power plant, namely Hwange Power Station was commissioned in 1987,which is 28 years ago (Mtetwa 2010). This is in spite of abundance of the resources needed for power generations.
Funding Options for Zim Asset implementation
Raising Finances Locally
Floating International bonds is not the way to go because it only enriches other countries at the expense of Zimbabwe as the interest component of the loans will be huge.
Zimbabwe can raise money locally for various projects for instance, the IDBZ issued the $30 million bonds on October 29 2012 to fund the fitting of prepaid meters in homes and small institutions countrywide which were installed by the Zimbabwe Electricity Transmission and Distribution Company and this was successful. It also plans to go back to the markets and raise an amount of $54 million for TeOne and ZPC
Also, the Insurance and Pensions Housing Bond was floated and raised $6 million for the construction of low cost housing so there is no reason why government if it is serious cannot raise money on the local markets.
Re-engagement of Multilateral Institutions
Engaging multilateral institutions like the World Bank and the International Finance Corporations is another way to raise funds. The World Bank still wants to assist us as a country, for instance it is now funding small scale mining activities in order to bring them into the formal channels of mining and this shows that with the right proposals of repayment and feasible commitments, the Government can get financing for some of its large projects that have been ear marked under Zim Asset.
Value Addition and Beneficiation
Beneficiation of minerals and minerals auctioning to the highest bidder for known reserves of minerals after extensive exploration can assist Government in getting funding for large projects especially in infrastructure development.
For instance, while a kilogramme of unprocessed tobacco costs an average $3 at the auction floor, threshed tobacco costs around $7,30 per kilogramme, while cigarettes cost around US$30-50 per kilogramme.
In monetary terms, from the 162 million kilograms of raw tobacco sold in 2013 and exported to various countries around the world at a cost of $608 million, Zimbabwe could have realised as much as US$6,08 billion from finished cigarettes.
A rough diamond cost about $40 per carat but cut and polished diamond value increases to $400 per carat. The same stone fetches around $600 per carat when it reaches the consumer.
There are many other minerals and goods than can be beneficiated in the country.
Privatisation and Restructuring of Loss Making State Enterprises
Privatisation and restructuring of loss making State and Public Enterprises like NRZ, GMB, Zesa, Air Zimbabwe, TelOne etc.
If well implemented this can raise funds for the Government and also take away the burden of funding loss making entities from the taxers payers funds thereby creating savings which can be channeled towards capital projects which not only aid infrastructure development.
This will also help Government in revenue generation through more taxation of the privatised entities in the form of corporate tax, dividends from Government shares and taxation from the increased tax base of regularly paid employees in profit making companies.
Import Substitution
Import bill too high and the country must stop importing things like chickens it kills our agriculture. For instance the import bill from January to June 2014 was $2,9 billion with the retail sector importing $400 million of goods.
We should start exporting more as a country. Zimbabwe’s exports totaled $2,4 billion against imports of $5,3 billion and this has led to a trade deficit of $2,9 billion for the period to October 2014.
Maize Production
We need to look at the 1980s success when Zimbabwe was still the bread basket of Africa for inspiration as the following statistics will show. For instance, the largest bumper harvest had been recorded in Zimbabwe after Independence in 1981 when 2,8 million tonnes of maize were harvested and 2,7 million tonnes in 1985.
The highest wheat production in Zimbabwe was 325 000 tonnes in 1990 and this has since declined from 2000.
Except for one year in the 1970’s Zimbabwe has never been self-sufficient in wheat production. Zimbabwe consumes more than a million loaves of bread daily and the current national annual requirement is roughly 400 000 tonnes.
At the peak of production during the 1980s, the GMB was holding over three (3) years of food security reserves and over eight years of supply of small grains (Rukuni et al 2006) but that glory has been lost because the country cannot feed itself anymore and will need to import 700 000 tonnes of maize this year alone in a country where national grain requirement is 1,7 million tonnes of maize per year.
Revive Agro-based Industries
Cold Storage Company in Bulawayo and the beef canning plant in West Nicholson can be resuscitated to resume exports to the European Union (EU) since sanctions have been removed on most state run companies. CSC is parastatals that dates back to the colonial days, established in 1938 for the purpose of running the beef industry.
The dormant state of CSC which has put most of its workers out of employment except for a few hundred is a reflection of the near collapse of cattle industry in the country, which has in turn translated to the near collapse of the leather industry and of course contributed to the massive loss of employment in Bulawayo and Gweru.
If small abattoirs without any ranches and specialised equipment as compared to the massive equipment that can be found at CSC can succeed in this Zimbabwean meat market then there is nothing that can stop the revival of CSC to its former glory days. Mauritius currently imports beef from Australia and New Zealand yet Zimbabwe produces organic beef which is non GMO but fails to make CSC viable why? DRC imports its beef from France yet Zimbabwe is there, why should this be happening is the question that should be directed at CSC.
Conclusion
It is therefore in the consideration of some of the points raised above about Zim Asset and its likely pit falls that Zimbabwe as a country can rise up and take its place in the global village and leave its slumber of the past decade or so and the country will restore its former glory and status of being the “bread basket” of Southern Africa and not the basket case and perennial beggar that it has reduced itself to. With this I say Zimbabwe will rise again.
Butler Tambo is a policy analyst and can be contacted on [email protected]
