eBusiness Weekly
The expectation that Zimbabwe will earn $3,5 billion from mining this year, almost $1 billion more than the $2,7 billion of last year, coupled with the record tobacco harvest will bring some relief to the hard-pressed economy and will allow continued expansion in the industrial sectors, generally large net users of foreign currency for raw materials.
The estimates in mining production come from the sector itself, through the Chamber of Mines, rather than from Government sources, although the Mines Ministry and Mining Development confirms the data. So it would appear to be a sober and achievable target since the mining companies will be wary of making rash promises that they cannot hope to meet.
There are those who worry that Zimbabwe is so dependent on non-renewable resources for the bulk of exports, with a good chunk of the rest coming from tobacco, a target of anti-smoking legislation and programmes around the world.
But a lot depends on how we use the mining wealth, something that most of our neighbours also have to consider. Just about the only country in Southern Africa that gains most of its export earnings from selling industrial products and services is the richest and most developed of us all, South Africa. But for well over a century South Africa created the wealth and local markets that allowed sophisticated industrial and service sectors to develop by being the world’s top producer of gold and diamonds. The fact that while minerals are still important and useful exports, South Africa is now no longer in the top gold and diamond league. But this does not matter. Its economy is still growing because it used mining to create a decent middle-income economy.
In any case, Zimbabwe has still large reserves and its mineral exports are made up of a wide range of products. Gold is still the leading export, as it has been for so much of the past few centuries, with 21 tonnes extracted by the end of July, producing $850 million in exports, and allowing an enhanced target of an easy record of 35 tonnes to be set for this year. Yet despite the fact that gold has been panned and mined in Zimbabwe for centuries – the Portuguese called the country the Rivers of Gold in the 17th century when they made a determined effort to colonise the area – there is still a lot of gold left to mine.
Indeed there is now an ambitious target to raise production to 100 tonnes a year by 2023. One advantage Zimbabwe has is that its gold tends to be both prevalent and in small deposits. In one sense this is a nuisance, since we cannot support those huge mines such as were common on the Witwatersrand. But on the other hand it does mean that gold mining spreads wealth since a substantial percentage of production comes from small-scale producers, as it has for most of the centuries. Such a system does require support and incentives, and it is because this is finally being taken very seriously that production is now growing fast.
Platinum and diamonds, the newest additions to exports, are now in proper production with volumes set to grow and in time exceed gold’s contribution. Lithium is the new hope, although it has been mined for decades, and nickel and chrome can still be economic mainstays, again now we are removing constraints and allowing miners a freer hand to help both themselves and the rest of the country.
Indeed a lot of the expansion we are seeing in mining is because the present Government that came into office in November last year saw from the very beginning that mining was the key to growth and that with a set of far more sensible policies, the stripping out of corruption and well-administered incentives that key would open the door to middle-income status by 2030.
Mining does a lot more than ease the pressure on the balance of payments. That $3,5 billion we will get this year has far greater benefits once we start to examine how it is distributed. Some goes to the investors who put up the initial capital, as is just and necessary. A modest percentage goes to Zimra in direct taxes, these days largely royalties. Some is used to replace plant and machinery or to expand the mine. But a significant chunk goes into the bank accounts of tens of thousands of Zimbabweans who do the actual work; mining is a notoriously labour-intensive industry and all mining companies, from the biggest to the smallest, hire Zimbabweans almost exclusively for all post from top level engineers and geologists to the people who push the wheelbarrows..
And it is all those jobs that create the longest and best benefits. For every 1000 extra jobs there are a 1 000 extra taxpayers, there are 1 000 extra people who want to spend their money on things that other Zimbabweans grow or make or provide. If anyone wants to see what economic impact a couple of thousand people with decent jobs can have, just look at a respectable supermarket for that is roughly the customer base required to make the that enterprise viable. And as the majority of goods on the shelves are now made in Zimbabwe, it is easy to see how many other Zimbabweans get an industrial job and how many farmers move from subsistence to commercial production.
This, in fact, is how Zimbabwe will emerge as a middle-income country, by creating chains of jobs and incomes until the majority of the economically active population is middle class.
