HARARE - Zimbabwe must invest its mining revenue into other sectors to curb over-reliance on mineral exports-driven economic growth, according to World Bank (WB).
The global financier said while agriculture was the country’s mainstay during the 1990s, the contribution of other sectoral drivers of exports, including manufacturing and services, is much lower.
According to the Chamber of Mines, Zimbabwe earned $1,38 billion in mining revenue in the nine months to September 2013 largely driven by gold and platinum exports.
“Relying principally on mining as a source of growth is likely to mute the poverty-reducing effects of growth without offsetting measures. Studies have shown that growth in resource-rich countries have a lower poverty-reducing effect than growth in resource-poor countries,” the WB said in its latest trade competitiveness report.
It said that this effect is principally because resources such as oil and minerals are less labour intensive and rents accrue in the first instance to mine owners and to the State through taxation as well as to the skilled labour that mines employ.
“Only if governments consciously adopt macro policies to avoid the effects of a potential Dutch-disease, design programs to channel these rents into the development of a more diversified economy, and create programs that enhance skills among low-income groups, can growth path be made more inclusive,” WB said.
The Bretton Woods institution cited Botswana and Chile as countries that have been successful over several decades in this strategy.
It noted that at the start of the 21st Century, new patterns were minerals have contributed significantly and positively to export growth until the post stabilisation period emerged.
“All this is to say that the trade engine is firing on only one of four cylinders. As price stabilisation and economic reactivation have started laying the foundation for a broad-based recovery and export expansion, the policy agenda to strengthen recovery, elaborated elsewhere in several World Bank and other documents, entails efforts to re-establish creditworthiness with foreign lenders to tap into long-term foreign savings; efforts to balance public sector accounts in such a way as to increase much-needed public investment,” said WB, adding that “efforts to reverse the widespread perceptions of incoherent and ineffective economic governance was of paramount importance”.
Resolving these near-term issues would allow the country to turn its attention to diversify the economy without over-relying on the mining sector.
WB noted that the mining sector has potential to attract $12 billion in new investment over the next five year against $5 billion required for recapitalisation until 2018.
“While the value of exports only increased about 30 percent from 2000 to 2009, in 2010 there was a substantial increase in mineral exports of over 150 percent, which was followed in 2011 by another increase of near 30 percent.”
It added that the mining sector boom has also been accompanied by a transformation within the sector itself once dominated by small-scale gold production, in recent years there has been a surge in large-scale operations in platinum and diamonds.