THE ZIMBABWEAN
ECONOMY
BY GODFREY KANYENZE (Dr.), DIRECTOR
OF LEDRIZ
CRISIS COALITION ZIMBABWE
BRONTE HOTEL, 17 JUNE 2014
Introduction
Since independence in 1980, Zimbabwe has implemented no less than 14
economic blueprints:














Growth with Equity (1981);
Transitional National Development Plan (1982-1985);
First Five Year National Development Plan (1986-1990);
Economic Structural Adjustment Programme (ESAP) (1991-1996);
ZIMPREST (1996-2000);
Millennium Economic Recovery Programme (MERP) , 2001-02;
Ten Point Plan based on Agriculture (2002);
National Economic Revival Programme (NERP) (2003);
Macroeconomic Policy Framework (2005-2006);
National Economic Development Priority Programme (NEDPP)
(2007);
Zimbabwe Economic Development Strategy (ZEDS) (2008)(aborted
at Conception);
Short Term Economic Recovery Programme (STERP I) (2009-10);
Short Term Economic Recovery Programme (STERP II) (2010-12);
Medium Term Plan (2011-15).
• Since ZIMPREST, the programmes became short-term
Government was grappling with an emerging crisis;
as
• MTP represents the return to medium term planning;
• Experience suggests that Government has been long on planning
and short on implementation, with regular changes to the
programmes, policy incoherence and inconsistency, and even
reversals.
• With the adoption of Zim Asset after the July 2013 Harmonized
Elections, the MTP has effectively been unilaterally abandoned in
midstream;
• The rationale is that after the landslide victory by the ZANU PF Party
in the 31st July 2013 harmonised elections, the Party was given the
mandate to govern the country for a five (5) year term;
• Hence this is a party and not a national consultative position.
SOCIO-ECONOMIC OUTLOOK
•
Economic recovery since 2009 following a decade-long decline during 1999-
2008; a cumulative decline of at least 51%: (48% between 2000 and 2008),
Zimbabwe declined from the 2nd largest economy in SADC to 11th.
•
Economic stabilization and recovery anchored by the formation of the
Inclusive Government in February 2009;
•
The adoption of a multi-currency regime and cash budgeting, and
discontinuation of the quasi-fiscal operations of the RBZ killed off
hyperinflation and helped restore price stability;
•
Following a cumulative decline of GDP of 46.5% between 1998-2008, GDP
expanded by 25.2% during 2009-2011.
•
Recovery in fiscal revenues from 3.1% of GDP in 2008 to an estimated 34% of
GDP in 2012.
•
Modest growth in overall investment from 2% of GDP in 2008 to 9% of GDP.
Investment levels remain subdued with only few firms investing at very low
levels - poor access to finance, while profitable investment is not taking place.
•
Recovery anchored by mining and agriculture;
•
Real average GDP growth of 8.5% during 2009-13;
•
Recovery buoyed by the mineral sector, due to high global prices.
•
The mining sector became the leading export sector, largely due
to high mineral prices and expanded platinum, diamonds and gold
output.
•
Mining has surged to become the most dynamic sector, replacing
the role of agriculture in the pre-crisis Zimbabwe.
• The average share of GDP of mining grew from an average 10.2% in
the 1990s to an average 16.9% from 2009-2011.
• Strong external demand for primary commodities (in particular
platinum and gold) supported higher production levels, which
recovered the pre-2000 levels in terms of value.
•
There has been a marked change in the structure of sectors.
•
While in the past the mining sector was dominated by gold and smallscale production of over 40 minerals, it is now led by large platinum
operations, with diamonds emerging quickly since 2010.
•
Export recovery is driven by primary commodities such that of the
export receipts of US$14.1 billion generated during the period 2009 to
September 2013, US$9.2 billion (65.2%) emanated from the mining
sector, with agriculture, horticulture and hunting weighing in with US$4
billion (28.3%) and the manufacturing sector contributed the balance of
US$0.9 billion (6.4%).
•
Implies primary commodities (mining and agriculture) accounted for
93.5% of export earnings during the period 2009-13.
Mining drives export recovery post-2009 (contribution
to export growth - %) - one cylinder is firing (mining)
• In terms of mineral exports, the data shows a high concentration ratio,
with the top 20 exporters accounting for 92.7 % of the sector’s export
receipts.
• Mining exports are also concentrated on two commodities (platinum and
diamonds), with the top five exporters contributing more than 60% of the
export receipts (ZIMPLATS-platinum; Mimosa-diamonds; Mbadadiamonds; ZIMASCO-chrome; and Unki-diamonds), implying that the
economy is more exposed to commodity cycles and is increasingly in a
more capital-intensive mode.
• Potential for further output growth in gold, diamonds, nickel, ferrochrome
and platinum and, and in the longer term, coal and iron ore.
• However, the economic rebound experienced since 2009 is moderating as
growth declined from 11.4% in 2010 and 11.9% in 2011 to 10.6% in 2012
and a projected 3.4% in 2013 against a Medium-Term Plan (2011-15)
target of 7.1%;
• Slow down in recovery due to a poor rain season, lack of capital, revenue
under-performance, structural bottlenecks, including power challenges
and deteriorating infrastructure, corruption and a volatile and fragile
global financial environment.
Performance of the Zimbabwe Economy, Selected
Economic Indicators, 1986-2012 (Periodical Annual
Averages)
Indicator
Real GDP Growth ( percent)
Real GDP Per Capita ( percent)
Manufacturing/GDP ( percent)
Savings/GDP
Investment/GDP (current
prices)
Budget Deficit ( percent of GDP)
Inflation ( percent)
BOP (US$m)
Trade balance (US$m)
Export Growth (%)
Import cover (Months) 100%
Real Wage Index –1990=100
Formal Sector Employment
Employment Index – 1990=100
1986-90
4.6
1.4
20.6
16.5
1991-96
2.8
-0.6
21.1
17.8
1997-08
-4.3
-3.6
13.5
6.3
2009-12
7.5
15.7**
15.7
-5.0
16
21.7
10.6
15.8
-2.1
-5.8
-6.1
-3.9**
11.8
26.6
19,255,755.00
0.8
73.5
-254.6
-1209.1
267.7
75.2
25.8
-3799.2
0.1
0.1
-4.7
26.5
3.1
0.9
0.9
93.5
73.5
59.7*
1,118,133 1,249,200
1,213,200*
1,192,900***
94.9
104.8
101.8*
100.1***
• In 2014, the economy is projected to grow by 6.1%, premised on an active
Zim-Asset programme policy scenario anchored on strong recovery of
agriculture and improved performance of mining and construction sectors.
• In 2014, agriculture is projected to grow by 9%, mainly driven by growth in
maize (62.8%), cotton (27.8%), soya beans (26.7%), and groundnuts
(56.8%), among other crops.
• The improved state of preparedness, sustainable planned financing
arrangements and inputs availability, among others, will support the
above anticipated growth.
• These growth projections are not in sync with global commodity trends
and do not logically derive from the current situation analysis.
• In 2014, the mining sector is projected to grow by 11.4%, on the back of
planned investments and largely driven by strong performance in gold,
diamonds, nickel and coal.
• Again, projections are not in sync with projected commodity price trends.
Comparative GDP Figures (Source J.
Wade 2014, CZI Breakfast Meeting)
10
Nigeria
304
9
Mozamb.
17.2
GDP Growth 2014 (%)
8
Angola
135
7
Kenya
52.2
6
5
Zimbabwe
14.1
Botswana
19.2
4
Egypt
269
3
Tanzania
34.9
South Africa
393
Zambia
24.6
2
1
0
1
2
3
4
5
6
7
Avg GDP Growth 2011-13 (%)
ZEPARU 2014
8
15
AGGREGATE DEMAND SLOWDOWN (From Joseph
Mverecha, 2014)
Consumer Demand Growth (Actual & Forecasts)
Based on VAT on Domestic Goods
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
mom%
Moving Average mom%
Oct-14
Jul-14
Apr-14
Jan-14
Oct-13
Jul-13
Apr-13
Jan-13
Oct-12
Jul-12
Apr-12
Jan-12
Oct-11
Jul-11
Apr-11
Jan-11
Oct-10
Jul-10
Apr-10
Jan-10
Oct-09
Jul-09
Apr-09
Jan-09
0.0%
Mining
387.9
VAT
1,437
Cus. & Exc.
999
Zambia:
PAYE
910.8
Co. Tax
718
Other
284.3
Non-Tax
513.9
Total Revenue $5.24bn
Plus
Foreign $1,245m
Mining
206.5
VAT
1,109
Cust. & Ex.
880
PAYE
765
Co. Tax
382
Other
481.8
Non-Tax
296.0
Zimbabwe:
Total Revenue $4.12bn
Foreign
$0
22
1980-89
Personal 24.5
Corporate 17.1
VAT
17.1
Excise 10.8
Customs 13.3
1990-99
27.7
14.3
17.8
4.9
17.9
2000-20082009-2013
33.5 18.8
18.4 9.9
22.6 33.2
4.0 10.0
8.8 13.7
Distribution of GDP by Industry - % (Periodical Averages:
1980-2012) (current prices)
Industry
Agriculture, Hunting and Fishing and Forestry
Mining and Quarrying
Manufacturing
Electricity and Water
Construction
Finance and Insurance
Real Estate
Distribution, Hotels, and Restaurants
Transport and Communication
Public Administration
Education
Health
Domestic Services
Other Services
1980- 199190
96
14.0 14.1
4.8
3.4
21.4 21.1
2.2
2.8
3.1
2.5
5.7
7.4
1.7
2.1
14.2 16.6
6.1
5.4
6.3
4.6
5.8
5.7
1.6
1.4
1.5
1.1
4.6
3.7
19972008
20.6
5.8
13.5
3.4
1.6
8.0
1.3
16.6
6.7
4.3
5.0
2.0
1.3
4.6
2009
16.9
7.7
15.5
4.5
0.5
3.6
1.8
10.0
13.9
3.0
3.4
1.4
0.6
4.8
2010
15.6
9.6
15.7
4.8
0.8
3.2
1.7
9.9
12.2
3.9
4.1
1.4
0.5
4.7
2011
13.8
10.4
15.9
4.9
0.8
5.4
2.2
8.5
12.2
3.6
4.8
1.5
0.4
4.4
2012
14.0
10.7
15.6
4.7
0.8
5.4
2.2
8.4
12.4
3.6
4.6
1.5
0.4
4.4
Growth in Real GDP and Employment (1980-2012)
Sectorial Distribution of Employment, Selected Periods,
1980-2011
Sector/Year
Agriculture
Mining
Manufacturing
Electricity & Water
Construction
Financial Services & Real Estate
Distribution
Transport & Communication
Public Administration
Education
Health
Private Domestic Services
Other
Total
1980
32.4
6.6
15.8
0.7
4.2
1.2
7.0
4.5
7.0
4.1
1.5
10.7
4.3
100
1985
26.3
5.2
16.1
0.7
4.3
1.5
7.4
4.8
8.6
8.5
1.9
9.4
5.5
100
1990
24.3
4.3
16.5
0.7
6.4
1.5
8.1
4.5
7.8
9.1
2.1
8.6
6.2
100
1995
26.9
4.8
15
0.8
5.8
1.7
8.1
4.1
6.2
9.3
2.1
8.2
6.9
100
2000
26.3
3.6
14.7
0.9
4.3
2.8
8.4
3.5
4.7
11.3
2.3
8.3
9.0
100
2004
19.3
3.5
14.5
1.2
4.2
3.1
12.3
4.5
7.6
10.0
2.5
9.6
7.6
100
2010
32.2
3.3
12.1
1.4
1.7
5.7
6.7
2.7
7.9
10.1
3.9
8.1
4.2
100
2011
28.9
3.8
11.6
1.4
1.8
6.1
6.2
2.6
8.7
11.7
4.3
7.8
5.0
100
Major Capacity Constraints (CZI Surveys)
Factor-floor productivity and unit labor costs remain competitive, but the
sector is hampered by high cost of business (World Bank, 2012)
Trade
• Total exports for the period January to October 2013 stood at
US$2.8 billion, against US$3.2 billion realised during the same
period in 2012.
• By the end of 2013, exports are projected to reach US$4.430 billion.
Projected at US$5 billion in 2014.
• Imports continue to grow faster than exports, totalling US$6.6
billion by October 2013, against US$6.1 billion realised during the
same period in 2012.
• Total imports for 2013 projected at US$7.682 billion, while forecast
at US$8.321 billion in 2014.
• As a result of the fast growth in imports against the sluggish growth
in exports, the current account deficit continues to widen to US$3.8
billion, above the original projected deficit of US$2.5 billion for
2013.
• A competitiveness gap is emerging: - Appreciation of the real exchange
rate suggests that the price structure of the economy has shifted against
tradable products.
• The distribution sector has filled the gap , supplying imported goods,
keeping prices of tradables at low levels and contributing to a current
account deficit.
• Contributing to the continued de-industrialisation in the economy.
• Short-term protectionist measures could lead to short-term gains at the
expense of medium-term recovery.
• Measures aimed at reducing costs of business (including reducing the
country risk premium to facilitate access to finance), and supporting public
services (energy, water, transportation) are more likely to be effective in
the medium-term.
• Stronger policies in mining and agricultural sectors would also stimulate
international demand for manufactured goods and the establishment of
new horizontal and vertical linkages with the manufacturing sector.
Exports & Imports Surge Post-2009
Current Account Balance (Proj.)
Current Account Balance ($000)
0
2006
2008
2009
2010
2011
2012
-500
-1000
-1500
-2000
-2500
-3000
-3500
-4000
-4500
CURRENT ACCOUNT (excl.official transfers)
2013
2014
2015
Exports by Destination
Imports from South Africa surge
Export portfolio is less diversified
Zimbabwe’s falling diversification contrasts starkly with
other African countries
Increasing dominance of resource-intensive exports
Cost of Exporting & Importing a Container, 2013
Receipts from Tourism
• Official Development Assistance (ODA) inflows for the
period January to September 2013, amounted to
US$259.1 million against a combined annual projection
of US$642.7 million.
• In 2013, support under ODA was largely channeled
towards humanitarian and social programmes in
agriculture, health, education, social protection, and
governance sectors.
• The disbursement rate as at end June 2013 was 26.9%
– a significant decrease from the 2012 disbursement
rate of 52% for the period under review.
• Official Development Assistance for 2014 is projected
at US$580.3 million in support of humanitarian and
social programmes in agriculture, health, education,
social protection and governance sectors.
Trends in Grants-to-GDP Ratio, 1980-2013 (%)
Average Annual IMF Disbursements (US$M)
Average Annual World Bank Disbursements (US$M)
120
100
US$ M
80
60
40
20
0
1984-1989
1990-1999
2000-2006
Average Annual AfDB Disbursements
70
60
US$ M
50
40
30
20
10
0
1984-1989
1990-1999
2000-2006
Net Capital Flows (US$M)
400
Balances (US$ Millions)
300
200
100
0
-100
-200
1970-1979
1980-1989
1990-1999
Year
2000-2006
External Loan Inflows (US$M)
500
450
400
US$ Millions
350
300
250
200
150
100
50
0
1980s
1990s
2000-2006
Grant Inflows
140
120
US$ Millions
100
80
60
40
20
0
1980s
1990s
2000-2006
Negligible reserves heighten vulnerabilities.
• Low external reserves and lack of a lender-of-last-resort
mean Zimbabwe faces downside risks with minimal buffers.
• With usable international reserves covering only 6 days of
imports by end of December 2013, the country has no
cushion against external shocks.
• At least three months of imports in reserve coverage is
deemed necessary.
Unsustainable expenditure mix
•
Unbudgeted for adjustments of January and July 2011 saw the employment costs
rise from 45% of the budget in 2009 and 2010 to unsustainable levels of 63% in
2011 and 69% in 2013, crowding out public investment and service delivery.
•
Implies 69% of the national budget and taxes is used to engage civil servants which
account for less than 3% of the population.
•
The Wage Bill at 75% of the 2013 Budget continues to account for a
disproportionate share of overall budget expenditures.
•
The disproportionate share of the wage bill in the total Budget implies that we are
only living under 25% of Budget resources for both Operations and the Capital
Budget.
•
Yet the Medium Term Plan (2011-15) (MTP) singled out infrastructure
rehabilitation and expansion as the foundation for economic growth and
development.
•
Resource envelop of US$2 billion a year over a 5-year period is required.
•
A cash deficit emerged since 2010 financed mainly by SDR sales and nonconcessional loans.
• For the whole year (2013), total revenue collections are now estimated at
about US$3.72 billion, which is below the original budget estimate of
US$3.86 billion.
• Results in revenue projection shortfall of about US$140 million.
• Cumulative expenditures to November 2013 amounted to US$3.526 billion
against a target of US$3.396 billion, resulting in expenditure overrun of
US$130 million.
• For the period to November 2013, employment costs amounted to
US$2.429 billion accounting for 68.9% of total expenditure, against a
target of US$2.284 billion giving an overrun of US$145 million.
• During the period under review, operations and maintenance amounted to
US$744 million, accounting for 21.1% of total expenditures, against a
target of US$601 million giving an over-expenditure of US$143 million.
• The expenditure overrun was mainly necessitated by the Constitutional
Referendum and Harmonised General Elections at US$178.4 million,
outstanding obligations for the holding of the 2012 National Census
US$12.4 million, and hosting of the UNWTO Conference, US$7.6 million.
•
•
•
•
•
•
•
Investment is hampered by a poor business climate, uncertainties
over the implementation of the indigenization policy, and political
uncertainty, while domestic investors may face difficulties
accessing long-term credit.
At US$10.7 billion (77% of which are arrears), Zimbabwe’s external
public debt is unsustainable;
In fact, Zimbabwe is in debt distress with debt accounting for 88%
of GDP at end-2012- is likely to worsen further as resolving
external payments arrears through a comprehensive arrears
clearance framework underpinned by strong macroeconomic
framework is likely to be a protracted process;
Non-concessional borrowing could complicate future external
arrears clearance;
Debt overhang remains a serious impediment to macroeconomic
stability, sustainable growth and development;
Zimbabwe faces these risks with thin buffers – foreign exchange
reserves are very low at 0.3 months of imports at end-2011
against a minimum level of 3 months;
Based on rebound effects and in the absence of strong policies to
promote growth, recovery is therefore fragile.
FDI Inflows
FDI Inflows
Foreign Direct Investment Inflows (US$M)
100
90
US$ Millions
80
70
60
50
40
30
20
10
0
1980s
1990s
2000-2006
Inward FDI Flows into SADC Countries, US$m
2009
2010
2011
Botswana
128.8
-6.1
413.6
Lesotho
99.9
113.7
132.1
Malawi
49.1
97
128.8
Mozambique
892.5 1017.9 2662.8
Namibia
522.1
793
816
South Africa
5365.4 1228.3 6004.3
Swaziland
65.7
135.6
93.2
Zambia
694.8 1729.3
1108
Zimbabwe
105
165.9
387
Source: UNCTAD 2013 Investment Report.
2012
292.5
172.3
129.5
5218.1
357.5
4572.5
89.6
1066
399.5
FDI By Country........China……How China
Became the Second Largest Economy
300,000.00
250,000.00
China
Chile
Costa Rica
200,000.00
Brazil
Ghana
Axis Title
India
150,000.00
Peru
Tanzania
Vietnam
100,000.00
Zambia
Zimbabwe
Kenya
50,000.00
Angola
Malaysia
-
(50,000.00)
Korea, Rep.
Thailand
FDI By Country………Brazil & India
80,000
70,000
60,000
Chile
50,000
Costa Rica
Brazil
Ghana
40,000
India
Peru
30,000
Tanzania
Vietnam
Zambia
20,000
Zimbabwe
10,000
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
-
(10,000)
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
(5,000)
Tanzania
10,000
Peru
Axis Title
FDI By Country Since 1980…………..Chile
25,000
20,000
Chile
15,000
Costa Rica
Ghana
Vietnam
Zambia
Zimbabwe
5,000
-
FDI By Country Since 1980…………..Vietnam & Peru
12,000.00
10,000.00
8,000.00
Costa Rica
Ghana
Axis Title
6,000.00
Peru
Tanzania
4,000.00
Vietnam
Zambia
Zimbabwe
2,000.00
-
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
(2,000.00)
Competitiveness, Ease of Doing Business etc…
World Economic
Forum (WEF)
Global
Competitiveness
Rankings
World
Bank
(WB)
Ease of
Doing
Business
Rankings
World
Economic
Forum
(WEF)
Global
Enabling
Trade
Rankings
Heritage
Foundation
Index of
Economic
Freedom
Transparency
International Corruption
Perception Index
2007/08
129 / 131
154 / 183
2008/09
118 / 121
160 / 183
112 / 118
145 / 147
166 / 180
2009/10
132 / 134
156 / 183
118 / 121
175 / 179
146 / 180
2010/11
136 / 139
157 / 183
122 / 125
178 / 179
134 / 178
2011/12
132 / 142
170 / 183
175/177
154/183
2012/13
132/144
172/185
175/184
163/176
2013/14
131/148
170/189
176/178
(repressed
since 1995)
157/177
150 / 179
129//132
Deteriorating international competitiveness with a ranking of 132 out of 144 countries
on the Global Competitiveness Index (2012/13).
Strength in terms of ‘soft factors’ such as female participation in labour force, reliance
on professional management, quality of education system, low inflation, protection of
minority shareholders and taxation, that however have low weighting in enhancing
competitiveness (ranked 61st).
Low ranking in ‘hard factors’ such as national savings, breadth of value chains,
property rights observance, venture capital availability, quality of electricity supply,
number of days to start a business and soundness of banks whose presence or lack
thereof determines the level of an economy’s competitiveness (rank ranged from 135
to 143).
The Global Competitiveness Report (2012/13) survey also came up with six most
challenging factors for doing business in Zimbabwe.
As with the 2012 CZI Manufacturing Survey, the factors undermining doing business in
Zimbabwe were policy instability, lack of funding, corruption, inefficient government
bureaucracy and inadequate infrastructure.
“Surprises, however, arise not from the rankings, but rather from the policy
disconnect; specifically the unwillingness of policymakers to tackle the challenges
identified, opting rather to focus on soft factors which do not necessarily add value in
lifting competitiveness rankings.”
Zimbabwe’s competitiveness — Action points Message from Davos 2013
• Austerity measures with regard to the Zimbabwean
case relate mainly to management of the wage bill and
allocation of resources focusing on capital formation.
• Policymakers may also work on innovation and
technological advancement rankings, especially in
upgrading industry equipment as Zimbabwe declined
from 119 in 2011 to 128 in 2012.
• The direction of the movement is worrisome with deindustrialisation of the economy, implying a slipping
backwards in structural terms.
Topic Rankings
Change in
DB 2012
DB 2014 Rank DB 2013 Rank
Rank (2014 v
Rank
2013)
Starting a Business
150
143
145
-7
Dealing with Construction
Permits
170
170
169
0
Getting Electricity
157
157
165
0
Registering Property
93
85
84
-8
Getting Credit
109
129
127
+20
Protecting Investors
128
128
124
0
Paying Taxes
142
134
127
-8
Trading Across Borders
167
167
172
0
Enforcing Contracts
118
111
112
-7
Resolving Insolvency
156
169
155
+13
Zimbabwe’s Services Policy Among the Restrictive (Services
Trade Restrictiveness Index)
Price of mobile call per minute (Average/Mean, US$, 2011
Average price of 1 MB of 3G broadband, 2011
External Debt
•
Resolution of Zimbabwe’s debt overhang is key to normalising our relations with
the international financial institutions and bilateral creditors. Somalia, Sudan and
Zimbabwe are the only three African countries with arrears to the international
financial community. Zimbabwe is regarded as a fragile state.
•
One of the serious impediments to the country’s developmental agenda.
•
Continued accumulation of external debt payment arrears is seriously
undermining the country’s creditworthiness, and severely compromising the
country’s ability to secure new financing from both bilateral and multilateral
sources.
•
In November 2010 Government approved the Zimbabwe Accelerated Arrears
Clearance Debt and Development Strategy (ZAADDS), as a basis for negotiating the
clearance of arrears and debt relief for the country.
•
The key tenets of ZAADDS are as follows: (i) the establishment and
operationalisation of a Debt Management Office in the Ministry of Finance; (ii)
undertaking a validation and reconciliation exercise of Zimbabwe’s public and
publicly guaranteed external debt database with all creditors; (iii) negotiating with
creditors and the Development Partners for arrears clearance, debt relief and new
financing; and (iv) leveraging Zimbabwe’s natural resources in pursuit of debt
relief.
• The Zimbabwe Aid and Debt Management Office (ZADMO) was
established in December 2010, in the Ministry of Finance.
• The validation and reconciliation exercise of the external debt data
base which commenced in 2011 has now been completed.
• Total external public and publicly guaranteed debt (excluding
Reserve Bank and private sector external debt) as at 31 December
2012, stood at US$6.077 billion, (49% of GDP).
• The stock of accumulated arrears accounted for US$4.72 billion (78
per cent of total debt stock).
• Total multilateral debt stock as at 31 December 2012, stood at
US$2.49 billion (41% of total debt), of which arrears amounted to
US$1.96 billion.
• The breakdown of the arrears is as follows: World Bank, US$1.4
billion; African Development Bank, US$632 million; European
Investment Bank, US$302 million; International Monetary Fund,
US$125 million; and Other multilateral creditors, US$117 million.
• Total external debt to bilateral creditors stood at
US$3.59 billion (59% of total debt), of which the stock
of arrears amounted to US$2.75 billion or 77%.
• Of the total bilateral debt, as at 31 December 2012,
US$3.02 billion is owed to the Bilateral Paris Club
creditors, and US$572 million to the Non-Paris Club
creditors which include China.
• Of the total external debt amounting to US$6.077
billion, penalty charges accounted for US$1.026 billion
(17% of total external debt).
Structural Changes in the Economy
• Informalisation of the economy and, the structural change in
agriculture in view of land reform. The reallocation of jobs across
sectors is central to the process of structural change and
productivity upgrading.
• Growth in labour productivity arises either from changes in labour
productivity within sectors – for instance through the
implementation of new machines and innovative technologies that
allow more output with the same amount of labour input – or from
the reallocation of jobs across sectors (“structural change”) when
workers move from low- to high-productivity sectors (e.g. from
agriculture to industry or services);
• At the same time, structural change is central and necessary to
increase living standards durably and equitably by allowing ever
more people to benefit from higher productivity levels in more
advanced parts of the economy.
•
Structural change is the most effective driver of growth to bring down rates of
vulnerable employment in developing economies, both in the short and in the
long run.
•
It is the across-sector labour productivity component of growth that is associated
strongest with the speed at which vulnerable employment decreases, compared
with other growth components.
•
Zimbabwe is experiencing a structural regression: increasing dependence on
natural resources, de-industrialisation; informalisation (84% of employment; 85%
of MSMEs).
•
The Finscope Survey Report of 2011 revealed that 40% of the population is
financially excluded and that only 24% is banked.
•
In addition, only 13% of the population uses savings products - in excess of US$2
billion circulating outside the formal banking system.
•
The share of the manufacturing sector in GDP peaked at 26.9 per cent in 1992
before collapsing to 7.2 per cent by 2002 and 10.8 per cent by 2003, 15.5 per cent
by 2009, 15.9 per cent (2011) and 15.6 per cent by 2012.
•
Industrial capacity utilization declined sharply from 35.8% in 2005 to only 18.9% by
2007, and below 10% by 2008, before improving to 33% in 2009, 43.7% in 2010,
57.2% in 2011, and climbing down to 44.2% in 2012 and 39.6% in 2013.
Inequality and Poverty
• High levels of unemployment and decent work deficits:
72% of the population below the poverty line by 2003, up
from 55% in 1995;
• The Poverty, Income, Consumption and Expenditure Survey
(PICES) 2011/12 Report suggests that 62.6% of
Zimbabwean households are poor whilst 16.2% are in
extreme poverty (76% of rural households are poor
compared to 38.2% in urban areas), up from 42% of
households in 1995 and the same level of 63% of 2003;
• 77% of the employed persons in Zimbabwe earn gross
monthly primary incomes of less than US$350 compared to
the Poverty Datum Line (PDL) of US$514.24 for a family of
five in 2011, resulting in households selling financial assets
more than they were buying them (dissaving) to fund
current expenditures since incomes fell short of current
consumption expenditures.
• Per capita GDP declined from US$720 during 1997-2002 to
US$265 by 2008, rising to US$370 by 2012;
• Growing informalization as reflected by the increase in
informal employment from 80% in 2004 to 84% in
2011;
• Inequality worsened: the gini-coefficient increased
from 0.53 in 1995 to 0.61 in 2003;
• The disappearance of a middle class: the ‘missing
middle’;
• The results of the 2011 FinScope Survey launched in
May 2012 revealed that only 38% of Zimbabweans are
served by formal financial institutions; and that 40% of
the population is financially excluded from both the
formal and informal financial products/services;
• HIV and AIDS (adult prevalence rate of 15.9%) & the reemergence of diseases that had been controlled
(malaria, TB, cholera).
Poverty Situation in Zimbabwe, 1995, 2003 and 2011: PASS I
& II, and PICES (2011/12).
Persons living below
the:
1995
29 % of Population
Food Poverty Line
20% of Households
55% of Population
Total
Consumption
Poverty Line
42% of Households
2003
2011
58% of Population
16.2%
48% of Households households
72% of Population
62.6%
63% of Households households
of
of
Indicator
1990
2000
121
128
151
Human Poverty Index (Rank)
60
91
Net Primary School Enrolment (%)
99
82
Human Development Index (Rank)
2006-08 2011
173
Adult Literacy
67
89
89
92
Infant Mortality (per 1 000)
61
73
81
90
Maternal Mortality Rate (per 100
000 births)
330
700
880
960
Life Expectancy (Years)
63
43
41
51.4
85
81
75.8
US$338
376
Over 70%
72
78
Population Using Improved Water
(%)
GDP per Capita
US$644
Poverty Rate
Brain Drain
42%
Over 3m
Zimbabwe’s HDI trends based on consistent time
series data
1980
1985
1990
1995
2000
2005
2010
2011
2012
Expected
Life expectancy at years of
birth
schooling
59.2
6.5
61.5
11.4
60.6
10.1
53.1
10.1
44.7
10.1
44
10.1
50
10.1
51.4
10.1
52.7
10.1
Mean years of GNI per capita
schooling
(2005 PPP$)
3.2
0,585
4
0,593
4.5
0,622
5.5
0,582
5.9
0,604
6.7
0,412
7.2
0,373
7.2
0,404
7.2
0,424
HDI value
0.367
0.426
0.427
0.408
0.376
0.352
0.374
0.387
0.397
Budgetary Allocations for Health, Education, Defense and Social
Protection, 1980-2013 (Percentage of Total Expenditures)
Budgetary Allocation
30
25
%
20
15
10
5
0
1975
1980
1985
1990
1995
2000
Year
Health
Education
Defence
Social Protection
2005
2010
2015
Key Economic Challenges (2014 Budget Statement)
• High consumption, leading to negative domestic savings and, hence,
exposing the country to rely on external savings;
• Liquidity constraint reflected in declining money supply growth, low
financial intermediation and resulting in weak aggregate demand;
• High debt overhang resulting in limited and highly priced lines of
credit;
• Limited external inflows in the form of foreign direct investment,
lines of credit and grants linked to high country risk premium
resulting in low confidence by investors;
• Food insecurity owing to low productivity, low investment, as well as
climate change induced droughts and erratic rainfall distribution
pattern;
• Lack of industry competiveness due to obsolete equipment and
out-dated technology as well as dumping and smuggling imposing
unfair playing field with external competitors;
• Infrastructure deficits, in particular transport, energy and water,
resulting in high cost of doing business and, hence, lack of
competitiveness;
• Financial sector vulnerabilities stemming from weak governance,
low interbank market activity, high non-performing loans (15.9% on
average), low capitalisation and poor asset quality in several banks;
• Lack of transparency and accountability in the exploitation of our
mineral resources;
• Widening current account deficit due to faster growth of imports
than exports leading to haemorrhaging of the economy.
Way Forward: Unchanged Policies (Business as usual)
Scenario
• The economic rebound is projected to moderate up to 2017;
• Compared to other African countries, the Zimbabwean economy remains
highly differentiated, with a broad-based potential for recovery in all
sectors, from mining to agriculture, manufacturing and services.
• In this current phase of recovery, the mining sector is emerging as the
main sector capable of autonomous growth.
• The restructured agricultural sector also has potential of supply-response
to improved conditions, as well as tourism.
• However, growth in the manufacturing sector appears more dependent on
the internal demand generated by the two main driving sectors
(agriculture and mining).
• Hence, the quality of policy in the mining and agricultural sector will in the
main be the major determinants of the rate of growth of the economy.
Schematic illustration of linkages in the post-crisis
Zimbabwean economy (World Bank, 2012)
• The externally driven recovery of mining growth, based on the
intensity of external demand, is evident from the dynamics of the
recovery, which started around 2005 with the development of big
operations in platinum, while the economy was still in the midst of
economic turmoil.
• In spite of the strong recovery, the mining sector has not yet
recovered the pre-crisis peak-volumes due to unfavorable legal and
taxation regimes that stunt levels of investment.
• Thus, the baseline scenario (unchanged policies) estimates that
level of exports in the mining sector will reach US$ 5 billion in 2018,
below the potential of existing projects.
• Stronger policies in the mining and agricultural sector will ultimately
have positive downstream effects on the manufacturing sector, and
on services.
• Furthermore, development of mining’s potential requires transfer
of technology and FDI, both in the medium-term, and the longerterm (to support the process of discovery).
•
Without stronger policies, recovery of the mining sector may remain stunted and
limited to a temporary rebound due to stronger external demand, with limited
permanent downstream effects on the rest of the economy.
•
Besides, an approach seized with short-term maximization of rents-extraction from
temporary favorable external conditions may present adverse effects on the
country’s overall competitiveness and lead to worsening of economic governance.
•
Hence Zimbabwe is at risk of sliding into the resource curse.
•
Zimbabwe’s manufacturing sector remains one of the most diversified in SubSaharan African, albeit with very limited entry of new firms following the 2009
stabilization.
•
The remaining large firms in the sector, the ‘survivors,’ rely on imported inputs that
used to be sourced mostly locally.
•
Their current stress levels are extremely high and are suffering more from supplyside than demand-side constraints to capacity utilization.
•
Lack of competitiveness stems mainly from the consequence of the decade-long
crisis, and hyperinflation - Firms are operating obsolete machinery, there is limited
availability and high cost finance, power outages, higher input costs due to loss of
domestic linkages, lack of access to exports markets due to unreliable supplychain, and overall uncertainty.
• A sustained supply-response requires development of
infrastructure, in particular energy sources and a sound
management of water.
• In the absence of policy reforms, fiscal revenue growth will
stagnate; and expenditure will be heavily tilted towards
employment costs;
• The resulting cash balance will fail to provide appropriate
buffers against external shocks; and
• Despite the stabilization of the current account, external
debt will remain unsustainable.
Sustaining Pro-poor Growth, Restoring Sustainability:
Active Policies Scenario
Sustaining growth requires a commitment to reform:
‘business-as-usual’ will not work.
Active policies (reforms) are needed to raise
competitiveness,
underpin
confidence,
reduce
vulnerabilities, and unleash pro-poor and inclusive
growth, especially targeting agriculture.
This entails dealing with the most binding constraints to
growth (doing business reforms) and rebuilding and
strengthening commodity value chains and cluster
initiatives to facilitate pro-poor and inclusive growth.
• Stronger policies can turn the mining sector into the turnkey for longerterm sustainable development.
• Mineral windfalls can mitigate external vulnerability, facilitate
infrastructure investment, higher domestic saving, reduced banking sector
vulnerability, and lower cost of capital for investment in the manufacturing
and agricultural sectors.
• According to a World Bank study (McMahon et. Al, 2012), under improved
business conditions where all major bottlenecks, including infrastructural,
are removed by 2018, existing mining projects could absorb up to US$12
billion of investment by 2018, with an export potential of more than
US$11 billion per year.
• Development of the agricultural sector is critical to achieving long-term
broad-based growth.
• Hence higher productivity in agriculture can leverage a broad-based
process of economic transformation and long-term growth with
agriculture resuming its role as a supplier of savings, labour, and inputs to
other sectors, and contributing to food security and exports.
• In the context of dollarization, liberalization and high
international prices of commodities, the new
agricultural structure with many smaller farms presents
a high potential for long-term growth and employment
creation
• Apart from favorable incentives, the supply response
needs to be supported by agricultural services and
technical change.
• In addition to maintaining the strong improvement of
incentives since 2009, policy-makers should also pay
attention to improving competition in input and output
markets, contract farming, rehabilitation of
infrastructure and agro-processing facilities, resolution
of remaining uncertainties regarding land tenure and
resolution of conflict on land rights.
Strengthening the macroeconomic framework, start rebuilding reserves, and
implement key structural reforms.
Regulation and supervision of the banking system to deal with financial sector
vulnerabilities is necessary.
Finalization of RBZ restructuring is critical as well as restoring the lender-of-last resort
function as highlighted in the 2014 budget.
Strengthening fiscal management and improving the expenditure mix:
Better planning and control of spending and more transparency on diamond revenues
to avoid slippages that necessitate large mid-term budget reviews.
The spending mix is unsustainable, with employment costs taking up a very large share
of government resources.
Over the medium term, containing wage bill growth would create fiscal space to
improve public services, raise infrastructure investment, and build buffers.
Improve public financial management (PFM).
The government should reinforce expenditure control, and strengthen the human
resources and payroll management system to help contain the wage bill.
Other key reforms to restore fiscal sustainability include improving financial
monitoring and oversight, strengthening the governance of public enterprises, and
developing a medium-term expenditure framework.
Addressing structural bottlenecks such as the rehabilitation
and expansion of power stations, rehabilitation and
construction of road networks, and upgrades to water and
sewer infrastructure.
Restructuring of Public Enterprises:
Issue has been on the policy agenda since ESAP.
The 2013 restructuring programme focused on 18 public
enterprises identified by Cabinet which are also in the MidTerm Plan. No progress recorded.
The public enterprise and parastatal reforms also target the
implementation of Results-Based Management (RBM)
which entails concluding performance agreements
between the responsible Minister and the parastatal
Boards, who in turn will establish performance contracts
with Chief Executive Officers of public enterprises.
Zimbabwe’s debt overhang remains an impediment to medium-term fiscal and
external sustainability.
A debt-resolution strategy is therefore critical to resolving external payment arrears
and re-engaging the international community to unlock international credit lines.
Addressing this issue will require a comprehensive arrears clearance framework
underpinned by a strong macro policy framework.
DEBT RELIEF through the Zimbabwe Accelerated Arrears Clearance Debt Development
Strategy (ZAADS) of March 2012 to deepen engagement with both creditors and
development partners;
Being implemented through the Zimbabwe Accelerated Re-engagement Economic
Programme (ZAREP) which will contain detailed policy measures to be agreed with
the multi-lateral institutions based on:
• The establishment of a good track record of implementing sound macro-economic
policies (Staff Monitored Programme), giving scope for unlocking new financing;
• Containing and managing the public sector wage bill to sustainable levels; and
• Securing strong support from development partners for arrears clearance and debt
relief, including closing the financing gap in support of sustained and inclusive
economic growth.
Commendable progress has been made in operationalizing the Debt Management
Office (DMO), which has been reconciling and validating debt data with creditors with
the assistance of UNCTAD and MEFMI.
Need for a Social Contract & Implementation of Agreed Positions:
In view of the trade-offs in policies (e.g. containment and reduction of the
share of revenues taken up by employment costs), there is need for
Zimbabwe to negotiate and implement a Social Contract.
A Social Contract helps restore good faith (trust) amongst the social partners;
make them accountable to each other; help parties subordinate sectarian
interests to national interests; develop and share a common vision; and
inculcate a smart-partnership win-win mind-set.
Furthermore, there is an urgent need to implement the agreed TNF protocols
such as the Kadoma Declaration, the Principles of the TNF and the
National Productivity Institute launched in February 2003 to spearhead
the promotion of a culture of productivity.
According to the IMF, if corrective measures are implemented,
given the same trajectories for commodity prices, ...
• the economy is projected to grow faster, driven by higher
FDIs and a better business environment;
• Fiscal revenues will strengthen and a more balanced
expenditure mix will be achieved;
• The positive cash balance will provide a greater reserve
buffer against external shocks; and
• The economy will have a smaller debt stock.
• CASE STUDY OF THE MINING SECTOR DRAWN FROM:
ZIMBABWE: From Economic Rebound to Sustained
Growth
• GROWTH RECOVERY NOTES
• NOTE IV: ZIMBABWE CURRENT POTENTIAL FOR
MINING GROWTH
• December 2012
• Gary McMahon (World Bank); Rene Hochreiter and
Robinn Yale Kearney (Allan Hochreiter) and Brandon
Tracy (World Bank)
• Forecast 2018 production of gold in the current policy framework is
957,000 ounces; but could rise be 2,648,000 ounces with more investment
stability.
• Employment in the gold sector is estimated at 8,600; but could rise to
15,200 in 2018 in the current policy framework or 27,600 in the more
investor friendly framework.
• With respect to the kimberlite diamond mine at Murowa, production in
2011 was 367,000 carats and expected production in 2012 is 565,000
carats. With no major investment, production is expected to remain at the
level of 565,000 carats by 2018. In more favorable policy conditions, an
investment of US$100 million could result in production of 1 million carats
per year. Employment would then increase from 433 to 800 persons.
Investment in the sector is expected to reduce operating costs from about
US$100 per carat to US$60 per carat.
• From the four ZMDC controlled mines in Marange, production in 2011 was
9 million carats and expected production in 2012 is 11 million carats. [The
value of these alluvial diamonds is much less on average than in the
kimberlite pipes, averaging about 25 percent of the value per carat.
However, operating costs are also very low at about US$4 per carat.]
• Production is expected to peak at 12 million carats over the next few
years, and an investment of US$150 million could increase production to
15.2 million carats per year by 2018.
• Employment in the Marange area is about 1,000 persons and expected to
remain at that level.
• In the optimistic case where policies are more investor friendly and
there are significant infrastructure improvements, using average
2011 prices, by 2018 gross revenues and fiscal revenues of the
mining sector increase by 309% and 344%, respectively, compared
to 2011.
• The increase in gross and fiscal revenues compared to the base case
projections for 2018 are 119% and 112%, respectively.
• There are increases across the board, with the most important new
developments being the large expansions in gold and coal mining
and the opening of the iron ore mine.
• The gold sector is projected to provide almost half of fiscal
revenues from the mining sector.
• Projected employment is 56,200, excluding artisanal miners.
• Projected investment over the period is nearly US$12 billion,
dominated by coal.
• Once what is in the ground is known, three main factors can
enhance or constrain the development of a mine: (i) availability of
transport infrastructure, (ii) access to power, and (iii) the policy and
fiscal regime impacting the mining sector.
• Most of Zimbabwe’s mineral output is of the high value per volume
type and hence is not greatly affected by the general lack of or
poorly maintained transport infrastructure, particularly rail and
access to adequate port facilities.
• Diamonds, gold, platinum, and ferro-chrome can all easily be flown
out or taken by road at low costs relative to value. The only bulk
commodity being produced is coal, most of which is consumed
locally.
• While historically human capital has not been a major constraint, as
missing skills could be imported, given the global mining boom,
there are severe shortages developing around the globe and
Zimbabwe could be
• Affected if its mining sector had a major boom beyond
rehabilitating what currently exists.
• A recent survey placed the global mining skills shortage second
after resource nationalism as major constraints facing the mining
industry.
• If the coal and iron ore mines are producing in 2018, as in the
optimistic scenario, the situation will change radically: there will be
a need for both rail links and access to ports and a satisfactory road
network.
Transport Infrastructure
• The quality and capacity of infrastructure has declined tremendously in
Zimbabwe since 1995 due to low levels of maintenance and little
investment in new infrastructure.
• It is estimated that to rehabilitate the existing road and rail network would
require about US$4 billion.
• The main new investments would be railway of approximately 250 km
from the Sengwa coal field, at a cost of approximately US$750 million, and
smaller lines linking the Lubimbi coal field and the iron ore deposits in the
east to existing lines.
Access to Power
• According to the African Development Bank (2011) report, the situation in
the power sector may be even more dire than in transport infrastructure.
• The Chamber of Mines of Zimbabwe reports that average power prices
from the grid recently became the region’s highest tariffs at 10.6
cents/kWh, almost double the average of its neighbours.
• Mining operations are paying on average 17 cents/kWh.
• Full rehabilitation of the public system from 2011-2020 would cost about
US$2.2 billion and another US$2.1 billion of private investment in the
power sector would be needed in order to provide the country adequate
power by the end of the decade.
• These estimates do not include a large expansion in mining operations, as
projected in the optimistic scenario.
Mining Sector Policies and Fiscal Regime
• Economic and political instability aside, the policy aspects of Zimbabwe’s
mining sector, including taxes, were considered favorable by international
standards.
• The present Mines and Mineral Act is considered satisfactory by mining
operators as was the fiscal regime.
• A new draft Act has been produced, which is also considered satisfactory
but it has not been tabled, leading to uncertainty in the sector.
• However, royalties have been increased substantially recently as well as
various fees associated with exploration and exploitation.
• While most of these fees are bearable for an operating mine, they are not
for exploration companies where no income is forthcoming.
• What little exploration that is taking place will mostly be scared off if these
fees, which are likely the highest in the world, are not reduced.
Newcomers are unlikely to come in.
• The biggest uncertainty concerns the policy of indigenization, where
foreigners must cede at least 51% of a mining operation to indigenous
persons.
• While for existing operations, the owners have been making different
deals with the Government as how to make the transfer, very little of this
51% is going to be paid for with cash upfront.
• Except for very lucrative known deposits, it is unlikely that new greenfield
investments or major expansions are likely will take place.
• In the base case scenario, the expansion is mainly due to revitalization of
many gold operations in response to the continued very high prices, the
recapitalization of Hwange, the reopening of the nickel mine, and the
increase in diamond production at Marange.
• The policy uncertainty and political instability are freezing-out on new
exploration with the exception of diamonds and some known deposits.
• In the 2011-12 Fraser Institute survey of mining companies, Zimbabwe
was ranked 73 out of 93 jurisdictions with respect to policy attractiveness
for exploration; before the indigenization policy was implemented.
• When prices remained at very high levels and tax receipts often did not
follow suit, this has witnessed increased resource nationalism in which
‘softer’ countries are demanding revised contracts with higher tax rates
and ‘harder’ countries are demanding partial ownership of operations, or
some combination of both.
Mining Linkages
• There are three main forms of linkages from the mining industry:
backward, forward, and horizontal (or sideways).
• For low and low-middle income countries, the third linkage has the
potential to be the most important.
• While there are opportunities in surveying and related fields for backward
linkages, the main activities and expenditure are on sophisticated large
equipment and plant installations.
• There are also some forward linkages through refining and beneficiation in
general, but again the main activities are the manufactured goods that use
steel, aluminum, nickel, etc., dominated by sophisticated and/or low cost
economies.
• Most of these opportunities are not be taken advantage of in a lowincome or low middleincome country without an active effort by the
government, the mining companies, and the local business community.
• Industrial mining operations tend to rely heavily on long-established
contacts abroad and buy in bulk, particularly those with operations in
several countries.
• Domestic businesses are often not capable of providing the quality that
these operations need.
• The level of employment created through domestic procurement is often
far higher than employment in the mines themselves: a study of the
Newmont gold mine at Ahafo in Ghana found 2.8 direct supplier jobs for
each mining job.
•
•
•
•
•
•
•
McMahon and Tracy (2012) estimate that the Kansanshi copper mine in Zambia
creates about 3.5 jobs in mine supplier companies for every job in the mine.
These figures do not include employment in ‘supplier of suppliers’ or standard
multiplier impacts of the expenditures of the employees or owners of these firms.
Countries (such as Chile), that has increased domestic procurement by mining
companies across the board, have made directed efforts to increase the capacity
of domestic firms to meet the high standards demanded by mining companies,
introduced training programs to increase the relevant skills of the labour force,
and built adequate infrastructure so local companies can be competitive.
Zimbabwe has put considerable emphasis on increasing the downstream value
added of its mineral production, although outside of platinum, ferrochrome, and
tolling of nickel from Botswana, beneficiation has been rather limited.
Processing of gold and diamonds into jewelry is not taking place in the country to
any significant extent.
While historically, Zimbabwe had very strong institutions in developing the human
capital for some of the ‘capital light’ upstream industries—e.g. geologists,
surveying, mineral analysis—more and more the country is relying on external
agents for such activities given the drain of human capital in the industry and the
almost total deterioration of tertiary level schooling in the area.
The geology department at the University of Zimbabwe, for example, currently has
one permanent member of staff and one contract staff member versus the 24 staff
that the curricula calls for (Chamber of Mines, 2012).
• While information is limited, it seems likely that historically Zimbabwe
fared better with respect to domestic procurement of the mining industry
than most Sub-Saharan African countries other than the Republic of South
Africa due to its stronger industrial base and better infrastructure.
• In 2009 the Chamber of Mines estimated that local procurement was
US$150 million and projected an increase to US$300 million in 2010.
• Zimplats and Mimosa, who combined were likely the largest input
purchasers in the Zimbabwean mining industry in 2011, reported an
increase in local procurement from 20% of the total to 40% from 2010 to
2011 (Implats 2012).
• The strategy followed by these two companies includes:
• --‐ “Toll manufacturing of products such as protective clothing, roof
support and bulk bags;
• --‐ Encouraging local suppliers to partner with foreign OEMs who offer
specialized backup service;
• --‐ Outsourcing of non-core business activities to local suppliers;
• --‐ Working as guarantor for credible local suppliers to bankers; and
• --‐ Working with suppliers to support the government’s look east policy.”
• Ian Saunders of New Dawn, one of the larger gold mines, notes that while
most of their every day consumables are procured locally, he estimates
that about 5% are actually produced locally.
• The issue of horizontal linkages or domestic procurement is likely to be a
key issue in Zimbabwe in the near future as it is in most mining countries.
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Once the worst aspects of the economic crisis in Zimbabwe had passed, the mining
sector quickly moved to its historic position of a leading producer and generator of
foreign exchange and fiscal revenues in Zimbabwe.
Due to the economic and political instability, the country was not able to take
anywhere near full advantage of the global boom in mining prices.
However, while prices are moving lower (excluding gold and diamonds), they are
still well above historic trends for most commodities, so there is still an
opportunity to significantly expand the sector.
With a relatively investment friendly mining policy, taxes and fees set at average
global levels, and improvements of transport and power infrastructure, there
could be very large increases in production and value added, more than double
the projected increase in the status quo (base) case.
The value of production would increase by 293% by 2018, exports by 287% and
fiscal revenues by 344% in this optimistic scenario.
Until the policy and fiscal changes of the last two years, mine operators were
reasonably satisfied with the sector specific policies, laws, and taxes.
The two biggest impediments to new investment and exploration are the
indigenous ownership requirements and the very large application and registration
fees for prospecting and exploration.
While a return to the former mining sector legislation is unlikely, a situation
somewhere in the middle that is internationally competitive could greatly help the
sector move closer to the optimistic scenario described above (fees have been
revised downwards).
Policy reforms that address the difficulties of legitimate exploration companies in
obtaining access to claims of adequate size for adequate lengths of time, also
provide security with respect to the rewards for new discoveries, could go a long
way to building up the pipeline of new projects in the medium-term.
THANK YOU!