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Sunday, January 29, 2023
HomeGuest BlogEconomic Policy Should Be Modeled On Value Addition

Economic Policy Should Be Modeled On Value Addition

By Victor Bhoroma

Zimbabwe’s medium to long term economic policies should be modeled around value addition and beneficiation of its commodities as the route to re-industrialization and sustainable economic growth.  

The country’s trade statistics clearly show that the local economy is very resilient despite the headwinds of high inflation, currency instability and government policy inconsistency.

In the year 2021, export proceeds jumped 66.6% to US$6,195 billion from US$3,719 billion realized in 2020. In the first half of 2022, exports accelerated to US$3,467 from US$2,354 earned in the same period in 2021.

What is of great concern is that 82% of the above export values is made up of raw or semi-processed minerals and semi-manufactured tobacco.  The country’s biggest exports are semi manufactured Gold, Nickel Ores, Mattes and Concentrates, Unmanufactured tobacco, Platinum concentrates, Chromium ores and concentrates.

Surge in export value

The country’s exports have surged largely because of the rally in mining commodities on the world market with Gold trading at over US$1,653/Ounce in the last 3 years, up from around US$1,200 between 2014 and 2019. Similarly, nickel is currently trading at US$23,513/tonne from an average of US$11,700 between 2015 and 2019.

The same can be said for platinum, chrome and coke which are all key export products from Zimbabwe. The rally in global prices has improved investment in the mining sector. The central bank export incentives (where exporters retain 80%-100% of their earnings for incremental export growth) has also come in handy in boosting exports

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Mining sector Exports

Strong mining performance in 2021 generated over US$4.4 Billion in export earnings, an 18% growth from 2020 export value of US$3.7 Billion. In the first half of 2022, mineral exports grew by 32% from US$2,194 billion to US$2,899 billion buoyed by the rally in global commodity prices. As such, the mining sector accounts for about 12% of the country’s Gross Domestic Product (GDP).

Raw Tobacco Exports

Value Addition is import substitution

Key bottlenecks

Victor Bhoroma is an economic analyst. He holds an MBA from the University of Zimbabwe (UZ). Feedback: Email vbhoroma@gmail.com or Twitter @VictorBhoroma1.

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