by Justice Zhou
Weakening global demand and fluctuating prices of raw materials have left commodity exporters such as Zimbabwe in an awkward position.
Weakening global demand and fluctuating prices of raw materials have left commodity exporters such as Zimbabwe in an awkward position.
No wonder beneficiation and value addition have featured prominently of late in local debate, as the nation grapples with how it could reap meaningful benefits from its resources.
But the country could be on track towards a solution for the raw materials vicious cycle in the wake of plans by some global mining powerhouses to jointly set up a platinum and base metals refining complex at a cost of US$3 billion in Zimbabwe,
Major miners Impala Platinum, Anglo American Platinum and Aquarius Platinum are reportedly mooting the project.
Local production of the auto-catalyst representing about 6 percent of global supply. Zimbabwe also has the world’s second-biggest platinum deposits after South Africa.
Demand for the precious commodity by European car makers has been flagging due to some economic problems in that region.
However, economists say Zimbabwe still failed to take advantage of the recent commodity boom, which was spurred by emerging markets such as China.
And so the continued volatility of international prices of such raw materials requires that the country diversifies its export base by adding value to some of its products from the extractive industry.
The move could help it improve its terms of trade with most of its key trading partners such as China and the European Union so as to expand its revenue streams.
The corrosion-resistant metal is used to manufacture catalytic convertors, electrodes, jewellery, laboratory equipment and dentistry equipment, just to name a few.
Export revenues have hardly provided the solution to the country’s vexing budget, current account, debt and unemployment problems, even as trade has improved somewhat.
Zimbabwe isn’t alone in the value chain debacle, and the discourse pertaining to the subject has taken the rest of Africa by storm.
“To date, African firms have been operating at the lowest rung of the ladder in global value chains… If the continent is to get to the next level, we must accelerate the speed of transformation,” African Development Bank president Donald Kaberuka said recently.
“That is where jobs are created. That is what will reduce the level of dependence by African countries, by trading our way out of poverty.”
Apart from platinum, Zimbabwe doesn’t have diamond cutting and polishing facilities, prompting it to lose out on improved revenues due to depressed prices of rough diamonds.
If the considered platinum initiative were to be a wake-up call to other sectors, the country would have a lot to gain as it seeks to rebuild its stuttering economy.
The damage caused by the resource nationalism route currently being promoted by some politicians and analysts could be curtailed in this way.
Rather than cause more turmoil to foreign investment flows through a radical indigenisation approach, policymakers can as well come up with a model that entails a credible local empowerment programme, also placing beneficiation as a priority in the extractive industry.
The European Union has lifted sanctions on Zimbabwe’s Marange fields, paving the way for resumption of the alluvial diamond exports.
But reports of lack of transparency and accountability have continued to shroud revenues from the sale of the gems in mystery.
Zimbabwe's exports to the EU amounted to US$482 million in 2012 alone. Total trade between the bloc and Zimbabwe amounted to US$791 million, with a positive trade balance of $ 171.5 million in favour of Zimbabwe, according EU figures.
Policy makers will be faced with the task of ensuring that the need to attract foreign capital is balanced with efforts to ramp up fiscal income.
Nonetheless, beneficiation is a necessity which can’t be overemphasised, given the degree to which primary commodities are prone to global shocks.
If indeed the platinum project will become a reality in the foreseeable future as planned by the major miners, this could mark the beginning of an epoch-making era for Zimbabwe.
It’s been extremely hard to get by amid a turbulent international economic landscape for countries that rely mainly on the extractive industry. It’s a jungle out there.
The onus is for both these foreign firms and government to ensure that the project is followed through.
Hopefully, other players in various sectors will emulate this example. By so doing, foreign firms can in effect spare themselves the deep-rooted accusation that theirs is only to fleece the country of its resources.
