THE Reserve Bank of Zimbabwe (RBZ) has encouraged both Government and private sector players to build more industrial capacity to avoid the current over-reliance on mineral commodities.
Diversifying the economy and promoting value addition can reduce Zimbabwe’s vulnerability to external shocks and fluctuations in global commodity prices, experts say.
This is particularly pertinent given that the mining sector accounts for around 65-80 percent of the nation’s total export earnings, with platinum, gold and diamonds being major contributors.
In the past year, platinum prices faced an immense decline, which dimmed the sector’s performance. However, platinum prices are beginning to look up as they last week rose to US$1 090 an ounce, the highest since May 2024, driven by tight supply.
While minerals significantly contribute to the country’s economy, analysts and industry players have called for diversification to reduce dependence on a single sector. The fear is that recent commodity price fluctuations might continue to affect the country’s export earnings if the country remains reliant mainly on minerals. Despite having firm gold prices, minerals had a mixed performance in 2024 as the market experienced a significant decline in prices due to increased supply and ample inventories.
Zimbabwe’s export landscape has undergone significant changes over the years. In 1995, the country had a comparative advantage in approximately 2 840 export products, but this number has since declined to around 1 353 products.
A recent survey revealed a substantial decrease in products with export comparative advantage, from 488 in 2002 to just 160 today. Furthermore, the share of manufactured exports in total merchandise exports experienced a brief increase in 2019 but subsequently resumed its downward trend.
This decline in export competitiveness highlights the need for Zimbabwe to diversify its economy and strengthen its manufacturing sector to regain its position in the global market. These calls to build more industrial capacity beyond the current reliance on mineral commodities come as the government is actively working to diversify the country’s income streams, with a focus on boosting capacity and output in key sectors.
Agriculture is a major area of emphasis, particularly wheat production and horticulture, which have experienced remarkable growth in recent years. Additionally, efforts are being made to improve the ease of doing business, aiming to reduce costs for local industrialists and make manufacturing more competitive. These initiatives aim to promote economic growth, increase productivity and create a more favourable business environment.
To reduce dependence on raw minerals, stakeholders recommend proactive measures to promote value addition and export diversification. This could involve encouraging local processing and manufacturing of minerals to increase their value before export. Additionally, exploring new markets and products can help reduce reliance on a narrow range of commodities, making the country’s economy more resilient.
“Commodity prices are determined away from us, and there is so much volatility that takes place, sometimes due to geopolitics and that affects our economy a lot. We need to invest and build capacities elsewhere because minerals are a finite resource that also goes through unpredictable patterns,” said RBZ Deputy Director Exports and Diaspora Remittances, Mr Dennis Chirata, at the recently held POSB exporters conference.
“We do not have an option; value addition, we need to do forward integration if we are to survive in the long run. Going into that mode will solve our multiple problems, there will be more employment creation, more foreign currency, economic stability and inclusive growth.”
ZimTrade Manager — Export Development, Mr Tatenda Marume, said he was optimistic about Zimbabwe’s potential to diversify and expand its export portfolio, identifying numerous opportunities for growth and development.
“We need to reverse the current trend where we are exporting a few commodities. In 1992, our export products were quite diversified. We were exporting a lot of value-added products, which include processed foods, chemicals, clothing and textiles… and we were even exporting electronic products, like radios and televisions, to places such as the United States of America,” said Mr Marume.
National Competitiveness Commission Executive Director, Mr Phillip Phiri indicated that the country needs to move beyond exporting raw materials and instead focus on value-addition to boost earnings and create jobs.
“There is a need for big companies to start diversifying and looking at mine-to-factory models. We need to start thinking more about value addition. Imagine if US$1 billion we currently get from tobacco is converted to US$5 billion after value-addition.
Also, imagine value adding our current mineral exports from US$6 billion to US$35 billion exports,” said Mr Phiri.
By diversifying its export basket and promoting value-addition, Zimbabwe can drive economic growth and reduce its vulnerability to fluctuations in global commodity prices. This will require a concerted effort from government, industry stakeholders and other players to create an enabling environment for value addition and export diversification. – Sunday Mail