ZIMBABWE must avoid over-reliance on its natural resources and instead leverage on them to grow alternative forms of capital and become a sustainable economy in the long-run, a top think-tank said.
Report By Taurai Mangudhla
Alan Gelb, a fellow of the Centre for Global Development (CGD), said the drive can however not be achieved without political and institutional consensus, which has proved to be a major challenge in other economies.
Resource-based economies, he argued, faced a lot of uncertainty as market fluctuations expose producers to huge revenue and trade shocks.
“Who would have thought crude oil prices could fall to US$34 per barrel from as high as US$100,” said Gelb in his keynote presentation at a World Bank and Zimbabwe Economic Policy Analysis and Research Unit High-Level Technical Dialogue on Zimbabwe Growth Recovery forum this week.
“If you want to be rich you need more than just natural resources or natural capital. You must move to produced and intangible capital. When countries are poor, they have mostly natural capital and they move to produced and intangible capital as they get richer.”
Currently, mining is Zimbabwe’s major economic driver, contributing 12% of fiscal revenue in 2011, excluding diamond proceeds, and is expected to contribute up to 25% of income in 2012.
Latest Chamber of Mines of Zimbabwe production figures as at the end of October 2012 show the country’s mineral production in the 10 months to October amounted to US$1,6 billion spurred by gold production.
To diversify the economy meaningfully, Gelb said government should reduce the cost of doing business in non-resource-based sectors like manufacturing and spur productivity through other measures like local procurement policies.
“The country should also use infrastructure created for the resource-based sectors to support non-resource-based sectors,” he said. “They should also build human capital, improve the business environment and reduce costs.”
According to World Bank notes on Zimbabwe growth recovery in mining, the extractive sector is expected to grow in the next five years with the value of production anticipated to increase by 293% by 2018, exports by 287% and fiscal revenues by 344%.
The World Bank said results show the expected increase in production between now and 2018 would be significant under the current mining policy, mineral fiscal regime and state infrastructure, but there is need for rationalisation of the tax regime and ownership policy with respect to indigenisation to attain mining growth in the long-run.'