Zimbabwe must add value to its resources

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Zimbabwe is extremely fortunate to have a vast array of high quality primary products, although the exploitation of those resources has not been a major boost to the national economy.

ERIC BLOCH COLUMN

Those primary product resources include numerous minerals, inclusive of gold, diamonds, emeralds, coal, chrome, asbestos, and many others. Zimbabwe’s primary products also include timber in the Eastern Districts and in Matabeleland region.

These are some of Zimbabwe’s innumerable primary resources, over and above diverse agricultural products which are produced, that could be quantitatively enhanced.

The counter-balancing problem is that, on the one hand, the extent of Zimbabwe’s accessing of the primary products is relatively minimal, as against the potential for the very considerable exploitation of the primary product resources.

On the other hand, it is also economically unhelpful that insofar as there is some accessing of the primary products, most of them are exported in their initial format, without any domestic market value-addition to those products. Illustrative of Zimbabwe’s ongoing losses of non-value addition to the primary products is a recent statement by the Zimbabwe Textile Manufacturers Association (Zitma).

That statement records that “the textile industry once provided employment to over 20 000 people”, and that “currently the textile industry provides employment to approximately 3 000 people”.

The Zitma statement also records that:

“The 2013/2014 cotton crop is estimated to be over 200 million kg’s. Of this, over 96% (over 192 million kg’s) of Zimbabwe’s cotton crop will be exported as basic lint, which is a primary raw material, and only 3% (approx. six million kg’s) will be value added locally.

That despite Zimbabwe being a cotton producer and producer of cotton fabrics, companies continue to import finished articles of cotton clothing as well as cotton fabrics. In doing so these companies are providing employment to citizens of other countries and supporting those industries.

If an extra 5% (an extra 10 million kg’s) of cotton lint was value added in Zimbabwe, this has the potential of creating an extra 1 000 jobs. Imagine what we could achieve if 25% of our cotton was value added into cotton yarns and fabrics”.

The statement further notes that “the Textile Industry currently offers:

100% Cotton yarns.
100% Cotton Woven Fabrics, suitable for work wear, uniforms and bed sheeting.
100% Cotton Knitted Fabrics, suitable for T-shirts, undergarments, sports and leisure garments.
Wet Pressing, Dyeing & Finishing services.
Fabric Printing services.
100% Cotton Towels.
100% Cotton Surgical Wool.
Blankets.
Socks.
Woven Polypropylene bags.
100% Cotton Baling Twine.
Tobacco Twine and
100% Cotton Shirts.

Despite that immense range of textile industry processes in Zimbabwe, these processes are only applied to approximately 15% of the annual cotton crop, and about 85% of the crop is exported in unprocessed condition.

Similar circumstances apply to most of Zimbabwe’s considerable variety and quantities of other primary products, including the very extensive and diversity range of minerals and of agricultural and allied outputs.

There is very little value-addition to those minerals as are mined, almost all of such minerals being exported in the state of their extraction from the ground. Illustrative of that Zimbabwean default is the absence of any industrial processing of chrome, asbestos, platinum and diamonds (although, in consequence of governmental pressure upon Zimbabwe’s largest producer of platinum, that producer has declared the intent to establish a platinum processing entity in Zimbabwe).

But as yet naught has been declared by those in the mining sector, or by domestic or foreign investors, to establish any facilities for processing and value-addition to Zimbabwean minerals.

Diverse positive policies and actions by government are necessary to reverse the prevailing negative economic consequences of the almost total absence of value-addition of minerals in Zimbabwe. Such policies and actions required by government include, amongst many others, ensuring value-addition to minerals and Zimbabwe’s other primary products:

Facilitation and motivation of investment. In order to achieve such facilitation and motivation, government needs to ensure, convincingly, that the investments would be secure on an ongoing continuance basis. To do so, Zimbabwe’s indigenisation laws need to be modified (not reversed), as also should be some of current exchange control policies, including:

Introduction of appropriate taxation and other incentives;

Enhancement of service deliveries of utilities;

Constructive modification of prevailing Labour legislation, to ensure that the protectiveness accorded to labourers should be matched by appropriate protections of employees;

Progressive increases of import duties on products which have value-addition in their countries, which would motivate local value-addition to Zimbabwean primary products;

Export incentives on primary products which have been domestically enhanced by value-addition operations, and

Enhancement and acceptance of disputes between investors and Zimbabwean government, (being such disputes as are founded by investor conviction that government defaults upon any investment-inducing agreements between government and the investors) being resolvability of such disputes by external judicial courts or arbitrations.

Should Zimbabwe do that as is necessary to motivate, and facilitate, value-addition to primary products, there would be great enhancement to the economy in general, diminution of outflows from Zimbabwe of monetary resources, and considerable increase in numbers of locals benefitting from employment.

Clearly, it is markedly in Zimbabwe’s best interests to generate very substantial value-addition to the country’s primary products (inclusive of minerals, timbers, and agricultural products).

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