ZIMBABWE'S mineral exports are expected to decline further this year due to global headwinds, according to the World Bank (WB), with production inefficiencies in iron and steel weakening export competitiveness to the European Union (EU).
The country’s export proceeds fell by 16,90% to US$6,04 billion in 2023 compared to the previous year, largely weighed down by subdued mineral exports, latest data from the central bank show.
A number of impending challenges include slower global growth, particularly in China; high interest rates and debt levels; geopolitical and war threats; natural disasters; and unfavourable weather patterns.
The WB believes that these factors will have an impact on Zimbabwe in the form of falling export prices for minerals, increased risk of external debt obligations or fiscal pressure, increased risk of import costs, agricultural failures, and energy shortages.
The government has set a new US$40 billion by 2030 target for the mining sector. This came as the industry recorded US$20,5 billion in exports over the past five years.
The growth of the sector has been largely spurred by an improved investment environment, which, according to the Ministry of Mining and Mining Development, contributes 50% of the foreign direct investments.
However, speaking on the sidelines of a monetary policy review organised by the Confederation of Zimbabwe Industries, WB senior economist Victor Steenbergen said softening global commodities prices will also cripple the sector.
"So, the most obvious channel through which reduced global demand is affecting Zimbabwe is because mineral prices have been declining. So, we have seen platinum prices going down. We have seen lithium prices going down,” he told businessdigest.
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“There are also other commodities that have seen a decline in prices. In the last three months of 2023, that price drop was almost 30 to 40% for platinum, and I believe it is something similar for lithium. So, that leads to a real decline in export receipts.”
This is also coming at a time when global climate policies are taking centre stage. The economist said the carbon border adjustment mechanism (CBAM), an emerging bipartisan tool that aims to cut global pollution and avoid trade related carbon leakages, was a major call for action for Zimbabwe’s trade and industrial policy.
He said Zimbabwe was one of the most exposed countries to CBAMs due to the iron and steel industries.
As such, production inefficiencies in iron and steel will reduce the country’s export competitiveness to the EU.
"As we are seeing the introduction of new climate policies, such as the EU's carbon border adjustment mechanism, we also see that will affect export competitiveness of different African countries. So, one example for Zimbabwe, our own analysis suggests that the iron and steel market is affected by the sea bombs mechanism.
“So, because of the carbon intensity of iron and steel production in Zimbabwe, that could lead to a higher import tariff on the side of the EU and therefore Europeans may choose to purchase more iron and steel either from themselves or from other countries," he noted.
While other products may be added to CBAM, Steenbergen said there was a strong link between decarbonisation policy and export competitiveness, thus Zimbabwe had to build its capacity now.
CBAM entered into force on May 2023 and a transitional period is to apply between 2023 and 2025.
