Zim’s position in the export market

16 Dec, 2022 - 00:12 0 Views
Zim’s position in the export market

eBusiness Weekly

Rufaro Hozheri

Did you know that in 2021, Zimbabwe received foreign receipts worth US$9,7 billion, with the majority of that coming from exports? This year the number is expected to be even higher, with US$7,7 billion already in by August 2022.

The question I always get asked each time I put out these figures is how come this is never felt in the economy?

There is an economics school of thought that believes that natural resources are important but not necessary for economic growth. The paradox of plenty explains a scenario where a county is heavily endowed in natural resources but fails to do well economically because of overreliance on the resources and failure to innovate.

Another argument against this resource curse is that usually the government of the endowed country impose laws that are not favourable to investors in an attempt to protect the natural resources.

As we digest the source of Zimbabwe’s exports, I want you ascertain whether we suffer from the “Dutch Disease” or not.

  1. Platinum

The chemical element which is a member of the Platinum Group Metals is used in catalytic converters, jewelry and other electrical equipment. According to Wikipedia, Zimbabwe is the 3rd biggest platinum producers in the world after South Africa and Russia. Some of the biggest companies involved in platinum mining include Zimplats, Unki and Ngezi Platinum.

These companies are also some of the biggest companies in the country by balance sheet and have made some significant developments in the areas that they operate such building infrastructure for the community.

  1. Chromium

Zimbabwe is highly endowed in chromium reserves with claims that it might be second to South Africa only in terms of untapped chrome. The metal is mined in Shurugwi and the Great Dyke and used in the manufacturing of stainless steel, hardening the steel and in manufacturing of many vehicle components amongst other uses. The government recently banned the export of chrome ore and concentrates exports to encourage companies to invest in value addition and beneficiation facilities. Already Tsingshang, a Chinese multinational corporation is setting up a ferrochrome production entity in Mvuma. Zimbabwe earned over a billion from exporting ferro-chromium, ores and concentrates.

  1. Tobacco

The country boasts itself as one of the biggest producers and exporters of the golden leaf on the continent and world over. Tobacco farming is a major source of livelihood in most rural settings across the country. Most of Zimbabwe’s unmanufactured tobacco is exported to the UAE, South Africa, China and Mozambique, with over US$2,7billion worth having been exported since 2019. It is also worth noting that Zimbabwe does very little in value adding the unmanufactured tobacco and ends up exporting the majority in its raw form. Perhaps more would be exported if we manufactured cigarettes and value added the tobacco locally.

  1. Gold, unwrought or in semi-manufactured forms, or in powder form

Its no surprise that gold appeared on this list with just under US$5 billion worth of exports. The valuable metal has consistently appeared on this list with production increasing significantly in the recent years. In the past 18 months, the majority of the gold production came from the small-scale miners with the large-scale miners only contributing a third. An argument raised by many economic commentators is that in Zimbabwe if the conditions are set favourable with exporters retaining 100 percent of their exports, as a country we can actually export more than this.

  1. Nickel ores & concentrates, mattes, oxide sinters and other products of nickel metallurgy

I would not expect someone who is not conversant with mining to predict that Zimbabwe’s biggest export is nickel and products related to nickel. Unlike gold, where there are many artisanal miners, the mining of nickel and other PGMs is quite capital intensive.

Nickel is used as catalyst in organic chemistry and has become an important component of batteries for electric vehicles. Early this year prices went up after the tension in Europe.

Although Zimbabwe’s production is not as big as countries like Russia and Indonesia, in total between ores and concentrates to mattes and sinters Zimbabwe exported US$6.589 billion worth of the metals. Companies like Bindura Nickel Corporation and other producers of PGMs contributed towards this number.

Other significant exports

If you agree with the assumption that all remittances are a product of labor, then we can also add it to the list of our significant exports. Last year Zimbabwe raked in US$1,3 billion in remittances and over US$2 billion is expected by year end. Unlike the other conventional exports, this money is considered free funds and is not subject to retentions by the central bank. However, chances are most of it is likely to circulate in the informal sector.

Just like tobacco, Zimbabwe used to cash in massively on cotton exports in the past. Zim-cotton in the international market was considered clean and premium because it was hand-picked. With innovation and technology, there was the introduction of genetically modified cotton and Zimbabwe did not catch up, coupled with other local factors. With efforts to lobby the authorities to allow farming of genetically modified plants we hope to see cotton raking in more in the future.

My observation looking at the export numbers is that we mainly export minerals and agricultural output. I believe we can significantly increase our export receipts by value-adding and exploring other services that are not dependent on natural resources.

 

Rufaro Hozheri is a local financial analyst. He writes in his own capacity. For feedback contact Rufaro on email: [email protected] Cell: 0784 707 653.

 

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