Ms Piffaretti
Business Reporter
ZIMBABWE needs to invest proceeds from mineral exports to diversify its industrial base for sustainable economic growth.
This way the country can avoid potential eventual risks associated with prolonged dependence on resources, World Bank Zimbabwe senior official has said.
World Bank Zimbabwe senior country Economist Ms Nadia Piffaretti made the remarks at a seminar in Harare yesterday to discuss findings of the Zimbabwe trade diagnostic report focusing on opportunities and challenges around trade and competitiveness .
She said Zimbabwe needs to institute reforms around its trade and investment policies and use proceeds from extractive resources to set the economy on sustainable growth trajectory.
“The more you export gold, diamonds or platinum, ideally, you should see the percentage of these (mineral) exports going down because the rest of the economy is growing. Zimbabwe needs to use proceeds of mineral exports to support the diversification of its economy,” Ms Piffaretti said.
“That is the way Malaysia, Chile and Indonesia grew their economies. They used the minerals to lower the cost of doing business in other sectors.”
Failure to use proceeds from resources effectively could result in what is commonly known as the “resource curse” or “Dutch disease” where a country rich in natural resources has the majority of its people living in extreme poverty.
Zimbabwe is home to more than 40 known mineral occurrences that include gold, diamond, platinum, coal, copper, nickel and methane gas and has the second biggest reserves of the platinum group of metals after South Africa.
Further, virtual dependence on natural resources for small developing economies such as Zimbabwe include potential negative effects of primary commodity price volatility on global markets where the country is simply a price taker.
Mineral exports led the economic rebound between 2009 and 2013 following a decade of recession that decimated the country’s Gross Domestic Product by around 50 percent.
Exports surged from US$1,6 billion to US$5,2 billion, mining accounting for two thirds, although the benefits were undone by significant and simultaneous growth in imports from US$3,2 billion to US$7,2 billion over the same period.
The other significant contribution came from agriculture-mainly tobacco and cotton lint with contribution from manufacturing virtually insignificant and continuing to decline.
Failure to effectively use mineral exports comes within the context of the reality that they are a finite resource that may deplete leaving indelible eye sores in the form of mounds of soil and pits and no other meaningful economic activity.
It has been found that Zimbabwe is less competitive on the global competitiveness ratings due to the high cost of doing business with infrastructure such as roads, rail systems, air transport and access to information communication technology services part of major reasons for that.