AS commodity-driven economies grapple with weakening mineral prices on the global market, the World Bank has warned that Zimbabwe’s over-reliance on three export commodities could hurt export performance.
BERNARD MPOFU
The southern African nation is a net importer and relies on mining and a few agricultural commodities for export receipts. Official figures show that gold is the single largest export earner while tobacco tops agricultural exports.
“Zimbabwe’s concentration in three export commodities — gold, platinum, and tobacco — known for their price instability has increased the unpredictability of export earnings and fiscal revenues and complicated macroeconomic management,” says the World Bank in its new report on Zimbabwe’s private sector.
“In addition, recent increases in the global prices of food, energy, and fertilizers due to Russia’s invasion of Ukraine have significantly reduced the purchasing power of households and elevated the costs of production. The economy remains highly concentrated on a few products, with a small number of export products — mostly minerals and tobacco — generating the bulk of foreign exchange revenues.”
The agricultural sector, the World Bank noted, continues to retain a sizeable share of production and employment in the economy and the bulk of lending, with significant government support and intervention
“However, the level of productivity in the sector is the lowest across the economy, especially for food crops, with only tobacco and cotton demonstrating relatively high productivity. At the same time, higher value-added sectors, such as manufacturing and high-productivity services employ a smaller share of workers and have a lower share of lending,” the report says.
“Continuous macroeconomic challenges, and, as a result, a lack of a predictable, transparent, and non-discriminatory business climate; high levels of uncertainty; and lack of long-term fi[1]nance have resulted in limited investment in the country. Zimbabwe is lagging its aspirational peers, such as the Arab Republic of Egypt, Indonesia, and Türkiye on FDI.”
Official figures also show that after picking up in 2018 to US$718 million — largely reflecting one-off investments in the mining sector — foreign direct investment inflows Zimbabwe dropped to US$341 million in 2022.
“Meanwhile, price and exchange rate volatility, and large export surrender requirements have pushed many companies into the informal sector, limiting their ability to obtain financing from the banking system and further reducing the tax base,” the World Bank says.
“Also, many foreign exchange transactions take place in the informal sector, further intensifying pressure on the parallel market exchange rate. Inflation has been consistently high (three digits in recent years) and reached more than 314 percent in 2023, with the local currency weakening at a fast pace.”
