World Bank Predicts More Challenges in the Mining Sector

Image: World Bank

A World Bank report of June 2017 has predicted more challenges to come in the mining sector in Zimbabwe despite its stronger performance last year. Zimbabwe’s mining sector grew by 8.2 percent last year after contracting in 2015 according to the report which is titled The State In The Economy: Zimbabwe Economic Updates No.2.

The report states that the cost of doing business in the sector remains high due to an outdated capital stock, a difficult business climate, and high royalty rates relative to other countries.

“Significant investment will be required to improve productivity, lower costs, and sustain sectoral growth rates. The government’s commitment to the transparent, credible, and consistent application of its indigenisation policy will remain crucial to attract and retain investment in the mining sector,” the report states.

Last year the sector’s growth was driven by increased growth in gold (8.9 percent) and platinum (19.4 percent) which together accounted for about half of the mining sector’s total output.

“Artisanal gold production increased rapidly, due in part to the government’s decision to provide a US$20 million loan facility to unregistered artisanal miners and in part to the temporary reallocation of labor from the drought-stricken agricultural sector to the mining sector…
However, diamond production fell by more than 25 percent, as the industry is currently transitioning from alluvial to hard-rock mining.”

Despite the challenges, the mining sector is is expected to continue growing in 2017, mainly driven by gold and chrome production.

With regards to the manufacturing industry, the World Bank report states that the sector remained at an estimated growth rate of  0.3 percent in 2016.

The report states that, growth remains low in spite of the fact that since mid-2016 the sector benefits from import restrictions on goods that compete with domestic production (Statutory Instrument 64, SI64). On balance, the short-term benefit of SI64 was offset by continued closures of other firms.

SI64 restricts the importation of  products into the country with the hope of stimulating the local manufacturing industry.

This report is the second edition of the Zimbabwe Economic Update (ZEU) offered by the World Bank. ZEU offers a World Bank perspective on recent economic developments in Zimbabwe.

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