Zimbabwe’s economic rebirth: A reintegration into global trade networks?

Zimbabwe’s new President Emmerson Mnangagwa offers a break with the past at least in the economic sphere. In the political realm, it is much more uncertain whether Zimbabwe has simply swapped one autocrat for another, or whether Mnangagwa’s presidency will prove a bridge to democratic government at elections expected to be held in September.

Mnangagwa has already started down the road of much-needed economic reform, which should start to reintegrate the Zimbabwean economy into global trade networks.

Zimbabwe is rich in mineral deposits. While BP’s Statistical Review of World Energy lists 502 million tons of proved coal reserves in end-2016, the country’s total coal resource has been estimated at over 30 billion tons. Actual production stagnated and fell under former president Robert Mugabe to less than 3 million tons in 2016.

In addition, although production is small, the country is also the world’s fifth largest producer of lithium, with an output of 900 tons in 2016, or about 2.4% of the global total. Zimbabwe has proved lithium reserves of 23,000 tons, according to the US Geological Survey, and a resource in excess of 100,000 tons. This is certain to interest investors, given rising demand for the metal from the electric vehicle and other sectors.

Mnangagwa’s stance on foreign investment is certainly more accommodating than Mugabe’s. He has said that: “Key choices will have to be made to attract foreign direct investment to tackle high levels of unemployment while transforming our economy.”

Harare has asked interested parties to bid for stakes in eight state-owned companies, including power company Zesa Holdings and the National Railways of Zimbabwe, which transports coal. It has suggested that it might be prepared to fully privatize them.

At present, Zesa is forced to import much of the electricity it supplies, but is forced to sell it for less than it pays. Mnangagwa has also said that the condition that any new investment must be 51% owned by black Zimbabweans will be restricted only to platinum and diamond mining.

Zimbabwe was one of the richest in Africa on a per capita basis in the 1990s, but Mugabe’s confrontations with the country’s white farmers, opposition politicians, ethnic groups considered opposed to his Zanu-PF party and the international community brought the economy to its knees.

Astronomic inflation, the collapse of the Zimbabwean dollar and political uncertainty all deterred investment even before tight restrictions were placed on foreign investment. The country’s coal mining and power sectors struggled along with almost all other industries. The government’s budget deficit for 2017 was at $1.82 billion, or 11.2% of GDP.

However, while economic reform is underway, political reform looks less certain. But that’s another story.

The post Zimbabwe’s economic rebirth: A reintegration into global trade networks? appeared first on The Barrel Blog.

Source: http://blogs.platts.com/2018/01/18/zimbabwe-economic-rebirth-global-trade/

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