Adding value is a noble pipedream

There has been an outcry and repeated pleas to curb the export of raw materials by government, as it does more harm than good to our already ailing economy.

Minerals beneficiation (adding value by separating or processing minerals) and value addition of other raw materials from agriculture have been hailed as remedies to our acute revenue shortfalls, as well as a cure to rampant unemployment, hovering at above 85 per cent.

While the goal is noble, the million-dollar question is how feasible this initiative is under our current conditions.

First of all, our pathetic development in terms of technology militates against the immediate achievement of this crucial goal. We simply do not have the machinery and equipment required. The few industries that we have are battling to stay afloat due to high production costs, owing to obsolete equipment and antiquated methods. That explains why their goods are more expensive than others from outside.

Partnership with other players from outside Zimbabwe would have ameliorated our current predicament, but government’s indigenisation policy is enough to scare away any potential investors. Closely linked to that is the fact that our energy output is a far cry from what is required to propel value addition in productive sectors like agriculture, manufacturing, mining and tourism.

A report by Paul Nyakazeya (Zimbabwe: Nation Grapples With Power Crisis in The Financial Gazette, 31 Oct 2013) shows that, on average, ZESA generates 1000MW against a national demand of 2200MW, hence persistent load-shedding which curtails production.

Given such a scenario, it simply means adding value to minerals remains a pipe dream, as our current generation capacity cannot sustain big smelting plants.

The root cause of all this lies in the fact that government has not invested in power generation since 1980. Apart from the inherited Kariba hydro-power station and the Hwange thermal power station, completed in 1986, no new power stations have been built. That explains why, 33 years after independence, only 30 per cent of the country has access to grid power.

Coupled with that, government has no clear-cut policy on mineral beneficiation. Research carried out by the Centre for Natural Resource Governance pointed out that the country has the potential to generate US$8bn and more than 200,000 jobs if it allows a percentage of its rough diamonds to be polished locally.

But again we face a double tragedy – lack of political will, as well as rampant corruption and maladministration. Diamond mining remains shrouded in a mist of secrecy, with very little revenue trickling through to the treasurer. We also lack skilled personnel to execute the task. Massive brain drain aside, what have our scientists invented since 1980, apart from the Blair toilet and the ‘Tsotso’ stove?

Even Richard Mvududu, chairman of the Diamond Beneficiation Association, bemoaned the lack of skilled diamond cutters and polishers in the country when he appeared before the Parliamentary Portfolio Committee on Mines and Energy in May this year.

That explains why, out of the six diamond supply chain stages of exploration, mining, sorting, cutting, polishing and jewellery, only the initial three are done in the country.

The best way would be to increase capacity utilisation by radical economic policy changes and incentives that would enable us to up our production and operate at near full capacity to cushion ourselves from fixed costs and production costs – minimising losses and maximising profits. Only then, can we talk of value addition. At present, salaries gobble up a large chunk of the revenue and, since we can hardly feed ourselves, this means importing food is a priority for government.

So, in simple economic terms, once resources are committed to the production of product A, the same resources are no longer available for product B. In a nutshell, value addition is a noble cause, which, given the above, remains pie in the sky.

Post published in: Analysis

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