13 November 2012

Zimbabwe: MTP Reviewed

THE World Bank projects investment in the mining sector to reach US$15 billion by 2018 on the back of strong policy support with the investment seen creating about 30 000 new jobs. The Bretton Woods institution has thus called on Government to anchor its medium-term economic growth plans largely on mining, and also on another extractive sector, agriculture.

World Bank senior country economist Mrs Nadia Piffaretti made the call during the first annual review on the implementation of the Medium Term Plan in Harare yesterday.

She said horizontal linkages with the mining and agriculture sectors could then be used to revive other distressed sectors.

Her comments come amid indications that the MTP, Government's five-year economic blueprint covering the period 2011-2015, met with mixed success with key targets missed.

Mrs Piffaretti said Zimbabwe needed to exploit horizontal linkages in mining to drive other acutely distressed economic sectors that require huge funding to revitalise.

For instance, she said growth in the manufacturing sector existed in the medium to long-term, but should for now be anchored on horizontal linkages with mining and agriculture.

"In the baseline scenario we project a maximum of US$5 billion investment by 2018. Most of production volume would expand in gold and coal (with) 5 000 new jobs created.

"In the active policy scenario, investment could reach US$15 billion, with 30 000 jobs created. Gold, coal and chrome have high potential of absorbing new investment," Mrs Piffaretti said.

She noted that Government had not taken full advantage of the boom in global metal prices in the last few years, but sees potential for medium term growth in new linkages, largely, with mining. The World Bank contends that both forward linkages (refining and beneficiation) and backward linkages (surveying and large equipment installations) were too expensive.

In that scenario the bank said supporting growth of mining and horizontal linkages between mining and agriculture, capable of autonomous growth driven by external demand, was the key to medium term growth while other sectors recover.

But the World Bank feels there should be ample pool of labour, easy efficiency gains in agriculture, "smart" management of mineral projects, improved intermediation of domestic savings, improved efficiency of public expenditures and removal of policies that scare away investment.

Further, to increase the economy's increased resiliency there was need to address external the US$10,7 debt and ensure food security.

Presenting the first annual MTP review Economic Planning and Investment Promotion Minister said a number of the economic targets in the plan were missed although progress was noted. But he was bullish most targets will be met by 2015.

"We are 10 to 15 years behind Sadc, we must run this distance over the life of the Medium Term Plan," the minister said.

He noted challenges around limited fiscal space, low levels of investment, late disbursement of budgetary funds, policy inconsistencies and international isolation as some of the constraints. But the MTP has missed targets in terms of economic growth rates, power generation, investment inflows, balance of payment ratios, current account deficit and employment creation. Growth targets were also missed in mining and agriculture.

While targets have largely been missed progress has been noted in terms of rehabilitation of key infrastructure such as energy, road networks, supporting SMEs growth, availability and affordability of education and health services. However, it was generally agreed that the biggest challenge to the country's efforts at realising targets set in the US$9,3 billion programme remain the shortage of funding and power.

The country will draw lessons from papers presented on the experiences of China and Malaysia, which emphasised the importance of planning and scientific approach to economics.

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