Zimbabwe’s economy is likely to continue its strong recovery next year from a decade of decline to expand by 9.4 percent, Finance Minister Tendai Biti said on Thursday, but a hike in mining royalties could impede growth.
Biti said in a budget speech that agriculture and mining would be the main drivers of growth in the economy, which is projected to expand by 9.3 percent this year.
Despite controversy and confusion over a move by the unity government of President Robert Mugabe and Prime Minister Morgan Tsvangirai to boost local black ownership of mining firms, Biti said the sector attracted $502 million of investment in 2011.
Zimbabwe is home to the world’s second-biggest deposits of platinum, as well as vast reserves of gold, diamonds and coal.
The government is pressing ahead with a law forcing mining firms to surrender at least 51 percent stakes to blacks, which has led miners to halt expansion of their local operations.
Biti said the mining sector was recovering gradually, with gold production expected to more than double to 28 tonnes next year, while diamond sales could total $600 million.
But he said the government was not getting enough in taxes from mining, so it will hike royalties for gold to 7 percent from 4.5 percent while those for platinum would double to 10 percent next year.
“We don’t feel that we are getting what belongs to Caesar vis a vis gold and platinum. I therefore propose to increase the royalties on gold and platinum … in order to maximise the contribution of our minerals,” Biti said.
INVESTORS STAY AWAY
Despite the formation of the unity government in early 2009, most Western nations and investors are keeping the southern African nation at arm’s length while Mugabe remains at the helm.
Mugabe has been hit with international sanctions for suspected human rights abuses and vote rigging.
Consequently, Harare has been unable to attract even a small portion of the $10 billion it says it needs to rebuild infrastructure that has fallen into disrepair since the economy went into a hyperinflated tailspin from 2000.
Economic analyst Eric Bloch said while the GDP growth targets were attainable, the increase in mining royalties could undermine a sector driving economic recovery.
“The economy, which is growing off a low base, could even grow by as much as 15 percent. My biggest concern is on the mining royalties which are going to have a tremendous effect on mining operations, which are still recovering from a slump,” Bloch said.
Biti said that Harare had attracted aid commitments worth $618 million for next year, compared with just $370 million in 2011 but the money would be funnelled through non-governmental organisations mainly targeting health and education.
The agriculture sector is also recovering from a slump triggered by Mugabe’s seizure about a decade ago of white-owned farms to give to landless blacks.
Biti said 2012 maize production should rise to 1.8 million tonnes from 1.45 million this year. That figure is still below the 2 million tonnes analysts say are needed to feed the country’s 13 million people.
The government has achieved a strategic reserve of 500,000 tonnes for the first time in more than a decade, said Biti.