AS a third world country that is spiritedly seeking to shake off a decade-plus-long economic downturn, it is useful to draw lessons from countries that have made it or are making steady progress in developing their economies; the goal being to understand and embrace the attributes of success as we assess our progress and plot the next moves.
What has been witnessed by, and which inspired many, is the rise of the Asian Tiger economies (Hong Kong, Singapore, South Korea and Taiwan) from 1960s to 1990s. More recently, it is the BRICS (Brazil, Russia, India, China and South Africa) which have taken the economic advancement initiative along with a number of countries which include Indonesia, Vietnam, Malaysia, Turkey and Mexico. Since the East is where much of the action is, when viewed without political lenses, Zimbabwe’s look east policy was a novelty.
But establishing good relations with other countries alone without adopting their technology, penetrating and supplying their markets with our goods and services or attracting their investment (FDI) is not strategic. Government should therefore be commended for its fruitful efforts to maximize the benefits of such relationships as welcomingly exemplified by the country’s current holder of the title “mother of all FDIs”, the US$3 billion Russo investment in the platinum mine, Great Dyke Investment Company as well as the various investment undertakings by China.
Taking into account operations of current platinum players and their planned expansion programmes, Zimbabwe is set to be a major exporter of the platinum group metals in a few years time. This justifies calls by the government for beneficiation. With agility and decisiveness on the part of government, more and bigger FDIs are possible as we finally wake up and realize that our economic salvation may lie beneath the ground and that it is the above-the-ground issues (the politics) that have been stalling our progress.
As each country has its own unique qualities, an economic model that worked for another country may not necessarily produce the same results for us. However, the Asian Tigers and China presented us with valuable lessons on focused economic advancement and its tenets of long term planning (economic blue prints), productivity, innovation, research & development (R&D) and diplomacy among others. Less mentioned qualities are a strong work ethic and a culture of savings which played an important role in the advancement of these Asian countries.Advertisement
Another example is Norway, a one-of-a-kind resource-driven developed country. It discovered oil in 1969, and set up three local oil companies between 1970 and 1972 and decreed a 50% local content requirement for supplies to the oil industry. It then rapidly developed its capabilities in oil and gas by drawing labour from its existing ship building, fishing and construction industries and investing in its technical tertiary education institutions and R&D. Its state oil companies partnered with industry-leading foreign oil companies to deepen their capabilities. It removed the local content legislation in 1994 and its local companies competed successfully on a level playing field with foreign companies. For a country with a population less than half of Zimbabwe’s and a sovereign wealth fund of US$664 billion (2012 value) that is remarkable!
Zimbabwe should indeed embrace Russia’s investment in the platinum mining space. Russia is a world renowned resources sector player. It boasts of the world’s biggest natural gas company, Gazprom, which recently signed a US$400 billion long-term gas supply deal with China; nuclear power company Rosatom which builds more nuclear power plants than any company in the world; the world’s biggest potash (fertilizer) producer, Uralkali; the world’s second largest rough diamond selling entity by value, Alrosa; and, outside OPEC, Russia is the largest producer of conventional oil; and it is the world’s leading producer of nickel and palladium through Norilsk Nickel. Zimbabwe can tap into that rich experience in developing its own resources and infrastructure.
Economic challenges can be overcome by ingenuity and innovation. For example, in 2007 all projections pointed to a shortage of natural gas in the USA as reserves of conventional sources were running out, therefore requiring massive imports going forward. In a display of innovation, a new technology of horizontal drilling and hydraulic fracturing was successfully used to extract natural gas and oil trapped in sedimentary rock (shale) – i.e. the unconventional oil and gas. The country has massive deposits of shale gas and oil. And as a result of this technological feat, in 2011/12 USA was projected to become the largest supplier of natural gas and oil in the world by 2017 according to International Energy Agency (IEA).
While quick wins, that is exploiting a project’s low hanging fruit first, are necessary for demonstrating quick victory to stakeholders, they usually raise expectations of sustained and better outcomes. The diamond mining companies’ focus on alluvial mining in Marange without performing further exploration in order to mine the deeper diamond bearing kimberlitic pipes was outstanding in its short-sightedness and akin to artisanal mining. The nation had pinned its hopes on these companies to ramp up production and generate better revenue and profits, part of which, as had been hoped, would flow into the banking system and help ease liquidity challenges. That was not to be – we are a hopeful lot. However, as announced by government, a consolidation of this sub-sector to allow one or two big and well-resourced players to operate makes sense.
Mega projects such as large scale mines build out or power plant construction can take 5-10 years to complete. These are necessary legacy projects that, besides being economic game changers, show leadership foresight. A combination of quick wins and large long term investments is good for the country. It is worth emphasizing that adequate infrastructure e.g. power plants, roads, rail, pipelines, dams, irrigation etc, is critical because it has spillover benefits for productivity, leading to, for example, surplus food production and power generation, for export. And cheaper transportation of goods by rail and pipeline enhances competitiveness of the country. Overall, all sectors will receive a boost resulting in economic growth.
Having said that, there is a danger that lurks in the background, which is corruption. An important lesson for posterity is that a tendency or desire to avoid hard work and innovation in preference to the short route, usually untoward or illegal, to wealth is the bedrock of corruption and profligacy which breeds sharks and a generation of pleasure-seeking lazy youths. At its worst, such a culture drives the general populace to behave like carrot-chasing mice on a pin-wheel, which is our economy, while the sharks systematically siphon off money from their public and private coffers.
Nigeria’s former ruler Sani Abacha, who looted US$5 billion from state coffers during his reign, and Zaire’s (DRC) Mobuto, who treated state treasury as his private coffer while his people languished in poverty, remain classic corruption examples. By their nature, political sharks are insensitive and they decimate the livelihoods of ordinary people by stealing resources meant to uplift ordinary lives thereby perpetuating poverty, illiteracy, unemployment, diseases and suffering. Unbeknown to many, in the long-term, high levels of corruption and its cousin profligacy have a far more damaging effect to a nation than war, Aids and Ebola put together.
That’s why, way back in China and Cuba for example, serious corruption cases by senior government officials were reportedly met with extreme measures such as execution by the guillotine, hanging or firing squad, or alternatively, long prison terms. That deterrent worked wonders. However, in our modern-day world, ensuring strict adherence to governance principles and upholding the rule of law in letter and spirit should be deterrent enough.
While Zimbabwe may be perceived in the West as a high risk geopolitical jurisdiction, it is a safe bet to proclaim that the country is a frontier jurisdiction for discovery of large deposits of minerals and oil and gas. The perceived high risk aspect has proved to be an exaggeration. Nationalisation is not on government’s plans. History has taught us that it is not in government’s DNA to run companies as competitively and profitably as private and public listed companies do. A win-win scenario between a foreign investor and government or indigenous players is the desired target which the authorities are leaning towards.
Investors in the platinum space continue to increase. Current operating players are Zimplats (Implats), Unki (Anglo American), Mimosa (Implats, Aquarius) and the new addition Great Dyke Investments. The key take home point is, with government’s commitment to economic advancement, Zimbabwe’s investment policies can only get better. The early bird will benefit the most among investors.
In order to attain and sustain rapid economic development under ZimAsset, a skills set with a strong bias and exposure to technology (infrastructural, industrial, biological, information, etc) and geosciences is critical. As such professions like engineering (civil, mining, mechanical, chemical, electrical, metallurgy etc), biotechnology, geology, geophysics, IT and management among others, should step to the fore. Continued investment in our existing science and technology tertiary education institutions and new R&D facilities to support our industry and resources sector is imperative.
As an optimist I believe the years ahead could be exciting, if government puts its best foot forward. Having bagged deals with the Chinese and Russians, and “as we look everywhere”, not necessarily east according to Finance Minister, Patrick Chinamasa, the nation therefore looks forward to sealing more FDI deals with the Indians (e.g. action on Essar-NewZimSteel), Brazilians, South Africans, Canadians etc. The writing is on the wall – either we do the right thing by focusing on economic growth or be caught up in endless and unproductive political bickering to the nation’s demise. Separate the wheat from chaff and let the right talent run with the ball, unhindered!
Noel T Ngangira has an active interest in the resources sector. He has a passion to understand the world of finance, investment, science & technology, socio-economic issues and geopolitics and to determine how they may all coalesce and (a) help catalyze the resource revolution and (b)how that will shape the future of the developing world, Zimbabwe and Africa in particular.
Noel writes in his own capacity and can be contacted at firstname.lastname@example.org