Mining expected to anchor Zim economic growth in 2022

The Minister of finance and Economic Development Prof Mthuli Ncube expects the mining sector to drive economic growth this year on account of favourable commodity prices on the international markets.

During his mid-term budget review late last month he said, “The mining sector is now expected to grow faster at 9,5 percent in 2022, largely driven by increased output in gold, Platinum Group Metals (PGMs), chrome, nickel, diamonds and coal, as well as record high international commodity prices and increased investments in the sector.”

Economist Tinevimbo Shava said, despite the widespread interest rate hikes by various central banks, nominal lending rates were expected to remain low, a situation that should help propel gold prices.

“This is important for gold since gold’s short- and medium-term performance often tends to respond to real rates, which combine two important drivers of gold performance which are opportunity cost and risk and uncertainty,” he said.

According to Minister Ncube, domestic growth will be underpinned by multiple currency regime, which is expected to remain in place. The Treasury has vowed to continue with fiscal consolidation measures as the Reserve Bank of Zimbabwe will maintain a tight monetary policy stance.

Continued geo-political tensions spillover effects will also continue to give the economy a boost as favourable commodity prices that will support mining production and export receipts will persist.

“Stronger for longer remains our base case,” said renowned bank, RMB Morgan Stanley in a recent report on the PGM price outlook. “This view is driven primarily by supplyside constraints, with both recycled and mined supply forecast to fall into 2022/2023 and ongoing risk from the potential realignment of Russian supply,” the bank said.

Moderate agricultural output is projected due to the increase in prices of key inputs and variable rainfall patterns.

However, according to the Treasury, global supply bottlenecks will continue to hound manufacturers leading to increased production costs. Due to geopolitical tensions, high import prices coupled by a slow-down in the global economy will also have a negative impact on the growth of the economy.

During the mid term budget review, the Treasury chief also acknowledged growth in other sectors such as real estate which is poised to grow at a revised rate of 6,1 percent from 1,7 percent as construction of houses and malls continues.

Additional growth is expected to come from other sectors such as tourism as the minister said, “The accommodation and food services sector is expected to continue to grow in 2022, with bed occupancy rate projected at 20,6 percent, benefiting from recovery in international tourism and lifting of mandatory quarantine requirements worldwide.”

The information and communication sector, on the other hand, is projected to grow by 5,3 percent, driven by demand for mobile voice traffic and internet data. Almost all sectors of the economy are expected to record positive growth except agriculture which was affected by the uneven rainfall distribution, bottlenecks in input distribution and high cost of inputs, among other challenges.
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Minister Ncube alluded that, “These developments led to substantial write-offs in hectares planted of more than 23 percent. As a result, the agriculture sector is now projected to contract by negative 5 percent, from the initially projected expansion of 5,1 percent.

“Despite the increase in manufacturing capacity utilisation to 56,5 percent from 47 percent in 2021 and increased availability of domestically produced goods in the supermarkets, growth of the sector is now expected to slow-down to 3,6 percent in 2022 compared to an initial projection of 5,5 percent.”

The downgrade is mainly due to the high cost of production, attributable to rise in prices of imported raw materials and poor agricultural season.

As a way to deal with fertilizer global supply chain disruptions, the government is now supporting local production of fertilizer through prioritising access to foreign currency and working capital requirements for local fertilizer manufacturers.

Initially the minister had forecasted growth for 2022 at 5,5 percent but said taking everything into consideration, growth has been reviewed downwards to 4,6 percent Minister Ncube said, “Economic performance during the first half of 2022 reaffirms the positive growth trajectory as projected in the 2022 National Budget. GDP growth in 2022 is, however, now projected to slow down to 4,6 percent from the 5,5 percent initially projected.-eBusiness Weekly