Tawanda Musarurwa
IN recent years, Zimbabwe’s mineral sector has offered a paradoxical picture: enormous potential paired with frustrating underachievement.
The country’s mineral-rich earth holds the promise of untold wealth, yet this potential often seems just out of reach, thanks to volatile global markets and a lack of domestic value addition.
The first half of 2024 was a perfect microcosm of this situation.
According to the Minerals Marketing Corporation of Zimbabwe, a total of 1,9 million metric tonnes of minerals were sold during the first six months, valued at US$1,5 billion.
While this marked a 25 percent increase in sales volume from the same period last year, revenue still fell short of the US$2,03 billion target by a full 26 percent.
The gap between raw mineral exports and real profits is evident here, and it points to a significant issue: Zimbabwe’s lack of beneficiation.
In simple terms, Zimbabwe exports too many raw minerals and not enough processed goods.
The country is, in many ways, leaving money on the table.
The global commodity price downturn, especially in the case of lithium and nickel, cost the country dearly in the first half of the year.
Lithium alone, a key ingredient in electric vehicle batteries, saw its price plummet by 72 percent, while nickel dropped by 20 percent.
Coal also saw a 13 percent price decline.
Observers say the weakening mineral prices will have a negative impact on the broader economic performance this year.
“Definitely (weak mineral prices) will affect mining output for this year, exports and revenue inflows, hence our current account and balance of payments position. This impact could be moderated by the good performance of the gold sub-sector,” said economist Dr Prosper Chitambara.
“But overall, the mining sector is going to slow down and this will have a domino effect on the rest of the economy.”
No respite for weakening metal prices
Metal prices have experienced significant volatility on the global markets in recent years and this trend is expected to continue.
Some projections have suggested a long-term decline for many key metals, including lithium, nickel, and platinum group metals (PGMs), which are critical to the country’s export economy.
Projections for long-term metal prices, particularly for base metals, suggest that the combination of oversupply, technological advancements in recycling, and the global shift toward more sustainable, less resource-intensive technologies could lead to continued downward pressure on prices.
The bigger issue is not so much the quantity sold, but the fact that Zimbabwe sells raw lithium and nickel instead of processed products that command higher prices.
In a world where value addition is king, Zimbabwe finds itself exporting bricks of gold instead of finished jewellery.
To take a closer look, lithium exports amounted to US$233 million for the first half of 2024, beating expectations in terms of volume sold (331 826 metric tonnes compared to a target of 275 000 metric tonnes).
But here is the catch: Zimbabwe’s lithium is mostly sold in its raw form, as spodumene.
This means that while demand for lithium is soaring due to the global transition to electric vehicles, Zimbabwe is still largely exporting lithium at the lower end of the value chain.
The real money is not in the ore, but in what comes next – refining it into lithium carbonate or lithium hydroxide, which are the key ingredients for batteries.
Beneficiation, or domestic value addition, could change that.
For Zimbabwe, the numbers do not lie.
Spodumene may have beaten targets, but the lithium it is supplying is going to be processed elsewhere.
Meanwhile, the added value and job creation are happening far from Zimbabwe’s borders.
By processing lithium domestically, the country could climb the value chain, turning its exports into higher-priced finished products, while also creating more skilled jobs.
It is an all-too-familiar story in the developing world: countries rich in resources find themselves at the mercy of global markets, while others capture the profits from value addition.
It is not just lithium, though.
PGMs – one of Zimbabwe’s perennial top exports – showed a similar pattern.
PGMs, which include platinum, palladium, and rhodium, accounted for more than 30 percent of Zimbabwe’s mineral revenues in the first half of 2024.
But here again, the country is mostly exporting PGMs in a partially processed form.
PGMs matte (a semi-finished product) and concentrate are sold to refineries elsewhere, earning Zimbabwe US$479 million and US$294 million, respectively.
In total, the country exported 18 844 tonnes of matte and 85 407 tonnes of concentrate.
But the value could be far greater if Zimbabwe developed its own refining capabilities and sold finished platinum and palladium products.
What is happening in Zimbabwe is a case study in what economists call the “resource curse” or “paradox of plenty.”
You have the resources, but the rewards are disproportionately reaped by other countries that do the processing.
This is not just about the loss of immediate revenue, but missing out on the economic ecosystem that comes with beneficiation: jobs in mining, refining, manufacturing, and even research and development.
As it stands, Zimbabwe is getting a fraction of the wealth it could extract from its mineral resources, while other countries benefit from the value-added industries that these minerals support.
And then there is the issue of resilience.
The global commodity market is, at the best of times, unpredictable.
Prices for lithium, nickel, coal and coke dropped significantly in 2024, and with Zimbabwe primarily exporting these raw minerals, the country had little room to cushion itself against the downturn.
PGMs experienced a price dip too, with matte sales volume rising by 7 percent, but their value dropping by 5 percent.
Zimbabwe’s over-reliance on raw mineral exports leaves it vulnerable to price swings that are beyond its control.
Economist and lecturer in the Department of Economics at the University of Zimbabwe Dr Albert Makochekanwa said the country’s minerals sector, and more broadly the economy, are very prone to price volatilities on the global markets.
“More than 75 percent of Zimbabwe’s export receipts come from minerals, so decline in international prices of minerals means reduced export receipts.
“And a reduction of international prices means reduced contribution to national GDP,” he said.
“These reductions will defuse and trickle down in a negative way to citizens, as the country may have difficulty to import adequate essentials like fuel, medicine or electricity, among others.”
Beneficiation offers a way to create a buffer against such volatility, by diversifying income streams and reducing reliance on fluctuating commodity prices.
In a world where commodities are increasingly seen as strategic assets, exporting raw minerals is starting to look outdated.
Lithium, PGMs and even coal can all be processed domestically to capture more value.
This would not just boost government revenue, but would also create jobs, spur technological innovation and lay the groundwork for an industrial base that could help diversify Zimbabwe’s economy away from its heavy reliance on mining.
The first half of 2024 makes one thing clear: Zimbabwe cannot continue to rely solely on exporting raw minerals if it wants to build a sustainable, resilient economy.
Beneficiation could be the key to unlocking the true value of its resources, allowing the country to capitalise on the industries of the future, rather than merely supplying them.
Perhaps the most significant development in Zimbabwe’s drive toward beneficiation is the government’s plan to build a platinum refinery, although the plan seems to have stalled since it was mooted around 2014.
More recently, the 2022 ban on the export of raw chrome ore is another bold attempt by the authorities to shift from being a mere supplier of raw materials to a nation that processes and adds value to its resources. Chrome is a key component in stainless steel production, and Zimbabwe is home to the second-largest known chrome ore reserves in the world.
Dinson Iron and Steel Company has established the Manhize Steel plant in Mvuma, which is expected to be one of Africa’s largest integrated steelworks.
The current model leaves too much money – and too many opportunities – on the table.
Beneficiation offers a way for Zimbabwe to rewrite its economic story.
The question is whether the country will seize it.
ORIGINALLY PUBLISHED IN THE SUNDAY MAIL – https://www.heraldonline.co.zw/unprocessed-minerals-unfulfilled-potential/