Perspectives on the importance of Mining to National Economic Planning By: Innocent Madziva Deputy Director, Economic Modelling MEFMI candidate Fellow-Natural Resources Management Ministry of Macro-Economic Planning & Investment Promotion E-mail: innodziva@gmail.com

Presentation Outline Introduction Macroeconomic Framework Importance of Mining to National Economic Planning Mining success in National Economic Planning Conclusion

Introduction In National Economic Planning, minerals are usually given a special attention because:- they are a waste resource they belong to the nation (Section 3 (2) j of the new Constitution of Zimbabwe) The role of Government is to manage the sustainable exploitation of these resources in order to maximise the socio-economic benefits for both the current and future generations

Introduction Cont’ ZIMASSET (2013-2018) places the mining sector as a key driver of economic growth Since 2009, the sector has been a major foreign currency earner (contributing more than 50%). The mining sector in Zimbabwe is one of the few sectors that has relatively performed well (in terms of contribution to GDP) and in line with ZIMASSET targets over the period 2013 to date. 5/13/15

 Macro-Economic Framework 2012 2013 2014 2015 2016 Actual Estimate Initial Rev. Prj Agriculture, hunting and fishing 7.8 -2.6 23.0 -5.2 -9.9 -4.2 Agriculture (ZIMASSET) -1.3 9.0 5.1 7.0 Mining and quarrying 8.0 11.7 -3.4 0.4 14.0 13.2 Mining and quarrying (ZIMASSET) 6.5 11.4 9.2 Manufacturing 5.3 -0.6 -5.1 0.2 0.5 Manufacturing (ZIMASSET) 1.5 3.2 7.5 Electricity and water 0.3 5.0 5.4 -5.5 -21.8 Construction 23.5 3.9 6.9 4.0 4.5 1.8 Finance and insurance 28.0 11.3 7.7 4.6 6.4 2.0 Real estate 59.0 0.7 4.7 3.5 3.4 Distribution, hotels and restaurants 4.3 2.5 2.4 2.8 Transport and communication 6.7 1.1 1.9 3.0 Public administration 19.1 6.3 1.2 0.0 -5.0 Education 38.1 2.9 4.2 2.6 Health -0.7 Domestic services -3.5 6.0 2.2 1.0 GDP at market prices 10.6 3.8 1.4 “ Source: Ministry of Macro-Economic Planning & Investment Promotion, ZIMSTAT, Ministry of Finance, RBZ and ZIMASSET

Importance of Mining to National Economic Planning Mining and Poverty Reduction Both large-scale mining and artisanal and small-scale mining reduce poverty through the linkages four dimensions of poverty which are economic opportunity, capability, security, and empowerment

Importance of Mining to National Economic Planning Fiscal impact and foreign exchange income. Mining can be an important source of foreign exchange and fiscal receipts for governments. When managed well, the net foreign exchange and taxes generated by mining can be used by governments as an engine for overall economic growth and as a funding source for social sector and poverty reduction programs

Importance of Mining to National Economic Planning Local economic development Large mining operations often invest substantially in local economic development through training, social services, and public goods such as clean water, transport, energy, and other infrastructure

Importance of Mining to National Economic Planning Improved land-use planning Geoscience and mapping data collected for mining purposes can contribute to improved land-use planning. This can benefit the poor by helping identify and address issues related to competing land uses, which in turn helps to avert negative impacts on agricultural production and food security.

Importance of Mining to National Economic Planning Source of energy In countries with significant coal resources, such as China, India, Zimbabwe and South Africa, coal is an important source of energy contributing to economic growth.

Mining success in National Economic Planning Emperical evidence has shown that mining success does not only depend on the number of minerals that a country has nor the grades. For in countries with an overall poor governance record and weak institutions, mineral wealth frequently does not translate into development. Instead, sudden mineral export booms in many cases led to severe economic imbalances, rising corruption and armed conflict

Conclusion Success tend to depend on:- Long term Economic Planning and de-linking Economic cycles with Political cycles Negotiation of Contracts and Ownership structures Strong institutions Mineral governance-Transparency and accountability Efficient and Responsive Mining Fiscal Regimes Prudent management of Mining revenue-Survival beyond extraction

Norwegian Experience

Botswana Model 15% 80.8% of profits 50% of dividends Corporate taxes Others Government of Botswana Anglo American 80.8% of profits 15% 50% of dividends Corporate taxes 85% DBsa UK Ltd (Diamond Trading Company) 15% De Beers Investments Exploration holding structure De Beers Societe Anonyme (Lux) De Beers Canada 50% 50% Debswana DTC Botswana Namdeb 50% 50% De Beers Consolidated Mines (South Africa) Joint control

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