Zimbabwe Continues to Struggle in Crucial Areas

According to the Zimbabwe Revenue Authority, mining royalties declined by 39 percent, and overall royalties fell 65 percent when compared to 2014 earnings, according to Reuters. The nation also lacks energy and water services in certain areas, including old roads and bridges that need repair, discouraging further foreign investment.

According to the Zimbabwe Revenue Authority, mining royalties declined by 39 percent, and overall royalties fell 65 percent when compared to 2014 earnings, according to Reuters. The nation also lacks energy and water services in certain areas, including old roads and bridges that need repair, discouraging further foreign investment.

The fall in royalty revenue is attributable to the world slump in commodity prices, spelling major trouble for an economy where 17 percent of the country’s GDP relies on mining. The southern African nation is heavily dependent commodities, with the mining sector producing over half of economy’s export income. Zimbabwe is the second largest extractor of platinum, but platinum prices have been especially hit hurt by the global economy, including gold, which is another precious resource of the country. Zimbabwe also extracts other minerals such as iron ore and chrome.

Zimbabwe also has problems in the business community as a whole. The private sector struggles with higher production costs and greater competition abroad, but one primary problem holding back production is energy instability, and electric failures extend into communities across the country. As of 2015, 20 percent of urban citizens live without electricity. Officials are working to remedy the problem through such means as adding 300 MW of renewable electricity to the nation’s grid by 2018.

The energy situation is indicative of the lack of sound infrastructure, which hurts the business sector, most notably direct foreign investment. Foreign investment shot to $971 million, versus $555 million from a year ago, but experts note that the country’s crumbling infrastructure has been a major factor in keeping many investors at bay.

With that, another problem has to do with the country’s regulations, including a so-called empowerment policy that forces foreign firms to sell a 51-percent stake to native shareholders as a way of addressing the nation’s colonial history. Many investors have noted their complaints about the empowerment requirement and have suggested an easing of the policy. Officials may need to take a softer approach, in addition to improving the regulatory process, to boost living standards for Zimbabweans by fostering greater investment.

Despite Zimbabwe’s abundance in natural resources, many of its citizens live in desperate poverty, with 76 percent of the population being poor, and 23 percent of the population living in extreme poverty, notes Zimbabwe Independent. The economy suffered a 45-percent dip from 1998 to 2008, and the economy has gone through ups and downs in recent years. However, experts note that investment levels are not enough to usher the nation into full recovery mode.