Economic Impact of Mining through Linkages: A Case Study of 1980 and 2014 Production Linkages in Zimbabwe

Abstract

The manner in which mining is linked to other sectors of the economy in production, the extent of those linkages, and the problems and constraints which limit the development of production linkages are critical questions in the context of optimizing the sector's contribution to economic development in Zimbabwe. The primary objective of this study is to examine the extent of the production (upstream and downstream) linkages that the mining sector has created with the rest of the Zimbabwean economic sectors, their effect on the wider economy and how these linkages may be optimized. A mixed methodology is used comprising a quantitative analysis using the Leontief Input-Output model and secondary data to quantify the linkages for 1980, and a partial survey of mines and exploration companies. The results of the survey are used to update the key quantitative results to 2014 and to further explore qualitatively the nature of production linkages, and constraints and problems limiting their development. The study finds that downstream linkages were weak. There was insignificant beneficiation of minerals or other value-adding activities due to several constraints, among them, lack of support infrastructure and technical expertise, and huge financial requirements. Failure to maximize production of ‘development minerals' was a contributory factor to low downstream linkages. Slightly significant direct and total upstream linkages existed with manufacturing, electricityand water, and transport and distribution sectors. The mining sector's gross output multiplier was below but moderately comparable to those of other mining developing countries such as Chile. Upstream linkages were mainly constrained by lack of technical expertise and finance. Thus, overall production linkages were found to be weak. The paper makes several recommendations, among them, infrastructural development, increased primary production (for feed and market), larger expenditure on HRD and R&D, greater focus on development minerals and emphasis on incentives rather than penalties.