Zimbabwe experienced economic turmoil for decades under the regime of Robert Mugabe. During his reign, Zimbabwe was subjected to economic central planning and political totalitarianism. As a result, Zimbabwe suffered from massive inflation and the country became infamous for having inflation rates nearing 600% on a regular basis, and printing millions and millions of Z$ 1-billion banknotes, which made the Zimbabwean dollars completely worthless. Since Mugabe’s death, Zimbabwe is on the path to economic recovery and growth. Zimbabwe’s economy is no different from African economies. Like most African economies, the Zimbabwean economy is commodity-based. It relies on the export of its raw materials, mainly its minerals, to generate income. Indeed, Zimbabwe is an extremely rich country in minerals, and lithium is one of the minerals that the country produces the most. Why lithium though?
First, it is a light metal and second, it has a high-energy density, which makes lithium attractive to car manufacturers. Lithium is an important mineral that is used in rechargeable batteries for mobile phones, laptops, digital cameras, and electric vehicles. Lithium is also used in some non-rechargeable batteries for things like heart pacemakers, toys, and clocks. It is interesting to note that an unprecedented phenomenon has recently taken place in Zimbabwe. Under the leadership of the incumbent president, Emmerson Mnangagwa, Zimbabwe implemented a policy ban on the export of raw lithium. It is important to emphasize that mineral exports account for about 60% of Zimbabwe’s export earnings while the mining sector contributes 16% of its GDP, according to a 2021 mining report by the London School of Economics. Why ban the export of such an important mineral when your economy essentially relies on exporting minerals?
At first, this seems like a silly policy because this will make Zimbabwe lose billions of dollars in revenue. It was projected that Zimbabwe will lose $1.8 billion in mining earnings as a result of this policy. The main goal of the ban is to encourage the local processing of the mineral. According to the President of the Zimbabwe Miners Federation, Henrietta Rushwaya, the ban policy has resulted in 2 million tons of ore being stockpiled. When a country exports its raw materials to the global market, that country is on the losing end of the bargain. The buyer buys these raw materials at a price below market value. The buyer subsequently processes that commodity into a finished product and then resells that commodity as a finished product to the country from which it initially bought it, at a hefty price. The country that initially sold its raw commodity for very cheap ends up buying it back for ten or twenty times its initial price. It means that the buyer, which processes the commodity is the one that gets to determine the price of that commodity on the global market. The fact that many African countries are unable to process their raw materials is one of the fundamental reasons why they are in poverty.
Source: Trading Economics
The price of lithium is on the rise between 2021 and 2022 but dropped towards the end of 2022 due to price unsustainability. The price of lithium is expected to rise again. By banning the export of lithium ore, Zimbabwe wants to attract manufacturers to process that lithium in Zimbabwe. By processing that lithium on-site rather than exporting it as a raw commodity, the Zimbabwean government can bargain the price of lithium, and make Zimbabwe competitive in the hard-commodity markets. Processing lithium on-site will compel mining corporations to pay a competitive wage to Zimbabwean mines workers and create more jobs, hence, spurring economic growth in the long run. Zimbabwe is anticipated to rank among the top exporters of lithium due to its high domestic demand, with the government aiming to supply 20% of global lithium demand once all the country’s lithium resources have been fully utilized.