An Analysis of the Potential Contribution of the Mining Sector to Economic Development: A Case Study of Zimbabwe (1980-2013)

Abstract

The research focused on analyzing the Mining sector potential contribution economic development and how this can translate into addressing adverse socioeconomic issues like unemployment, access to better health care, nutrition, clean water and sanitation, the spread of HIV/AIDS and other social amenities. The target population was the Mining sector. Multiple regression analysis was used to come up with a model that best fits the time series data. The model results indicate that the sector is operating at about approximately 41% and the partial elasticity of GDP in mining output is1. 03, meaning that a 1% increase mining sector output results in a 1.03 % increase in GDP. This implies that at full capacity, the sector can increase GDP by US 6.05 billion dollars. We expect this to translate into public expenditure on capital and social welfare projects. It will also increase the households' disposable incomes which will induce demand for key services like health care, education and others. We also expect investment expenditure to increase leading to job creation and improved domestic production which means less dependence on imports and hence more savings at home. However, full operating capacity can only be attained if a consistent policy framework is put in place to attract the necessary investment in small to medium enterprises (SMEs) and labour intensive programs. This is expected to even out the income distribution within the economy. Investment in infrastructure and tertiary education is a critical element in the value chain since this is where innovation comes from. In developing countries, it is increasingly emerging that International business is keen to invest in the extractive industry where the risk is significantly reduced by a shorter payback period. The economics of this is largely due to corporate governance issues; political instability, inconsistency macroeconomic policies and corruption. This is therefore an area that needs to be addressed to gain investor confidence.