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NS4301 Summer 2015 Mozambique Economy Overview • Robert Looney, “Mozambique’s Moment,” Foreign Policy, September 18, 2014 • Mozambique going through a good period • Growing economy • Freshly signed peace agreement between Renamo and Frelimo – Renamo wanting a greater say in the government • Since return to peace in 1992 following bloody fight for independence and long civil war economy has been one of world’s most rapidly expanding • Between 1993 and 2000 GDP averaged 5.7%, speeding up to 6.4% between 2001 and 2010 with rates • Recent up-tick in violence did not hurt growth with • 7.4% (2011), 7.1% (2012), 7.4(2013), and 1.3% (2014). 2 GDP Growth 3 Basic Statistics 4 Sector Shares (% GDP) 5 Public Finances (% GDP) 6 External Accounts (% GDP) 7 External Debt (% GDP) 8 Economic Issues • Currently country looking at a future resource bonanza from major coal and offshore natural gas discoveries – worth billions of dollars • If spent properly could boost majority of Mozambique’s population out of poverty • Unfortunately record in Africa is often increased inequality, instability and conflict rather than a peaceful transition to prosperty • Whether Mozambique will be an exception depends in part on willingness of ruling party to maintain peace by allowing opposition political leaders to share in the wealth • Even greater extent it depends on what takes plce in the country’s long neglected agricultural sector 9 Poverty I • Despite Mozambique’s impressive growth record, majority of population remains rural and poor. • Mozambique has 25.8 million people, 70% who live in countryside and depend on subsistence agriculture • Mozambique’s per capita income averaged just $693 from 2009-2013 • Ranked below Afghanistan ($688), Bangladesh ($750), and Haiti ($776) • Mozambique made significant progress in reducing poverty for several years following the civil war. • Poverty rate fell from 69 percent in 1996-97 to 54% in 2003 – largely as a result of increased agricultural incomes and improved access to education. • Unfortunately progress has slowed thereafter. 10 Poverty II • By 2008 still more than half the population living below the poverty line -- household survey data • Poverty concentrated in rural areas and the central and northern regions of the county • Poverty reduction programs most successful in already relatively affluent south and around urban centers, especially Maputo • World Bank data 2008 show a wide disparity in distribution of income. • The poorest 60% of Mozambique’s population had access less than about 30% of the country’s income • Richest 10% had over 36% • The UNDP ranked Mozambique 184th out of 187 countries on its Human Development Index below Haiti, Afghanistan and Central African Republic 11 Food Security • Despite rapid growth, Mozambique’s low food security – the capacity of its people to access adequate sources of nutrition – has deteriorated in recent years. • EIU Index of Food Security – measures • Food affordability • Availability and • Quality and safety • Ranked Mozambique 90th out of 109 countries in 2012 • By 2014 the country was ranked 101st • Inability of Mozambique’s agricultural sector to meet demands of population apparent in September 2010 when increases in food prices triggered riots in capital 12 Agricultural Strategy I • Aware of country’s food problems the government the government had begun (early 2000s) an agricultural strategy that relies on large-scale farming to expand output and lower prices. • Since government owns all the land in Mozambique • Able to grant exclusive rights to large parcels for 50 to 100 years at very favorable terms • Little transparency in deals • Theory behind deals straightforward • Country has abundant land but little capital or know-how to develop it • Companies need land and can provide the necessary capital and skills • Result should be win-win – development on commercial terms. 13 Agricultural Strategy II • In practice approach has been met with strong local opposition • ProSAVANA project • Jointly funded by governments of Mozambique and Japan with cooperation and assistance from Brazil • Idea to introduce large scale monocrop farming in the Nacala Corridor region • Modeled on an earlier Japanese/Brazilian soybean farming venture in the savannah region of Brazil • Many Nacala Corridor groups question the untried transfer of foreign cropping methods to a new environment • Contend that the program is a blatant land grab that will displace local peasant farmers 14 Agricultural Strategy III • Residents claim • Little transparency in awarding or planning project • Local farmers had no input • This is a new version of colonialism that threatens to transfom them into rural laborers for giant agribusinesses – jeoparadixzes their basic human rights • Something to the complaints: • Previous agribusiness projects established without consolation have failed to make good on promises to farmers they displaced • There is an alternative • African Progress Panel (APP) has developed a model for Africa 15 Agricultural Strategy III • Focuses on giving smallholders a greater role in managing local farms • Argues most agricultural technology is scale invariant – as efficient on small farms as on large • Therefore large agribusinesses not inherently more efficient • Approach would give millions of peasant farms up to 5 hectares each • Making the most of available land • Peasants would farm the land on their own terms and for their own profit • Initial support of subsidized inputs such as mechanical ploughs and assured markets • Government’s new found revenue sources from coal and natural gas would provide funding 16 Assessment • Smallholder approach would not only increase food security • Would contribute to social, political and economic stability by increasing overall employment and enabling the survival of rural towns and villages. • Risks associated with current agribusiness strategy high and benefits problematic • Mozambique food insecurity, widespread poverty and increasing rural unemployment make for frictions when contrasted with highly concentrated pockets of wealth derived from mining, natural gas and foreign agribusinesses • Current strategy is facilitating rent capture by elites – bound to be a source of future conflict. 17