Download Mozambique Economy

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