2. Mozambique
2.5. Economic context
While Mozambique shows an impressive economic growth averaging 8% over the past decade, according to the World Bank Report, it is a country still in transition with limited infrastructure and high unemployment rate. Due to this it is a least developed country with a per capita income of USD 290 in 2003-2005 which increased up to USD 593 in the period 2009-2013.
The estimated population growth rate is 2.44%; by 2014 the population is expected to reach 26 million, without estimating the impact of HIV/AIDS. This is considered one of the most devastating threats to the country’s 19.8 million people, with the potential to wipe out all past and current gains. At present, the incidence of HIV/AIDS is higher among young females (in 1997, 14% of the population was infected with HIV/AIDS). The lack of access to healthcare services and drinking water has worsened the spread of such diseases as malaria, intestinal diseases and acute respiratory infections, which are among the highest causes of death in the population.
Approximately 80% of the population live in the rural areas. Poor people depend on agriculture and small-scale informal trading for their livelihood. “The battle against absolute poverty will never be victorious, because the participation of the intended beneficiaries is barred. The struggle waged against AIDS nationally, is just a discriminatory struggle, because the messages are all expressed in a language which is only understood by the majority of residents in the cities”37.
As regards employment, “reliable data on Mozambique’s labour market hardly exists.
Estimates assume that about 520,000 Mozambicans are employed in the formal sector, and approximately 95% of the total labour force depends on the informal sector for their subsistence. This distortion also results from a poorly educated workforce with limited skills.
Although large companies are prepared to invest n training of their workers it is mainly the small and medium sized enterprises that lack the necessary resources for training”38.
Economically the mid-1980s were characterized by structural adjustment plans; for instance, the Economic Rehabilitation Program in 1987 by the World Bank and the International Monetary Fund (IMF). In 1984, Mozambique joined the IMF. In 1992, Mozambique, like the rest of Southern Africa, experienced the worst drought since the beginning of this century.
37 See Mazula pag.17
38 Bertelsmann Foundation (eds.), Mozambique in www.bertelsmann-transormation-index.de (21.09.2006)
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Since the end of the civil war (1992), which lasted for 15 years, the Mozambican government has embarked on a liberalisation and privatisation policy39, hastening the process of opening up the market economy, which, according to the World Bank and the International Monetary Fund, is moving forward successfully.
As early as 1993, the year following the Rome Accords, Italy launched the Extraordinary Programme to Support the Mozambican Peace Process40, to back the Mozambican government41, and took on the financial commitment of providing the emergency food assistance and support for the displaced persons42.
These were medium-term operations that were intended to link the emergency phase and the development phase, mainly to help demobilise the army and reincorporate the war veterans, as well as resettling the refugees and displaced persons. The programme also made provision for capacity-building operations to support the Mozambican institutions, particularly at the Ministry of Health, focusing on the areas and the communities that had been most severely affected by the war.
Since 1994, Mozambique has been the second recipient of ODA in Sub-Saharan Africa after Tanzania, with USD 6.6 billion between 1991-1994. Donors’ aid has averaged more than USD 820 million per year, reaching about 22% of GDP. This has attracted foreign direct investment, which over the period 1998-2001 averaged USD 300 million. Per capita income also reflects this trend. In 1996, per capita income stood at USD 90, in 1997 it had reached USD 125, rising in 2000 to USD 22043. Inflation in 1996 stood at 16.6%, but by 1999 this had fallen back again to 5%.
In 2001 the GDP grew of 13.9%, while the inflation was 21.9%, combined with a depreciation of 31% of metical exchange rate to the dollar. In 2002, according to the available data, economic growth reached 10%, while the inflation rate decreased to 9.1% and the Metical was stable against the USD. The efforts to replace infrastructures destroyed by the floods and the recovery of agricultural production, together with the start-up in aluminium production by Mozal, made feasible the re-launching of the economy from 2001 onwards.
39 The first structural adjustment programme dates back to 1987. That same year, the government launched a 'Reabilitaçâo Económica', an economic rehabilitation programme discussed in: Moçambique: Aprender a caminhar com uma bengala emprestada? Ligações entre descentralização e alívio à pobreza. Iina Soiri, December 1999.
40 The Extraordinary Programme to Support the Peace Process. The purpose of this Programme was national reconciliation and its objectives were:
• to increase employment and raise incomes in the rural areas, to encourage resettlement;
• to create social and healthcare infrastructure to promote more evenly balanced development;
• to improve public and private managerial capacities in order to enhance and make the best use of local resources.
The measures under the Programme were to be used to link emergency relief to development, which required a medium- term plan. The extraordinary plan was intended to link into other previously implemented ordinary activities, and taken together with ordinary future activities they were intended to form part of a joint strategy.
The work was concentrated in four provinces: Maputo (social infrastructure in peri-urban areas of the city, Sabie and Umbeluzi projects);
Manica (the re-establishment of confidence in the provincial government, institutional support at Mossurize, healthcare operations in Gondola and Macossa); Sofala (healthcare programme, a census of the drinking water points, services and infrastructures around Beira);
Zambesia (work at Morrumba and Mopeia). The central government had asked other provinces to draft Provincial Reconstruction Plans to be used to constitute the National Reconstruction Plan.
Italy committed USD 7 million to this effort. Following October 1993, 15 contracts were signed totalling USD 3.6 million, out of a total number of 27 activities worth USD 9 million.
The programme was intended to contribute to national reconciliation by easing the tension caused by the demobilisation of the war veterans, and the return home of the displaced and the refugees, and to contribute to the implementation of the National Reconstruction Plan for national economic and social development.
41 This was in compliance with the covenants set out in the preliminary agreement for the emergency in Mozambique, signed by Italy in 1993.
42 It involved the provision of aid to support the repatriation of refugees and displaced persons from Swaziland (65,000), South Africa (250,000), Tanzania (72,000), Zimbabwe (84,500), Malawi (940,000) and Zambia (25,000). Source: UNHCR.
43 See UNDP, Moçambique. Relatorio Nacional do Desenvolvimento Humano 1998.
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Economic growth has also been underpinned by a substantial flow of bilateral and multilateral international aid which in 1998 alone totalled USD 1,093 million, more than twice the value of Mozambique's exports.
The country’s macro-economic performance has been positive: real GDP growth was 7.5% in 2004, 7.7% in 2005 and 10% in 2006. Annual inflation decreased from over 54% in 1995 to 6.3% in 2005. Over the last two years some substantial progress in fighting poverty and improving human development has been made. The incidence of absolute poverty reduced by 15.3%, from 69% in 1996/1997 to 54% in 2002/03.
According to the Bertelsmann Foundation Mozambique’s country profile, inflation is influenced by the South African rand’s exchange rate. This is due to the fact that the majority of food imports originate from South Africa. In relation to the USD, the Metical (the local currency) remained relatively stable.44
In 2005, according to two surveys45 by the Instituto National de Estatística, the incidence of poverty decreased from 69% in 1996-97 to 54% in 2002-03. Although rural and urban poverty rate are similar (53%), there are relevant regional variations. Manica, Sofala and Zambesia provinces have the lowest poverty rate of the country.
The overall primary and secondary school enrolment rate is 68% for boys and 64% for girls, 79% for urban children and 60% for rural one. In addition there is a marked north and South divide for enrolment rates. Infant mortality is 178 per 1000 live births; this rate is still quite high by international standards. Life expectancy at birth is 44 years for men and 47 for women.
According to the African economic outlook 2006, fiscal management improved in 2005, with increased expenditure in education, tax revenues and decentralisation – increased from 63%
of total expenditure in the first half of 2004 to 66.9% in the first half of 2005, exceeding the Poverty reduction strategy (Plano de Acçao para a Reduçâo da Pobreza Absoluta - PARPA) target of 65%, as a result the country will be included in the G8 debt initiative that is expected to reduce the net present value of debt to 10% of GDP46.
The Mozambican economy has a huge public budget deficit, and also a chronic trade balance deficit. The current account deficit dropped to 5% of GDP in 2004 from 9.2% in 2003.
Exports rose from USD 1.04 billion to 1.50 in 200447.
In 2004, aluminium from Mozal project accounted for nearly two-thirds of exports revenue - the principal export market is the Netherlands -. Despite sluggish exports in prawns, sugar, tobacco in the first half of 2005, and a jump in the oil import bill, the trade balance improved slightly. Imports are dominated by mechanical machineries, vehicle, iron and cereals.
Over the past five years, substantial progress has been made in macro economic stability as mandated by 2001-05 PARPA and the three-year Poverty Growth Facility agreed with IMF.
“Reporting and management of expenditure has improved considerably, in areas such as the wage bill and, as seen, debt management. The 2005 joint review (government, donor and civil society) noted that the overall performance of fiscal policy was encouraging.
44 Cit. Bertelsmann, country report on Mozambique.
45 Instituto National de Estatística, Inquerito aos Agregados Familiares Sobre Orçamento Familiar1996/97 and 2002/03. Maputo
46 See AfDB/OECD, African Economic Outlook, 2006.
47 Cit. African Economic Outlook 2006
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In 2006, according afdb/OECD, the government has extended the new computerised system for recording expenditure (e-SISTAFE) to all ministries’ spending and increasing fiscal decentralisation. It has allocated USD 300,000 per year to each district to finance small scale infrastructure projects. The 2006 budget also calls for recruiting 10,000 teachers and 200 health workers”48.
Despite this trend, the National Human Development Report 2005, launched in Maputo in September 2006, underlines four issues:
• A balance between macroeconomic stability and sustainable broad-based economic growth;
• Investments in responses to HIV/AIDS, malaria and tuberculosis
• A rethink of the agricultural development strategy in distribution of the state budget
• Promotion of a partnership between government, development partners and civil society
The poverty reduction strategy Action plan for 2006 – 2009 (PARPA II), launched in May 2006 is expected to address the above mentioned issues, and the improvement of the formal market flexibility issues49. To pursuit a more inclusive growth beyond the Strategy implementation plan 2008-2010, the plan has been followed by the Poverty Reduction Strategy (PARPA 2011-2014), aimed at introducing patterns of inclusive growth by increasing the allocation of funds for investment under the following pillars:
1. Enhancing production and productivity in agriculture and fishing;
2. Creating employment; and
3. Enhancing social and human development,
focusing at specific indicators mesurements to assess progress toward strategic aims.
PARPA
Before the PARPA, an important survey conducted for the period 1996-1997 on a sample of 8,000 households, gave a very precise picture of the state of the poverty in Mozambique50. It transpired that an average of 69.4% of Mozambican households lived under the poverty threshold and 90% of the rural population and 79% of the urban population lived on a per capita income of USD 20051. Seven Mozambicans out of ten had a disposal income of USD 0.40 a day, while one-third of the population, which is considered extremely poor, disposed of 60% less than the USD 200 national poverty line figure.
In the period 1992-1997, school enrolment levels sharply slumped for children between 7 and 11 years of age from 51% (1980-1985) to 40%, while the illiteracy rate amongst adults aged between 18 and 65 is 60%. In education, too, there is a marked inequality between the rural and the urban zones: 32% of the adult rural population are literate, compared with 71% of the urban population.
48 Cit. Afdb/OECD 2006.
49 Conselho de Ministros – República de Moçambique, Plano de acção pare a redução da pobreza absoluta 2006-2009 (PARPA II). May 2006
50 Report by the Instituto Internacional de Pesquisa em Política Alimentares (IIPA), "Inquerito naçional dos agregados familiares sovre condiçoes de vida da popolaçao 1996-1997"
51 USD 200 indicated the national poverty threshold.
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By the end of 2001, inflation was still at 21.9%, combined with a strong depreciation of 31.3% in the Metical exchange rate to the US dollar. As far as exports are concerned, in 1999 they were worth USD 559 million compared with USD 1,579 million in imports.
In 1999, Chissano’s government launched the Plano de Acçao para a Reduçâo da Pobreza Absoluta (PARPA), which objective is to reduce absolute poverty levels from 70% of the total population to less than 50% by the end of 201052. The PARPA strategy includes policies targeted to the establishment of an enabling environment to investment and productivity, and to the achievement of a comprehensive average annual growth rate of GDP of 8%, combined with low inflation. At the same time, the strategy covers other basic dimensions of poverty, namely gender, vulnerability and environment.
The PARPA monitoring matrices regard the performance of sectors and follow the Plano Economico e Social (PES) balances. It is based on the projections for the demographic and macroeconomic context of Mozambique targets households53.
In 2001, the weight of priority sectors in total expenditure, excluding debt interest, was 2.4%
below the goal of 68.2% set by PARPA. Sluggish economic growth, the low level of education of the members of the economically active age group, the low level of productivity of the rural families, the lack of employment opportunities in agriculture, and the poor state of infrastructure development in the rural areas, are all factors responsible for the poverty of the Mozambican population.
PARPA and PARPA II lay out the country’s strategy for reaching the Millennium Development Goals (mdgs). For the future, over 2010-20014, the Programa Quinquenal do Governo will include the PARPA. In line with the Programa quinquenal do governo para 2005-200954, the PARPA II has the following priorities for 2006-2009:
Macroeconomy and Poverty: economic growth and macroeconomic stability, poverty analisys and monitoring system public sources management
Governance: sector reform, justice sector reform, decentralisation
Economic development: private and financial sectors, agriculture, infrastructure Human capital: Health, Education, water and sanitation
Mainstreaming issues: demining, environment, natural disaster impact reduction, HIV/AIDS, gender, food security Science and technology, rural development.
52 Mozambican Government, Interim Poverty Reduction Strategy Paper. Incorporating the Action Plan for the Reduction of Absolute Poverty. Maputo 16 February 2000. The main objectives of the plan are:
- to sustain economic growth by promoting the industrial sector and enhancing agricultural productivity,
- to develop the human capital through investment in education, healthcare, and improved access to drinking water and basic services, - to increase household agricultural productivity,
- to develop infrastructures in the rural areas,
- to protect vulnerable groups under social welfare programmes,
- to promote employment in the rural and urban areas through micro-projects, - to improve the technical and institutional capacity to monitor and appraise poverty.
53 Cf. ibid.
The targeted households are those with a single source of income, headed by a woman, or a casual labourer. As far as the demographic structure of Mozambique is concerned, in 2004 the population will be about 19 million, of whom 32.5% will live in the North, 41.8% in the Centre, 19.5% in the South, and 5.6% in Maputo city. Over the next four years the population is expected to grow at an annual 7%-9%, with a 5% GDP growth rate.
54 Conselho de Ministros, República de Moçambique, programa quinquenal do governo para 2005 -2009. Maputo 2005.
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According to PARPA II, poverty was expected to reduce from 54% (2006) to 45% in 2009.
National economic integration and productivity increasing were the two new priorities included in this plan.
According to a mid year review (September 2005), the overall of performance against PES/PAF has been encouraging for the expansion of primary education, the improvement of some health indicators, the improvement of the revenue collection. However remain some concerns. Just to underline some emerging bottlenecks: low mid-year budget execution rates for funds in investment budget, delays in the roll out of e-SISTAFE to the Ministry of education and culture, quality of education, slow progress in public and justice sector reform, failure to meet the water and sanitation 2005 PES/PAF targets. In addition, HIV prevalence rates are increasing.
The Poverty Reduction Strategy Implementation (PARP 2011-2014), by introducing the following pillars mentioned before, set specific provisions as to develop each single pillar with a tailored approach to the specific issue. To enhance production and productivity in agriculture and fishing a development strategy for 2011-20 has been adopted and an agricultural investment plan 2013-17 was lauched to gradually help the production to shift from subsistence to commercial farming; while in the social and human development field, the programme effort was mainly focused to boost primary school enrolment, the creation of an increasingly gender-equitable system, particularly in secondary schools55.
G20 and poverty observatory
Since the concept phase of PARPA, the government has been seeking a dialogue with civil society. In order to create a platform for open debate the Poverty Observatory was created56. It elaborates an annual report, with the objectives to convey concerns and opinions of eight thousand people from 102 districts (rural/urban). Information is collected by members of religious group, member of unionised workers, peasants, entrepreneurs and people who belong to civil society, called G2057.
The 2004 Report underlines the increasing participation and the agrarian growth as the two cornerstones to be implemented. The G20 also suggests that an incentive package be created to benefit enterprises whose activities have a direct effect upon the poor, such as generation of employment. In addition they recommend promoting the national entrepreneurial sector, with an emphasis on small and medium enterprises and cooperatives.
The report underscores the need to increase the productivity of the family sector to improve food security. More than half the Mozambicans interviewed turned to their families to resolve social conflicts rather than the state's legal system because of a lack of trust in the government institutions, many of which were perceived to be corrupt. While more than 75%
of respondents had land for cultivation and approximately 80% had a stand to live on, 40% of them did not have security of tenure.
55 International Monetary Fund, Republic of Mozambique: Staff Report for the 2013 Article IV Consultation, Washington D.C. 2013.
56 G20, RAP. Annual Povertà Report 2004. Fighting the causes of poverty. Maputo 2004 in www.iid.org.moz
57 G20:Conferência Episcopal de Moçambique, Conselho Islâmico de Moçambique, Conselho Cristão de Moçambique, Movimento Islâmico de Moçambique, Organização dos Trabalhadores Moçambicanos - Central Sindical, Confederação dos Sindicatos Livres de Moçambique, CTA - Confederação das Associações Económicas, Associação Industrial de Moçambique, Associação Comercial de Moçambique, Associação Moçambicana de Bancos, União Nacional dos Camponeses, TEIA - Fórum Nacional de ONGs Moçambicanas, LINK - Fórum de ONGs, FÓRUM MULHER, FÓRUM TERRA, Rede Nacional do SIDA, Grupo Moçambicano da Dívida, Fundação para o Desenvolvimento Comunitário, ORAM - Associação de Ajuda Mútua, KULIMA, ABIODES, CRUZEIRO DO SUL - Instituto de Investigação para o Desenvolvimento.
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A majority of households reporting that a member of their family had been ill also declared they had had insufficient food and a large number of Mozambicans could not afford to buy medicines, despite government's efforts to subsidise medication.
On the basis of the data collected, the G20 has proposed the creation of consultative councils comprising representatives of NGO’s, political parties and other interest groups to identify
On the basis of the data collected, the G20 has proposed the creation of consultative councils comprising representatives of NGO’s, political parties and other interest groups to identify