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GREAT insights Magazine

Mozambique: Ready for a Rollercoaster Ride?

December 2012

De Tollenaere, M. 2012. Mozambique: Ready for a rollercoaster ride? GREAT Insights, Volume 1, Issue 10. December 2012. Maastricht: ECDPM

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The prevailing sentiment in Maputo these days is similar to being pulled up the track of a rollercoaster: a combination of excitement and insecurity about what is to come. One is easily carried away by the speedy succession of economic events. Announcements of new gas, coal and mineral deposits, announcements of large investments, the chain of trade missions of countries from five continents, it all induces a sense of excitement. 

The country is rich, wealth is within reach and finally one can do away with the dependency on patronizing donors. Bur there is also insecurity and even fear. What is this all going to do with the country? Are we, Mozambicans, master of our destiny? Will I, Mozambican, be able to get a share of the wealth?

The track record 

This rollercoaster stands in a country that has known consistent high economic growth since the mid-90’s (7 to 8% GDP/annum) and that received sustained high levels of aid (ca. 1,5 billion US$/annum). There are multiparty elections since 1994 and basic freedoms are fixed constitutionally. An impressive number of policies and strategies were formulated and approved, almost all as part of creating an enabling environment for the aid sector.

Yet, all these inputs and assets only partly delivered the anticipated outcomes. Poverty reduced between 1997/8 and 2002/3, but this can no doubt to a great extent be attributed to the “peace dividend” that allowed a return to normal economic life. Poverty reduction was not sustained as demonstrated in the 2008 assessment (improvements in some urban areas were balanced out by a fallback in some rural areas). Mozambique’s Human Development Index improved since the mid-90’s, but is still among the lowest worldwide and the country could not get closer to the Sub-Sahara average. The Worldwide Governance Indicators show pretty much steady lines for the period 1996 to 2011 for 5 of the 6 indicators. 

Only political stability and absence of violence shows continued improvement over the interval. Clearly, the governance situation did not deteriorate, but neither did it improve, despite multiple reforms and despite the fact that it was consistently on the top of the aid conditionality agenda. On the political front, the household institutions of democracy were all put in place, but the net result has been a gradual, and by now overwhelming, dominance of the ruling party. While the main opposition party Renamo put up a major challenge in the 1994 and 1999 elections, it shrank rapidly over the past decade because it failed to turn itself in a functional political party.

Looking back

Why was there not more and better progress, considering the considerable growth, the external resources and the “right” policies? From a development logic there is no real explanation for this. So most agencies would say this is just a matter of time. The country is on the right track. Here and there some policy adjustments need to be made and results will eventually, unavoidably, be produced.

What is called here the development logic is the conviction that reducing poverty is the overriding goal of the Frelimo government. The development rabbits are firmly stuck in the headlights of this overarching narrative, but it turns a blind eye to other, even stronger, motivations for political decision-making. For the past twenty years, two such incentives can clearly be identified. 

On the political front, all objectives were made secondary to securing continued rule by Frelimo. For Frelimo this is nothing less than complying with a historical mission resulting from the fact that it liberated the country from colonial rule. Trying to stay in power is a legitimate political objective. The issue is whether this is achieved through competition or through engineering. 

While there was a tendency to split party and state after the first multiparty elections in 1994, this trend was entirely reversed as from 2003, when Armando Guebuza was appointed as secretary general of the party. The split between party and state was seen as the cause of a near electoral loss in 1999 and had to be reversed. Guebuza revitalized the party structures from top to bottom and made it no secret that the state was the principal instrument to reproduce the power of the party.

Adherence to the ruling party became a necessity to get access to the public service, or to get access to loans, scholarships, housing etc. Membership increased from 1.6 million in 2003 to staggering 3.6 million in 2012. In 2009, Frelimo secured a qualified majority in the Parliament (giving it the freedom to change the constitution), won the Presidency with ¾ of the votes, a majority in all provincial assemblies and it governs 41 out of 43 municipalities. 

From a practical point of view, this process required time and resources, at the expense of fighting poverty effectively. From a principled point of view it has produced a state apparatus that is not geared towards the production of collective goods and securing equal rights and protection for all citizens. The state is turned in an executive branch of a party. This has detrimental effects. An example is the “open and inclusive presidential visits” Guebuza carries out since he was elected. Although it is objectively laudable that the president leaves his palace and visits towns and villages all over the country, there are serious side-effects: the visits consume budgets that are intended to stimulate local development and accountability tends to be concentrated on one single institution, the presidency. An increase of presidential authority comes at the cost of the credibility of lower and middle level institutions.

On the economic front, there was, certainly since the liberalization of the economy, a strong conviction that somehow Mozambican ownership or partnership had to be guaranteed. Discussions on the need for a national bourgeoisie to secure the Mozambican stake in the economy are still ongoing, but in the meantime it has already happened. The privatization of state property (houses, companies) and bureaucratic decision-making power laid the basis for the creation of a Mozambican elite (right out corruption not to be discarded). This produced an economic model that was increasingly driven by the need to control access to the national economy and the drive to seek rent. 

One of the characteristics is the preference for large investments and for business that guarantees a quick return. Frelimo old-hands will argue that there was no other option. If not, by mere lack of cash when liberalization started, the economy would have been entirely in foreign hands. Rent seeking was also required to feed the ever-widening network of patronage. If not based on ideological conviction, loyalty and allegiance need to be bought.

The point made is not that Frelimo intentionally tries to keep a majority of the Mozambicans poor. The point is rather that there are stronger political incentives than poverty reduction that have shaped the political economy of Mozambique and an emergent property of that political economy is that it does not produce inclusive growth. 

Looking forward 

The overly summarized fundaments of Mozambique’s political economy sketch the platform for the take off of a natural resource boom. It is possible that the absence of a political contender (low threat) and the prospect of a sharp increase in income gear the political incentives of the elite towards inclusiveness and redistribution. Possible, but not likely! 

A main reason for this is that society and state are detached. A handful of intellectual activists do a great job in pointing out problems with the current political economy, but the silent majority has retracted, away from politics (only 30% of the voting age population actually voted in 2009) and is surviving in the informal sector. When tolerance levels are challenged, there has been a violent reaction (2008 and 2010), but the government contained it with repression and concrete measures (for example a currency inflation to keep food import costs under control and fuel subsidies to transporters). The riots were upsetting, but no threat to the system. The matter is that there is for the time being not enough organized pressure from society to do things differently. The legitimacy and representativity of critical voices is contested by the powers that be and there simply are no organized social forces that can voice alternatives and weigh on policy.

There are of course also other reasons. Literature abundantly demonstrates that a resource blessing is subject to transparency (upstream on licensing and contracts; downstream on different kind of income from the sector) and to capable and credible institutions before wealth arrives. None of this is sufficiently present. 

In Why Nations Fail, Acemoglu and Robinson argue that the more concentrated political power is, the more a small group in society tries to extract wealth for itself to the detriment of the rest: this is a world of “extractive” institutions (1). The argument further states that in the presence of extractive political and economic institutions, all outsiders do is reinforce the plunder machine. In Mozambique, “the ownership and control over mineral and energy resources, as well as natural resources (land, water and forests) and infra-structure (roads, bridges, communications, energy, etc) associated with the mineral-energy complex are increasingly concentrated at the hands of large multinationals and a small group of domestic partners”, as says economist Carlos Nuno Castel-Branco in Challenges for Mozambique – 2011 (2)

All this happens at a time of an international economic crisis that changes the incentives on the side of the development partners. Despite successive drops in the Ease of Doing Business Index and the Global Competitiveness Index, investors are literally lining up. The core activity of embassies is quickly shifting from aid to business. The good governance agenda has been put on hold, or transferred to the business sector. The assumption is that business needs good governance and will therefore enforce it. 

Going back to the rollercoaster, all indicates that a few will thoroughly enjoy the new ride, while the crowds stand and watch, murmuring and hoping, but, at least in the short term, without the power to join.

Marc De Tollenaere is an ECDPM Programme Associate. He is writing in his personal capacity.

Footnotes
1. Daren Acemoglu and James Robinson (2012), Why Nations Fail. The Origins of Power, Prosperity and Wealth, Crown Publishing Group.
2. Carlos Nuno Castel-Branco et al. (eds.) (2011), Challenges for Mozambique – 2011, IESE, Maputo.

This article was published in Great Insights Volume 1, Issue 10 (December 2012)

 

African institutionsEconomic Transformation and TradeMozambique

External authors

Marc De Tollenaere