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Mozambique: Between Stagnation and Growth

December 2012

Francisco, A. A. da Silva. 2012. Mozambique: Between stagnation and growth. GREAT Insights, Volume 1, Issue 10. December 2012. Maastricht: ECDPM

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“Moçambique is maningue nice” has become an increasingly popular expression, especially within the urbanized Mozambican elite. However, the positive and promising image contrasts with another image, also true, but very different and not at all pleasant; the “Mozambique maningue nasty” concept, illustrated by the fact that about 60% of the population lives on less than $ 1.25 per day, while only less than 20% has more than $ 2 per day.

Mozambique: maningue nice or… maningue nasty?

Part of the expression’s popular appeal comes from the fact that a rather brief sentence comprising four words mixes up three different languages ​​relevant in everyday life. Besides the Portuguese word “Moçambique”, the official language, there is the word “maningue”, meaning “very” in one of several languages ​​of the south of Mozambique, and the English word, “nice”, the dominating lingua franca in southern Africa.

No doubt. That Mozambique is “very nice” is not a mere nationalist imagination. It is real. Besides its idyllic landscapes, Mozambique is one of the richest Southern African countries due to its natural resources. Mozambique has also a privileged geo-strategic location, as it provides access to the Indian Ocean to its landlocked neighbours. Furthermore, at least in the past two decades, the formal economy has exhibited high rates of growth and is expected to sustain buoyant growth in the future.

The “Mozambique maningue nasty” concept refers to an entirely different reality. Rural Mozambique for example, which represents between 65 to 70 percent of the total population, is mostly in an incipient demographic transitional phase. While the mortality rate decrease began in the first half of the twentieth century throughout the whole country, the fertility transition is occurring only in some parts of the urban area. In fact, the total fertility rate remains above five children per woman of which; 6.6 children per woman in rural areas compared to 4.5 children per woman in urban areas.

The current slow demographic change is consistent with a virtually stagnant rural economy, predominantly dominated by a primitive and precarious subsistence production. A Malthusian regime still dominates rural Mozambique: low level of productivity, lack of technology and consequently very low production and income. Throughout the first decade of this century, the daily average rural income was about 10 Meticais (MT) per capita (circa 30 cents of an American dollar (USD), against a median income of only 4 MT (approximately 13 cents of an USD), suggesting that inequality is on the rise.

The contribution of the rural economy to the national income, estimated by the Gross National Income (GNI), might have only been a quarter of the total GNI or so. In other words, while the rural Mozambican produces an annual income of about US$ 120 per capita, the urban or urbanizing Mozambican generates an annual wealth around ten times higher: about US$1100 per capita (1) . 

Realism versus Wishful Thinking

The two contrasting images of Mozambique highlighted above inspire a multiplicity of analytical representations, opinions and interpretations leading to different perceptions and approaches. While some observers and analysts try to adapt their representations to reality, others choose to take their desires, aspirations and interests as realities, and then take decisions or follow options based on these desires, instead of taking them on the basis of facts.

The first approach, whether optimistic or pessimistic, can be called realistic. Regarding the latter, one can only designate it as “wishful thinking”. In extreme forms it is a kind of self-illusion; in milder forms, an unwarranted optimism. In its most absurd form, the approach consists of trying to make things happen merely by wishing for them to happen. Sadly, this last form of wishful thinking has become the dominant ideology in Mozambican policymaking, amongst political leaders, the Government, and donors alike.

An illustrative example of the current Mozambican “wishful thinking”, converted into the official ideology of the regime, can be found in the recent speech held by Armando Guebuza, President of Mozambique, delivered in Brussels, on last October 16. Particularly revealing is the concept of “redistribution of wealth”, which Guebuza chose as an illustration of an experience “Made ​​in Mozambique”.

“For us, in Mozambique”, said Guebuza, “this concept is translated into the empowerment of citizens for them to do their share in the fight against poverty, because wealth is produced through work and one can only distribute what one has”. To this, Guebuza added another very much cherished concept among donors, “inclusive development” by stating that, “… we identify the actions which lead to the integration of more citizens in the nation’s social and economic life, thus becoming active agents of their development and its primary beneficiaries”(2) .

To be even more convincing to the audience, the Mozambican President illustrated his views on Mozambican redistribution of wealth and inclusive development referring to the “decentralized financial resources to the rural districts … aimed at generating employment and food production, also known as the “7 million Fund”, approximately EUR 200.000”.

In reality, this has been a rather exceptional ad hoc financial funding, very much centralized and monitored by the President himself, allocated mainly to the districts linked to the Frelimo Party. In fact, these districts are still ruled on one party basis, as they continue to be administratively ruled by the State, without ever holding local democratic elections, contrary to what is prescribed by the Constitution of the Republic.

Even when people do not call the “wishful thinking” approach by its name, it is easily recognizable. One only has to pay attention to the words, actions and attitudes of protagonists. In relation to the previously mentioned speech, those who looked forward to seeing President Guebuza outline his plans to manage the revenues from the mining sector had plenty of reasons to leave the event disappointed. Citizens of Europe certainly did not find in the empowerment, employment and growth rhetoric provided by the Mozambican President, any inspiration for their own struggling economies, or any examples from the so-called Mozambican macroeconomic stability.

Unfortunately, when the International Monetary Fund (IMF) evaluates the performance of Mozambican economy, it often does so in a rather complacent and patronizing stance, as the following assertion illustrates: “Mozambique continues to weather the global economic turmoil remarkably well” (3)Without being totally incorrect, this assessment fails to point out the true vulnerability to which the external accounts of the Mozambican State is exposed, knowing that it has relied so much on relationships and support from donors.

A much more realistic view of the internal and external context was depicted by Standard & Poor last August, when it released its ‘B+/B’ long- and short-term foreign and local currency sovereign credit ratings for Mozambique. First, Mozambique enjoys a relatively stable outlook, but in a highly speculative market environment. Second, this “stable outlook”, is conditioned on the expectation that “donor support will continue to help fund fiscal and external deficits, strong economic growth will continue, and the political situation will remain broadly stable (…) We may lower the ratings if donor support wavers, fiscal or external deficits widen, inflation returns to double-digit rates, or social unrest or political tensions escalate” (4). Even those who currently live in luxury need to bear in mind that in international financial jargon they are also living in a “junk” environment. 

Mozambique at a Turning Point?

There are several reasons to believe that Mozambique is at a crucial turning point in several areas, but pointing in different directions. It is always possible to improve and distribute wealth and available resources better. What is more difficult, if not impossible, is to distribute the wealth we have failed to produce and do not have. Not totally impossible, because in the case of Mozambique, the State and its Executive have so far managed to distribute more than Mozambican society produces, thanks to donations provided by developed countries.

However, without a sound economic and financial framework, we will not be able to reduce poverty and promote the social and economic development that high growth rates have failed to do.

In a recent study, the author of this text has shown that the initiatives associated with the IMF’s Poverty Reduction Strategy Paper (PRSP and PARPAs in Mozambique) and with the UN (United Nations)’s Millennium Development Goals (MDGs) helped Mozambique to avoid the Failed State status, but will not free the country from the country’s three-decade long state of Quasi-bankruptcy (5).

Now, a new initiative called the Social Protection Floor (SPF) is said to aim at replacing and continue the existing initiatives, namely the MDGs that go up to 2015. Its success will most probably depend on the extent to which they will take reality into account, particularly the characteristics and structuring nature of prevailing demography and economics dynamics.

When donors claim, as the European Commission (EC) did last August that “Social transfer programmes … remain the dominant form of social protection with donors often playing an important role in their design and funding” (6), they are well-intentioned, but dead wrong. The reality in Mozambique of today is that for the time being having many children is still the main form of social protection in Mozambique. For all its shortcomings, old forms of social protection need to be the starting point of policymaking, rather than retracting to wishful thinking. Just because it would be nice if something were true will not make it happen.

Beyond that, recently the Mozambican Government and the IMF have opened a window of opportunity by accepting to widen the miniscule fiscal space for social protection in the State budget. The PRSPs being unfit to help Mozambique to free itself from the quagmire of economic stagnation and financial bankruptcy, determining what other political and economic instruments can be used remains the question. This is in fact the big challenge that Mozambique is facing at this crucial time in its history.

Dr. António A. da Silva Francisco is Associate Professor of Economic Development at the Economics Faculty, Eduardo Mondlane University (UEM) in Maputo. He is Instituto de Estudos Sociais e Económicos (IESE) Research Director. He can be reached at [email protected]

Footnotes
1. Francisco, A. & Muhorro, S., 2011. Pauperização Rural em Moçambique na 1a Década do Século XXI. IDeIAS, Boletim No 34, 8 de Abril. Available at: http://www.iese.ac.mz/lib/publication/outras/ideias/ideias_34.pdf, and World Bank, 2012. The World Bank: Data, Indicators. Available at: http://data.worldbank.org/indicator/SI.POV.DDAY?display=default [Accessed November 18, 2012]. 
2. Guebuza, A., 2012. Speech by Armando Emílio Guebuza, President of the Republic of Mozambique, Brussels, 16 October 2012. Eudevdays.eu. Available at: http://eudevdays.eu/node/5280 [Accessed November 9, 2012]. 
3. IMF, 2012. Republic of Mozambique: Fourth Review Under the Policy Support Instrument and Request for Modification of Assessment Criteria. Country Report No. 12/148. International Monetary Fund (IMF). Available at: www.imf.org/external/pubs/cat/longres.aspx?sk=26002.0 [Accessed June 20, 2012] 
4. S&P, 2012. Ratings on Mozambique Affirmed at “B+/B”; Outlook Stable. Santandard & Poor’s. Available at: www.standardandpoors.com/prot/ratings/entity-ratings/en/us/?entityID=277554&sectorCode=SOV [Accessed September 3, 2012]. 
5. Francisco, A., 2012. Política Pública e Intervencionismo: Porque Existe o PARP em Moçambique? In L. de Brito et al., eds. Desafios para Moçambique 2012. Maputo: 259-294. 
6. EC, 2012. Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: Social Protection in European Union Development Cooperation, Brussels: European Commission (EC). Available at: http://ec.europa.eu/commission_2010-2014/piebalgs/headlines/news/2012/08/20120824_en.htm [Accessed November 16, 2012].

 

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

 

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External authors

António A. da Silva Francisco