Mozambique: The presidency of Guebuzza (2005-2009)

Updated October 2009

At his inauguration President Guebuzza undertook, amongst other things, to reform the justice system and fight corruption (Cravinho 2007, 800). Amendments to the constitution, made in 2004 came into effect in March 2005, creating an office of Ombudsman to curb abuses of power by officials, while in August the Central Office for the Combat of Corruption was created (Global Integrity Undated). In the same month senior officials in the National Social Security Institute were dismissed or reassigned, allegedly due to corruption and mismanagement, (Global Integrity Undated). In August 2005 also, to broaden consultation and inclusiveness, a Council of State was created by the President in terms of a November 2004 constitutional amendment (Cravinho 2007, 800). However, international donor countries felt that insufficient concrete steps had been taken to reduce corruption, pointing to the absence of corruption prosecutions in 2006 and 2007 (AFDB/OECD 2008, 472). Constitutional amendments made in 2006 created Provincial Assemblies, a key demand of the opposition Mozambique National Resistance (RENAMO), and the 5% vote threshold for representation in the Assembly of the Republic was abolished, while the Electoral Commission was restructured so as to depoliticize and professionalize it by giving a majority of positions to members of civil society (Cravinho 2007, 801). Provincial Assembly elections, originally scheduled for 2007, were postponed to coincide with the national elections in 2009 (Cravinho 2007, 801).

There was a high degree of continuity in economic and social policies with the government of Guebuzza's predecessor, Joaquim Chissano. The government practiced fiscal and monetary discipline and prioritised economic growth and poverty reduction (AFDB/OECD 2008, 465). Aid from foreign donor countries formed around half the government's budget and the large scale economic development projects embarked on involved huge sums of money, so the government embarked on a reform of the management of state finances (AFDB/OECD 2008, 465). Progress was also made in improving tax collection and reforming tax structures, especially in regard to large companies, to reduce dependence of foreign aid so that by 2008 foreign aid formed only 35% of government spending (AFDB/OECD 2008, 464, 465). In January 2005 Mozambique enjoyed further debt relief when the United Kingdom wrote off some US$150 million in debt and a year later the IMF US$153 million, followed by the African Development Bank (US$370.4 million) in July, the World Bank (US$1359 million) in October and Romania (US$140 million. Cravinho & George 2007, 811). By the beginning of 2009 foreign debt had been reduced to a manageable 36% of GDP and, as a result, debt servicing fell from 2.5% of GDP in 2005 to 1.2% in 2006 and 1.1% in 2007, freeing up resources for use in economic development and the provision of social services (AFDB/OECD 2008, 468; Financial Standards Foundation 2009, 8).

Economic growth, though it declined from the high level of 8.85 in 2001-2005, remained high, averaging 7.4% between 2006 and 2008 (IMF 2008; AFDB/OECD 2008, 461). Growth of 8% in GDP in 2006 dropped to 7.4% as oil prices rose and drought and cyclones ravaged agricultural production (AFDB/OECD 2008, 461, 462). In 2008 the growth rate dropped to 6.8% as the global financial crisis made itself felt and the energy crisis in South Africa impacted, especially on the increasingly important manufacturing production (CCBG in SADC 2009, 2). The impact of these setbacks was ameliorated to a large extent by foreign investment in mining, industry and agriculture, which in turn, together with donor funded infrastructure development, fuelled a boom in the construction industry (AFDB/OECD 2008, 461, 464; CCBG in SADC 2009, 8). Between 2000 and 2007 foreign investment rose by 157.5% and by the end of 2007 the stock of foreign investment was 42.6% of GDP (Financial Standards Foundation 2009, 10). However, the international financial crisis impacted badly on economic growth in 2009, with declining investment, export revenue and a drop in the number of tourists, and the IMF forecast a growth rate of 4.3% for the year (Financial Standards Foundation 2009, 14). As a result of monetary and fiscal discipline the inflation rate declined from a yearly average of 13% in 2000-2005 to 9.3% in 2006-2008, reaching a low of 6.2% at the end of 2008 (IMF 2008; AFDB/OECD 2008, 461). This was achieved despite food and oil price rises and imported inflation from South Africa (CCBG in SADC 2009, 2).

The population growth rate, which had fallen slowly but steadily between 2001 and 2005, accelerated worryingly to 2.3% in 2006 and 2007 (IMF 2008). High population growth rates and declining income growth rates necessarily implied falling per capita income growth rates. From 6.7% a year on average in 2001-2005, per capita income growth fell to 5.8% in 2005, to 5.5% in 2006 and then again to 4.6% in 2007 (IMF 2008). The economy had diversified considerably and by 2007 manufacturing contributed 15.5% to GDP, retail and wholesale 14.5% and financial and business services 11.1% while agriculture and fishing was 27.4%; aluminium earned 63% of export earnings, food 10% and electricity 9% (Financial Standards Foundation 2009, 4, 7).

The relatively high economic growth rates experienced in the new millennium where primarily the results of large scale enterprises that were mainly capital intensive, requiring skilled labour, that was in short supply in Mozambique, and employing insufficient unskilled labour, of which Mozambique had a surplus, to significantly affect under and unemployment (AFDB/OECD 2008, 462). Thus despite diversification, agriculture continued to dominate the economy, employing 80% of the workforce (African Development Bank 2006, 2). The formal economy employed 10% or less of the labour force in 2006/7 and grew at a rate lower than national income, while employment in the informal sector, which contributed 40% to GDP in 2000, grew at 7%-8% per year (African Development Bank 2006, 11; AFDB/OECD 2008, 473). Unemployment stood at around 17% while about 75% of the labour force was engaged in informal sector activities (AFDB/OECD 2008, 473; Financial Standards Foundation 2009, 9). The inflexibility of the labour market in Mozambique was blamed for inhibiting job creation and in May 2007 legislation was passed to permit various kinds of contract work, making it easier for firms to reduce or increase their employment levels according to economic circumstances (African Development Bank 2006, 11; AFDB/OECD 2008, 469).

The commitment of the government to fighting poverty and to economically empowering the poor was reflected in the Economic and Social Plan for 2007, but high population growth and lack of resources made progress slow; by 2008 only 6% of the population had access to electricity (African Bank 2006, 8; Financial Standards Foundation 2009, 7). In terms of the plan, access to potable water was to be expanded from 46% of the population to 48.5% and in 2008 government and private initiatives were launched to improve water access in Maputo, Matola and Chimoio, Mozambique's first, second and fifth largest cities (AFDB/OECD 2008, 470; Financial Standards Foundation 2009, 6). However, little progress was made in improving access to proper sanitation, which was restricted to 32% of the population (African Bank 2006, 8; Financial Standards Foundation 2009, 12, 13). The government attempted to reduce the devastating effect of malarial inflection, at the time the country's leading cause of death, by distributing mosquito nets for use by children under five and pregnant women (AFDB/OECD 2008, 473). Nevertheless infant and maternal mortality rates remained high and life expectancy low, a mere 41.2 years in 2009 (AFDB/OECD 2008, 473; Financial Standards Foundation 2009, 12, 13). The decline in life expectancy, as with other Southern African countries was due to the advance of HIV/AIDS, for the adult (14-49 years) prevalence rate rose from around 12% in 2001 to 16% in 2007, though prevalence growth has slowed and may have begun to decline (National Aids Council 2008, 15). Prevention of mother to child transmission treatment rose from 0.2% in 2002 (when the programme was initiated) to 29.7% in 2007 (National Aids Council 2008, 32). However, the government lacked resources to roll out universal treatment for Aids sufferers, and only a sixth of those who need treatment were receiving it in March 2007 (AFDB/OECD 2008, 473).

Education too proved to be challenging, especially in regard to the needs of the growing economy, the high levels of poverty and the need to uplift the status of women and reduce population growth. Despite efforts to expand the educational system, and the implementation of free compulsory education for ages 6 to 14, more than 75% of the population had five or fewer years of formal education in 2008, only 8.5% secondary or tertiary education and adult literacy was only 44% in 2007 (African Bank 2006, 12; AFDB/OECD 2008, 470; Financial Standards Foundation 2009, 13; UNDP 2009). Low teacher to pupil ratios (1:65) and overcrowded schools with few facilities, as well as the need of poor children to earn incomes (that 31.7% of children 5 to 14 work) led to high dropout rates, with only 31% of those who enrolled graduating from primary school (Financial Standards Foundation 2009, 13). Considerable gains were made in improving the enrolment rates of primary school children, which reached 94% in early 2007, but education quality declined and secondary education expansion did not keep pace so that large numbers of primary school graduates could not continue their education for lack of facilities and teachers (AFDB/OECD 2008, 472). The consequence of all this is that poverty, though declining, remained high and, worryingly, a study in 2006 suggested that the rate of reduction may have declined, that the position for many may have deteriorated and that inequality was increasing (AFDB/OECD 2008, 472).

On 27 November 2007 Mozambique took possession of the Cahora Bassa dam through a purchase of 67% of the shares from Portugal for US$700 million, the loans to be serviced and repaid from electricity sales to South Africa (AIM 2007). Poor transport infrastructure was a major inhibiter of economic growth and several projects were undertaken to restore or upgrade, roads, railway lines and ports (AFDB/OECD 2008, 463). The rehabilitation of the Nacala corridor, providing Zambia and Malawi with more direct and cheaper access to the sea for exports and imports, continued and the port itself attracted investments, especially in the form of an oil refinery (AFDB/OECD 2008, 463, 470). Similarly work on the Maputo corridor, connecting South Africa economic core in Gauteng, was undertaken. The upgrading of Maputo harbour was completed in 2006, the improvement of the rail line continued and in addition modernisation and expansion of Maputo International Airport was begun and is expected to be complete in mid 2010 (Financial Standards Foundation 2009, 5, 6; AFDB/OECD 2008, 470). Rehabilitation of the railway line from the Moatize coal field in Tete to Beira was begun, to be completed in early 2010, and capital was raised to upgrade Beira's port facilities to cope with anticipated expansions in coal and sugar exports (Financial Standards Foundation 2009, 5, 6). In 2007 the government obtained a US$100 million loan from the World Bank to upgrade the road network (Financial Standards Foundation 2009, 5).

In addition to investment in coal mining at Moatize, titanium mining began in 2007 and a smelter at Mona to process the minerals was commissioned in 2008 (AFDB/OECD 2008, 462, 463). The agricultural sector's potential was also recognised. The sugar industry's production expanded by 60% a year, four mills were restore and reopened and the industry was poised to take advantage of the rehabilitation of Beira port and the Everything But Arms initiative that would producers quota and duty free access to European Markets (AFDB/OECD 2008, 462, 463). To reduce food imports, save foreign exchange, increase food self-sufficiency and raise incomes for peasant farmers the government invested in research to improve agricultural technology that would raise yields and increase land under food cultivation (AFDB/OECD 2008, 462). It also initiated a project to produce bio-fuels and bio-ethanol from crops such as coconuts, palms, maize and cassava, thus increasing agricultural production and incomes and reducing fuel imports (AFDB/OECD 2008, 463). Finally, the government began drafting new legislation in 2008 to reduce red tape delays and regulatory burdens for business operating in the country and for new investors while increasing taxes on large corporations (AFDB/OECD 2008, 469).

References

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AFRICAN DEVELOPMENT BANK 2006 "Mozambique 2006-09 Country Strategy Paper", [www] http://www.clubofmozambique.com/solutions1/solutions/business/african_development_bank/adb_com.pdf [PDF document, opens new window] (accessed 11 Mar 2010).

AIM (MOZAMBIQUE NEWS AGENCY) "Cahora Bassa is ours - President Guebuza", No 351, 7 December, [www] http://www.poptel.org.uk/mozambique-news/newsletter/aim351.html#story1 [opens new window] (accessed 11 Mar 2010).

CCBG IN SADC (Committee of Central Bank Governors in SADC) 2009 Mozambique: Recent economic developments, April, [www] http://www.sadcbankers.org/SADC/SADC.nsf/LADV/BDFE243FB83663E6422575DD0032C6E7/$File/Mozambique.pdf [PDF document, opens new window] (accessed 11 Mar 2010).

FINANCIAL STANDARDS FOUNDATION 2009 "Country Brief: Mozambique", 19 June, [www] http://www.estandardsforum.org/secure_content/country_profiles/cp_124.pdf (offline 11 Mar 2010).

CRAVINHO, JG 2008 "Mozambique: Recent History" IN Frame, I (ed) Africa South of the Sahara 2008, Europa Publications, 796-801.

CRAVINHO, JG & GEORGE, E 2007 "Mozambique: Economy" IN Frame, I (ed) Africa South of the Sahara 2008, Europa Publications, 802-811.

GLOBAL INTEGRITY UNDATED "Mozambique Timeline", [www] http://www.globalintegrity.org/reports/2006/MOZAMBIQUE/timeline.cfm [opens new window] (accessed 11 Mar 2010).

NATIONAL AIDS COUNCIL 2008 Mozambique Progress Report for the United Nations General Assembly Special Session on HIV and AIDS 2006-2007, January, [www] http://data.unaids.org/pub/Report/2008/mozambique_2008_country_progress_report_en.pdf [PDF document, opens new window] (accessed 11 Mar 2010).

UNDP 2009 "Mozambique HDI Rank - 172", IN Human Development Report 2009, [www] http://hdrstats.undp.org/en/countries/data_sheets/cty_ds_MOZ.html [opens new window] (accessed 15 October 2009).

WHO/INAIDS 2008 "Epidemiological Fact Sheet on HIV and AIDS, Core data on epidemiology and response: Mozambique", [www] http://www.who.int/globalatlas/predefinedReports/EFS2008/full/EFS2008_MZ.pdf [PDF document, opens new window] (accessed 15 October 2009).