Mozambique’s transition from a post-conflict country to one of Africa’s “frontier economies” has been nothing short of impressive. Economic growth – spurred on by political stability, steady macroeconomic management, reconstruction, and structural reforms – has been bolstered by a boom in large foreign investments in the burgeoning energy and natural resources sectors. The country has become a world-class destination for mining and natural gas development. Vast untapped coal reserves have attracted multinationals such as Brazil's Vale and Australian Rio Tinto. Recent figures indicate that foreign direct investment (FDI) doubled to US$5.2 billion in 2012. The country’s recent achievement of Extractive Industry Transparency Initiative (EITI) compliant status (October 2012) is an important milestone in the country’s economic development.
Alongside its natural resources, Mozambique’s long coastline positions it as a natural gateway to global markets for neighboring land-locked countries. Mozambique's economy is forecast to grow at 7% this year (2013). The country has weathered the global economic and financial crises, with economic growth dipping to 6.3% in 2009 but rising to 7.2% in 2011 and 7.5% in 2012. Inflation has reached record low levels, at 1.2% in the 12-months ending in September 2012. Infrastructure spending as well as foreign investments in new mega-projects are expected to drive economic growth to 8% over the medium-term. However, this impressive trajectory of growth has not been matched by a concomitant reduction in poverty and creation of jobs and livelihoods, prompting questions about the current development model and the need for greater inclusiveness and economic diversification.
Following independence from Portugal in June 1975, the country underwent a 16-year armed conflict that ended in 1992. The transition to peace, political stability, and democracy culminated in the country’s first democratic elections in 1994 and the emergence of the Front for the Liberation of Mozambique (FRELIMO) as the dominant political force in the country, a fact that still holds true today.
Looking ahead, the next two years will be marked by several political milestones. The well anticipated designation of the party’s candidate to succeed President Guebuza who is due to step down at the end of his term in 2014 and the 2013 municipal elections. In the meantime, the country is undergoing political turmoil since the leader of the largest opposition group (RENAMO) decided to boycott this year’s municipal elections and the subsequent general elections of next year, following years of successive poll defeats. RENAMO is demanding, among other things, the revision of the electoral law and regulations governing the composition of the electoral body. It considers this issue a precondition for the realization of municipal elections that they've threatened to disrupt if agreement is not reached. In parallel, there have been calls for direct talks between President Guebuza with RENAMO leader. Delegations of both sides have been holding talks since the crisis first erupted some three months ago.
The deceleration of poverty reduction in the face of robust economic growth is the defining development challenge in today’s Mozambique. The challenge is to diversify the sources of economic growth; integrate capital-intensive mega-projects with the government’s poverty reduction strategy; and develop the agriculture sector which employs close to 80% of the workforce but remains largely unproductive and subsistence-based. More broadly, Mozambique needs to improve provision of public goods to facilitate inclusive growth (e.g., infrastructure, education, health); set up well-targeted safety nets for the most vulnerable; promote greater voice and citizen participation while building transparent and accountable systems, and, lastly but not least accelerate investment climate reforms. The scale of Mozambique’s challenges is enormous. The World Bank’s Doing Business Report 2013 has Mozambique sliding from 139th place to 146th among the 185 economies ranked.
Last updated September 2013
Since 1984, the World Bank has been providing development assistance to Mozambique, designing assistance based on the country’s needs and priorities, from economic stabilization in the 1980s, to post-war reconstruction in the early 1990s, to a comprehensive support strategy in the late 1990s, to the current strategy – the Country Partnership Strategy (CPS) for FY12-15 -- which involves close collaboration with the government, development partners, and civil society to ensure sustainable and inclusive growth.
Like the Africa Regional Strategy, the CPS has two cross-cutting pillars and a foundation:
Competitiveness and employment. In view of structural issues, and growth and poverty trends, the Bank looks to help improve the regulatory environment; prioritize investments through spatial planning; enhance agricultural productivity and employment in potential growth sectors; improve provision of transport, water, energy, and other infrastructure; and promote an educated, skilled, and healthy workforce.
Vulnerability and resilience. Given the country’s susceptibility to idiosyncratic and exogenous shocks, the Bank aims to help improve health services for the vulnerable; strengthen social protection; and encourage climate change adaptation and reduce vulnerability to natural disasters.
Governance and public sector capacity. Key to achieving the country’s development objectives is improved public financial management, particularly at the sector and local levels; improved citizen participation in service delivery monitoring; improved capacity to manage renewable and non-renewable natural resources.
In addition, the CPS aims to mainstream gender, social accountability, and nutrition in the portfolio. On gender, the Bank will build on an already solid track record of addressing gender equality during project preparation and implementation. There is broad scope to introduce social accountability mechanisms, particularly in projects seeking to improve service delivery. A parallel strategy to incorporate social accountability is currently under discussion. Similarly, with chronic malnutrition among the worst in the world, nutrition-related activities are planned for active and pipeline operations, as appropriate.
World Bank Lending
The IDA 16 notional envelope provides about US$1.04 billion for the first three years of the CPS period. International Development Association (IDA) resources will continue to be supplemented by trust funds, parallel and basket financing, and used strategically to catalyze and leverage donor and private sector financing. Given the potential for the mineral and gas sectors, agribusiness, tourism, and other sectors, as well as the government’s desire for the Bank to be a catalyst for large and complex infrastructure projects, the Bank will look at the range of instruments, including International Bank for Reconstruction and Development (IBRD) enclave financing, and will ensure coherence and complementarity with International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA). The Bank will also generate greater knowledge products, including South-South knowledge exchange across a range of areas.
Mozambique benefits from an important number of analytic work and technical assistance that are prepared in collaboration with the Mozambique government, development partners, and other stakeholders, and are widely disseminated once completed. The financing for these studies is from the World Bank’s administrative budget as well as from other development partners. In addition to country-specific activities, the World Bank offers a range of regional and global knowledge products relevant to Mozambique, including the Doing Business annual survey and report, and the Africa Development Indicators report that provides macroeconomic, sectoral, and social indicators of 53 countries.
The International Finance Corporation, IFC
Mozambique also benefits from the International Finance Corporation’s support in Africa in the areas of tourism, mining and energy, and financial services. This support encompasses the cross-cutting issues of mobilization of both local and foreign direct investment to key sectors of the economy; improving private sector access to finance; developing infrastructure; improving the investment climate; increasing linkages between large investments and the local economy; increasing private sector awareness of HIV/AIDS issues; and supporting private sector involvement in the water sector. IFC’s main investments have been in the Mozal aluminum smelter near Maputo, and the Mozambique-South Africa gas pipeline. For more on IFC’s work in Africa, please visit http://www.ifc.org/africa
The Multilateral Investment Guarantee Agency, MIGA
Mozambique is one of MIGA's largest host countries. MIGA cooperated with IDA in relation to the previous IDA-funded Enterprise Development Project (PoDE) by providing assistance to Mozambique’s Investment Promotion Center. MIGA is working on several applications for guarantee coverage of investments, and its newest program in Mozambique is a small investment guarantee program for investments of less than US$5 million. For more information on MIGA’s work, please visit http://www.miga.org
The World Bank works closely with other development partners to improve the quality and effectiveness of development assistance to Mozambique. Fundamental to the World Bank’s assistance strategy for Mozambique is the provision of general budget support to implement key policy and institutional reforms under the country’s poverty reduction plan. The budget support program is now on its eighth operation and is closely aligned through a common performance framework with the general budget support activities of eighteen other development partners, namely the African Development Bank, Austria, Belgium, Canada, Denmark, European Union, Finland, France, Germany, Ireland, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom.
In addition, the IDA funded National Decentralization Planning and Finance Program has funneled US$30.4 million to a Common Fund to further advance the decentralization agenda in Mozambique. Other financial supporters are the United Nations in Mozambique, Germany, Switzerland, Ireland, and the Netherlands. Collaboration with development partners has also focused on education, health, roads, and fiduciary and monitoring and evaluation.
Last updated September 2013
ProMaputo: The Maputo Municipal Development Program (MMDP), Phase 1 -- The Bank set out to build the capacity of the City Council of Maputo (CCM), which was unable to provide services or collect taxes in the rapidly growing capital of Mozambique. The Bank helped develop an integrated financial management system, empowered CCM and rehabilitated transport infrastructure, among other achievements as follows:
The CCM revenues rose from US$3.5 million in 2006 (at the beginning of the program) to $9.8 million in 2010 ; 85 kilometers of non-rural roads were rehabilitated by the end of 2009, linking those living in the periphery of Maputo with the urban core; Urban solid waste deposited in the dump rose from 253 tons per day in 2006 to 650 tons in August 2011; Individuals served with regular solid waste collection rose from about 100,000 in 2006 to 1 million in 2011, which included first time services to the 90% of Maputo’s residents who live outside of the city center, and are largely impoverished; Solid waste collection microenterprises contracted under the project provided hundreds of jobs for residents living in areas inaccessible to trash trucks; Annual report cards allowed citizens to give feedback on CCM services and provided forums where CCM staff discuss report card findings with citizens
Supporting Smallholder Farmers -- The Bank-funded Market-Led Smallholder Development Project aims to increase the incomes of smallholder farmers in selected districts of the Zambezi Valley Region in central Mozambique through direct support to smallholder groups and other supply chain participants, and also through the strengthening of local level capacity to undertake and manage agricultural services delivery within the context of the government’s decentralization policy. The number of Community-based Organizations (CBOs) exposed to agricultural technology innovations demonstrated through the extension services surged to 440 across the five target districts in the regions mentioned above.
More than 400 networks of Community Facilitators were established to disseminate technologies among smallholder farmers including through on-farm demonstrations. To date more than 1,000 proposals for grant funding were submitted by CBOs, individuals and district administrations to benefit from the project’s financing. The project also provided funding for micro-projects including rehabilitation of feeder roads, small bridges, livestock treatment facilities, productive assets, community-based nurseries, household silos for grain storage, maize mills, and honey production in an environmentally-friendly fashion. Some of early impacts of this ongoing project is that most household farmers are investing in crop diversification including into those with access to markets (sesame), market linkages with agribusiness and traders are increasing, savings and Loans Groups are being established all over the districts.
Expanding Access to Water -- The International Development Association (IDA) funded Water Services and Institutional Support (WASIS) project is, among other things, supporting the government’s expansion and improvement of water supply networks in the cities of Beira, Nampula, Quelimane and Pemba. These were the four cities supported under the previous IDA-funded National Water Development Project II which also financed water production facilities. In addition to water production, the WASIS project is also addressing existing water distribution shortcomings in the Cities of Beira, Dondo, Nampula, Quelimane, Pemba, Nacala, Angoche, Chimoio, Gondola, Tete, and Moatize. The project contemplates the construction of 355 km of additional distribution and network resulting in about 25,150 new connections in the selected cities. In addition, the WASIS is supporting operational efficiencies of the government water bodies in the eleven largest cities. The physical investments occurring in those cities include customers’ meters, valves, pumps, pipes and fittings, equipment, parts, vehicles, chemicals and consumables (fuel and electricity).
Helping Implement Public Private Partnerships to Enhance the Capacity of the Maputo Municipal Council (CMM) to Deliver Services -- Through the IDA-funded ProMaputo I, and with strong support from the Public Private Infrastructure Advisory Facility (PPIAF), the CMM developed a set of successful Public and Private Partnership (PPP) initiatives in Maputo city, including the introduction of private management of public parks; development of municipal parking lots; construction of transport terminals and commercial facilities in high traffic public transit areas; and introduction of a private operator to establish paid hourly parking in the central commercial and business district; and mobilization of private investors to rehabilitate degraded municipal buildings. In addition, with IDA credit support, the CMM prepared a municipal bylaw to adapt new national PPP legislation to the specific legal and institutional situation of the municipality.
Supporting Expansion of Higher Education in Mozambique -- IDA support to higher education (HE) contributed to impressive improvements in the sector. The number of students enrolled in HE institutions increased from 9,800 in 2000 (before the project) to 63,000 in 2007, and to 105,526 in 2010 at the completion of the project. The project also helped increase the share of female students enrolled in HE institutions from 25% to 38% in 2008. The number of higher education graduates increased from 800 in 2000 to 13,083 in 2010. Female students also made up a larger share of those graduating in 2008 (41%, from 30% in 2003). Additionally, the share of students from Northern provinces – historically an underrepresented group -- studying in universities in the south increased substantially.
Helping Bring the Government Closer to the People -- IDA support to decentralization has helped bring the government closer to the people, empower citizens, and promote voice and accountability. Through the Bank-funded ProMaputo I, citizen “report cards” allow Maputo residents to score to the quality of services delivered by the Municipality (CMM). These annual report card scores are then disseminated broadly and have contributed to greater dialogue between the CCM and the residents of Maputo and its suburbs. This process has led to a significant increase in demand from citizens for improved services. CCM officials participate in forums with citizens to discuss the findings of the report cards. Official reports show that this interaction has motivated them to improve the delivery of municipal services.