How Economic Transformation Helps Mozambique's Farmers and Entrepreneurs Reach Markets at Scale

Challenge

Poverty reduction through broad-based growth is Mozambique’s defining challenge. Despite achieving among the strongest growth performance in Africa in past decades (annual average growth rate of 7 percent between 1998-2018), the benefits generally did not translate into broad development outcomes for most of the population. This is partly due to heavy reliance on the extractive industry, with limited linkages to the broader economy, and to low productivity in agriculture—the primary source of livelihood for the poor, which employs over 70 percent of the population (2019). Investments in labor-intensive sectors such as agribusiness were hampered by the high cost of doing business; infrastructure gaps in irrigation and connectivity; and lack of capital and extension services. Local businesses had limited access to technology and ability to meet the quality standards of export and corporate markets.

Approach

The Integrated Growth Pole Project aimed to improve the performance of enterprises and smallholders in the Zambezi Valley and Nacala Corridor and was born out of a need to spur inclusive growth and jobs creation at scale. It adopted a spatial development approach, focusing on locations with high growth potential (called “growth poles”), where investments in critical infrastructures, targeted policy and institutional reforms, and firm-level support were combined to increase farm- and firm-level productivity, improve incomes, create better jobs, and prompt positive spillovers to the local and broader economy. An innovative dimension was to support smallholder farmers at scale by partnering them with large anchor firms under an Innovation and Demonstration Catalytic Fund (FCID). This helped farmers like Abel learn climate-responsive techniques and acquire new technology to increase production and receive support along the entire value chain, from production all the way to market.

Results

Overall, over 200,000 people— of whom about 40 percent are women —benefited from the project (2013-2020).
The project helped encourage smallholder farmers (grouped in producer associations) to partner with medium and large private firms under an innovative matching-grant mechanism called the Innovation and Demonstration Catalytic Fund (FCID).
World Bank support was provided through FCID, which helped to mobilize $26.5 million from the private sector to develop agriculture service centers, processing plants, warehouses and cold-storage facilities, mechanization, improved seeds, training programs, and quality certification. By supporting 18 anchor firms, the FCID reached over 21,000 smallholder farmers (33 percent of whom were women), whose agricultural output increased on average by 79 percent by project end.
Over 200 kilometers of roads were upgraded, connecting farmers in the Angonia, Tsangano, and Macanga districts to markets in Tete.
139 kilometers of water distribution networks were upgraded, thus improving water provision of over 32,000 people in the Nacala region.

Bank Group Contribution

The project was financed with a credit from IDA of $100 million, of which approximately 98 percent was disbursed. Through the FCID matching grant, the project was able to mobilize $ 26.5 million from the private sector to develop agriculture service centers, processing plants, warehouses, and cold storage facilities, mechanization, improved seeds, training programs, and quality certification. IFC provided technical support in helping identify a pipeline of potential candidate firms to participate in the FCID matching grant.

How Economic Transformation Helps Mozambique's Farmers and Entrepreneurs Reach Markets at Scale

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