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Mozambique’s long road to peace and prosperity

Mozambique’s long road to peace and prosperity

President Nyusi of Mozambique on a visit to Portugal

Mozambique has made progress in creating a stable environment for investors, but overcoming political and economic exclusion in the north and central regions is key to unlocking its vast natural wealth. Tendai Marima reports from Zobue

A line of trucks wait for dawn to break at Zobue, a small border town in Mozambique, before they cross over into Malawi. Carrying goods for export, the trucks are a positive sign of an economy expected to grow at 6% this year. Female night vendors sell farm produce, one in a faded white t-shirt bearing the president’s face, and express their hopes of a better future in their coal-rich province of Tete. In this rural hamlet with poor roads and limited basic services, the promises of peace and prosperity made by President Filipe Nyusi when he began his second five-year term following his inauguration in January are being tested.

Tete, once a forgotten province ravaged by war, is rich in natural resources with over 6bn tonnes in estimated coal reserves. But the continuing poverty of rural inhabitants and occasional flashes of violence reflect the significant development challenges facing Mozambique. Nyusi has promised a fairer distribution of revenue from the extractives industry. However, ordinary citizens like Maria Alberto, a fruit seller in Zobue, are doubtful that they will see the benefit.

“We hear a lot of things on the radio, many good promises are made but I don’t know if we will really see what the president has said. It will be good if I were able to get a loan so I can build a bigger business buying things in South Africa and coming to sell them here,” she says.

Rural investment is crucial

Although Mozambique has made strides towards reaching the UN’s sustainable development goals, 46.1% of its 28m people live below the poverty line and close to two thirds of Mozambican women are among the financially excluded.

The World Bank’s most recent Mozambique economic update, Mind the Rural Investment Gap, shows there is a significant discrepancy in wealth between rural and urban areas and suggests that closing it is key to macroeconomic stability.

The report reveals a growing disparity between urban and rural areas in the funding of essential infrastructure to provide drinking water, roads, electricity and health facilities. It found “significant misallocations” in public investment and “an insufficient focus on areas that are lagging in terms of access to basic infrastructure”. The northern and central zones, especially Nampula, Zambezia and Cabo Delgado, were amongst the most underserved areas in terms of investment.

The government has launched a scheme to decentralise the state budget to allow provinces to have more control over their expenditure and invest in security, public works and natural resources. Experts say that improving security and public works will be essential to unlocking the potential of the emerging natural resources industry. 

Resources potential

The northern province of Cabo Delgado is home to one of the world’s largest offshore natural gas reserves, but the coastal region is also plagued by insurgency. Hundreds of people have been killed in attacks by Islamist-linked militants and international oil exploration companies have appealed to the government for soldiers to supplement teams of private security contractors. Cabo Delgado, Nyusi’s home province, has at least 75 trillion cubic feet of liquefied natural gas (LNG) while drilling for natural gas is currently ongoing in Buzi province. The IMF says that successful LNG development could lift millions out of poverty.

Mark Lundell, the World Bank country director for Mozambique, Madagascar, Mauritius, Seychelles and Comoros, believes that increased revenue from the extractive industries could broaden Mozambique’s fiscal base by the late 2020s. “In such a favourable context, planning infrastructure reforms ahead of time will help in getting public investment priorities right to ensure that the population benefits evenly from these resources,” he commented in a statement coinciding with the launch of Mind the Rural Investment Gap.

An IMF mission in November noted progress in LNG projects and mooted plans for a sovereign wealth fund and recommended strengthening the nation’s planning and institutions to ensure a more equitable distribution of wealth.

“The mission welcomed the progress in the development of the LNG megaprojects in the northern province of Cabo Delgado,” said the team’s press statement. “It reiterated the importance of building stronger institutions to help ensure that the fiscal revenue from such projects transform the lives of the Mozambican people, playing a significant role in sustainable development and poverty reduction. In this context, the mission welcomed the Government’s intention to save part of the capital gains tax – from the sale to Total of Anadarko/Occidental’s share in one of the projects – into an embryonic, future sovereign wealth fund.”

Combating corruption

However, discontent over political and economic exclusion in the north and central regions is likely to remain a major hurdle to unlocking Mozambique’s wealth. High-profile corruption scandals have dented public trust in the government and fuelled scepticism of its plans. The government has undergone extensive debt restructuring following the $2bn “tuna bond” scandal, in which government officials took out vast hidden loans, leading donors to suspend financial support for the country.

Celeste Filipe, the director of the Centre for Public Integrity (CIP), a local NGO tracking governance and public expenditure, says corruption and opacity on government policy is one of the main causes of continuing poverty.

“We are used to [Nyusi’s] speeches on combating corruption and promoting transparency but they have proven to be empty in terms of content, and without a mobilising strategy that could lead Mozambicans in attacking this problem of corruption that has been one of the main causes of the country’s continuous underdevelopment, it will be difficult to achieve,” he tells African Business.

“Without implementation of strong legal mechanisms aimed at accountability of public finances the programme is incomplete and possibly ineffective. The issue of income redistribution must begin with cutting excessive privileges to public officials, prioritising investment in the social sectors and mobilising resources by reducing tax benefits to megaprojects.”

Peace deal hope

Yet the country has made progress on ensuring a more stable environment for investors.

Last August, a historic peace treaty was signed between the ruling Frelimo and Renamo, its historic enemy in the civil war which ended in 1992 but continued to simmer thereafter. Renamo leader Ossufo Momade and President Nyusi signed an agreement to commit to disarmament, demilitarisation and reintegration. Reintegration of Renamo fighters into the national police and military has been extremely slow; so far only 10 members of Renamo have been assimilated and splinter groups continue to launch attacks. Sustainable economic growth in regions impacted by the insurgency will help to usher the peace deal to a successful conclusion.

The country is also attempting to bounce back from two cyclones in 2019 that left a trail of death, destroying 240,000 houses and leaving 2.2m people in need of humanitarian assistance.

“I am happy that Mozambique’s economy is recovering from the effects of Tropical Cyclones Idai and Kenneth last year,” said Tao Zhang, deputy managing director of the IMF at the conclusion of his visit to Mozambique in early February. “For growth to accelerate further and become more inclusive, it is important that economic policies remain prudent and reforms continue. These would include actions to strengthen governance and transparency, address climate vulnerabilities, and achieve the Sustainable Development Goals.” 

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