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Mozambique’s Vietnam Option
MOZAMBIQUE sits today on the cusp of globalization, having enjoyed fifteen extraordinary years of recovery since the end of its civil war in 1992.
This has produced a different country.
Flying into the northern Tete province offers a sense of the immense change – and challenge. Shimmering in 43 degree Celsius heat on the one side of the runway is the skeleton of the old airport, reputedly attacked by Rhodesians in the late 1970s. The chequered control tower fades gently into the undergrowth, while in the foreground a dilapidated Dakota drunkenly wags one wing toward the sky. This is a monument to the folly of war and the idiocy of central planning.
But on the other side of the runway is a newer, smart terminal building. Peace, multiparty democracy and a market economy have brought other dividends – and there is much more in the pipeline.
Once a battleground between the rebel (and now official opposition) Renamo movement and the Frelimo government, Tete was once war-torn, then sleepy and very, very poor. Today there is a new urgency and a lot more going on.
One can see Brazilian coal mining, railway rehabilitation, tobacco leaf production and much other agriculture. Then there is the Cahora Bassa hydro plant: a four-generator dam, the second largest in Africa, producing 2.200 MW, almost all of it sold to neighbouring South Africa. Now the Mozambique government has bought out the majority Portuguese stake, and aiming at building a second 1.500 MW hydro facility dam downstream at Mpanda Uncua downstream on the great Zambezi. No doubt there will be a willing market in load-shedding SA.
Elsewhere in Tete, from very little in just a decade, US-affiliate Mozambique Tobacco Leaf Company will, next year, have 90,000 outgrowers each making up to $400 profit for their tobacco crop annually. Before these farmers simply subsisted from the land. The province produced just 15,000 metric tons of tobacco three years ago; today it is 28,000mt, and the aim is to produce 70,000mt by 2015, what Zimbabwe now grows. This has been achieved by private-sector agriculture extension, funding all inputs, offering training and technical advice, and buying from the farm gate. Now the Corporation is planting new forests and diversifying into soya and other crops including ground nuts. This shows what the private sector can achieve in poverty alleviation, the commercial underpinnings ensuring sustainability, unlike most aid programmes.
The Brazilian mining giant CVRD is also investing $1.5 billion in an 11 million tonne per annum coal mine in the province, which they expect will last 35 years. This will also feed a planned thermal power station at Moatize. And there are numerous other prospectors sniffing around for a variety of minerals from more coal to graphite, bauxite and iron.
But this story is not just about finding things to dig up or to grow.
With the adoption of liberal political and economic reforms, Mozambique has moved with astonishing speed from an apparently ‘failed state’ to one of Africa’s most notable success stories. Three multiparty elections have now been conducted, the most recent of which resulted in President Armando Guebuza’s inauguration in January 2005, and with the extension of peaceful governance to the whole country, the groundwork has been laid for a remarkable transformation.
Economic performance has been impressive. Real GDP growth since 1993 has averaged over eight percent. Annual inflation has shrunk from over 50 percent in 1995 to under eight percent today.
The increase in the growth rate has not been a simple product of higher commodity prices. Rather Mozambique has attracted a significant amount of foreign investment. FDI inflows increased from US$9 million in 1990 to US$337 million in 2003, reaching a total stock in 2004 of over US$4 billion. Most of the investment has been concentrated in a few ‘mega-projects’, including the Mozal aluminium smelter in the south, the SASOL natural gas pipeline from Inhambane, and now CVRD.
But three problems have to be addressed.
First, one big question for Mozambique is whether the economy can grow fast enough – and widely enough in terms of employment – through ‘mega-projects’ of the sort of Mozal and CVRD in Tete. While the fiscus benefits through these projects (though this impact is diluted through tax holidays), poverty and joblessness remain critical issues. For example, in drab and depressed Beira, once the hot holiday-spot for many of the 300,000 mainly Rhodesian and SA tourists who visited annually before independence, 70 percent of its people are unemployed.
Second, despite progress in boosting agriculture production (with growth averaging eight percent for the past three years), the country is still not able to completely feed itself not least since it is unable to distribute surpluses around the country. More than that, it remains uncertain how Mozambique can add more value to its agriculture commodities. Thus broad-based growth remains a challenge. Rural people are half as wealthy as the national average; and enjoy less than one-quarter of the income of Maputo’s two million or so inhabitants.
Third, more than half the government budget comes from donors, an inflow tallying more than US$1 billion annually, an aid-to-GDP ration of more than 20 percent. This leaves Mozambique vulnerable to both a change in development assistance sentiment and aid’s more distortive impacts, including currency overvaluation and the relatively small voice of the private sector in economic decision-making.
So how to further develop Mozambique on the cusp between recovery and globalization?
Given its similar colonial (and violent) history, coastal geography and economic profile, Vietnam offers a useful and positive analogy for Mozambique’s development.
The Southeast Asian country has grown its economy spectacularly in spite of its difficult geography and history, a development process based on sequenced growth in agriculture, manufacturing and services. Like Mozambique, Vietnam has a political economy traditionally rooted in small-holder subsistence agriculture. Fifteen years ago it was a net rice importer, and produced hardly any coffee. Today it is the world’s second largest exporter of both crops. Vietnam’s agriculture revolution, like that in Taiwan and elsewhere in Asia, was essentially based on three simple tenets: extending land tenure and usage rights; improving inputs including fertiliser, irrigation techniques and infrastructure, seeds and fuel; and by producing cash crops and opening markets.
But in assessing what models are appropriate for African development one also needs to assess the differences and not just the similarities.
Vietnam ’s transformation is underpinned by local ownership of the development process, a focus on encouraging private investment and local determination of aid expenditure. It shows that anyone can make it, whatever their background or connections. Notably, not only do they tolerate the mega-wealthy among their ranks, but Vietnamese publicly and proudly celebrate business success. Vietnam has moved quickly from war to business heroes.
Three pointers stand out on how to translate the analogy into effect in Mozambique – as for others attempting a similar transition:
First, while a few generic rules apply (good governance, clear leadership direction, encouragement of investment, more efficient and less bureaucratic hurdles), the country’s advantages should be disaggregated, and policy choices provided region by region.
Second, within this framework, priority opportunities exist including:
Third, be both aware of the limits of the mega-investment project while making full use of the not-so-obvious opportunities they offer. The gains can be leveraged if the government pays close attention to helping Mozambicans who are interested in providing services, supplies and skills to these mega-projects, and by creating business centres around these sites. The CVRD investment in Tete and the related Sena railway to export its coal through Beira (and/or Nacala), could be used to release economic and employment-generating energy through small businesses province-wide. As the Tete governor, Idelfonso Mwanatata, observes, ‘We believe that the CVRD project could attract small and medium enterprises to the province … and add value to both the project and the country’s development.’
Reassuringly the Vietnam option does not require a radical revision of the Mozambique state or its role. In fact Mozambique has a natural resource endowment to make Vietnam jealous. It does not suggest either a helter-skelter interventionist or free-market approach. Instead, it employs the gains of the past decade-and-a-half, putting people, smaller business and economic growth at the centre of the development process.
Dr Mills heads the Johannesburg-based Brenthurst Foundation; Niels B. Thuesen is the CEO of BankInvest in Copenhagen. Both attended the recent Presidential International Advisory Board meeting in Maputo.