Reality Bites: What future for Mozambique?

After a decade and half of radical, collectivist and misguided economic policies implemented by Frelimo, the political force that has been controlling Mozambique since independence in 1975, aggravated by a bloody post-independence civil war (1976–1992) that ruined the economy and drove the state into bankruptcy, Mozambique has made significant economic strides over the last two decades. In 1990, South Africa produced, in just seven days, the equivalent of wealth that Mozambique produced in an entire year. By 2010, Mozambique at least produced, in one year, as much as its more developed neighbour produced in two weeks. This has made Mozambique a poster child for the “Africa rising” narrative that has dominated recent headlines about the once “hopeless” continent. But is this achievement here to stay?

Mozambique’s positive and promising image – based on the country’s idyllic landscapes, vast natural resources, gross domestic product (GDP) growth rates of around 7 percent over the last ten years, and privileged geographic location providing access to the Indian Ocean for its landlocked neighbours – contrasts with another image that is not pleasant at all. The fact that about 60 per cent of the population lives on less than USD 1.25 per day, while less than 20 per cent has more than USD 2.00 per day, portrays a reality that makes Mozambique a rather “maningue nasty” place to live for the majority of its people. The “upper middle class,” which lives on USD 10–20 per day, represents less than one percent of the Mozambican population, demonstrating that the truly wealthy comprise a tiny minority.

An inselberg outcrop in Mozambique. Image: Russel Scott

The biggest problem faced by Mozambique continues to be widespread economic stagnation, especially in rural areas where 65–70 per cent of the population live. The rural economy remains dominated by precarious subsistence production characterised by low levels of productivity, lack of technology and, consequently, very low income. Throughout the first decade of this century, the daily average rural income was a mere USD 0.30 per capita. The rural economy contributes only about a quarter to the national income, in terms of gross national income (GNI). In other words, while the rural Mozambican produces an annual per capita income of about USD 120, the urban Mozambican generates around 10 times as much (about USD 1,100 per capita), suggesting a huge income asymmetry.

Politics of Wishful Thinking

These two contrasting images of Mozambique have inspired many analytical representations, opinions and interpretations, leading to different conceptions and approaches to the country. While some observers and analysts try to adapt their representations to reality, others choose to take their desires, aspirations and interests as reality, and then act on the basis of these desires instead of on the basis of facts.

The first approach, whether optimistic or pessimistic, can be called realistic. The latter, one can only designate as “wishful thinking.” In extreme forms, it is self-delusion; in milder forms, an unwarranted optimism. In its most absurd form, this approach tries to make things happen merely by wishing for them. Sadly, this has become the dominant ideology in Mozambican policymaking among political leaders, the government and donors alike.

Image: World Economic Forum

An example of wishful thinking converted into the official ideology of the regime can be found in a speech given by Armando Guebuza, former president of Mozambique, in Brussels on 16 October 2012. Particularly revealing is Guebuza’s concept of the “redistribution of wealth” as an illustration of a “Made in Mozambique” experience.

“For us, in Mozambique,” said Guebuza, “this concept is translated into the empowerment of citizens for them to do their share in the fight against poverty, because wealth is produced through work and one can only distribute what one has.” To this, Guebuza added “inclusive development,” another much-cherished concept among donors, stating, “we identify the actions which lead to the integration of more citizens in the nation’s social and economic life, thus becoming active agents of their development and its primary beneficiaries.” However, those who looked forward to seeing President Guebuza outline his plans for managing the revenues from the mining sector had plenty of reasons to leave the event very disappointed.

Unfortunately, when the International Monetary Fund (IMF) evaluates the performance of Mozambican economy, it often does so in a rather complacent and patronising manner: “Mozambique continues to weather the global economic turmoil remarkably well”. Without being totally incorrect, this review fails to point out the true vulnerability of the external accounts of the Mozambican state: as the country continues to rely heavily on its relationships and support from donors, it faces severe constraints in terms of domestic savings.

A much more realistic view comes from Standard & Poor’s (S&P), one of the best known international ratings agencies. In August 2012, S&P affirmed its “B+/B” long and short-term foreign and local currency sovereign credit ratings, as well as a stable outlook for Mozambique.

The stable outlook reflected S&P’s expectation that growth would remain strong, that significant donor inflows would continue to fund Mozambique’s fiscal deficits as well as its balance of payments, and that the political situation would remain stable despite the risk of sporadic unrest. However, S&P announced it would lower the ratings if donor support wavered, fiscal or external deficits widened, inflation returned to double-digit rates, or social unrest and political tensions escalated.

In August 2013, unsurprisingly, S&P revised its outlook for Mozambique from stable to negative, with the possibility that it could downgrade Mozambique within the next year if progress on big investment projects slows, if projects seem less likely to generate the growth needed to narrow external and fiscal deficits, if there is material increase in public sector external commercial debt, or if the deterioration of the security situation in the country threatens the economic boom.

In other words, to use international financial jargon, even those who currently live in luxury need to bear in mind that they are also living in a “junk” (non-investment grade or speculative) environment.

So What is to be Done?

To be fair, modern and inclusive economic growth is hard to achieve in a country with most of its population still subjected to a persistent struggle for survival. Structural and comprehensive institutional changes will be necessary. The current stagnation of the rural economy is a structural problem and probably much more difficult to overcome than the current maldistribution of wealth created through the resources sector. For the average Mozambican to start enjoying the achievements of modern development in the long run, productivity and economic growth need to be triggered at household level, in order to widen the country’s economic base, which at this stage is set to rely heavily on natural-resource extraction.

Sifting through garbage at a dump in Maputo, Mozambique. Image: Gianluigi Guercia, AFP, Getty Images

However, without pro-development political institutions, Mozambique will hardly be able to pull the majority of its population from the precarious subsistence economy, nor will it be able to significantly reduce poverty.

Political institutions capable of achieving such broad-based social and economic development are, however, only likely to flourish if there is a pluralistic political system with open competition for political office and an engaged electorate. Currently, Mozambique’s institutional setting corresponds closely with what Acemoglu and Robinson have termed economic and political “extractive institutions”. Such institutions concentrate power in the hands of a narrow elite and place few constraints on the exercise of the power. They increase the potential stakes of the political game by creating unconstrained power and great income inequality. Because whoever controls the state becomes the beneficiary of this excessive power and the wealth that it generates, extractive institutions create incentives for infighting in order to control power and its benefits.

Stumbling into a New War?

Worryingly, the above conceptual framework highlights features that were common to the war for independence (1964–1974), the war for democracy (1976–1992), and the war that started six months ago. Although this new conflict is still being downplayed by the ruling leadership, since June 2013, and more frequently in recent weeks, there have been almost daily reports of fighting between government forces, controlled by the ruling Frelimo party, and Renamo. Renamo is the only political party that has remained partially armed, in accordance with the Comprehensive Peace Agreement of 1992 that ended the civil war between the two rivals. A government attack on a Renamo base in October 2013 led the latter to unilaterally terminate the agreement.

Frelimo posters, Mozambique. Image: Carlos Litulo, AFP.

Frelimo and Renamo, both apparently having failed to fully transform from liberation or guerrilla movements into political parties, blame each other for sliding back into yet another military conflict. At the same time, the daily clashes between government forces and Renamo soldiers are reported as isolated skirmishes, with deaths and injuries sometimes even being concealed.

In addition, a spate of ransom kidnappings in recent months and police shootings of unarmed citizens during the country’s municipal elections in November 2013 have amplified the climate of fear in Mozambique among locals and expats alike. With the level of conflict already at this point, it seems that the key issue is no longer “whether or not” but “how long” this new conflict will last. For now, nobody knows.

Despite the violence, Renamo is gaining at least some public sympathy for challenging the establishment and demanding responses on a number of governance issues that have been deteriorating and that affect the whole of society. In particular, there is support for Renamo’s demands for electoral reform (this was the main justification for its refusal to participate in the latest municipal elections), an end to Frelimo’s sway over the security forces, the de-politicisation of the civil service, and a dividend for all Mozambicans from the country’s burgeoning new wealth from coal and gas.

As in the title of this article, reality bites. In the case of Mozambique over the last half century, it has bitten badly and with tragic consequences. For the time being, people still hope that this time will be different. If it is not, it means that Mozambique will become even more maningue nasty than nice.