Increased Focus

Even though Mozambique is one of the fastest-growing economies in Africa, with an average GDP growth of 7.4% over the past two decades, poverty remains a core issue. What initiatives have to be taken to improve the conditions of those in greatest need?

Growth remains strong and this has been the case for 20 years, but consumption growth has been far slower. This reflects slow increases in productivity in the informal and formal sectors. The primary focus needs to be on skills acquisition, and that will require an increased focus on achievements and a higher quality of education in primary, secondary, and vocational training, as well as some focus on tertiary or higher level education for specialized skills that the modernizing part of the economy clearly needs since in many cases it is in short supply. There also needs to be a focus on integrating rural areas with urban areas if we are really going to see a reduction of poverty and an improvement in the lives of the poorest 40% of the population. We need investment to be focused on areas outside of the five larger cities or provincial capitals, with a more decentralized investment plan linked to areas with raw materials and other rural areas. The government should consider linking, both in terms of infrastructure and markets, the areas where the majority of people are living—about 70% of the population lives in rural areas—to the towns that can serve as intermediary points for processing, marketing, and opening channels to the larger primary cities and export channels. This has so far been unattainable. There has been more of a focus on the basic communications infrastructure between the larger cities. However, the current government’s five-year plan is designed to pursue more effectively creating links between infrastructure and the smaller towns and furthering backward linkages to rural areas.

What is your assessment of the achievements of the Mozambican government in that regard?

The government has stated its intention for the renewed development of traditional sectors, and the process I described is an equally important part of their development strategy in comparison to that of the large infrastructure and megaprojects. Megaprojects can provide the growth, but the traditional sectors need to provide more in terms of growing employment. To the government’s credit, this is increasingly being integrated into sectorial development plans. There is a realization that waiting for the megaprojects to provide all of the growth in employment will take too long, meaning that the government needs to be more active in terms of supporting labor-intensive sectors like agriculture.

In which sectors and industries do you see the most potential?

This country has a large amount of raw materials and natural resources that can be used in the agri-business sector, which is the prime sector that many investors are increasingly looking into. Also, certain service sectors are promising, and there is potential in the light industry segment. There is a reasonable amount of cotton production, for example, and there is also interest in the textiles sector. When you look at what is going on now in terms of primary natural resources, most of the inquiries come back to agriculture and agribusiness, including forestry. The government is realizing that the tobacco segment is an area that continues to grow, but I think they would like to see the cashew segment improved quite a bit, and cotton, soy, and maize, while strong, could be further expanded. It is unfortunate that the country is a net importer of rice, as Mozambique could be a net exporter of all of these agricultural products in as little as five to ten years.

In the newly released Doing Business report, Mozambique came in at 127th place. How would you interpret this result and last year’s economic performance?

If you look at this year’s rankings, especially the ways in which it is measured relative to the frontier of the best performing countries, there have been some clear improvements in terms of starting a business, as well as in the issuing of construction permits and registering property. Mozambique is about two-thirds down the list out of around 180 countries, but on average, its distance from frontier status is only about halfway, which means that there are a lot of countries in between Mozambique and the frontier level. This is a challenge for Mozambique because ease of doing business is a relative measure of a country’s attraction for investment. Improving access to finance is a recognized area of priority, and resolving this is partially an issue of property registries, collateral registries, and the financial inclusion of those in the informal sector, which is a major focus here for the Ministry of Economy and Finance as well as the Bank of Mozambique (Central Bank). There have been a number of important conferences here on financial inclusion over the past year, and it is really one of the key focus areas for the country. Although Mozambique does reasonably well in access to electricity, the area that has not been picked up on in the Doing Business is the stability of the supply of electricity which has been a problem over the past year in Tete, Nampula, and now in Maputo. This is something that is particularly important for making sure that productivity levels can remain high in the manufacturing sectors as well as meet the needs of other sectors more widely. This issue is increasingly on the radar screen of the Ministry of Energy and Natural Resources. It is a difficult area because providing secure energy supply requires billions of dollars of investment. There are some other large projects for expanding energy production that could use billions of dollars of investment, but we see energy security as a top priority.

As of October 2014, the Mozambican World Bank portfolio had 23 projects with an overall net commitment of approximately $1.5 billion distributed across all major sectors, as well as 53 Trust Funded-operations with total allocation of $222 million. How is this portfolio growing?

Almost two-thirds of our portfolio—which is currently about $1.8 billion to be implemented over four years—are in the top five sectors, which are water, education, rural-urban integration, transport, and the natural resources and environment sector. There are other sectors in which we should be more active, for example, agriculture. Most of the large infrastructure projects are finally being started in an accelerated fashion, with the final designs, bidding, and drawing up of contracts complete. We are entering a phase in which disbursements are going to accelerate. The primary and secondary education projects are being well financed, and these projects have been moving ahead steadily. The water sector, because it is so large, is being slowly implemented for the building of additional dams and water supply facilities. Overall, the portfolio is performing well across the board.

What is the World Bank’s forecast for Mozambique’s mid-term future?

The World Bank expects growth to be between 7 and 7.5% over the next few years, with continued investment in Mozambique’s extractive sectors and growth in related sectors (construction, transportation, trade). In the short run, resource-related investment and public investment will be major contributors to growth. If investments in Mozambique’s extractive industries do not materialize or are significantly delayed, we would expect growth to slow down to more moderate levels. In the medium term, we expect growth in Mozambique to accelerate further as gas exports start toward the beginning of the next decade. The development of the gas fields in the Rovuma basin present an incredible opportunity for Mozambique, and the extent to which it will benefit Mozambique of course will depend on how the country choses to use these resources. A judicious use of resources would mean investing the rents from natural resources into other forms of capital, such as in infrastructure, human capital and a more capable government and stronger institutions.