FORTIFYING THE BRIDGES

Mozambique 2016 | DIPLOMACY | REVIEW: DIPLOMACY

Following the implementation of strategic socioeconomic reforms, Mozambique has a long list of allies that are happy to do business and lend a helping hand during tough times.

It has been over a year since President Filipe Nyusi entered the Presidential palace overlooking Maputo Bay. His election was based on a wave of goodwill, presenting himself as a humble leader who promised to bring about better governance and transparency. But with the economy struggling into the spring of 2016, the country is beginning to demand results.

Nyusi is part of the Frente de Libertação de Moçambique (Frelimo) party, and comes in after two terms of the party's predecessor Armando Guebuza. Although Nyusi started the campaign as a relatively obscure candidate, his continuity with the former leader and the fact that he is from the north played into his hand, becoming the first northern president of Mozambique. As a former factory worker who made it up the rungs to become executive director of the state rail company, his background was relatively apolitical until he was elected to office in 2008 as the minister of defense. During campaigning, his history worked in his favor, and he won support among working class Mozambicans who sympathized with his strong belief in education and prioritizing of infrastructure.

Opposing Frelimo was the Resistência Nacional Moçambicana (Renamo) party, the main opposition and former rebel group led by the everlasting patron Afonso Dhlakama. Dhlakama has been the leader of Renamo since the first post-war elections. In 2015, he lost once more, this time to Nyusi who garnered 57.1% of the vote. Renamo was resurgent, however, taking nearly twice its percentage in the 2009 election. The results indicated that Frelimo's traditional hardline with Renamo should be softened in exchange for closer dialogue and political stability. The Frelimo heartlands are in central Mozambique and although there are no fears of Mozambique returning to civil war, the threat of sporadic violence near the key north-south highway is worrying for investors and citizens alike.

Heading into 2016, Nyusi's priority is to align growth and policy targets with foreign investment. In 2007, Mozambique was celebrated for its stellar growth figures and sound macroeconomic management. It was one of the fastest turnarounds of a post-conflict country since Vietnam. Today, however, Mozambique has lost momentum and Nyusi's government has a challenge ahead as it tries to balance the books. With borrowing only expected to increase, a poor commodity price environment, and a rise in infrastructure projects, 2020's debt levels are projected to double to more than $16 billion.

Fiscal consolidation policies are expected and the government is trying to mend relations with donors and halt the decline in foreign aid. The efforts have been well received, and early budget support commitments for 2016 at $312 million are already up on the $273 million of 2015.

The government is encouraging the domestic use of gas to promote industrial development as part of a gas master plan, developed with World Bank assistance, which would account for 25% of all production under new petroleum legislation passed in August 2014. Fiscal priorities, otherwise, remain focused on the social sector, including social subsidies, health, and education. The sector accounted for 68.3% of spending in 2014. Growing domestic revenue independence will support the government's assertive nationalism of recent years, which has seen donor influence curtailed.

Thankfully, Mozambique has a long list of strong bilateral relations and allies developed through years of diplomatic assistance and partnership. These players will be key to facilitating and supporting Mozambique's growth ambitions.

Historically, Mozambique played a pivotal role in the international processes that brought about the independence of Namibia and Zimbabwe and the unbanning of the African National Congress and other nationalist movements in South Africa, a process that culminated in the release of Nelson Mandela and the eventual dismantling of apartheid.

Mozambique has been hailed internationally for its assistance in solving diplomatic problems in different parts of the world. The country has consistently contributed military personnel to organizations such as the African Union and the UN. Mozambican personnel contributed to the settling of political crises in Madagascar, Zimbabwe, Lesotho, and the DRC, all of which are now strong trading partners within the region.
Mozambique was also one of the key members of the Southern African Development Co-ordination Conference (SADCC) when it was launched in 1980. The member states came together with a focus to reduce dependence on apartheid South Africa and creating a channel for donor aid to the region. However, in 1992 the organization was replaced with the Southern Africa Development Company (SADC), and in 1994 South Africa was incorporated into the organization.

Today, SADC has 14 member states and has three main aims. The first is the promotion of economic co-operation and integration, with a view to becoming a fully-fledged common market; the second is strengthening regional solidarity, peace and security; and the third is pursuing common economic and social values. Given that 73% of the group's total GNP is accounted for by South Africa some commentators have expressed concern at possible resentment towards the 'big brother' of the organization and the notion of a grouping of satellite states clustered around one regional superpower. Prior to South Africa joining the SADC in 1994, intra-SADC trade accounted for 2.6% of regional exports. Since South Africa's inclusion, this has increased to 14.5% largely as a result of South African exports to SADC states. Currently, 86% of intra-regional imports are supplied by South Africa.

Within the region, the longstanding free trade agreements mean that Mozambique is a key player in the movement of goods across borders. Mozambique recently became Zimbabwe's second largest regional trading partner after South Africa, taking 18% of the country's exports in the first 10 months of 2015, which amounts to $365 million worth of goods to Mozambique. Both being party to the SADC, the two states enjoy duty-free entry into both countries, as well as an operational bilateral trade agreement, which gives duty-free concession to qualifying products.

Mozambique is well positioned to take advantage of the regional trade bloc. The Tripartite Free Trade Agreement, signed in Sharm-el-Sheikh, Egypt in June 2015, brought the East African Community (EAC), the Common Market of Eastern and South Africa (COMESA), and the SADC into the continent's largest free-trade zone, covering 26 countries, ironically enough realizing Cecil Rhode's dream of a unified bloc from Cape Town to Cairo.

The agreement is expected to promote growth. Already, it is estimated that the volume of intra-regional trade among these three blocks has increased from $2.3 billion in 1994 to $36 billion in 2014, a more than 12 fold increase from 7% to 25% of trade. While low compared to the EU and Asian blocs, this is the start of a growing market.

All of these factors are working together to offer Mozambican industry an avenue for its goods and materials. With high growth expectations for agricultural products and services, it is reassuring to know that there is a strong and growing market beyond Mozambique's borders.