Mozambique News Agency

No.186, 19th June 2000


Consultative Group meets funding needs

For the second time in two months foreign donors and funding agencies have offered the Mozambican government more aid than it asked for. Mozambique's international partners gathered in Paris on 8 and 9 June for the 12th annual meeting of the Consultative Group on Mozambique, and pledged $530 million for this year and $560 million for 2001 to meet the economy's financing requirements. 75 per cent of the money is in grants - a higher percentage than the government had thought likely.

The paper which the Mozambican government presented to the Consultative Group had requested $504 million for 2000, and $514 million for 2001.

This money is in addition to the $452.9 million pledged by donors at the conference held in Rome in early May to raise funds for reconstruction after the devastating floods of February/March. In Rome too donors were surprisingly generous. pledging rather more than the $450 million requested.

The World Bank released a statement which praised Mozambican government policy as "stable, moderate, pragmatic and increasingly business- friendly". Mozambique's foreign partners, it said, "applauded the reforms and congratulated the government on its sound economic management and performance".

They also "appreciated the government's commitment to macro-economic stability and poverty reduction, and its efforts to set priorities and improve the transparency and consistency of resource allocation through the Medium Term Expenditure Framework".

The meeting also welcomed government promises "to broaden the tax base and strengthen tax administration with a view to gradually reducing dependence on external assistance".

The meeting considered that, since 80 per cent of Mozambicans work on the land, efforts to increase agricultural productivity will have an immediate effect on poverty reduction.

"To this end, government and partners agreed to support investment in rural roads and bridges, energy and other infrastructure to open access to markets, and encourage diversification into higher value crops", said the World Bank release. "Partners endorsed efforts to improve the delivery of technology to small farmers and urged the government to increase the security of land tenure for all".

The government, the document added, also "agreed to continue efforts to reduce the regulatory burden on business, update old laws and strengthen the judiciary".

The meeting called for further reform of the public sector, welcoming a government commitment "to enhancing civil service effectiveness both through intensified skills training and improved incentive structures that link remuneration to performance".

Consultative group "a success"

According to Finance Minister Luisa Diogo, the meeting in Paris "went very well, not only because of the financial pledges made, but also because of the consensus that under the current conditions Mozambique will have difficulty in attaining two digit economic growth if there are no changes in certain areas".

Interviewed in the independent newsheet "Metical", Diogo said that "there were no deep divergences among the country's foreign partners. The main differences were in how to implement the recommendations. Some of the Nordic countries are in favour of strengthening direct funding for the budget. Others stressed a sectoral approach. Still others thought that, before embracing the model of increased direct funding for the budget, there must be improvements in budgetary management".

She said the government was in favour of a gradual approach, increasing direct funding for the budget "as we improve the management of the budget". She recognised that budgetary management "has weaknesses that we are working on".

Diogo added that other consensual positions at the meeting were that Mozambique should receive greater debt relief, and that there should be "deepened dialogue within the country".

US official opposes "ideological" approaches

US Treasury Secretary Lawrence Summers on Saturday made a veiled criticism of the World Bank and IMF attitudes towards Mozambique, declaring that issues should not be approached from a viewpoint of "a priori ideologies".

At a joint press conference with Summers, Mozambican Finance Minister Luisa Diogo said they had discussed the United States role within the Bretton Woods institutions.

So did that mean, AIM asked Summers, that the US would moderate World Bank/IMF hostility to Mozambican industries ? Had Diogo convinced him of the justness of the Mozambican position ? Would the US ensure that there was no repetition of the ruination of the Mozambican cashew processing industry in the name of free trade ? Would Mozambique be allowed to protect its sugar industry, currently under serious threat from the IMF ?

Choosing his words carefully, Summers said "I have learned a lot in the time I have spent here, and have been given a great deal to think about and a greater understanding of a range of issues and concerns".

He declined to discuss "details of discussions between the Bretton Woods institutions and Mozambique, as the United States is not a party to those detailed discussions" (somewhat disingenuous, given the huge US voting weight in the IMF and World Bank).

Summers added that, in his discussions with Diogo, with President Joaquim Chissano, and with the Mozambican business community, he had been given "a renewed understanding of the importance of developing the agricultural sector".

That meant, he stressed, not only support for smallholder farmers, but also for "labour intensive agro-industry", which would be "crucial for successful development".

As the most significant labour intensive agro-industry in Mozambique is the sugar plantations and mills currently undergoing rehabilitation and expansion, this could be read as cautious support for protecting this industry.

"It is important that policies be assessed in a pragmatic and analytical way, and not through any a priori ideology", Summers declared.

Summers added "the need must be recognised to pay attention to all those affected and not just those in the best position to lobby the government".

He said he would return to the United States "with a greater ability to think through how the Bretton Woods institutions, particularly in the context of debt relief, can render the greatest contribution to poverty relief".

Transparent management mechanisms adopted

The Mozambican government, the donor community and civil society have established a technical commission to supervise the management of aid funds for the post-flood rehabilitation programme, aimed at assuring that the funding reaches the intended beneficiaries, reports "Noticias" on 7 June.

The commission was created as a follow-up to the Rome donor conference of early May, where donors pledged $452.9 million - the donors have started disbursing the funds, and mechanisms on how they will be channelled, be it for the public or the private sector, have been set up.

The deputy national director of the International Cooperation department in the Planning and Finance Ministry, Argentina Mausse, told "Noticias" that the new commission comprises representatives from the government, the donors, the Central Bank, the private sector, the Association of Commercial Banks, and two observers, one national and the other foreign.

The formal disbursement of funds is done upon the signing of an agreement between the government and each of the donors. Some donors have specified which areas they want their money to be used, other have not, and in these cases the government can decide how to use the funds.

Mausse said that the agreements upon which the influx of funds hinges are being drafted. "While the allocation of funds hasn't been formalised, the information we have is that they have been secured. For example, we have a letter from Germany confirming $10 million for the rehabilitation of the electricity grid, and one from Finland which grants $4 million for the Meteorology Institute".

Grain production drops

Mozambican grain production for this year's harvest is estimated at 1.5 million tonnes, rather than the initial target of 1.8 million tonnes, reports "Noticias" on 16 June. This is a shortfall of 16.6 per cent. The drop is blamed on the February/March floods that hit the southern and the central regions of the country.

According to data collected by the National Food Security Early Warning System, Mozambicans planted about 3,888,000 hectares, but lost 198,000 of these to natural disasters.

During the present campaign, Mozambique hopes to harvest about 1,163,000 tonnes of maize, compared with 1,246,000 in 1999, 234,000 tonnes of millet, down from the 326,000 tonnes of last year, and 115,000 tonnes of rice, compared with last year's 186,000 tonnes.

The second season planting is drawing to an end, and in the areas affected by the floods there is no hope that the harvest from these late sowings will be sufficient to overcome dependence on food aid.

This is mostly blamed on the shortage of seeds for this second season planting. The Agriculture ministry managed to distribute about 60,000 kits of seeds, but in some cases they arrived too late.

To preserve what was been harvested, the Early Warning System calls for the improvement of storage conditions, because of the prevailing moisture in the areas that had been flooded.

Despite all the constraints, the present harvest is described as good in several provinces, particularly in the fertile north, which was unaffected by the floods.

Weapons to hoes project a success

The Mozambican Christian Council (CCM), the umbrella organisation for the country's mainstream Protestant churches, has said that so far the "Weapons to Hoes" (TAE) project has met with success.

This project, aimed at exchanging weapons used in the 16-year long war of destabilisation for agricultural tools, or other useful implements, has succeeded in collecting more than 55,000 instruments of war.

In its first stage, the project spent about $600,000 in the four provinces where it was implemented (Maputo, Gaza and Inhambane in the south, and the central province of Zambezia), he said.

"The second stage will be expanded to other provinces with the priorities being the central provinces of Sofala and Manica, and the northern Nampula province", said CCM general secretary Lucas Amosse, adding that the Germany embassy in Maputo has already pledged $268,000 for an eight-month period as of 1 May 2000. Currently, CCM and the embassy are negotiating an annual budget of $339,000 he said.

Amosse said that the project will continue to use civic education as its main activity prior to the gathering of weapons, in a measure aimed at raising awareness that this exercise contributes towards maintaining peace.

Customs denies responsibility for price rises

Importers from the informal sector are lying about the customs duties they pay in order to justify exorbitant prices for fruit and vegetables in Maputo markets, accuses Mozambique's National Customs Directorate.

Importers cited by the daily paper "Noticias" have claimed they are forced to pay 55 rands (about $8) at the border for each 20 kilo crate of tomatoes imported from South Africa.

"This is not true", declared customs. "For each 20 kilo crate of first grade tomatoes, customs charges 16.8 rands in duty and tax. For low grade tomatoes, the charge is 7.3 rands. Clearly these false accusations are made in order to give the impression that Customs is responsible for the high prices in the markets".

Customs has held a series of meetings with representatives of the informal importers. "At each meeting they have been asked to present evidence that they are buying these products at low prices", said the customs service. "But so far nothing has been presented".

Chibuto road reopens again

The link between the southern and the central regions of Mozambique, through the Chissano-Chibuto road in Gaza province, reopened to traffic on 12 June. The road had been closed for a week because of rains that rendered it impassable again, after allowing traffic for only two days.

The conditions are such that vehicles with no more than two axles and with no trailer will be allowed onto the road. They will go in convoys that are to be controlled both at Chissano, where the road splits from the main north-south highway, and at Chibuto, at the other end of the 38 kilometre stretch.

The Chibuto road is currently the only alternative to the north-south highway, parts of which, between the Gaza provincial capital, Xai-Xai, and Chicumbane, were washed away in the February floods on the Limpopo river, and have not yet been rebuilt.

Work on the Chicumbane-Xai-Xai stretch of the road, which is about 15 kilometres long, is planned to start by 1 July, according to a source in the Gaza Provincial Directorate of Public Works and Housing.

Zimbabwean farmers to arrive in June

About 150 Zimbabwean and South African commercial farmers are due to start arriving this month in the central Mozambican province of Manica, according to the provincial governor, Felicio Zacarias.

The farmers will be encouraged to undertake agricultural and livestock activities over an area of 440,000 hectares, mainly in the sparsely populated districts of Barue and Macossa.

Zacarias separated the presence of Zimbabwean farmers in Manica from the current political crisis in Zimbabwe, where self- styled "veterans" of the independence war have occupied about 1,500 commercial farms in the run-up to elections scheduled for late June.

Investments by Zimbabwean farmers in Mozambique "have nothing to do with the current explosive situation in Zimbabwe", said Zacarias. "This move is to do with the need for the socio-economic development of the region".

The farmers will settle in Manica in phases over the next five years, and they will enjoy the fiscal incentives that the Mozambican government has established for projects in the Zambezi valley.

The farmers are being offered land between the Pungoe and Nhazonia rivers "where there is no land conflict with peasants", and which offers favourable conditions for agriculture. Under Mozambique's land law they will have tenure rights for a period of 50 years.

Zacarias said each farmer will be granted about 4,000 hectares. He thought that the investment to be made by the first 60 farmers would amount to around $30 million.

The Zimbabwean and South African farmers will concentrate on growing soya, maize, tobacco and sunflower. Related industries, producing, for example, vegetable oils will be established which will imply the import of modern machinery into Manica.

Dhlakama insists on "negotiations"

Afonso Dhlakama, leader of Renamo, declared on 9 June that he was "satisfied" that President Joaquim Chissano had recognised "for the first time" that "negotiations" are under way between the government and Renamo. He claimed that Renamo wanted "to continue serious negotiations" with the ruling Frelimo Party.

On 5 June when President Chissano admitted to secretive contacts between his government and Renamo, he specifically ruled out any political negotiations. He told reporters that what Renamo was essentially asking for was money, rather than new elections, or a recount of the votes from the 1999 elections.

Furthermore, President Chissano said that the contacts started when the former leader of the Renamo parliamentary group, Raul Domingos, came and asked for government protection because "he thought that the Renamo president (Dhlakama) might order him to be liquidated".

President Chissano sent his Transport Minister, Tomas Salomao, to speak with Domingos, but gave him strict instructions not to discuss anything to do with the elections. The shroud of secrecy covering these contacts was demanded by Renamo, he said. The series of discussions between Domingos and Salomao have so far produced nothing more than a shopping list of Renamo demands, mostly concerning money.

Domingos, of course, denied Chissano's version of his talks with Salomao. But he had met alone with Salomao, and there were no minutes or tape recordings of the talks.

Asked what the supposed "negotiations" were about, Dhlakama admitted that Renamo has dropped its electoral demands. He was no longer pushing for a recount of the December votes, and accepted that new elections were "impossible" because of this year's floods, and because donors will not fund them. Renamo was now concentrating on the appointment of new governors for the six provinces where it won a majority of votes.

The new governors would not necessarily be card-carrying members of Renamo, but would be people who "know about administration". This formulation is so vague that it will allow Dhlakama to claim a victory no matter who Chissano appoints as new governors.

No political criteria for public companies

The Mozambican government appoints directors of public companies on the basis of their professional competence, not their political affiliations, Prime Minister Pascoal Mocumbi declared on 15 June.

He was speaking at a Maputo press briefing, in response to questions about the demand from the Renamo that its members be given seats on the boards of publicly-owned companies such as the telecommunications and electricity companies, TDM and EDM, and Radio Mozambique.

This is one of the matters Renamo claims has been discussed in the contacts between Raul Domingos, former head of the Renamo parliamentary group, and Transport Minister Tomas Salomao.

Business confidence drops

Business confidence in Mozambique fell sharply in the first quarter of 2000, according to findings of the Maputo branch of the auditing and consultancy firm KPMG.

KPMG publishes a quarterly "business confidence index" deriving from a questionnaire circulated among a representative sample of businesses in Mozambique.

The index was launched in the third quarter of 1998, which is the base period for the index, calibrated to represent 100.

In 1999 business confidence slowly fell, and the index hit 90.4 in the last quarter. But the figure in the first quarter of this year was just 80. KPMG points out that this decline represents the largest movement in the Business Confidence Index in any quarter since it was launched.

The only sectors which fared comparatively well were building and real estate, and retail trade, with increases in confidence of seven and three per cent respectively.

The worst decline was shown by agro-industry, where confidence fell by 32 percentage points - this was mainly due to the February and March floods in Mozambique.

Communications, banking, and manufacturing industry showed declines of 18, 13 and 12 per cent respectively.

Another factor which KPMG believes may have impacted negatively on the index were the December general elections, and the ensuing political dispute when the main opposition party, Renamo, refused to accept the results.

Other factors which worried business were the rise in inflation, the poor state of the country's road network, difficulties in obtaining foreign currency, and the devaluation of the metical in the first quarter of the year.

Among the factors which businesses regarded in a positive light were information technology (increased availability of internet and e-mail services), import and export controls, and government stability.

Despite the slump in confidence, KPMG is optimistic about the future. Although the floods may slow Mozambique down, "they do not represent the demise of the nation's fledgling economy as presented in the international media". Projected GDP growth rate this year is six per cent, and projected for growth in 2001 is eight per cent.

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