By Joseph Hanlon<\/b><\/p>\n
Africa-Press – Mozambique. <\/strong><\/span>World Bank admits policy failure<\/b> The World Bank in two reports in June admits the catastrophic failure of its policies in Mozambique over the past three decades. \u201cMozambique\u2019s decades-long remarkable growth performance [makes it] one of the fastest growing economies in sub-Saharan Africa (SSA).\u201d But it follows a \u201cgrowth model that has been associated with a rise in inequality\u201d and poverty, reports the Mozambique Country Economic Memorandum (CEM).<\/p>\n Mozambique \u201cin now amongst the most unequal countries in SSA\u201d and \u201cpeople in the bottom 40% of the income distribution have been largely left behind. \u2026 Mozambique\u2019s impressive growth rates have disproportionately benefitted those at the top of the income distribution in urban areas.\u201d Rural roads remain poor while \u201cinfrastructure investment, notably road transport, has been skewed towards urban areas and export corridors.\u201d<\/p>\n \u201cMozambique\u2019s existing growth strategy of \u201cdependence on export-oriented, capital intensive megaprojects, with limited linkages to the rest of the economy \u2026 has been limited in its capacity to generate productive jobs and support accelerated poverty reduction. \u2026 Today most jobs do not provide a sufficient stream of income of lift workers and their families above the poverty line.\u201d<\/p>\n Mozambique is constrained by \u201cweak governance and corruption\u201d and \u201ccorruption is increasing\u201d. The CEM adds that \u201cMozambique is ranked among the most corrupt countries in the world\u201d and governance indicators are below the SSA average. Procurement is biased toward \u201cwell-connected firms\u201d.<\/p>\n \u201cThe country has one of lowest levels of learning compared to those of its peers \u2026 and overall learning levels are significantly lower in the North and Centre of the country\u201d. The Mozambique Economic Update: Getting Agricultural Support Right was also released in June and makes similar points. \u201cCompared to its peers in SSA, Mozambique has the lowest levels of land and labour productivity.\u201d<\/p>\n Comment: Rethink whose model?<\/b><\/p>\n CEM co-team leader and senior country economist Fiseha Haile wrote a blog on the CEM headlined \u201cMozambique needs a new growth model for sustained, inclusive growth\u201d. The authors of the CEM and Economic Update are too cautious to admit that the model that needs to be replaced is the one imposed by the World Bank. But the reports both cite as models countries that have not followed World Bank polices: Rwanda and Bangladesh (CEM) and Brazil and Mexico (Economic Update).<\/p>\n In the early 1990s, with the end of the Cold War and Mozambique\u2019s proxy war, the World Bank and IMF imposed \u201cshock therapy\u201d which was intended to rapidly convert the socialists to capitalists. Urgency meant the policy necessarily targeted powerful people in Frelimo, who had control of land, contracts, donor funds, etc and helped them use their power to become \u201coligarchs\u201d. Compared to Russia and the former Soviet Union, these were small oligarchs. But the intention was that oligarchs would look to the west, for technology and investment, and to transfer money from their countries to western banks. It was explicitly to create \u201coligarchs\u201d who would serve the interests of western banks, companies and donors by simply taking a cut \u2013 known as \u201crents\u201d \u2013 for serving western interests. The policy is built on the alleged \u201cfree market\u201d which gives huge advantages to international business and put no stress on local development to make domestic capital competitive. And this has continued for three decades, supported by the donors and Bretton Woods Institutions.<\/p>\n It cannot be a surprise that building rent-seeking into the model leads to corruption and poor governance and it has repeatedly been reported by researchers for three decades. My own 1996 book was titled Peace without profit: How the IMF blocks rebuilding in Mozambique.<\/p>\n The surprise is that the World Bank is publicly recanting. Perhaps it reflects a younger generation of World Bank staff who never learned that the old model came from their institution. jh<\/p>\n World Bank confronts Nyusi over Cabo Delgado<\/b><\/p>\n \u201cThere is a widespread consensus that among the driving forces behind the insurgency is the systematic sense of exclusion and grievances that were capitalized by extremist groups,\u201d says the World Bank Country Economic Memorandum (CEM). The full page (page 26) of the CEM on Cabo Delgado is a direct challenge to President Filipe Nyusi who denies grievances play a role.<\/p>\n The insurgency is, in some cases, \u201csupported by local population [which] signals the importance of addressing the socio-economic dimension,\u201d says the Bank. \u201cWith a poverty rate at 50%, the northernmost province of Cabo Delgado is one of Mozambique poorest. \u2026 Districts are poorly served in terms of infrastructure and public services, with deficits in transport, access to markets, schools, health facilities and electricity.\u201d The CEM adds: \u201cin Cabo Delgado, poverty reduction has been minimal.\u201d<\/p>\n \u201cDisenfranchised youth \u2026 with limited access to education, political voice, technical knowledge, and resources \u2026 are pushed away from the development benefits. Most of the time options gravitate between taking low productivity informal jobs in urban centres, opting for illicit activities or, in this case, being recruited by extremist groups.\u201d<\/p>\n \u201cThe sense of neglect was exacerbated by the recent increased presence of the State in the province with a heavy-handed approach to formalization of extractives activities. This pushed local population away from extractives activities without alternative forms of employment or access to services.\u201d The problems are compounded by \u201csystematic exclusion from political participation\u201d which led to \u201cthe use of violence as a form of social participation\u201d.<\/p>\n The CEM concludes that \u201caddressing the key sources of fragility is fundamental not only to curb current conflicts, but also to avoid replication and expansion. Thus far, government has mainly resorted to security interventions\u201d but it must respond to \u201cexpectations about upcoming LNG benefits, increasing economic inequality [and] youth unemployment.\u201d<\/p>\n Little gas money until after 2035<\/b><\/p>\n Significant fiscal receipts from the gas are not expected until all the initial costs are paid, and \u201csubstantial LNG revenues are not expected until well into the 2030s,\u201d concludes the Economic Update. CEM estimates suggest that it will be four years after the resumption of work at Afungi before gas accounts for 2% of government revenue, and then another eight years before there big money arrives, jumping to 8% of government revenue. This will not happen before 2035.<\/p>\n The Economic Update contains a number of interesting statistics:<\/p>\n \u201cThe public sector wage bill continues to grow, [in 2021 reaching] 13.3% of GDP, up from 8% of GDP in 2008. This growth has been driven by discretionary rises in compensation elements beyond the basic salary.\u201d<\/p>\n \u201cDonor grants declined to 2.2% of GDP in 2021 (from 3.6% in 2020), with shortfalls covered by the withdrawal of deposits from past capital gains and rising domestic debt issuances. Domestic debt stock reached 22% of GDP in 2021, up from 16% in 2019.\u201d And much of this was expensive sales of bonds to banks, with effective interest rates rising from 5% in 2015 to 10% in 2021. This is low risk and hugely profitable for the financial institutions, which discourages them from lending to higher risk small and medium businesses.<\/p>\n Military spending rose four-fold in just two years, reaching 2% of GDP in 2021.<\/p>\n Reduce poverty by supporting agriculture<\/b><\/p>\n \u201cAgricultural growth would decrease poverty and inequality over three times faster than growth in any of the other sectors,\u201d reports the Economic Update. Mozambique has an \u201coverreliance on exports of primary commodities and capital-intensive mega-investments with limited local linkages,\u201d says the CEM. It adds: \u201cCountries that managed to achieve strong and relatively inclusive growth, including Uganda, Rwanda, and Bangladesh, did so by investing in the sectors where the poor earn their living, notably in agriculture.\u201d<\/p>\n But the Economic Update writers bump into a huge range of contradictions. They note that in the developed OECD countries, 40% of agricultural GDP comes from the state. The United States is higher, at 50% \u2013 half of the average farmers income is government subsidy. Mozambique is much lower, at 13%.<\/p>\n But what Economic Update does not say is that the reason for this is that neo-liberalism and shock therapy as applied since the 1990s says that poor countries cannot subsidise agriculture and the free market must apply \u2013 but this is imposed by the US and other OECD countries who never follow that rule themselves. And \u201cover the last two decades, Mozambique has seen low and declining public spending on agriculture.\u201d<\/p>\n A similar problem arises when Economic Update notes that \u201ccompared to its peers in sub-Saharan Africa, Mozambique has the lowest levels of land and labour productivity.\u201d This is largely due to low use of inputs such as fertilizer and improved seeds. The report also argues that there is a need \u201cto allow Mozambique\u2019s farmers to produce based on market signals.\u201d But there is a contradiction which the World Bank does not see. Without subsidy, fertilizer or organic farming is too expensive. The price paid to farmers in Mozambique for maize is so low that it does not cover the cost of fertilizer. So farmers have already responded to the market signals, and do not use fertilizer. So productivity is low.<\/p>\n OECD countries do not have a free market in agriculture \u2013 yet after three decades of failure, they still expect poor countries like Mozambique tofollow the free market. And then the CES and Economic Strategy cite as models countries like Brazil, Rwanda and Bangladesh where the World Bank was not able impose a free market in agriculture.<\/p>\n OMR \u2013 the agricultural alternative<\/b><\/p>\n The World Bank continues to dominate agricultural policy, but there is an important alternative local voice in Mozambique, the Observat\u00f3rio do Meio Rural (OMR, Rural Observatory, https:\/\/omrmz.org\/), led by Joao Mosca and Joao Feij\u00f3. Reports are published frequently but most are only in Portuguese; a few are in English as well<\/p>\n OMR has also become the most important research group on the Cabo Delgado war. \u201cIngredients for a youth revolt \u2013 poverty, consumer society and frustrated expectations\u201d by Joao Feij\u00f3, Jerry Maquenzi, and Aleia Rachide Agy is one of the best research papers setting out why young people join the insurgents. (In English, OR 121, Feb 2022, https:\/\/omrmz.org\/omrweb\/download\/8429) \u201cThe lack of employment and the economic needs of the youngest are the reasons most mentioned by the interviewees to justify the option for violence. The reports reflect a deep feeling of vulnerability on the part of young people, in terms of lack of employment and difficulty in integrating into consumer markets. In a scenario in which agriculture is not a profitable activity, the violent expulsion of thousands of artisanal miners, an activity that generates numerous complementary jobs (taxi-motorcycles, food preparation, local rental, commerce, etc.), had a negative impact on local microeconomies. The increase in schooling of many young people contrasts with the difficulties of integrating into the labour market, so the economic precariousness and lack of alternatives make young people quite vulnerable to recruitment by radical and violent groups, especially in the face of promises of payment of monetary sums.\u201d<\/p>\n Two June papers by OMR director Joao Mosca look at the needs of agriculture and the development of the fragile state.<\/p>\n \u201cNo transformation of the agricultural sector is taking place. Capital (technology) has not intensified, labour remains the main factor of production, the number of holdings has increased due to the demographic effect and the average areas have decreased, productivity has remained the same or decreased in food crops and increased in cash crops, employment in agriculture, as a percentage of the population, has remained the same.\u201d (DR 175, 10 June, Joao Mosca e Yara Nova)<\/p>\n \u201cEconomic and commercial relations, based on the externalisation of the economy, on dependence on foreign investment, the exchange relations in international trade and the alliances between the elites of the developed countries and those of the less developed countries, permanently restructure the divisions of labour on a global scale, which reproduce underdevelopment and enrich the developed countries. For these realities to occur, there needs to be a fragile State that is unable to carry out its functions. \u2026 A power infiltrated by corrupt people in the upper echelons that block any attempts at oversight. But the weak state must be strong enough to repress and threaten people in demonstrations and strikes and civil society organisations. The incompetence of the state (in the sense of the real incapacity to exercise its functions) is a purpose that interests capital and the national oligarchies in close alliance with each other.\u201d (DR 177, 28 June, Joao Mosca)<\/p>\n The two World Bank reports released in June are:<\/p>\n Mozambique Economic Update : Getting Agricultural Support Right (31 May 2022)<\/b><\/p>\n Mozambique \u2013 Country Economic Memorandum: Reigniting Growth for All (dated October 2021 but the final version was only created on 8 March 2022 and only released in June 2022)<\/p>\n and blog by the authors Fiseha Haile Gebregziabher & Fernanda Massarongo: \u201cMozambique needs a new growth model for sustained, inclusive growth\u201d<\/p>\n For More News And Analysis About Mozambique<\/a> Follow Africa-Press<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":" By Joseph Hanlon Africa-Press – Mozambique. World Bank admits policy failure World Bank admits its policy failed, leading to high growth but inequality, poverty, corruption; Admits need to \u201crethink\u201d current model The World Bank in two reports in June admits the catastrophic failure of its policies in Mozambique over the past three decades. \u201cMozambique\u2019s decades-long […]<\/p>\n","protected":false},"author":84,"featured_media":22575,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2,6,8,16],"tags":[233,281,283],"class_list":["post-22576","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-news","category-files","category-homepage-english","category-twitter","tag-africa-press","tag-africa-press-mozambique","tag-mozambique"],"yoast_head":"\n
\nWorld Bank admits its policy failed, leading to high growth but inequality, poverty, corruption; Admits need to \u201crethink\u201d current model<\/b><\/p>\n