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In Mozambique—and In Africa—Rising Requires Resilience

Three months ago African leaders and policymakers assembled in Mozambique under an “Africa Rising” banner to assess the continent’s strong economic performance. But while the outlook for the continent remains strong, individual countries have faced problems and the uncertain global outlook continues to pose risks. Against this backdrop, what are the policies that Africa should pursue to sustain the positive momentum for the continent?

In reality, Africa Rising has never been about unbridled optimism; it has been a tale of strong growth tempered by serious challenges. And rising in economic terms is as much about sustaining expansion as about the dimensions of growth itself. The extended process of African development also requires increased resilience to shocks, and it is this resilience that may be tested by economic problems in some African nations.

Strong growth—and increased resilience—were the focus of the Africa Rising conference organized in May by the IMF and the government of Mozambique in Maputo. The nearly 1,000 officials, corporate executives, civil society representatives, and journalists who gathered for the two-day event discussed the difficult issues that must be addressed if Africa is to maintain its upward trajectory of the past two decades.

Parallel issues

These issues have parallels across sub-Saharan Africa as each country pursues its own path to development. It is by examining individual countries in detail that we gain a clearer understanding of what has been achieved and what remains to be accomplished. For this reason, the IMF African Department compiled a book on Mozambique called Mozambique Rising: Building a New Tomorrow, which is available in English, French and, most recently, Portuguese.

The book examines Mozambique’s macroeconomic accomplishments, from its emergence from civil war in 1992 to its current efforts to build on discoveries of massive reserves of coal and natural gas. But it also describes the myriad of challenges that must be addressed if the country and its people are to achieve their potential.

Mozambique’s immediate priorities are to share the benefits of two decades of strong growth more broadly, and to shepherd the economy through the transformation from a traditional agricultural base to one centered on mining, agro-business and processing, and services.

As the book makes clear, reaching these objectives will require continued institutional and capacity building in public administration to further improve the foundations and structures of economic policymaking and governance, and adapt them to a fast-changing world. It will also require further efforts to create an environment conducive to private sector development since this will need to be the primary source of future employment. It also calls for the government to work with small and large enterprises to make Mozambique more business friendly and competitive.

Natural resources

As with several other emerging African nations, Mozambique’s future is inextricably tied to the development of natural resources and foreign-financed megaprojects that are capital intensive and export oriented. There is no doubt that these projects will make a significant contribution to growth, but so far they have generated only limited employment opportunities and government revenues. To fully benefit from this strategy Mozambique will require a more dynamic business climate and changes to its tax regime.

Resource development also requires substantial changes to the formulation of fiscal policy. Mozambique’s resource revenues, while modest to date, are likely to become sizable in a few years, thus affording a unique opportunity to close infrastructure gaps, invest in priority sectors such as health and education, support more inclusive growth, as the economy radically transforms. However, capacity constraints seem high, and the pace at which resource wealth is anticipated and used should be gradual.

To reap the full returns on scaled-up public investment, reforms would also need to enhance the efficiency of investment through strengthened investment planning and coordination; project assessment, selection, and monitoring; better governance; and provision of complementary infrastructure.

Social protection

There are many other challenges, not the least of which is inclusive growth. While poverty in Mozambique has fallen significantly, a 2009 household survey showed that overall poverty rates had stagnated since 2003 at around half the population. Policies to ameliorate this have focused on improving agricultural productivity; creating jobs through improvements in the business environment and training; developing more focused and better designed social protection programs; and preserving macroeconomic stability.

However, work remains to be done to refine policy priorities, derive policy actions and sequencing, and measure results. Also, policy coordination to ensure accountability has been lacking in areas that cut across ministerial jurisdictions, and there are significant data gaps that weaken analytical capacity and thus the basis for policy decisions.

All of these issues raise questions about how fast and how high Mozambique can rise, but at the same time they point the way to the policy path that could transform the country to realize its tremendous potential.