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«Industrial Policy in Mozambique Matthias Krause Friedrich Kaufmann Industrial policy in Mozambique Matthias Krause Friedrich Kaufmann Bonn 2011 ...»

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The FRELIMO party has ruled Mozambique since independence in 1975. Only after the end of the civil war was the FRELIMO Government legitimised in 1994 by free general elections (for the Presidency and the Parliament). FRELIMO has won all subsequent elections at the national level (1999, 2004 and 2009), always winning the absolute majority in the national parliament and the presidential elections. This ‘quasi monopoly’ has contributed to blurring the distinction between party and Government and has undermined the checks and balances between the country’s different branches of government (USAID 2005; see also Öhm 2009). Because of its supremacy and the electoral system, FRELIMO has strong influence over members of parliament. Parliamentarians “are chosen on [the] basis of proportional representation using provincial party lists” (Chakravarti 2005, 146), which gives the party strong control over them. Moreover, the party – through its members in the executive branch – practically controls the judiciary, thereby undermining its independence (Mosse 2006).10 For example, the nomination of judges is not carried out in a transparent manner, and to become a judge, a candidate apparently has to have close ties to the executive or the party. According to Hanlon / Smart (2008, 116–118), the development of an independent, well-functioning legal system is not a high priority for the Government.

FRELIMO’s supremacy has reduced its incentives to reach out to civil society for alternative perspectives, which contributes to polarization and reduces its accountability to citizens. Apart from RENAMO and to a certain extent, a new party founded in Beira in 2009 (the Democratic Movement of Mozambique), there are no significant national power bases in the country that could compete with the ruling party to make political competition more vigorous and transparent.11 Moreover, the blurring of the separation of powers and the lack 10 The lack of independence is just one problem of the legal system in Mozambique. Another big problem is the lack of expertise and training (Mosse 2006; USAID 2005).

11 In 2003, RENAMO at least managed to win the local mayoral elections for mayors in 5 out of 33 autonomous cities – all the others were won by FRELIMO; in 2008, however, FRELIMO won the local 22 German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE) Industrial policy in Mozambique of independence of the judiciary has generated a culture of impunity that undermines the rule of law. Party officials seldom risk sanctions or punishment for disrespecting the law or for corrupt behaviour (Öhm 2009). Finally, the party’s dominance has a big influence on recruitment for public service: In practice, only FRELIMO members are recruited – which apart from being discriminatory, harms the capacity and quality of the public service when party membership is given preference over technical qualifications. The capacity of public servants is generally low, with only a few receiving adequate formation or training for their positions (DFID 2006).

Civil society is not able to countervail this lack of checks and balances. There is no welldeveloped network of civil society organisations or formalised interest groups (more on the role of business associations below). Civil society organisations typically depend on state or donor initiatives and their agendas are closely connected to their sponsors’ agendas (Nuvunga 2009, 20). Moreover, there are only a few opportunities for civil society organisations to monitor government activities, and their capacity and levels of organisation are weak (MASC 2008). The most important group of civil society organisations is the ‘G20 Network’, which was set up during the ‘Poverty Observatory’ process to monitor the implementation of the Mozambican povertyreduction strategy (PARPA – Plano de Acção para a Redução da Pobreza Absoluta, see also Section 5.1). Independent local research capacity in Mozambique is weak and slowly developing – although lasting recent years, some noteworthy think tanks have been established, such as the Instituto de Estudos Sociais e Económicos (IESE), the Centro de Integridade Pública (CIP) and Cruzeiro do Sul.

Since the formal installation of a multi-party democracy, the media have become more pluralistic (Hanlon / Smart 2008, 200). But despite increasing diversity, the State continues to play an influential role since it owns an important part of the media. Because of high levels of illiteracy and poverty, radio is the only medium to reach most of the population (Hodges / Tibana 2004). According to the Freedom of the Press Index 2008, Mozambique is classified as ‘partly free’, ranking 86th out of 195 countries (Beula 2009) – which is above average for sub-Saharan Africa.

4.3 Important industrial policy players This section briefly characterizes the role of three important groups of players that have a stake or a say in industrial policy making: the business elite linked to FRELIMO, the business associations and donors.

The business elite linked to FRELIMO There are important ties between the political and economic elite in Mozambique that create conflicts of interest.12 Particularly influential are high-level FRELIMO cadres, such as the Machel family, the Chissano family or the Guebuza family, who simultaneously run mayoral elections for mayors in all but one autonomous city: Beira – which was won by an independent candidate.

12 A well-documented case concerned awarding a concession for non-intrusive inspection services (scanners) for the port of Maputo to a FRELIMO-owned enterprise. Cf. Mosse / Munguambe (2007).

German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE) Matthias Krause / Friedrich Kaufmann important business groups.13 Particularly during the privatisation process, these and other party cadres used their political power to increase their private wealth. They have built up powerful business groups, secured the land-use rights of large, economically-attractive areas, and obtained concessions for profitable business activities (Hanlon / Mosse 2009).14 The fact that FRELIMO has managed to remain united over such a long period has helped it stay in power. However, according to Hanlon / Mosse (2009, 4), despite the party’s outward unity, the party elite is divided into two groups: (i) the predatory group that merely looks for rent-seeking and personal gain, leaving the development agenda to donors and foreign investors, and (ii) the developmental group that “looked to entrepreneurial activities that would promote Mozambican development, and continued with a traditional Frelimo ideology of wanting to ‘develop’ Mozambique.” Hanlon / Mosse (2009) state that the latter group has become more influential under President Guebuza, and speculate whether the combination of a development-oriented industrial policy agenda supported by this FRELIMO faction and the productive use of its business empires (by Guebuza, for instance) could serve as the backbone of a successful welfare-enhancing industrial development for Mozambique in the style of the Asian tigers.

Business associations

Since the late 1980s, numerous business associations have been established in Mozambique, some of which represent sector interests at the national level, while others represent regional business interests across sectors. In general, few of these business associations are effective in communicating business interests to the Government or in providing businessdevelopment services to their members; further, few manage to collect member fees and remain afloat. One possible explanation for the relatively low relevance of business associations in Mozambique is that most important State–business relations are made using the close ties between the party and the business elite. For a businessman it is probably therefore much more important to be a party member, or to be otherwise connected to FRELIMO, than to be a member of a business association.

Nevertheless, there are some relevant business associations (e.g. ACIS, see below) that have formed the umbrella organisation Confederação das Associações Económicas de Moçambique (CTA), which has become the private sector’s principal and almost ‘official’ Government interlocutor (Hodges / Tibana 2004, 81). Strongly supported by donors, the CTA has a growing technical capacity and organises a series of dialogues with the Government on private-sector policy issues, like the annual private-sector conference or the semi-annual forum with the Prime Minister. Moreover, the CTA represents business in the private sector’s donor working group.

The CTA is still struggling to define its role. Its mission to represent private-sector interests is challenged by the enterprise sector’s fragmentation (see Section 3.3) and by the strong network of political and business elites described above. Big international investors are usually able to negotiate directly with governments and do not depend on the CTA (see also the case study in Section 6.2). The same is true for businesses linked to the regime that use informal channels or the party to communicate with the Government. The 13 See also: The Indian Ocean Newsletter 31.5.2008: “Guebuza family has finger in every pie”.

14 On this topic, see also EIU (2008, 30) and APRM (2009, 279–81).

24 German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE) Industrial policy in Mozambique vast universe of unorganised informal and micro-enterprises do not have the means to engage with the CTA, which therefore remains largely limited to the small group of formal SMEs. The CTA depends to a good degree on donor contributions (it also receives some support from the State budget, and from its members). Several CTA members and executives are linked to, or are members, of the ruling party, creating a conflict of interest when the CTA negotiates with the Government.

One of the few business associations that apparently represent genuine business interests, and that has the organisational and financial means to articulate and voice these interests, is the rapidly growing ACIS (Associação Comercial e Industrial de Sofala). ACIS is based in Beira, the capital of the province of Sofala. Its members are mainly formal, mediumsized enterprises – many of them owned by foreign investors – that are not closely linked to the political elite. ACIS has repeatedly criticised the Government openly.


Since the late 1980s, when Mozambique started to cooperate with the IMF and World Bank in a structural adjustment programme, donors have been important, influential stakeholders in policy formulation (for the World Bank’s influence on the cashew-policy framework, see Box 2 in Section 6.1). Today over 20 multi- and bilateral agencies are engaged in official development cooperation with Mozambique, which is one of the most aid-dependent countries in the world.

Some analysts consider Mozambique to be ‘a model for donor coordination’ and a case in which the international donor community and the partner government have jointly improved aid effectiveness (Fischer et al. 2008, 238 ff.). Donors are an important, if not the most important, dialogue partners of the Government (de Renzio / Hanlon 2007). The Programme Aid Partners (PAP), who are engaged in budget support, participate in policy formulation in a particularly active manner – through donor working groups, joint-review mechanisms, and the elaboration of programme approaches, etc. They also shape policy through the Programme Assessment Framework (PAF), which defines priorities for action and indicators to monitor the development process, including good governance and economic development.15 The dialogue between the PAPs and the Government in the context of the budget-support mechanism offers potentially transparent, open and productive discussion and cooperation.

Several observers consider that donors play a positive role in promoting the Government of Mozambique’s development-orientation and accountability. But it is not always clear if reforms are backed by genuine national policy and party interests, or if instead they are donor-driven – and thus ultimately lack the ownership needed to be effectively implemented. Since Mozambique is highly dependent on aid and democratic accountability is not well developed, the Government risks being more accountable to the donors than to its constituency (Castel-Branco 2008; de Renzio / Hanlon 2007). Not even PAPs always speak with one voice which may hamper consistency in policy formulation. Moreover, critics maintain that on some occasions, donors appear to have tolerated Government corruption to achieve their programmatic goals, such as the privatisation of Mozambique’s enterprises (Hanlon / Mosse 2009, 4).

15 See http://www.pap.org.mz/.

–  –  –

Donors have not promoted a selective industrialpolicy agenda, but rather the opposite.

The ‘Washington Consensus’ did not favour selective industrialpolicy approaches, and most donors conventionally viewed economic development as being basically about macroeconomic stability, liberalisation, privatisation, and lowering the costs of transactions through Doing-Business-style reforms – issues that in recent years have dominated the debate about economic reform. The joint review, which assesses government performance based on defined indicators, does not reflect a philosophy of selective industrial policy, but does mention indicators for monitoring the implementation of Doing-Business-style reforms.16 Moreover, donors prefer to engage in clearly defined sectors like health and education. Industrial policy is a cross-cutting task which is neither reflected in donor structures, such as donor working groups, nor in the organisation of the line ministries. In fact, the Government lacks a powerful coordination platform to implement an industrial policy approach. Something similar happens in the policy field of private-sector development, which is not part of the donors’ combined-budget-support efforts. Private-sector development or local economic-development activities often result from bilateral donor projects that are not linked to any national strategy. Several of these projects support local value chains, for example, local brick production for construction or the production of oil from locally grown seeds. These efforts are mostly limited in scope and time and do not incorporate government planning and learning cycles, and their impact on the structural transformation of the economy is generally limited.

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