Donor confidence continues despite corruption

Donors have again pledged massive support to Mozambique's state budget but lack of progress in implementing the anti-corruption strategy remains a concern.

At a recent press conference Deputy Finance Minister Pedro Couto said progress had been made in implementing "some elements" of the strategy, and the government was strengthening the Criminal Investigative Police (PIC) and the Anti-Corruption Unit of the attorney-general's office, the Mozambican news agency, AIM, reported.

Developing and respecting new administrative financial procedures was also a major step in the right direction to fight corruption, he said.

According to Jolke Oppewal, who represents a group of 18 donors providing direct budget support, these financial procedures were commendable but, she warned, both the government and donors acknowledged that the anti-corruption strategy needed to be put into action. "At present, corruption cases are not visible - there is no publication referring to the number of corruption cases."

Mozambique has one of the largest coordinated aid programmes on the continent: the latest round of meetings between the Mozambican government and its main donors succeeded in securing around US$583 million for 2007. The 18 donors who provide state budget support, known as "Programme Aid Partners", include the World Bank, the African Development Bank, the European Union, and most individual EU member states.

Total aid to the country, including the US and Japan, which don't channel their aid as direct budget support, is about US$1.2 billion dollars - almost half of the state budget.

Donors have been generous to Mozambique because, according to Oppewal, they are seeing results from their investments. "There has been positive development for a sustained period in Mozambique, so it is better for the donors to invest more aid here than in some other African countries. Dialogue with the government is constructive, and we see that the country is on track to a more efficient use of aid," Oppewal told IRIN.

Donor confidence has also been strengthened by lasting peace since the October 1992 peace accord, which brought an end to a 16-year civil war that left half the population dependent on food aid, destroyed much of the infrastructure and cost thousands of lives.

Mozambique has seen impressive economic progress. According to the African Economic Outlook 2005-06 report by the Organisation for Economic Co-operation and Development, growth reached 7.7 percent in 2005.

But observers say more is needed for a real transition out of poverty. Expansion has been driven mainly by foreign-financed "mega-projects" and large aid inflows, but "unemployment and poverty remain critical problems", the report acknowledged.

Mega-projects like the US$2 billion Mozal aluminium smelter, principally owned by Australia's BHP Billiton, triggered further interest in the country as a destination for foreign direct investment. It was followed by a $1.2 billion pipeline by South African oil company, Sasol, to deliver natural gas from Mozambique to the neighbouring country, and a new $450 million titanium smelter in Moma, in Mozambique's northern province of Tete. But with 70 percent of the population living in rural areas, mega-projects alone are not enough to hit poverty where it hurts.

Nonetheless, Rachel Turner, head of the Mozambique office for Britain's Department for International Development (DFID), said DFID was encouraged by the "mutual accountability framework" set up between the 18 donors and the government. "This is a critical step towards creating the space for citizens to hold government accountable to them," she told IRIN.

Donors also acknowledged the progress in decentralisation and efforts to reduce regional differences. Last year the central government gave $300,000 to each of the country's 128 districts, to be used for investment in small economic activities. After criticism that some of the funds were used to improve housing for local officials, the consensus amongst donors was that more needed to be done. According to Oppewal, "lack of human capacity in the districts is one of the main challenges" in the decentralisation process.

Justice and governance issues remained the biggest concern. Public-sector reform has been slow, and Oppewal commented that the current system was bureaucratic, complicated and slow. Donors and the government also acknowledged that access to justice for ordinary citizens was poor.