Second wave of reforms aims to share wealth

After a four year stint working on a South African gold mine in Johannesburg, Orlando Khosa, 33, returned home to Mozambique to establish his own business and eight years later it proved to be a smart business decision.

"I used to earn about R2,000 (US$250) a month at an underground gold mine in Carlton, but the money was not enough and I decided to come back home in the year 2000," Khosa told IRIN.

"But since I returned I have been looking after my family working as a dealer and supplier of goods such as TVs, radios and cellphones and other services. I make more money that way," he said, outside his kiosk situated in the narrow streets of the poor residential district of Polana Canico, on the outskirts of the Mozambican capital, Maputo.

Khosa is one of the more than three-quarters of Mozambique's workforce who earn their living in the informal sector. According to the African Development Bank’s (ADB) 2008 Economic Outlook Report released in May at the bank's annual conference in Maputo, only eight percent have jobs in the formal sector. About 17 percent of those of working age are unemployed.

Polana Canico is one of the numerous districts on the outskirts of the capital, where the majority of the city’s population of about two million inhabitants reside.

Many have missed out on the economic boom of the past decade that has seen robust growth rates, at times as high as 14 percent, which has been largely driven by huge capital investments that has, however, created few employment opportunities. Mozal for example, the second largest aluminium producer in Africa, cost US$2.1 billion to set up, but directly employs just 1,000 people.

Five years after Mozambique’s 16 year-long civil war ended in 1992, the government launched its first anti-poverty initiative, the Absolute Poverty Reduction Action Plan (PARPA), which saw the incidence of poverty - defined as living on US$1 a day or less and also lacking access to health, education and other services - decreased from 69 percent to 54 percent by 2003.

But the good news has been tempered by concern that while the reforms aimed at reducing poverty through access to education, establishing basic infrastructure and ensuring good governance has had an impact, the drive to eradicate poverty has both slowed down in recent years and in some areas seen an increase.

At the opening of the ADB's annual meeting, Mozambican President Armando Guebuza said in his key note address that the government wanted to reduce the incidence of poverty to 43 percent by 2009, a drop of 11 percent from the 2003 figure of 54 percent.

Growing concerns

Frank Sheridan, Ireland's ambassador to Mozambique, said of the country's poverty situation: "It seems to me that many of the poorest are struggling just to maintain their present standards of living, or even falling back while the prosperous are benefiting disproportionately."

Our main aim is to get the country to produce enough food to meet domestic consumption. At the moment we still import rice and maize to augment our local production

A September 2007 country report on Mozambique, sponsored by the Brazilian Institute of Applied Economic Research (IPEA) and the United Nations Development Programme (UNDP,) found that while the incidence of poverty had fallen nationally, when assessed on a province by province basis, it had actually worsened in the country's southern provinces.

The report said the incidence of poverty increased in the city of Maputo by 5.8 percent to 53.6 percent in 2003 compared to 47.8 percent in 1997. In Maputo province it increased by 3.7 percent to 69.3 percent from 65.9 percent over the same comparative period whilst other southern provinces of Gaza and Inhambane had only witnessed marginal reductions.

In contrast, the central and northern provinces enjoyed huge declines in the incidence of poverty, with the highest of over 50 percent recorded in the central province of Sofala.

Miguel Chauke, 26, is unemployed and lives in Polana Canico with his wife and child. "These days finding work to do is hard. If the country can get more foreigners to invest in the country like they did with Mozal, then we can get more work,” he told IRIN.

Second wave of reforms

But PARPA's second phase - launched in 2006 - is the pursuit of a "green revolution", designed to open up the country's 128 districts to the rewards of commercial agriculture through the provision of transport, communications infrastructures and financial services in the rural central and northern provinces.

About 80 percent of the country's 21 million people are engaged in small-scale farming.

“[Our] main aim is to get the country to produce enough food to meet domestic consumption. At the moment we still import rice and maize to augment our local production,” Caterina Pajume, deputy minister of agriculture, told IRIN. “We are doing this by funding [at low interest rates] agricultural projects [at the grass roots level] in the 128 districts of the country.”

The government is also revising its approach to extractive industries to ensure that future mega-projects, like Mozal, generate more revenue for the poor.

New tax regulations, such as 10 percent on oil, six percent on natural gas, 10 percent on other mining products, would also see mining concerns paying a tax on a mine's surface area.

Deputy Minister of Mineral Resources, Abdul Razak, said earlier this year the 2007 laws had made it obligatory to publish fiscal revenue from petroleum operations, and ensure that part of the tax revenue from mining and petroleum operations would be used for the local community's benefit.

"When the country negotiated the first wave of investments in the mega-projects they were not prepared to negotiate for maximum gains for the majority. All they needed was investment," Constantino Marrengula, economics lecturer at the Eduardo Mondlane University in Maputo, told IRIN.

"The idea was to attract big investments, which they did, but they had to do so by giving them no taxes. But had the government taken the view that investors where interested in the natural resources they need we would have negotiated better deals," Marrengula said.

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