Mozambique seeks peace dividend

Will the recent peace accord between the government and former rebels set Mozambique on the path to economic recovery? Charlie Mitchell weighs up the possibilities.

When he touched down in Maputo early in September, Pope Francis heaped praise upon the people of Mozambique. “You have experienced suffering, sorrow and affliction,” he said. “But you have refused to let human relationships be governed by vengeance or repression.”

The pontiff was referring to a landmark peace deal signed in August that ended decades of conflict between the ruling Front for the Liberation of Mozambique (Frelimo), led by President Filipe Nyusi, and the heavily-armed Mozambican National Resistance (Renamo) opposition group, led by Ossufo Momade.

Overall, some 1m people are estimated to have died in the civil war between Frelimo and Renamo that began shortly after independence in 1975 and ended with a peace accord in 1992. Conflict erupted again in 2013 after Renamo repudiated the accord following an escalation of tensions.

Analysts view Mozambique’s economic development – underpinned by offshore gas but constrained by conflict, corruption and misrule – as contingent upon prolonged peace.

Signed just two months before national and provincial elections in October, the peace accord will be immediately tested.

“The conduct and result of the election will be a litmus test of the durability of the peace deal,” says Ed Hobey-Hamsher, senior Africa analyst at global risk consultancy Verisk Maplecroft. “A poor election performance by either Frelimo or Renamo will exacerbate existing internal fault lines.”

For now, the odds look good. Having resisted peace for years, there is genuine will within Renamo to lay down arms.

“The majority of those still fighting are middle-aged, in their 50s and 60s and are increasingly fatigued by conflict,” says Alex Vines, head of the Africa programme at Chatham House.

“They are more amenable to finding a pathway towards peace.”

Although analysts expect Nyusi to win re-election, Renamo could secure control over a number of central provinces, such as Zambezia and Sofala, with its anti-elite, populist message.

Between two and five province wins will be considered a reasonable electoral return for the movement and dispel frustrations with an electoral process skewed towards the government.

“If governed effectively, they will indicate that Renamo has completed its transition from insurgency to functioning political party,” says Hobey-Hamsher.

However, a dissident faction calling itself the Renamo Military Junta says it will not lay down arms until Renamo has a new leader. Analysts hope it will not tarnish recent progress by spilling blood on election day. Although the group claims to have recruited 500 young men, Vines puts the number closer to 80.

Constraints to growth

A peaceful poll is the first step on a long road to economy recovery for Mozambique. Nyusi will have less than two years to effect real political and economic change before Frelimo’s internal politics move onto his successor, according to Vines.

And the many constraints to growth in the indebted southern African nation mean economic projections remain pessimistic, in spite of the significant peace agreement.

Today, Mozambique is plagued by “stubborn poverty, deepening inequality and very high demographic growth,” says Vines.

These socioeconomic factors have exacerbated an Islamist insurgency in northern Cabo Delgado province, just as they grew support for Renamo. The response to the uprising, which has killed scores of civilians near gas-rich areas in the past two years, is the key to unlocking Mozambique’s potential, according to Vines.

“A government that understands this issue, knows how to handle it and not exacerbate it, is the top priority in the short term,” he says.

Earlier this year, the fragile economy was dealt another blow, as Cyclones Idai and Kenneth barrelled into Mozambique, destroying nearly 300,000 homes, killing 650 people and obliterating 800,000 hectares of crops.

The IMF had predicted real GDP growth of 3.8% for 2019, but revised its forecast down to between 1.8 and 2.8% following the storms.

Mozambique will continue to be a victim of climate change, suggesting natural disasters will grow in frequency and strength, slashing agricultural output.

“Obviously the main cost [of the storms] was felt by the affected people, but the economy has been dealt a serious blow,” says John Ashbourne, economist at Capital Economics.

Loans scandal

Meanwhile, international investment in Mozambique has yet to recover from a damaging loans scandal, which emerged in 2016 and cooled interest.

Between 2011 and 2015, annual GDP growth bobbed around 7% but in 2016 it nearly halved to 3.8%, according to the World Bank.

Three years earlier, the government had secured loans worth $2bn from international banks to invest in tuna-fishing and maritime security, but failed to declare more than half to the IMF.

An independent audit later found that $500m was unaccounted for, and that the government – which defaulted on the loans – had been overcharged by $700m for the equipment.

Legal disputes are ongoing and “the scandal will sap investors’ faith in the Mozambican government over the long term,” predicts Ashbourne.

Hobey-Hamsher agrees, noting that “full recovery to pre-2016 levels of investor confidence will require those implicated to face full judicial accountability, whether that is in domestic, US or South African courts.”

Mozambique’s former finance minister, Manuel Chang, is awaiting a US extradition hearing from prison in South Africa. A high-profile trial in the US could reveal damaging allegations against other senior Mozambican politicians.

Reasons for optimism

Still, there are reasons to be optimistic, particularly if August’s peace deal ushers in a new era of stability in Mozambique.

Since 2017, the country’s central bank has been quietly stabilising the economy, easing monetary policy and appeasing international investors in the process.

Formerly a socialist state, Mozambique enjoys close ties with Russia, which recently forgave 95% of the debts the country owed it. Meanwhile, coordination on cyclone relief has improved relationships and repaired trust with other international partners, including the UK and the US, says Vines.

And various sectors, including coal mining, agriculture and manufacturing have growth potential, partially due to Mozambique’s border with South Africa, with its large consumer market and developed transport infrastructure.

But it was gas that promised to transform the nation from one of the world’s poorest to a regional investment hub. So impressive are its reserves that international oil companies have continued to meet investment schedules, even as the loans scandal has raged in Mozambique.

Liquefied natural gas production is on course to begin in 2022 but significant revenues are not expected to reach state coffers before 2027. When they do, the government will need to ensure the equitable allocation of dividends to Mozambicans and address popular grievances around economic inequality, as well as investing in infrastructure. If it does not, the factors that have fostered violent insurgencies will go unresolved.

Given Mozambique’s history of misrule, some are pessimistic about that prospect – and thus the country’s long-term growth.

“There will be a huge jump in GDP in the mid-2020s, but I doubt there will be much real structural change,” says Ashbourne. “This looks more like Chad’s oil boom than Kuwait’s oil-powered development.”