The Commission on Growth and Development chaired by Nobel Prize Laureate Michael Spence designates countries that have achieved a growth rate of 7 percent for at least 25 years “growth miracles.” So far there are only 15 such miracles around the world and only one of those countries, Botswana, is in Africa. However, according to economic forecasts, Mozambique will be part of this select group in 2017.
There is no doubt that the 1992 peace accord that ended a brutal civil war in Mozambique (where more than 1 million people died) between the Liberation Front of Mozambique (Frelimo) and its rival, the Mozambican National Resistance (Renamo), was the catalyst for this impressive growth record. In terms of its economic performance, Mozambique has not looked back.
However, recent sabre rattling between the two former foes is raising the sinister specter of civil strife at a time when Mozambique is close to achieving a “growth miracle.” There are two lessons from the recent events. The first is that the quality of growth matters and the second is that economic growth has to be inclusive.
Record growth in Mozambique since 1992 has been driven largely by a number of megaprojects in the energy sector and extractive industries, together with agriculture and strong donor support. However this strong economic growth has not necessarily translated into significant poverty reduction. Worse, the reduction in the country’s poverty rate has weakened in recent years and over half of the population still lives below the poverty line. In fact, Mozambique remains one of the poorest countries in Africa and in the world (185 out of 187 in the 2013 Human Development Index).
A critical challenge of Mozambique’s growth strategy, which is based on increasing investment in its extractive industries, is the risk of having prosperous economic enclaves that are not linked with the rest of the economy and worse, do not create jobs. And unfortunately, recent large gas and coal discoveries in Mozambique likely mean that growth in the country will continue to be supported by this type of investment.
Mozambique’s continued lack of jobs and rampant poverty will have to be addressed, and certainly these issues will have implications for peace and stability in the country. The social unrest that closely preceded the Arab Spring should serve as a warning to the Mozambican authorities. Issues of inequality could be further exacerbated by the expected larger wealth from gas and coal discoveries, which could ultimately strain the country’s political stability. Another challenge associated with Mozambique’s natural resource-driven growth is that it creates a “resource rent” that politicians often cannot resist capturing.
After 15 years of war and 21 years in the opposition, Renamo announced this week that it had pulled out of the peace deal. Its leader, Afonso Dhlakama, had previously threatened to “’destroy Mozambique’ if Renamo did not get a bigger slice of the country’s growing wealth.” While there are some signs of other figures in the party leadership talking themselves back from Dhlakama’s words, the party’s main point of contention appears to remain the division of wealth.
Renamo leaders reportedly feel marginalized politically and economically and argue that the government lacks the capability and willingness to conduct free and fair elections. The next general elections are scheduled to take place in 2014, in which Frelimo’s Armando Guebuza is not expected to run for a third term as president. Nonetheless, Frelimo is expected to win next year’s elections as Renamo’s popularity has declined in recent years and its role as the main opposition party is increasingly challenged.
In short, the literature on the resource curse is vast and policy advice on how to make growth more inclusive and build adequate institutions in resource-rich countries is a well-trodden path. The real problem is in the political economy of implementing these necessary reforms. Mozambique cannot afford another civil war and owes it to its people to become a shared “miracle.”