Experience from Mozambique

Environmental economic- accounting

By: E. Monica MagauaAddis Ababa 2011

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Introduction

SNA is an important instrument since it is the primary source for economic data;

It is helpfull for the policemakers to take their decisions and is worthful to assess the performance of the country; The inclusion of environment and natural capital to the conventional national accounts can be done through the system of satellite accounts for the environment; 

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Introduction• SNA is a coherent, consistent and integrated set of tables

based on concepts, definitions and classifications and accounting rules internationally accepted;

• It provides a complete and detailed record of all economic activities and its relations among economic agents.

• In Mozambique, the INE according to the 1993 SNA

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Introduction

• The classifications used by the 1993 SNA are regarded to three domains:

• Products, economic activities and institutional sectors.

The definition of structure is the key element in national accounts, because it determines the contents of the different categories in order to constitute the accounting system

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Some concepts in conventional national accounts

Production and its boundaries

In the SNA production is classified as a physical process realized under responsability, control and management of an institutional unit, in which capital and labor are used to transform intermediate goods and services to produce other goods and services.

All produced goods and services can either be sold, changed or self consumed .

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Some concepts in conventional national accounts

• Some natural processes can or can not be considered production depending on the circumstances;

• The necessary condition for an activity to be considered as productive, is that it must be taken under control and responsability of an institutional unit that has some rights on what is being produced.

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Production concepts, cont.

• For example:

• The natural growth of fish in the ocean, is not considered as production, because the process in not generated by an institutional unit.

• On the other side, the farming of fish (aquaculture) is considered as production

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National accounts extension to the environmental satellite accounts

The satellite accounts for the environment, have a similar structure as the conventional national accounts.

It consists on the value of stocks and flows of environmental goods and services.

It provides a set of indicators to monitor the environmental-economic performance in the future. The definition of environmental goods is huge, in principle it measures

the total economic value including non mercantile transactions.

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National Accounts in Mozambique: current situation

Mozambique uses the SNA 93 Environmental accounting is not currently included in the official calculation of GDP (by INE)

But, there have been some (international) attempts to incorporate certain environmental considerations into the national accounts

On the side of the national environmental authorities, there is interest about environmental accounting

Therefore, some environmental accounting activity, but happening as ad

hoc research rather than mandatory national accounts calculations.

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Environment in Mozambique

Economic growth in Mozambique has been strong in recent years (7.0% annual average 7 years)

But, this has to some extent occured from the exploitation of natural (non-replaceable) resources (deforestation causing rising CO2 emissions)

And, this is expected to rise significantly in the near future (big foreign companies exploiting minerals- contracts signed, activity due to start soon

Mozambique is rich in natural resources. Managed correctly, they will contribute significantly to economic growth.

Current GDP calculations do not reflect this. 10

GDP structure in Mozambique (nominal, 109 Mt)

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Description 1996 2003 2005 2008 2009

Agriculture 13 960(22.45%)

20 335(18.32%)

23 037(17.35%)

31 285(19.36%)

33 945(19.7%)

Forest 2 305(3.71%)

3 247(2.93%)

3 468(2.67%)

3 850(2.38%)

3 943(2.3%)

Extraction 182(0.29%)

657(0.59%)

1 153(0.87%)

1 855(1.15%)

1 905(1.11%)

Manufacture 4 874 (7.84%)

16 636(14.99%)

19 235(14.82%)

21 403(13.2%)

22 077(12.8%)

Water 30(0.05%)

309(0.28%)

321(0.25%)

441(0.27%)

458(0.3%)

Trade 6 247(10.05%)

10 559(9.52%)

12 745(99.82%)

18 165(11.24%)

19 559(11.4%)

Others 34 583(55.6%)

59 229(53.4%)

69 821(53.8%)

84 636(52.4%)

90 167(52.4%)

GDP 62 181 110 973 129 764 161 635 172 054

Description of natural capital

According to SEEA, natural capital falls into 3 broad categories:

1. Landa. Agricultureb. Forests

2. Ecosystemsa.Water

3. Natural Resourcesa.Mineral Resources

Apply these classifications to Mozambique in what follows… 12

Natural capital in Mozambique: LAND (agriculture)

With objective to find an indicator of sustainable development, we should pay attention to the following items related to the LAND:

Agriculture, forests desertification and carbonization.

Mozambique has in total 36mn ha of arable land, 5 of which are being cultivated.

From the 3.3 mn ha of potential land for irrigation only 50 thousand are being used for these purposes. About 12 mn ha are classified as natural pastures .

Forests over an area of 46.4 mn ha, from which 20 mn ha are productive forests and 8.8 mn ha are conservation areas

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Description Use Area (ha)

Arable land 36.000.000

Cultivated land 5.000.000

Irrigable land 3.300.000

Actually irrigated 50.000

Forest formations 46.400.000

Parks and reserves 8.800.000

Productive forests 20.000.000

Natural Pastures 12.000.000

Agricultural ResoucesLand uses

Table 1

Table 2. Summary of key caracteristics of agric sector in Mozambique

1999‑2000

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Indicators Kind of agricultural farms Total

Small Medium Big

Nr of agric farms 3.054.106 10.180 429 3.064.715

Cultivated total area (ha) 3.736.619 67.727 120.977 3.925.324

Each agric farms area (ha) 1,22 6,65 282 1,28

% of planted area with food crops 84,4 74,2 7,6 81,8

% de planted area with

commercial crops

4,7 5,1 30,2 4,5

Sustainable development indicators for agriculture

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Description 2001 2002 2003 2004

Agro- animal existing farms 3 064 287 3 127 493 3 209 594

Cultivated area (ha) 3 925 234 4 760 673 4 534 646

Nº of farms that use chemical

fertilizers

84 119 116 337 170 873

Nº of farms that use pesticides 139 260 211 327 171 751

Nº of farms that use irrigation 119 917 337 695 190 808

Wood production evolution (m3) 91 215 130 290 96 271 111 523

Natural Capital in Mozambique: LAND (Forests)

SNA 93 treats planted forest different from natural forest.

Mozambique follows this system.For the planted one, SNA records both production and change in

forest stocks;For the natural, SNA only records the revenue coming from the

timber production and not the change in stocks. Other benefits are not recorded (eg non financial benefits like clean air)

In Mozambique, income generated from natural forests is probably quite large. Both measures provide mercantile and non mercantile goods and

services that are sometimes not recorded

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The Theory: Satellite account struture for the mineral Resources (Depreciation-Apreciation of assets)

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Physycal accounts

Monetary accounts

Stock in the begining X X

Changes in stocks due to - Extraction +New descoveries +Other changes in volume

X X X X

X X X X

Reavaliation ( just for monetary acounts)

X

Stock at the end X X

An Application to Mozambique:

Mangrove coverage

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Physical

accounts (ha)

Monetary

accounts

Stock in 1972 408 079

Changes in stocks

- Degradated area 14 569

+ new areas 2 570

Stock in 1990 396 080

Natural Capital in Mozambique: water resources

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Mozambique has a lot of water data (INE and Environment Ministry).

- Inland water bodies and rivers;- River dams (capacity, flow, principal use, irrigation potential);- Hydroelectric installations (elec capacity, flow, turbine size);- Underground water;- Urban water provision (provision capacity, storage capacity, wells);- Population with water supply;- Daily (drinking) water demand;- Source of water used for households (well, tap, river etc);- Water quality indicators.

- But- Data collection is ad hoc. Not systematic. - Different units of measurement!- Not (yet) in the format of SEEA.

Mineral resources (compilation process in Mozambique)

Up to now, the contribution of mineral resources in very low, but around 1.15% of GDP)

We expect that in the next 2 to 3 years its contribution will double or triple due to the new discoveries and big investments that are being done in the industry.

According to the compliation process, the surplus of mineral extraction is equivalent to the difference between the sales value of the mineral and the cost incurred into the extraction. It ignores the value of resources.

The availability of mineral resources is reduced due to their extraction. The resources are non-replaceable.

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Mozambique produces at large scale the following: natural gas, tantalite(black heavy metal), calcarium and rhyolite

At small scale: gold, tournaline, marine water and quartz

There are some relevant projects in the begining of its life: Heavy sands in 3 areas namely Chibuto, Moma, Moebaseand Mineral Coal in Moatize.

Natural Capital in Mozambique: Natural Resources (Minerals)

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Mineral resources (compilation process in Moz.)

The extraction of minerals implies a reduction in stocks (depreciation of non produced assets)

The monetary value of this loss is not reflected in the owners revenue. But the economic value of this loss should be subtracted from the operating surplus (SEEA, Resource Rent).

Therefore it ignores the value of extracted mineral resources and the depreciation of environmental assets.

For Mozambique, this is a very important issue. GDP (SNA 93) will grow rapidly as a result of these projects. But, is it sustainable (‘true’ growth).

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Some additional indicators for mineral resources satellite accounts

The objective of defensive expenditures is to avoid that activities coming from environmental degradation, such as the installation of anti polluents equipments are seen as any add to the national wealth.

Environmental expenditures refer to the amount that the country should pay to avoid degradation by maintaining the environment intact

The reduction in stocks is seen as a Depreciation of natural capital, if there is an addition in stocks it is an appreciation. The difference between the final and inicial stocks implies loss or gains in the natural patrimony

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Supply table for emissions by industries

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Emissions

E Ind. An g Residuale Proc. rr ig cy

(Gg)

CO2 1534 51 - 7680 9265

CH4 0 - 195 3 74 272

N20 1 - 2 - 0 3

NOX 36 - 58 1 0 95

CO 1360 3378 25 0 4763

Total 14398 83 14481

Land and Forest Use Change

total

industries

International Transport

Total

83 83

Tentative supply and use table for emissions

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Emissions(Gg) Kerosene GPL Firewood Charcoal Jet KeroseneAVGAS Gasoline Diesel TotalCO2 147,220 5,760 27,280,590 558,690 72,200 2,890 0.620 7,240 28,067,351

CH4 0 0 0 0 0 0 0 0

N20 0 0 1,040 0.005 0 0 0 1,040

NOX 0 0 0.520 26 0 0 0 26.520

CO 0 0 133,640 0 0 0 0 133,640

Total 147,220 5,760 27,415,271 558,716 72,200 2,890 0.620 7,240 28,202,057 ROW TotalKerosene 45,981.49 45,981.49GPL 1,954.00 1,954.00Firewood 1,000,000.00 1,000,000.00charcoal 200,000.00 200,000.00Diesel 2,297.0 2,297.00Gasoline 200.0 200.00Jet Kerosene 22,664.31 22,664.31

AVGAS 878.96 878.961,273,975.76

Type of product (domestic) Type of product (RoW)

consumption ( tn)

Conclusion

• Mozambique uses SNA 93, but growth would appear very differently if SEEA used.

• In Mozambique there is not an institution that claims for the ownership of environmental satellite accounting.

• According to what we have in terms of availability of data, it is possible to compile a satellite account for some areas: forests, mineral resources, agriculture (land), water.– The results we have presented here were not assessed, so we need

inputs in order to improve it.

• Due to the lack of systematic data on yearly basis, for some sectors it may be difficult to compile environmental adjusted

GVA.

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