Inside this issueThe economyThe country’s potential is stilllargely untapped, writesDavid White Page 2

CorruptionTensions mountedwhen donorsdelayed aid dueto concernsaboutgovernancePage 2

PoliticsThegovernmenthas been

accused of rigging elections, saysRichard Lapper Page 3

Coalrush Brazilian, Australianand Indian companies have

poured hundreds ofmillions of dollars into coalfields at TetePage 3

More on FT.comRead about foreign

investment,tourism and

architecture atwww.ft.com/mozambique­2010

MOZAMBIQUEFINANCIAL TIMES SPECIAL REPORT | Tuesday June 22 2010

www.ft.com/mozambique­2010 | twitter.com/ftreports

Bid to shake off dependence on aid

Maputo still has asleepy down-at-heelcharm, with its artdeco houses, crum-

bling concrete apartment andoffice blocks and usually con-gestion-free streets. Yet the nos-talgic 1970s feel might not lastmuch longer. A new bridge tolink the downtown area ofMozambique’s capital with Cat-embe across the river Tembeand a new road to the SouthAfrican border at Ponta de Ouroare among a clutch of projectsplanned by the government as ittakes advantage of surginginterest in the country’s abun-dant land, coal, gas and mineralreserves.

These developments raise theprospect that one of Africa’spoorest and aid-dependent socie-ties may reduce and eventuallyeliminate its dependence on for-eign assistance.

“We have to go faster,” AiresBonifacio Ali, the country’sprime minister told the Finan-cial Times. Mr Ali argues thatthe drive to improve infrastruc-ture – including a new roadsfrom the southern border toCabo Delgado in the remotenorth – is “crucial” if the coun-try is to free itself from theclutch of overseas donors.

“If we have good roads andgood communications it will beeasier to improve agriculture.Our dream is to connect ourcountry from north to south.”

Mr Ali is building on solidprogress in a number ofrespects. Political stability hasbeen established since the endof the civil war in 1992.

The country remains bitterlypoor but it has advancedsocially. “There have been goodimprovements in reducing childmortality and access to schools.There has been a significant

catch-up from such a low base,”says one foreign diplomat.

What is more, Mozambique’seconomy – opened in the mid-1980s through a series of mar-ket-friendly reforms – has grownrelatively quickly. Felix Fischer,the local representative of theInternational Monetary Fund,says that since 1992 Mozam-bique’s economy has traced agrowth path similar to that ofthe Asian tiger economies in the1970s and 1980s.

The Mozal project, a pioneer-ing aluminium investment dealwith BHP Billiton, the interna-tional mining group, has helpedestablish Mozambique’s reputa-tion among foreign business.Foreign investment has risen

rapidly, climbing from $107.8min 2005 to $881.2m in 2009. Abouthalf the funds have beendirected into so-called mega-projects centred on gas, tita-nium, forestry and coal.

The coal investments – basedin the northern province of Tete– are particularly important,with Vale, the world’s largestiron ore miner, and Riversdale,an Australian company, inwhich Tata Iron and Steel ofIndia and CSN of Brazil ownrespectively 35 per cent and 16per cent stakes, both preparingmulti-billion dollar funding.

Long-term demand from steelcompanies (for coking coal) andpower plants in Asia (for ther-mal coal) makes these projects

especially attractive, and bothVale and Riversdale are plan-ning significant investments intransport and port infrastruc-ture, opening two corridorsfrom the province to the coastat Beira and Nacala.

Both companies also haveplans to build coal-powered gen-erating plants, which would selltheir product in neighbouringelectricity hungry South Africa.Separately, Mozambique hasplans to build a new hydro-elec-tricity plant downstream fromthe existing Cahora Bassa planton the Zambesi.

The country’s reputation as apower producer and exportercould be further enhanced ifsome of the proposed $2bn plus

foreign investments in bio-fuels,many of which are based on theconversion of a grass called jat-ropha into bio-diesel, come tofruition.

Ris ing demandfrom China, India, Bra-zil and South Africa seems setto increase the importance ofthese comparative advantages.But the challenge for Mozam-bique will be to ensure that theprofits generated are ploughedback into national developmentrather than siphoned off abroad.

Critics suggest that the coun-try needs to increase theamount it obtains in tax reve-nue from these large invest

Richard Lapperreports on efforts toensure big foreignprojects lead to solideconomic development

Changing skyline: a clutch of building projects raises the prospect that one of Africa’s poorest societies may reduce, and eventually eliminate, its dependence on foreign assistance Alamy

Continued on Page 2

2 ★ FINANCIAL TIMES TUESDAY JUNE 22 2010

Mozambique

Bid to shake off dependence on aid

ments. Mozambique issteadily increasing its taxbase, with revenues sched-uled to rise from currentlevels of about 18 per centof gross domestic productby an annual average ofabout 0.5 per cent of GDP.

But even though tax holi-days were less generousand other terms and condi-tions tighter than thoseoffered to BHP Billiton, thegovernment recognises thatthe big foreign investorsthat have ploughed moneyinto “mega projects” needto contribute a bigger shareof tax revenue. “We do needto get more money from theprojects,” says Mr Ali.

That stance is supportedby the multilateral agen-cies. Mr Fischer says thatwhen the Mozal investmentwas made “no one knewwhether the country wouldhold together. They had tosend de-mining teams intothe compounds. It is a bigasset and they are stillthere, performing well . . .but I wish they were con-tributing more”.

“If you keep changingthe rules you lose credibil-ity but in this case the IMF,the World Bank, the donors,the markets, everybodyagrees the projects must berenegotiated,” says CarlosNuno Castel-Branco, direc-tor of the Institute forSocial and Economic Stud-ies in Maputo.

Another priority is toensure that the big invest-ment projects are linked tothe development of thelocal economy. The govern-ment is encouraging thedevelopment of infrastruc-ture in a number of corri-dors, running east and westand north to south.

But it faces a number ofdifficulties in creating amore vibrant local capital-ism. The country has a veryweak tradition of businessdevelopment.

As Tende Onitiri, countrymanager at the Interna-tional Finance Corporation,the private sector arm ofthe World Bank, puts it:“Companies are not regis-tered or audited and theyhave very serious problemswith managerial capacity.

There is no real entrepre-neurial history.”

Some of the big investorshave begun to buy servicesfrom local companies or aretraining local workers. Butthe extent of this develop-ment is limited, partlybecause the projects tend tobe capital intensive.

Omar Mithá, chief econo-mist at Millennium BIM, alocal bank. says Mozam-bique’s underdevelopmentcan make the process ofestablishing such “link-ages” complicated in unex-pected ways.

“Companies won’t employwelders that don’t have pro-fessional certification butthere is no professionalinstitute in the country,” hesays, citing one example.

Mr Ali says that a short-age of credit has under-mined the formation ofsmall and medium sizedcompanies. In order to rec-tify this he is hoping laterthis year to complete a dealwith the Portuguese state-owned Caixa Geral deDepósitos to form a $1bninvestment bank that wouldoffer funds to local business.

ContributorsRichard LapperSouthern Africa BureauChief

David WhiteFormer FT Africa Editor

Stephanie GrayCommissioning Editor

Steven BirdDesigner

Andy MearsPicture Editor

For advertising details,contact:Mark Carwardine on:+44 (0) 207 873 4880;e­mail:mark.carwardine@ft.comor your usualrepresentative

Another issue that com-plicates this is the prepon-derance of the state in anumber of economic activi-ties and apparently grow-ing connections betweenthe ruling party and localbusiness. Mr Onitiri saysthat, under the currentadministration, he has“seen more and moreprojects that have Frelimoinvolvement”.

The prime ministerrebuffs such criticismsarguing that since “mostpeople in Mozambique arein Frelimo” and “somemembers of Frelimo havebusinesses” it does notmake sense to prohibitpolitical involvement inbusiness. “We are trying tomobilise people to beinvolved in economic activ-ity.”

That may make themultilaterals and inter-national donors wary,but Mozambique knowsthat such is the scale andquality of its coal and othernatural resources means itwill continue to be a focusof overseas investmentinterest.

Continued from Page 1

Donors press concernsover embezzlement

Effort to speedup pace ofdevelopment

Western donorsneed successstories inAfrica to jus-

tify their efforts and, for 15years or more, Mozam-bique’s economic perform-ance has fitted that require-ment. Since the country’srecovery from civil warbegan in 1993, it has hadone of the continent’s besttrack records, with growthaveraging about 8 per centa year. But the question anumber of internationalofficials and economists askis whether, given all thefunding flowing into thecountry, it should havebeen growing even faster.

Amid concern about aloss of momentum, the gov-ernment and internationalfunders have been lookingat ways of stepping up thepace. For the first timesince Mozambique emergedfrom successive debt reliefprogrammes in the mid-2000s, the government isconsidering turning to non-concessional borrowing towiden its access to finance.This would mark a depar-ture for a country that hasremained one of the mostaid-dependent in Africa.

The record of compara-tively strong growth hasbeen partly a matter ofpost-war catching up from alow starting point. But thecountry’s potential, withoutstanding naturalresources, mostly unusedfarmland, its Indian Oceancoastline and its privileged

position on South Africa’sdoorstep, is still largelyuntapped.

Mozambique showedremarkable resilience in theface of oil and food pricerises in 2008 followed by thesecondary effects of the glo-bal financial and economiccrisis. In the rest of sub-Saharan Africa averagegrowth slowed sharply lastyear, to barely 2 per cent.But although Mozambiquesaw its trade balance deteri-orate, growth suffered onlya small reduction from 6.7per cent to 6.3 per cent.

This year the governmentexpects the rate to return tobetween 6.5 per cent – theInternational MonetaryFund’s prediction – and 7per cent.

Last year’s relativelystrong growth was achievedat the same time as the low-est inflation of recent years– an annual average of 3.3per cent. Prices haverecently accelerated, partlybecause of the lifting oftemporary fuel subsidies,but officials are confident ofkeeping the average for theyear within single digits.

The government is wor-ried about the possibleknock-on effects from theturmoil in sovereign debtmarkets, which could affectsupport from partners suchas Spain and Portugal. Inany case, it aims to reduceits reliance on aid by boost-ing its own revenues.

Its target is to raise theseannually by 0.5 per cent ofgross domestic product tobring them into line withthe rest of the region. Overthe past four years, officialssay, it has achieved morethan double the targetincrease, lifting revenuesfrom 13.8 per cent to 18.4per cent of GDP. This hasbeen done by modernising

the tax system, improvingcollection and widening thetax base, with a simplifiedsystem for small taxpayersdesigned to bring in peoplefrom the informal economy.

Despite recent tensionswith donors over govern-ance, Mozambique is set torenew its arrangement withthe IMF for a second three-year period. The so-calledPolicy Support Instrument,which the IMF has negoti-ated with several Africangovernments, does notinvolve Fund financing butis seen as an important sig-nal for donors and investorsand an insurance policyenabling the government togain access to contingencyfunding if necessary, as itdid last year to cushion theimpact of the global down-turn.

Although the governmenthas raised investmentspending, there are stillyawning gaps, particularlyin rural infrastructure. The

economy is narrowly based,highly dependent on alu-minium exports, with lowproductivity in most of itsagriculture, which involvesthree-quarters of the popu-lation. The number of for-mal jobs is not keeping upwith the number of newarrivals on the labour mar-ket, while the number ofskilled people is notincreasing as fast as isrequired on new projects.Credit to the private sector

has been expanding apace,but small companies facehigh borrowing costs. Cov-erage by the main bankinggroups has improved, butfewer than half of the coun-try’s 128 districts have asingle bank branch.

Steps have been taken tosimplify procedures such aslicensing and bankruptciesand a single-window systemhas been set up for com-pany registration. Fiscalbenefits for investmentswere standardised last year.But Mozambique is stillconsidered to be as bureau-cratic as any country insouthern Africa.

The World Bank’s latestindicators on the ease ofdoing business rankedMozambique 135th out of183 countries. This was fourplaces better than the previ-ous year, but poor com-pared with others in theregion.

To scale up investment inareas such as transport, thegovernment is looking atnew financing options. Debtrelief has reduced foreign

debt to about 38 per cent ofGDP, compared with 95 percent in 2005. Since this isoverwhelmingly on softterms, the cost of servicingpublic external debt is onlyabout 2 per cent of exports.

The IMF has nudged thegovernment towards a pru-dent and gradual approachto non-concessional borrow-ing. Isabel Sumar, directorof research at the financeministry, makes clear: “Atthe moment there is noscope for sovereign bonds.”

However, the governmentwants to tap the non-con-cessional lending windowsof the World Bank and Afri-can Development Bank, andis looking at the possibilityof mixed credit deals withcountries such as India andBrazil. Ms Sumar says thesewould only be used forprojects that promise imme-diate returns.

This prospect has to beset against a generally unfa-vourable climate for projectfinance in Africa, affectedby risk aversion and higherglobal credit costs. The gov-ernment and the IMF haveagreed on a manageablenon-concessional borrowinglevel of about $900m overthe next three years, start-ing with $200m this year,strictly limited to commer-cially viable investments.For other investment needssuch as health and socialprogrammes, Mozambiquewill remain heavily relianton aid.

The economyDavid White findsyawning gaps,particularly inrural infrastructure

The Centre for Public Integ-rity (CIP), an anti-corrup-tion organisation, could nothave picked a more appro-priate setting for its newoffices, just across thestreet from the party head-quarters of Frelimo, thenucleus of power in Mozam-bique.

The organisation, fundedby five European countries,seeks to increase transpar-ency and close legal loop-holes that allow self-enrich-ment by the politically well-connected. The scale of cor-ruption and abuse of influ-ence, and the extent towhich the authorities aredealing with them, are mat-ters on which the govern-ment and donors havesharply differing percep-tions.

Tensions escalated whena number of donors delayeddecisions on aid disburse-ments for this year untilthey obtained satisfactorycommitments on a range ofgovernance concerns.

Marcelo Mosse, CIP’sexecutive director, saysscope for pressure fromwithin the country is lim-ited. A former journalist, hedeplores the scarcity ofindependent media to inves-tigate and expose high-levelmisconduct. “This is a bigdilemma in Mozambique,”he says.

The so-called “donors’strike” involved the groupof 19 multilateral and bilat-eral donors that providedirect budget support andwanted to make the pointthat aid should not be takenfor granted.

Their leverage was less-ened by the fact that theWorld Bank, the biggestbudget support provider,had already paid its $110mcontribution, and by theunlikelihood that theywould agree on any drastic– and potentially destabilis-ing – cut-off of aid.

But they presented aunited front in pressingtheir concerns, which alsorelated to the electoral proc-

ess and the blurring of dis-tinctions between Frelimoand the state.

The US, the biggest bilat-eral donor but not involvedin direct budget support,also called into questionwhether Mozambiqueshould qualify for increasedaid. A three-month stand-offended in March with aseries of governmentpledges, including a tighten-ing of legislation regardingconflicts of interest and thedeclaration of assets.

Under existing rules,high-ranking officials mustdeclare assets to the Consti-tutional Council, but thecouncil’s job is simplyreceiving and keeping thedeclarations, not openingthem to inspection. “It isjust symbolic,” Mr Mossesays. Manuel Chang,finance minister, was theonly senior figure to makehis declaration public.

However, reforms follow-ing a new anti-corruptionlaw in 2004 have made

progress in tackling abuses,with many more prosecu-tions. The attorney-gen-eral’s office was shaken upthree years ago and anexperienced prosecutor,Ana Gemo, appointed tohead the Central Office forthe Fight against Corrup-tion (GCCC).

The first high-level con-victions came in February,when António Munguambe,a former transport minister,was sentenced to 20 years’imprisonment for his role ina scheme to siphon offmoney from the state air-ports company, alongsidethe company’s chief ecutiveand finance director. Alm-erino Manhenje, a formerinterior minister, also facescharges at the supremecourt.

Ms Gemo says more than1,500 cases have been inves-tigated in the past threeyears. Up to last December140 people were arrested forcorruption and 85 forembezzlement of statefunds or property. However,

Mr Mosse says the GCCC’spowers need to be rein-forced and laws overhauledto include the classificationof illicit enrichment as acriminal offence.

Transparency Interna-tional, the Berlin-basedwatchdog, puts Mozam-bique in 130th place out of185 countries in its corrup-tion perceptions index,alongside the likes ofNigeria and Libya.

Households routinelyhave to pay bribes to policeor for access to public serv-ices, and businesses saykickbacks on procurementcontracts are commonplace.Mozambique is not thoughtto be prone to grand corrup-tion on the dimensions of,say, Kenya, but concernfocuses more widely on theuse of position for personalgain.

The US has also made alink between élite corrup-tion and narcotics traffick-ing. Early this month, Pres-ident Barack Obama putMohamed Bachir Suleman,a high-profile businessmanand overt Frelimo financialbacker, on the US list ofdrugs barons.

Officials say opportunitiesfor large-scale scams arelimited, since donors areinvolved in most big infra-structure projects. Interna-tional partners recognisethat reforms in publicfinancial management havebrought dramatic improve-ments, with electronic con-trol systems reducing thescope for misallocation offunds.

Mr Mosse accepts this,but says it is only partlytrue since there is stillroom for manipulation andnepotism in public con-tracts.

With a growth in miningprojects and oil prospecting,Mozambique last yearbecame a candidate for theinternational ExtractiveIndustries TransparencyInitiative (EITI), one ofabout 30 countries in thisprocess, undergoing a two-year validation phase.

“Within five years,income from naturalresources will multiply,”says a diplomat in Maputo.“Before this happens, thereshould be structures inplace to govern how thisincome is used.”

CorruptionDavid White onmixed results ineliminating graft

Police presence: 1,500 cases of corruption been investigated in the past three years Alamy

The record ofstrong growth hasbeen partly amatter of post­warcatching up from alow starting point

AlmerinoManhenje,ex­interiorminister,is facingcharges

Small axe: agriculture suffers from low productivity Reuters

FINANCIAL TIMES TUESDAY JUNE 22 2010 ★ 3

Experience of Marxist government feeds sense of surreal

Mia Couto has made hisreputation as a novelist, butprefers to describe himselfas a poet who tells stories.

His tales are told in a dis-tinctive idiom, bringing inelements of Mozambique’spredominantly oral cultureand peppered with inventedproverbs, riddles, legendsand fables.

While the country’s 16-year-long civil war and itsconsequences form thebackdrop to many of hisstories, he says his books

are not really about thewar, but about humantraits that can be revealedin extreme situations.

One of the foremost writ-ers from Portugal’s formerAfrican colonies, he hasgained growing interna-tional recognition, and hisbooks have been translatedinto more than 20 lan-guages. But while he hasreached the point where hemight earn a living solelyfrom book royalties, he sayshe also loves his othercareer – as a biologist.

Having been a universitylecturer and researcher, heruns a consultancy carryingout environmental impactassessments. An unassum-ing man, he chats in Eng-lish in his Maputo officeabout his development as awriter, coinciding with the

beginnings of Mozambique’shistory as a nation. Now 54,he was turning 20 at inde-pendence.

He was born and grew upin Beira, Mozambique’s sec-ond city, where his parentsmoved to from Portugal.

His father, a railwayadministrator, has alsobeen a poet and journalist.But it is more to his motherthat Mia Couto – who useshis childhood nicknamerather than his real nameAntónio Emílio Leite Couto– traces his talent for spin-ning stories. He had hisfirst poems published at 14.

At the time of thebuild-up to Portugal’s 1974revolution, which led toMozambican independencethe following year, he was amedical student in the capi-tal, Maputo (then called

Lourenço Marques), and anactivist for the Frelimo lib-eration movement. At Fre-limo’s request, he ditchedhis studies temporarily tobecome a journalist. “Forme it was a dream, servingwith guerrilla forces,” herecalls. But the ideals of theperiod were a far cry fromthe poverty of today.

“We were fairly naïve,”he admits. “I had a verysimplified idea of the world,what it was possible to do.”The dream evaporated withthe shock of his first visit tothe Soviet Union and EastGermany.

He became director of thenewly founded MozambiqueInformation Agency, ran aweekly and later edited thegovernment newspaper,Notícias.

The experience of Marxist

government in Mozambiquefed his sense of the surreal.He was given a card givingaccess to a special shop forthe ruling party élite. “Thespecial shop just had twothings to sell: toilet paper,which we probably didn’t

need at the time [we hadnothing to eat], and liquidsoap to do the dishes [butwe had no dishes to clean].”He gave back his card.

He is now distanced fromFrelimo, still the over-whelmingly dominantparty. “They pretend I don’t

exist, and I pretend theydon’t exist.”

He has published 22books – collection of poems,volumes of short stories,novels, essays and chil-dren’s books.

As a white Mozambican,he sees himself as belong-ing to a mix of cultures.The characters he createsare mostly black.

Ranging from the comic tothe lyrical, his writing has adream-like quality, drawingthe reader into sometimesfantastical stories, in whichmythical and real worldsoverlap and the supernatu-ral is interwoven with ordi-nary events. “There’s nosuch thing as realism inMozambique,” he says.

His narratives, whilecarefully structured, have aflavour of spontaneity,

brought out by surpriseeffects.

One early short storystarts, irresistibly, with thesentence: “Suddenly, the oxexploded.”

Although the comparisonis frequently made, he doesnot much like being lumpedtogether with Spanish-American novelists such asGabriel García Márquez andIsabel Allende under thetag of “magical realism”.

He feels closer affinitywith Brazilian writers ofthe last century, such asMário de Andrade and JoãoGuimarães Rosa, who brokefrom Portuguese literarynorms to find a specificvoice.

“They also have this con-dition of being fromanother culture, using thelanguage of another culture

and wanting to express thedifferences within the lan-guage.”

His favourite among hisown works is his débutnovel Sleepwalking Land,published in 1992, the yearthe civil war ended.

It is about an old manand a boy who take refugein a burnt-out bus, with asecond story-line from adiary account in notebooksthat they find next to acorpse, telling of the searchfor a lover’s lost son.

All his writing reflects hisattachment to his country.He has no desire to branchout and use different set-tings for his fiction.

“If I were to live fromnow on in Russia, or some-where else,” he says, “Iwould always write aboutMozambique.”

Mixed resultsin povertyrankings

You do not have to travelfar from the buzz and build-ing works of Maputo beforeyou are in a different world,on the edge of the monetaryeconomy.

Marracuene, the next dis-trict to the capital goingnorth along the coast, is anarea dotted with cashewtrees and cassava plots,where smallholders livebarely above subsistencelevel, growing the staples ofmaize and vegetables andmaybe keeping a couple ofoxen. People mostly scratchan income from selling anysurplus, wood cutting or insmall-time commerce.

Alberto Fumo, local co-or-dinator for the UK-basedcharity ActionAid, sees rea-sons for optimism, though.Public spending in the pastfew years has broughtmany more children intoschool, and more healthfacilities. The agency isinvolved in several pro-grammes in the area, ineducation, women’s rightsand food production, chan-nelling funds into localcommunities from the spon-sorship of children throughits Spanish branch.

“A lot of things haveimproved,” he says. Butschools, which are free atprimary level, often have 50or more to a class and notalways enough seating.There are only two second-ary schools, both small andunder-equipped, for a com-munity of about 70,000 peo-ple, and many families can-not afford transport to getto them. Poor water supplyis a ubiquitous complaint.Although there are othermedical staff, the area isserved by just two doctors.

Since 1990, when war-damaged Mozambique stoodalmost at the bottom of theUnited Nations humandevelopment rankings, itsprogress has been contra-dictory. It comes out as thecountry that has mostimproved its score in theindex, revised annually bythe UN Development Pro-gramme. But at the sametime, there are still only 10countries below it, out ofthe 182 listed. Its indexscore, at 0.402, is half thestandard of countries suchas Peru and Colombia.

There are signs that thereduction in poverty hasslowed in recent years,despite sustained economicgrowth. Official datashowed a sharp fall in thepoverty rate from 69 percent in 1997 to 54 per centin 2003. But results from thelatest household survey,due out in October, areexpected to show littledecrease since then.

The rate is higher in thecentre and north than thesouth, and disparitiesappear to be growing. Thegap between the privilegedurban class and the ruralpoor is also becoming moreaccentuated. Recurrentflooding and droughtsendanger rural livelihoodsand food security. Onlyabout half the populationhas regular access to publichealth services, accordingto the World Health Organi-

sation, and fewer than halfof adults can read andwrite, the lowest level insouthern Africa.

The government hasgiven priority to education,to which it devotes a fifth ofits annual budget. This hasachieved a sharp increasein school enrolment andteacher numbers, butdonors express concernsabout the quality of educa-tion received. Many schoolsoperate on three shifts dur-ing the day, and the ratio ofpupils to teachers at thefirst level of primaryschool, according to theeducation ministry, is 69 toone.

Progress towards meetingthe UN Millennium Devel-opment Goals, set 10 yearsago, has been mixed. Thecountry is clearly off trackfor reaching the main head-line goal of halving the pro-portion of people in extremepoverty by 2015 comparedwith 1990 levels.

But, according to the lat-est assessment by theOrganisation for EconomicCo-operation and Develop-ment and the AfricanDevelopment Bank in theirannual African EconomicOutlook, it is on course toachieve universal primaryeducation and to meet tar-gets for reducing child mor-tality, and has performedwell on maternal health.

On the other hand, it isamong the countries judgedto be “regressing” in thefight against HIV and Aids.According to the NationalStatistics Institute, overall

prevalence in the popula-tion between the ages of 15and 49 is 14 per cent. Butfor men in their 30s in thesouth of Mozambique –neighbouring South Africaand Swaziland, two of thecountries worst affected –the rate is more than one inthree.

Mozambique has rankedconsistently among thelargest recipients of devel-opment assistance inAfrica, especially on a percapita basis, and has longbeen a favourite of donors.It was among the first coun-tries to receive aid in theform of direct budget sup-port, which accounts for aquarter of total assistance,with $472m pledged thisyear.

Government investmenthas concentrated onimproving basic infrastruc-ture. But new or upgradedroads, railways and portsare under-utilised. As inmost other African coun-tries with predominantlyrural populations, there hasbeen little success in rais-ing the productivity ofsmall farms as a means ofovercoming poverty.

In Marracuene, there isno irrigated agriculture,and fertilisers are consid-ered too costly. AlbertoMatine, president of a localsmallholders’ co-operative,sees numerous barriers to amore commercial kind offarming. “The central prob-lem,” he decides, “is a lackof means.”

Fewer than halfof adults canread and write,the lowest levelin southernAfrica

Too much power in Frelimo’s hands

Leaving colonial Mozam-bique to attend universityin Portugal in 1958, JoséOscar Monteiro remembersbeing much impressed byBrazil.

“All the talk was that weshould have a society likeBrazil, where racial divi-sions and tensions weremuch less,” says Mr Mon-teiro, who when he arrivedin Lisbon became one of theearly members of the Frontfor the Liberation ofMozambique (Frelimo).

Subsequently the younglawyer went through amuch more radical phase,fully supporting the libera-tion movement’s armedstruggle and its “more pro-gressive vision” of being“part of liberating thewhole of southern Africa”.

But half a century on and

with Frelimo grapplingwith the complex realitiesof governing and develop-ing Mozambique, Mr Mon-teiro has in a sense comefull circle.

The former minister, whois still an active member ofFrelimo, is again a big fanof Brazil and in particularof the relatively open eco-nomic policies and prag-matic reform championedby its socialist president,Luiz Inácio Lula da Silva.

“We have a lot to learnfrom Brazil, especially howthey took care of poverty,”says Mr Monteiro, an aca-demic and internationallyrenowned expert in publicadministration..

Brazil-style pragmatism iscertainly one influencewithin Frelimo.

Since forging a peaceagreement with the armedright-wing rebels of theMozambican NationalResistance (Renamo) in1992, the governing partyhas operated within a mul-ti-party democracy, retain-ing office through elections.

For an even longerperiod, Frelimo govern-

ments have encouraged theprivate sector and beenopen to foreign investment,offering generous incen-tives to multinational com-panies to establish subsidi-aries in Mozambique.

At the same time, how-ever, Frelimo has notescaped the influence ofMarxist-Leninism, whichtook hold of the movementduring the long fightagainst Portugal, SouthAfrica and their interna-tional allies.

Although previous elec-tions have been fair, lastyear the ruling party wascriticised for stopping anewly formed oppositionparty, the DemocraticMovement of Mozambique,from contesting polls innine of 13 constituencies.

Indeed the vote wasmarred by numerousreports of vote-rigging andlack of transparency.

International donors wereso angry about the issuethat they suspended aid dis-bursement earlier this year,only resuming support afterthe government had agreedto give the new party’s MPs

powers to initiate legisla-tion and sit on legislativecommittees.

And although relationswith foreign investors aresmooth, the donors are alsoconcerned about the way inwhich senior leaders of Fre-limo control the statemachinery and havebecome directly involved inprivate business.

Tolerance or complicityin such high-level corrup-

tion makes it more difficultto develop transparent andaccountable administrationand directly contributes topetty corruption by mem-bers of the civil service andpolice force, critics argue.

Mr Monteiro accepts thatthere are difficulties, argu-ing that the autocracy oftraditional tribal culturehas sometimes clashed withFrelimo’s efforts to promote

wider social participation.“The cult of personality

and authoritarianism hasbeen a problem,” he says.

“People tend to say, ‘don’tforget the boss is the boss’.There has been a tendencyto short circuit discus-sions.”

The origin of Renamo hasbeen an additional problem.

Originally funded byapartheid South Africa, itsfighters were guilty ofhuman rights atrocities dur-ing the bitter civil war, arecord that has bred dis-trust and made it difficultto build confidence.

“Renamo poured fire intothe cracks,” says Mr Mon-teiro.

“They were an artificialcreation and should haveused the period of democ-racy to change themselvesradically.”

Renamo has declined inrecent years.

Its vote has steadily fallenfrom more than 2m in 1999to 900,000 in 2004 and toeven less than that in lastyear’s elections. “Peopledon’t trust the party anymore,” says Mr Monteiro.

But that has not necessar-ily been a positive thing forMozambican democracy.

Nor has the controversysurrounding the MDM,formed by Daviz Simango,the charismatic mayor ofBeira, helped improve thepolitical system.

True, Frelimo now domi-nates the assembly to anunprecedented extent.

But as Mr Monteiro putsit: “The size of the victoryhas created big expecta-tions. It is not normal. It istoo much. Too strong powerisn’t that good.”

He says that Frelimo is“making a big effort to openitself up. We realise wehave been something of afamily”.

And he says that thegoverning party wouldwelcome the emergenceof a healthy responsibleopposition, especially ifthat were to be nationallyrather than regionallybased.

But “what form thatopposition will take I do notknow. Our role [as Frelimo]is not to create the opposi-tion”.

PoliticsRichard Lapperfinds multi­partydemocracyfraying at the edges

Immigrantsf lood intocoalrushbackwater

Not so long ago, Tete wasan archetypal backwa-ter. Remote, dirt poorand in the summer

months unbearably hot, the townthat started life as a Portuguesetrading post on the banks of theZambesi attracted few visitors.During Mozambique’s long civilwar, right-wing guerrillas control-led much of the surroundingcountryside, blocking supplies offresh food and increasing the iso-lation of its inhabitants.

Yet today, Tete is booming.Brazilian, Australian and Indiancompanies have poured hundredsof millions of dollars into nearbycoalfields, attracted by some ofthe world’s best and most valua-ble reserves of coal. Earlier thisyear, trains ran from the port ofBeira to nearby Moatize for thefirst time in 25 years and inves-tors are planning other hugetransport projects to get their coalto market.

Rural immigrants have floodedinto the town to take advantageof job opportunities, increasingTete’s population threefold tomore than 300,000 over the pastdecade. Property prices have risensharply, with rentals on theupmarket accommodation soughtby company technicians, geolo-gists and engineers more thandoubling in the past 12 months.

Small businesses – from barsand hotels to computer consult-ants and accountants – are spring-ing up all over the city. “It is likea snowball,” says Mário Salemo,the owner of a bar much favoured

by the foreign professionals. “Itwas a city without expectations.Now everyone wants to comehere.” Or as César de Carvalho,president of the city’s municipalcouncil, puts it: “Tete has becomean economic reference point forthe whole of Mozambique.”

All of this is happening evenbefore coal is being mined. Vale,the Brazilian mining company,expects to start production fromgiant open pits later this year.Riversdale, an Australian com-pany in which Tata Iron and Steelof India and CSN, the Braziliansteelmaker, have respectively 35and 16 per cent stakes, will followsuit next year. And at least threeother companies – including twofrom India – are waiting in thewings.

The coalfields to the north con-tain plentiful supplies of thermalcoal – used in power plants – andharder and more expensive cok-ing coal, which is mixed with ironore to produce steel. Breakneckindustrial growth in China, Indiaand Brazil means both varietieswill find ready markets. In addi-tion, both Vale and Riversdale areplanning to build and supply theirown coal-fired power plants,which will then export electricityto power-hungry neighbouringSouth Africa.

Riversdale says it has at least13bn tons of coal in two conces-sions. Vale has been more modestin its estimates, but industrysources and diplomats in Maputosay the real amount of coal bothimmediately north of Tete andslightly further afield is very sig-nificant indeed, amounting to theworld’s most significant discoveryof coal since production began atthe Bowen Basin in Queensland,Australia in the 1960s.

To get the coal to market,though, is going to require signifi-cant investment in infrastructure.Vale plans to build an entirely

new railway and new port atNacala, north of Beira – a schemethat mirrors developments thecompany has put into place inBrazil, linking Amazon iron oremines to the Atlantic coast. Riv-

ersdale is talking about new portfacilities.

Already, Tete’s road and hous-ing infrastructure is comingunder intense strain. The 1950ssuspension bridge that links thetown with the coalfields has been

under repair for months, addingto congestion with long queues ofmini-buses and heavy lorriessnaking around narrow streets atall hours of the day and night. MrDe Carvalho says plans are afootto build a second bridge over theriver to the east but admits thatthis could take some time.

All this increases the potentialfor social frictions that havealready been evident. For exam-ple, a few hundred subsistencefarmers displaced from their landby Vale into new model villageshave complained about their con-ditions and a lack of consultation.What is more, although the newmines will provide thousands ofnew jobs, demand for work is setto exceed supply and wages arelikely to be low.

Selma Joaquin Arraujo, 22, isglad to have found work at Riv-

ersdale as an assistant stonemason, but she complains thather wage of M2,500 – about $80 – amonth is barely enough to feedherself, let alone her jobless par-ents and siblings. “Life is gettingbetter because of all the compa-nies that are coming into thetown, but the money really isn’tenough,” she says. “It is veryhard.”

According to some critics, theMozambique government shouldbe doing more to plan things.“Some Chinese bankers visitedrecently and were really excitedabout the potential but they wereall amazed that there is not moreco-ordination,” says one westerndiplomat based in Maputo, whoknows the area well. “They saidthe authorities should have hadroads and railways in place longago.”

TeteRichard Lapper reportsfrom a town whosepopulation hassuddenly risen threefold

Boom town: more than 300,000 immigrants have arrived, putting infrastructure under intense strain Getty

Small businesses, frombars and hotels tocomputer consultantsand accountants, arespringing up over city

Social policyDavid White looksat a widening gapbetween urban richand rural poor

Novelist Mia CoutoDavid Whitelistens to theguerrilla fighterturned writer

‘[Frelimo is]making abig effortto open up’,says OscarMonteiro

Mozambique

‘For me, itwas a dream,serving withthe guerrillaforces,’ saysMia Couto

4 ★ FINANCIAL TIMES TUESDAY JUNE 22 2010