The study ‘Diagnostic Framework for Mozambique’s Growth’ by the London School of Economics and Political Science (LSE), in coordination with the government and funded by the United States Agency for International Development (USAID), concludes that the lack of infrastructure, specifically roads, is limiting the diversification of the country’s economy.
The study published weeks ago by the Ministry of Economy and Finance (MEF) on the diagnosis of Mozambique’s growth reveals that the growth of the economy is limited by different challenges, mainly road infrastructure, which is considered deficient.
‘These deficiencies, especially in rural areas, increase transport costs, which limits the ability of farmers, national companies and major investors to access national and foreign markets and to develop upstream and downstream links along value chains,’ the document states.
The research goes further by stating that excessive bureaucracy and poor regulatory quality create a turbulent business environment, increasing costs for existing and new companies.
‘Access to land is complex, with difficulties in registering and transferring rights, undermining private investment and sustaining corrupt practices. The lack of coordination between government institutions harms the business environment and trust in government. Testimonies highlight overlapping responsibilities and ineffective policy implementation,’ the experts explain.
Road destroyed by rain
Although human capital is not an immediate challenge, the study proposes improvements in education for long-term economic diversification. ‘Labour regulations, including employment quotas for foreign companies, create challenges in hiring qualified foreign workers, affecting foreign investment,’ says the study.
Furthermore, for the experts, despite the macroeconomic challenges, such as controlled inflation and reasonable fiscal balance, the effective management of public resources is crucial to address structural challenges and prepare for future scenarios, such as the export of natural gas.
‘Economic growth depends more on the quality than the quantity of public spending and investment, requiring a holistic and coordinated approach to overcome the challenges facing Mozambique,’ the experts point out.
Among the main recommendations is also the creation of a high-level Board of Directors, made up of independent individuals and institutions with specialised knowledge, which would be responsible for overseeing a long-term strategic plan for road infrastructure, guaranteeing the appropriate allocation of resources and protecting against political influence.
N1 in terrible condition
In addition, it is proposed to implement an execution unit to lead the realisation of priority projects by acting as a bridge between policy formulation and implementation, and facilitating coordination within the public administration.
Improving the legal framework for public-private partnerships is also highlighted in the document as fundamental to attracting private investment in the road sector. This includes ensuring transparency, clarity in risk allocation and compliance with international best practice.
Also in the recommendations, the document highlights the need to coordinate and systematise public services more effectively, reducing companies’ compliance costs, simplifying registration processes and digitising the payment of fees.
‘It is essential to involve all relevant government institutions in the One-Stop Shop (BAU) in order to simplify the provision of services, along with efforts to publicise the benefits of BAU to businesses and train staff. It is also vital to resolve the issue of the lack of public registers of laws, the responsibilities of civil servants and ministers and to implement a national identification system,’ the document argues.
In addition, the experts stress the importance of adopting a business-friendly approach to inspections of state institutions, prioritising the facilitation of compliance and the growth of the sector. ‘This implies adopting a co-operative approach, providing user-friendly channels for interaction with businesses and incorporating the concerns of businesses into the fine-tuning of policies,’ the document explains.
The Ministry of Industry and Trade (MIC) is called upon in the document to develop an effective short-term action plan, identifying practical actions to monitor compliance with the regulations and strengthen its technical capacities to ensure the effective application of government measures.
MIC and CTA meet
The experts believe that the Land Policy reform can also be improved by simplifying the regulations on access, transfer and use of Land Use and Utilisation Rights (DUAT), as well as finding ways to allow holders to use their rights as collateral to access formal credit.
Investments are recommended in cross-cutting reforms in the field of digitalisation, aimed at increasing transparency and accountability, improving digital connectivity and boosting business productivity, as well as in the development of new technologies.
The authors of the study believe that if the measures are implemented effectively, they have the potential to simplify processes, reduce costs for companies and improve government efficiency, thus contributing to a more favourable business environment and sustainable economic development in Mozambique.
‘The Government of Mozambique is considering the report’s recommendations when drawing up its medium and long-term policies and strategies to boost the country’s economic development,’ said Angelo Nhalidede, Deputy National Director of Economic and Development Policies (DNPED) at the MEF, quoted in a Ministry statement made public on 22 May.
For her part, the USAID mission director, Helen Pataki, considered that ‘Mozambique faces significant challenges, including poor road infrastructure, regulatory obstacles to business growth, insufficient inter-institutional coordination and the government’s still limited capacity to provide essential public goods and services. The report highlights the urgent need for comprehensive policy reforms to promote sustainable and inclusive economic growth’.
