Orderly Change

IT IS EASY TO FORGET THAT JUST TWELVE YEARS AGO, Mozambique was devastated by a civil war that claimed an estimated one million lives. Much has changed in a decade. From being one of the poorest countries on earth, it has joined a rare group of success stories. A few months ago at Chatham House, UK Development secretary of State Hilary Benn repeatedly referred to Mozambique as an African success. It has a booming economy which has achieved an average annual real gross domestic product growth of 9 percent for the past twelve years. Substantial progress has been made in social sector investment and in reducing poverty. Mozambique holds its third democratic election this month, heralding new leadership - a good moment to assess whether the success is sustainable.

The December elections are important. Twenty-five political parties and five presidential candidates are competing. But only two parties, Frelimo, which has ruled the country since independence from Portugal in 1975, and Renamo, the former rebel group, are represented in the current parliament. They are expected to receive the vast majority of votes. The main presidential candidates are Armando Guebuza of Frelimo and Afonso Dhlakama representing Renamo, which is an alliance often other minor parties.

All predictions are that Guebuza, the Frelimo candidate, will win. But in the 1999 elections the presidential contest was tight: Joaquim Chissano was re-elected with 52 percent of the vote while Dhlakama captured 48 percent.

Guebuza has been a senior leader of Frelimo since the liberation struggle. Prior to independence he was an active guerrilla fighter against the Portuguese. He was close to the first post-independence President Samora Machel and occupied a variety of key posts including Minister of Interior in the seventies and eighties. In this position, he oversaw what was far from Frelimo's finest hour; the forced deportation of large numbers of urban unemployed to the rural areas in what was called Operation Production.

After the death of Machel in an air crash in 1986, Guebuza continued to prosper under President Joaquim Chissano, first as transport minister and then as head of the government team that went to Rome for peace talks with Renamo. He was chosen as head of the Frelimo parliamentary group in late 1994 and re-elected five years later. Guebuza's ambition to succeed Chissano resulted in a deterioration of their relationship, to the point that they communicated through an intermediary at times.

Guebuza's support within Frelimo continued to be strong. At its Seventh Congress in 1997 he came second in the Central Committee contest with 92.9 percent of the vote. At the next Congress in June 2002 he was elected the party's secretary-General and presidential candidate. Guebuza has always been a shrewd politician, and outmanoeuvred various other presidential hopefuls such as agriculture minister Helder Muteia, and a clumsy effort by Chissano to get party support for a third term.

Mozambique's key success in post-conflict reconstruction is the degree to which political space has opened up. Since the first multiparty elections in 1994, institutions have been strengthened and the political contest is now conducted through parliament. Civil society groups continue to grow and a lively independent media has developed. Journalists demonstrated courage through ongoing revelations about bank privatisation fraud in the mid-1990s.

Renamo became the largest opposition party in Africa, although it was overtaken by Zimbabwe's movement for Democratic Change in 2002. Renamo won nearly forty percent of the overall vote and the majority in five provinces in both the 1994 and 1999 elections. Its continuing popularity surprised many observers because of its atrocious record for human rights abuses during the war. Although Renamo is weak, its support indicates discontent at continued domination by Frelimo. The country is still divided and the wounds of the civil war are yet to fully heal.

Frelimo is aware of this danger and the large central and northern provinces of Zambezia and Nampula have been targeted for increased state spending on services and infrastructure. There have also been public-private partnerships in these provinces aimed at attracting private investment. But the north of the country remains visibly poorer than further south around the capital Maputo, Frelimo's heartland.

It may well be that the high point of national reconciliation is over. Frelimo has now been in power for almost thirty years and many younger Mozambicans yearn for a change of political leadership.

Guebuza has a deep knowledge of Rename and understands the needs of its leader Dhlakama. In the short term Guebuza will continue to pursue the policies of outgoing president Chissano, to placate Renamo and tie it firmly to the democratic process. The new leader is pragmatic and does not wish to cause undue internal tensions early on. He has also talked about constitutional reform and will need opposition support.

Private investment interests Guebuza a great deal. He is a leading exponent of the black economic empowerment that greatly benefited from the privatisation of state-owned enterprises in the late 1980s and early 1990s. Guebuza's business acumen earned him the nickname 'Mr Gue-Business' and his private portfolio includes banking, brewing, construction, fisheries, publishing, ports and communications.

The country's economic performance has been spectacular since 1994, making it one of the greatest recipients of foreign capital inflows in Africa. These inflows and increasing domestic growth enabled government expenditure on social and infrastructure projects to be doubled. Investment has included the $2 billion BHP-Billiton aluminium smelter - the largest single investment in Mozambique's history. But can such high growth rates be maintained?

There is no doubt that the authorities have demonstrated long-term support for economic reform and generally observed strong economic discipline. Government has become noticeably more technocratic and supportive of the current poverty reduction strategy. The new president will still have to face enormous challenges - weak human capacity, bureaucracy and corruption are serious constraints for investors.

KEEPING DONORS HAPPY

Guebuza has said one of his first projects will be to lead an anticorruption drive. It will be interesting to see if this materialises since the Frelimo elite frequently abuses its political dominance in order to capture new business opportunities.

Two state-owned banks, Banco Comercial de Mozambique and Banco Austral, were plundered prior to privatisation, resulting in bankruptcy and a government bail-out. In Mozambique, though, there seems to be a balance between such feasting and maintaining macro-economic stability - so much so that foreign delegations visit the authorities to learn how they keep donors happy.

In many ways this is a country of parallel economies: the poorly performing traditional sectors and the dynamic new prestige projects, such as BHP's aluminium smelter, which are good for the economy but labour-intensive.

Poverty reduction has been mostly driven by public spending. But, according to the International Monetary Fund the quality of that spending is poor. This suggests that it is not sustainable. Spending to combat poverty needs to be improved and, with a limited pool of skilled people, Mozambique has to achieve institutional efficiency.

The post-conflict decade was, in many respects, a honeymoon period of relatively easy economic development. The legacy of the war produced post-conflict, catch-up growth and one-off investments projects like BHPs. Taking these factors into account, the country starts to look like a high-cost economy with a weak domestic private sector and poor infrastructure. Good times look as though they are drawing to a close and Guebuza may need to re-earn his nick name 'Mr Cue-Business' if he is to keep Mozambique at the top of the growth league table.