A. Cuco
Arlito Cuco is a forestry economist with the National Directorate of Forestry and Wildlife, Ministry of Agriculture, Maputo.
An analysis of developments in the forestry sector since the advent of structural adjustment 1987, including considerations of the impact made by the recently terminated civil conflict.
Manica Province - one of the sawmills affected by the civil war
Although Mozambique is endowed with abundant land, water, forest and wildlife resources which hold substantial potential for the country's development, there has been a substantial decline in real GDP per caput since the country became independent in 1975. For example, in 1984 the GDP per caput was estimated to be around US$ 150 (Word Bank, 1988) and, in 1994, per caput income is estimated to be around US$ 80, making the country one of the poorest in the world.
Economic decline in Mozambique began in the decade prior to independence and was aggravated by the sudden departure of about 90 percent of its Portuguese residents, who took with them the essential managerial, operational, maintenance and administrative skills. The forestry sector was one of the sectors to be most affected and it was left on the brink of total collapse. At the third congress of the Frente de Libertação de Moçambique (Frelimo - the ruling party) in 1977, Frelimo issued a number of directives to guide economic development in the country. These enabled the government to develop further and consolidate its role in the economy, and economic management became increasingly centralized. Under the annual State Central Plan (PEC), production targets were established for many enterprises, and the inputs and outputs were increasingly subject to administrative allocation.
In line with these Frelimo directives and in order to prevent an imminent collapse of economic production, the government was compelled to undertake a number of emergency measures which, in the forest industry sector, included taking control of about 60 abandoned wood processing firms. The intention was to keep these production units running so as to alleviate both growing wood shortages in the construction industry and unemployment. The state wood enterprise Madeiras de Moçambique (MADEMO) was set up as a parastatal firm in 1980 (Boletim da Republica, 1980) by grouping all the operational sawmills.
TABLE 1. Wood production and export before 1987
|
Year |
Production |
Exports |
|||
|
Logs |
Timber |
Logs |
Timber |
Total |
|
|
('000 m3) |
|||||
|
1969 |
- |
220.0 |
2.6 |
118.1 |
120.7 |
|
1980 |
- |
- |
11.4 |
8.4 |
19.8 |
|
1981 |
186.0 |
69.3 |
8.2 |
6.0 |
14.2 |
|
1982 |
117.5 |
44.3 |
4.8 |
3.2 |
8.0 |
|
1983 |
87.1 |
34.0 |
0.7 |
1.1 |
1.8 |
|
1984 |
103.0 |
41.5 |
2.2 |
0.5 |
2.7 |
|
1985 |
76.7 |
32.6 |
1.3 |
0.1 |
1.4 |
|
1986 |
90.7 |
37.8 |
2.1 |
0.1 |
2.2 |
Note: - data not available.
Although state enterprises were receiving priority in the allocation of scarce investment resources, inputs and credit, their performance was generally not satisfactory. Many were not even able to cover their operating costs. Moreover, the government did not have the administrative and technical capacity to coordinate the various support services that such large-scale and complex enterprises required. As a result, production and trade began their sharp decline, as shown in Table 1.
In addition, the poor performance recorded during 1975-1986 is also a reflection of basic management problems at both production unit and central planning levels. Production targets for the enterprises were generally set up without taking sufficient account of the economics and complexity of the production environment. For example, the planning system was very rigid in its plans for a sector facing a chronic shortage of skilled labour and financial resources for operating.
The security problem (civil war) caused a massive destruction of infrastructure, economic and social installations. By 1987 more than 21 sawmills were reported to have been either totally or partially destroyed (FAO, 1987).
In addition to this, the majority of the productive forests became practically inaccessible because of the war and a gradually deteriorating road infrastructure; thus, it was difficult to obtain adequate wood raw materials to supply the industries. Further, the civil war also compelled the government to divert most of the available resources from social and economic development programmes to sustaining its military capability. This further reduced the amount that could be channelled into the forestry sector.
Prompted by the serious deterioration of the economy, the government initiated a reassessment of overall economic strategy and policy in 1983 and, in 1987, adopted an Economic Rehabilitation Programme (PRE) as an element of an overall structural adjustment programme (SAP). Since the start of the PRE, the central planning system has been gradually dismantled and steps have been taken towards a more liberalized economy and decentralization in planning.
In recent years many developing countries have been concerned with SAPs, largely formulated on the basis of the policies of the International Monetary Fund (IMF) and the World Bank (WB). The ingredients of SAPs are essentially: currency devaluation, wage restraint, higher interest rates, ceilings on domestic credit expansion, a reduction of fiscal deficits, the liberalization of foreign trade and the abolition of subsidies on food and utilities.
Since 1987 Mozambique has been implementing a SAP which focuses on agricultural production and price liberalization, industrial development and the promotion of exports to earn foreign exchange. The forestry sector is not specifically addressed under the programme. This sector usually receives little political attention in comparison with most other investment areas of apparent short-term socio-economic value. This is despite the fact that this sector involves about 71 percent of the total land area of the country. Land is a valuable production input which even donors cannot offer.
Since the initiation of the PRE, progress has been made in the development of economic policy and the rehabilitation of the economic structure of the country. The rate of recovery is reflected by growth in which the GDP averaged 5 percent per annum during 1987-89, after a 30 percent decline in 1982-85 (Word Bank, 1990), as shown in Table 2.
TABLE 2. The evolution of real growth
|
|
1982-85 |
1986 |
1987 |
1988 |
1989 |
1990 |
1991 |
1992 |
1993 |
|
(Percentage) | |||||||||
|
Aggregate GDP |
-5.9 |
-0.9 |
4.6 |
5.5 |
5.3 |
1.5 |
4.50 |
- |
5.6 |
|
Agriculture |
-5.7 |
-0.6 |
7.0 |
7.2 |
4.0 |
2.0 |
3.70 |
- |
8.0 |
|
Industry |
-18.4 |
-4.3 |
8.9 |
7.5 |
6.8 |
3.0 |
8.00 |
- |
17.01 |
|
Construction |
-2.2 |
-44.8 |
-16.0 |
-0.2 |
3.0 |
3.0 |
3.00 |
- |
3.0 |
|
Transport |
-15.9 |
1.7 |
-9.8 |
6.2 |
10.2 |
3.9 |
8.50 |
- |
10.0 |
1 Includes trade.
Note: - data not available.
Sources: GPIE (1992); AIM (1994).
The forest sector's contribution to the GDP in 1989 is estimated to be about 8.9 percent for which 0.2 percent represents forest industrial contribution and 8.7 percent represents non-industrial forestry (Sharma, 1992). This represents an increase from about 7 percent in 1983 (Government of Mozambique, 1992a).
The Mozambican economy experienced unanticipated setbacks in sustaining recovery and slowing inflation during 1990. Real GDP growth was less than 2 percent, reflecting a stagnation in agricultural production and a decline in manufacturing output. The 1990 results were adversely influenced by poor harvests, repeated sabotages to power supply lines, work stoppages and the rise in world petroleum prices. On the demand side, data now available show that the growth of monetary aggregates was running at an annual rate of more than 50 percent in late 1989 arid was brought down to 35 percent only in late 1990.
The best result during the implementation of the PRE is that GDP grew by an estimated 5.6 percent in 1993. For 1994 the government is anticipating a 5.5 percent of growth in GDP and a reduction of inflation to 18 percent (inflation is currently running at about 30 percent per year) (AIM, 1994).
The SAP was conceived to contain and reverse the decline and unfavorable trends in the economy. It is too early to assess its impact on the forestry sector because long-term public investment requires economic and political stability, which is not the case in Mozambique, as the country signed a peace accord only in October 1992 following 16 years of civil war. However, there are some indications that the programme will have a positive impact on the economy as a whole, and there is also a general agreement that the important role played by the forest industry sector in the past can be improved and strengthened, considering its existing potential.
Privatization
The nationalization policy implemented after independence discouraged private ownership of forest resources, the major means of processing forest products as well as effective participation in trade in forest products.
One of the aims of the PRE is to promote the participation of the private sector in the production and liberalization of terms of trade. Therefore, this programme effectively reverses the nationalization policy. As a result, state wood processing industries are being privatized according to a law issued by the government in 1991 (Boletim da República, 1991). In the last three years, 54 percent of wood processing enterprises grouped under MADEMO were privatized and, at present, about 13 sawmills are under evaluation for privatization (Table 3).
The rationale behind this lies in the belief that the private sector has the means and ways to improve efficiency. However, the impact of this process, as shown in Table 4, does not reflect the initial expectation.
The reasons for the continuous decline in the production of forest industry have been well documented and include obsolete equipment, a lack of spare parts, poor raw material supply and insecurity because of civil war (FAO, 1993a).
Although legislation on investment and trade was aimed at encouraging both national and foreign enterprises to participate both in the development of the forest sector and in reviving the economy as a whole, it seems that the prevailing political environment in the country has not stabilized enough to encourage the private sector to invest in the rehabilitation of the existing wood industry, in setting up new wood processing facilities and expanding forest plantations. It may be advisable to evaluate the effect of this policy some time after the October 1994 elections.
TABLE 3. Privatization of wood processing enterprises
|
Region |
Privatized |
In process |
Total |
|
South |
8 |
11 |
19 |
|
Centre |
3 |
2 |
5 |
|
North |
4 |
0 |
4 |
|
Total |
15 |
13 |
28 |
Source. Agostini (1993).
TABLE 4. Wood production and exports from 1987 to 1992
|
Year |
Production |
Exports |
|||
|
Logs |
Timber |
Logs |
Timber |
Total |
|
|
('000 m3) |
|||||
|
1987 |
102.3 |
41.9 |
3.7 |
0.1 |
3.8 |
|
1988 |
89.8 |
36.8 |
1.5 |
0.4 |
1.9 |
|
1989 |
58.6 |
24.2 |
1.5 |
0.3 |
1.8 |
|
1990 |
71.2 |
29.8 |
1.0 |
0.1 |
1.1 |
|
1991 |
50.3 |
19.2 |
0.8 |
0.1 |
0.9 |
|
1992 |
- |
17.9 |
1.7 |
0.2 |
1.9 |
Sources. Ribeiro (1992); Government of Mozambique (1992c).
Incentives for forest industry development
Following the profound changes in Mozambique, specifically those arising from the PRE, and realizing the need to adopt a more open and objective economic policy that favours greater participation, complementarily and equality in the treatment of national and foreign investments, in 1993 the government revised and passed Investment Law No. 3193, which is a legal framework for private investment matters (CPI, 1993).
Logging operations in a Mozambican pine plantation
The present law and regulations seek to establish a basic and uniform legal framework for carrying out both national and foreign investments in the country They also cover the question of eligibility for guarantees and incentives provided in Mozambique.
In addition to the Investment Law and regulations, in mid-1993 the Government of Mozambique approved the Code of Fiscal Benefits for investment projects carried out under Investment Law No. 3193. The fiscal benefits comprise exemptions from import duties and other taxes, reductions in tax rates, allowable deductions from taxable income and other fiscal measures resulting in a reduction in the payment of taxes, which are granted in the public interest with the aim of furthering the economic development of the country.
Unfortunately, the forestry sector is not specifically addressed in the Investment Law, the regulations or the Code of Fiscal Benefits. The forestry profession has a number of special characteristics, one of which is the time required to grow most forest crops, which is very much greater than that involved in many other production processes. The length of the production period also has a critical impact not only on tax effects but on other factors. Therefore, there is a need for special incentives to promote the development of the forestry sector, particularly in the area of forest plantations for fuelwood and wood industries.
Revenue system
Under the existing forest legislation, revenue is generated through: i) fees and royalties charged on licences for harvesting; ii) forest land tax; iii) forest land-clearing tax; and iv) fines paid by violators of existing rules and regulations. There are no reliable nationwide statistics on revenue collection but the present level of revenues collected is without doubt very low. For example, revenue collected in 1992 is estimated to be not more than US$ 335000 (FAO, 1993b).
The forest revenue system can be made to serve several objectives beyond that of collecting forest fees and taxes for the government as the owner of the resource. In fact, forest revenue can be deployed to reinforce incentives for efficient and sustainable forest and environmental management as well as in support of concession agreements and forest regulations.
The actual revenue system in Mozambique does not provide incentives for the sustainable development of forest resources. The most important fee is the stumpage fee, which is administratively determined (ranging from US$ 1.20 per m3 for second-class species to US$ 3.60 per m3 for precious species) rather than being set according to needs and variations of market prices reflecting the interactions of supply and demand. There is therefore an urgent need to revise the actual revenue system as well as the stumpage price, which must reflect timber's competitive value.
Institutional mandate
The role of the government through the Ministry of Agriculture, under which there is the National Directorate of Forestry and Wildlife (DNFFB) which manages forestry matters in the country, has gradually shifted from a production-oriented to a service goal, comprising monitoring management practices, providing feedback to the users, enforcing management rules, promoting forest resource expansion, setting up information networks on forest and wildlife resources and promoting awareness of the protection and conservation of forest and wildlife resources.
At the provincial level, there are Provincial Agricultural Directorates (DPAs) which represent the Ministry of Agriculture. Within the DPA structure, the DNFFB is represented by the Provincial Forest and Wildlife Services which function under the direct supervision of the DPAs' director. In line with the provincial administration system, the DPAs extend over the provincial districts through the District Agricultural Directorates.
Greater local community and private sector involvement in forestry (multiple - use management of natural forests, farm and community forest, plantation establishment and management) implies an important shift in the role of government. Following the recent significant changes in the administrative and management functions of the government, the DNFFB is in the process of decentralizing some of its planning, management and control functions to the Provincial Forest and Wildlife Services. However, long-term sustainability of forest resources ultimately depends on the viability of local institutions and social structures. At present, the legal control over these resources is held at the district level. Local institutions, such as a village, that might be better suited for more effective and equitable natural resource management, have neither the capacity nor the legal recognition that would enable the legitimacy of customary social structures nor the power or resources needed to supply them.
Thus, there is a need to strengthen local institutions, both customary and contemporary, and to reform legislation to give communities greater control over resource use and management. Also, a legal mechanism is needed to channel financial incentives towards improving forest management.
Distorted salaries
In order to maintain management capabilities of senior civil servants and technical staff, in 1993 the government introduced a salary incentive for government technical staff and civil servants. This measure discriminates against staff engaged in the private sector. It distorts the labour market and makes it difficult for the underdeveloped private forest sector to employ adequate qualified staff. In order to compete in the labour market for the best staff without exceeding total budgets, the private sector has adopted several measures, including a reduction of the labour force in the production units. This measure has had a negative impact on the promotion of employment in the forest sector. For example, IFLOMA, one of the biggest wood processing firms in Mozambique, at present has about 867 workers, equal to about 60 percent of its labour force in 1987 (FAO, 1993a).
Others measures outside the forest sector
The work programmes of the forest sector have suffered from poorly coordinated public sector investment policies and the inconsistent allocation of public funds. The forest subsector typically lacks sufficient budgetary support. For example, in 1992 the forest subsector developed 16 percent of the projects in the agricultural sector and received only 6.3 percent of the total investment budget, some US$ 4.4 million (Government of Mozambique, 1992b).
It seems that the DNFFB is poorly placed to perform a coordinating function with regard to the use of forest lands because it has little influence over decision-making processes. The forest subsector interest is invariably overshadowed by the interests of other sectors, both inside and outside the Ministry of Agriculture. For example, top government priority is currently directed to the resettlement of displaced people who are returning after 16 years of civil war. It is surprising and unfortunate that the forest sector is not involved in this process, especially in appraising the appropriateness of land allocated to returning refugees and dislocated people. Since these people will settle in areas with some forest cover, it is imperative that measures be taken to ensure that the use of land they are allocated is compatible with other potential uses of the same area.
Generally, none of the measures of structural adjustment has had the opportunity to be fully implemented because of the civil war which impeded movement and the implementation of forestry operations in the field. Therefore, the evaluation of impacts of structural adjustment largely highlights the constraints that the war and the prevailing political environment have had on the development of the forest sector, rather than the actual impacts of programme implementation.
Development generally demands macroeconomic stability. Without stability, long-term capital investment is impossible. Development of the forest sector- its infrastructure, processing facilities and the forests themselves - requires extraordinarily large amounts of capital deployed over long periods of time. As a consequence, economic and political stability is very important for realizing benefits from such investment options.
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AIM. 1994. Mozambique File. January 1994, No. 210. (Mozambique News Agency monthly bull.).
Boletim da República. 1980. Criação da MADEMO. Boletim da República, 1(14). Maputo, Impresa Nacional da Moçambique.
Boletim da Republica. 1991. Lei No. 1951: Normas sobre a reestruturação empresarial. Boletim da República, 1(31). Maputo, Impresa Nacional da Moçambique.
CPI. 1993. Legislation on investment in Mozambique - Law No. 3/93. Maputo, Investment Promotion Centre.
FAO. 1987. Forestry subsector study - Mozambique. Rome.
FAO. 1993a. Some aspects of forestry policy in Mozambique. Maputo, FAO.
FAO. 1993b. Forest and Wildlife Resource Management Project. ADB-MOZ Report.
Government of Mozambique. 1992a. Estratégia de desenvolvimento florestal. Maputo, DNFFB, Ministry of Agriculture.
Government of Mozambique. 1992b. Programa de desenvolvimento florestal e de vida silvestre: projectos do sub-sector florestal (PTIP 93/95). Maputo, DNFFB, Ministry of Agriculture.
Government of Mozambique. 1992c. Relatório florestal anual de Moçambique. Maputo, DNFFB, Ministry of Agriculture.
GPIE. 1992. Investor's guide to Mozambique. Maputo.
Ribeiro, A. 1992. Development of forest industry in Mozambique. Wolfson College, Oxford, UK. (thesis)
Sharma, N.P., ed. 1992. Managing the world 's forests - looking for balance between conservation and development. Dubuque, Iowa, USA, Kendall/Hunt.
World Bank. 1988. Mozambique agricultural sector survey. Washington, DC, Southern Africa Department, World Bank.
World Bank. 1990. Mozambique: restoring production and trade. Washington, DC, Southern Africa Department, World Bank.
