SADC Regional Integration
The role of the Lusophone
Countries, 2004
Muagerene, A.
Windhoek, 11-12/06/05
Contents
1. Introduction
2. The SADC Lusophone countries
a. Similarities and differences
3.
4.
5.
6.
Economic Integration
Sectoral Cooperation
Political convergence
Conclusions
Muagerene, A.
Windhoek, 11-12/06/05
1. Introduction
• Angola and Mozambique are the SADC
Lusophone countries (SLC).
• Regional Integration as a process of integration
of small economies into the global economy
(economies of scale).
• SLC integration process through the
conditionalities of the Structural Adjustment
Programs (SAPs).
– The SLC differ in speed, intensity, and the outcomes.
• Why compare the variable of the SLC?
Muagerene, A.
Windhoek, 11-12/06/05
2. Angola and Mozambique: Similarities
• Former Portuguese colonies
– Independence in 1975.
• Marxist-Leninist ideology and central planned
economy in the post-independence.
• Long civil war: regional strategic role in the
context of cold war and Apartheid.
• Frontline States.
• Late 80s introduction of political and economic
reforms.
– Changes in the constitution (1990).
Muagerene, A.
Windhoek, 11-12/06/05
2. Angola and Mozambique: Differences
• Colonial economy - different patterns.
– Moz.: Closer to South Africa and landlocked neighbor countries.
– Ang.: Colonial platform for exports to Brazil, Portugal.
• Political processes:
– Moz.: the peace agreement in 1992 followed with regular
elections and national reconciliation.
– Ang.: several failed peace agreements until the 2002. Still,
slowly reconciliation and replacement is taking place.
• SAP’s implementation:
– Moz.: Implemented systematically.
– Ang.: Trapped in a complex and difficult transition.
• Angola – huge resource endowment.
• Mozambique – national initiative on PRSP; debt relief
(HIPIC).
Muagerene, A.
Windhoek, 11-12/06/05
SLC: Macro-economic Indicators
Indicators
Population
Angola
Mozambique
14.3 mn (2003) 19.4 mn
GDP – ppp. $ bio. (2004e)
23.17
GDP – real growth rate (2004e) 11.7%
Inflation rate (Consumer pr.) 43.8%
23.38
7.2%
12.8%
Exchange rate (2004)
Current Bal. Ac. (2004)
Exports - $ Fob (2004)
Imports - $ Fob (2004)
Mt/$ - 23,612
- 101.2 mn
89.4 mn
972.9 mn
Kz/US$ - 83.2
- 37.88 mn
12.76 mn
4,896 bn
Reserves forex - $ (2004e) 800 mn
Debt external - $ (2004e)
10.45 bn
Source: US, 2005; CIA – The World Fact Book, 2005.
Muagerene, A.
Windhoek, 11-12/06/05
1,206 bn
966 mn (2002e)
3. SLC: Economic Integration
3.1. Country Openness
and Climate for Investments
• The SAPs aimed at: Address economic decline, and
slow down macroeconomic imbalances.
• Angola: during the 1990s introduced series of ineffective
economic reforms ( civil war, external shocks).
• In 2003: Law on Bases for Private Investment – Law
3/03 (substitute the former 1994).
– Create the National and Private Investment Agency (ANIP);
– Oil, and mining investments require concession, or involvement
of parastatal;
– Investment approval – include several steps:
• The “Doing Business” 2004: average of 164 days (regional 63);
• The World Economic Forum, 2004, ranked Angola at 103/104
– Most time consuming county
• 2004 Gvt. response: One Stop Shop (Balcao Unico).
Muagerene, A.
Windhoek, 11-12/06/05
SLC: Economic Integration (Cont…)
3.1. Country Openness
and Climate for Investments
• Angola:
– Corruption: Angola’s economic setback.
• Angola ranked at 133/145 countries (Transparence
International, 2004).
• Petty corruption in the Public Sector (Hodges
2004).
– Gvt. Response:
– 2004 Anti-corruption Law – not yet inplemented.
– Angola participant of NEPAD – peer review include good
governance.
Muagerene, A.
Windhoek, 11-12/06/05
SLC: Economic Integration (Cont)
3.1. Country Openness
and Climate for Investments
Mozambique: Under SAPs:
• Law on Investments – Law 3/93:
• Create the Investment Promotion Centre (CPI)
– The process of company registration regarded as time
consuming.
• “Doing Business” 2004: average of opening business of 153 days.
– Constraints: administrative, regulatory, and commercial-legal
barriers (SARPN, 2004)
• Corruption: severe constraint:
– Bribery seeking behavior of public officials (US, 2005).
– Transparence International ranked Moz, at 90/145 countries.
• Gvt. Response:
– Anti-Corruption bill enacted in 2004, and established the AntiCorruption Unity: Still, Corruption is a “white elephant”.
– Mozambique signed the International Convention against
Corruption.
Muagerene, A.
Windhoek, 11-12/06/05
Economic Integration
3.1. Country Openness and Climate of
Investments
• Both, Angola and Mozambique, have
made progress in creating legal and
institutional conditions to attract
investment.
– Still, the processes remain burdensome
preventing market entry, and raising costs of
doing business.
Muagerene, A.
Windhoek, 11-12/06/05
SLC: Economic Integration
3.2. Trade Agreements of the SLC:
Agreement
Angola
Mozambique
SADC Trade Protocol
2003
1999
Bilateral Agreement
for Investments
Portugal, RSA, UK,
Italy, Germany (Not
implemented)
Cape Verde.
RSA, Port, Zimb,
Mauritius, Fra, Ita,
Chi, Egy, Indon, Alg,
Switz, Ger, Swed,
Den, UK, Cuba, USA.
EU Cotonow Agrmt.
Yes
Yes
AGOA
Yes
Yes
Multilateral
FMI, MIGA (WB),
WTO
FMI, MIGA, WTO
Source: FMI, 2004; US, 2005.
Muagerene, A.
Windhoek, 11-12/06/05
SLC: Economic Integration
3.3. Foreign Direct Investment flow
• Angola: Massive investment in oil
industry.
– World Bank estimates US$ 1.42 bio (2003),
and US$ 1.55 bio (9% GDP)(2004).
– USA is the most important trade partner.
• Mozambique:
– Investments slowed down in 2004:
• 143 projects: US$ 508 mio.
– RSA the most important trade partner in 2004.
Muagerene, A.
Windhoek, 11-12/06/05
SLC: Economic Integration
3.3. FDI – Moz.: Regional Share, 2004
Countries
No. Projects FDI US$ (mio.)
RSA
2
59
Malawi
Zimbabwe
Mauritius
Tanzania
4
22
2
2
5
4
3
2
Source: CPI, 2004. In: US, 2005.
Muagerene, A.
Windhoek, 11-12/06/05
SLC: Economic Integration
3.4. Export structure, 2004
Angola
Exports f.o.b (04e) $12.76 bn
Export Partners
US 48.1%, Chi 23.5%, Tai
Mozambique
$689.4 mn
Bel 26.5%, RSA 14.6%, Ita
9.8% Spa 9.6%, Ger 8.5%, Zim
8.1%, Fra 7.4% (2003)
4.8% (2003)
Imports f.o.b (04e) $4.896 bn
Import Partners
Export
merchandise 2004
Muagerene, A.
$972.9 mn
Por. 18.1%, RSA 12.3%, US
12.1%, Net 11.5%, Fra 6.5%,
Bra 6.2%, UK 4.1% (2003)
RSA 26.7%, Aus 9.3%, US
91.92 Oil industry; 7.45
Diamonds; 0.63 Others
75% mega-project exports;
20% agriculture; 5% others
3.9% (2003)
Windhoek, 11-12/06/05
Sources: IMF, 2005: 7; SARPN, 2004: 32; CIA, 2004; Tralac, 2005.
SLC: Economic Integration
3.4. Export structure (Cont.)
• Angola: export based on oil industry and
diamonds :
– Share 45% in the GDP.
– High openness with the World economy.
– Employing less than 0.5 % of the population.
– No complementarities with other domestic
activities.
• Angola has the economy of enclave.
• Need for export diversification.
Muagerene, A.
Windhoek, 11-12/06/05
SLC: Economic Integration
3.4. Export structure (Cont.)
• Mozambique: export promotion through the
Industrial Free Zones (IFZ) – Decree no. 61/99.
– Areas covered with special exemptions.
• Since late 1990s Mozambique attracted capitalintensive investments in the “mega-projects”.
–
–
–
–
–
increase in exports and imports (+).
linking the economy to a global market (+).
However, mega-projects create a few jobs (-);
few linkages with the domestic economy (-).
Mozambique is in need for more labor-intensive
exports of goods and services, such as Agriculture,
tourism.
Muagerene, A.
Windhoek, 11-12/06/05
4. SLC: Sector Integration
4.1. Energy
• Electricity: Promising sector in the regional
integration.
• Angola:
– Agreed with Namibia, the construction of the Gove
Station, on the New Cunene river, in Feb 2003.
– Western Corridor Power (WESTCOR) Project:
•
•
•
•
Aim: pull of the hidro-potential of DRC, Angola and Namibia.
Capacity: 5.500 MW
MU signed Apr 2002.
Value: US$ 4.0 bn (funding under way – NEPAD projects).
Muagerene, A.
Windhoek, 11-12/06/05
4. SLC: Sector Integration
4.1. Energy (Cont.)
• Mozambique:
– The Cahora Bassa hydroelectric-dam in the
Zambezi river. Capacity of 2,075 MW.
– Supply domestic needs, RSA, and Zimbabwe.
– From 2004 agreement to supply to Malawi:
300 MW for the next 20 years.
Muagerene, A.
Windhoek, 11-12/06/05
4. SLC: Sector Integration
4.1. Development Corridors
• Based on the concept of the Spatial
Development Initiatives (SDI):
• Angola: had about 2,700 km of railways network,
– The outlet to Luzaka (Zambia), and Lubumbashi
(Congo).
– Only 850 km (1/3) is operational.
• Angola launched in 2004 the “AngoFerro”
Project, evaluated US$ 4.0 bn to upgrade and
rehabilitate the railways network.
Muagerene, A.
Windhoek, 11-12/06/05
4. SLC: Sector Integration
4.1. Development Corridors (Cont…)
Mozambique: based on three “development corridors”:
Nacala, Beira and Maputo.
1. Nacala Development Corridor: in the northern
province o Nampula linking Mozambique, Malawi and
part of Zambia, including the Nacala port, the road and
railway.
- Privatized in 2000.
2. Beira Development Corridor: With 2 lines.
1. Maxipanda line: linking Beira to Zimbabwe. Include the Beira
port and 300 km of road, railway, and pipeline.
2. Sena line: links Beira to coal Mine of Moatize, and Malawi,
about 600 km. Upgrading project is underway.
Muagerene, A.
Windhoek, 11-12/06/05
4. SLC: Sector Integration
4.1. Development Corridors (Cont.)
• Maputo Development Corridor (MDC):
– Links the Capital of Maputo to RSA province
of Mpumalanga.
– Includes the Maputo port, the road, railway
and the Border post.
• From 2004 also includes the pipeline.
– The MDC is located within the IFZ of Maputo.
• Also the success story of MOZAL and SASOL.
Muagerene, A.
Windhoek, 11-12/06/05
5. Political Convergence
• SLC are young democracies.
• Assessment must consider the factors
contributing to Democracy consolidation.
– Regular democratic elections;
– Respect of basic Human rights, and
– The absence of political violence (PettersBarriers, Naidu, 2003: 11).
Muagerene, A.
Windhoek, 11-12/06/05
5. Political Convergence (Cont.)
Indicators
Angola
Mozambique
UNDP – HDI
Ranked 160/177 (0.381)
Ranked 171/177 (0.354)
TI – CPI (2004)
Position 133/145;
CPI Score (2.0)
Position 90/145
CPI Score (2.8)
Freedom House
Political rights: 6;
Civil liberties: 5
“Not free” country
Political rights: 3;
Civil liberties: 4
“Partly free”
(2002)
Sources: UNDP, 2004; Transparence International, 2004; Freedom House, 2004
Muagerene, A.
Windhoek, 11-12/06/05
5. Political Convergence (Cont.)
• Angola:
– War-torn society facing the legacy of the civil war.
– Angola is among the low human development
countries, i.e., with lower longevity, lower education
and low standard of living for the majority of the
population.
– The oil revenues did not trickled down to alleviate the
poverty.
– The country faces the corruption, which “robs its
potential” to recover the effects of the long war.
– The undermined respect for the constitution, the
human rights, and the rule of law, make the country to
be ranked as “not free” country.
Muagerene, A.
Windhoek, 11-12/06/05
5. Political Convergence (Cont.)
• Mozambique is a poor country:
– As the case of Angola, is among the low human
development countries which result in low longevity,
low educational attainment, and quality of life.
– The country faces the effects of corruption preventing
the attainment of the goals express in the PRSP, as
well as the MDG.
– Mozambique was ranked as “partly free”, which need
to improve the human rights, and the civil liberties, s
well as the rule of law, in general.
Muagerene, A.
Windhoek, 11-12/06/05
Conclusion
• Mozambique and Angola, form the SLC, given
the fact that they have gone through parallel
historic and political processes.
• Both countries have made progress toward
regional integration at levels of economic
integration, Sectoral cooperation and Political
Convergence.
• However, both countries need to consider step
further for effective regional convergence
addressing the constraints identified.
Muagerene, A.
Windhoek, 11-12/06/05
• Thank you for the attention.
Muagerene, A.
Windhoek, 11-12/06/05