Cablegate: Global Hunger and Food Security Initiative: Mozambique

DE RUEHTO #0046/01 0121610
R 121610Z JAN 10




E.O. 12958: N/A

REF: STATE 127466; STATE 124059

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1. SUMMARY: With untapped economic potential and high levels of
poverty and malnutrition, Mozambique merits consideration for
inclusion in the Global Hunger and Food Security Initiative (GHFSI).
However, based on current discussions about overall USG assistance
levels in relation to heightened democracy and governance concerns,
increasing corruption, lack of transparency, and the Government of
Mozambique's failure to utilize some existing agricultural financial
resources already available, Post recommends that Mozambique's
initial participation in the GHFSI take place within the current
resource levels. This would mean using already-funded ongoing
activities to improve nutrition, agricultural production, rural
enterprises, infrastructure and human capacity to pursue GHFSI
objectives. Should the GRM show concrete progress on USG concerns
in the coming months, increased funding levels could then be
considered. Effectiveness of programming to improve food security
at any level will require policy actions by the GRM, including: 1)
developing a food security investment plan as part of the
Consolidated Africa Agricultural Development Program (CAADP); 2)
expanding access to agricultural inputs of finance, fertilizer,
improved seed and important extension services; 3) diminishing
barriers to trade efficiency and private sector investment; 4)
improving nutrition standards; 5) ensuring sustained support for
priority infrastructure from local and provincial governments; 6)
developing human capacity focused on entrepreneurship and business
skills, and; 7) strengthening the existing capacity to respond to
natural disasters and threats to agriculture from global climate
change. Post has engaged the government on these issues at various
levels with varying degrees of receptivity. These policy issues
will inform our deliberations in donor fora and sector working
groups. MCC's program to address land tenure issues directly
addresses a critical policy issue and USAID programs with key
business associations and civil society organizations are focused on
priority actions to improve the business environment. END SUMMARY.


2. International indicators from respected observers such as
Transparency International and Freedom House point to increased
corruption and a reduction in the democratic space in Mozambique.
The actions of the GRM that limited participation of opposition
parties in the run-up to the October 28 general elections highlight
a deteriorating general policy environment and are cause for
concern. Given that current USG funding levels are likely to
surpass $400 million in 2010, and that the USG is already the
largest donor to the country, Mozambique's initial involvement in
the GHFSI may best be contemplated within a framework of maintaining
current levels of funding for proposed activities as opposed to
providing major increases at this time. Should the GRM show
concrete progress on democracy and governance in the coming months
however, increased funding levels could then be considered.
Furthermore, most of the key economic policy issues associated with
the implementation of this initiative in Mozambique are not/not
dependent on increased funding levels and action on key reforms
would pave the way for greater impact with any future increase in
resources under this initiative. These policy issues are
highlighted in the draft Implementation Plan for Mozambique in
relation to the five core investment areas. In each core investment
area, in order to maximize progress toward improved agricultural
production and greater food security, USG staff and programs would
engage the GRM to promote the necessary policy actions or reforms.

Core Area 1: Improve Productivity of Farmers

3. Pursue Mozambique's development of a strategic vision, priority
investment plan, and performance measures under the Comprehensive
African Agricultural Development Program (CAADP) process. A core
principle of the GHFSI is that national food security efforts must
be led by the host country. For countries in Africa, implementation
plans should build upon and reflect the development principles and
processes of CAADP. The CAADP plan should include prioritized
investments, supporting policy agenda, and results based performance
measures while taking into account potential effects of climate
change on agriculture and disaster vulnerability. Mozambique has
not made significant progress in implementing the CAADP process, but
has developed various strategies that can be integrated and
harmonized to serve as the foundation for this effort, including the
Green Revolution Strategy, the Food Action Plan, and the draft
10-year Agricultural Sector Development Strategy (PEDSA). Analysis
done by USAID, MCC, the World Bank, and others also contribute to a
strong foundation for advancing the CAADP process.

4. Land tenure - All land in Mozambique is owned by the state which

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issues usage rights to individuals and corporations. This system
has led to uncertainty about land tenure rights for investors and
traditional occupants of land parcels. Such uncertainty has limited
the use of land as collateral to obtain credit for capital
investment and working capital. Proposed reforms to include 1)
establishing a mechanism to allow the usage rights documentation to
serve as the basis for using land as collateral, 2) streamlining the
transfer of land use concessions, especially in rural areas, by
simplifying or eliminating the cumbersome government approval
process, and 3) reforming the land tax system to improve revenue
collection and to encourage users to make productive investment.

5. Farmer associations & cooperatives - A very good law governing
associations and cooperatives was passed last year. However, it
requires development and implementation of regulations to put this
law fully into effect and the USG will encourage the Government of
Mozambique to accelerate an awareness campaign to ensure district
officials are able to implement the new policy.

6. Fertilizer - Low use of fertilizer in Mozambique is primarily
due to limited access and prices that are beyond the means of most
small farmers. Policy reforms to address these constraints include
1) eliminating the 2.5 % fertilizer import tax, 2) removing
restrictions on transit of fertilizers within the country for
domestic use, and 3) establishing a clear policy on whether
fertilizer subsidies should be used to increase fertilizer access by
smallholder farmers in rural areas.

7. Agricultural extension - The technology transfer that is a
centerpiece of the Mozambique Implementation Plan requires an
expansion of agricultural extension efforts involving both the
government and private sector. The size and focus of government
extension efforts is still a matter of policy debate and will need
to be part of overall planning efforts.

8. Disaster Vulnerability reduction and Preparedness: The USG will
continue its coordination with the Government of Mozambique and
other donors to implement the National Disaster Management Agency's
policies regarding preparedness for flooding along Mozambique's
rivers, as well as the development of village level
disaster-management prepared committees to respond to other natural
disasters, such as cyclones. Food insecurity in the southern
provinces of Mozambique remains as a policy issue to be tackled,
given that the political will to reform the necessary food security
policies is not yet in place. For example, the Ministry of
Agriculture is focused on encouraging the production of wheat in
agricultural areas, including the south, where such production is
not feasible or economical. Moreover, the donor community has not
coalesced around the issue of food security for the southern
provinces. The USG continues its efforts to develop a donor working
group which would be prepared to take on this issue and encourage
the Government of Mozambique to undertake a major reform of its
policies that would lead to food security for the southern
provinces. However, as the national highway linking the central and
northern provinces (where the surpluses are grown) with the southern
districts in Mozambique will be fully rehabilitated in 2012, the
timing to shape the most appropriate policies to address food
security for the southern provinces will be clearer at that point.

--------------------------------------------- --------
Core Area 2: Improve Opportunities and Incentives for Entrepreneurs
and Investors
--------------------------------------------- --------

9. Trade - Trade issues have been central issues in the private
sector's current dialogue with the government related to "Doing
Business" reforms but movement has been slow. The continuing
recommendations to include 1) opening sea freight competition to
allow domestic shipping, 2) reducing time required for imports and
exports by eliminating the pre-shipment inspection and introducing
an electronic payment system between importers, freight forwarders,
dispatch agents and customs (single window), 3) reducing port
handling charges, including the requirements and unreasonable costs
for scanning incoming freight, and 4) expanding air transport
competition and decreasing taxes and fees for airlines and

10. Finance - Banks in Mozambique have been conservative in their
lending and reluctant to finance agricultural projects and
agri-business enterprises. Interest rates are high and banks
prefer to purchase relatively risk free treasury bonds rather than
make loans. Policy reforms to address these constraints include 1)
creating a second-tier bond market to open new avenues for financing
larger domestic businesses and create competition for banks in
dealing with traditional clients, 2) introducing new banking
regulations on commissions and fees that enhance transparency in the
banking system, and 3) amending an existing policy to broaden the
set of borrowers who can qualify for loans in foreign exchange.

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11. Labor - Though a new labor law passed in 2007 offers mechanisms
to streamline and simplify labor requirements, the intended benefits
have not been realized. Working with the new government, efforts
will focus on 1) improving implementation of regulations, including
automatic approval of work permits for expatriate workers within the
labor law's quotas and 2) reducing the cost of termination in line
with other SADC countries.

--------------------------------------------- -----
Core Area 3: Improve Consumer Access to and Use of Nutritious Food
--------------------------------------------- -----

12. Fortification of staple foods - Should our P.L. 480, Title II
program be restored to its original five-year design, it would
overlap during the first years of the Global Hunger and Food
Security Initiative, and the USG is prepared to work closely with
the five major millers (purchasing the Title II and Food For
Progress wheat) and the Ministry of Industry and Commerce to begin,
on a pilot basis, the fortification of wheat before it is used to
produce bread and pasta products for domestic consumption. We
believe that Mozambique, with assistance from the donor community,
is open to adopting the same fortification standards in use in the
Republic of South Africa. This step will be a major milestone in
improving nutrition standards for all Mozambicans (rural and

13. Climate Change Mitigation: The USG has ongoing programs focused
on adaptation to climate change at the national, local and community
level. These include developing research systems for determining
agricultural vulnerability, improving agricultural extension methods
in rural areas and the introduction of drought tolerant crops. An
additional objective is to establish a clear policy for the
promotion of specific conservation farming practices in the
different agro-ecological zones of Mozambique together with a
clearinghouse for information on these best-practice methods.

14. Prevention programs for malnourished children/pregnant women -
The USG would work with both the Ministry of Health and the Ministry
of Women and Social Action to encourage the adoption of the
successful approach taken in our P.L. 480, Title II program. This
program encourages mothers to make their own enriched porridges from
locally grown products as an acceptable substitute for the
distribution of imported commodities such as corn-soy blend (CSB).
The use of enriched porridges for all children under the age of five
helps to prevent malnutrition, as opposed to being used as part of a
treatment plan for only those who are already malnourished. This
approach is sustainable and makes better use of crops already being
grown in the rural sector - where access to a product such as CSB
would be difficult.

15. Training in Nutrition for Community Health Workers - Community
Health Workers must be trained to respond to a variety of health
needs in the community, such as HIV/AIDS, family planning and
maternal/child health. The Ministry of Health is reviewing its
policy to determine which health sectors will be included and the
curriculum to be provided to ensure proper standardization in all
training programs. The USG, with other donors, is participating in
discussions with the Ministry of Health in its policy review.

Core Area 4: Improve Rural Infrastructure

16. Provincial Budgeting: Past agreements with provincial
representatives of the National Roads Authority (ANE) to maintain
newly constructed or rehabilitated farm-to-market roads have failed
because sufficient funds are not available to the provincial ANE.
As this problem involves the budgeting process of Mozambique, the
USG will (1) work with Provincial Governors where farm-to-market
roads will be targeted to secure agreements that the provincial ANE
budgets are sufficiently funded; (2) urge district administrators
to allocate a portion of their 7 million meticais budget for local
infrastructure maintenance; and (3) continue to push with other
donors at the national level to have the fuel tax, which is for road
maintenance, audited regularly to ensure transparency and proper use
of the funds. Collectively, these efforts should address the issue
of timely payments from government authorities to contractors.

17. Road classification and timely payment for maintenance: Each
province in Mozambique maintains a classification system whereby
road maintenance is scheduled and prioritized. Previously, many
farm-to-market roads were not included in the classification
exercise and, therefore, were not maintained. The USG will seek to
work with the Provincial Directorate for Roads and Bridges (DPEP) to
reclassify roads with the inclusion of farm-to-market roads. The ANE
does not actually undertake road rehabilitation or maintenance, but
contracts out the work to small and medium sized enterprises (SME).

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Unfortunately, at the provincial level, the ANE's payment process is
not timely - which places SMEs at risk. Many SMEs are reluctant to
undertake work for the ANE because of this. The USG will continue to
review the process and work with the provincial ANE/DPEP to identify
reforms to simplify the payment process for SMEs.

18. Improved Market Infrastructure: One of the key challenges in
developing the agribusiness sector, especially in the post-harvest
portion of the value chain, is the lack of appropriate market
infrastructure to ensure that products arrive to the customers
without deterioration in quality. Among the infrastructures that
need to be developed are processing facilities, cold chain, storage
and handling facilities, water pumps, irrigation infrastructure,
warehouses, etc. Working with the new government, efforts will focus
on 1) joint programming of investment priority areas in
infrastructure development, and 2) encouraging the GRM to involve as
much as possible the private sector in managing and maintaining the
market infrastructures to be built.

19. Pump Standardization: At present, the Ministry of Public Works
has only approved one type of pump for community wells. While pumps
need to be standardized to ensure that spare parts become readily
available and mechanics sufficiently trained, the process to get
approval for pumps for different conditions (depth of the well,
improved pumps) is cumbersome. The USG proposes to continue to
work with the Ministry of Public Works to review the process to
introduce approved pumps for Mozambique.

Core Area 5: Develop Human Capacity

20. A major challenge to achieving growth in Mozambique is weak
human capacity in the areas of democracy, agriculture, business,
education, and health. To address this challenge, the US Government
will address policy reforms which will 1) build the capacity of
existing educational institutions to introduce finance and business
skills; 2) mobilize workplace training programs for bank staff that
increase understanding of credit risks for clients without previous
bank history, and; 3) promote local Universities' ability to offer
advanced degrees in agriculture, health and business administration
so that students no longer need to be trained elsewhere.

--------------------------------------------- ---------
Diplomatic Strategy to Support the Implementation Plan
--------------------------------------------- ---------

21. The diplomatic strategy to address the above policy agenda
involves all agencies at post and a wide range of interventions and
activities including direct policy dialogue with key
decision-makers, policy analysis, policy advocacy through
stakeholder dialogue with the Mozambican government, support for
development of policy options and implementing regulations. The key
elements of this strategy involve many key actors and USG programs
in multiple fora.

22. Chief of Mission direct policy dialogue at the highest levels -
The size of the USG assistance program provides access to government
officials at the highest levels. Once the new Government is in
place, the Chief of Mission will include food-security-related
policy issues as part of an ongoing dialogue with senior GRM policy
makers. Initially, this should focus on moving ahead with the CAADP
process, addressing long-standing issues affecting trade, and
garnering high-level support for a process to address land tenure

23. Direct policy dialogue with Ministries - The USAID Director,
MCC Director, and Political/Economic Counselor all have direct
relationships with key Ministers involved in policy issues
identified in the Implementation Plan and are important figures in
policy dialogue fora. USAID's role in the leadership of the Private
Sector Working Group provides dialogue opportunities on issues
associated with the business environment. MCC's support for
development of the Land Forum provides opportunities for engagement
on land reform. Other staff also has contacts within key Ministries
to address these policy issues at the working level of Ministries
and with Provincial authorities. For example, monthly meetings are
held at a working level with Ministry of Industry and Commerce

24. Influencing the policy dialogue of donor groups and Technical
Working Groups - USG associate membership in the G-19 donor group
and a leadership position in a nascent all-inclusive donor group
offer opportunities to influence the direction of policy dialogue
carried out by those groups with the GRM. We have already been
successful in putting business environment issues onto that limited
agenda. Policies associated with the ProAgri common fund focused on
agricultural development have been discussed at the Heads of

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Cooperation level. USG programming and commitment to key aspects
of private sector development, agricultural development, and food
security, as well as in-country presence of competent technical
staff, have led to USG leadership in important technical working
groups involving donors and GRM representatives. These working
groups play a key role in evaluating GRM performance and identifying
priority issues for funding and higher-level policy dialogue. The
USG is represented in the leadership of the Private Sector Working
Group, the ProAgri group, and Technical Working Groups focused on
Water, Roads, and Nutrition.

25. Program support for policy dialogue - Key stakeholders and
civil society partners of the USG contribute to the dialogue on some
important policy issues outlined above. For example, USAID support
for business associations has helped them develop an ongoing
formalized dialogue on some of these[U1] issues[U2].

26. Regional networks - Agriculture and Food Security programs will
collaborate with regional organizations and regional development
initiatives. Examples include: New Partnership for African
Development (NEPAD), Food and Agriculture Policy Analysis Network
(FANRPAN), Regional Strategic Analysis and Knowledge Support System
(RESAKSS) which is implemented by the International Food Policy
Research Institute) for policy reform and investment planning;
CARDESA for agricultural research; and East and Southern Africa Seed
Alliance (ESASA) for the seed sector.

27. Local support for policy dialogue - Many USG-funded activities
are supporting the development of community-based organizations
(CBOs) to strengthen the voice of civil society regarding democracy
and governance at the village level. USG-funded programs that
develop and enhance the capacity of Community Councils are made up
of leaders from Farmer Associations, Health Groups, Water Management
Committees and other key elements of the community (including
religious leaders, teachers, and the village chiefs). The Community
Councils are effective voices at the district level to promote
policy changes or to lobby for district funds. Additionally, a
federation comprised of Farmer Associations in each district is
being formed. These federations, collectively, will be utilized to
form a voice for agriculture policies at the provincial level.

28. Public diplomacy - Many of these policy issues can be raised in
public speeches, interviews, and discussions involving USG staff and
in editorials placed in local publications. USG support for forums
and conferences can also be used to focus on selected issues and
technical experts working in USG programs can offer interviews or
analysis to the press.

29. Support for the CAADP process - A first priority for the
diplomacy strategy supporting the Mozambique Implementation Plan is
to ensure Mozambican leadership of this process. In FY 2010, the
USG will support, in collaboration with other donors, the CAADP
process leading to development of a CAADP "compact" and a medium
term CAADP investment plan to help in meeting the Millennium
Development Goal (MDG) of reducing poverty, hunger, and child
malnutrition. Michigan State University and IFPRI, along with key
International Agricultural Research Centers (IARCs) and development
partners, will assist with required analysis and support the
collaborative stakeholder consultation process. A multi-stakeholder
workshop on the CAADP is being planned for first quarter of CY 2010.
MINAG, with donor support, is currently finalizing the PEDSA to
ensure that it is consistent with the CAADP framework.

30. USG Interagency Coordination - USG agencies at post coordinate
activities through a range of mechanisms. Mozambique has an "all of
government" Country Assistance Strategy (FY 2009 - 2014) which was
developed through a coordinated multiagency process and after
extensive consultations with stakeholders. Related to trade and
investment, the USTR-led USG interagency process for advancing the
Trade and Investment Framework Agreement between the US and
Mozambique involves 13 USG agencies (Commerce, Energy, Ex-Im, Labor,
interagency Economic Working Group meets regularly to discuss
economic policy, business, trade, and related areas. USG agencies
in Mozambique will collaborate with the Southern Africa Global
Competitiveness Hub for regional economic integration and trade
facilitation; and with regional representatives and programs of
USAID, USDA, Commerce and USTR.

[U1]Teresa: This appears to address the national level policy
dialogue while paragraph 24 addresses the local or district
dialogue. I think the salient point here is that our implementing
partners are also engaged in the policy dialogue. If that can be
captured elsewhere, that would be fine. Robert
[U2]Could this paragraph be eliminated or combined with no. 24?

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