Agricultural Growth and Poverty Reduction in Mozambique: Technical Analysis in

Support of the CAADP Process

Karl Pauw (IFPRI)

James Thurlow (UNU-WIDER)

Rafael Uaiene (MSU)

John Mazunda (Independent)

Objectives of the study

Conduct CGE analysis of the economywide implications of accelerated agricultural growth on national/regional growth, poverty reduction, and caloric availability

Help policymakers understand

− the nature of economic linkages between agriculture and other sectors;

− the socio-economic importance of the agricultural sector;

− implications of regionally-focused policies under PEDSA;

− how to better integrate agricultural development policies into the broader development strategy for Mozambique

Introduction and context

Very rapid GDP growth during 2003-2008 (8%), with strong growth across all sectors.

Agriculture also performed strongly (7%)... at least according to national accounts

What about poverty?

Survey year

Nat-ional

Location Region

Urban Rural North Center South

2002/03 54.1 51.5 55.3 55.3 45.5 66.5

2008/09 54.6 49.5 56.8 46.3 59.7 56.8

Explaining the growth-poverty disconnect (Arndt et al. 2011)

1. Food and fuel price shocks: − Prices peaked in 2008 when survey data was collected

− High import intensity = vulnerable to shocks

2. Drought in 2008 affected central region in particular:

− 16-17% yield shock for key staples

3. National accounts agricultural statistics doubted

− Early Warning System estimates used until 2009

− TIA used since 2010; considered more reliable but paints a much gloomier picture for 2002–2008

Model scenarios

CGE model (base year 2007) used to compare two alternative growth paths during 2009–2019 (PEDSA implementation period)

“Baseline scenario”

− Assume Mozambique continues along the same growth trajectory

− Need to understand what exactly happened

“CAADP scenario” − Broad-based agricultural growth across all subsectors

− PEDSA targets high-potential areas in center and north

− Growth target of 7 percent achieved

Lessons from “yield analysis”

Stagnant crop yields; land expansion just matched population growth; decline in per capita staple crop production.

Regional differences:

− North: high potential, but sharp decline in yields; very rapid land expansion

− Centre: relatively strong yield growth despite drought impact; land expansion rate exceeds population growth

− South: some crops (e.g., cereals) performed adequately, but average yields remain very low and land expansion slow

Institutional factors: 2000s more about restructuring institutions and developing agricultural policies, and not so much about developing agriculture

Example: Cereal crop yields (2002–2008)

National GDP at factor cost

GDP shares (%)

Growth 2009-2019

Base CAADP

Total GDP 100.0 5.7 6.8

Agriculture 26.7 3.4 7.0

Cereals 7.5 3.8 8.5

Root crops 5.3 3.8 6.0

Pulses 3.2 3.3 7.9

Horticulture 2.6 2.0 4.3

Export crops 1.2 3.7 5.3

Livestock 1.9 3.1 6.9

Industry 26.1 5.3 5.3

Services 47.2 7.1 7.5

Regional agricultural GDP at factor cost

Agric. GDP

shares (%)

Growth 2009-2019

Base CAADP

Agricultural GDP* 100.0 3.5 7.1

Northern region 25.9 1.0 7.6

Central region 57.6 4.6 7.6

Southern region 16.5 2.8 4.2

* Crops and livestock only; excludes forestry and fisheries

Yield effects (selected crops)

Initial yield

(2009) (mt/ha)

Yield achieved by 2019

% change 2009-2019

CAADP Base CAADP

Maize 0.9 0.9 1.3 43.7

Sorghum 0.6 0.8 0.8 39.1

Rice 1.0 1.3 1.5 40.4

Cassava 8.4 12.1 14.2 67.9

Pulses 0.7 0.6 1.0 49.2

Groundnuts 0.3 0.3 0.5 46.8

Vegetables 5.0 4.8 6.3 25.3

Sugarcane 12.2 9.8 15.8 29.6

Cotton 0.5 0.4 0.6 36.7

Poverty and calorie deficiency rates

2009 2014 2019

Poverty Base

54.6 51.0 46.8

CAADP 45.2 36.1

Calorie deficiency

Base 49.5

45.5 40.2

CAADP 41.0 32.6

Conclusions

Neglecting the agricultural sector has proven to be damaging to poverty reduction efforts and food security

An agricultural revival is needed if Mozambique is to achieve agricultural growth and poverty reduction goals

Yield targets for achieving 7% growth are reasonable and within reach

Prioritization is important as crops differ in terms of their effectiveness in contributing to growth, poverty reduction, or nutrition

Policies that target only “breadbasket” regions may lead to unequal outcomes

Final remarks: Agriculture and the broader development strategy

Does agriculture run the risk of Dutch disease (the “resource curse”)?

What are the potential spillover effects for agriculture from investments in “development corridors”

Development corridors: east-west versus north-south? − CGE results: even under CAADP scenario we still see

significant gains for households in the south is the

“common national market assumption” valid?