Strategic privatisation: rehabilitating the Mozambican sugar industry

Abstract

This article argues that the rehabilitation of the sugar industry in Mozambique cannot be understood without including the active role played by the state and government. It focuses on key aspects of why and how the Mozambican sugar industry was rehabilitated after 1996 with and through foreign direct investments. It challenges the externalist literature on Mozambique that has commonly argued that all policy decisions are enforced by the pressure of well-meaning donors and/or ignorant international financial institutions preparing the ground for large international corporations through neoliberal policies, privatisation and structural adjustment programmes. There can be no doubt that donors in general, international financial institutions, and international capital have had and continue to have considerable influence over economic and industrial policy in Mozambique, but externalist accounts of various persuasions have limitations and tend to present accounts of the Mozambican state and government solely as victims instead of active players.

Keywords:

• elites
• productive sectors
• sugar industry
• bureaucracy
• politics

Acknowledgements

Thanks to the participants in the Elite, Production and Poverty research programme (EPP) and those at the African Studies Association, UK, meeting held at St Antony's College, University of Oxford, who shared their generous comments. We are particularly grateful to Lindsay Whitfield, Mette Kjær, Ole Therkildsen, Jan Kees van Donge, Alison Stent and Gary Littlejohn, as well as the two anonymous reviewers, who commented so helpfully on the article in draft form. The usual disclaimers apply.

Notes

Furthermore, there is, despite the relevant critique of SAPs and liberal reforms, a ‘certain intrinsic value in such features as reining in runaway budget deficits, an end to state monopsony, an export-oriented foreign exchange regime, a measure of privatization, and reduced tariffs on industrial and agricultural inputs‘ (Taylor 2007, p. 9).

Interview with the Investment Promotion Centre (CPI), April 2010.

As the Ministry of Planning and Development has argued over the last year, productivity has been constantly low. The food and cash crop sub-sectors of the agriculture sector grew primarily through area expansion and an increase in the labour force, with a large increase in cultivated areas in the central region after the General Peace Accord in 1992 and the first national multiparty elections in 1994.

This article is based on fieldwork carried out in Mozambique between February 2008 and February 2011 as part of the Elites, Production and Poverty (EPP) research programme (http://www.diis.dk). The methodology for the Mozambican part of the EPP involved archive studies, open-ended, semi-structured interviews with relevant actors combined with participatory observation. The main aim was to understand why the rehabilitation policy of the industry was considered desirable and how it was made feasible.

In general, we follow Haggard et al., (1997, p. 38) and differentiate between government as a shifting and relatively temporary collection of political leaders, while state officials/personnel are the more or less permanent bureaucracy of the public sector.

Interview with management, Marromeo, 2009.

One can argue that this position forms part of the ‘common suspicion‘ that state and business relations attract across quite diverse theoretical positions, be they liberal or Marxist/socialist in orientation, as illustrated by Schneider and Maxfield (1997, pp. 3-5).

Interviews, 2009, 2010.

Interview with National Sugar Distributor director, 2008.

Interview with former Minister of Finance and Prime Minister Luisa Diogo, June 2010.

A preferential trade arrangement with the United States – amounting to 1.3% of total US imports – allowed Mozambique to export between 14,000 and 26,000 tonnes during the 1990s, stimulating a small increase in production (INA 2001, p. 4).

Interviews with Luisa Diogo, 2009, 2010.

Interestingly, the continued co-ownership by the Mozambican state has not been included in any of the discussions of the privatisation of the sugar industry (the few studies include Gode 1997; Castel-Branco et al. 2001; Castel-Branco 2002, 2008) or privatisation in general (Pitcher 2002).

We here follow Khan (2000a) in so far that rents based on transfer are ‘rent-like incomes … created by transfers organized through the political mechanism’ (p. 35).

Interview with DNA, 2008.

Interview with the former Director, October 2010.

This now seems to be happening, 15 years later. On 3 March 2011 it was announced that Buzi would be rehabilitated at a cost of US$120 million before 2014 by way of a Portuguese investment group led by Jorge Petiz.

Interview with Sofala, 2011.

For this reason, starting in October 1999, the sugar industry benefited from a five-year regime of full exemption from customs duties and taxes on a range of equipment and material associated with the project, including on foreign investors' and staff members' personal belongings.

It follows the formula: sobretaxa = preco de referencia – preco CIF (calculated price) (INA 2000, p. 14). It is INA that ‘calculates and publishes indicative c.i.f. prices for both raw and white sugar, based on prevailing … world market prices (including transport costs locally) … and a margin of USD80/tonne for freight and insurance …’ (LMC and Global Sugar Consulting 2000, p. 2).

Interview with Luisa Diogo, 2009, 2010.

Interview with General Secretary OTM, 2008.