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"Mozambique is increasingly held up as one of the ‘success stories’ of the 1990s, but the Washington-based proponents of that line are increasingly having to distort history and present reality to make their story seem credible. . . " Hanlon looks at three examples: marking the way in which IMF claims about the Mozambican economic miracle present only a false facade; the extent to which Washington-imposed "good governance" actually increases corruption; and the manner in which history is being rewritten in order to prove that Chester Crocker and the United States saved poor Mozambique from the evil communists. He concludes: "What we have, in sum, is a growth industry in myths about Mozambique: the Yanks won the war and have imposed good governance and prosperity on the reluctant former communists - and if you can't see it that way, wait a bit so we can rewrite history and build better facades." (jbv)

vol 14 no 4

Mozambique notes
Joe Hanlon


Printable Version
 
Southern Africa Report

SAR, Vol 14 No 4, August 1999
Page31
"Mozambique"

MOZAMBIQUE NOTES

BY JOE HANLON

Joseph Hanlon is a journalist and writer on southern Africa. He is editor of the Mozambique Peace Process Bulletin (published irregularly; free by contacting j.hanlon@open.ac.uk) and is author of Peace Without Profit: How the IMF Blocks Rebuilding in Mozambique (James Currey, London, 1996).

Mozambique is increasingly held up as one of the "success stories" of the 1990s, but the Washington-based proponents of that line are increasingly having to distort history and present reality to make their story seem credible.

In these notes I look at three examples: marking the way in which IMF claims about the Mozambican economic miracle present only a false facade; the extent to which Washington-imposed "good governance" actually increases corruption; and the manner in which history is being rewritten in order to prove that Chester Crocker and the United States saved poor Mozambique from the evil communists.

Trickling down to prosperity

The IMF and World Bank are now citing Mozambique as their best success in Africa. On 29 October 1999 the IMF's senior Vice President, Stanley Fischer, held a southern Africa video press conference. In the televised press conference, Salomão Moiane, the editor of the weekly Savana, said "Mozambique has been mentioned in some IMF literature as an example in achieving a rapid macroeconomic stability and in keeping inflation at a very low rate. But when we look at the living conditions of the people of the country, we find that they are not improving."

Fischer replied, in effect, that he did not believe Moiane. "I would be very surprised if that rate of growth does not reach down - gradually, to be sure - through the economy ... It's hard to believe that with growth rates like this, which would mean that by the year 2000 the income per capita would be double in real terms [from] what it had been seven years ago, that that doesn't affect everybody in the country in some way, and that you'd be seeing that happening," Fischer said.

But on 16 April the Mozambican Catholic Bishops responded in a pastoral letter which said:

While recognizing the global growth of the Mozambican economy, in reality the conditions of life of the majority of the people have worsened in recent years. In effect, poverty and misery have increased to the point where people die of hunger.

Unemployment is increasing, particularly among youth. Thousands of citizens have lost their jobs due to the privatization of state companies without any policy to protect the old workers.

Salaries are truly at starvation level and have not accompanied the increasing cost of living. Prices of basic goods are prohibitively high, making it impossible for the majority of citizens to acquire the basic necessities for a dignified life.

All indications are that economic growth is concentrated in the Maputo corridor - Maputo itself and the area along the new toll road to South Africa - which contains the big projects such as the aluminium and iron and steel plants. The signs of prosperity in Maputo are clear - traffic jams, many grand houses under construction, and cable television. But this is growth for those who can afford cars and mobile phones, and not those who must walk and cannot afford radio batteries.

Of course there is some spin-off. More servants are being hired, for example, and peasants near the paved roads in the southern half of the country also have gained a bit. As a result, visiting consultants and IMF officials see what they think is real economic growth. But Frelimo activists in the north of Mozambique know the bishops are right; they are growing worried that when people are worse off than five years ago, they will vote for Renamo.

The IMF's reply came in its 30 June statement on debt relief: "Mozambique has been pursuing a wide-ranging program of economic stabilization and structural reform, which has been reaping impressive results. Market liberalization, completion of an ambitious privatization program, fiscal reform, and progress on public sector reform have contributed to strong economic growth."

The view from Washington is simply that the Mozambican bishops, journalists and Frelimo activists do not know what they are talking about.

Good governance = corruption

To hear the donors and northern parliaments tell it, poor country governments are all corrupt and incompetent. Britain's International Development Minister Clare Short has repeatedly stated that poor countries cannot be trusted with unconditional debt relief or aid because " `they' will waste it on Mercedes and palaces." Instead, poor country governments need to be forced to adopt "good policies."

Over the past decade, the International Monetary Fund (and, to a lesser extent, the World Bank) have succeeded in creating the image that the policies they impose are "good policies." The hegemony of this view is now absolute; even relatively progressive northern government ministers, officials and legislators (and many in the south) accept unquestioningly that "good governance" is synonymous with IMF structural adjustment policies.

Yet in Mozambique it is clear that IMF policies have increased corruption and led to poorer governance. In the early 1990s the IMF demanded that front-line civil servants be paid wages below the poverty line (in line with IMF views that to work harder, their own staff and the rich must be paid more, but that poor country workers and the poor in general will work harder if they are paid less). The effect, not surprisingly, was that civil servants had to find other sources of money to feed their families - some stole time and were hardly ever seen as they found other ways to earn a living, others stole government resources (either directly to sell, or, say, in the case of government cars to use as taxis), while others took bribes. The World Bank, IMF, UN and donor community then compounded the process by paying money to civil servants to work for outsiders on consultancies, or to attend conferences, during time they were supposed to be working for the government. Thus IMF "good governance" created a climate of petty corruption and demoralization.

Next, the IMF said Mozambique could not rebuild after the war until inflation was controlled, and that government - and donors - could not spend money on reconstruction. Donors, particularly the Nordics, had big budgets that they had to spend and also saw that IMF policy was wrong. So they encouraged government ministries to keep the money "off budget" so that it could be spent without the IMF finding out. As the IMF became better at finding hidden money but as, simultaneously, it became ever more obvious that it was essential to spend on rebuilding no matter what the IMF said, the tricks of the donor became more sophisticated. Not surprisingly, some government officials realized that it was easy to take a slice of this "off budget" money for personal use. Now some donors, notably the Nordics (not the same people, of course, because aid staffs change and there is no institutional memory), are complaining about lack of transparency and money going astray. Again, IMF imposition of its view of "good governance" helped create a climate of corruption and dishonesty.

The most recent case in point is the IMF's bizarre obsession with Value Added Tax (VAT, IVA in Portuguese), which it is trying to impose on all African countries (including Rwanda, the IMF announced in June). In principle, VAT is - as the name indicates - a tax only on the additional value at each stage in the process. So if a shopkeeper buys an item at $9 and sells it at $10, they pay tax on only $1. By contrast, flat rate sales tax or turnover tax, as had been used in most African countries, require the first seller to pay a tax on the wholesale value of $9 and the shopkeeper to pay a tax based on the entire retail value of $10 - what is known as a cascading tax because the same item attracts a tax several times, and in later stages there is tax on the tax.

VAT is said to be fairer, and it is said to encourage exports because VAT need not be charged on exports. However, it is a tax designed by accountants - it requires much more complex bookkeeping, because the shopkeeper in fact pays VAT on the whole $10 but then reclaims the VAT paid on the first $9.

In African countries, few businesses have standards of record keeping sufficient to make VAT work, and governments also lack the skilled tax inspectors required. In South Africa, for example, the level of VAT fraud is massive, according to the tax authorities.

In the mid1990s, Mozambique had come to an agreement with the business community to introduce a simplified turnover tax that reduced the cascade effect and would be easier to implement. The main goal was to bring within the tax net the parallel economy - particularly street and market traders and very small workshops - who were not paying taxes but who constitute a big section of the economy.

But the IMF rejected the deal, and said Mozambique must introduce VAT. Government and business both objected, and even the donor community said it was a bad idea. But the IMF said "good governance" demanded VAT. Government dragged its feet, so the introduction of VAT finally became a condition of HIPC debt relief - and it had to be introduced in 11 months. The system was finally introduced in some chaos on 1 June this year, so that Mozambique would qualify for debt relief by 1 July.

It is too early to know the outcome, but many observers predict a boom in corruption. At the sophisticated end will be VAT fraud (mainly claiming VAT rebates on exports not actually made or inputs not actually purchased). But for smaller businesses and the parallel sector it will mean that they simply cannot cope. This, in turn, will cause a big increase in the kind of corruption that already exists, where small traders are forced to pay bribes to tax inspectors. Thus the IMF has effectively rejected a government attempt to formalize the informal sector, and instead has further pushed it into illegality.

It is hardly surprising that many in Mozambique think that IMF "good governance" means increasing corruption, and assume that their misunderstanding of the phrase "good governance" is because their English is not very good.

Rewriting the history of the war

The United States Institute of Peace (USIP) and the chair of its Board, Chester A. Crocker, are actively engaged in trying to rewrite the history of the Mozambique war and retrospectively justify and inflate the US role in it. The USIP is funded by the US government and its board is appointed by the President of the United States, so its position is clear.

A 1994 USIP book by Cameron Hume ( Ending Mozambique's War) tried, against all evidence, to argue that the US played a key role in the Rome talks. (Other reports show that the mediators made extensive and successful efforts to keep the US at arm's length.)

Crocker himself gave extensive interviews to Hans Abrahamsson for his published thesis ( Seizing the Opportunity - Power and Powerlessness in a Changing World Order - The Case of Mozambique, Padrigu, Gotenburg University, 1997), leading Abrahamsson to conclude that Crocker's "constructive engagement" policy in the region was, perhaps, not as bad an idea as we all had thought. In particular, Crocker has convinced Abrahamsson that it was not US policy that encouraged South Africa into its harder line and attacks on Mozambique in the early 1980s!

Next came the USIP's commissioning of journalist Richard Synge to write the book Mozambique: UN Peacekeeping in Action 1992- 94. Synge is a good journalist and he has much new material on the UN in Mozambique. But USIP's choice of a non-Portuguese speaking writer for the study may not be accidental, because it makes him reliant on US and British diplomatic sources for his background on the war. The effect is a subtle rewriting of history, to make the two sides in the "civil war" equal in history, goals and conduct.

This same process goes much further in a USIP-funded study by Stephen Chan and Moises Venancio ( War and Peace in Mozambique, Macmillan (UK) and St Martin's (US), 1998). Chan and Venancio do not disguise their hostility to Frelimo. They claim that in the late 1970s under Frelimo "people began to disappear in large numbers" and that in the 1980s "government soldiers disguised as Renamo would perpetrate attacks on civilians." Their references for these claims are no more than the increasing famous unidentified "diplomatic sources."

USIP is using its money and access to diplomatic and security archives and people to rewrite the history of Mozambique's war -and to retrospectively justify a United States policy that was partially responsible for the deaths of a million people in Mozambique. The Cold War is over, and the winners are rewriting history.

* * *

What we have, in sum, is a growth industry in myths about Mozambique: the Yanks won the war and have imposed good governance and prosperity on the reluctant former communists - and if you can't see it that way, wait a bit so we can rewrite history and build better facades.

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