Some good news from Mozambique: poverty levels have been reduced

Mozambique has recorded significant poverty reduction in recent years. REUTERS/Grant Lee Neuenburg

There has been a serious deficit of good news in Mozambique for quite some time. The recent release of Mozambique’s Fourth Poverty Assessment, based on a large nationally representative household survey conducted in 2014-15, provides a welcome shift. The report finds that, relative to the prior survey undertaken in 2008-09, significant gains have been made in Mozambique’s fight to reduce poverty and improve living conditions across an array of measures and approaches.

Over the last 25 years, Mozambique has nearly halved the share of its population consuming below a basic needs poverty line. Comparisons with other countries in Africa and elsewhere are also generally very favourable in terms of trends. Mozambique remains poor. But it is now approaching the living standard levels of other low income African countries, like Tanzania.

The report was released at the end of October in the midst of an unfolding macroeconomic crisis which was provoked by a number of factors. These include the reemergence of open hostilities between the ruling Frelimo party and its old foe, the opposition party Renamo.

The International Monetary Fund (IMF) and other international partners stopped disbursing funds to Mozambique after revelations that the previous government of President Armando Guebuza failed to disclose official backing of a series of large loans to state owned companies. And, the much lower world prices for coal and natural gas has reduced private investor enthusiasm.

Mozambique’s GDP growth in 2016 is expected to be about 3.6%. This will be its lowest by far since 2000. The currency has depreciated massively against the dollar. More expensive imports have stoked inflation, which is currently running at about 25%.

The current crisis reflects a collapse in confidence across a series of key relationships including between Frelimo and Renamo. Relations between the Mozambican government and its international donor partners and investors have been unsettled.

Most importantly, it is difficult to imagine that all this has not eroded people’s faith in the state’s ability to deliver on broadly shared development objectives.

Yet the poverty assessment reveals that, prior to the crisis, the country had achieved significant improvements in living conditions across multiple indicators. These include monetary measures such as household consumption plus an array of non-monetary measures related to education, water, sanitation, roofing, electricity and possession of durable goods.

Significant gains

The assessment considers poverty and well-being using two principal approaches. The first approach focuses on household consumption by determining a basket of goods corresponding to a basic living standard. The cost of acquiring this basket of goods is the poverty line. Households whose real consumption per person falls below the line are considered absolutely poor in monetary terms.

The second approach assesses whether broad based improvements are being realised across a series of non-monetary measures using the now broadly employed Alkire-Foster multidimensional poverty index as well as a complementary first order dominance approach (FOD). The FOD approach dispenses with the need for a weighting scheme across welfare measures by focusing on movement of the population towards unambiguously better living standards.

Across all approaches, a coherent story emerges. At the national level, welfare levels have improved compared with the prior survey undertaken in 2008/09. The share of the population living in monetary poverty (below the absolute poverty line) fell by about five percentage points. Even more rapid gains were realised for the non-monetary measures. Looking back to 1996/97, the gains in well-being, both monetary and non-monetary, have been substantial. These gains have been registered in rural and urban zones and in every province.

Data weaknesses, particularly undercounting of food consumption, militate against precise statements. Nevertheless, the monetary poverty rate in Mozambique likely falls in the range of 41% to 45% of the population. This is down from an estimated 80% in 1990. As such, Mozambique has come very close to achieving Millennium Development Goal 1. This called for a halving of the share of the population living in absolute poverty between 1990 and 2015.

The conclusion that poor households are progressing is strongly reinforced by the multidimensional analysis. For example, taking six basic dimensions of non-monetary welfare, nearly half of the population was considered deprived in all six dimensions in 1996-97. This means that nearly half the population lived in households where no member possessed at least a fourth grade education. In these households water access was unsafe, sanitation was inadequate, the roof was made of grass, there was no electricity and there were very few durable goods.

Further, only 2% of the population was considered not deprived in all six dimensions. By 2014-15, the share of the population considered deprived in all six dimensions had fallen to about 14% while the share not deprived in any indicator had risen to about 16%.

The Alkire-Foster multidimensional poverty index, shown in the figure below, comprehensively tracks the population considered deprived across multiple dimensions. Broad based improvements are evident.

Alkire-Foster multidimensional poverty index. 1996/97-2014/15. Fourth National Assessment

Much remains to be accomplished

The findings of the most recent poverty assessment are not all positive. In particular, the gains realised have not contributed to a convergence in welfare levels. The gap between rural and urban zones is large and at best persistent, if not aggravating. Living conditions in the south are much better than those in the north and the centre across almost all welfare dimensions considered and all methods.

In addition, the fruits of the rapid economic growth experienced since 1996 have been tilted towards wealthier households. Inequality of consumption has been increasing since 1996/97 with a particular spike since 2008/09. One of the best known measures of inequality, the Gini coefficient on consumption, rose to 0.47 in 2014/15 compared with 0.40 in 1996/97. This is a large increase from an initially relatively high level.

In sum, governance weaknesses in the Mozambican state and its failure to deliver a more equitable growth pattern must be balanced against a real record of achievement in the fight against poverty.

The hope is that this record emboldens all parties to begin taking concrete steps towards rebuilding a workable level of mutual confidence. Reestablishing key working relationships is necessary to achieving inclusive growth – the core policy challenge facing Mozambique in its economic and social development over the next decades.

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