Presentation Transcript

1. Competitiveness of Mozambican Agriculture October 2008
2. Executive Summary
3. CONTENTS Review economic indicators Discuss enabling environment Examine trends in investment landscape Present priorities and recommendations
4. Agriculture comprises a substantial component of the national economy, with small holders as the primary driver of production GDP (MM of MT) Agricultural production highly dependent upon the estimated 3.2 million small farmers, which account for 95% of total production The remaining 5% of production is attributable to roughly 400 commercial farmers, which tend to focus on cash crops and export products Source: InstitutoNacional de Estatística, FAO “Mozambique Factsheet”, 2007, SACD Trade Industry and Investment Review (2007/2008) **Note: Agriculture includes livestock, hunting and forestry
5. Agriculture production has grown at a health rate, however growth rates in the sector have been comparable to growth within the economy as a whole Compound Annual Growth rate of 8.1% between 2000 and 2007 Agriculture’s share of GDP has remained largely constant in recent years Source: InstitutoNacional de Estatística Note: Agriculture includes animal production, hunting and forestry
6. Add slide on number of different stake holders – commercial farmers, traders, small holders, agro-processors, financiers, etc.
7. Zambezia and Nampula account for the largest contributions to agricultural production, with nearly a half of total output derived from the two provinces Population, Millions, 2007 Large current production Share of agriculture production by province Percentage, 2006 High agricultural potential 1.1 1.7 3.9 3.9 1.6 1.4 1.7 1.4 1.4 1.1 1.3 20.4 45% Niassa, Manica and Sofala: high potential due to fertile soil, adequate rainfall and good water balance Production is well correlated with the distribution of population Source: INE; Team analysis
8. Despite the fact that agriculture is the largest sector of the economy in terms of output, it comprises only a small component of total exports Agricultural exports comprise only 16% of total exports, which pales in comparison to the contribution by fuels and mining products Despite the considerable growth in agricultural production in recent years, the country continues to be a net importer of agricultural products Merchandise exports Break-down by main commodity group 2006 Evolution of agricultural exports Vs agricultural imports from Mozambique Indexed 66% of total exports due to aluminum Source: WTO; FAO; Team analysis
9. The vast majority of the population depends on agriculture as the primary source of livelihood, overwhelming the case in rural areas Population distribution Primary Economic Activity Primary Economic Activity by Setting Non-Agriculture Urban Agriculture Rural Source: InstitutoNacional de Estatística Note : Economic Activity Chart refers to Distribuição Percentual da População de 15 e mais anos Empregada Por Conta Própria na Actividade Económica Principal, por Sector de Actividade - 2004/05
10. Lack of training and education among non-commercial producers negatively impacts opportunities for productivity gains within the agricultural sector Mozambique has the lowest literacy relative to neighboring countries… … and its work force is likely to remain the most unskilled in the forthcoming years Adult literacy rate Percentage, 2005 Combined elementary, secondary and tertiary gross enrollment rate Percentage, 2005 Source: Human Development Report (UNDP); Team analysis
11. Mozambique contains ample land suitable for agricultural production, yet sub-optimal utilization of land has resulted in untapped potential for increased output Less than half of the arable land is currently utilized for crop production However, much of the arable land not in use may lie in inaccessible or economically nonviable areas Irrigation systems are underdeveloped, negatively impacting crop yields Lack of sufficient irrigation systems also accentuates the negative impact of droughts and floods, which afflict much of the country** The extensive river network provides conditions suitable for considerable expansion of irrigation systems Opportunities exist to increase agricultural output through increased utilization of land as well as expanded irrigation systems ** Of the 128 districts, 30are “highly prone” to floods, 20 to droughts, and 7 to both floods and droughts (SACD Review) Source: FAO Mozambique Factsheet July 2007, SACD Trade Industry and Investment Review (2007/2008)
12. Commercial lending to agriculture lags behind nearly all sectors in terms of levels of credit relative to contribution to GDP Decreasing access to credit Insufficient access to credit in agriculture has negatively impacted levels of investment aimed at increasing output Source: Bank of Mozambique (credit figures for Dec. 2007) , InstitutoNacional de Estatística *Note: Agriculture includes livestock, hunting and forestry**Note: Construction includes public works
13. Foreign investment in agriculture has been inconsistent, inhibiting efforts to encourage development and fully tap into the potential within the sector Much of the investment in agriculture in 2007 is likely directed towards bio-fuels Manufacturing accounted for the majority of FDI in 2001 and 2002, but extractive industries have emerged as the primary target of FDI in recent years Source: Bank of Mozambique *Note: Figures include Equity Investment plus Supplemental Capital **Note: Extractive industries include coal, petroleum, gas and minerals ***Note: Figures shown include Agriculture, Livestock and Forestry
14. The low productivity in the agricultural sector is caused by a wide variety of factors Productivity in agriculture Low Productivity Causes of low productivity Traditional crops – use of modern seeds, inorganic fertilizers, pesticides and herbicides is uncommon Low technology methods – sparse use of mechanical traction and irrigation systems largely not used by small farmers Lack of education Underfunded infrastructure – geographically dispersed population, making provision of services and transport links difficult Minimal access to markets for supplies and products Underinvestment – difficulties in accessing capital Source: Nathan Associates, USAID/Mozambique Trade and Investment Project (TIP), Private Investment in the Agriculture Sector in Mozambique, June 2008, Draft / INE
15. CONTENTS Review economic indicators Discuss enabling environment Examine trends in investment landscape Present priorities and recommendations
16. Uncertainty surrounding foreign investment is attributable to some degree to challenges that exist within the business environment World Bank Ease of Doing Business Ranking: Selected Metrics Countries are ranked from 1-181 according to ten factors, with first place being the best ranking. A high ranking corresponds to an environment that is conducive to doing business Accessing credit is difficult in Mozambique relative to neighboring countries Nearly all SACD countries rank poorly in cross-border transactions Relative to South Africa, Mozambican businesses are considerably disadvantaged in nearly all metrics of the business environment Source: Doing Business 2009 Report, World Bank, covers the period from April 2007 – June 2008
17. Current strengths lie in investor confidence and property protection while constraints include accessing capital and employment issues Business environment evaluation Strengths Challenges Access to capital – difficulties for mid-size farmers in gaining capital (loans between $100k and $1MM) Employing workers – low productivity, rising minimum wage, high costs to reduce workforce Obtaining construction permits - may take upwards of 381 days Cross border trade Investor protection – strong rankings for transparency and shareholders rights Paying taxes – total tax rate low relative to region Opening a business – time to open a business is fairly short (26 days vs. 48 for Africa as a whole) Enforcing contracts Sources: Doing Business 2009 Report, World Bank, covers the period from April 2007 – June 2008, Team Analysis Source: USAID/Mozambique Trade and Investment Project (TIP), Private Investment in the Agriculture Sector in Mozambique, June 2008
18. CONTENTS Review economic indicators Discuss enabling environment Examine trends in investment landscape Present priorities and recommendations
19. Source: Source: (World Bank (2005b:9). World Bank staff estimates
20. Mandioca, milho e cana-de-ãçúcar são as culturas mais importantes em termos de produção Produção das Principais Culturas Alimentares, 2007/08 Produção das Principais Culturas de Rendimento, 2007/08 Change slide to compare current production to production potential – use Technoserve crop reports as basis for potential estimates Source: CEPAGRI Report, “AGRONEGÓCIOS EM MOÇAMBIQUE:OPORTUNIDADES E DESAFIOS” , 22 Septembro 2008
21. There are a number of growth opportunities for agro-business, a number of which have are competing in international markets Opportunities for agrobusiness growth Castanha de cajú and mandioca not included in opportunities? Source: CEPAGRI Report, “AGRONEGÓCIOS EM MOÇAMBIQUE:OPORTUNIDADES E DESAFIOS” , 22 Septembro 2008
22. Total amount of credit has remained largely constant over the past three years Among agricultural crops, cotton and sugar have had the greatest access to capital Source: Bank of Mozambique
23. Foreign direct investment (FDI) in agriculture does not exhibit any clear trends and does not constitute a large component of total FDI Source: Bank of Mozambique *Note: Figures include Equity Investment plus Supplemental Capital Note: Figures shown include Agriculture, Animal Husbandry and Forestry
24. CONTENTS Review economic indicators Discuss enabling environment Examine trends in investment landscape Present priorities and recommendations
25. CONTENTS Back-up slides
26. There are a number of challenges that currently face the private agro-business sector Discuss key issues and highlight them here Key Challenges Fracas infraestruturas nas áreas rurais (transporte, electricidade, etc.) Produção instável e, geralmente com standards de qualidade baixos para a exportação Níveis baixos de produtividade agrícola Problemas na fase pós-colheita: manuseamento, embalagens e altos custos de transacção Accesso limitado ao crédito para farmeiros Juros muito altos nos Bancos Comerciais (23% por ano em MT) Agricultura visto como sector de alto risco por os bancos Falta de experiência anterior em lidar com o mercado externo e procedimentos de exportações Necessidade de formação do pessoal não qualificado Falta de sistema de informação sobre os mercados nas áreas rurais Change section Source: CEPAGRI Report, “AGRONEGÓCIOS EM MOÇAMBIQUE:OPORTUNIDADES E DESAFIOS” , 22 Septembro 2008 Source:KPMG/Mozambique, Índice de Ambiente de Negócios em Moçambique/Business Confidence Index, No.19, 2008.
27. The largest provincial producers of agriculture are found within the northern provinces Mozambique Among the largest agricultural producing provinces, agriculture comprises approximately a third of the total local economies … Note: GDP figures shown refer to Precos Correntes Source: Instituto Nacional de Estatística
28. REGIONAL ECONOMIC INFORMATION IN MOZAMBIQUE (1/2) Population Millions, 2007 Area Thousand Km2 Per Capita GDP Thousands MT, 2006 Source: INE; Team analysis
29. REGIONAL ECONOMIC INFORMATION FOR MOZAMBIQUE (2/2) RSA Education enrollment rate Percentage, 2006 Life Expectancy 2006 Adult literacy Percentage, 2006 Human Development Index*, 2006 51 82% 0,67 77% * Mozambique ranks 172 out of 177 countries Source: INE; Team analysis