Context and intervention area
Over the last two decades, Mozambique has been experiencing one of the strongest economic growths in Africa. This is due, in part, to the dynamic of country’s reconstruction, which was strongly supported by the international community.
The recent discoveries of gas and coal should significantly change the economic structure of the country by 2025: the country’s GDP has reached USD 15.9bn in 2014 and is expected to grow at a rate of 8% per year over the next decade.
However, the strong economic growth in Mozambique contrasts with the slow pace of poverty reduction and the evolution of the country social indicators: over 80% of the 24 millions of inhabitants still live on less than two dollars a day, and Mozambique’s Human Development Index (2013) is ranked 178th out of 187 countries.
Mozambique faces the challenge of an inclusive growth, which lies mainly in improving the population’s access to infrastructure and basic services.
AFD started its activities in 1981, and Maputo Agency was opened in 1985. In 30 years of activity, the total volume of AFD’s financings in Mozambique (including its subsidiary PROPARCO) has reached 1 billion Euros (30% in grants; 26% for the energy sector). In the last 4 years, AFD approved an average of €50m of financings per year and a maximum amount of €85m in 2013 (mainly 3 loans to the government).
The AFD Group in Mozambique intervenes with a range of financial instruments: grants, loans to state-owned or private companies, bank loans guarantees, and participations in private companies (through its subsidiary PROPARCO) that allow the Group to support a wide range of actors in the socio-economic development of the country.
AFD is also responsible for the implementation of the Contract for Debt Reduction and Development (C2D) on behalf of the French’s state. Through the C2D, AFD contributes to General Budget Support to Mozambique and participates in the associated group of donor coordination which structures the dialogue between the Mozambican authorities and the community of donors. Beside infrastructure projects, AFD funds projects in the vocational, environment and health sectors. Moreover, AFD supports the private sector through guarantees granted to the main banks of the country in order to accompany the development of the SME sector, and through its subsidiary dedicated to the private sector, PROPARCO.
Finally, AFD supports French NGOs (ESSOR, Douleur Sans Frontières, Inter-Aides) through dedicated grant fund managed from Paris.
AFD’s priorities are consistent both with the Mozambican development priorities as stated in the national five year plan (2015-2019) and the French priorities of cooperation in Mozambique:
• Human and social capital development (vocational training/C2D, NGOs);
• Job creation, productivity and competitiveness (support to the private sector, ARIZ, PRCC);
• Economic and social infrastructure development (73% of the 2005-2015 financings);
• Sustainable and transparent management of the natural resources and the environment (support to the country’s protected areas, FFEM).
Infrastructure: an historic sector of intervention
Mozambique has adopted a policy which promotes the development of infrastructures, in order to stimulate the local economy, and improve directly the living conditions of the population through the provision of basic services. AFD accompanies this policy in key fields such as energy, drinking water in suburban zones, transports and health. The main partners of AFD are the state-owned companies: energy (EDM), water (FIPAG), telecommunications (TDM), airports (ADM), and the power transmission company MOTRACO.
Through its financings, AFD contributes to:
- Providing additional 36 GWh per year of renewable energy at a low cost: AFD finances through a 50M€ loan the rehabilitation of two hydroelectric dams (located in Mavuzi and Chicamba), that will ensure the supply of electricity at low cost in Mozambique.
- Securing the provision of electricity to Mozambique through the exploitation of the gas resources of the country: AFD finances the 40M$ participation of EDM in the PPP (public private joint venture) created for the building of a 170MW gas power plant.
- Connecting over 100,000 persons to the electric grid: AFD cofinances the EDAP project through a 20M€ loan to improve access to power in areas in Maputo and Pemba where most of the households are not yet connected to the electric grid.
- Providing access to drinking water in the suburbs of Maputo to 830,000 persons: AFD finances, though an initial grant of 7M€ and a 40M€ loan, the rehabilitation and extension of the Maputo and Matola water distribution systems to connect 73% of Maputo’s population and its surroundings (compared to 40% 6 years ago).
- Improving the provision of health services in the central region of Sofala (population of 780 000 people): AFD cofinances the construction of two hospitals in the central province of Sofala (12M€ loan).
In addition, in 2014, a 25M$ loan was granted to the group “Aga Khan Educational Services Mozambique” for the building of an educational complex in Matola/Maputo.
Protection of the natural capital: a very important asset for Mozambique
With more than 10,000,000 ha of protected areas, Mozambique intends to foster conservation and sustainable use of its natural resources (tourism, sports hunting, carbon sink…) as a driver for economic development. Accordingly, AFD supports projects combining biodiversity protection and local development projects in favor of rural areas where the level of poverty is especially high.
AFD finances through grants three protected areas (Limpopo, Quirimbas and Gilé). These areas represent 2,000,000 ha of natural resources protected and sustainably used so as to be a basis for the development of more than 300,000 people. AFD also funds pioneering actions (fight against poaching, climate change adaptation, biodiversity offset).
Because of the change of the IMF ranking of Mozambique, AFD can no longer provide sovereign loans. Thus AFD, in line with its priorities, will focus on projects eligible to financing without any government guarantee. Several projects are being appraised in the sectors of renewable energy, gas, transport, water, agriculture, education and health. Moreover, AFD intends to develop its guarantees for SMEs (ARIZ mechanism) in partnership with the local banks. As for PROPARCO, it is considering PPPs, private infrastructure projects as well as financings to banks.
Finally, the AFD will implement the last C2D tranche (2015-2019, 21,5M€) that will be dedicated to global budget support (GBS), vocational training and support to the protected areas of Mozambique.
These new projects aim at supporting a sustainable and inclusive growth; through an increased access to basic services, job creation, vocational training and a sustainable management of the natural capital of Mozambique.