VZCZCXRO5901
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHTO #0046/01 0121610
ZNR UUUUU ZZH
R 121610Z JAN 10
FM AMEMBASSY MAPUTO
TO RUEHC/SECSTATE WASHDC 1178
INFO RUCNSAD/SADC COLLECTIVE
RUEHLO/AMEMBASSY LONDON 0588
RUEHRC/DEPT OF AGRICULTURE WASHDC
RUEHLMC/MCC WASHDC

UNCLAS SECTION 01 OF 05 MAPUTO 000046 
 
SIPDIS 
 
STATE FOR C AND EEB/TPP/ABT 
 
E.O. 12958: N/A 
TAGS: EAID EAGR ECON ETRD PREL PGOV KDEM MZ
SUBJECT: GLOBAL HUNGER AND FOOD SECURITY INITIATIVE: MOZAMBIQUE 
 
REF: STATE 127466; STATE 124059 
 
MAPUTO 00000046  001.2 OF 005 
 
 
¶1.  SUMMARY: With untapped economic potential and high levels of 
poverty and malnutrition, Mozambique merits consideration for 
inclusion in the Global Hunger and Food Security Initiative (GHFSI). 
 However, based on current discussions about overall USG assistance 
levels in relation to heightened democracy and governance concerns, 
increasing corruption, lack of transparency, and the Government of 
Mozambique's failure to utilize some existing agricultural financial 
resources already available, Post recommends that Mozambique's 
initial participation in the GHFSI take place within the current 
resource levels.  This would mean using already-funded ongoing 
activities to improve nutrition, agricultural production, rural 
enterprises, infrastructure and human capacity to pursue GHFSI 
objectives.  Should the GRM show concrete progress on USG concerns 
in the coming months, increased funding levels could then be 
considered.  Effectiveness of programming to improve food security 
at any level will require policy actions by the GRM, including: 1) 
developing a food security investment plan as part of the 
Consolidated Africa Agricultural Development Program (CAADP); 2) 
expanding access to agricultural inputs of finance, fertilizer, 
improved seed and important extension services; 3) diminishing 
barriers to trade efficiency and private sector investment; 4) 
improving nutrition standards; 5) ensuring sustained support for 
priority infrastructure from local and provincial governments; 6) 
developing human capacity focused on entrepreneurship and business 
skills, and; 7) strengthening the existing capacity to respond to 
natural disasters and threats to agriculture from global climate 
change.  Post has engaged the government on these issues at various 
levels with varying degrees of receptivity.  These policy issues 
will inform our deliberations in donor fora and sector working 
groups.  MCC's program to address land tenure issues directly 
addresses a critical policy issue and USAID programs with key 
business associations and civil society organizations are focused on 
priority actions to improve the business environment.  END SUMMARY. 
 
------------------------------- 
GHFSI AT CURRENT FUNDING LEVELS 
------------------------------- 
 
¶2.  International indicators from respected observers such as 
Transparency International and Freedom House point to increased 
corruption and a reduction in the democratic space in Mozambique. 
The actions of the GRM that limited participation of opposition 
parties in the run-up to the October 28 general elections highlight 
a deteriorating general policy environment and are cause for 
concern.  Given that current USG funding levels are likely to 
surpass $400 million in 2010, and that the USG is already the 
largest donor to the country, Mozambique's initial involvement in 
the GHFSI may best be contemplated within a framework of maintaining 
current levels of funding for proposed activities as opposed to 
providing major increases at this time.  Should the GRM show 
concrete progress on democracy and governance in the coming months 
however, increased funding levels could then be considered. 
Furthermore, most of the key economic policy issues associated with 
the implementation of this initiative in Mozambique are not/not 
dependent on increased funding levels and action on key reforms 
would pave the way for greater impact with any future increase in 
resources under this initiative.  These policy issues are 
highlighted in the draft Implementation Plan for Mozambique in 
relation to the five core investment areas.  In each core investment 
area, in order to maximize progress toward improved agricultural 
production and greater food security, USG staff and programs would 
engage the GRM to promote the necessary policy actions or reforms. 
 
-------------------------------------------- 
Core Area 1: Improve Productivity of Farmers 
-------------------------------------------- 
 
¶3.  Pursue Mozambique's development of a strategic vision, priority 
investment plan, and performance measures under the Comprehensive 
African Agricultural Development Program (CAADP) process.  A core 
principle of the GHFSI is that national food security efforts must 
be led by the host country.  For countries in Africa, implementation 
plans should build upon and reflect the development principles and 
processes of CAADP.  The CAADP plan should include prioritized 
investments, supporting policy agenda, and results based performance 
measures while taking into account potential effects of climate 
change on agriculture and disaster vulnerability.   Mozambique has 
not made significant progress in implementing the CAADP process, but 
has developed various strategies that can be integrated and 
harmonized to serve as the foundation for this effort, including the 
Green Revolution Strategy, the Food Action Plan, and the draft 
10-year Agricultural Sector Development Strategy (PEDSA).  Analysis 
done by USAID, MCC, the World Bank, and others also contribute to a 
strong foundation for advancing the CAADP process. 
 
¶4.  Land tenure - All land in Mozambique is owned by the state which 
 
MAPUTO 00000046  002.2 OF 005 
 
 
issues usage rights to individuals and corporations.  This system 
has led to uncertainty about land tenure rights for investors and 
traditional occupants of land parcels.  Such uncertainty has limited 
the use of land as collateral to obtain credit for capital 
investment and working capital.  Proposed reforms to include 1) 
establishing a mechanism to allow the usage rights documentation to 
serve as the basis for using land as collateral, 2) streamlining the 
transfer of land use concessions, especially in rural areas, by 
simplifying or eliminating the cumbersome government approval 
process, and 3) reforming the land tax system to improve revenue 
collection and to encourage users to make productive investment. 
 
¶5.  Farmer associations & cooperatives - A very good law governing 
associations and cooperatives was passed last year. However, it 
requires development and implementation of regulations to put this 
law fully into effect and the USG will encourage the Government of 
Mozambique to accelerate an awareness campaign to ensure district 
officials are able to implement the new policy. 
 
¶6.  Fertilizer - Low use of fertilizer in Mozambique is primarily 
due to limited access and prices that are beyond the means of most 
small farmers.  Policy reforms to address these constraints include 
1) eliminating the 2.5 % fertilizer import tax, 2) removing 
restrictions on transit of fertilizers within the country for 
domestic use, and 3) establishing a clear policy on whether 
fertilizer subsidies should be used to increase fertilizer access by 
smallholder farmers in rural areas. 
 
¶7.  Agricultural extension - The technology transfer that is a 
centerpiece of the Mozambique Implementation Plan requires an 
expansion of agricultural extension efforts involving both the 
government and private sector.  The size and focus of government 
extension efforts is still a matter of policy debate and will need 
to be part of overall planning efforts. 
 
¶8.  Disaster Vulnerability reduction and Preparedness:  The USG will 
continue its coordination with the Government of Mozambique and 
other donors to implement the National Disaster Management Agency's 
policies regarding preparedness for flooding along Mozambique's 
rivers, as well as the development of village level 
disaster-management prepared committees to respond to other natural 
disasters, such as cyclones.  Food insecurity in the southern 
provinces of Mozambique remains as a policy issue to be tackled, 
given that the political will to reform the necessary food security 
policies is not yet in place.  For example, the Ministry of 
Agriculture is focused on encouraging the production of wheat in 
agricultural areas, including the south, where such production is 
not feasible or economical.   Moreover, the donor community has not 
coalesced around the issue of food security for the southern 
provinces.  The USG continues its efforts to develop a donor working 
group which would be prepared to take on this issue and encourage 
the Government of Mozambique to undertake a major reform of its 
policies that would lead to food security for the southern 
provinces.  However, as the national highway linking the central and 
northern provinces (where the surpluses are grown) with the southern 
districts in Mozambique will be fully rehabilitated in 2012, the 
timing to shape the most appropriate policies to address food 
security for the southern provinces will be clearer at that point. 
 
--------------------------------------------- -------- 
Core Area 2: Improve Opportunities and Incentives for Entrepreneurs 
and Investors 
--------------------------------------------- -------- 
 
¶9.  Trade - Trade issues have been central issues in the private 
sector's current dialogue with the government related to "Doing 
Business" reforms but movement has been slow.  The continuing 
recommendations to include 1) opening sea freight competition to 
allow domestic shipping, 2) reducing time required for imports and 
exports by eliminating the pre-shipment inspection and introducing 
an electronic payment system between importers, freight forwarders, 
dispatch agents and customs (single window), 3) reducing port 
handling charges, including the requirements and unreasonable costs 
for scanning incoming freight, and 4) expanding air transport 
competition and decreasing taxes and fees for airlines and 
passengers 
 
¶10.  Finance - Banks in Mozambique have been conservative in their 
lending and reluctant to finance agricultural projects and 
agri-business enterprises.   Interest rates are high and banks 
prefer to purchase relatively risk free treasury bonds rather than 
make loans.  Policy reforms to address these constraints include 1) 
creating a second-tier bond market to open new avenues for financing 
larger domestic businesses and create competition for banks in 
dealing with traditional clients, 2) introducing new banking 
regulations on commissions and fees that enhance transparency in the 
banking system, and 3) amending an existing policy to broaden the 
set of borrowers who can qualify for loans in foreign exchange. 
 
MAPUTO 00000046  003.2 OF 005 
 
 
 
¶11.  Labor - Though a new labor law passed in 2007 offers mechanisms 
to streamline and simplify labor requirements, the intended benefits 
have not been realized.  Working with the new government, efforts 
will focus on 1) improving implementation of regulations, including 
automatic approval of work permits for expatriate workers within the 
labor law's quotas and 2) reducing the cost of termination in line 
with other SADC countries. 
 
--------------------------------------------- ----- 
Core Area 3: Improve Consumer Access to and Use of Nutritious Food 
--------------------------------------------- ----- 
 
¶12.  Fortification of staple foods - Should our P.L. 480, Title II 
program be restored to its original five-year design, it would 
overlap during the first years of the Global Hunger and Food 
Security Initiative, and the USG is prepared to work closely with 
the five major millers (purchasing the Title II and Food For 
Progress wheat) and the Ministry of Industry and Commerce to begin, 
on a pilot basis, the fortification of wheat before it is used to 
produce bread and pasta products for domestic consumption.  We 
believe that Mozambique, with assistance from the donor community, 
is open to adopting the same fortification standards in use in the 
Republic of South Africa.  This step will be a major milestone in 
improving nutrition standards for all Mozambicans (rural and 
urban). 
 
¶13.  Climate Change Mitigation: The USG has ongoing programs focused 
on adaptation to climate change at the national, local and community 
level.  These include developing research systems for determining 
agricultural vulnerability, improving agricultural extension methods 
in rural areas and the introduction of drought tolerant crops. An 
additional objective is to establish a clear policy for the 
promotion of specific conservation farming practices in the 
different agro-ecological zones of Mozambique together with a 
clearinghouse for information on these best-practice methods. 
 
¶14.  Prevention programs for malnourished children/pregnant women - 
The USG would work with both the Ministry of Health and the Ministry 
of Women and Social Action to encourage the adoption of the 
successful approach taken in our P.L. 480, Title II program.  This 
program encourages mothers to make their own enriched porridges from 
locally grown products as an acceptable substitute for the 
distribution of imported commodities such as corn-soy blend (CSB). 
The use of enriched porridges for all children under the age of five 
helps to prevent malnutrition, as opposed to being used as part of a 
treatment plan for only those who are already malnourished.  This 
approach is sustainable and makes better use of crops already being 
grown in the rural sector - where access to a product such as CSB 
would be difficult. 
 
¶15.  Training in Nutrition for Community Health Workers - Community 
Health Workers must be trained to respond to a variety of health 
needs in the community, such as HIV/AIDS, family planning and 
maternal/child health.  The Ministry of Health is reviewing its 
policy to determine which health sectors will be included and the 
curriculum to be provided to ensure proper standardization in all 
training programs.  The USG, with other donors, is participating in 
discussions with the Ministry of Health in its policy review. 
 
----------------------------------------- 
Core Area 4: Improve Rural Infrastructure 
----------------------------------------- 
 
¶16.  Provincial Budgeting:  Past agreements with provincial 
representatives of the National Roads Authority (ANE) to maintain 
newly constructed or rehabilitated farm-to-market roads have failed 
because sufficient funds are not available to the provincial ANE. 
As this problem involves the budgeting process of Mozambique, the 
USG will (1) work with Provincial Governors where farm-to-market 
roads will be targeted to secure agreements that the provincial ANE 
budgets are sufficiently funded;  (2) urge district administrators 
to allocate a portion of their 7 million meticais budget for local 
infrastructure maintenance; and (3) continue to push with other 
donors at the national level to have the fuel tax, which is for road 
maintenance, audited regularly to ensure transparency and proper use 
of the funds.  Collectively, these efforts should address the issue 
of timely payments from government authorities to contractors. 
 
¶17.  Road classification and timely payment for maintenance: Each 
province in Mozambique maintains a classification system whereby 
road maintenance is scheduled and prioritized.  Previously, many 
farm-to-market roads were not included in the classification 
exercise and, therefore, were not maintained.  The USG will seek to 
work with the Provincial Directorate for Roads and Bridges (DPEP) to 
reclassify roads with the inclusion of farm-to-market roads. The ANE 
does not actually undertake road rehabilitation or maintenance, but 
contracts out the work to small and medium sized enterprises (SME). 
 
MAPUTO 00000046  004.2 OF 005 
 
 
Unfortunately, at the provincial level, the ANE's payment process is 
not timely - which places SMEs at risk.  Many SMEs are reluctant to 
undertake work for the ANE because of this. The USG will continue to 
review the process and work with the provincial ANE/DPEP to identify 
reforms to simplify the payment process for SMEs. 
 
¶18.  Improved Market Infrastructure:  One of the key challenges in 
developing the agribusiness sector, especially in the post-harvest 
portion of the value chain, is the lack of appropriate market 
infrastructure to ensure that products arrive to the customers 
without deterioration in quality.  Among the infrastructures that 
need to be developed are processing facilities, cold chain, storage 
and handling facilities, water pumps, irrigation infrastructure, 
warehouses, etc. Working with the new government, efforts will focus 
on 1) joint programming of investment priority areas in 
infrastructure development, and 2) encouraging the GRM to involve as 
much as possible the private sector in managing and maintaining the 
market infrastructures to be built. 
 
¶19.  Pump Standardization:  At present, the Ministry of Public Works 
has only approved one type of pump for community wells.  While pumps 
need to be standardized to ensure that spare parts become readily 
available and mechanics sufficiently trained, the process to get 
approval for pumps for different conditions (depth of the well, 
improved pumps) is cumbersome.   The USG proposes to continue to 
work with the Ministry of Public Works to review the process to 
introduce approved pumps for Mozambique. 
 
----------------------------------- 
Core Area 5: Develop Human Capacity 
----------------------------------- 
 
¶20.  A major challenge to achieving growth in Mozambique is weak 
human capacity in the areas of democracy, agriculture, business, 
education, and health.  To address this challenge, the US Government 
will address policy reforms which will 1) build the capacity of 
existing educational institutions to introduce finance and business 
skills; 2) mobilize workplace training programs for bank staff that 
increase understanding of credit risks for clients without previous 
bank history, and; 3) promote local Universities' ability to offer 
advanced degrees in agriculture, health and business administration 
so that students no longer need to be trained elsewhere. 
 
--------------------------------------------- --------- 
Diplomatic Strategy to Support the Implementation Plan 
--------------------------------------------- --------- 
 
¶21.  The diplomatic strategy to address the above policy agenda 
involves all agencies at post and a wide range of interventions and 
activities including direct policy dialogue with key 
decision-makers, policy analysis, policy advocacy through 
stakeholder dialogue with the Mozambican government, support for 
development of policy options and implementing regulations.  The key 
elements of this strategy involve many key actors and USG programs 
in multiple fora. 
 
¶22.  Chief of Mission direct policy dialogue at the highest levels - 
The size of the USG assistance program provides access to government 
officials at the highest levels.  Once the new Government is in 
place, the Chief of Mission will include food-security-related 
policy issues as part of an ongoing dialogue with senior GRM policy 
makers.  Initially, this should focus on moving ahead with the CAADP 
process, addressing long-standing issues affecting trade, and 
garnering high-level support for a process to address land tenure 
issues. 
 
¶23.  Direct policy dialogue with Ministries - The USAID Director, 
MCC Director, and Political/Economic Counselor all have direct 
relationships with key Ministers involved in policy issues 
identified in the Implementation Plan and are important figures in 
policy dialogue fora.  USAID's role in the leadership of the Private 
Sector Working Group provides dialogue opportunities on issues 
associated with the business environment.  MCC's support for 
development of the Land Forum provides opportunities for engagement 
on land reform.  Other staff also has contacts within key Ministries 
to address these policy issues at the working level of Ministries 
and with Provincial authorities.  For example, monthly meetings are 
held at a working level with Ministry of Industry and Commerce 
staff. 
 
¶24.  Influencing the policy dialogue of donor groups and Technical 
Working Groups - USG associate membership in the G-19 donor group 
and a leadership position in a nascent all-inclusive donor group 
offer opportunities to influence the direction of policy dialogue 
carried out by those groups with the GRM.   We have already been 
successful in putting business environment issues onto that limited 
agenda.  Policies associated with the ProAgri common fund focused on 
agricultural development have been discussed at the Heads of 
 
MAPUTO 00000046  005.2 OF 005 
 
 
Cooperation level.   USG programming and commitment to key aspects 
of private sector development, agricultural development, and food 
security, as well as in-country presence of competent technical 
staff, have led to USG leadership in important technical working 
groups involving donors and GRM representatives.  These working 
groups play a key role in evaluating GRM performance and identifying 
priority issues for funding and higher-level policy dialogue.  The 
USG is represented in the leadership of the Private Sector Working 
Group, the ProAgri group, and Technical Working Groups focused on 
Water, Roads, and Nutrition. 
 
¶25.  Program support for policy dialogue - Key stakeholders and 
civil society partners of the USG contribute to the dialogue on some 
important policy issues outlined above.  For example, USAID support 
for business associations has helped them develop an ongoing 
formalized dialogue on some of these[U1] issues[U2]. 
 
¶26.  Regional networks - Agriculture and Food Security programs will 
collaborate with regional organizations and regional development 
initiatives.  Examples include: New Partnership for African 
Development (NEPAD), Food and Agriculture Policy Analysis Network 
(FANRPAN), Regional Strategic Analysis and Knowledge Support System 
(RESAKSS) which is implemented by the International Food Policy 
Research Institute) for policy reform and investment planning; 
CARDESA for agricultural research; and East and Southern Africa Seed 
Alliance (ESASA) for the seed sector. 
 
¶27.  Local support for policy dialogue - Many USG-funded activities 
are supporting the development of community-based organizations 
(CBOs) to strengthen the voice of civil society regarding democracy 
and governance at the village level.  USG-funded programs that 
develop and enhance the capacity of Community Councils are made up 
of leaders from Farmer Associations, Health Groups, Water Management 
Committees and other key elements of the community (including 
religious leaders, teachers, and the village chiefs).  The Community 
Councils are effective voices at the district level to promote 
policy changes or to lobby for district funds.  Additionally, a 
federation comprised of Farmer Associations in each district is 
being formed.  These federations, collectively, will be utilized to 
form a voice for agriculture policies at the provincial level. 
 
¶28.  Public diplomacy - Many of these policy issues can be raised in 
public speeches, interviews, and discussions involving USG staff and 
in editorials placed in local publications.   USG support for forums 
and conferences can also be used to focus on selected issues and 
technical experts working in USG programs can offer interviews or 
analysis to the press. 
 
¶29.  Support for the CAADP process - A first priority for the 
diplomacy strategy supporting the Mozambique Implementation Plan is 
to ensure Mozambican leadership of this process.  In FY 2010, the 
USG will support, in collaboration with other donors, the CAADP 
process leading to development of a CAADP "compact" and a medium 
term CAADP investment plan to help in meeting the Millennium 
Development Goal (MDG) of reducing poverty, hunger, and child 
malnutrition.  Michigan State University and IFPRI, along with key 
International Agricultural Research Centers (IARCs) and development 
partners, will assist with required analysis and support the 
collaborative stakeholder consultation process.  A multi-stakeholder 
workshop on the CAADP is being planned for first quarter of CY 2010. 
 MINAG, with donor support, is currently finalizing the PEDSA to 
ensure that it is consistent with the CAADP framework. 
 
¶30.  USG Interagency Coordination - USG agencies at post coordinate 
activities through a range of mechanisms. Mozambique has an "all of 
government" Country Assistance Strategy (FY 2009 - 2014) which was 
developed through a coordinated multiagency process and after 
extensive consultations with stakeholders. Related to trade and 
investment, the USTR-led USG interagency process for advancing the 
Trade and Investment Framework Agreement between the US and 
Mozambique involves 13 USG agencies (Commerce, Energy, Ex-Im, Labor, 
MCC, OPIC, SBA, State, Treasury, USAID, USDA, USTDA, USTR). A USG 
interagency Economic Working Group meets regularly to discuss 
economic policy, business, trade, and related areas.  USG agencies 
in Mozambique will collaborate with the Southern Africa Global 
Competitiveness Hub for regional economic integration and trade 
facilitation; and with regional representatives and programs of 
USAID, USDA, Commerce and USTR. 
 
 
[U1]Teresa: This appears to address the national level policy 
dialogue while paragraph 24 addresses the local or district 
dialogue. I think the salient point here is that our implementing 
partners are also engaged in the policy dialogue. If that can be 
captured elsewhere, that would be fine. Robert 
[U2]Could this paragraph be eliminated or combined with no. 24?