evaluation of development cooperation between mozambique

Evaluation of Development Cooperation between Mozambique and Denmark, 1992–2006

WORKING PAPER 09 PRIVATE SECTOR DEVELOPMENT

Ann Bartholomew

Final

September 2008

Moko ro L t d

8 7 London Road

Head i ng ton , Ox fo rd ,

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Evaluation of Development Cooperation between Mozambique and Denmark, 1992-2006

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Preface

In 2007, Danida and the Ministry of Planning and Development of Mozambique commissioned

an independent evaluation of Danish assistance to Mozambique over the period from 1992–

2006.

The Terms of Reference1 described the evaluation's purpose as follows:

The overall purpose of the evaluation is to assess how Danish aid has responded to the rapidly changing

circumstances in the aid context and development needs in Mozambique – not just through its choice of

modalities but as much through its choice of partners, time perspectives, geographical and institutional

focus, etc? What lessons can be learned from the Danish support that may be useful for the future

development assistance to Mozambique and other countries?

This is one of 12 Working Papers prepared by the evaluation team (see the References for a full

list). The Working Papers were intended as stepping stones towards the synthesis report. At the

draft stage they were translated into Portuguese, and the evaluation team received extensive

comments on them. These final drafts (also available in both English and Portuguese) take

account of the comments received, but the views expressed remain the responsibility of the

authors.

1 The TOR are appended to the Synthesis Report of the evaluation.

Working Paper 09: Private Sector Development

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Contents

Preface_______________________________________________________________________________ 2

Abbreviations and Acronyms ____________________________________________________________ 5

1. Introduction ____________________________________________________________________ 7

2. Overview of Danish Assistance Programmes for Private Sector Development ______________ 8 Key Initiatives _______________________________________________________________________ 8 Danish Private Sector Development Strategy ______________________________________________ 10

3. Context of the Business Environment in Mozambique and Government of Mozambique Policy 12

4. Danida’s Private Sector Development Programmes in Mozambique _____________________ 15 Business to Business Support __________________________________________________________ 16 Mixed Credit Support ________________________________________________________________ 17 ADIPSA __________________________________________________________________________ 17 Danida’s Contribution to Overall Private Sector Development ________________________________ 18

5. Other Private Sector Donor Programmes and Donor Coordination Mechanisms __________ 20 Donor Coordination and Policy Dialogue in the Private Sector Development Sector________________ 20

6. Overall Assessment and Conclusions_______________________________________________ 22 Were Danida activities relevant and well designed? _________________________________________ 22 Were they efficiently and effectively implemented?_________________________________________ 23 What impact did they have, and were they sustainable? ______________________________________ 24 Were they coherent? _________________________________________________________________ 24 Choice of partners and modalities _______________________________________________________ 25 Capacity development and use of TA ____________________________________________________ 25 Cross-cutting issues__________________________________________________________________ 25 Monitoring and Evaluation ____________________________________________________________ 25 Lessons for the future ________________________________________________________________ 26

References _____________________________________________________________________________ 27

Annex A: Mozambique Exports and Costs of Doing Business_________________________________ 30

Annex B: Danida Private Sector Programmes _____________________________________________ 31

Annex C: Description of Donor Activities in the Private Sector _______________________________ 33 World Bank: Enterprise Development Project (PODE): 2000–2006 __________________________ 33 USAID: Country Strategic Plan 2004–2010_____________________________________________ 33 UNIDO: Integrated Industrial Development Programme, Phase II 2004–2007 __________________ 33 Norway _________________________________________________________________________ 34 Sweden _________________________________________________________________________ 34 Italy____________________________________________________________________________ 34 Netherlands ______________________________________________________________________ 34

Boxes

Box 1: Mozambique: Doing Business Indicators 2007 ...................................................................... 13 Box 2: Objectives of ADIPSA Phase I and II..................................................................................... 18 Box 3: Key Findings of Private Sector Programme Evaluations........................................................ 23

Tables

Table 1: Danish Bilateral PSD Interventions, 1992 to Present............................................................. 9 Table 2: Mozambique GDP, Real Rates of Change in %, 1992–2004 ............................................... 12 Table 3: Annual Disbursements and Sector Share of Business and Industry in the Danida Mozambique Programme, 1992–2006 ............................................................................................... 15 Table A1: Mozambique Costs of Doing Business Rankings, 2006 Data ........................................... 30 Table B1: Projects above DKK 3 million (up to DKK 30 million) .................................................... 31 Table B2: NGO projects above DKK 3 million 1992–2006 .............................................................. 31


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Table B3: Projects under the Embassy grant authorization 1992–2006 (by definition below DKK 3 million). .............................................................................................................................................. 31 Table B4: Mixed Credit Projects........................................................................................................ 32 Table C1: Donor Activities in Business Development OECD-DAC 25000, 2005–2008................... 35

Figures

Figure A1: Mozambique Composition of Exports (USD millions).................................................... 30


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Abbreviations and Acronyms ADIPSA Support to Private Sector Initiatives in the Agriculture Sector (Apoio às Iniciativas do Sector

Privado no Sector da Agricultura) ASPS Agriculture Sector Programme Support B2B Business to Business BDP Business Development Profile BSSP/BSPS Business Sector Support Programme CPI Consumer Price Index CTA Confederation of Mozambican Business Associations DAC Development Assistance Committee (OECD) Danida Danish International Development Assistance DFID Department for International Development (UK) DIPO Danish Import Promotion Office DKK Danish Krone EU European Union EVAL Danida’s Evaluation Department GBS General Budget Support GDP Gross Domestic Product GNI Gross National Income GOM Government of Mozambique H&A Harmonisation and Alignment HIPC Heavily Indebted Poor Country HIV/AIDS Human Immuno-deficiency Virus/Acquired Immune Deficiency Syndrome HQ

Ibis

Headquarters Danish NGO – successor to WUS

IDA International Development Association (World Bank) IMF International Monetary Fund INE Institute of National Statistics (Instituto de Estatística) IR Inception Report ISRI International Relations Institute (Maputo) FFPI Fundo do Fomento de Pequena Industria (Fund for the Promotion of Small Industry) KFU Centre for Technology Transfer M&E Monitoring and Evaluation MCP Mixed Credit Programme MDGs Millennium Development Goals MFA Ministry of Foreign Affairs (Denmark) MIC Ministry of Industry and Commerce Mifresta Miljø, fred og stabilitet (Environment, peace and stability) MSI Mozambican SME Initiative MPD Ministry of Planning and Development MZM Mozambique Metical (currency) NCG Nordic Consulting Group A/S NGO Non-governmental Organisation Norad Norwegian Agency for Development Cooperation ODA Official Development Assistance OECD Organisation for Economic Cooperation and Development DAC Development Assistance Committee PARPA Mozambique’s PRSP/Strategy for the Reduction of Absolute Poverty (Plano de Acção para a

Redução da Pobreza Absoluta)

PEFA Public Expenditure and Financial Accountability PER Public Expenditure Review


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PoDE The Enterprise Development Project PPP ProAgri

Public-Private Partnership Agricultural Sector Public Expenditure Program

PRSC Poverty Reduction Support Credit PRSP Poverty Reduction Strategy Paper PSD Private Sector Development PS Private Sector Development Programme QS Quality Support RDE Royal Danish Embassy (Mozambique) SBS Sector Budget Support Sida Swedish International Development Agency SME Small and Medium sized Enterprises SWAp Sector-wide Approach TA Technical Assistance TOR Terms of Reference TRDA Trade-Related Development Assistance UK United Kingdom UNDP United Nations Development Programme UNIDO United Nations Industrial Development Organisation USAID United States Agency for International Development USD US Dollars WB World Bank WDI World Development Indicators WP Working Paper


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1. Introduction

1.1 This paper examines Danida support to private sector development (PSD) in Mozambique. The development of the private sector to date in Mozambique has been weak, as the economy is mostly dominated by mega-projects which have been the key drivers of economic growth and correspondingly there has been a neglect of small and medium sized enterprises (SMEs). Danida has been undertaking private sector development activities in Mozambique only since 2000 and the approach that Danida has taken has been the same as in other countries in which Danida operates. This is to encourage partnerships between Danish companies and local Mozambican companies to facilitate the transfer of technology and know-how. The PSD programme (reformulated in mid 2006 as the Business to Business programme – B2B) is managed by the Embassy in Maputo, whereas the Ministry of Foreign Affairs (MFA) in Copenhagen has overall policy and budgetary responsibility. The programme is not integrated into the Danish country programme for Mozambique; it is a stand-alone scheme funded separately from Copenhagen. 1.2 The paper begins by examining the Danish assistance programme for PSD, the instruments available for PSD support and the MFA’s private sector strategy. It then examines the business environment in Mozambique to understand the context in which the private sector operates and goes on to examine Danida’s main support for the private sector through the PSD and Business2Business (B2B) programmes, which pair Danish companies with Mozambican companies to provide technical assistance and technology transfer. Danida’s interventions are then compared with other donors and the extent to which this support is coordinated with donors and the GOM is assessed. 1.3 The PSD programme is then evaluated to examine the extent to which it has played a role in supporting the development of a private sector in Mozambique. It is worth noting that there have already been a number of evaluations undertaken of Danida’s programme of private sector development support. Given that the same programme is used in each developing country that Danida supports, these evaluations are extremely pertinent to the case of Mozambique. This paper finds that many of the criticisms levelled at the Danida private sector development programme as a whole, are relevant to the programme as it stands in Mozambique. Namely, that the Danida programme does not address the key constraints faced by businesses in Mozambique and, as the uptake of the programme is so small, the overall impact is limited.


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2. Overview of Danish Assistance Programmes for Private Sector Development

Key Initiatives

2.1 Danida has been very active in supporting business development as part of the bilateral aid programme and over time PSD has become an increasingly important strand of Danida development assistance. A recent evaluation found that current Danida Business Support Programmes are generously funded by international standards (MFA 2004/6). The first PSD scheme began in 1967 when the Industrialisation Fund for Developing Countries was established. This was followed by the Danish Import Promotion Office (DIPO) in 1977 which promoted imports to Denmark from developing countries and in 1991 a Centre for Transfer of Appropriate Technology was set up.

2.2 More recent initiatives are outlined in Table 1. The main one has been the Private Sector Development Programme which began in 1993. This was initially established on a pilot basis in Ghana, India and Zimbabwe for a three year period 1993–1996 and was later expanded with a second phase for a five year period from 1996–2001 to include Uganda, Vietnam and Egypt. In 1999 the programme was expanded again to cover Bolivia, Mozambique, Nepal, Nicaragua and Tanzania. At this point, Bangladesh replaced India in the programme. In 1995 as part of Danida’s assistance to South Africa, a sister programme to the PS programme was introduced. It was envisaged that it would finish in 1998, but it was extended until 2001 and in 2000 a decision was made to extend the scheme indefinitely. The objective of the PSD Programme was to address the general development objectives of Danish development assistance and to achieve this ‘by contributing to economic growth and social development through facilitating business-to-business co-operations between private companies in the developing countries and Danish companies’ (MFA, 2001/1).

2.3 The total budget for the first phase was DKK 180 million and DKK 853 million for the second. In the first phase there was an enabling environment component which was dropped from the second phase. The main support given through PS was technical assistance and finance for business-to-business co-operations. Assistance was given for partners to visit each other, for studies to assess scope for cooperation and feasibility studies. There was also a start-up facility available to initiate cooperation between partners and to fund initial technology transfers of up to DKK 0.5 million. Normally support granted to facilitate establishment of long-term partnerships under this programme was limited to DKK 3 million.

2.4 In 1993 the Mixed Credit Programme (MCP) was developed. The MCP replaced the Danish State Loan Programme and provided tied or untied, interest free or low interest loans of 8 to 15 years’ maturity to finance development projects undertaken by Danish exporters in developing countries. The MCP was revised in 2005. After the revision there are no longer any requirements for Danish content in the commercial contract (except for China where it was 25%). The objectives of the projects financed under the MCP have to be in accordance with Danida’s overall development objectives.


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Table 1: Danish Bilateral PSD Interventions, 1992 to Present

Programme Objective Direct Beneficiaries/ Coverage 2004

Modality Funding/ Portfolio Magnitude

Centre for Technology Transfer (KFU) 1991– 1997

Increase Danish Capacity to Transfer Technology

Danish companies / Denmark

Information and TA Accumulated funding (1997) DKK 26.9 million

Mixed Credit Programme (MCO) 1993–

Provide subsidized loans to finance overseas projects

Danish suppliers (untied window since 2002)/ Dev. Countries with GNI p.c. USD 3,348

“Grant element” 35-50% of loan

Accumulated funding (2003) DKK 2.540 billion

Private Sector Programme (PS) 1993– 2006

Partnerships between Danish companies and partner firms

Partnership companies/ Danida programme countries

Grants and loans up to DKK 5 million/project

Accumulated funding (2003) DKK 1.278 billion

Business to Business Programme (VtV) South Africa

1995–20062

Almost as per PS programme,

As PS, but with a “previously disadvantaged individual” partner/South Africa

As per PS programme, plus Venture Capital Fund (since 2002)

Accumulated funding (2002) DKK 190 million

Business Sector Support Programme (BSSP/BSPS)

Improve partner countries’ business environments and trade opportunities

Public and private institutions in partner countries /Tanzania (1998 – present), Vietnam & Ghana (2004– ), Kenya

(2006–)

TA, including for TRDA

Accumulated funding (2003) Tanzania DKK 300 million, Ghana & Vietnam DKK 150 million each

Core Sector Programme PS components, 1999–

Promote export oriented agri-business investment in partner country

Partner country enterprises/ Tanzania, Benin, Uganda, Mozambique

TA and Guarantees N/A

Business 2 Business Programme for Development 2006–

Re-launch of PS program with increased focus on job creation, internal and external environment and occupational health safety.

Partnership companies /Danida programme countries.

Grants up to DKK 5 million/ project

Accumulated funding since 1993 (PS&B2B) all countries:

1.983 billion

Public Private Partnerships

2006–

Supports establishment of sustainable partnerships between local and Danish companies, organizations or public institutions in order to promote better living and working conditions.

Employees, and families of employees, of partner organizations, companies and public institutions

Grants up to DKK 5 million/project

Total funding period 2004–2008: DKK 100 million

Industrialization Fund for Developing Countries (1967– )

Promote economic activities through Danish FDI

Danish foreign investors/joint ventures/Dev. Countries with GNI p.c. USD 5,128

Equity, loans and guarantees

Accumulated funding (2003) 1.050 billion

Source: MFA, Danida ‘Meta-Evaluation: Private Sector Development Interventions, 2004/6.

2.5 In 2006 after an analysis of the PS Programme and how to strengthen its impact, the programme was replaced by the B2B Programme. The overall objective of the B2B programme

2 From 2006 activities in South Africa have been harmonised fully with B2B activities.


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is to ‘reduce poverty by promoting economic growth and social development in developing countries’ (MFA www.b2bprogramme.com). The immediate objective is to promote the establishment of long-term sustainable partnerships between companies in Danida’s programme countries and Danish companies with a view to promoting local business development. The programme provides capacity building through the transfer of skills, know-how and technology to achieve these objectives. The process usually lasts for three years, with a contact phase, pilot phase and project phase. A maximum of DKK 5 million in support, is currently available for each partnership. 2.6 More recently, there has been scope for private sector development programmes to become more integrated into Danida country programmes through PSD components included in sector support programmes and other bilateral programmes such as through Non-Governmental Organisations. There is also the Public Private Partnership (PPP) Programme, which aims to promote public private partnerships for better working and living conditions in developing countries by advancing corporate social responsibility and increasing opportunities for investments and enhanced competitiveness through innovation. The objectives are achieved by establishing public private partnerships within the framework of the United Nations’ Global Compact. These programmes have been grouped together under the 3i initiative which promotes private sector development through a strategy of investment, innovation and entrepreneurship. Investments occur through the mixed credits, innovation through PPP and entrepreneurship via the B2B programme. Furthermore, there has been a move towards creating more synergy between private sector development initiatives and the recent opening in 2007 of an IFU regional office in Nairobi should further strengthen regional initiatives which will include Mozambique in its scope.

Danish Private Sector Development Strategy

2.7 No formal statement of strategy relating to PSD instruments was outlined until 1999. This was the Partnership 2000 Strategy where the following three priorities for PSD interventions were outlined:

i) Supporting partner countries to develop a positive business climate, a well functioning financial system and an effective legal system.

ii) Directly promoting business activity in these countries, not least in relation to Danida’s main sector programmes.

iii) Strengthening development cooperation overall through the involvement of Danish business life in long-term cooperation.

2.8 These priorities were operationalised through a new ‘programme of action’ for PSD which was introduced in 2001. This included building capacity for information technology as a priority, and outlined new initiatives and placing stronger emphasis on areas already included in the programme, such as business information and advisory services and micro-finance. In 2003 a new statement of development policy was published: ‘A World of Difference’ (Danida, 2003) which did not fundamentally change the approach to PSD, although there was a commitment to increase trade related development assistance (TRDA). In 2004 new programmes were added to the existing PSD programme. These were support to Danish companies to include corporate responsibility initiatives in their activities with partner country companies, support to management capacity building in partner countries, facilitation of enhanced public and private research capacity in the agricultural sectors of partner countries.


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2.9 In 2005 a new strategy was launched called the Business, Growth and Development-Action Programme for Danish Support to Private Sector Development in Developing Countries. This aimed to mainstream support for private sector development within Danida programmes and to be more demand driven. The introduction of the new strategy also coincided with new business development instruments, with the B2B programme replacing the Private Sector Development Programme in all targeted countries and new guidelines which emphasised employment opportunities for women, health and safety issues and workers rights.


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3. Context of the Business Environment in Mozambique and Government of Mozambique Policy

3.1 In order to evaluate Danida’s PSD activities, it is useful to examine the overall business environment in Mozambique to judge the extent to which Danida support has been appropriate within the overall Mozambican context. The Mozambican economy has been an impressive performer as it has achieved high rates of GDP growth of an average 8% a year since the civil war ended in 1992, and a poverty headcount index which reduced from 69% in 1997 to 54% in 2003 (IMF, 2007). This was achieved by the implementation of a first generation of reforms aimed at structural reforms, macroeconomic stabilisation and increased economic growth. Despite this, the development of the private sector has been limited and SMEs have not been supported by GOM policy or encouraged due to the difficult business environment which they face. This is primarily a result of the legacy of colonialism and Marxist central planning, which led to a lack of development of significant infrastructure or industrial sector development.

Table 2: Mozambique GDP, Real Rates of Change in %, 1992–2004

1992–96 1992–2004 1996–2004

Real GDP Growth 3.1 6.5 8.5

Sectoral Growth rates

Agriculture

Fishing

6.0

0.7

6.2

1.3

6.6

2.6

Industry

Mining

Manufacturing

Electricity and Water

Construction

5.6

-0.1

1.4

4.9

16.7

16.4

32.0

11.0

32.0

16.5

22.5

44.1

17.2

45.6

17.2

Services

Commerce

Restaurants & Hotels

Transport &

Communication

Financial Services

Real Estate Rentals

Corporate Services

Government Services

Other Services

3.5

-1.1

16.2

17.8

2.6

4.3

…

-1.8

6.0

5.3

2.3

12.3

11.9

4.7

3.2

4.1

3.8

7.7

5.8

3.9

10.8

8.5

5.0

2.6

6.0

6.5

8.8

Source: IMF (2005) ‘Republic of Mozambique: Selected issues and Statistical Appendix’, August 2005, IMF Country Report, No.05/311

3.2 Table 2 outlines growth rates of GDP and illustrates that the industrial sector was a large contributor to GDP growth during the period 1996–2004, with average growth rates of around 22% per year. However, this growth rate was driven by three mega projects, which were the MOZAL aluminium smelter, the Cahora Bassa hydroelectric plant and the SASOL gas pipeline to South Africa (IMF, 2005). Accordingly, between 1992–2002, the contribution of mega projects to GDP growth increased from zero to 7%. At the same time, total export growth was


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dominated by exports from mega projects, and in 2004, exports from mega projects made up around 70% of total merchandise exports (see Annex A, Figure A.1). 3.3 Additionally, the agricultural sector played an important role in development, particularly after the war, where recovery was built on rapid agricultural growth. As Table 2 shows, rates of GDP growth in agriculture have averaged over 6% in the post-war period and it is in agriculture where most private sector activity has taken place. 3.4 Although a variety of reforms have been undertaken directed at the improvement of the business environment, both the IMF and the World Bank argue that a second generation of reforms are crucial for the maintenance of high growth rates and further poverty reduction. Reforms related to strengthening private sector growth include: improving the investment climate through expanding access to finance and reducing bureaucracy related to establishing and running businesses. Even though improvements have occurred, Mozambique was ranked 140 out of 175 in the Doing Business 2007 Indicators (World Bank, 2006). 3.5 Box 1 outlines the key reforms that are needed to improve the business environment in Mozambique. The constraints that exist tend to be more burdensome for SMEs as there are extensive procedures at customs checkpoints which impact more on small companies, labour laws which are inflexible that make it difficult to hire and fire workers, while inadequate infrastructure and burdensome and non-transparent regulations also increase the costs of small businesses. The Cost of Doing Business rankings for Mozambique are shown in Annex A, Table A.2.

Box 1: Mozambique: Doing Business Indicators 2007

Doing Business 2007 indicators suggest that the following reforms are needed to improve the business

climate in Mozambique:

i) streamlining burdensome regulatory practices;

ii) reducing the costs of hiring and firing workers;

iii) removing infrastructure bottlenecks;

iv) a financial sector reform agenda centred on further reducing the cost of and expanding

access to financial services;

v) a governance agenda to minimize expropriation risks.

Source: World Bank (2006) ‘Doing Business 2007: How to Reform’, Washington.

3.6 Clément and Peiris (2007) also point out that there are a variety of other reasons why the experience of the non-mega project export sector has been disappointing. They argue that many of Mozambique’s export products may face declining demand which has considerable implications given that the export base is very concentrated. Export diversification would be the solution which points to the need for structural reforms to improve competitiveness.

3.7 There has been little attention paid to the productive sector by the GOM. The PARPA is the Poverty Reduction Strategy for Mozambique and PARPA I was very much focused on public expenditures. It has been argued that there was a need to make it more focused on broad based economic growth to encourage private sector development and in turn job creation and income opportunities for the population (Norad 2002). PARPA II acknowledges the role of the private sector in creating economic growth and the role of the government in creating a good business


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environment under Pillar three, economic development. (Government of Mozambique, 2006). It stresses the development of Public-Private Partnerships (PPP) to achieve a structural transformation of the agricultural sector and the need for the creation of alternative mechanisms for agricultural finance. The need to create labour intensive manufacturing is also mentioned, but as Hanlon (2006) notes, this is not given priority and there are no targets on job creation, despite the fact that this is a priority for most Mozambicans. To date, there has not been a Mozambican Government strategy on Private Sector Development, although one has recently been developed and is now awaiting approval.


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4. Danida’s Private Sector Development Programmes in Mozambique

4.1 The private sector has always comprised a fairly small share of Danida’s programme in Mozambique. As Table 3 indicates, the share was higher in 1992 with business and industry comprising 6.5% of overall programme disbursements, which fell to 1.6 per cent by 2005. A higher percentage of NGO projects funded by Danida were directed towards the private sector, with 6.4% disbursements over the evaluation period from 1992–2006, as compared to 1.9% over the same period for the overall Danida programme.

Table 3: Annual Disbursements and Sector Share of Business and Industry in the Danida Mozambique Programme, 1992–2006

Year Annual Disbursements

Percentage share of Danida

Programme

1992 8,320,746.00 6.5%

1993 4,002,262.00 2.2%

1994 9,207,025.00 4.4%

1995 15,083,526.00 6.0%

1996 6,437,086.00 2.4%

1997 8,194,484.00 4.4%

1998 5,649,903.00 2.2%

1999 - 0.0%

2000 1,457,966.00 0.5%

2001 3,288,452.00 1.0%

2002 1,774,302.00 0.5%

2003 4,212,245.00 1.0%

2004 4,770,049.00 1.2%

2005 6,069,217.00 1.6%

2006 6,874,898.00 1.6%

1992–2006 85,342,161.00 1.9%

Source: Synthesis Report, Appendix D, Table D1.

4.2 Private sector growth has always been acknowledged by Danida as an important factor in the development of the Mozambican economy and discussions on how best to encourage the private sector have featured in nearly all the annual consultations between Denmark and the GOM. A specific strategy for business and private sector development does not feature in the Danida Country Strategy until 2000, however. Prior to this, business development activities had been part of sector specific activities, and in the 1995 Country Strategy were discussed in relation to supporting small and family farms and semi-industrial fishing, as the sectors most directly linked to employment creation and export earnings.

4.3 In the 2000 Danida Country Strategy, the introduction of a specific private sector programme under the PSD programme was outlined. This was designed to ‘run parallel with sector-specific efforts, with the objective of boosting cooperation between private enterprises in Denmark and Mozambique’ (Ministry of Foreign Affairs, 2000). A separate initiative was support


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for the development of the private sector in the Agricultural Sector. The ADIPSA programme also began in 2001 and these two programmes are currently the main Danida private sector initiatives in Mozambique.

Business to Business Support

4.4 Private sector support began in Mozambique with the launch of the Private Sector Development Programme in 2000, which was then re-launched as B2B in 2005. The scheme operates by matching local Mozambican businesses with Danish companies, who provide technical assistance and know how to local companies. The Programme Coordinator in the Danish Embassy in Maputo approaches local businesses to ascertain if they would benefit from this type of support. Parallel to this, partners are identified in Denmark with the assistance of industry organisations and consultants. As part of the matchmaking process, Mozambican companies can be invited to participate in a matchmaking event carried out at trade fairs in Denmark where they have the opportunity to meet potential partners. In Denmark, potential Danish companies are screened and evaluated by one of two Danish consultancy companies who are contracted to assess potential companies for their suitability.

4.5 The partnership proposals are assessed on: ‘their contribution to strengthened competitiveness of the local company; increased employment opportunities, especially for women; improvement of the external environment and the working environment; and the promotion of other elements of corporate social responsibility, such as promotion of HIV/AIDS awareness among employees and their families’ (MFA, 2007). The Mozambican company must be Mozambican owned, with 3 to 5 years of operating experience and audited accounts if possible, although sometimes start-ups are accepted. The Danish company must have at least 5 years operating experience and 3 years of audited accounts. The B2B programme support is direct to the companies involved and is in the form of grants, primarily covering hours spent on training and technical assistance. Grants are, unlike other bilateral aid, paid on a reimbursement basis according to a detailed budget. In 2006 a Business Development Profile was introduced, which in the case of Mozambique describes business opportunities in the light of the needs of the Mozambican private sector. The objective of the business development profile is two-fold; a marketing tool to attract private investors to Mozambique as well as an instrument to focus on granting support under the B2B programme.3 The focus is on four sectors, which are agro-processing, mining, wood products/furniture, and arts and crafts as these are perceived as the areas of the economy where there is good potential for growth.

4.6 There are three phases of support as follows:

i) Contact phase: (a total maximum of 100,000.00 DKK funding available to finance study visits to Denmark/Mozambique, cultural workshops and pre-investment meetings at a reimbursement of 90%).

ii) Pilot phase: Studies, technical assistance and preliminary discussions to identify if the partnership is likely to work (1million DKK available with 90% reimbursement for the pilot project and 75% for studies).

3 Since 2003 both the Confederation of Danish Industries and the Federation of Small and Medium Sized Enterprises have been contracted by MOFA to assist companies to prepare profiles, develop partnerships etc. As per 2008 a new model for consultancy services has been introduced opening the market for all international consultants i.e. Local consultants.


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iii) Project implementation phase: this lasts 3–4 years (Up to 5 million DKK available with 90% reimbursement and only 25% allowed to be spent on equipment).

4.7 To date, eight partnerships have been supported since the beginning of the PSD scheme in 20004 and around five others are in the pipeline for potential support. Also, 16 contact-phase collaborations were funded which did not lead on to the project phase. Details of the support provided can be found in Annex B, Table B1 and cover a range of enterprises from the building of aluminium boats, design and manufacture of sanitary ware to the manufacture of leather goods. The expansion of the scheme is limited by the number of suitable candidates for support among local businesses and limited interest among Danish companies in partnering with an enterprise in Mozambique, given that it is not a traditional market for Danish products, while distance and language act as significant barriers.

Mixed Credit Support

4.8 There are currently six projects that are in the pipeline for mixed credit support in Mozambique. Three are currently being implemented through this mechanism, one has been approved by the Committee for Mixed Credits and tender documents are under preparation. The two remaining are at the stage of screening. Assistance under the mixed credit programme is entirely managed by the Ministry of Foreign Affairs. The Embassy in Maputo acts as a focal point, and the embassy is also involved in the appraisal of the projects, although the programme is managed from Copenhagen. The projects and their status are as follows:5

Approved projects:

i) Rehabilitation of Regional airports in Tete, Beira, and Quelimane – project implementation started in January 2008.

ii) Dredger for Beira Port (port rehabilitation) – this project was approved by the Committee for Mixed Credits in November 2006.

iii) Rural Telecommunications Project – project implementation began in June 2006.

iv) Backbone Transmission Network, Phase II – project implementation began in March 2007.

Screened projects:

v) Backbone transmission network, Phase 3, November 2007 and awaits feasibility study.

vi) Reinforcement of the Central Transmission Grid – January 2008 and awaits feasibility study.

ADIPSA

4.9 Danida funds the private sector development component of the Agricultural Sector Programme Support (ASPS) in Mozambique. This support for the development of private sector initiatives in the Agricultural Sector (ADIPSA) is now in its second phase. The first phase focused on Tete province beginning in 2001, Manica in 2003 and also Cabo Delgado. It aimed to address problems in the agricultural production and marketing chain. Smallholder farmers faced difficulties in accessing markets as there were weak trading networks, limited and inefficient agro-processors and a lack of linkages to internal and export markets. The first phase was completed in 2006.

4 There have not yet been any disbursements in one of the projects (Royal Fish Denmark A/S and Pescadan Ltd). 5 Further details on funding and the companies involved can be found in Annex B4.


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Box 2: Objectives of ADIPSA Phase I and II

The objectives of ADIPSA Phase 1 were to:

Development Objective – To improve the livelihood and equity within the agricultural sector in Manica, Tete and

Cabo Delgado by assisting operators to engage in commercial production i.e. income generation, production and

related rural economic activities.

Intermediate objective 1 – To increase the capacity of producers, agro-business, marketing and other operators to

engage in commercial activities along the agricultural chain.

Intermediate objective 2 – To develop rural financing systems capable of addressing the needs of small-scale private

business operators, including agricultural producers.

Intermediate objective 3 – To develop capacity in rural communities to support private sector development.

The objectives of ADIPSA Phase 2 were to:

Development Objective – Sustainable and increased smallholders’ income from marketing agricultural production.

Objective Intervention Area 1 – Farmers Associations are contributing significantly to increased sales of agricultural

produce and improved income of member households.

Objective Intervention Area 2 – Small and medium scale agri-enterprises contribute significantly to increased

profitability of smallholder farmer production.

Objective Intervention Area 3 – Increased supply of sustainable financial services to smallholder associations and

agricultural SMEs.

Objective Intervention Area 4 – Effective management of interventions has led to efficient utilisation and

coordination with other actors in private sector development has been carried out.

Source: Government of Mozambique, Ministry of Agriculture and Denmark Ministry of Foreign Affairs, Danida,

Mozambique, Agricultural Sector Programme Support, Phase II, Annex 1, Private Sector Development Component,

October 2005.

4.10 The second phase ADIPSA II addressed similar problems to phase 1, but with an acknowledgement that the environment had improved in the previous 5 years. The trading network had experienced an improvement as there were now more traders present, there had been a substantial increase in out-growers schemes and some growth in agro-processing. Access to credit had improved for some farmers, while access to agricultural inputs had improved only slightly and was still a major problem. The supply of business services had only improved slightly (GOM/MFA, Oct 2005). The objectives of ADIPSA phase 1 and 2 are outlined in Box 2. The overall total budget for phase 1 was DKK 40 million and phase 2 is DKK 84.96 million, excluding Danida advisors.

Danida’s Contribution to Overall Private Sector Development

4.11 Danida’s contribution to PSD in Mozambique has been marginal overall, mainly because Danida’s activities have been relatively narrow, with only a small number of companies supported, and it is a stand-alone programme run out of the MFA with no linkages with the GOM or other donors. This has resulted in a lack of coordination with the rest of the Danida programme and other donor interventions. It is worth pointing out that Danida is no different than other PSD donors who are implementing activities in a similarly narrow and uncoordinated manner.

4.12 The ADIPSA programme has been undertaken in a different manner as it is a complement to ProAgri which is the main sector support programme for agriculture. Therefore it has been more integrated into agricultural sector activities as a whole and supports the implementation of ProAgri, which is funded by the main donors in the agricultural sector.


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Progress to date has been slow in implementing activities, but it is not within the scope of this paper to evaluate ADIPSA and an assessment of its implementation can be found in the working paper on agriculture (WP02).


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5. Other Private Sector Donor Programmes and Donor Coordination Mechanisms

5.1 A number of donors are involved in implementing PSD programmes. One of the largest programmes, PoDE, run by the World Bank, has recently been completed and now most private sector development activities consist of small projects run by bilateral donors or NGOs. Financial details of the main donor programmes can be found in Annex B, Table B1, but this vastly underestimates the number of donor activities related to the private sector that are being undertaken in Mozambique. This is due to the fact that only activities under OECD DAC Business Development category 25000 are captured. As some donors have mainstreamed private sector programmes into broader sector programmes, as in the case of Danida with ADIPSA, these are not recorded under this heading. There are also reported to be numerous NGO projects aimed at private sector development. The main donors and their programmes are described in Annex C.

Donor Coordination and Policy Dialogue in the Private Sector Development Sector

5.2 The Confederation of Mozambican Business Organisations (CTA) is the main forum for private sector – government dialogue as the CTA is an organisation which represents the private sector in Mozambique. In 2005 the ‘Private Sector Working Group’ was established; this group is primarily a forum for donor dialogue, but government, private sector and civil society also attend to discuss private sector issues. Danida is a member of this forum, as are those donors who are engaged in private sector development activities. The forum is primarily designed for information sharing.

5.3 The Private Sector Working Group was created as part of the PARPA process. PARPA I (2001–2005) focused on the priority areas of education, health, basic infrastructure, agriculture and rural development, good governance, and macroeconomic and financial administration. For PARPA II (2006–2009) it was decided to continue the priorities of PARPA I, while increasing the focus on conditions for sustained economic growth, with three main pillars of governance, human capital, and economic development. As a result, the private sector became an important aspect of this and policy dialogue in this area was intended to take place through the private sector working group.

5.4 Despite the formation of the working group, in practice this has not led to increased coordination of donor activities or dialogue on strategic aspects of private sector support. The approach by donors has tended to be uncoordinated and disjointed, with a tendency to undertake ad-hoc interventions in private sector development without creating linkages between them. There is also a tendency for the interventions of each donor to reflect the particular ideological viewpoint of the organisation, which leads to some focusing on the business environment, others such as Danida on establishing links with their own industry and others taking a sectoral/geographic focus. This has led to donors implementing very different strategies and an unwillingness to coordinate interventions.

5.5 The GOM is not very active in coordinating PSD activities. This is primarily due to the lack of overall vision and strategy for PSD in Mozambique and, until recently, this area has not been flagged as a priority. It also stems from the weakness of the Ministry of Industry and Commerce (MIC) as an institution. Many of the activities that would form part of a coordinated PSD strategy are required to be implemented by other ministries and the MIC does not have the political power to ensure that these are undertaken.


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5.6 The fundamental problems of donor private sector programmes in Mozambique are succinctly summarised by Castel-Branco (2004) and can be applied to Danida as much as any other donor. He notes that there are three major problems with private sector development programmes:

i) they do not form part of a broader and coherent strategy to develop business and productive capacities and the economy as a whole;

ii) they do not strengthen domestic institutions and assist them to become sustainable and capable of developing policies and strategies;

iii) the programmes themselves put conflicting pressures on public and private sector capacities and they crowd out domestic capacities and initiatives.


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6. Overall Assessment and Conclusions

6.1 In assessing Danida’s support to PSD it is useful to consider the conclusions of a number of evaluations that have already been undertaken on Danida PSD activities. These are summarised in Box 3 below and are relevant to the Danida programme in Mozambique, not least because the same programme operates in Mozambique as in other developing countries which receive Danida assistance. The assessment and conclusions of this section relate to the PSD/B2B programme as this is the programme that has been running the longest. The Mixed Credit Programme has only been operational in Mozambique since 2005.

Were Danida activities relevant and well designed?

6.2 The private sector/ B2B programme cannot be judged as relevant to the Mozambican context as it does not aim to address the constraints faced by the private sector in Mozambique. Given the business environment in Mozambique and the constraints faced by the private sector described earlier, there has been no attempt by Danida to address these issues or become involved in generating an enabling environment. As the programme is ‘one-size-fits-all’, there was no assessment of the type of assistance that would be most appropriate for Mozambique and, as a result, Danida did not tailor the design of the programme to the context or the issues faced by the private sector in Mozambique. This is a common fault of these types of business partnership programmes (see Box 3 point ii) and due to this, it is difficult to argue that the programme was well suited to Mozambique.

6.3 One area where the programme can be said to be relevant, is that there is a lack of technical capacity and knowledge within the Mozambican business sector, and the access to technology and know-how that the Danish companies brought was appreciated by all the companies that the evaluation team visited. However, it should be noted that it is not obvious that Danish companies are the most appropriate ones to support this process, but the tying of B2B aid means that it is only Danish assistance on offer. Proximity to the South African markets would suggest that partnering with South African companies or buying in technical assistance from a country nearer to Mozambique would be better, particularly as companies already working in Africa would have a better idea of the constraints faced, while costs of travel and support would be lower and spare parts easier to obtain. The latter were issues that were raised by some of the companies involved in the scheme, and those that had been the most successful were those that accepted Danish technical assistance but sourced their inputs from South Africa, rather than Denmark, and had been trained in Mozambique not Denmark.

6.4 Another issue with the design of the programme is that there seems to be no mechanism for learning from the experience of enterprises assisted and tailoring future support accordingly. The owners of businesses with substantial experience had clearly gained more from the scheme, as they knew what aspects of the scheme would be beneficial for them and which would not be useful. This was less so for those with less experience who had learned from their mistakes, but these experiences did not seem to be being fed back into the design of the programme and there was no discussion of lessons between the companies supported. An example of this is that those enterprises who had received training in Mozambique had a much more positive experience than those who had gone to Denmark. This type of lesson would be useful to highlight for future recipients of B2B, and new internal guidelines for the BDP emphasise that a contact list should be given to new participants.


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Box 3: Key Findings of Private Sector Programme Evaluations

A number of evaluations have been undertaken on private sector Support programmes. Schulpen and Gibbon

(2002) reviewed PSD programmes and policies for bilateral and multilateral donors in the 1990s and found that:

i) no donor attempted to develop the linkage between PSD and poverty reduction;

ii) no bilateral donors provided national PSD assessments to tailor interventions to individual countries;

iii) no donors referred to the DAC’s reservations concerning direct enterprise support, or reviewed the

experiences of other donors in this field;

iv) in most cases there was only a weak relation between countries with a high aid priority and destination

countries;

v) there was almost a complete lack of donor coordination on support to business enterprises;

vi) other evaluations all criticise the lack of integration between PSD activities and general overall aid

objectives and lack of focused interventions for specific objectives.

World Bank, Batra and Mahmood (2003) reviewed programmes that offered direct investment and lending to

companies and TA for business development. They concluded from their own work and others that:

vii) there is an absence of detailed impact evaluation or cost-benefit analysis of these programmes;

viii) analysis that has been undertaken point to extremely limited impact as most programmes are small in

nature as the uptake is very low;

ix) sustainability is low as only half of all enterprises supported are viable at the end of the support and

viable enterprises would in all likelihood have implemented these changes anyway.

Source: Ministry of Foreign Affairs Denmark, Danida ‘Meta-Evaluation: Private Sector Development Interventions,

2004/6.

6.5 Finally, it is not clear how the design of the PSD/B2B programme activities fits with the overall objective of the programme which is to ‘reduce poverty by promoting economic growth and social development in developing countries’ (MFA www.b2bprogramme.com). There is no reason why the seven programmes supported in Mozambique are likely to achieve this aim and no analysis of the channels through which this may be achieved and how the activities implemented will support this (See Box 3, point vi).

Were they efficiently and effectively implemented?

6.6 It is not possible to tell whether the PSD/B2B scheme in Maputo is efficiently and effectively implemented, as the evaluation team found no evidence to make a judgement on this issue.

6.7 Overall, the following comment from the Ministry of Foreign Affairs, Danida (2001/1) Evaluation of the Private Sector Development Programme is very relevant for the PSD activities in Mozambique. The report concludes that:

In the perspective of the current design the Programme is reasonably successful. It is in general effectively implemented within the designed framework by a competent and dedicated staff…However, the design is very narrowly focused on individual private business-to-business co-operations with limited concern for broader aspects of the private sector as a whole and for the role of private sector development in the overall growth and development of the respective countries. Consequently, the development impact of the Programme is limited and less than optimal.


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What impact did they have, and were they sustainable?

6.8 The impact of the scheme has been marginal due to the low uptake by Mozambican companies. This is put into perspective by the fact that since 1991 a total of 7 companies have been supported and one of these has not yet begun disbursing. The overall funds allocated to PSD projects have been DKK 21 million, in comparison to overall disbursements of DKK 4.4 billion. Most of the companies supported are small with a limited number of employees which means that the employment and income generating opportunities created are low. The largest company had 115 employees, but this was a well-established business and it was not clear that Danish funding has led to any more employees being taken on.

6.9 There was no evidence of spin-off effects or demonstration effects for the rest of the private sector and the multiplier effects are likely to be low, as all the companies visited were importing inputs. Also, the businesses supported are not necessarily in areas where there is the greatest potential for growth or exports and although all the businesses planned to export, none had begun to do this yet. Any tangible impacts are difficult to measure as no cost-benefit analysis or evaluation of impacts has been undertaken as most of the partnerships are still on-going.

6.10 Whether the businesses supported will be sustainable is not clear. The impact and sustainability of Danish assistance is probably limited by the manner in which potential businesses were identified. Danida actively approached businesses to see if they needed funding, so the support is supply driven rather than demand driven. This appeared to lead to enterprises being supported when possibly they were not viable in a business sense, or that the owner themselves would not have started the business if they would have had to borrow commercially to start the business. On the other hand, there were also established business people involved in the scheme, who might well have started the business regardless of whether support was available from Danida or not.

6.11 An indication that at least two of the businesses supported may be sustainable is that two of the companies visited were considering joint ventures with their Danish partners, which suggests that the business relationship will continue. On the other hand, one company mentioned that it would not be viable without continued support after Danida funding finished. Finally, it is obvious that if the constraints faced by SMEs in the wider business environment are not addressed, then sustainability or significant impacts are likely to be limited, regardless of the businesses supported. It is not financing or technical know how that are listed in the Cost of Doing Business Survey discussed above, as the key constraints faced by business. This means that if the key difficulties are not addressed by Danida, then it is hard to see how a small scheme such as B2B can make a sustainable impact.

Were they coherent?

6.12 The B2B programme is not currently fully integrated into the current Danish Country Programme for Mozambique and there is no strategy for integrating support to the private sector into the Danish programme. A study was undertaken in 2004 to assess the extent to which this may be possible, but it appears that there are no plans to undertake this in the future (T & B Consult, 2004). As B2B is a stand alone programme with few links to Danida’s programmes, there is no coherence with the rest of the Mozambican country programme. There is also no alignment or coordination with GOM activities, as there is no contact with the GOM or consultation on which companies should be supported or discussion of the appropriateness of Danida’s programme. Although Danida attends the private sector working group, this is only an information giving forum and there is no coordination by Danida with other donor programmes;


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but generally there is little donor coordination in the private sector as a whole, so Danida is not operating any differently to other donors in this sense.

Choice of partners and modalities

6.13 As mentioned above, there has been no coordination with other donors or the GOM in the PSD/B2B programme. However, the tying of assistance to Danish companies is an important issue, as it restricts the access of Mozambican companies from receiving know-how and technical assistance from other sources which might be more appropriate.

Capacity development and use of TA

6.14 The main mechanism for capacity development occurs through training provided by Danish partner companies. The experience of this among the companies interviewed had been variable, but on the whole, those Mozambican companies that had received in-country training had been more satisfied than those who had gone to Denmark. In-country training allowed the Danish partner to get a better appreciation of the conditions faced by the Mozambican company and more hands-on-advice could be given, focused on specific aspects of the business’ operation. Overall, there was a general view that the technical assistance given by the companies had been good, although the experience had been less positive when this was tied to receiving inputs and technology from the company. Where there had been no link with TA and inputs, the experience had been better for the companies concerned.

Cross-cutting issues

6.15 There has been little focus on gender issues in the scheme, although Danida was aware of taking gender into account, but due to the limited number of eligible companies they found it difficult to find companies that employed more women. However, this may change given the introduction of new guidelines for the B2B programme in 2006, as well as a targeted 3i initiative to support women entrepreneurs.

6.16 HIV/AIDS has been addressed through a specific component of the B2B programme which grants DKK 100,000 to be spent on AIDS awareness activities. This has been used by the companies concerned on a number of activities, ranging from providing information, to the provision of anti-retrovirals for employees who are HIV positive. Danida are aware that there is a need to make activities more focused, given there is currently a lot of information on HIV/AIDS, and they are working in conjunction with the Danida HIV/AIDS country programme to provide companies with ideas that might be more effective for combating AIDS.

6.17 Danish health and safety standards are not enforced within the B2B programme. This is an issue, as in one instance, two employees of one of the companies supported had developed health problems as the company had not been advised about adequate health safety procedures. Environmental aspects are taken into consideration in the project appraisal stage of the B2B programme.

Monitoring and Evaluation

6.18 In the B2B programme there are now programme indicators, measures of corporate responsibility and environmental impact included. In the project document for each B2B project the expected outcomes of each indicator are included. To date, there has not been completion of any of the projects and as such no evaluations undertaken of impact. However, the OECD DAC Peer Review of Denmark (2007) points out that what is missing in the B2B M&E system is any


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attempt to establish the chain and transmission channels through which project activities are expected to lead to economic growth and poverty reduction. Tracing this through would assist in identifying which activities are likely to be the most effective, as currently this is not clear.

Lessons for the future

6.19 There is a need to address the Mozambican PSD context more directly and focus assistance on alleviating the constraints faced by SMEs. This is likely to have a greater impact on PSD than the approach of supporting a handful of companies which is currently being undertaken. This is in line with the World Bank (2003) who in an evaluation of bilateral and multilateral PSD programmes, concluded that the same amount of support directed to improving the enabling environment would probably have generated higher returns. Therefore a move to a business sector support style of programme in Mozambique would be more appropriate.

6.20 Lessons from the experience of Danida’s programme in Mozambique and other relevant evaluations, point to a need for Danida to reorientate its Mozambique PSD programme to:

• Focus on supporting an enabling environment for PSD and addressing the key constraints faced by SMEs.

• Tailor support to the Mozambican context, rather than just taking a one size fits all approach, and ensure it reflects local concerns rather than the objectives of Danish Foreign policy.

• Include a more integrated approach to PSD and broaden the scope of the PSD programme.

• Tighten the linkage between PSD activities and how they relate to poverty reduction objectives.

• Align PSD support with the new GOM PSD strategy and strengthen linkages and coordination between the individual donor PSD programmes.

• Untie B2B support.

• Consider whether support to the private sector through B2B and other mechanisms should be continued.

6.21 Overall, best practice would suggest that Danida moved from direct support to enterprises to supporting the development of markets at the macro and meso level, with a focus on strengthening development partner institutions to facilitate an enabling environment for private sector development.


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References The full list of Working Papers for this Evaluation is:

Perception Study (Ann Bartholomew, with Amélia Cumbi, Alícia Calane, et al)

01: Political and Social Context (Martin Adams)

02: Agriculture (Martin Adams)

03: Education and Health (Muriel Visser-Valfrey)

04: HIV/AIDS (Kerry Selvester)

05: Energy (Mette Visti)

06: Environment (Martin Adams)

07: PFM (Alex Warren-Rodríguez)

08: Governance, Justice and Democracy (Simon Norfolk, Alícia Calane)

09: Private Sector Development (Ann Bartholomew)

10: Provincial Aid and Tete (Amélia Cumbi, Alex Warren-Rodríguez)

11: Danida Programme Management (Mette Visti)

12: Capacity and TA (Ferry Philipsen)

Batley et al. (2006) Partnership General Budget Support in Mozambique. Richard Batley, Liv Bjørnestad and Amélia Cumbi. Joint Evaluation of General Budget Support 1994-2004 – Mozambique Country Summary,

Batra, G. & Mahmood, S. (2003) ‘Direct Support to Private Firms: Evidence on Effectiveness’, World Bank Policy Research Paper 3170, Washington

Castel-Branco, C. (2004) ‘Business and Productive Capacity Development in Economic Growth and Industrialisation’, Study on how to integrate private sector development in Denmark’s new Country programme in Mozambique for the period 2005–2009 .

Clément, J.A.P & S.J. Peiris, ‘Country Study, Mozambique’, IMF Research Bulletin’, December 2007

Danida (2006) Aid Management Guidelines Glossary, February 2006 (2nd edition).

Danida (2007) Evaluation Guidelines, Ministry of Foreign Affairs of Denmark (Danida, November 2006).

EIU (2007) ‘Mozambique: Country Profile’, www.eiu.com

Government of Mozambique and Government of Denmark (1998), ‘Development Cooperation Programme: Agreed Minutes and High Level Consultation Report.

Government of Mozambique and Government of Denmark (1999), ‘Development Cooperation Programme: Agreed Minutes and High Level Consultation Report.

Government of Mozambique and Government of Denmark (2000), ‘Development Cooperation Programme: Agreed Minutes and High Level Consultation Report, October 2000

Government of Mozambique and Government of Denmark (2002), ‘Development Cooperation Programme: Agreed Minutes and High Level Consultation Report, 27 February- 1 March 2002

Government of Mozambique and Government of Denmark (2004), ‘Development Cooperation Programme: Agreed Minutes and High Level Consultation Report, 30 June -1 July 2004


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Government of Mozambique and Government of Denmark (2007), ‘Development Cooperation Programme: Agreed Minutes and High Level Consultation Report, 30 June – 1 July 2007

Government of Mozambique, Ministry of Agriculture and Denmark Ministry of Foreign Affairs, Danida, Mozambique, Agricultural Sector Programme Support, Phase II, Annex 1, Private Sector Development Component, October 2005 (F128).

Government of Mozambique (2006) ‘Plano de Acção para a Redução da Pobreza Absoluta 2006-2009.

Government of Mozambique, Ministry of Agriculture and Denmark Ministry of Foreign Affairs, Danida, Mozambique, ‘Agricultural Sector Programme Support, Phase II, Private Sector Development Component, Inception Report, Draft’, October 2006 (F129).

Hanlon, J. (2006) ‘PARPA II – Key Quotes and Comments by Joseph Hanlon’.

Harding, A and Gerster, R. (2004). Learning Assessment of Joint Review 2004. Draft Final Report to Programme Aid Partners and Government of Mozambique. (April 2004).

HLF (2005) Paris Declaration on Aid Effectiveness, High Level Forum, 2005.

IMF (2005) ‘Republic of Mozambique: Selected issues and Statistical Appendix’, August 2005, IMF Country Report, No.05/311

Lledo, V. forthcoming, ‘Strengthening Mozambique’s Business Environment: Diagnostics, Strategies and Outcomes’, in Post Stabilisation Economics in Sub-Saharan Africa: Lessons from Mozambique ed by Jean Clément, and Shanaka J. Peiris, Washington, IMF.

Ministry of Foreign Affairs Denmark, Danida, ‘Evaluation: Private Sector Development Programme’, 2001/1

Ministry of Foreign Affairs, Danida, Mozambique: Strategy for Development Cooperation between Denmark and Mozambique, 1995 (F401)

Ministry of Foreign Affairs, Danida, Mozambique: Strategy for Development Cooperation between Denmark and Mozambique, May 2000 (F403)

Ministry of Foreign Affairs, Danida, ‘ADIPSA, Draft Final Inception Report’, April 2001.

Ministry of Foreign Affairs Denmark, Danida ‘Meta-Evaluation: Private Sector Development Interventions, 2004/6.

Ministry of Foreign Affairs Denmark, Danida, Business-to-Business Programme, www.b2bprogramme.com

Ministry of Foreign Affairs, Technical Advisory Services, Mozambique, ‘Appraisal of the Second Phase of Danida’s Agricultural Sector Programme Support, ASPS II Appraisal Report’, 11 July 2005 (F127).

Mokoro Ltd (2007) Evaluation of Development Cooperation between Denmark and Mozambique: Inception Report, October 2007.

NCG (2007) Pre-study in preparation of an Evaluation of the Danish Mozambique Country Programme 1992–2006, Research Paper commissioned by Ministry of Foreign Affairs of Denmark and Ministry of Planning and Development, Mozambique, September 2007.

NORAD (2002) ‘Study on Private Sector Development in Mozambique’, June 2002

Nordeco (2007) A synthesis of existing evaluations and related studies on aid and development in Mozambique, Research Paper commissioned by Ministry of Foreign Affairs of Denmark and Ministry of Planning and Development, Mozambique, September 2007.


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OECD (2006) DAC Guidelines and Reference Series: Harmonising Donor Practices for Effective Aid Delivery Volume 2: Budget support, sector wide approaches, and capacity development in public financial management. (DAC). OECD. Paris

Schulpen, L. & Gibbon, P. (2002) ‘Private Sector Development: Policies, Practices and Problems’, World Development Vol. 30 (1) 1-15.

T & B Consult (2004) ‘Study on How to Integrate Private Sector Development in Denmark’s New Country Programme in Mozambique for the Period 2005–2009, Ministry of Foreign Affairs, Danida.

World Bank (2006) ‘Doing Business 2007: How to Reform’. Washington

World Bank (2007), ‘Implementation Completion and Results Report on a Adaptable Program Credit in the Amount of SDR 21.7 million to the Republic of Mozambique for the First Phase of an Agricultural Sector Public Expenditure Program (ProAgri), 22 May.

World Bank (2007) ‘Promoting Shared Growth through Empowerment of Citizens and Institutions: Mozambique Country Partnership Strategy, 2008–2011.


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Annex A: Mozambique Exports and Costs of Doing Business

Figure A1: Mozambique Composition of Exports (USD millions)

Source: IMF (2005) ‘Republic of Mozambique: Selected issues and Statistical Appendix’, August 2005, IMF Country Report, No.05/311

Table A1: Mozambique Costs of Doing Business Rankings, 2006 Data

Ease of

doing

business

Enforcing

contracts

Starting

a

business

Trading

across

borders

Closing

a

business

Employing

workers

Protecting

investors

Registering

property

Getting

Credit

Paying

Taxes

Dealing

with

licenses

South Africa 29 43 57 67 65 87 9 69 33 74 45

Mauritius 32 109 30 21 67 64 11 156 83 11 49

Botswana 48 77 93 89 22 62 118 34 13 67 136

Uganda 107 71 107 161 44 8 60 166 159 43 110

Mozambique 140 168 153 141 126 157 83 105 83 80 103

Tanzania 142 65 127 67 105 143 99 157 117 113 172

Source: World Bank Doing Business Report, 2


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Annex B: Danida Private Sector Programmes

Table B1: Projects above DKK 3 million (up to DKK 30 million)

All figures are expressed in million DKK

Sector Danida file no Name of Programme Period Grant Disb.

Business & Industry

104.Moz.100.

207-3

Business and Technical Co-operation Project between Max Design and BN Produkter

2004–2007

3.91 3.96

Business & Industry

104.Moz.100-201-3

PSD cooperation: Nexø Skibs-Og Bådbyggeri A/S and Xibotana Ltd.

2006–2009

3.69 1.42

Business & Industry

104.Moz.100-206-3

PS-Industria Mocambicana de Agendas and Gellert Leather ApS

2004–2007

3.86 3.54

Business & Industry

104.Moz.100-208-3

PSD cooperation: Orana A/S & Gani Comercial Lda.

2005–2008

3.02 0.19

Business & Industry

104.Moz.100-210-3

PSD cooperation: Cabana Ltd & Woodshade Organics ApS

2004–2008

3.68 0.28

Business & Industry

104.Moz.100-214-3

PSD cooperation - Royal Fish Denmark A/S and Pescadana Ltd.

2006–2009

3.04 0

Business & Industry

104-215-3 Prǽstbro Maskiner A/S –Kanes Alfaias Agricolas Sari

2005–2007

2.50 ?

Table B2: NGO projects above DKK 3 million 1992–2006

All figures are expressed in million DKK.

Sector File No NGO / Partner

Name of programme Period Grant Disb.

Business & Industry

104.N.266/96 Ibis

Handicraft and small scale industry in Sofala*

1996– 1999

8.30 4.26

Table B3: Projects under the Embassy grant authorization 1992–2006 (by definition below DKK 3 million).



Business & Industry

104. Moz.50-102.

Development of database on associations and private companies

2000–2002

3,000,000

Total Grant

3,136,871

Disbursed


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Table B4: Mixed Credit Projects



Communication 104.0.30.Moz.1 Rural Telecommunication Project 2005–2008

58.41 47.57

Transport 104.0.30.Moz.2 Rehabilitation of Regional Airports 2005–2009

106.20 0.30

Communication 104.0.30.Moz.3 Backbone Transmission Network, Phase II

2006–2009

67.12 34.71

Transport 104.0.30.Moz.4 Dredger for Beira Port 2006–2010

147.05 0.00


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Annex C: Description of Donor Activities in the Private Sector

World Bank: Enterprise Development Project (PODE): 2000–2006

This project was completed in 2006 and was conceived as a broad donor support programme for private sector development. The project had three elements which were:

i) Supporting the competitiveness of private firms by strengthening their access to training, consultancy and linkages.

ii) Promoting access to finance.

iii) Building the capacity of GOM institutions and non-governmental agencies to enhance their ability to provide business services and to improve the business environment.

The project was supported by three other donors, the EU, Norway and DFID which funded the HIV/AIDS component of PoDE. PoDE ended in 2006 and the World Bank Country Partnership Strategy 2008–2011, outlines the Bank’s focus on second generation reforms and the removal of constraints to growth as their key activities for the next country strategy to support pillar three of the PARPA. This will involve supporting reforms to improve the investment climate and financing investments in infrastructure, rural development and regional integration.

USAID: Country Strategic Plan 2004–2010

USAID’s program is designed to increase labour-intensive exports and remove constraints to investment and trade. It provides technical assistance, training, and capacity building to the Government of Mozambique and the private sector to:

i) increase international markets access for Mozambican products;

ii) enhance Mozambique’s competitiveness by reducing the cost of doing business;

iii) increase exports in specific sectors such as tourism, garments, and horticulture.

USAID also supports CTA and their business arbitration centre to reinforce CTA's capacity to advocate for a more competitive business environment. It is also providing technical assistance to the Ministry of Industry and Commerce (MIC) to conduct trade analysis and to formulate and implement better trade strategies.

UNIDO: Integrated Industrial Development Programme, Phase II 2004–2007

The Integrated Programme aims to contribute to the diversification of Mozambique's economy and to enhance industry's role in economic progress by providing assistance at policy, institutional and sectoral levels. There are two components under the programme:

i) Capacity building for policy and support institutions for private sector development.

ii) SME support with a focus on reducing the regional imbalance of institutional support services for SMEs.

iii) Development of an information system to give public organisations and private enterprises information on business services available, regulations etc.


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Norway

In 1999 Norway selected Mozambique for a special PSD focus to pilot micro and meso level interventions. The objective was to integrate PSD into existing and new programmes rather than have a separate PSD component. At the same time, Norway has supported part of UNIDO’s Integrated Programme and the Business Development Programme.

Sweden

Sida is involved in financing Fundo de Fomento de Pequena Industria (FFPI) which provides credit services in Niassa province, where Sida has focused much of its assistance. The aim is to encourage activities to contribute to increased production and productivity with a focus on forestry, agriculture, trade and eco-tourism and includes support to the development of entrepreneurship.

Italy

Italy has two private sector development programmes. The first aims to support entrepreneurship in the fishing industry and to improve productivity in the sector within the districts of Govuro, Mabote and Zavala. The second programme was established in response to the effects that the floods of 2000/1 had on the rural economy. The programme is designed to rehabilitate and strengthen the small and medium enterprises operating in the districts affected by the floods. Financial assistance is provided through a credit line financed by the Italian Government, managed by the Mozambican Ministry of Industry and Commerce and implemented by the local banking system. The credits are soft loans with below-market interest rates and are aimed at supporting approximately 100 enterprises.

Netherlands

The Netherlands provides support to Mozambican SMEs through financial and technical assistance services based on the Mozambique SME Initiative (MSI) and Mozlink. The aim is to improve capacity and availability of technical assistance providers and Mozambican SMEs competitiveness in the supply chain of large industries.

Evaluation of Development Cooperation between Mozambique and Denmark, 1992-2006

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Table C1: Donor Activities in Business Development OECD-DAC 25000, 2005–2008

Donor Project n° Project Designation Currency Total Amount

Total Disbursed

Undisbursed Currency Total Committed

Total Disbursed

Undisbursed Total Disbursed

2005

Total Disbursed

2006

Total Disbursed

2007

Total Disbursed

2008

Start Date End Date

DENMARK MOZ.100 Danida Private Sector Development Programme - Business to Business

DKK 33.000.000 28.754.981 4.245.019 US $ 5.820.106 5.071.425 748.681 1.070.899 1.169.809 802.498 2.292.769 1/1/2001 31/12/2008

ITALY 8258 Fishery and fish farming micro-business support in Inhambane (NGO SVI2000 and COSPE)

Euro 812.380 0 812.380 US $ 1.160.543 0 1.160.543 0 0 0 0 1/9/2007 30/8/2010

ITALY 6980 Support to the Private Sector

Euro 5.390.000 5.390.000 0 US $ 7.700.000 7.700.000 0 0 0 0 0 5/8/2004 31/12/2007

NETHERLANDS 16216 MAP IFC Euro 1.000.000 0 1.000.000 US $ 1.428.571 0 1.428.571 0 0 857.143 571.429 1/8/2007 31/12/2009

NETHERLANDS 14721 CFM Consultancy for dredging

Euro 125.000 115.000 10.000 US $ 178.571 164.286 14.286 0 21.429 142.857 14.286 1/8/2006 31/8/2008

NORWAY MOZ-06/029 Support to GAPI Transformation

NOK 2.000.000 0 2.000.000 US $ 330.579 0 330.579 0 0 165.289 165.289 30/3/2007 1/10/2007

NORWAY MOZ-03/314 Modernization of Company Registry

NOK 19.000.000 15.378.384 3.621.616 US $ 3.140.496 2.541.882 598.614 471.177 1.740.126 330.579 247.934 25/5/2004 31/12/2007

SWEDEN 23000141 Confederation of Business Associations (CTAs)

SEK 10.000.000 8.129.800 1.870.200 US $ 1.428.571 1.161.400 267.171 0 0 481.457 285.714 1/9/2002 30/6/2008

SWEDEN 23000000 Private Sector Niassa/Malonda Foundation

SEK 81.000.000 80.611.160 388.840 US $ 11.571.429 11.515.880 55.549 2.580.822 4.284.573 1.955.419 3.142.857 1/1/2002 30/6/2007

Total Funds US $ 32.758.866 28.154.873 4.603.994 4.122.898 7.215.937 4.735.242 6.720.278

evaluation of development cooperation between mozambique

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