Public Investments in and for Agriculture in Mozambique:

Tentative Insights to What They Have Achieved, and What Determines Them

Tewodaj Mogues and Samuel BeninInternational Food Policy Research Institute (IFPRI)

IFPRI-Maputo WorkshopMaputo, Mozambique

18 October 2012

Public Investmentsin

and for Agriculture

Impacts and Determinants of Public Investments in Agriculture

Determining factors Outcomes

Public Investmentsin

and for Agriculture

Impact of Public Investments in Agriculture

Determining factors Outcomes

Goal and Objectives of Study of Public Investment Impacts

• Conceptualized initially:• Assess impact of and returns to public investment in the agricultural

sector• Estimate public investment required to achieve specific development

objective—e.g. 7% ag. GDP growth per year (recent goals)• First objective is methodologically challenging; made even

more difficult by data constraints• We use descriptive and trend analyses of available public spending and

TIA data to get a sense of likely influence• Second objective depends on first objective and solid M&E

data• Mozambique’s CAADP Investment Plan may face similar constraints

given the data scarcity• We use parameters estimated for other countries to assess public

investment requirements

High overall agricultural performance

• Agricultural sector performance has been impressive. Annual average growth rates b/w 2000 and 2011:• AgGDP=8.4%; total public agricultural spending=12.2%; public

agricultural investment=13.2%• Public spending and investment has, however, slowed down since

2005

0

1

2

3

4

5

0

10

20

30

40

50

60

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Agricultural GDP and public spending (billion Meticais, 2003 constant prices)

AgGDP (left axis)

Expenditure (right axis)

Investment (right axis)

8.4 7.39.6

12.2

27.2

5.7

13.2

34.9

5.30

5

10

15

20

25

30

35

40

2000-11 2000-05 2005-10

Agricultural GDP and public spending (annual average growth rate, %)

AgGDP Expenditure Investment

Sources: Authors’ calculations based on MOF (CGE) and World Bank (agricultural PER 2011; WDI)

Is the high performance sustainable?

• Agricultural sector has performed beyond targeted growth rates (CAADP 6% and PEDSA 7%); suggesting that continuing business-as-usual may be desirable

• Key question: is the high performance sustainable?

0

0.2

0.4

0.6

0.8

1

1.2

1961 1966 1971 1976 1981 1986 1991 1996 2001

Total factor productivity and technical change (Index, 1961=100)

TFP Efficiency Technical change

Indications are that it is not sustainable because: it is starting from a

small base after the civil war

there has been very little or no technical change

TFP growth is driven by improvement in efficiency of factor use only

Source: Benin et al. (2011)

Land and labour productivity have stagnated or declined

Sources: Cunguara and Kelly (2009)

Low use of ag. services and technologies

• Low and declining land and labor productivity are a reflection of low use of productivity-enhancing agricultural services and technologies• particularly for combined use of improved seeds, fertilizers and irrigation (less

than 2% of households)

• Except for irrigation, access to public services and use of technologies have stagnated or declined

0%

5%

10%

15%

20%

2002

2003

2005

2006

2007

2008

2002

2003

2005

2006

2007

2008

2002

2003

2005

2006

2007

2008

2002

2003

2005

2006

2007

2008

2002

2003

2005

2006

2007

2008

2002

2003

2005

2006

2007

2008

2002

2003

2005

2006

2007

2008

2002

2003

2005

2006

2007

2008

Extension Improved seed Chemicalfertilizers

Irrigation Improved seed& fertilizers &

irrigation

Improved seed& fertilzers

Fertilizers &irrigation

Animal traction

Access to services and use of technologies(percent of households)

Source: Authors’ calculations based on TIA data

Positive impact of services and technologies (I)

• Greater access to public services and use of technologies have contributed to higher productivity among households using them, especially those using fertilizers

82.8100.7

82.5

166.8

82.8100.2

0306090

120150180

no yes no yes no yes

Receivedextension?

Used chemicalfertilizers?

Used animaltraction?

Maize productivity (kg per capita)

Source: Cunguara and Kelly (2009)

Positive impact of services and technologies (II)

However, the proportion of household farms using these public services and technologies has remained too low over time to bring about any technical change.

02468

10

no yes no yes no yes no yes no yes no yes no yes no yes no yes no yes no yes no yes no yes no yes no yes no yes

2005 2006 2007 2008 2005 2006 2007 2008 2005 2006 2007 2008 2005 2006 2007 2008

Received extension? Used improved seed? Used chemicalfertilizers?

Irrigated fields?

Average number of months of surplus production of staple

• Greater access to public services and use of technologies have also contributed to greater food security

Source: Authors’ calculations based on TIA data

4.0

4.5

5.0

5.5

6.0

2002 2003 2004 2005 2006 2007

Cultivated area (in million ha)

Policies and public spending have promoted area expansion

• The rapid growth in public spending (12.2% per year in 2000-2011) seem to have promoted rapid expansion of agricultural area.

• Between 2002 and 2007, total cultivated area expanded by 5 percent per year on average

• The slow down in area expansion in more recent years shows that this type of agricultural growth may not be sustainable.

• Accelerating technical frontier is essential to compensate for rapid growth in rural population and to improve rural incomes

Source: AgPER and TIA data

Public investment required for technical change (I)

• Because the current performance in growth has surpassed the targets (CAADP 6% and PEDSA 7%), the critical issue is changing the sources of growth as illustrated:

0

3

6

9

2012(annualaverage

1993-2004)

2013 2014 2015 2016 2017

Illustration of desirable change in sources of agricultural output growth (%), 2012-2017

Factors and InputsTFP-Technical changeTFP-Efficiency

Sources: Authors’ illustration based on World Bank (WDI) and Nin Pratt and Yu (2009)

Public investment required for technical change (II)

• Approach and assumptions (based on Benin, Fan and Johnson 2012)• Overall agricultural growth remains unchanged at 2000-2011

average 8.4% per year• Substitute growth due to factors of production (low rate=0.50 and

high rate=0.75 percentage points per year) with growth due to TFP (allocate 1/3 to efficiency and 2/3 to technical change)

• Simulate using high (0.10) and low (0.05) scenarios for the elasticity of TFP with respect to public investment in agriculture

• Other complementary expenditures (agricultural and non-agricultural) or capacity of implementing agents expands appropriately to absorb increased public investment

• Simulate over ten years: 2012 to 2022, with 2012 as base

• Public investment must grow from baseline rate of 13.2 % per year to 18.2 and 28.2 % per year under low and high investment scenarios, respectively

Public investment required for technical change (III)

0

5

10

15

20

25

30

2012

2014

2016

2018

2020

2022

Inve

stm

ent

(Bil.

Met

icai

s, 2

003

pric

es)

Public agricultural investmentrequirement, 2012-2022

Baselow conversion-low elasticityhigh conversion-low elasticitylow conversion-high elasticityhigh conversion-high elasticity

(in billion Meticais; 2003 prices)Base High elasticity Low elasticity

lowconv

highconv

lowconv

highconv

Total amount 45.6 60.1 69.2 79.6 105.4Additional amount (over base)

Total n.a. 14.5 23.5 34.0 59.8Annual average n.a. 1.3 2.1 3.1 5.4

Sources: Authors’ simulation based on Benin et al. (2012), World Bank (WDI) and Mozambique CGE and AgPER

Conclusions from Preliminary Analysisof Investment Outcomes

• Recent high agricultural growth performance in Mozambique represents catching-up with the levels achieved in the early 1990s.

• The growth is driven largely by expansion in area cultivated, and to a more limited extent use of fertilizers, and increased efficiency in use of many inputs. There has been little or no technical change.

• The slowdown in area expansion and the rapid growth in rural population necessitates technological change.

• This will require large incremental investment in agricultural R&D, human capital, infrastructure, and institutional development.

• The types of agricultural investments and policies are important because they are not growth neutral; those that deliver location-differentiated technologies and that account for diversity of farmers are likely to be critical.

Public Investmentsin

and for Agriculture

Public Investment Decisionmakingand its Determinants

Determining factors Outcomes

Why Seek to Understand Determinants of Agricultural Investments?

• Public investments in agriculture—as well as foragriculture—can have profound contributions to productivity, nutrition, reduction of poverty

• Much evidence on the impacts of different types of investments in and for agriculture (Mogues et al. 2012)

• However, in some cases, strong research consensus on high impact areas have not translated in higher investments on the ground (and vice versa). Example: agricultural R&D.

• Must begin to ask why, by undertaking serious investigations of what are the drivers of public investment decisionmaking

• Purpose of such investigation is to support policy‐ and decisionmakers on how to encourage high‐impact investments and scale back ineffective ones

Public Investment Decisionmaking and its Determinants – A Conceptual Framework

Based on Mogues (2012)

I. The Budget Process as a Driver of Agricultural Public Investments

Theories on Processes of Budgetary Decisionmaking

• Formal procedures underlying the budget process• ‘Garbage‐can budgeting model’: Allocations are random 

(Cohen et al. 1972)

• Budgetary model of incrementalism: Inertia and path‐dependency in investment decisionmaking (Davis 1971; Cowart et al. 1975; Ostrom 1977) … or continuity / stability

• Budget implementation (vs. approved budgets)• E.g. in Nigeria, on average 21 % of agricultural budget never spent 

(Mogues et al. 2012)

• Sudden revenue short‐ (or wind)falls; use of funds for other purposes; leakages; etc.

• Striking results from public expenditure tracking survey (e.g. Uganda: 13 % of expenditures in education reached intended services) (Reinikka & Svensson 2004)

Planning, Budgeting, Reportingin Mozambique

Planning & Investment Strategies over Time

Formal Budget Process in Mozambique

Studies on the implications of the budget process in Mozambique

• De jure vs. de facto planning & budget process—both must be understood

• Correspondence between the agricultural budget and the PAAO, given process of PAAO’s creation

• Change in nature of intergovernmental co‐ordination in the budget process:• Shift from weight on vertical co‐ordination between agricultural 

offices at central, provincial and district level, to horizontal co‐ordination between agricultural and finance/planning offices

• Trade‐off between national agricultural priorities and local priorities across sectors

II. Actors, their Incentives and Constraints: Consequences for Agricultural Investments

Theories on Role of Various Actors in Public Investment Decisionmaking

• Policymaker as ‘benevolent and unencumbered’ social planner (Tridimas 2001; Reddick 2002)

• Politicians vs bureaucrats (Niskanen 1971)• Strength of economic groups to lobby for provision of public 

investments benefiting them is larger when:• more spatially concentrated  dispersed agricultural households vs. 

concentrated urban residents (Olson 1985)• better transport and communications infrastructure  urban vs rural• Size of group small  agricultural population much larger in many 

developing countries, reverse in rich countries (Olson 1965)• Average income and education of group member is higher  low 

among smallholder agricultural households (Binswanger & Deininger 1997; Krueger 1996)

• Donors’ contribution to ag. investments:• Direct vs. indirect; fungibility; etc.

Role of Actors in Ag. Investments: Recent Studies on Mozambique

• Ag. industry and policymakers: Embeddedness improves policy support (Buur and Whitfield, 2011)

• Diverse interests among the key actors with proximity to policymaking (Buur, 2012)

• Inter‐party competition and agricultural investments (do Rosario 2011)

• Role of Donors:• Underestimation of the influence of domestic institutions vis‐à‐vis that 

of donors (Buur et al. 2011)• Donor influence on aggregate ag. investments: Limited due to partial 

crowding‐out of domestic agricultural investments? (Cabral, 2009)• Strong influence on composition of ag. expenditures (for institutional 

strengthening vis‐à‐vis direct production support) (Cabral et al. 2007)

III. How Attributes of Services and Goods Influence Resource Allocation

Characteristics of Public Investments and their Influence on Resource Allocation

• Attributability of investments to conscious decisions made by politicians (e.g. visibility, “markability”) (Keefer & Khemani 2005)

• Temporal features of public investments• Long lag perturbs attributability

• Lag of investments vs. political cycle

• Time may allow for “things to go wrong”—greater uncertainty

Characteristics of Public Investments: Studies on Mozambique

• Heightened visibility of “promotional activities” as opposed to “core services” (World Bank 2011)

• Attributability an important element in trade‐off b/w projectised aid and sector budget support (Hodges & Tibana, 2004)

• Lag between expenditures and outputs/outcomes: Influence on irrigation investments (World Bank 2011)

• Lag of effects of investments in institutional strengthening: Lessons from ProAgri I (Cabral et al. 2007)

IV. Economic and Political Institutions

CAADP Process in Mozambique

1. Sensi-tisation

2. Focal Point

3. Launch

4. Com-mittees

5. Cabinet Memo

6. Stock-taking

7. Analytical

Work

8. Stake-holder

Workshop9. Round-

table

10. Donor Confe-rence

11. Compact

12. Invest-ment Plan

13. Technical Review

14. Business Meeting

15. Operatio-nal Design

16. Execution

June 2010

13. Dec. 2010

9. Dec. 2011

Being drafted as we speak!

Evidence on How CAADP Processes Influence Agricultural Investments

• Very little research evidence on this to‐date for any part of Africa!• Partly because of recent nature of implementation, and only in some 

countries have final stages been reached

• Three studies in other African countries give a mixed review• On Ghana: Already advanced policy process meant CAADP had little 

added‐value (Kolavalli et al. 2010)• On Kenya, Ghana, Uganda: Narrower breadth of participation than 

initially anticipated (Zimmermann et al. 2009)• On 15 countries: CAADP very relevant, but misperceptions about CAADP 

led to deflated interest at national level (Ackello‐Ogutu et al. 2010)

How will CAADP Process in Mozambique Influence Investments?

• Proposal to undertake rigorous study to support the CAADP Process in Mozambique• By providing information on which factors could help and which could be 

a bottleneck in achieving intended investments• Important to initiate this investigation at this early stage, as 

baseline data are critical to being able to attribute evolution of investment portfolio to CAADP• Followed up by midline and endline data collection

• Qualitative research method appropriate to disentangle complex pathways leading to investment choices• although both qualitative and quantitative data needed)

• Draw on the most relevant theoretical frameworks regarding (i) processes, (ii) actors, and (iii) characteristics of publicly provided goods, as as the drivers of public investments

We are very interested in your feedback at the early stage of this set of studies!

Public Investments in and for Agriculture in Mozambique:

Tentative Insights to What They Have Achieved, and What Determines Them

Tewodaj Mogues and Samuel BeninInternational Food Policy Research Institute (IFPRI)

IFPRI-Maputo WorkshopMaputo, Mozambique

18 October 2012

Abbreviated Version of Selected References

• Ackello‐Ogutu et al. 2010. CAADP Review: Renewing the commitment to African agriculture. • Benin et al. 2011. Annual Trends and Outlook Report, ReSAKSS.• Benin et al. 2012. Estimating public agricultural spending requirements. In: Diao, Thurlow, Benin and Fan, 2012. Strategies and Priorities for African 

Agriculture: Economywide Perspectives from Country Studies. IFPRI, Washington, DC.• Buur. 2012. Mozambique Synthesis Analysis: Between Pockets of Efficiency and Elite Capture• Buur and Whitfield. 2011. Engaging in productive sector development: Comparisons between Mozambique and Ghana.• Buur et al. (2011): Strategic privatisation: rehabilitating the Mozambican sugar industry, Review of African Political Economy.• Cabral. 2009. Sector Budget Support in Practice: Desk Study Agriculture Sector in Mozambique • Cabral et al. 2007. Formulating and Implementing Sector‐wide Approaches in Agriculture and Rural Development • Cunguara and Kelly (2009). The impact of PARPA II in promoting the agricultural sector in rural Mozambique, 2002‐2008.• Hodges, T. and R. Tibana. 2004. Political Economy of the Budget in Mozambique.• Keefer, P., and S. Khemani. 2005. “Democracy, Public Expenditures and the Poor: Understanding Political Incentives for Providing Public Services.” 

World Bank Research Observer 20 (1): 1–27.• Kolavalli et al. 2010. Do Comprehensive Africa Agriculture Development Program (CAADP) Processes Make a Difference to Country Commitments 

to Develop Agriculture? The Case of Ghana. IFPRI Discussion Paper # 1006. • Mogues. 2012. What Determines Public Expenditure Allocations? A Review of Theories and Implications for Agricultural Public Investments. IFPRI 

Discussion Paper, forthcoming.• Mogues et al. 2012a. “Agricultural Public Spending in Nigeria.” In: Public Expenditures for Agricultural and Rural Development in Africa, edited by T. 

Mogues and S. Benin. London and New York: Routledge.• Mogues et al. 2012b. The Impacts of Public Investments in and for Agriculture: Synthesis of the Existing Evidence and New Empirical Analysis. IFPRI 

Discussion Paper. Washington, DC: International Food Policy Research Institute, forthcoming.• Nin Pratt, A., and B. Yu. 2008. An Updated Look at the Recovery of Agricultural Productivity in Sub‐Saharan Africa. IFPRI Discussion Paper 787.• do Rosario. 2011. From Negligence to Populism: An Analysis of Mozambique’s Agricultural Political Economy.• World Bank. 2011. Report No. 59918‐MZ, Mozambique, Analysis of Public Expenditure in Agriculture, Volume I: Core Analysis.• Zimmermann, et al. 2009. Agricultural Policies in Sub‐Saharan Africa: Understanding CAADP and APRM Policy Processes.