Mozambique, impact on political stability and business of RENAMO’s resurgence

This week Africa Trends Matter has moved slightly beyond our normal borders and looked into the causes of Renamo’s resurgent military activities in Mozambique and its implications on political stability and investor confidence in the extractives sector. We do not have explicit scenarios for Mozambique, but we still try to offer comments on risks and drivers. We hope you will enjoy the blog.

As usual, please comment on write to us of you have questions.

 

The data: Basically, most of both the factual data and the perception based data point to gradual progress in Mozambique up to around 2009. Since then, progress in terms of quality of governance has leveled off. The data also point to a strongly patrimonial state, which almost no attempts to separate the state and the ruling FRELIMO party. Compared to the other countries we follow and other countries in the region, only Zimbabwe have similar features.

RENAMO on its side started as a militia, which became a stronger movement from 1979 when the present leader Dhlakama took over as leader. Initial funding came from  SA/Rhodesia and possibly the US. Later the Peace fund (from 1990). Struggling now (no major access to rent). 
Political support then and now: Provincial/north urban support during war. Support peaked in 1999, when Dhlakama got 48% of the presidential votes. Since then, Dhlakama has made a number of tactical errors, not least by boycotting key elections. Yet, the party is still popular in some areas although our assessment is they will get less than 15% in October’s elections. Relationship with FRELIMO: Enemies, but similar in terms of being old-school parties. Essentially RENAMO in its present form will not be able to win elections, especially not with the new MDM (since 2009) party picking up much of the opposition vote. The role as a spoiler, however, should not be underestimated.

Dhlakama, Renamo’s leader, did very well during the war, but has essentially not managed to transform his thinking and leadership style from military to a political modus operandi.

 

Why insurgency now: We essentially see four reasons why the resurgence happened at this time;

  • Opportunity – FRELIMO increasingly corrupt (but also weak in military terms)
  • Desparation – RENAMO increasingly marginalised from power and funding
  • Last chance – MDM coming up.
  • Dhlakama’s fight for relevance?

 

Impact on political stability and investor confidence:

State: Moz already high risk – poor institutions, weak, one-party state, trying to manage rapidly increasing rent opportunities (growing patronage network) and an increasingly demanding population.

Investors: Harder place to invest, deals may be “easy”, but legislation, regulation and enforcement remains weak. Increasing political risks as well as risks to assets, contract sanctity and expropriation. With the resurgence and RENAMO in crisis, uncertainly – both short- and medium term has increased. => more careful risk monitoring required.

 

Risks to watch:

  • Short/medium term risk: Increasingly populist measures, related to further weakening of the state. Likely driven by crisis or political competition (MDM now and towards 2019).
  • Peace-deal, July 2014. Good and lowers risk – but could be abandoned. RENAMO’s last chance to stay relevant as a party. FRELIMO absorbing RENAMO fighters. In short, lowers short- and likely also medium term risks related to RENAMO-FRELIMO fighting. Dignified exit for Dhlakama&co required.
  • Societal medium term: growing unrest driven by inequality or perception of inequality and corruption.

Sources:

Mo Ibrahim, Cost of doing business data, Afrobarometer, Stability and Fragile States Index, TI and the Corruption Perception Index as well as Joe Hanlan’s blog

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