Cheaper new food subsidy coming

MAPUTO, 11 May 2011 (IRIN) - Mozambique's government will again attempt to curtail subsidy expenditures for essential foods and services, but this time its approach will be more nuanced so as to avoid a repeat of the cost-of-living protests in 2010.

Antonio Cruz, director of policy analysis in the planning ministry, recently told local media that subsidies on fuel, bread and rice, estimated to cost the donor-dependent government millions of dollars each month, would be phased out by the end of June 2011.

At least 13 people died during widespread civil unrest in September 2010 in the capital, Maputo, after the government announced the immediate ending of all subsidies, which were subsequently reintroduced in the face of the protests.

Unsustainable subsidies

On 21 September 2010 the Mozambique news agency reported that registered bakers would receive a subsidy of 200 meticais (US$6.60) for every 50kg bag of wheat flour - costing then 1,050 meticais ($37.75) - they purchased.

Other relief measures included halving water connection fees for low-consumption households - considerably reducing the cost of piped water to the poor - giving free electricity to households consuming 100kWh or less, and prepaid electricity consumers would no longer pay for refuse collection.

The subsidies had been introduced in 2008, ahead of the 2009 national elections. The government said they were required to mitigate the rising cost of living for the poor in the wake of the global financial crisis.

Economic analysts warned at the time that such blanket subsidies would be nsustainable, as the long-term global trend indicated rising food prices, although there would be fluctuations at the local level.

Improved prospects

"Prices of [Mozambique's] main staple, maize, declined markedly between March and April [2011] in all monitored markets, reflecting the start of the 2011 harvest," said the Global Food Price Monitor, published on 5 May 2011 by the Food and Agricultural Organization (FAO).

"The sharpest decreases (between 29 and 33 percent) were recorded in the surplus northern provinces of Zambezia and Nampula. Prices are lower (between 12 and 18 percent) than in April last year [2010] due to satisfactory crop prospects," the FAO noted.

However, the price of rice in Maputo, a staple food in the area, declined slightly in April from its almost record levels in March, but "remain 16 percent above the high levels seen a year ago [in 2010]", the FAO said.

New subsidy model

Planning and development minister Aiuba Cuereneia told the state-run newspaper, Noticias, that savings accrued from discontinuing the generalized subsidies would enable the introduction of a new food basket and transport benefits for families earning less than two dollars a day.

The new subsidy system is expected to come into effect between June and August 2011 and the first phase of the scheme, which will take place between June and December, will focus on the urban poor.

The goods envisaged in the new basket include maize, flour, rice, fish, beans, groundnuts, vegetable oil and bread, and those eligible would be identified through a "census" based on income rather than wages. Bus passes would also be issued to workers, students and the elderly.

The census is being conducted in the country's 11 provincial capitals, but according to a recent Survey of Household Budgets, the government estimates that 1.8 million people in urban areas have a monthly income below the threshold of 2,500 meticais ($82) and would be eligible to buy the food basket, which would cost 840 meticais ($28).

In February 2011 the government warned that the country's food security needed to be "deeply improved" after 37 percent of households were found to be subsisting on one meal a day or less during the lean season - the three months leading up to the main harvest.

Diplomatic sources, who declined to be named, said the effects of global economic uncertainty had made Mozambique's food security situation "more precarious", as some donor countries and aid agencies were struggling to maintain the budgetary support they had provided in the past.

Donors also embarked on a "strike", in which budget support was suspended between December 2009 and March 2010, demanding action on electoral reforms, corruption, and the often blurred line between the state and the ruling Frelimo party, among other things.

Citing Finance Minister Manuel Chang, Noticias reported in February 2011 the government was facing a $2 billion shortfall in this year's budget, which was earmarked to be covered by donor support and international loans.

Rural adversity

However, due to the adverse affect of the global financial crisis and projected increases in food prices it is feared some of this support may not be provided.

"The rural people in Mozambique face many challenges when it comes to ensuring they have enough food to eat, not least because our country is incredibly prone to natural disasters that can devastate crops," said Marcela Libombo, an official in the disaster management secretariat of the agriculture department.

"In the past, farmers have reported losing 30 to 40 percent of their crop, especially maize, because of an inability to get crops [from the north] to markets down south [to the main urban areas such as Maputo, which sources food from neighbouring South Africa] and a lack of storage silos," she told IRIN.

"But the reality is our northern provinces grow plenty of food. The main problems we have relate to storage and transport infrastructure."