mozambique country consolidation and exit...

Mozambique

Country Consolidation and Exit Program 2016-2020

Exit Grant

Note for the Programme Committee

February 2016

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Table of Contents

1. Background and introduction .............................................................................................. 1

2. Context and justification ..................................................................................................... 1 2.1 Country context .................................................................................................................................................................. 1 2.2 Denmark’s role as a development partner in Mozambique ............................................................................. 2 2.3 Justification .......................................................................................................................................................................... 3

3. Exit Grant proposal ............................................................................................................. 4 3.1 Growth and Employment Programme ..................................................................................................................... 4 3.2 Climate Change and Environment Programme .................................................................................................... 6 3.3 Health and Nutrition Sector Programme Support ............................................................................................... 8 3.4 Strengthening Public Financial Management ........................................................................................................ 8

4. Management and administration ...................................................................................... 10

Annex 1. Summary budget .................................................................................................... 11

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1. Background and introduction In October 2015, the Danish government suggested to Parliament to phase out the cooperation program

with Mozambique. The Danish fiscal act for 2016 envisages the use of the current balances of provisions

in the existing country programme supplemented by an additional grant of 194 million DKK to secure

sustainability and safeguard results, with the last development operations to be wound up at the end of

2019. The consolidation and exit phase of the country program is expected to last from January 2016 to

the final reporting and accounting on program activities expected in 2020.

Two documents set out the parameters of the consolidation and exit phase of the country program, namely

1. The Exit Strategy and Action Plan containing the analytical and strategic considerations leading to the

proposed exit strategy and action plan as well as the exit strategy and action plan themselves, and; 2. Exit

Grant – the present note for the Program Committee which in general terms suggests how the exit grant

should be used.

The Consolidation and Exit Programme takes its point of departure in the five ongoing sector pro-

grammes. The emphasis will be on consolidating of the capacity and other key development results with a

view to enhance sustainability and reduce the risks associated with Denmark’s withdrawal. The current

program phases were planned to end financially in 2017 or before, while substantially leading into the new

five-year Country Programme for Mozambique that was under preparation for 2016-2021. However, an-

ticipated delays mean that some programmes/ components have to be extended at no cost into 2018 and

2019. In connection with the phasing-out, reallocation of funds and allocation of unallocated funds is sug-

gested as described in the Exit Strategy and Action Plan. The additional funds will augment existing fund-

ing for selected programme components in accordance with the Embassy’s Exit Strategy and Plan.

Chapter 2 of this note provides a condensed summary of the rationale for and the main features of the

suggested exit strategy and action plan. Chapter 3 presents briefs on the sector programmes’ results

framework, i.e. programme objectives and objectives and outcomes by component. For each programme,

brief assessments are made of: a) the exit grant’s contribution to consolidation of results; b) capacity de-

velopment; c) risk analysis and risk response, d) management and monitoring; and e) programme budget

showing the allocation of existing funds and additional funds. Chapter 4 presents the proposed manage-

ment set-up to supplement Embassy staff and eventually replace it after the Embassy closure. The budget

summary is in annex 1.

2. Context and justification

2.1 Country context At the end of 16 years of armed conflict in 1992 Mozambique was the poorest country in the World with

an annual average capita GDP of 80 $ and human development amongst the lowest worldwide. Since then,

very significant progress has been made in building core institutions and providing access for the popula-

tion to health, education and other basic services. Support from Mozambique’s external donors such as

Denmark has been significant and accompanied by an exit from absolute poverty for almost half of all

Mozambicans.

20 years of above 7 % average annual economic growth has multiplied the size of the GDP and helped

raise domestic revenue significantly. And external aid now covers below 30 % of public expenditure,

down from more than 60 percent in the 2000’s. However, from the early 2000’ the positive impact of

growth on the income of poorest households has diminished and around fifty percent of the population

still struggle in absolute poverty and Mozambique still faces a considerable backlog in human develop-

ment terms as compared to its peers. Considering Mozambique’s history of conflict, this backlog is not

surprising.

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More than 85 pct. of the working population depends on agriculture and informal non-farm enterprises for

their living and agriculture has seen little diversification and productivity development. The current

growth trend is increasingly driven by exploitation of the country’s natural resource endowments. The

poverty reduction impact of these investments has been at best limited.

Mozambique’s press, its academics and relatively well developed civil society contribute significantly to

the critical debate and advocacy in favour of an inclusive outcome for Mozambique. Citizens, however,

are generally not organized in trade unions and farmer associations.

Mozambique has made massive progress in improving public management in terms of planning, budget-

ing, execution and reporting. But significant challenges remain. Years of comprehensive reform of public

financial management has reduced the scope for misuse of funds on the budget. But public procurement

and the state’s participation in the economy including through public-private partnerships provide room

for considerable discretion and risk of misuse.

Mozambique’s bi-partisan and winner-takes –all electoral system has contributed to consolidate Frelimo’s

hold on power since 1992, and the separation between party and state is not complete. The stability of the

country is threatened by the continued existence of an armed opposition party, marginalization of the op-

position and its supporters and the prevailing conflict-rooted mind-set. Evidence of this is the resurgence

of armed conflict in 2013 after 22 years of peace, including the many minor skirmishes between the army

and Renamo groups. Worsening security could have significant implication also for the possibili-

ties of carrying on with donor funded programs and projects in the country.

Fifty per cent of the population is below 15 years of age and the labour force is increasing by around

300.000 a year. If the aspirations of these young people for jobs and a future are met, they will become a

power-full force for nation building. If not, they may become an equally strong force of destabilization

and source of migration, in a Mozambique with a legacy of conflict.

From around 2025 large revenues are expected to accrue to the Mozambican state from the exploitation of

Mozambique’s vast resources of coal, gas and other mineral deposits. Wisely invested, these revenues

could help catapult the country along the way towards an inclusive growth model where the majority of

people have opportunities for both contributing to and benefitting from economic growth. But as experi-

ence from other countries wealthy in mineral resources shows, there is also a real risk of setting in motion

a negative spiral where the economic interests of the elite prevail, to the exclusion of the majority of the

population, economically as well as socially and - by implication - also politically.

There is now a window of opportunity to support a relatively new government and a president with new

priorities - emphasizing inclusive economic development, reconciliation and democracy - that provide a

promising framework for dealing with the aforementioned challenges. But the Executive currently faces

difficulties in pursuing his initial political manifest. An inclusive political settlement has to be secured in

an economically unfavorable environment. Thus, Mozambique is experiencing economic set-backs as a

result of considerably falling prices on most of its traded commodities, a slow-down in investment, as well

as the worst droughts in a decade and a growing external debt burden. At the same time, the new govern-

ment took over a rapidly growing burden of external debt and reserves that had been brought to a mini-

mum following a protracted period in which the Metical had been defended against depreciation.

2.2 Denmark’s role as a development partner in Mozambique

An evaluation of Denmark’s development interventions in the period 1992 to 2006 documents that the

program has been strongly influenced by the concern to achieve continued long-term benefits. This has

been reflected in a systematic preference for working with government institutions rather than stand-alone

projects and for linking interventions to coherent national and sector policies. There have been strong el-

ements of capacity development and long-term support of Mozambican institutions. Denmark’s consistent

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focus on long-term goals and preparedness to stick to the agreed plans even under adverse conditions, as

well as to act with flexibility when circumstances required it, has been invaluable. In view of the current

economic and political situation in Mozambique, Denmark’s decision to phase out its development coop-

eration has indeed come at a difficult time for Mozambique. The reaction of surprise to the announcement

of the decision was to some extent also triggered by the fact that Denmark up until June 2015 had been

working on a fully-fledged five-year continuation of its country program with a budget of around 200

million US$ – the elements of which had been known to the Government.

Assuring sustainable results of the on-going Danish assistance will not be possible in all areas of Den-

mark’s involvement, as Mozambique’s capacity to take over responsibilities and financing of interventions

is inadequate in the medium-term. Since the communication of the decision to exit, the Embassy has spent

considerable time and energy consulting with the Government of Mozambique and other partners to build

consensus around the modalities to be chosen for the exit. To ensure maximum buy in, the various risks

associated with the exit have been identified and assessed and ways of minimizing and managing these

risk are essential design parameters of the exit strategy.

2.3 Justification

The Exit Grant of approximately 27 million US$ replaces a planned new 5 year country program of ap-

proximately 200 million US $. Hard choices had to be made to adjust to this reality. They were amongst

others guided by the following development considerations. The need to create jobs and business opportu-

nities for the majority of the population is seen as the main challenge and solution to poverty reduction,

diminishing of social and political tensions and the transition to a more generalized and equitable distribu-

tion of benefits over time. Improving the business environment for small-scale farmers and small and me-

dium sized enterprises where the majority of people have their economic mainstay is the key to unlocking

this potential. The constraints to growth in this part of the economy are not entirely understood and still

require additional research. The broadening and deepening of the economy will also create the capacity to

effectively absorb the income from gas and mineral exploitation when they start to arrive in volume. Im-

provements in these areas have benefitted from efforts to combine learning at the central and the provin-

cial/district levels. Moving decision-making closer to the citizens through decentralization is key to a more

inclusive and participatory political and social model. Continuing reform in public financial management

and taxation is essential to ensure effective and transparent use of public monies and - with time - the tran-

sition to self-sustained financing. And, finally, building resilience to climate change and capability for

environmentally sound development is essential to safeguarding the future of the country.

Based on the consideration of this logic and in view of Denmark’s role as a development partner for

Mozambique, the current plight of the country and the sensitive and often ground-breaking nature of the

portfolio, the guiding principles of the Exit Strategy and Grant are simply:

A. Implement all ongoing programs and project as agreed where feasible.

B. Where ongoing programs have met with challenges and delays, which constitute considerable risk

to attainment of objectives within the agreed period and budget, corrective measures including

additional funding will be used to limit damage to and secure the best possible outcomes and at-

tainment of the agreed objectives.

C. Well performing programs with direct impact on the poorest and most vulnerable sections of the

population and key reforms in Mozambican society will be continued up to 2019 with additional

funding.

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D. In principle no new programmes and projects would be initiated, but the negotiations with

Mozambican Government about the phasing-out, resulted in two minor projects.1

The exit grant is primarily allocated to three sector programmes: Growth and Employment (GEP) (42%);

Public Financial Management (PMF) (21%); and Environment and Climate (CCEP) (14%) – with imple-

mentation carried through to mid-2019. A minor allocation is provided to HN-SPS, but only to cover the

cost of delegating responsibility for managing Denmark’s contribution to the health common fund to an-

other donor. The Justice Sector does not receive an allocation and will be largely closed when the current

construction of two justice buildings terminate in 2016. Reference is made to Annex I for a budget over-

view.

The main outcomes of the exit grant relate to: poverty reduction through the creation of jobs and business

opportunities; adaptation to climate change; strengthened public financial management and accountability;

and citizens’ engagement and social accountability. The Danida interventions are implemented both at the

national level to address medium- and long-term enabling environment constraints and at the local level to

address immediate needs and provide short-term results with a focus on local governance and decentrali-

sation. The combined resources of the Exit Grant and existing funds enable consolidation of the five ongo-

ing sector program while also ensuring a gradual phase-out.

3. Exit Grant proposal

3.1 Growth and Employment Programme The Growth and Employment Programme (GEP) consolidation and exit is planned for implementation

from January 2016 to June 2019 and aims at consolidating outcomes and impacts of the Growth and Em-

ployment Programme 2011-2015 (GEP).2 The GEP comprises three components: 1) Business and Envi-

ronment Fund; 2) Agro-Investe; and 3) District Roads. The GEP programme matrix indicating objectives

and outcomes is shown below:

GEP program matrix

Programme elements Objectives Outcomes

Programme GEP-2

Government Agreement: Min-

istry of Foreign Affairs

1) Increased economic growth and pro-

poor employment in Mozambique through

enhanced competitiveness and productivi-

ty of targeted small and medium-sized

private sector enterprises; and 2) sustaina-

bility of programme achievements ensured

at the time of phasing-out the cooperation.

Increased market oriented agro-based pro-

duction of food supplies by improving the

enabling environment for small-scale farm-

ers and SMEs and resulting in increased

employment opportunities for poor people.

Business and Environment

Fund Component

MOU MIC

Partner: FAN Foundation

The business environment in Mozambique

made more conducive to socially balanced

private sector growth.

Increased capacity of private sector organi-

zations (business associations, trade unions,

SME interest organizations, etc.) to provide

quality services to members and member

organizations and to improve their capacity

to effectively engage in evidence-based

dialogue with the government at the national

and local levels.

Agro-Investe Component

MOU MASA

Partner: GAPI

Smallholders’ income from business has

been considerably increased through

improved and market related agricultural

production.

Access to financing at affordable costs for

SMEs of the agro-business value chains,

either directly through Agro-Empreender or

indirectly through commercial banks,

backed by a guarantee arrangement through

the subcomponent Agro-Garante.

District Roads Component

MOU: MOPHRH

Partner: FdE/ANE

1) Sustainable increased access to im-

portant productive areas through im-

provement and maintenance of district

roads carried out by the District Govern-

Rehabilitation of 1.000-2.000 km of district

roads per year giving rise to enhanced op-

portunities for farmers for market-oriented

production and increased income – using

1 The exceptions are: the support to a new initiative by MITADER (ref. Section 3.2) and support to a labour market study for MEF (ref. Section 3.4).

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ments using labour intensive technologies;

and 2) Creation of employment and busi-

ness opportunities at district level by

developing and training micro and small-

scale enterprises to implement works on

district roads.

SMEs for labour intensive spot improve-

ment is expected to increase local employ-

ment and income.

The exit grant’s contribution to consolidation of results Funds from the exit grant will enable all three of the GEP’s components to continue in 2018 and 2019, and

thus stimulate broad based private sector development further, especially as regards generation of business

and employment opportunities in the short as well as in the medium-term. The exit grant will, furthermore,

contribute to improving the enabling environment for private sector development. Experience shows that

building portfolios in credit and guarantee schemes takes time and is especially vulnerable in the first

years. Continuing monitoring and support can substantially reduce the risk of failure.

Capacity development and technical assistance The special capacity development and technical assistance inputs to support sustainability and consolida-

tion of results of the three components are:

FAN: The transformation of FAN to a national foundation by August 2016 will require organisational and

human resources development with a view to ensuring an appropriate level of performance – especially as

regards the viability of the supported project portfolio. The revenue basis and associated sources for

FAN’s operations need to be secured to ensure its medium-term sustainability.

AGRO-Investe: The positive outcomes from the investments in the agro-business value chains are essential

for stimulating economic growth and employment. Therefore, the capacity and capabilities of GAPI3 as an

investment society are of paramount importance as regards: the selection of investment projects that have

a high probability of being successful; the quality of the guidance provided to the investors; and effective

monitoring of internal and external factors that influence results.

District Roads: The concept of labour-based, small-scale contractors for maintenance of district roads is

still in the process of being consolidated. Capacity and capabilities need to be further developed at nation-

al and local levels to ensure that district roads are appropriately funded and managed. The Advisory Office

for Local Government, under ANE will be strengthened to oversee districts’ technical and financial per-

formance in relation to allocated funds. Climate proofing is a particular issue in relation to district roads

maintenance and construction.

Risk analysis and risk response The main risks and corresponding responses to the three components are:

FAN: There is a risk that FAN will not succeed in transiting to a Foundation structure, and that some al-

ternative arrangement has to be accepted. An exit strategy for FAN should be prepared if alternative fund-

ing support is not forthcoming by the time of Denmark’s exit.

AGRO-Investe: Other donors are supporting the component, so there is some probability that funding

could continue. The main programmatic risk is that investment projects do not achieve the anticipated

outcomes and impact. Monitoring and reviews will ascertain the level of performance.

District Roads: Danida is the only donor supporting district roads. Funding for district roads is allocated

from the Road Fund (FdE) and the national budget. The main programmatic risk is that the component

concept will not be appropriately institutionalised in the Road Fund and the National Road Administra-

tion (ANE), and will thus not contribute – as anticipated – to the market oriented agro-based production of

food supplies. The most robust approach is to focus on enhancing the enabling environment for district

roads management – whether other donor funding is forthcoming or not.

Management and monitoring

3 GAPI is registered in the Bank of Mozambique as a Financial Intermediary Institution.

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The Growth and Employment Program will be the administratively most demanding part of the consolida-

tion and exit portfolio. The current management and monitoring mechanisms for GEP will continue during

the phasing-out period, except for the changes that will be made as a result of the closing down the Danish

Embassy in 2017. Additional TA will be provided to: 1) assist FAN in being established as a foundation in

2016; and 2) strengthening of the newly established District Roads Office in the Road Fund/ANE.

Two sub-components of the FAN component (Support to Community Land Use and Support to MIC), and

the support to MASA under the Agro-Investe component (CEPAGRI and the Directorate of Economics

for studies and capacity building) will be phased out by June 2016.

Budget Table 3.1 shows the expected allocations from the exit grant and the contributions from the additional

funds, including allocation of DKK 52.5 million of unallocated funds.

Table 3.1: Growth and Employment (DKK million)

Programme Components Existing funds Additional funds

2016 2017 2018 2019 2017 2018 2019

Component 1: Business and Environment Fund 26.4 12.0 0 0 0 12.0 0

Component 2: Agro-Investe 35.3 26.5 0 0 1.0 22.5 4.5

Component 3: District Roads 1.0 31.0 0 0 2.0 31.0 2.0

Management 4.0 4.0 0 0 0 4.0 2.0

Total 66.7 72.5 0 0 3.0 69.5 8.5

3.2 Climate Change and Environment Programme

The Climate Change and Environment Programme (CCEP) 2015-2017 was approved in October 2014 as a

bridge between the Environment Sector Programme Support (ESPS) 2011-2015 and the planned country

programme for Mozambique beginning in 2017. The CCEP consolidation and exit is planned for imple-

mentation from January 2016 to June 2019. The CCEP is based on the National Climate Change Strategy

(ENAMMC) and the Green Economy Action Plan (PAEV). The CCEP comprises three components: 1)

Strengthening Climate Change and Environment Sector Capacity; 2) The Municipal Programme for

Northern and North- Central Mozambique (PRODEM); and 3) Support to civil society through to AGIR

II. The CCEP programme matrix indicating objectives and outcomes is shown below.

CCEP programme matrix


Climate Change and Envi-

ronment Programme

Government Agreement: Min-

istry of Foreign Affairs

1) Consolidated, sustained and further

developed capacity of state and non-state

actors to undertake actions in accordance

with their duties and rights that improve

the environment, livelihoods and resili-

ence to climate change of the people of

Mozambique; and 2) sustainability of

programme achievements ensured at the

time of phasing-out the cooperation.

Capacity developed in central and local

governments to accommodate climate

change effects in national and local plans in

order to adapt to adverse effects and en-

hance resilience.

DE1: Strengthening Climate

Change and Environment

Sector Capacity MOU: MITADER

Partners: INGC and key sectors

Consolidated, sustained and further devel-

oped capacity of government agencies to

undertake and monitor actions, in accord-

ance with their mandates, that secure a

rational and harmonious use of natural

resources, improve living conditions of

Mozambicans and reduce their vulnerabil-

ity to Climate Change.

Government climate change and environ-

mental priorities as per the Government

Five-Year Plan (PQG) 2015-2019 are inte-

grated and mainstreamed (at district, prov-

ince and national sector level) into Social

and Economic Plans (PES) and local devel-

opment and climate change adaptation plans

(LAPs).

DE2: Contribution to Pro-

gram for Municipal Devel-

opment in North-Central

Mozambique (PRODEM)

MOU: MAEFP

Partners: ANAMM and munic-

ipalities

Contributed to urban poverty reduction

and sustainable development of the mu-

nicipalities, through improvements in

municipal governments’ administration

and service delivery, resilience to climate

change impacts, social accountability and

citizens’ participation.

Responsible municipal governance and

citizen engagement in financial manage-

ment, climate change adaptation and solid

waste management in 26 municipalities in

North and North-Central Mozambique are

enforced.

DE3: Contribution to AGIR

II1

MOU: We Effect/Sida

Partners: CSOs

“Rights-holders (women and men) living

in the rural and urban areas have secured

benefits from use of natural resources,

enjoy safe and healthy environment and

Rights holders have capacity to mobilise and

undertake policy advocacy on environment

and climate change.

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reduced negative climate change impact.”

Note: 1) The support for AGIR II will cease in 2017.

The exit grant’s contribution to consolidation of results The exit grant will make it possible for PRODEM to transit into the 2

nd Phase (2018-2019), as envisaged

by donors and partners. The program is widely seen as a major source of inspiration for decentralization in

the country. Danida’s contribution to the 2nd

Phase will be instrumental for the Joint Financing Agree-

ment (JFA) partners to allocate budgets for this phase and for one of them taking over the lead role. Not

implementing the 2nd

Phase will substantially reduce the programme outcomes.

The former Environmental Ministry (MICOA) has had its mandate expanded to become MITADER by

including land, forests and rural development in addition to environment. To fulfil its new mandate, the

‘Programa Estrela’ has been conceived with a view to among others boost income in rural areas. The

programme is a multi-sectoral one with the following strategic priorities: capacity development and tech-

nology transfer; infrastructure for enhanced access and market linkages; land rights; access to financial

services; access to improved water sources; and access to energy. Although being a new endeavour, the

Embassy considers it essential to a sustainable exit.


tion of results of the three components/development engagements are:

Strengthening Climate Change and Environment Sector Capacity: The mainstreaming of climate change

and environment preparedness in key sectors (e.g. agriculture, water resources, energy, transport, etc.)

needs to be further promoted to enhance resilience and mitigate adverse effects. The enabling environment

for local level interventions (provinces, municipalities and districts) needs to be further developed in terms

of strategies, instruments and tools to enhance appropriate local level actions and management. Capacity

development of national institutions that promotes coordinated national and local actions is required.

Contribution to Program for Municipal Development in North-Central Mozambique: Capacity and capa-

bilities for urban planning and management at the municipal level need to be strengthened on a continuing

basis consistently with national climate change policies and strategies. Empowerment of citizens to enable

their active participation in public resources management and service delivery requires that municipal staff

has the capabilities to interact with citizen groups and in turn help them develop their capabilities. Mobili-

sation of municipal funds for investments and operations – and corresponding transparent financial man-

agement – is paramount to sustaining results.

Contribution to AGIR II: The support to civil society has contributed to strengthening of partner organisa-

tions’ capacity for networking, advocacy and awareness raising on matters related to climate change, envi-

ronmental management, natural resources management and governance. The civil society involvement,

furthermore, facilitates that citizens’ demand is articulated from a right-holder’s perspective. The support

to civil society has both a capacity development impact on partner institutions as well as on its own capac-

ity to influence the development agenda. AGIR provides support to four international CSOs that in turn

provide support to local CSOs.

Risk analysis and risk response The main risks and corresponding responses to the three components/development engagements are:

Strengthening Climate Change and Environment Sector Capacity: The main risk is that the inertia for

developing capacity and capabilities will slow down as TA support is withdrawn. Inadequate capacity will

in turn imply that interventions are less effective in addressing the climate change and environmental chal-

lenges, which will impact negatively, especially on poor people. The response is to install as much capaci-

ty in the key government institutions during the phase-out period as possible, and enlist support from other

donors.

Contribution to Program for Municipal Development in North-Central Mozambique: The main risk is that

the program is taken hostage in the current climate of political tension. The administrative support for

PRODEM is provided through a major TA contract – funded by Danida as part of the JFA. It expires in

2017 and its optional second phase can only be put into effect with Danida as the contract holder. Because

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it is envisaged to hand over the donor lead and delegate responsibility for managing Denmark’s contribu-

tion to PRODEM to another donor, a solution is being sought to this dilemma.

Contribution to AGIR II: The risk is that the demand-supply equation comes out of balance, implying that

public service delivery is not adequately adjusted to meet citizens’ demand and their active participation.

Sida is the lead donor for AGIR II, which also receives support from Norway and the Netherlands. The

response will be to encourage Sida and other donors to continue the support to AGIR throughout the

phase-out period.

Management and monitoring The general support in the field of climate change and environmental management will continue as

planned to end 2017. Even so, efforts are underway to further streamline it through alignment of the finan-

cial contribution and a less demanding TA input. The PRODEM donor lead will be handed over to another

donor and the management of Denmark’s contribution delegated to another donor. PRODEM will be ex-

tended into 2018 and 2019.

Programme budget Table 3.2 indicates how the exiting funds will be allocated and the suggested contribution from the addi-

tional funds.

Table 3.2: Climate Change and Environment (DKK million)


2016 2017 2018 2019 2017 2018 2019

Component 1: Strengthening CC&E Capacity 32.5 24.7 0 0 0 0 0

Component 2: PRODEM 14.0 16.0 0 0 0 14.8 6.2

Component 3: AGIR II 7.0 7.0 0 0 0 0 0

Management 2.0 2.0 0 0 0 0 0

Rural development (Programa Estrela)* 0 0 0 0 0 7.0 0

Total 55.5 49.7 0 0 0 21.8 6.2

3.3 Health and Nutrition Sector Programme Support

The Health and Nutrition Sector Programme Support, Phase V (HN-SPS) was planned for implementation

from December 2012 to December 2017. The consolidation and exit entails adding 2018 as a no-cost ex-

tension year for selected components and setting aside 5 million DKK to cover the administrative fee for

delegated management of Denmark’s contribution to the health sector common fund PROSAUDE, includ-

ing support to strengthening coordination in MOH.Table 3.3 indicates how existing funds and the contri-

bution from the additional funds are expected to be used.

Table 3.3: Health and Nutrition (DKK million)


2016 2017 2018 2019 2017 2018 2019

Component 1: PROSAUDE, SRHR, SBS 41.55 41.55 31.72 0 0 0 0

Component 2: Nutrition 30.36 30.36 2.73 0 0 0 0

Component 3: Civil Society 13.83 8.94 0 0 0 0 0

Management 4.91 4.91 4.91 0 0 0 0

GACOPI – DPS Infrastructure 28.40 0 0 0 0 0 0

Delegated cooperation* 0 0 0 0 2.0 2.0 1.0

Total 119.05 85.77 39.37 0 2.0 2.0 1.0 *The delegated cooperation will be pursued in 2016, which may imply that some funding is required late 2016.

3.4 Strengthening Public Financial Management

The Strengthening Public Financial Management (PFM) Program was planned for implementation from

2014 to 2017. The PFM consolidation and exit phase is scheduled for from January 2016 to June 2019.

The current PFM program comprises three components: 1) Reform of public financial management and

taxation; 2) Policy research and analysis; and 3) Civil society support. New financing is suggested for

taxation and research policy in the consolidation and exit phase, while support to the IFMIS (e-SISTAFE)

and the independent research institute IESE and the NGO Centre for Public Integrity will be phased out

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when current funding ends in 2017.The PFM programme matrix indicating objectives and outcomes is

shown in Table 3.7 on the next page.

The exit grant’s contribution to consolidation of results The exit grant will contribute to further development and reform of the taxation system, and growth and

poverty related research related to PFM. MEF has expressed interest in a labour market study with the

involvement of the Danish Association of Danish Industries (DI) and the Danish Labour Organisation

(LO). This study is proposed to be funded from the Exit Grant.

PFM programme matrix


PFM

Government Agreement:

Ministry of Foreign Affairs,

MINEC

1) Strengthened public financial management

and taxation as well as the capability to pro-

duce quality research and surveys on growth

and trends in poverty in Mozambique; and 2)

sustainability of programme achievements

ensured at the time of phasing-out the coop-

eration.

A fully accountable and effective public

sector, capable of providing quality ser-

vices to the underserved segments of the

population and of pursuing public invest-

ments with maximum social and economic

returns.

Component A: Revenue

Management

MOU: MEF

Partners: CEDSIF, AT and

IMF

Increased transparency of revenue manage-

ment that can cope with the natural resource

boom, through improvement of PFM systems

that support revenue management.

Improved transparency in the revenue

management and making the payment

process of taxes less burdensome.

Component B: Policy re-

search and analysis

MOU: MEF

Partner: DNEEF, CEEG-

UEM

Improved capacity for policy analysis and

formulation in a way that scientific evidence

on factors hindering poverty reduction and

inclusive growth is available and public

debate on public spending priorities is stimu-

lated.

Research and policy analysis used for

debate on country priorities.


tion of results of the three components are:

Component A, Revenue Management: Mozambique has come a long way in raising internal revenue for

development, but there is a need to ensure that the burden is evenly distributed and loopholes closed. Con-

tinued funding of the tax reform for an additional two years should put it on a sustainable footing. With

funding from Denmark the IMF has provided valuable technical assistance to the Government for the re-

form of public financial management and revenue mobilization. Funding for an additional two years

would be an effective way of sustaining reform and consolidating gains, including taxation of the extrac-

tive industry.

Component B, Policy Research and Analysis: The Directorate for Economic and Financial Studies’

(DNEEF) capacity to conduct policy analysis is of vital importance to inform policy-makers and govern-

ment decision-makers on poverty trends and constraints to pro-poor growth. DNEEF analyses the data

collected in national household surveys on the incidence of poverty throughout the country by the Nation-

al Institute of Statistics to identify trends and suggest ways of adjusting policy to better address challeng-

es. DNEEF cooperates with the University of Copenhagen, UNU-WIDER and CEEG at Eduardo

Mondlane University in this endeavour. It is vital that this sub-component continues till the end of 2019

when the next nation household living standard survey is conducted.

Risk analysis and risk response The main risks and corresponding responses to the three components are:

Component A, Revenue Management: The Danida funding to AT constitutes just one part and other donors

will presumably still be there after Danida’s exit.

Component B, Policy Research and Analysis: DNEEF’s capacity for policy research and analysis will be

reduced without adequate external support – and if so – with the consequence that the knowledge base and

space for policy dialogue will be diminished, thus weakening the evidence base for planning and man-

agement of key government sectors. In the new programme – launched in the beginning of 2016 - it has

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been possible to attract three more donors, and the Centre for Economic Research at the University of

Eduardo Mondlane now participates as a partner.

Management and monitoring Support to taxation will be delegated to another donor in 2016. Managing support to the IMF is not oner-

ous and will be handled bilaterally, as will the support to Policy Research and Analysis where Denmark

has a moral obligation to make an extra effort to keep the new program together

Programme budget Table 3.4 indicates how the exiting funds will be allocated and the suggested contribution from the addi-

tional funds.

Table 3.4: Strengthening of PFM (DKK million)


2016 2017 2017 2018 2019 Component 1: Public Financial Management 39.5 28.0 0 18.0 6.0

Component 2: Policy Research and Analysis 14.0 6.0 0 7.5 2.5

Component 3: Civil Society 4.0 4.0 0 0 0

Labour Market Study (MEF, DI and LO) 0 0 2.0 3.0 0

Management 1.0 1.0 0 0 0

Total 58.5 39.0 2.0 28.5 8.5

4. Management and administration

The gradual reduction of embassy staff and final closure of the Embassy at the end of 2017 are the main

parameters affecting the ability to manage both the development portfolio and other business areas of the

representation. Already by August 2016, four out of seven posted diplomats will be recalled and not re-

placed and three senior, local program officers will have ended their employment. By September 2017 the

remaining program staff and the ambassador will have wound up their work and the embassy will contin-

ue to function till its closure at the end of 2017 with the chief financial officer and a limited number of

administrative personnel.

From 2017 responsibility for administering and coordinating the Danish assistance will increasingly be

passed on to the Government of Mozambique. Additional external advisory service in the form of a Pro-

gramme Monitoring and Advisory Unit (PMAU) and individual advisors will be hired to assist the Gov-

ernment of Mozambique and the Government of Denmark. After closing of the Embassy it is expected

that Denmark’s official representation vis-à-vis Mozambique will be handled by a Danish embassy in a

neighbouring country (Republic of South Africa or United Republic of Tanzania) supplemented by an

honorary consul in Mozambique. The administration of the remaining part of the Danish aid portfolio will

by then be almost exclusively dependent on Mozambican partners, other donors and the external advisory

service.

For this purpose it is foreseen to recruit three international advisers and five local advisers for a period of

approximately two years. One of the international advisers will act as Chief Adviser and Program Coordi-

nator and report to the Minister of Economy and Finance of Mozambique (MEF). The two other interna-

tional advisers will be placed in the Ministry of Health (MISAU/SETSAN) – covering nutrition and health

- and in the Road Fund/National Road Administration – covering public works and the private sector. The

Ministry of Foreign Affairs and Cooperation (MNEC) and MEF will jointly establish a “Reference and

Oversight Group” that will receive financial and progress reports from the chief adviser on quarterly basis

and give directions on outstanding issues. Reports and minutes from these meeting will be submitted to

the MFA/KFU for information and no objection.

Major disbursements to programmes will be undertaken by MFA, Copenhagen on the basis of quarterly

reports and request from the PMAU. For minor disbursements and the running of the advisory team and

the PMAU, the Chief Adviser will be equipped with a bank account. Funds for contracting the external

advisers and establishment and functioning of the Reference and Surveillance Group have been included

in the budget (DKK 25 million) and correspond to approximately 13% of the total phasing out grant.

While the bulk of activities are expected to terminate in 2018 a few will run into 2019. This means that

11

there will be reporting and closing of accounts and projects into 2020. It is important to ensure that there

will be funds for on-call assistance as required to allow the Danish government to wind up its obligations

and report to its auditor general in a responsible fashion. DKK 4 million has been included in the budget

for this purpose.

Annex 1. Summary budget

The proposed allocation of the Exit Grant is presented in Table 5.1, and the proposed use of existing funds

in Table 5.2. Table 5.3 presents the combined funding – the declining amounts during the four-year period

clearly demonstrate a gradual phasing-out.

Table 5.1: Proposed use of the exit grant (DKK million)

2016 2017 2018 2019 Total

Growth and Employment Programme 0 3.0 69.5 8.5 81.0

Climate Change and Environment Programme 0 0 21.8 6.2 28.0

Health and Nutrition Sector Programme Support 0 2.0 2.0 1.0 5.0

Strengthening of Public Financial Management 0 2.0 28.5 8.5 39.0

Support to the Justice Sector 0 0 0 0 0

Phasing out advice 1.0 6.0 9.0 9.0 25.0

Unallocated funds 0 10.0 5.0 1.0 16.0

Total 1.0 23.0 135.8 34.2 194.0

Table 5.2: Use of existing funds (DKK million)

2016 2017 2018 2019 Total

Growth and Employment Programme 66.7 72.5 0 0 139.2

Climate Change and Environment Programme 55.5 49.7 0 0 105.2

Health and Nutrition Sector Programme Support 119.1 85.8 39.4 0 244.3

Strengthening of Public Financial Management 58.5 39.0 0.0 0 97.5

Support to the Justice Sector 39.0 9.2 2.6 2.6 53.4

Phasing out advice 0 0 0 0 0

Unallocated funds 0 0 0 0 0

Total 338.8 256.2 42.0 2.6 639.6

Table 5.3: Proposed combined funding of existing funds and exit grant (DKK million)

2016 2017 2018 2019 Total Growth and Employment Programme 66.7 75.5 69.5 8.5 220.2

Climate Change and Environment Programme 55.5 49.7 21.8 6.2 133.2

Health and Nutrition Sector Programme Support 119.1 87.8 41.4 1.0 249.3

Strengthening of Public Financial Management 58.5 41.0 28.5 8.5 136.5

Support to the Justice Sector 39.0 9.2 2.6 2.6 53.4

Phasing out advice 1.0 6.0 9.0 9.0 25.0

Unallocated funds 0 10.0 5.0 1 16.0

Total 339.8 279.2 177.8 36.8 833.6

Percent of total 40.9 33.6 21.5 4.0 100.0

mozambique country consolidation and exit...

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