This article was downloaded by: [Newcastle University]On: 21 December 2014, At: 15:03Publisher: RoutledgeInforma Ltd Registered in England and Wales Registered Number: 1072954 Registered office: Mortimer House,37-41 Mortimer Street, London W1T 3JH, UK

Cambridge Review of International AffairsPublication details, including instructions for authors and subscription information:http://www.tandfonline.com/loi/ccam20

Economic links between South Africa and MozambiqueJohn DeverellPublished online: 13 Sep 2007.

To cite this article: John Deverell (1986) Economic links between South Africa and Mozambique, Cambridge Review ofInternational Affairs, 1:1, 9-15, DOI: 10.1080/09557578608400001

To link to this article: http://dx.doi.org/10.1080/09557578608400001

PLEASE SCROLL DOWN FOR ARTICLE

Taylor & Francis makes every effort to ensure the accuracy of all the information (the “Content”) containedin the publications on our platform. However, Taylor & Francis, our agents, and our licensors make norepresentations or warranties whatsoever as to the accuracy, completeness, or suitability for any purpose of theContent. Any opinions and views expressed in this publication are the opinions and views of the authors, andare not the views of or endorsed by Taylor & Francis. The accuracy of the Content should not be relied upon andshould be independently verified with primary sources of information. Taylor and Francis shall not be liable forany losses, actions, claims, proceedings, demands, costs, expenses, damages, and other liabilities whatsoeveror howsoever caused arising directly or indirectly in connection with, in relation to or arising out of the use ofthe Content.

This article may be used for research, teaching, and private study purposes. Any substantial or systematicreproduction, redistribution, reselling, loan, sub-licensing, systematic supply, or distribution in anyform to anyone is expressly forbidden. Terms & Conditions of access and use can be found at http://www.tandfonline.com/page/terms-and-conditions

9

Economic Links Between South Africa And Mozambique

JOHN DEVERELL1

In early August 1986 the Republic of South Africa (RSA) announced theimposition of levies on goods passing through the Republic to other states in theregion.2 Zambia and Zimbabwe are the states immediately affected by thesemeasures, and if pressure on the South African government increases over the nextmonths it is likely that other states will experience more extensive controls fiomPretoria. Mozambique is a member both of the Front Line States and the SouthernAfrica Development Coordination Conference (SADCC), but has stated that herdependence on the RSA is too close for economic links to be severed.3

Mozambique's economy has weakened since independence, yet these links apppearto consolidate. Evidence has accumulated over the last decade with which toaccuse South Africa of attempting to establish economic dominance overMozambique, by means of "levers". Could this be interpreted as an insidiousmethod of increasing South African political control over Mozambique? Thisessay examines the foundations to such a view.

Economic necessity has meant that despite the ideological differencesbetween the RSA and SADCC, bilateral ties between South Africa and Mozambiquehave grown since the latter's independence. Long-standing agreements on the useof Mozambique's transport infrastructure and migrant labour for the mines, as wellas substantial construction projects such as the Cahora Bassa dam, drewMozambique closely into South Africa's economic orbit even before independence.

After independence Mozambique's economy declined rapidly. A mass exodusof skilled labour followed; the white population declined from 200,000 to 40,000by June 1975. A native illiteracy rate of around 90-95% did little to cushion itsimpact. The transition to a Marxist economy, along with extensivenationalisation of private property and industry and collectivisation of agriculture,undercut national productivity and sapped investor's confidence. The latterproblem was exacerbated by lack of foreign exchange and controls over movementof funds. •

In spite of considerable international aid, eventual membership in theInternational Monetary Fund and the World Bank, and accession to the LomeConvention, which gives more or less free trade access to the EEC, Mozambique'seconomy has not since recovered. Mozambique had been refused membership inthe East Bloc dominated CMEA, and Soviet aid, though rising again in 1984-1985, has been reduced since its peak in 1978. In 1979, approximately 80% of

1 © John Deverell, 1986. The views in this article should not be construed as representingthe views of any employer of the author.2 The Times, 6 and 7 August 1986.3 Ibid, 18 July 1986.

Dow

nloa

ded

by [

New

cast

le U

nive

rsity

] at

15:

03 2

1 D

ecem

ber

2014

10Mozambique's exports were to the non-Soviet world.4 Sanctions against Rhodesiaare calculated by Mozambican authorities -to have cost more than U.S. $550million in lost transit revenues and remittances, as well as an additional $50million in property destroyed during raids.5 The insurgent group RENAMO hasconsiderably increased its activities, causing damages in excess of $300 millionby 1984.6 Severe floods and droughts, causing 100,000 to die of famine in 1984alone,7 as well as continuing economic mismanagement, a fact admitted by Machelhimself, have all caused much damage to infrastructure and productivity.

No wonder therefore that Machel should so welcome the economic benefitsthat the 1984 Accord of Nkomati, concluded with South Africa, was expected tobring to the special economic relationship between the two countries. Salientfeatures of this relationship will now briefly be examined for several major fields.

Railroads and Ports

The railway and port network, a legacy of the Portuguese, emphasises theimportance of Mozambique as a country through which a number of other statesfind their shortest routes to the sea. From north to south, Nacala, Beira, andMaputo are the major ports. Nacala is linked to Malawi and Zimbabwe by railway;Maputo is linked by railway to Zimbabwe, to South Africa, and to Swaziland, and,indirectly, to Zambia and Botswana. South Africa has devoted substantialresources, partly on a loan basis, to improving these links, as well as the portsthemselves, as have other states by means of various aid programmes. However,both capacity and volume of traffic has everywhere dropped. In part because ofpoor maintenance and a lack of skilled workers, but chiefly because of RENAMO'sactivities, the Limpopo line to Zimbabwe has now been closed for over a year,8

and the others sometimes for lengthy periods. Even the "Beira Corridor", guardedby Zimbabwean troops, is not immune. Ironically, FRELIMO themselves wereregularly sabotaging this railway in 1974.9 The flow of international transittraffic on the railways declined by 80% between 1973 and 1983, and at the portstraffic dropped by about 70%, from 13.4 million tons to 3.6 million in the samedecade.10 This is all the more startling since Maputo is. the second biggest port inSouthern Africa after Durban.

4 Soviet Review, No. 8 (September 1985).5 Area Handbook Series, Mozambique, A Country Study, p. 68.6 Africa No. 151 (March 1984). p. 35.7 US News and World Report, 25 February 1985, p. 37.8 Interview, J. Neil Young, Maputo Port, 22 April 1986.9 Birmingham and Martin, ed., History of Central Africa 2, pp. 353-4.1 0 1985 World Bank survey quoted in The Star, 24 March 1986.

Dow

nloa

ded

by [

New

cast

le U

nive

rsity

] at

15:

03 2

1 D

ecem

ber

2014

11Some see the railways as potentially South Africa's most effective economic

lever in the region.11 Indeed, South Africa remains Maputo's best customer. Bymanipulating tariffs, by opening a railway in 1978 though Swaziland to Golela(thus reducing the distance from Eastern Transvaal to Richard's Bay and Durban by250 kilometres) and by taking advantage of the fact that the Limpopo Line (auseful shortcut from Zimbabwe to Maputo) is kept permanently closed byRENAMO, South Africa can persuade many more customers to use its railways inconjunction with ports that used to be more expensive and distant to reach. Otherfactors make Mozambican railways (CFM) less attractive. Rhodesia sent 80% ofher foreign trade (approximately 2.5 million tons) via Mozambican ports in 1975,but was obliged to switch to South African railways because of FRELIMO'ssolidarity with UN sanctions. After 1980, partly because of RENAMO's attacks,Zimbabwe never switched more than half that amount back.12 Tariffs are aprincipal undermining factor. Under the 1928 Mozambican Convention,modifying earlier agreements, South Africa recruited mineworkers fromMozambique in exchange for a guarantee of a set percentage of Pretoria-Witwatersrand-Vereeniging area traffic to Mozambique.13 A business agreement of26 February 1979 means that South Africa may not manipulate goods rates todetract from or nullify the geographical advantage Maputo has due to her relativeproximity to many goods' point of origin. Yet by giving special tariffs to regularbulk users, preferential port and shipping rates, and minimising loss risk andturnaround time by avoiding transit through Mozambique, it can be argued thatSouth Africa provides an unfairly attractive package to shippers in contraventionof the 1979 agreement. It would appear to be in South Africa's interest tomaintain CFM railways and ports at a level of operation adequate for transit of herown goods, as required, but to keep them unattractive relative to her own railwayand port services in order to retain as much as possible of Zimbabwe's and othercountries' traffic. It cannot be proved whether or not RENAMO is wittingly partof this scheme.

South African Railways deny breaking the 1979 agreement.14 They state thatMaputo remains important because of limits to the volume and nature of goodsthat Durban and Richard's Bay can handle, but cite CFM's inability to preventdelays or to offer contract rates to long-standing customers.

Labour

The supply of migrant Mozambican miners to South Africa is longestablished and has also been governed by many agreements. The first formal

11 Interview, Paul Fauvet, AIM, Maputo, 22 April 1986.12 Business Day, 28 January 1986.1 3 ISSUP Strategic Review, January 1981, p. 3.14 Interview, D. Kitschoff, MJ Swart, South African Transport Services (SATS),Johannesburg, 25 April 1986.

Dow

nloa

ded

by [

New

cast

le U

nive

rsity

] at

15:

03 2

1 D

ecem

ber

2014

12regulation of the supply of mine labour, for example, goes back to 1887.15

Accusations that South Africa uses migrant labour as an economic lever are basedchiefly on three facts: the decision to cease part of the payment in gold, thedrastic fall in numbers employed in the 1970s, and threats, on occasion, tosuspend employment altogether in the event of international sanctions againstSouth Africa.16 FRELIMO themselves threatened, before independence, to halt thesupply of contract labour. Whether such threats would be carried out remains opento conjecture; rhetoric of this sort frequently characterizes the relationshipbetween the two countries.

As far as payment in gold is concerned, from 1961 the mines paid only 40%of Mozambican workers' wages in money and the rest was paid directly to thePortuguese government in gold at the official gold price. This had been sold byPortugal at a considerable profit since the establishment of a free market price forgold. After Mozambique's independence, the South African Reserve Bank sold thegold on behalf of Mozambique, to the benefit of the latter's foreign exchangereserve. But from April of 1978 Mozambican miners were to be paid at the free,not the official market value of gold. This was a sharp blow for Mozambique;nonetheless, the reduced earnings remain an important source of revenue.

The issue of reduced employment is similarly explicable. In 1970 SouthAfrican mines employed approximately 113,000 Mozambicans; in 1975, 91,000and by 1978. only 42.000.17 Even though the latest figures still amount tosubstantial employment in a context of high local unemployment, the reductionwas unwelcome. Ardent destabilisers might relish the harm that the reduction hascaused to Mozambique, but it need not be explained as part of a destabilisingstrategy. Contributing factors are: technical advances in the mines, fullemployment in the shafts which therefore require fewer new workers, bureaucraticdelays during one period in the 1970s when Mozambique decided to issue formalpassports, and, more recently, an increase in unemployment in South Africa itself,as well as Pretoria's desire to be less dependent on others. The latter point arisesout of Malawi's unilateral decision in 1974 to cut drastically the amount of labourshe supplied South Africa. In brief, the issues of migrant labour are marketorientated, being based on South Africa's demand and Mozambique's willingness tosupply. There are no suggestions that cooperation should not continue on thisbasis.

Cahora Bassa and Power Supply

Initiated by the Portuguese government, Cahora Bassa began generatingpower in 1975 and was finally completed in 1979.18 It is much the most

15 Kalley, Bibliography of South Africa's Foreign Relations, 1980-1984, p. 146.1 6 cf. The Star, 3 August 1985.1 7 ISSUP Strategic Review, January 1981, p. 5.1 8 Middlemas, Cabora Bassa, pp. 201-2.

Dow

nloa

ded

by [

New

cast

le U

nive

rsity

] at

15:

03 2

1 D

ecem

ber

2014

13important hydro-electrical project in Mozambique. Export of electricity to SouthAfrica began in 1977, eventually supplying 10% of the Republic's consumption.19

However, because of the continuing activities of RENAMO, there has been nosignificant flow of electricity since 1983. South Africa is the only regionaleconomy strong enough to absorb this excess power; yet South Africa has reducedits dependence on the system and at present in fact supplies Mozambique withmuch of the latter's electricity.20 South Africa's state-owned ESCOM is still keento see Cahora Bassa working and the facility expanded to produce power for otherstates; this could prove advantageous to the Republic, given a projected growth indomestic demand for electricity of 5% to 6% a year.21 There have beendiscussions on the use of non-SADF security personnel to guard the power lines toprevent sabotage, but although ESCOM is state-owned it would resist anysuggestion by the government that it tailor its policies, pricing or supply in orderto use power as a lever against Mozambique.22 Otherwise, there is no plausibleindication that South Africa has an interest in seeing Cahora Bassa remain a whiteelephant.

Trade and other links.

Like labour, ports, and railways, trade strongly linked South Africa withMozambique long before the latter's independence. Ironically, the trade link grewas independence approached: because of their policies. South Africa and Portugalbecame increasingly isolated from the rest of the world. On independence. SouthAfrica replaced Portugal as Mozambique's main trading partner. Even beforeindependence, Mozambique's trade with South Africa in some years exceeded byfive times her trade with the rest of Africa.23

South Africa remains the largest single supplier of goods to Mozambique.Mozambique needs foreign exchange to make its purchases; remittances frommigrant labour, ports, and railways together are the most significant source ofincome, totalling at least 42% of Mozambique's foreign exchange earnings in1977. Since the late 1970s Machel has appealed to the West while P.W. Bothahas exhorted South Africans to invest more in Mozambique. Businesssmen wereencouraged by the Accord of Nkomati, and by a Mozambican investment codewhich included a more flexible system of foreign currency controls. These moveswere based on a mutual acknowledgement of the importance of a dependency whichwas, for Mozambique, as economically necessary as it was politically undesirable.

Businessmen are hoping that in Mozambique profits can either be madequickly, or secured eventually on the basis of improved security, opportunities,

19 ISSUP Strategic Review, January 1981, p. 4.2 0 MF Survey, 4 March, 1985, p. 67.2 1 Interview, I.C McRae, ESCOM, Johannesburg, 8 April 1986.2 2 Ibid.2 3 African Affairs, 79, no. 317, (October 1980), pp. 569-70.

Dow

nloa

ded

by [

New

cast

le U

nive

rsity

] at

15:

03 2

1 D

ecem

ber

2014

14and infrastructure. The foreign investment code, the amount of foreign exchange,and the supply of imported raw materials remain quite inadequate, yet the purchaseor hire of Mozambican resources can often be cheaper than that of the SouthAfrican equivalent Mozambique does have some success in securing internationalloans to finance foreign ventures, despite the motives of "leverage" and"constellation-building" often attributed to South African projects. Theinspiration behind the Development Bank of Southern Africa has been questionedon these grounds. Nonetheless government control over private businessesremains limited, and statements by prominent executives, such as I.C. McRae,Senior General Manager of ESCOM, and Dr. J.G.H. Loubser, General Manager ofSATS, suggest that government appeals even to state businesses to orientatepolicies towards political leverage, to the prejudice of profits, would be rebuffed.

Conclusion.

South Africa and Mozambique are mutually dependent; yet this dependence isfar more important, and increasingly so, for Mozambique. The latter'svulnerability limits its options, despite the natural economic and political appealof diversification rather than concentration of links. Nonetheless, there remainmany obstacles for South Africans wishing to involve themselves financially inMozambique. Security and lack of foreign exchange are the two principalconcerns, to which are added the current recession in South Africa, deficiencies ofinfrastructure, and the uncertain supply of raw materials. .The Bank of Mozambiqueretains a monopoly on all foreign exchange transactions and does not acceptdeposits from, or make credits to the Mozambican private sector.24 Given theCMEA's.rejection of Mozambique's appeal for full membership, and a Soviet aidpolicy which remains inadequate, the country has no alternative but to hope togain from economic cooperation with the West and with South Africa. Ideologicalconstraints endure. Rennie's Freight and Unicom Lines, to cite two examples,have had to diversify the location of their offices away from South Africa and shipunder other names; there are difficulties for South African firms wishing toadvertise at Mozambican trade fairs.25 Bigger and richer foreign companies suchas Lonrho have become involved in a number of sectors, yet the majority of SouthAfrican businessmen will remain skeptical of Mozambique investment can proceedunder more- capitalistic rules.

Plans to achieve or extend South African dominance over Mozambique byeconomic means are likely to be thwarted. Nevertheless, a clear pattern ofdependency has evolved, based on economic necessity rather than consciousefforts by either side. There are indications that SATS and perhaps South Africanroad freighting services have taken advantage of existing links to make

2 4 IMF Survey, 4 March 1985, p. 68.25 Interviews; Air Vice Marshal Hawkins, Johannesburg, 26 March 1986; TGS Hammond,Durban, 14 April 1986; A. Coelho, Maputo, 21 April 1986.

Dow

nloa

ded

by [

New

cast

le U

nive

rsity

] at

15:

03 2

1 D

ecem

ber

2014

15Mozambique unprofitable to other countries in the region as a transit route.26

Certainly the stronger SADCC's ties are with South Africa the less likely areconstituent members to impose sanctions. Like Botswana, Mozambique has nowstated that she will not cut off trade with South Africa in the event of sanctions,because of her overwhelming dependency.27 Advocates of destabilisation and"constellation" aficionados can be expected to proclaim the virtues of economicleverage, in the event of constraints on more direct political and military meansof exerting pressure on Mozambique. Yet, as indicated by Viljoen's instructionsto RENAMO for the ceasefire not to be effective, in order that economicagreements should not be made, it would appear that adherents to this view arekeener not to let economic ties progress in the first place.28 Although SouthAfrica does not generally make "soft" loans, she has nevertheless madeconsiderable efforts in attempting, economically, to "shore up" the Mozambicanregime.29 Mozambicans are apt to dismiss this view as an example of SouthAfrica's "total strategy": "the South African investors build it and RENAMOdestroy it, as a coordinated South African project!"30 The conclusion drawn isbased partly on which side of the fence the analyst sits. Given an economicscenario where motives are not clear and control is not complete, and where therehave been constraints, not all voluntary, on South African economic involvement,it is possible to interpret economic initiatives as inspired either by profit-makingand contribution to development, or by a quest for dominance — creating levers tosupport political objectives. Whatever the truth, it would seem that Mozambiquewishes unprejudiced economic intercourse to continue and to increase.

2 6 New Statesman. 30 May 1986, pp. 26-7.2 7 The Times, 18 July 1986.28 Business Day, 2 October 1985.2 9 Economist, 30 March 1985, p. 24.30 Interview, C. Cardoso, AIM, Maputo, 22 April 1986.

Dow

nloa

ded

by [

New

cast

le U

nive

rsity

] at

15:

03 2

1 D

ecem

ber

2014