June 12, 2019 Mozambique Catalyzing the Agrarian Sector transformation: A Summary of the World Bank Technical Support to Mozambique’s Public Sector Policy, Strategy and Implementation. Non Lending Technical Assistance P168732 – Completion Note CONTEXT 1. Most Mozambicans’ incomes depend on the earnings generated in the Agriculture sector . The most important driver of GDP growth in the last decade has been the mining sector, which is very capital intensive and offers relatively few employment opportunities. By contrast, even though Agricultural output, including fishing and forestry, only represents around 21 percent of total GDP (2017), the sector employs over two-thirds of the entire labor force. This means that Agriculture will continue to play a critically important role in determining the speed and direction of Mozambique’s economic and social development in the foreseeable future. 2. In addition, poverty reduction is most responsive to Agriculture sector growth. The overall GDP growth elasticity of poverty reduction in Mozambique is only -0.26 (about half of the African average), but it is -2.6 when the elasticity is related to Agriculture growth. Therefore, Mozambique’s continued, accelerated and sustainable progress toward inclusive economic growth and poverty reduction requires appropriate and focused technical support for identifying, prioritizing and activating the strategic elements which can catalyze its agrarian sector transformation.1 2. On the request from and in close collaboration with the Ministry of Agriculture and Food Security (MASA), the World Bank/WB during 2017 carried out an independent assessment of the Mozambique National Agricultural Investment Plan (PNISA: 2013-2017).2 Following the assessment, the Conselho Técnico and the Conselho Consultivo of MASA endorsed and adopted the main findings and recommendations in eary 2018. These recommendation proposed a roadmap of 16 priority activities, including the extension of the PNISA to end of 2019 to lay the groundwork for a new cycle of planning for the agrarian sector. 3. To support the effective implementation of the agreed roadmap, the World Bank approved a “Non- lending Technical Assistance� activity to be carried out in two Phases: Phase 1: FY 19 (July, 2018 to end of June, 2019); and Phase 2: FY 20 (July 2019 to end of June 2020). The section below summarizes the status of the progress made during Phase 1 in the delivery of these priority activities, and outlines the proposed next steps, in moving toward Phase 2. This support and activities are grouped under two categories: (i) Technical Advisory Services: just-in-time, demand driven support; and (ii) Analytical Support and Capacity Building focused on carrying out an Agricultural Sector Expenditure Review and formulating a proposed Private Sector Strategy for the Agricultural Sector. 1 In the case of Mozambique, there is a need to define more precisely the agriculture sector, in terms of the “agrarian sector� , given its subsectoral scope and institutional fragmentation. In Mozambique, the “agrarian sector� refers to major subsectors of crops, livestock, fisheries and other functions that directly contribute to agricultural production, and value chain development, and which directly support rural productive infrastructure (e.g., rural roads); this is consistent with the African Union’s definition of the “agricultural sector�. 2 See, Mozambique National Agricultural Investment Plan (PNISA): Assessment (November 27, 2017), including 6 supporting annexes. 1 SUMMARY OF PROGRESS AND WAY FORWARD 4. Overall, good progress has been made in the delivery of the expected activities/outputs, working in close collaboration with various stakeholders, namely: Government representatives from the 5 agrarian sector ministries, development partners, private sector, academia and civil society. These outputs and supporting participatory processes also are positioning the WB Mozambique team to continue to work more intensively with these stakeholders during the remainder of FY19 and going into FY20. It is recognized that there will be appropriate adjustments to ensure priority and quality technical support, which also can contribute to financing/operational WB support – through supporting on-going and proposed World Bank funded operations, including a possible Program for Results Program to Support Mozambique’s Agrarian Sector Transformation. 5. Technical Advisory Services. This support, and associated outputs, and further work required during 2019, include: (i) M&E System: Support to MASA’s on-going work to strengthen MASA-level and sectoral Monitoring and Evaluation System, driven by an enhanced Results Framework, and identification of strategic core indicators. The WB team provided MASA/DPCI an enhanced version of the Results Framework for the agrarian sector, and identified core indicators at the 3 levels of results: impact, outcome and outputs. MASA/DPCI has made continued progress in strengthening the M&E system mainly for MASA. Further work is needed during 2019/20 for MASA to establish and operationalize an agrarian sector M&E system , and to ensure integration and complementarity with the M&E systems of each of the other sectoral ministries (with respect to the agrarian sector agenda); (ii) Reactivated CCSA: It has been agreed there is an urgent need for Government to reactivate the high-level multi-stakeholder Coordination Committee for Agrarian Sector (CCSA). During late 2018 the WB team provided technical support to the formulation of the draft TOR to guide the effective functioning of the CCSA. AGRA (The Alliance for a Green Revolution in Africa ) has approved a project to fund the Technical Secretariat to support the effective functioning of the CCSA, which is expected to be mobilized by mid-2019. There is a need for the Minister of MASA to take the leadership to launch the CCSA, together with other stakeholder members, and to ensure a proactive role, given the substantive agenda ahead. (iii) 3 Pillars of Agrarian Sector Transformation: The WB team worked with and supported the formulation of several draft TORs for the Government’s leading the preparation of the 3 pillars of agrarian sector transformation (Policy, Strategy and Implementation Plan) including: TORs for the agrarian sector policy (to update the agricultural sector policy of 1995); TORs for the agrarian sector strategy (2020 – 2029) known as PNISA II which will provide inputs and complement the Government’s ongoing preparation of the Plano Quinquenal do Governo/PQG (2020 – 2024); TORs for the agrarian sector investment program (2020 – 2024), also known as PNISA II, and also to provide inputs for the PQG. It also helped providing cost estimates for carrying out this work. It is important for the government/CCSA to review and endorse these TOR and the detailed roadmap for carrying out these activities, in a sequential and timely manner. There is also a need to help Government mobilize funding and/or in-kind technical assistance for these 3 strategic activities on an urgent basis. The CCSA will need to clarify the precise arrangements for coordination at the technical level, to ensure efficient and effective carrying out of these activities, working closely with other stakeholders. (iv) Coordination, Communication and Outreach: The WB team extended overall technical support to MASA, through the Directorate for Planning and International Cooperation (DPCI), in helping: 2 (a) to reactivate the coordination mechanisms through preparing the groundwork for the launching of the CCSA, which also is linked to the normal sectoral development partners dialogue, and to design contents and products for efficient communication. This support has enhanced MASA’s role in delivering on their central role in the coordination of the agrarian sector, on improving the deliverables of their own mandate and on establishing and strengthening more systematic and long term results-oriented partnerships. The team further supported MASA, in collaboration with FAO, in preparing the post-cyclones disaster needs assessment report. 6. Analytical/Knowledge Support: Building on and contributing to the above TA services, the WB team has carried out two complementary analytical studies, for which each study has generated a draft report intended to support the Government‘s preparation (2019) of its updated agrarian sector policy, strategy and investment program. The need to carry out these studies stems from the recognition that: (i) The public sector continues to face fiscal and capacity constraints. The agricultural sector averages 6.4% of the total budget and is misaligned with the relative importance of the sector’s share of GDP estimated at 23% pa. In addition, agricultural budgetary allocations are erratic and decreasing among all ministries, non-prioritized, and inefficient. In this context there is a need to better understand the allocation of public expenditures in agriculture as a management tool to reorient scarce resources to where they can be most effective; and (ii) Because in this scenario a large public investment program in agriculture is snot an option, the private sector needs to be enabled to play a much larger role in fostering growth and deepening the development process. Given the tight budgetary framework, the government needs to rely primarily on non-monetary incentives to induce greater private sector engagement, particularly in the agrarian sector, where Mozambique exhibits the greatest room for improvement in terms of growth, jobs, and poverty reduction. The two analytical studies are outlined below. (i) Moz. Agricultural Sector Public Expenditure Review (AgPER). The main objective was to generate sound evidenced-based findings and a roadmap of priority recommendations, including a results-focused action plan, for enhancing the efficiency, effectiveness and sustainability of Mozambique’s agricultural public expenditures. The report focused on PNISA’s more strategic programs (Research, Extension and Irrigation). The main focus of the priority actions is to enhance key aspects of the management of the budgetary cycle of the agrarian sector, with a strong results-orientation. The WB AgPER team has worked in close collaboration with key counterparts from the agrarian sector ministries, and carried out consultations with key stakeholders, including: from Government (sectoral ministries, together with MEF); private sector; development partners; and civil society/academia; and key stakeholders from 3 provinces: South: Gaza; Central: Manica; and North: Nampula. (ii) Strategy for Expanding the Role of the Private Sector in Transforming the Agrarian Sector. The report identifies core constraints to expand the role of the private sector in the agrarian sector; and formulates a set of seven inter-connected strategic outcomes. The report also identifies supporting priority actions designed to remove or mitigate the impacts of the main constraints and achieve the seven strategic outcomes. As evidenced by the evaluation of the PEDSA/PNISA carried out by the WB last year, greater private sector involvement in the agrarian sector will be a crucial element of the second generation of the sectoral strategy and investment program. The strategic outcomes and actions are presented in the form of a roadmap for policy makers, with further details outlined in a recommended Action Plan. As part of an ongoing effort, during May/June, 2019 the WB team will conduct additional consultations within the World Bank (to draw on global experience) and with key stakeholders in Mozambique to validate and sharpen the recommended strategy and roadmap of prioritized and results-focused actions. 3 7. Way Forward. In order to ensure the effective use of the findings and recommendations of these two complementary studies, including the recommendations to strengthen inter-ministerial and multi-stakeholder results-focused coordination, the task team plans to: (i) further enhance the draft final versions of these two reports based on additional validation and feedback received at the Decision Meeting on June4, 2019; and (ii) provide cross-ministerial high-level support to foster effective coordination, collaboration and integrated planning, aiming at having more coherent and results oriented sectoral inputs for the forthcoming PQG. This implies expanded engagement with key ministries/stakeholders, such as the Ministry of Economy and Finance. The findings of both the TA advisory services and analytical studies will be used to enhance on-going and proposed WB-funding and other development partner support, including a possible multi-donor Program-for- Results Operation to Support Agrarian Sector Transformation, subject to the results of the Bank’s and DP ongoing dialogue with Government and its demonstration of leadership and commitment to move forward. The collaboration with other development partners, especially FAO, IFAD, AGRA, DfID and SIDA will be instrumental to mobilize resources, and also to orient Government towards a more effective integrated and coordinated planning and implementation approach. 4