Mozambique Compact

The Millennium Challenge Corporation (MCC) and the Government of Mozambique signed a five-year, $506.9 million compact in July 2007, designed to increase the country’s economic growth and reduce poverty by investing in four project areas: agricultureland tenureroads and bridges; and water supply, sanitation and drainage.

Selection of these jointly identified project areas was based on: efforts to fund activities that would help attract private investment and increase economic growth to reduce poverty; input from businesses and civil society; and lessons from previous government development strategies. The compact focused on Mozambique’s northern provinces, home to half the country’s population but where the economy has lagged compared to the southern provinces.  

At the end of the compact in September 2013, the Government of Mozambique and MCC had spent 90 percent of the anticipated compact funds to help farmers improve coconut crop management and yields; formalize land titles; rehabilitate roads used for commercial traffic; and help upgrade water and sanitation systems. The Government of Mozambique and MCC expect more than two and a half million people to benefit from the investments. Further details of the compact results and impacts will be shared in forthcoming impact and performance evaluations, expected late 2015 through 2017. 

  • Original Amount at Compact Signing: $506,924,053
  • Amount spent: $447,904,512
  • Signed: July 13, 2007
  • Entry Into Force: September 22, 2008
  • Closed: September 22, 2013

Estimated benefits correspond to $310.8 million of compact funds, where cost-benefit analysis was conducted:

  • 2,684,796Estimated beneficiaries over 20 years

    Any household expected to receive an income gain from the MCC project, either through direct monetary increases, time savings, land value.

  • $132,000,000Estimated net benefits over 20 years

    Net Benefits are the compact benefits minus the costs for the project(s) over the 20 year compact life. This is calculated at a 10% discount rate.

Compact Changes

The MCC-Mozambique compact included large scale capital investments in infrastructure and major service delivery systems like those that manage water and sanitation. Because MCC compacts are a fixed amount implemented over five years, partner governments must focus on the compact results while constantly balancing changes in costs and speed of implementation.

As MCC and the Government of Mozambique encountered higher-than-anticipated construction costs—based on additional technical and regulatory information about the design of compact investments–they agreed to make four compact changes:

  • Reducing the compact’s infrastructure projects from four road segments totaling 491 kilometers to two segments totaling 253 kilometers. 
  • Restructuring the Water Supply and Sanitation Project and the municipal drainage activities from six in each area to two. 
  • MCC and MCA-Mozambique terminated a Water Supply activity (Nacala), due to an under-performing contactor. The government began working with the World Bank in 2013 to complete this water supply activity.
  • The Government of Mozambique committed an additional $30 million in 2012 to help complete compact components that faced procurement and civil contractor staffing delays. This enabled them to complete all road works in January 2014.

Project Results

Farmer Income Support Project

  • $17,432,211Original Compact Project Amount
  • $18,857,349Total Disbursed
  • 36%Estimated Economic Rate of Return over 20 years

Historically, Mozambique has been a significant exporter of coconuts and coconut products. However, outbreaks of coconut lethal yellowing disease (“CLYD”) had threatened the industry and the livelihoods of over 1.7 million people in Zambézia and Nampula Provinces.  Affected trees stop producing fruit and must be removed and replaced. The objective of the project was to improve productivity of coconut products and encourage diversification into other cash-crop production. The project aimed to eliminate biological and technical barriers hindering economic growth among farms and targeted enterprises, while supporting diversification into other cash crops and improved farming practices to assist smallholders and producers to recover lost income. Therefore, in conjunction with tree removal and replacement, the project assisted farmers in adopting new cropping systems and developing alternative sources of cash income during the time required for the coconut trees to reach productive age, which would be seven years and beyond. Meanwhile, the project provided technical support to introduce better practices aimed at increasing crop yields.  At its conclusion, over 8,000 hectares with diseased or dead palm trees were cleared in endemic zones, more than 780,000 disease-resistant seedlings were planted and over 15,000 farmers were trained in coconut pest and disease surveillance and control.

Estimated benefits correspond to $19.5 million of project funds, where cost‑benefit analysis was conducted:

  • 534,044Estimated beneficiaries over 20 years
  • $43,050,000Estimated net benefits over 20 years

Evaluation Findings

MCC is conducting a performance evaluation of the farmer income support project that will measure CLYD prevalence and spread, household incomes, and the survival of coconut seedlings. It is expected to be available in September 2015. 

Key performance indicators and outputs at Compact End Date

Key performance indicators and outputs at Compact End Date
Activity/Outcome Key Performance Indicators Baseline End of Compact Target Quarter 1 through Quarter 20 actuals (Dec. 2013) Percent Compact Target Satisfied (Dec. 2013)
Business Development Support

Outcome: SME business development in target value chains

Businesses receiving BDF Grants 0 150 119 79%
Control of Endemic Disease

Outcome: To control and mitigate the spread of Coconut Lethal Yellowing Disease

Farmers trained in planting and post planting management of coconuts
  • The three farmer training indicators cannot be aggregated as farmers may participate in multiple trainings.
0 8,000 28,830 360%
Farmers trained in surveillance and pest and disease control for coconuts
  • The three farmer training indicators cannot be aggregated as farmers may participate in multiple trainings.
0 8,000 15,607 195%
Improvement of Productivity

Outcome: Provision of technical assistance for income diversification

Farmers using alternative crop production and productivity enhancing strategies(%) 0 30 38 127%
Hectares of alternative crops under production 0 8,000 7,686 96%
Farmers trained in alternative crop production and productivity enhancing strategies
  • The three farmer training indicators cannot be aggregated as farmers may participate in multiple trainings.
0 8,000 8,958 112%
Rehabilitation of Endemic Areas

Outcome: Planting of coconut seedlings more tolerant of Coconut Lethal Yellowing Disease

Coconut seedlings planted 0 650,000 782,609 120%
Survival rate of coconut seedlings 0 80 76 95%

Land Tenure Services Project

  • $39,068,307Original Compact Project Amount
  • $39,466,421Total Disbursed
  • 24.5%Estimated Economic Rate of Return over 20 years

Land is an important asset for income generation and wealth creation.  In Mozambique, land has been at the center of a long-standing debate about the different choices and visions for growth in rural and urban areas.  The Land Tenure Services Project was designed to address the issue of land insecurity and access, by improving the policy and regulatory framework and helping specific beneficiaries better understand the processes and requirements for registered land rights. The project comprised three mutually reinforcing activity areas: 

  • supporting an improved policy environment, including addressing implementation problems for the existing land law, and engaging in regulatory review to improve upon it; 
  • building the institutional capacity to implement policies and provide quality public land-related services; and,
  • facilitating access to land use by helping people and business with: 
    • clear information on land rights and access; 
    • resolution of conflict with more predictable and speedy resolution of land and commercial disputes, which in turn will create better conditions for investment and business development; and 
    • registering their grants of land use, whether in the form of land titles to long-term or perpetual-use rights.

Through the project, nearly 8.8 million rural hectares were mapped, nearly 150,000 urban titles were formalized and distributed and a consultative forum was established to engage stakeholders for transparent and systemized policy discussions relevant to the sector. 

Estimated benefits correspond to $40.1 million of project funds, where cost‑benefit analysis was conducted:

  • 1,333,445Estimated beneficiaries over 20 years
  • $38,840,000Estimated net benefits over 20 years

Evaluation Findings

MCC is planning impact evaluations of both the urban and rural activities in this project which will measure the costs of obtaining land titles, the amount of investment in newly registered land parcels, and productivity of land use. The evaluation findings are expected in June 2017. In addition, MCC expects a performance evaluation of the land administration capacity activity in September 2015, which will measure the time to process a land title registration and graduation rates of land administration training. A performance evaluation of the community land use activities is already available here.

Key performance indicators and outputs at Compact End Date

Key performance indicators and outputs at Compact End Date
Activity/Outcome Key Performance Indicators Baseline End of Compact Target Quarter 1 through Quarter 20 actuals (Dec. 2013) Percent Compact Target Satisfied (Dec. 2013)
Land Administration Capacity Building

Outcome: Land administration capacity building

Land administration offices established or upgraded 0 26 26 100%
People trained (paralegal courses at CFJJ, general training at DNTF, etc.)
  • CFJJ: Legal and Judicial Training Center (Portuguese acronym); DNTF: National Department of Land and Forestry (Portuguese acronym).
0 750 1,516 202%
Site Specific Secure Land Access

Outcome: Facilitation of site-specific secure access to land

ITC Communities land areas mapped 0 222 259 117%
ITC Rural hectares formalized 0 3,030,000 2,258,867 75%
LTR DUATs delivered to the rural beneficiaries 0 6,237 9,456 152%
LTR Rural hectares mapped 0 5,000,000 8,762,020 175%
LTR Urban parcels mapped 0 140,000 188,423 135%
LTR DUATs delivered to the urban beneficiaries
  • DUAT: “legal recognition of right of access and use of land”; LTR Urban and LTR Rural DUATs only. Other forms of household legal recognition include "Comprovativos" (LTR activities) and "Certidões" (iTC Activities). The end-of-compact target is equal to the number of DUATs issued into the hands of urban and rural beneficiaries, including producer associations.
0 140,000 144,522 103%

Rehabilitation/Construction of Roads Project

  • $176,307,480Original Compact Project Amount
  • $136,802,301Total Disbursed
  • 7.3%Estimated Economic Rate of Return over 20 years

The objectives of the Roads Project were to: 

  • improve access to markets, resources, and services; 
  • reduce transport costs for the private sector to facilitate investment and commercial traffic; 
  • expand connectivity across Mozambique’s northern region and towards the southern half of the country; and,
  • increase public transport access for individuals to take advantage of job and other economic opportunities.

In its design, the project was to rehabilitate 491 kilometers of high-priority interventions on key segments of National Route 1, which form the backbone of the country’s transportation network. Due to higher than expected costs identified during the preparation of full feasibility studies and detailed engineering designs, MCC and the Government of Mozambique agreed to re-scope the activity to two segments totaling 253 kilometers of improved road. At the conclusion of the compact, approximately 90 percent of the 149 kilometer road segment and 70 percent of the 103 kilometer segment had been completed. As a result, the Government of Mozambique committed a total of $30 million (an initial tranche of $10 million and a subsequent tranche of $20 million) to finish the works and cover the associated project management costs. These works were completed in December 2014.

Estimated benefits correspond to $127.7 million of project funds, where cost‑benefit analysis was conducted:

  • 1,237,734Estimated beneficiaries over 20 years
  • $-13,280,000Estimated net benefits over 20 years

Evaluation Findings

MCC is planning a performance evaluation of the Roads Project that will measure road roughness, road maintenance, annual traffic, and vehicle operating costs.

Key performance indicators and outputs at Compact End Date

Key performance indicators and outputs at Compact End Date
Activity/Outcome Key Performance Indicators Baseline End of Compact Target Quarter 1 through Quarter 20 actuals (Dec. 2013) Percent Compact Target Satisfied (Dec. 2013)
Road Rehabilitation

Outcome: Rehabilitate high priority segments of the N1 highway

Kilometers of roads issued "Take-over Certificates" 0 253 253 100%
Percent of roads works contracts disbursed 0 100 88 88%

Water and Sanitation Project

  • $203,585,393Original Compact Project Amount
  • $200,221,661Total Disbursed

With the recognition that lack of access to water and sanitation can be a major barrier to growth and health, the Water Supply and Sanitation Project was designed to improve access to safe, reliable water supply and sanitation services. This project aimed to increase productivity and reduce waterborne diseases—one of the leading causes of death in children under five. The project was also designed to address issues of inadequate access and unreliable service delivery in an underserved market segment: small- to mid-sized town water supply and sanitation. Ultimately, through the project, more than 614 rural water points (boreholes with hand pumps) were constructed, two municipal drainage systems were upgraded and expanded, and two urban water supply systems were upgraded and expanded.  Additionally, MCC, the Government of Mozambique and other sector stakeholders worked to develop and apply new policies to promote sustainable management of Mozambique’s water resources infrastructure. This included the creation of a new, semi-autonomous government entity (AIAS) responsible for the management of water supply and sanitation assets in 134 of Mozambique’s medium-sized cities and towns.

Estimated benefits correspond to $123.5 million of project funds, where cost‑benefit analysis was conducted:

  • 780,908Estimated beneficiaries over 20 years
  • $52,360,000Estimated net benefits over 20 years

Evaluation Findings

MCC is planning an evaluation of the Urban Water Supply and Drainage and Sanitation Activities that will measure access to improved water sources and per capita water consumption.

The Rural Water Supply Activity Final Evaluation Report was released in August 2014 on the MCC Evaluation Catalog (available at http://data.mcc.gov/evaluations/index.php/catalog/76/related_materials). A summary of key results includes:

  • Consumption of improved water increased by 15.1 liters per capita per day.
  • Median household year-round trip time to the primary water source fell by 62 minutes and dry-season roundtrip time fell by 129 minutes.
  • Time savings were primarily used for domestic activities, resting, family activities/child care, and farming.
  • No statistically significant impacts on health-related outcomes.
  • No statistically significant impacts have been detected on household income.
  • No statistically significant impacts detected on poverty rate.

Key performance indicators and outputs at Compact End Date

Key performance indicators and outputs at Compact End Date
Activity/Outcome Key Performance Indicators Baseline End of Compact Target Quarter 1 through Quarter 20 actuals (Dec. 2013) Percent Compact Target Satisfied (Dec. 2013)
Construction of Rural Water Points

Outcome: Install and rehabilitate rural water supply points

Persons trained in hygiene and sanitary best practices 0 7,200 8,400 117%
Amount disbursed for rural water points construction contracts 0 8,597,705 8,223,869 96%
Percent of rural population of the six intervention districts with access to improved water sources 0 22 23 106%
Rural water points constructed
  • Rural water points constructed refer to communal hand pumps in Nampula Province and communal small scale solar systems in Cabo Delgado Province.
0 600 614 102%
Municipal Sanitation and Drainage Systems

Outcome: Rehabilitation/ expansion of sanitation and drainage systems in urban areas

Amount disbursed for municipal sanitation and drainage construction contracts 0 51,354,969 51,222,254 100%
Value of Municipal Sanitation and Drainage Systems construction contracts signed 0 40,437,763 51,354,969 127%
Urban Water Supply Systems

Outcome: Rehabilitation / expansion of water supply systems in urban areas

Percent of revised construction contract disbursed for water systems 0 100 81 81%
Value of contracts signed for construction of Water Systems 0 91,518,535 109,547,822 120%

Coordination and Partnerships

With a recognition that construction on the 253 kilometers of road would not be totally complete by the September 2013 compact end, the Government of Mozambique provided an initial budget allocation of $10 million in July 2013 to cover expected post-compact construction and associated project management costs. Following the compact’s closure, the Government of Mozambique allocated another $20 million (for a total Government of Mozambique contribution of $30 million) to cover expected final costs associated with the Road Project, which included outstanding construction and project management costs as well as funding to cover construction-related claims.  Since the compact’s closure, the Government of Mozambique has been proactively working with the World Bank to identify financing and construction opportunities for the Nacala Water Supply activity, which was terminated by the Government of Mozambique as a result of a poorly performing contractor.

Key Conditions Precedent

To facilitate and incentivize the desired investment outcomes under the compact, MCC and the government of Mozambique agreed that the following conditions precedent (CP) would be met before disbursing funds needed for the projects identified below.

Key Conditions Precedent
Key Compact Component(s) Major Condition Precedent or Policy Reform Required Rating
Water and Sanitation Project

Increased Authority of Central Regulatory Agency

To better ensure sustainability and consistency within the WSS sector, the regulatory agency will have broader oversight to include smaller cities and towns. As a CP, the Minster of Public Works and Housing signed a letter of sector policy which officially expanded the mandate of the regulatory agency.

Met on time

Land Tenure Services Project

Land Use Legislation

Land use rights are currently not easily transferrable, hindering considerable small and medium-scale development, business creation, etc.  The Government will adopt revised legislation and administrative procedures that allow land use rights to be transferred without undue delay or risk.

Not met

Water and Sanitation Project

Legal establishment of Provincial Water Boards for AIAS

Administração de Infraestruturas de Água e Saneamento (AIAS), a new institution established to manage water supply and sanitation assets in Mozambican cities with populations between 50,000 and 150,000.  

Met on time

Rehabilitation/Construction of Roads Project

Road Maintenance

The Government of Mozambique has prepared a paved road maintenance program that includes a periodic maintenance for the entire paved roads network. The program includes but is not limited to the following items: a rolling planning period of eight years; provisions for annual updating of the program based upon additions to the paved road network; a detailed listing of all paved roads subject to periodic maintenance by year; a funding plan that includes 100% of routine and periodic maintenance works such that those works will be funded in increasing amounts to 100%  by user fees as of ten years after the initial paved roads maintenance program.

Met on time