Sharing Natural Resource Revenues with Affected Communities: Policy Options for Mozambique

"As in many other resource-rich countries, the development of Mozambique’s mining and natural gas sectors has raised important and challenging questions regarding the distribution of resource revenues, particularly in areas directly impacted by the extractive industries. Mozambique is estimated to possess vast reserves of coal, natural gas and other mineral resources. If they can be managed properly, these resource reserves have the potential to transform the country’s economy by financing much-needed infrastructure investment and supporting vital economic diversification and poverty reduction efforts. However, ensuring that resource revenues are allocated efficiently and equitably presents a serious challenge, as policymakers often face intense pressures to channel resource rents to influential constituencies. In this context, establishing clear fiscal rules for revenue sharing, including the mandatory allocation of rents to communities in affected areas, can help to shield resource revenues from undue influence and guarantee that a meaningful share of the returns to resource extraction is devoted to offsetting its social, environmental and infrastructure costs.

 

This note analyzes the institutional and policy context in which Mozambique allocates and manages resource revenues at the subnational level. Its objectives are (i) to better understand the extent to which the current revenue-sharing system advances the country’s stated development goals, (ii) to identify any significant weaknesses or constraints in the current system, and (iii) to provide recommendations for strengthening the policy framework and institutional mechanisms for sharing resource revenues. This analysis is informed by the international experience with allocating and managing resource revenues at the subnational level, and it applies a number of important lessons learned."