CAPE VERDE - POVERTY REDUCTION CHAMPION

HOW TO CONTINUE TO BE A POVERTY REDUCTION CHAMPION: OVERCOMING THE CHALLENGES OF CAPE VERDE By: ROB SWINKELS & ROHAN LONGMORE Posted on February 7, 2019 in Posted in Africa can end poverty Original text in English Few countries can track the progress of Cape Verde's development over the past quarter century. Its gross national income per capita (GNI) has increased sixfold. Extreme poverty fell by two-thirds, from 30% in 2001 (when poverty measurement started) to 10% in 2015 (see first graph), translating into an annual poverty reduction rate of 3.6%, surpassing any other African country during this period. Non-monetary poverty has also declined rapidly (see Chart 2). In many ways Cape Verde is a star in development and this progress has been made despite the disadvantage it faces as a small island economy in the middle of the Atlantic. What lessons can be learned? And what should Cape Verde do to maintain this good performance and meet the recent challenges? These topics were discussed during four debates held in Cape Verde last month as part of the dissemination of the systematic country diagnosis prepared by the World Bank and validated by the government. Cape Verde's achievements in poverty reduction are based on political stability and strong institutions, as well as an open economy driven by the exponential growth of the tourism industry, exploring the country's natural beauty. Investments in human capital also played an important role. Its life expectancy is the second highest in Africa at the age of 73, just after Mauritius. And in the global gender disparity index, Cape Verde ranks among the best in the world in terms of health, survival and schooling. Even after the 2008 financial crisis, poverty continued to decline, but at a slower pace. Poverty reduction was greater in rural areas and likely resulted from investments in rural infrastructure such as the construction of dams and rural roads, as well as the extension of the electricity grid and access to electricity. water, allowing the expansion of irrigated horticulture to markets. urban Progress has been faster in the three islands with the highest number of poor people: Santiago, Santo Antão and Fogo. Increased remittances, rural-urban migration, and fewer children per woman may also have played a role in reducing rural poverty. Unfortunately, the country faces a number of challenges to maintain the accelerated pace of development progress. The weak economic growth between 2008 and 2016 highlights the limits of the current tourism model, where 85-90% of all visitors stay in all-inclusive hotels with limited links to the rest of the economy. Youth unemployment is high (63% in the capital, Praia), partly due to lack of skills and persistent dropout issues, and there are signs that crime is on the rise. Economic diversification is necessary, but it has been hampered by a relatively weak business climate: Cape Verde ranked 127th out of 190 countries in the 2018 Doing Business report. High public investment and weak economic growth since 2008 have contributed to the rapid growth of the debt, which currently represents 128% of gross domestic product. A significant portion of the debt is held by poorly managed state enterprises, such as social housing, electricity and airlines. This, together with the growing risks associated with climate change, poses a significant threat to the sustainability of Cape Verde's achievements. The country's challenges are recognized by the current government. Its Sustainable Development Strategy Plan (Plan Stratégique de Développement Durable) 2017-2021 highlights the need for private sector investment and greater public sector efficiency. Several actions have already been undertaken and negotiations with several new private sector investors are underway. Our study identifies five areas for attention to maintain Cape Verde's status as a development champion. We suggest that the following action is urgently required: Further build human capital. This will require tackling the causes of the relatively high school drop-out rate and the lack of skills and qualifications in the workforce. Opportunities for women to participate in the labor market need to be enhanced, for example through better childcare services and changing gender norms around household chores and child-rearing support. Strengthen connectivity. The strengthening of transport infrastructure, in particular air and maritime transport, is urgently needed through public-private partnerships. Better information and communication technology services are also needed, as well as better management of the energy sector. Combat high public debt. Improving the technical and operational efficiency of state enterprises is a priority to reduce the losses the government had to cover with its budget. More effective and systematic involvement of the diaspora in investments in the country could also help mobilize resources. Make the public sector more efficient. Several concrete measures are identified, such as improving traditional government standards and procedures, strengthening inter-agency coordination, focusing processes on results, improving performance monitoring and evaluating key programs requiring better microdata access and performance improvement. the public-private system. Dialogue. Building resilience to natural disasters. Given that Cape Verde's climate to natural disasters will worsen with climate change, a number of measures are needed to build the resilience of families. These include strengthening disaster preparedness, protecting infrastructure and strengthening the asset base of the poorest, for example through better targeting of transfers to provide economic opportunities and better monitoring of these programmes, as well as a better preservation of capital originating from Cape Verde. Cape Verde has achieved star development status. But to keep the star shining brightly, the country must act now. This will then illuminate the most likely path for its progress: a diversified and more inclusive tourism sector and an expansion of niche products from agriculture, livestock and fisheries. Or maybe even become a logistics hub, or a digital and innovation hub, if the right conditions are created and the private sector can be attracted. If the right action is taken now, Cape Verde's future will continue to be bright.