February 2009 prem 4 Africa Region

Infrastructure Spending

Adequacy

28. 
    Measured based on execution, infrastructure spending in Cape Verde is extremely high: US$401 per capita in 2006.⁸⁵ This figure is large even when compared to some other countries with larger per capita income such as Chile and Turkey (Table 5 .43). ELECTRA expenditures per se correspond to 5.9 percent of GDP and approximately US$138 per capita.⁸⁶ To get a cross-country comparison, TACV expenditures have been excluded from Table 5 .43. TACV’s spending represented 9.8 percent of GDP in 2006, raising the total infrastructure spending to 26.9 percent of GDP in 2006. This high level of spending does not necessarily indicate over-investment, but rather inadequacy of past infrastructure investments. For instance, in the road sector, past expenditures on both investment and maintenance have been minimal. Most investments now are for rehabilitation of the network to bring it up to a maintainable standard.
    

29. 
    The public sector in Cape Verde so far has played a critical role as provider, policy-maker, and planner of the infrastructure business. However, the government’s capacity for achieving improvements in infrastructure delivery through increased fiscal spending is limited by its overall objective of fiscal discipline. Moreover, within the boundaries of fiscal discipline, an increase in the envelope for infrastructure would imply reduction in other sectors, perhaps of equal priority to the overall goals of growth and poverty reduction. Cape Verde’s spending on infrastructure is already high (table 1.9). Hence, continued improvement in infrastructure delivery should not be achieved solely through an increase in total spending but also through improvements in efficiency. International experience shows that authorities should work on three fronts to circumvent these constraints. The fronts are (a) coordinating with development partners so that infrastructure receives high priority in public expenditures; (b) improving efficiency of the infrastructure expenditures so that better service provision can be achieved with the same given level of resources, and (c) exploring and implementing additional options to involve the private sector in management, ownership, and financing infrastructure operations in the state-owned firms.
    
30. 
    The share of the private sector in infrastructure expenses in Cape Verde is relatively small. The private sector operates the fixed and mobile telecommunications through Cape Verde Telecom and holds approximately 30 percent of ELECTRA’s capital. In addition, there are a few performance-based maintenance contracts in roads.⁸⁷ There are no precise data on private spending in infrastructure. The World Bank PPI database shows that private participation in ELECTRA represented 8 percent of GDP, or US$48 million, in 2001 (private participation in ELECTRA was reduced in 2006) and 4.1 percent in Cape Verde Telecom in 1995. The government so far has entrusted a major role to the private sector only in the telecommunications sector, aiming to mobilize private sector capital and management skills. This is not surprising as it is a worldwide trend. Privatization processes in telecommunications have been successful globally, mainly because the industry has proved to be easy to regulate and has grown rapidly.