In 2012, the Millennium Challenge Corporation (MCC) partnered with Cabo Verde, an island nation off the coast of West Africa and a long-standing maritime and security partner of the United States Government, to implement a five-year, $66.2 million compact designed to reduce poverty through economic growth. Building on Cabo Verde’s first MCC compact completed in October 2010, this compact combined infrastructure improvements with ambitious policy and institutional reforms to strengthen property rights and increase access to clean water and sanitation, improving the lives of more than 600,000 people.
To accomplish the compact’s objectives, the Government of Cabo Verde (GoCV) successfully passed over 50 laws, closed ineffective institutions, and created new agencies based on sustainable commercial principles, demonstrating their commitment to undertake difficult policy and institutional reforms, try new approaches, and scale effective interventions. This commitment remained strong throughout the compact and was critical to the compact’s success, even after elections midway through implementation brought a new political party into office.
Under MCC’s country ownership model, governments receiving MCC assistance are responsible for implementing the MCC-funded programs. Partner governments establish units known as accountable entities, referred to as MCAs, to manage implementation for compact projects. In this case, the GoCV established the Millennium Challenge Account – Cabo Verde II (MCA-Cabo Verde II) to oversee, manage, and implement the compact. The compact’s programs aimed to not only build capacity within the Cabo Verdean civil sector, but also to build a foundation for economic growth for the people of Cabo Verde that can be sustained long after the compact.
The overwhelming driver of growth in Cabo Verde is tourism, an industry that accounts for as much as 40 percent of Cabo Verde’s gross domestic product and is a major employer in the country. In developing this compact, analysis of Cabo Verde’s constraints to economic growth revealed two key issues: poor access to improved water and sanitation and the lack of a reliable source of information about land rights. Alleviating both of these constraints is critical to growing Cabo Verde’s tourism sector and both are important components of the GoCV’s economic transformation agenda, which aims to reduce the country’s reliance on foreign aid and remittances and to increase mobilization of private sector investment and improved domestic resource management.
Water Supply, Sanitation, and Hygiene Project
Clean water and sanitation services are critical to reducing poverty and driving economic growth in Cabo Verde. Service improvements lead to better health and time savings for households, as well as an improved business environment. Tourism, for example, can drive economic growth, but depends on improved water and sanitation services. This is especially true for small-scale tourism, which has historically created higher levels of local employment than all-inclusive resorts
This extremely water-scarce country faces a number of challenges in the water and sanitation sector. During compact development, the GoCV and MCC determined that the sector suffered from fragmented oversight, inefficient service provision, and poor infrastructure planning and implementation. To address these challenges, the Water, Sanitation, and Hygiene Project (WASH Project) was designed to establish a financially sound, transparent, and accountable institutional basis for the delivery of water and sanitation services to Cabo Verdean households and businesses. The project’s approach to improving sector performance was based on a three-pronged strategy: (1) reforming national policy and regulatory institutions; (2) transforming inefficient utilities into independent corporate entities operating on a commercial basis; and (3) improving the quality and reach of the water and sanitation infrastructure.
- National Institutional and Regulatory Reform Activity: MCC supported the creation of a new National Agency for Water and Sanitation, Agência Nacional de Água e Saneamento (ANAS), responsible for overseeing policy and planning of all water resources, domestic water supply, wastewater, and sanitation. The creation of ANAS drew certain roles and responsibilities from four separate ministries and placed them under one roof for streamlined efficiency and enforcement. The activity also strengthened the existing economic regulator to better regulate economic aspects of the WASH sector. The activity strengthened ANAS’s environmental protection functions to include water and wastewater quality. The activity also provided technical assistance to integrate social and gender analysis and equity in policy and planning in order to facilitate access to and sustainability of improved water and sanitation services.
- Utility Reform Activity: This activity created a single, new independent corporate entity, Aguas de Santiago (AdS), by merging and restructuring nine smaller municipal utility departments. The activity supported the formation of this utility on the island of Santiago, Cabo Verde’s most populated island, where half of the nation’s population resides. The activity provided support and capacity building to improve planning and operational efficiency at the utility, to reduce commercial losses in Santiago and to expand and improve services and information for women, low-income residents, and other vulnerable populations. The process was designed to demonstrate the efficiency and results of a single corporate entity, thus encouraging similar utility restructurings on other islands.
- Infrastructure Grant Facility: The compact created an entity to distribute infrastructure grants (i.e., a grant facility). The infrastructure grant facility was designed to address the most pressing water and sanitation needs and provide economically viable solutions in Cabo Verde. The facility was open to proposals from any utility in the country, provided that the utility met eligibility criteria related to demonstrated progress towards commercialization of utility operations. The facility received 78 project grant applications from qualified applicants and ultimately funded 23 grants. The success of the facility led the government to establish a revolving fund mechanism to further finance water and sanitation infrastructure expansion. This activity also included a Social Access Fund, in partnership with The Coca-Cola Africa Foundation, to improve access to water and sanitation for poor and women-led households.
The legal, institutional, and utility reforms in the Water, Sanitation and Hygiene Project are expected to benefit approximately 278,000 people, roughly the entire population of Santiago. The GoCV and donors are extending the corporatization of utilities throughout the country’s other islands, expanding the compact’s reach. In addition, about 48,000 people, just over 10 percent of the current national population, are expected to benefit from projects financed under the Infrastructure Grant Facility. These accomplishments have contributed to the WASH Project meeting and exceeding its implementation targets.
A performance evaluation 1 will be conducted of the WASH Project to assess the implementation, outcomes, and impacts of the National Institutional and Regulatory Reform Activity, the Utility Reform Activity, and the Infrastructure Grant Facility. The evaluation will also assess the success and sustainability of the WASH sector reforms conducted under the compact. Interim results will were published in 2020 and final results of the evaluation are expected in 2022.
Land Management for Investment Project
Tourism is the main driver for economic growth in Cabo Verde. However, due to the Government’s limited financial resources, the country is highly dependent on investment, mainly, foreign direct investment (FDI), for the development of the tourism sector and the associated hotel, real estate, and construction industries. Foreign investors want confidence that their property rights are secure and that land transactions in Cabo Verde are completed in an efficient and transparent manner. As such, clear information on land rights and boundaries and efficient procedures are key to creating economic growth as well as securing FDI, particularly in the tourism sector.
Prior to the compact, Cabo Verde lacked a central repository of land information, which led to widespread confusion over land ownership and boundaries that often resulted in the delay or cancellation of public and private investment projects. MCC’s Land Management for Investment Project aimed to improve Cabo Verde’s investment climate by supporting the creation of a single, definitive source of land rights and boundaries information. By enhancing the legal, institutional, and procedural environment, the compact sought to create conditions for increased reliability of land information, greater efficiency in land administration and transactions, and strengthened protection of land rights. The project also developed and implemented a new land information management system and, through fieldwork activities, clarified parcel rights and boundaries 2 on specific islands with high investment potential. Taken together, these activities aimed to strengthen Cabo Verde’s investment climate for large and small investors as well as reducing land registration time and costs. The project was comprised of two activities:
- Legal and Institutional Foundations Activity: This activity worked at the national level to support multiple legal reforms designed to create a new land management information and transaction system. This system is expected to create greater efficiency in land registration, land transactions, and land administration in the short term; and to improve land use, investment planning, and property tax administration in the long term. This activity also addressed environmental, social, and gender vulnerabilities by: (1) identifying land in environmentally sensitive areas; and (2) identifying and including in the record the land rights of women in marriage and civil unions. 3
- Rights and Boundaries Clarification Activity: Building on the groundwork laid by the project’s Legal and Institutional Foundations Activity, the Rights and Boundaries Clarification Activity supported the clarification of parcel rights and boundaries on targeted islands of high tourism investment potential. This activity collected information on environmental and social risks, particularly those related to women in de facto civil unions. Data on rights and boundaries of land was entered into the new land management information system to enable the municipal governments, national government, and land users to more quickly and conclusively identify the land boundaries and rights information needed to complete land transactions.
Through decreases in land transaction times and increases in the security of land rights, the Land Management for Investment Project is expected to increase investment in tourism and real estate development and result in job creation benefitting an estimated 13,000 people on the target islands of Sal, Boa Vista, São Vicente, and Maio. Beyond the tourism impact, the project activities are expected to generate an increase in incomes through property investments by Cabo Verdean citizens who, prior to project interventions, did not possess formal land rights.
A performance evaluation 4 of the Land Project is in process. The evaluation is designed to assess the effectiveness of the Land Project activities and related outcomes on land and property investment, tourism investment, utilization of land, property values, land transaction times, and perception of tenure. Results of the evaluation are expected in 2020.