Report No. 70530-CM Cameroon Social Safety Nets June 28, 2012 Human Development Department Social Protection Unit Africa Region Document of the World Bank GOVERNMENT FISCAL YEAR January 1 - to – December 31 CURRENCY EQUIVALENTS Currency Unit : CFA Franc (CFAF) (as of May 16, 2011) 1 US$ : 464 FCFA WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS AfDB - African Development Bank CILSS - Comité permanent Inter-Etats de Lutte contre la Sécheresse dans le Sahel CRS UNICEF -- Catholic United Services Fund ReliefChildren’s Nations CSB UNDP -- Corn-Soya United blend Nations Development Program CSPH VAM -- Caisse de stabilisation Vulnerability Analysis and prix des produits pétroliers desMapping CTS VAT -- Committee for Value-Added TaxMonitoring Economic Programs DSCE WFP -- Foodde Document World Stratégie pour la Croissance et l’Emploi Program (Growth and Employment Strategy Document) ECAM - Enquête Camerounaises Auprès de Ménages (Household Survey data set) EGS - Employment Guarantee Scheme EMOP - Emergency Operations FAO - Food and Agriculture Organization FEWS NET - Famine Early Warning Systems Network FDI - Foreign Direct Investment FCFA - Franc de la Communauté Financière Africaine GAM - Global Acute Malnutrition GCM - Global Chronic Malnutrition GDP - Gross Domestic Product HDI - Human Development Index HIPC - Heavily Indebted Poor Countries ILO - International Labor Organization IMF - International Monetary Fund LBW - Low Birth Weight MICS - Multiple Indicator Cluster Survey MDRI - Multilateral Debt Relief Initiative MINADER - Ministère de l'Agriculture et du Développement Rural MINEDUB - Ministère de l’Education de Base MINEPAT - Ministère de l’Economie, de la Planification et de l’Aménagement du Territoire MINESUP - Ministère de l’Enseignement Supérieur MINPROFF - Ministère de la Promotion de la Femme et de la Famille MINSANTE - Ministère de la Santé Publique MINAS - Ministère des Affaires Sociales MIS - Management Information System NGOs - Non-Governmental Organizations ODA - Official Development Assistance OVCs - Orphans and Vulnerable Children PADY - Projet d’Assainissement de Yaoundé PLW - Pregnant and Lactating Women PRSP - Poverty Reduction Strategy Paper PSNP - Productive Safety Nets Program SAM - Severe Acute Malnutrition SFP - Supplementary Feeding Program SONARA - National Oil Refinery (Société Nationale de Raffinage) SSN - Social Safety Nets UN - United Nations UNDP - United Nations Development Program UNICEF - United Nations Children’s Fund UNDP - United Nations Development Program VAM - Vulnerability Analysis and Mapping VAT - Value-Added Tax WFP - World Food Program Vice President : Makhtar Diop Country Director : Gregor Binkert Sector Director : Ritva S. Reinikka Sector Manager : Lynne Sherburne-Benz Task Team Leader : Carlo del Ninno ACKNOWLEDGEMENTS This synthesis report was prepared by the team consisting of Kaleb Tamiru (Consultant) and Carlo del Ninno (AFTSP, Task Team Leader) in close collaboration with the government counterpart team at the Comité Technique de Suivi (CTS) of the Ministère de l’Economie, de la Planification et de l’Aménagement du Territoire of Cameroon. The CTS is led by Mr. Jean Tchoffo (President), and is composed of Mr. Gregoire Mebada (Permanent Secretary), Mr. Michelin Njoh (Research Officer), Alphonse Nigour (Research Officer), and Mme Claudine Bahiya (Research Officer). Valuable guidance and suggestions were provided by: Yasser El-Gammal (Lead Social Protection Specialist, AFTSP), Setareh Razmara (Lead Social Protection Specialist, AFTSP), Lynne Sherburne-Benz (Sector Manager, AFTSP), Maureen Lewis (Advisor, AFTHD), Mary Kathryn Hollifield (Country Coordinator, AFCCM), and Kalanidhi Subbarao (Consultant, SASHD). Peer reviewers for the synthesis report were Phillippe George Leite (Economist, HDNSP), Andrea Vermehren (Senior Social Protection Specialist, SASHD), and Andrew Dabalen (Senior Economist, AFTP3). The team received strong support in Cameroon from Faustin-Ange Koyasse (Senior Operation Officer, AFTP3), Gaston Sorgho (HD Coordinator, AFTHE), Raju Sing (Lead Economist, AFTP3) and Dan Murphy (Senior Country Officer, AFCCM). Administrative support was provided by Natalie Tchoumba Bitnga (Team Assistant, AFCC1) in Cameroon, and Nadège Nouviale (Program Assistant, AFTSP) as well as Ana Makiesse Lukau (Program Assistant, AFTSP) in Washington, D.C. The report draws from five background papers dealing with analysis of evolution of poverty and review of existing social safety nets programs. These background reports were prepared by Andrea Borgarello (Consultant); Ngueste Tegoum Pierre (Consultant); Étienne Modeste Assiga Ateba (Consultant); Zamo Akono Christian (Consultant); Nkama Arsene (Consultant); and Nkou Jean Pascal (Consultant). The team was supported by Cameroon’s National Statistical Institute during the preparation of the background papers. To prepare this report, the team worked closely with the government counterparts and other Development Partners (particularly AfDB, UNDP, UNICEF, and WFP). Preliminary results from the background reports were discussed in a stakeholder workshop in October 2010 in Yaoundé. Subsequently, preliminary results of the synthesis report as well as a draft action plan were discussed in Yaoundé in March 2011 at a participatory workshop with government officials, development partners and NGOs. The action plan proposed in this report takes into account comments and suggestions received from the government and other participants at the workshop. The World Bank Rapid Social Response Program (RSR) provided the main sources of funds for this study. The RSR Program is the result of a concerted effort by several donors seeking to support developing countries to implement efficient social protection systems so as to better protect poor and vulnerable people against serious shocks such as food, energy and financial crises. The RSR Program operates through the generous support of the Russian Federation, Norway, the United Kingdom and Australia, and is currently supporting 83 activities throughout the world. Activities undertaken also benefit from the support of the Japan Social Development Fund Emergency Window. The authors of the present report acknowledge and thank the Russian Federation, Norway, the United Kingdom and Australia for their financial support. TABLE OF CONTENTS EXECUTIVE SUMMARY.................................................................................................................................... I A. MOTIVATION AND OBJECTIVES ................................................................................................................................ I B. POVERTY AND VULNERABILITY ............................................................................................................................... I C. EXISTING SAFETY NETS PROGRAMS ..................................................................................................................... III D. ANALYSIS OF EXPENDITURES ON SAFETY NETS ..................................................................................................V E. ALTERNATIVE FOR EXPANDING SOCIAL SAFETY NETS PROGRAMS ..................................................................VI F. CONCLUSIONS AND RECOMMENDATIONS ........................................................................................................... VII G. POLICY RECOMMENDATIONS .............................................................................................................................. VIII H. IMPLEMENTATION STRATEGIES ............................................................................................................................IX CHAPTER I: INTRODUCTION .........................................................................................................................1 A. BACKGROUND AND RATIONALE ..............................................................................................................................1 B. MACROECONOMIC CONTEXT ...................................................................................................................................3 C. THE DEFINITION OF SOCIAL PROTECTION AND SOCIAL SAFETY NETS USED IN THIS REPORT .......................8 D. STRUCTURE OF THE REPORT ................................................................................................................................11 CHAPTER II: POVERTY AND VULNERABILITY IN CAMEROON........................................................12 A. THE EVOLUTION AND EXTENT OF POVERTY LEVELS ........................................................................................ 13 B. RISKS, CHRONIC AND TRANSITORY POVERTY .................................................................................................. 18 C. FOOD INSECURITY AND POVERTY ........................................................................................................................ 23 D. FOOD AND FUEL PRICE AS WELL AS THE GLOBAL FINANCIAL CRISES ............................................................ 29 E. SUMMARY OF KEY FINDINGS.................................................................................................................................32 CHAPTER III: SOCIAL SAFETY NETS SYSTEMS REVIEW....................................................................34 A. SOCIAL SECTOR SPENDING ...................................................................................................................................34 B. SAFETY NET PROGRAMS .......................................................................................................................................35 C. DESCRIPTION OF PROGRAMS ................................................................................................................................39 D. EXPENDITURE ON SAFETY NETS ......................................................................................................................... 46 E. ANALYSIS OF SOCIAL SAFETY NET COVERAGE ................................................................................................... 49 F. EFFICIENCY OF UNIVERSAL PRICE SUBSIDIES................................................................................................... 51 G. SUMMARY OF FINDINGS ........................................................................................................................................54 CHAPTER IV: FINANCIAL, INSTITUTIONAL AND POLITICAL FEASIBILITY OF AN EXPANDED SOCIAL SAFETY NETS SYSTEM ...................................................................................................................56 A. EXPANDING THE COVERAGE OF SOCIAL SAFETY NETS PROGRAMS ................................................................. 56 B. POSSIBLE NEW PROGRAMS TO INTRODUCE ....................................................................................................... 58 C. INSTITUTIONAL FRAMEWORK FOR SAFETY NETS AND ADMINISTRATIVE CAPACITY .................................. 62 D. POLITICAL ECONOMY OF SAFETY NET REFORMS............................................................................................... 64 E. SUMMARY OF KEY FINDINGS.................................................................................................................................65 CHAPTER V: CONCLUSION AND RECOMMENDATIONS......................................................................67 A. SUMMARY OF FINDINGS ........................................................................................................................................67 B. POLICY RECOMMENDATIONS ...............................................................................................................................68 C. IMPLEMENTATION STRATEGIES .......................................................................................................................... 69 REFERENCES.....................................................................................................................................................72 ANNEXES.............................................................................................................................................................75 ANNEX I: GLOSSARY OF TERMS ..............................................................................................................76 ANNEX II: EVOLUTION OF MONETARY POVERTY ACCORDING TO THE SOCIO-DEMOGRAPHIC CHARACTERISTICS OF HOUSEHOLD HEADS ................................................................................................. 78 ANNEX III: FACTORS THAT PREDICT LIKELIHOOD OF CHRONIC POVERTY .................................... 81 ANNEX IV: STRUCTURE OF THE POPULATION AS A FUNCTION OF THE STRATA OF CHRONIC POVERTY AND VULNERABILITY (2007) ........................................................................................... 83 ANNEX V: INCIDENCE OF CHRONIC POVERTY BY REGIONS AND PRINCIPAL VARIABLES OF INTEREST (%) ...............................................................................................................................................84 ANNEX VI: HOUSEHOLDS’ ACCESS TO SERVICES AND CERTAIN ASSETS BY STRATA OF LEVELS OF CHRONIC POVERTY AND VULNERABILITY ............................................................................... 85 ANNEX VII: SPATIAL EVOLUTION OF VULNERABILITY BETWEEN 2001 AND 2007 .................... 86 ANNEX VIII: HOUSEHOLD WELFARE ACCORDING TO LEVELS OF FOOD SECURITY..................... 87 ANNEX IX: FOOD SECURITY ACCORDING TO THE SOCIO-DEMOGRAPHIC CHARACTERISTICS OF HOUSEHOLD HEADS ............................................................................................................................88 ANNEX X: SOCIAL SECTOR SPENDING: EDUCATION, HEALTH, AND SOCIAL PROTECTION ...... 89 ANNEX XI: SOCIAL SAFETY NETS: BENEFICIARIES, 2006 -2010 ........................................................... 90 ANNEX XII: SOME COUNTRY EXAMPLES OF GOOD PRACTICE IN SAFETY NET PROGRAMS IN AFRICA .............................................................................................................................................................91 Ethiopia’s Productive Safety Net Program (PSNP) ............................................................. 91 Kenya Cash Transfer Program for Orphans and Vulnerable Children (CT-OVC) .. 93 Malawi Cash Transfer Programs ................................................................................................. 96 ANNEX XIII: GOOD PRACTICE DESIGN FEATURES FOR DIRECT SUPPORT DRAWN FROM INTERNATIONAL EXPERIENCE .......................................................................................................... 100 Selection of Households for Direct Support .........................................................................100 Determining Benefit Levels .........................................................................................................100 Monitoring and Evaluation of Cash Transfer Programs ............................................... 102 MAP…. ……………………………………………………………………………………………………………………………104 List of Tables Table 1: Growth targets and performance since 1995 (percent) ................................................ 4 Table 2: Selected economic indicators (2000-2009) .................................................................. 5 Table 3: Millennium Development Goals ................................................................................ 14 Table 4: Spatial distribution of the evolution of monetary poverty ......................................... 16 Table 5: Poverty Dynamics according to occupation of household head: 2001-2007............. 18 Table 6: Summary of Social safety nets programs in Cameroon and the main actors............. 37 Table 7: Expenditure on Social Safety Net Programs: 2006-2010 (Million FCFA)................ 38 Table 9: Nutritional Programs .................................................................................................. 40 Table 10: Characteristics of Public Works Programs in Cameroon......................................... 41 Table 11: Purchase and sale of cereal stock by the MINADER, 2002-2009 ........................... 43 Table 12: Price subsidy spending by the Government (2008-2010) ........................................ 43 Table 13: Food price subsidies (2007-2009)............................................................................ 44 Table 14: Cameroon Fuel pricing formula (March 2011), in FCFA per liter .......................... 45 Table 15: Subsidy of the state to cover education and health fee waivers (average 2008-10) 46 Table 16: Spending on Social Safety Nets with and without subsidies (2008-10) .................. 47 Table 17: Comparison of government and donor contribution in social safety net expenditures ............................................................................................................. 47 Table 18: Expenditure in the different safety net programs ..................................................... 48 Table 19: Coverage of the Principal Social Safety Nets Programs, 2008 ................................ 50 Table 21: Direct and indirect impact of food price subsidies on consumption levels.............. 52 Table 22: Consumption expenditure on subsidized energy products (% of total consumption) by quintiles........................................................................................ 53 Table 23: Direct and indirect impact of fuel price subsidies on household consumption........ 53 Table 24: Current safety net expenditure per year per beneficiary in the case of uniform distribution ............................................................................................................... 57 Table 25: Amount of money to spend per different scenarios of transfer and coverage ......... 58 Table 26: Safety Nets spending disaggregation by donors/partners (Average 2008-2010)..... 68 Table 27: Likelihood of access by households to some basic commodities by strata of chronic poverty and vulnerability ............................................................................ 82 List of Figures Figure 1: Human Development Trends: 1980 - 2010 (UNDP, 2010) ........................................ 2 Figure 2: Evolution of Foreign Direct Investment ..................................................................... 3 Figure 3: Economic structure and performance of Cameroon ................................................... 4 Figure 4: Non-Oil government revenue in percent of non-oil GDP........................................... 6 Figure 5: Share of Oil in the economy, government revenues, and export earnings ................. 7 Figure 6: Public Debt as a Percentage of GDP .......................................................................... 7 Figure 7: Position of Social Safety Nets in Larger Development Policy................................. 10 Figure 8: Regions where incidence of poverty has increased between 2001 and 2007 (%) .... 15 Figure 9: Percentage Change in Poverty Rates ........................................................................ 15 Figure 10: Evolution of Incidence of poverty between Urban and Rural Areas...................... 17 Figure 11: Incidence of poverty according to household head characteristics......................... 18 Figure 12: Chronic vs. Transient poverty................................................................................. 20 Figure 13: Regional disaggregation of transient and chronic poverty (2007).......................... 21 Figure 14: Characteristics of chronic poverty in selected regions ........................................... 22 Figure 15: Prevalence of Food Insecurity ................................................................................ 23 Figure 16: Structure of expenditure on staple food by poor households (% of budgets in food shares).............................................................................................................. 25 Figure 17: Household welfare according to levels of food security (% of households) .......... 26 Figure 18: Evolution of Global Acute Malnutrition rates in selected regions, 1991-2006 ...... 27 Figure 19: Comparative evolution of price indices: food and non-food inflation, 2006-2010 30 Figure 20: Evolution of food prices ......................................................................................... 30 Figure 21: Imports of Staple Foods in Cameroon .................................................................... 31 Figure 22: Evolution of level of government spending in different social sectors and in overall government budgets..................................................................................... 35 Figure 23: Evolution of social sector and social safety net spending ...................................... 47 Figure 24: Spending on Safety Nets in selected countries ....................................................... 49 Figure 25: Subsidy amounts captured by each quintile............................................................ 54 Figure 26: Key steps in political economy of safety nets reform............................................. 65 List of Boxes Box 1: Methodological note on the construction of food security indicator............................ 24 Box 2: Methodological note on measures of acute malnutrition.............................................. 28 Box 3: Public Work Programs - Elements required for reaching the poor .............................. 42 Box 4: Reform of Fuel Subsidies in Indonesia to assist the Poor through cash transfers ........ 59 Box 5: Public Works Programs: Elements Required for Reaching the Poor ........................... 62 EXECUTIVE SUMMARY A. Motivation and objectives 1. This report responds to the Government of Cameroon’s strong interest in strengthening its social safety net system to support the poorest and most vulnerable households during crises. It is grounded in extensive discussions with government counterparts in a collaborative and inclusive process. The report incorporates detailed comments received from the government as well as important donors and partners through two participatory stakeholder workshops. In addition, it is a part of the World Bank’s Rapid Social Response program 1 to support the Government of Cameroon in making its system of safety nets more comprehensive, flexible, and suitable to the country’s economic and social conditions. 2. In this context, the objective of this report is to lay the ground for a social safety net system that can address the needs of the poor in Cameroon. The high level of chronic poverty and high levels of malnutrition (especially in the northern regions of the country) call for targeted social safety net program. Therefore, the objective of this report is to: (i) assess the evolution and extent of poverty levels; (ii) provide a detailed, updated inventory of existing social safety net programs; (iii) identify their shortcomings; and (iv) propose suggestions, based on international experience, for improving the coverage, efficiency, relevance and financial sustainability of the most relevant programs to set the basis for a coherent safety net system. 3. Cameroon has a high level of chronic poverty and social indicators remain very low. Its Human Development Index is ranked as very low (131 out of 179 countries in 2010) according to the United Nations Development Program (UNDP) Human development index. Approximately 39.9 percent of its population of 17.9 million lives below the monetary poverty line. In the North and extreme North regions, where the poverty rate is highest, almost two in three people are poor. Overall chronic poverty rate in the country is at 26 percent. 4. With a population growth rate of 2.7 percent (which is higher than the average economic growth rates), demographic pressure contributes to poverty aggravation. Unless economic growth rate accelerates significantly and necessary income redistribution programs in favor of the poorest parts of the country are adopted, Cameroon risks not reaching the Millennium Development Goals by 2015. Furthermore, Cameroon is highly vulnerable to a variety of shocks (environmental, economic, and social) and has recently been hit by rising prices of basic food commodities, fuel and the general cost of living following the current global financial crisis. B. Poverty and vulnerability 5. Cameroon suffers from high levels of food insecurity. Results from vulnerability analysis using WFP’s approach to vulnerability through diversity and frequency of food 1 The Rapid Social Response Program is part of the World Bank’s response to the Food, Fuel and Financial crises. Its mission is to help the world’s poorest countries become better prepared to cope with systemic and unpredictable shocks. i consumption indicate that 27.6 percent of households have poor consumption of food, which translates to 3.38 million people (2.84 million in rural areas vs. 0.54 million in urban areas). In addition, only 37.1 percent of households enjoy food security while the remaining 35.7 percent of households live under limited food security. 6. Analysis of the evolution and extent of poverty indicates that monetary poverty has remained stable during the period from 2001 (40.2 percent) to 2007 (39.9 percent). However, the actual number of poor people increased due to an annual population growth rate of 2.7 percent. Of the total population, estimated at nearly 15.5 million people in 2001, 6.2 million were classified as poor. In 2007, the ECAM3 2 estimated the population of Cameroon at nearly 17.94 million people, of which 7.1 million were considered poor. 3 It is further estimated that among the poor, 26 percent find themselves in chronic poverty (please see paragraphs 9 and 10 below.) 7. Poverty remains primarily a rural phenomenon and disproportionately affects the Northern and extreme Northern regions of the country. As compared to urban areas where poverty rates have declined, overall poverty levels in rural areas have increased from 52.1 percent (2001) to 55 percent (2007). Of all individuals classified in the poorest quintiles of income distribution, 40 percent and 17 percent respectively are found in the Northern and extreme Northern regions. In terms of evolution of poverty rates, these two regions have experienced the largest increases in poverty between 2001 and 2007: 13.6 percentage points in the extreme North and 9.6 percentage points in the Northern regions. Overall, in the rural areas poverty rates have increased from 52.1 percent in 2001 to 55 percent in 2007. 8. Cameroonian households are vulnerable to a multitude of environmental, economic and social risks. Risks from environmental shocks have a direct impact on the livelihoods of 45 percent of the population that is engaged in subsistence agriculture. Through a decline in aggregate food supply, environmental risks also have an indirect impact on the food security of the population in the country. In addition to macroeconomic risks – inflation, exchange rate fluctuation, export price volatility, depressed export demand, declines in remittances and foreign direct investment - that have become prominent in recent years, Cameroon is also vulnerable to risks emanating from the basic structure of the economy. These include over reliance on production of unprocessed primary goods, undiversified export base and high import dependency as well as low agricultural productivity. 9. Chronic poverty – those who are currently poor and could not rise above the poverty line in the near future and are particularly vulnerable to shocks - account for 26 percent of the population. Transient poverty, those who are not poor, but remain vulnerable to falling into deeper levels of poverty due to volatile consumption levels account for 9.9 percent of the population. Similarly to poverty, chronic poverty is also a rural phenomenon: 38 percent of rural inhabitants find themselves in chronic poverty, and only 20 percent of rural inhabitants above the poverty line are deemed non-vulnerable to falling into chronic poverty. In terms of regional distribution, the Northern and extreme Northern regions of Cameroon have the highest 2 Enquête Camerounaises Auprès de Ménages (Household Survey data set) 3 Government of Cameroon. 2009. Strategy document for growth and employment – Draft. ii levels of poverty and vulnerability. 10. The chronic poor live in the larger households with several children and are engaged in agricultural production. According to results from the ECAM3 household survey datasets, households in chronic poverty have a household head that has very low level of education (48.4 percent), and are engaged in agricultural production (44.2 percent). Furthermore, households in chronic poverty have larger number of children between the ages of 4 and 15. 11. The food and fuel price crises as well as the recent financial crisis had a negative impact on household welfare. Cameroon is dependent on imports to satisfy its food needs and the recent increase in imported cereal prices has invariably affected the welfare of poor households and, in the absence of a safety net cushion, is likely to plunge the transient poor to deeper levels of poverty. Similarly, the fuel price and financial crises have a direct impact on the economy as a whole and on poor households more specifically. Given the high level of vulnerability, the current situation makes the probability of risks being realized higher. 12. Poverty is correlated with food insecurity as regions with high levels of chronic poverty or have experienced a dramatic increase in poverty levels also suffer from high levels of food insecurity and malnutrition. Furthermore, households in regions generally viewed to have moderate levels of food insecurity could rapidly plunge into acute levels of food insecurity in the face of even a small consumption shock. C. Existing safety nets programs 13. The review of existing social safety net programs indicates that they are inadequate to tackle chronic poverty. Cameroon currently has a limited number of ad hoc social safety net programs. Most programs are limited in scope and coverage: each individual program covers at best only one percent of the total population and only around two-thirds of individuals identified as vulnerable in a target group. In addition, they suffer from implementation challenges – particularly weak targeting efficiency. School Feeding Programs 14. School feeding programs are primarily focused on improving the educational attainment levels of girls in target geographic zones; however, they have very limited coverage. The Northern, extreme Northern, and the Adamaoua regions have the lowest girl-to- boy school enrollment ratios. In addition, girls’ primary school attainment levels are only 24.6 percent in Adamaoua and 17 percent in the extreme Northern regions. These programs are mainly financed and implemented by WFP and the Ministère de l’Education de Base (MINEDUB). On average, only 55,366 students from 367 target schools have benefited from these programs annually in the last three years. This represents only 5.3 percent of all primary school students in three Northern regions of the country identified as priority regions. Nutrition Programs 15. Nutrition programs have largely been operated by donors and partners. The iii principal actors in nutrition programs in Cameroon are UNICEF, CARE, and Catholic Relief Services (CRS). All nutritional programs are essentially categorically targeted to support orphans and vulnerable children – in particular those infected by HIV or have lost their parents to AIDS. All programs attend to the immediate needs of orphans and vulnerable children such as health care, nutrition, and transport. The UNICEF program also provides direct support to households through subsidizing the cost of accessing loans in microfinance institutions. In addition to sponsoring the school fees of OVCs, Catholic Relief Services also provides business development skills training for older OVCs as well as for single parents. However, it should be noted that relative to the scale of the orphan crisis, coverage through these programs is extremely limited. Public Works programs 16. The current public works programs are limited in scope and suffer from faulty design features. There are two public works programs in Cameroon: Projet d’Assinissement de Yaoundé (PAD- Y) (cash-for-work) and WFP projects (food-for-work). PAD-Y is primarily focused on cleaning projects in the city of Yaoundé, but it has covered only 6,000 employees so far. In addition, its remuneration rate of 57000 FCFA/month is much higher than salaries of employed individuals (29000 FCFA/month) – inevitably distorting labor market incentives. This makes it seem more like an employment program than a temporary labor-intensive public works program. The WFP food-for-work programs are active in the Northern and extreme Northern regions of the country, which are characterized by chronic levels of food insecurity, deteriorating ecological conditions, as well as poor road networks. The program covers around 16,590 families in these target regions. However, a gradual transition from in-kind to cash transfer modalities should be explored. Emergency Response Initiatives 17. Considerable resources are allocated to food emergency response initiatives, often under the purview of WFP. These programs involve the creation of cereal stocks in village communities, which are then drawn from in times of distress. With a budget of USD 21, 593,854, WFP’s country program has helped finance the creation of 133 cereal stocks, which is 64 percent of the total envisaged between 2007 and 2012. In addition to its country program, WFP also runs emergency response programs to respond to the needs of refugees from Central African Republic and Chad. This additional program had a two year budget (2008-2010) of USD 35, 937,417. Total number of beneficiaries stood at 565,400 in 2008 and 94,457 in 2009. The refugee assistance program of WFP, on the other hand, has assisted 760,940 refugees in 2008 and 227,655 in 2009. Universal Subsidies 18. Universal subsidies like import and value-added tax exemptions are instruments used by the government to mitigate the negative effects of high food, energy, as well as transport costs. Through 5-20 percent reduction in import taxes as well as elimination of value- added taxes, the government has subsidized the price of food items – maize, flour, fish, rice, and wheat – to the tune of 60 billion FCFA on average annually between 2007 and 2009 (an average of around 2.42 percent of the government budget). At the peak of the fuel price increase in 2008, iv the government has spent 136 billion FCFA in energy price subsidies. Public transport subsidies have cost an average of 3.2 billion FCFA between 2007 and 2009. Direct cash transfers 19. Cash transfers are not a common instrument of social assistance in Cameroon; however, there are some limited direct transfer programs targeting indigent population groups. In particular, the Ministère des Affaires Sociales (MINAS) is involved in assisting abandoned and street children; handicapped individuals; old-age people; as well as the vulnerable cultural minority groups in the country. Because this type of assistance seems ad-hoc, it is not well organized and the number of individuals covered is not easily ascertainable. In addition, there has not been any systematic evaluation of program effectiveness. However, information gathered from multiple sources indicates an average budget of around 50 million FCFA. Fee Waivers for basic services 20. Fee waiver programs are mainly addressed to education and health services; however, coverage is quite limited. The Ministère de la Santé Publique (MINSANTE) manages fee-waiver programs for the indigents and the needy, in particular for emergency hospital treatment and medical evacuation. Nonetheless, this fee-waiver often does not cover the entire cost of treatment. While the Ministère de l’Education de Base (MINEDUB) provides fee waivers to disadvantaged primary school students, the Ministère des Enseignements Supérieur (MINESUP) provides needy students with fee-waiver privileges for higher education. In 2009, this program had a budget of 4,800 million FCFA covering priority educational zones in the northern and western regions of the country. During the same year, fee-waivers for higher education have covered about 60,000 mostly handicapped students. D. Analysis of expenditures on Safety Nets 21. The analysis from available sources indicates that expenditure on social safety nets is limited. Social sector spending is dominated by expenditure on health and education. Between 2008 and 2010, spending on social safety net interventions averaged around 7.4 percent of the government’s budget and 1.63 percent of GDP. However, if price subsidies are excluded this figure is around 1.1 percent of government’s budget, which translates to 0.23 percent of GDP compared to an average expenditure of 1.9 percent in developing countries. While the price subsidies provided by the government consume around 6 percent of the budget, they are not well targeted. This suggests that current social safety nets initiatives are inadequate to satisfy the needs of the poorest segments of the population. This is all the more so given that close to 80 percent of the investment on social safety nets (excluding price subsidies) is allocated to ad hoc emergency response initiatives rather than well designed and efficiently targeted programs that sustainably address chronic poverty and food insecurity. In general, spending on safety nets vary between 1 and 2 percent of GDP in most developing countries (Grosh et al., 2008). 22. Food and fuel price subsidy programs are the most costly, yet they are regressive. The fiscal burden of all subsidy programs has been an average of 6.28 percent of the v government’s budget and 1.39 percent of GDP between 2008 and 2010. 4 Furthermore, it should be noted that a spike in subsidy spending, like in 2008, is reflected in a corresponding decline in social sector spending, especially in Education and Health sectors. Yet, subsidy spending is mostly regressive as most of the subsidized items are not in the consumption basket of the bottom quintile of the income distribution. Only price subsidies on Kerosene are pro-poor. To illustrate, the richest quintile spends almost five times what those in the poorest quintile spend on the consumption of fish, yet this item continues to be subsidized. Similarly, the subsidies for gasoline, gasoil (diesel fuel), and LPG are regressive as those in the richer quintile spend a greater share of their income to these commodities relative to those in the poorest quintile. Table 1 - Summary of expenditure for Safety Nets programs between 2006-2010 (Billion FCFA) 2006 2007 2008 2009 2010 PAD-Y 4.6 4.6 4.6 4.6 4.6 School feeding 0.1 0.1 1.8 1.8 1.8 Emergency programs 0.3 0.2 26.1 6.8 14.9 School fee waivers - - - 4.8 4.8 Hospital fee waivers 1.4 1.6 4.4 1.6 1.6 Food price subsidies - 56.8 73.0 51.0 51.0 Fuel Subsidies - - 136.9 22.5 112.5 Total food and fuel Subsidies 56.0 209.9 73.5 112.5 % GDP - 0.6 2.0 0.7 1.0 % Gov - 3.2 10.2 3.4 4.4 Total Program 6.0 62.2 226.6 91.1 117.1 % GDP - 0.6 2.2 0.8 1.0 % Gov - 3.6 11.0 4.3 4.6 Source: Constructed from various government documents. E. Alternative for expanding social safety nets programs 23. A simple simulation exercise indicates that current spending levels would be sufficient for covering different vulnerable population groups. If the current average safety net spending is uniformly distributed and perfectly targeted at a reference group of poor people, it would be possible to transfer a modest amount of money per individual to make a reasonable difference in their consumption levels. This is so particularly considering the poverty gap of 12.3 percent or 33,142 FCFA per poor person. However, administrative costs often take a certain percentage of the allocated budget (10-20 percent is the norm in direct transfer programs) and that in reality uniform distribution and perfect targeting are unachievable. Thus the cost of transfers would have to include an additional cost of approximately 10 percent to take into account targeting efficiency. 4 Between 2008 and 2010 food and fuel price subsidies had a combined average cost of 152 billion FCFA, equal to 6.15 percent of the government’s budget or 1.36 percent of GDP. vi 24. Alternative scenarios of direct cash transfer expenditure indicate that safety net interventions are possible within the current safety nets budget envelope. If 1,000 FCFA per person is to be distributed monthly, all individuals under the monetary poverty line could be covered with 86 billion FCFA annually. If we concentrate only on the chronically poor (approximately 26 percent of the population), the budget requirement would be just 56 billion FCFA annually whereas the annual budgetary requirement to cover all vulnerable populations (chronically poor and other vulnerable groups) won’t exceed 120 billion FCFA. A monthly transfer of 1,000 FCFA per chronically poor individual is equivalent to only 0.5 percent of GDP (2010) - a figure much lower than the current average expenditure on safety nets, including price subsidies. Therefore, after accounting for administrative costs, it is feasible to cover all the individuals living in chronic poverty without significantly increasing the annual budget. Even adding this cost to the current level of total spending between 2008 and 2010 total expenditure will not exceed 2 percent of GDP with price subsidies included. 25. However, completely eliminating universal subsidies might be politically difficult in the immediate future. Such a policy action could potentially lead to social unrest as resulting price increases invariably impact low-income groups. And social instability could have implications for political stability. Therefore, policy actions will need to strike the right balance and develop a well-planned strategy coupled with information campaign. One possibility would be for the government to set up targeted cash transfer programs for the poorest income groups while gradually reducing subsidy amounts over a set period of time (Please refer to a schematic representation of a roadmap in section G below). F. Conclusions and recommendations 26. Cameroon does not have a coordinated system of social safety net programs based on a national social protection policy, but only some isolated and ad-hoc interventions. Because individual programs are small and poorly coordinated, each has an average coverage level of one percent of the population, with all the programs combined (exclusive of price subsidies) covering no more than six percent of the population. It is crucial that the government with the support of its donor partners address chronic poverty and vulnerability in order to significantly reduce their level. This should be considered a strategic priority anchored in a national social protection strategy. 27. In the current spending configuration, resources are utilized inefficiently vis-à-vis the categories of vulnerable people. Food and fuel price subsidies cost the government 213 billion FCFA in 2008 alone, which is much higher than the total average annual expenditure on social safety nets (excluding subsidies). Yet the better off segments of the population capture the majority of the subsidy amounts. In the other safety net programs, geographic targeting and self- selection are utilized - reaching no more than two-thirds of the intended target beneficiaries. Due to the low coverage and poor coordination of individual programs, each program only reaches about one percent of the population, and together the programs cover only six percent of the population (excluding price subsidies). 28. There is a need for a coherent social protection strategy and an effective safety nets system to address chronic poverty as well as food insecurity in Cameroon. This strategy vii should identify risks and vulnerabilities and map them to appropriate and necessary programs. Priorities need to be accorded to investments in human capital as well as geographic areas more adversely affected by (chronic) poverty, i.e. the Northern and extreme Northern regions of the country. G. Policy Recommendations 29. Develop a coherent safety net strategy and set of programs to address the chronic nature of poverty as well as food insecurity in Cameroon. Given the poor targeting performance of safety net interventions, a reallocation of funds – in particular, reduced spending on subsidies and increased spending in targeted programs – will likely make a meaningful difference in reducing poverty and vulnerability. Such an approach will not only make safety net interventions affordable, but it will also enable them to respond to emergencies. 30. Introduce new safety net programs to move towards a well-coordinated system of safety nets that efficiently targets resources to the poorest and most vulnerable. A direct cash transfer program that transfers a set amount of money to vulnerable households throughout the year could significantly reduce vulnerabilities to chronic food insecurity. In addition, alternative forms of safety nets interventions aimed at helping households mitigate shocks could help to respond to climate related shocks and other seasonal income shortfalls. Integrating other forms of safety net programs such as labor intensive public works together with cash transfers could improve the targeting effectiveness. Figure 1: Key steps in political economy of safety nets reform 31. Move from universal subsidy programs to targeted safety net programs in a few years time. An effective system of safety net programs that covers the majority of target beneficiaries requires extensive financial resources. Since revenue sources are unlikely to create substantial fiscal space, it seems more realistic to reallocate expenditures from less efficient viii programs. However, the timing of universal subsidy reforms should consider political economy ramifications. H. Implementation Strategies 32. Four main policy objectives need to be addressed in short and medium terms to establish an effective social protection system. Based on the action plan discussed with the government (see attached policy matrix), the four main policy objectives identified are the following: 1) strengthening the strategic and institutional framework for designing, implementing, and managing safety net programs; 2) reducing poverty by supporting the consumption of the poor and vulnerable and increasing their access to basic social services through an efficient safety net system; 3) strengthening the financial framework for a national social protection system; and 4) establishing a system of monitoring and evaluation for social protection. 1. Strengthening the strategic and institutional framework for designing, implementing, and managing safety net programs (a) Building an effective safety nets system requires a strong institutional framework that provides policy guidance and coordination. Because social protection covers issues relevant to a multitude of institutions, this should be carefully delineated in a cross-ministerial committee for safety nets that guides policy formulation and plays an effective coordination role with other poverty reduction programs – notably labor market programs, pensions, health insurance, policies to ensure macroeconomic stability, rural development, and human capital formation. A sub-committee responsible for safety nets should also be set up in order to define the type, role, and instruments suitable to address the needs of the poor and vulnerable population groups. (b) Institutions implementing social protection and safety net programs should be identified and strengthened. Defining which institution will manage the design, implementation, and ongoing operation of a social transfer program is a crucial first step upon adoption of a social safety net program. Finally, for successful program design and implementation, capacity building is essential. This may include on-the-job training as well as participation in international seminars and study tours in similar countries at advanced stages of implementing safety nets and other social protection interventions. 2. Reduce poverty by supporting consumption of the poor and vulnerable and increase their access to basic social services through efficient social safety nets system (a) Design an effective safety nets system to address chronic poverty and food insecurity. This process should start by identifying priority groups that could benefit from safety nets programs. Appropriate targeting mechanisms also need to be developed to ensure the participation of those in need. (b) Improve the efficiency of selected safety net programs by conducting an in-depth critical review of selected programs to better inform necessary adjustments. This should ix primarily focus on improved coverage and targeting efficiency of universal programs as well as of food and nutrition programs. (c) Launch new programs – direct cash transfers and public works programs – that meet the needs of the chronically poor and food insecure. Feasibility studies – which should establish the objectives and overall scope of the programs – will need to be conducted to pilot and expand effective direct transfer and public works programs. The overall objective of cash transfer and public works programs in Cameroon should aim to target chronically poor households and take into account institutional capacity to administer the programs. 3. Strengthen the financial framework for the national social protection system. (a) Set up a sustainable financial framework for financing social protection and safety nets programs. This should start by determining the budget envelope needed for a comprehensive safety nets system and identifying the sources of sustainable financing. 4. Establish a system of monitoring and evaluation for social protection. (a) Design and set in place a robust monitoring and evaluation (M&E) system for safety nets to facilitate informed policy decisions. The specific objectives of an M&E system are to: inform the implementation of the program and any necessary adjustments in a timely manner; demonstrate program impact to policy-makers, development partners, and general public; and feed into the global lessons of experience. The evaluation function is particularly critical to inform an evidence-based policy development. x CAMEROON: POLICY ACTION PLAN FOR AN EFFECTIVE SOCIAL SAFETY NET SYSTEM Policy Recommendations Actions and Time Frame Actors Monitoring Indicators 2011-2012 2013-2015 Policy Objective 1: Strengthen Strategic Framework to design, coordinate, and manage the National Social Protection System, including Social Safety Nets 1.a) Provide policy x A permanent SP inter-ministerial x Structures in charge of SP and x CTS coordinating x Adoption of national guidance, and coordination committee to design and monitor SP SSNs are operational all social SSN strategy (2012) for the design, adoption strategy, including SSNs. x Dissemination of national SP protection x Adoption of national SP and implementation of a x A sub-committee responsible for strategy including SSNs is activities in an strategy (2013) national Social Protection monitoring and evaluation is set up designed, executed and inclusive manner x Annual reports on strategy involving various become operational. evaluated with results of SP including social sector institutions representatives x A sub-committee responsible for SSNs SSNs and agencies from sectoral is set up to define the type, role, and ministries, and instruments suitable to address the technical and needs of the poor and vulnerable financial partners (TFPs) x Ministère de l’Economie, de la Planification et de l’Aménagement du Territoire (MINEPAT) 1.b) Strengthen the x Clarify the role and responsibilities of x Ensure coordination between x CTS x Institutional capacities institutions implementing the different national institutions the state and TFPs x Ministère de are improved SP and SSN programs engaged in SSNs: define roles and l’Economie, de la x Resource needs analysis appropriate implementation Planification et de continuously re-visited arrangements l’Aménagement and progress made. x Identify and outline resource needs in du Territoire terms of staffing, equipment, and SP (MINEPAT) coordinating institutions x Provide capacity-building support xi Policy Recommendations Actions and Time Frame Actors Monitoring Indicators 2011-2012 2013-2015 Policy Objective 2: Reduce Poverty by supporting consumption of the Poor and Vulnerable and increase their access to Basic Social Services through efficient Social Safety Net System 2.a) Design effective x Define priority groups that should x Develop effective targeting x Sub-committee x Effective SSN system Safety net programs benefit from SSNs based on the tools to redirect the flow of responsible for proposed analysis of the 2007 household survey resources toward the poor SSNs (Draft SSN x Criteria for targeting x Define priority instruments to address system) needs of priority groups x Develop a targeting systems 2.b) Improve efficiency of x Review cost-effectiveness and targeting x Assess the feasibility of x Sub-committee x Assessment reports current SSNs programs efficiency of universal subsidy alternative targeting responsible for x Monitoring indicators (In-kind programs; School programs mechanisms for improved SSNs (prepare feeding; universal x Review mechanisms for strengthening targeting TOR for program subsidies, and fee waivers) and expanding nutrition programs assessment) x Technical ministries implementing the programs x Technical and financial partners (TFPs) xii Policy Recommendations Actions and Time Frame Actors Monitoring Indicators 2011-2012 2013-2015 2.c) Launch new programs x Prepare feasibility analysis for cash x Complete testing pilot x Sub-committee x Feasibility reports for the most vulnerable transfers programs (cash transfers and responsible for x Evaluation report on the (Cash transfers and Public x Prepare feasibility analysis for public works) and monitor and SSNs results of pilot programs works programs) introducing public works targeted to the assess them (prepare/validate poor and based on ongoing experience TOR for feasibility x Preparation of workshops to present assessment) results of the feasibility analysis and consider selection of potential pilot x Technical programs ministries implementing the x Initiate pilot programs pilot programs x Technical and financial partners (TFPs) Policy Objective 3: Strengthen the financial framework for a national social protection system 3. Set up a sustainable x Establish rigorous tracking of SP x Multiyear program x CTS x Reporting system on financial framework for expenditures and of public SSNs. budgeting of SSNs x Ministère de spending on SSNs financing SP programs x Determine budget envelop needed for a l’Economie, de la (including budget and including SSNs comprehensive SSNs Planification et de external funding) x Identify sources of sustainable l’Aménagement financing (budget, development du Territoire partners, local collectivities, NGOs, (MINEPAT) and private sector) xiii Policy Recommendations Actions and Time Frame Actors Monitoring Indicators 2011-2012 2013-2015 Policy Objective 4: Establish a system of monitoring and evaluation for social protection 4. Design and set in place a x Develop a program monitoring and x Transmit annual program x CTS x Annual monitoring robust monitoring and evaluation system to assess cost- evaluation reports to the x Ministère de report for each SSN evaluation system for effectiveness of SSNs, including a cost sectoral ministries responsible l’Economie, de la program SSNs to facilitate informed estimate for such an investment for SP and SSNs Planification et de x Impact evaluation of policy decisions x Set up minimum reporting x Strengthen the sectoral l’Aménagement most important requirements for SSNs ministries capacities for du Territoire programs x Begin implementing systematic monitoring and evaluation (MINEPAT) monitoring and evaluation of SSNs (training, exchange of experience across programs). x Involve relevant civil society in monitoring and evaluation xiv CHAPTER I: INTRODUCTION This introductory chapter presents the background and rationale for this study, clarifies the definition of “social safety nets� as it has been used in this report, and describes the methodology of the study as well as the structure of this report. A. Background and rationale 1. This report responds to the Government of Cameroon’s strong interest in strengthening its social safety net system to support the poorest and most vulnerable households during crises. It is grounded in extensive discussions with government counterparts in a collaborative and inclusive process. The report incorporates detailed comments received from the government as well as important donors and partners through two participatory stakeholder workshops. In addition, it is part of the World Bank’s Rapid Social Response program 5 to support the Government of Cameroon in making its system of safety nets more comprehensive, flexible, and suitable to the country’s economic and social conditions. 2. Cameroon is a poor country with critically high levels of food insecurity. Results from vulnerability analysis using WFP’s approach to vulnerability through diversity and frequency of food consumption indicate that 27.6 percent of households have poor consumption of food, which translates to 3.38 million people (2.84 million in rural areas vs. 0.54 million in urban areas). In addition, only 37.1 percent of households enjoy food security while the remaining 35.7 percent of households have limited food security. 3. Demographic pressure is likely to exacerbate current levels of poverty and food insecurity. Cameroon’s current population level of 17.9 million people (2009 data) is projected to reach up to 26.5 million in 2020, of which the majority is estimated to be young people. 45 percent of the population was below 15 years of age in 2009 as compared to only 3 percent of the population, which was above 65 years of age. 4. According to the United Nations Development Program (UNDP), the country’s Human Development Index (HDI) is ranked as very low (131 out of 179 countries in 2010). With a per capita income at USD 2,196.9 per annum in PPP terms, life expectancy at birth is 52 years. The combined gross school enrollment rate (for both males and females) is at 52.3 percent. Between 1980 and 2010, the HDI index of Cameroon has increased by 0.9% annually passing from 0.354 to 0.460. The sub-saharan average has increased from 0.293 in 1980 to 0.389 in 2010, placing Cameroon’s HDI index above the regional average. 5 The Rapid Social Response Program is part of the World Bank’s response to the Food, Fuel and Financial crises. Its mission is to help the world’s poorest countries become better prepared to cope with systemic and unpredictable shocks. 1 Figure 1: Human Development Trends: 1980 - 2010 (UNDP, 2010) Source: UNDP (2010). 5. Despite recent economic progress, Cameroon still has a relatively high level of poverty concentrated in the northern regions of the country. Approximately 40 percent of its population lives below the poverty line. In the North and extreme Northern regions – where the poverty rate is highest – almost two in three people are poor. In addition, the extreme poverty rate is also high: 41 percent in the extreme North and 31 percent in the North. Nearly 40 percent of individuals classified in the poorest quintile live in the extreme North and 17 percent in the North. Finally, it is estimated that 26 percent of the poor find themselves in chronic poverty. 6. Malnutrition is a significant human development challenge for Cameroon. WFP estimates that 13 percent of children under 5 suffer from chronic malnutrition. In addition, it is estimated that 18 percent of children under 5 are underweight and suffer from stunting. Regionally, the levels of malnutrition are more severe in the northern regions of the country, which are prone to unfavorable environmental and ecological conditions (erratic rainfall, shortage of arable land, degraded soil conditions, etc.) 7. The recent food price crisis has exacerbated the level of vulnerability amongst poorest segments of the society. A spike in food prices not only accentuated risks of deeper levels of poverty and malnutrition for the chronically poor, but also the transient poor are likely to have been made more vulnerable to similar risks. It is estimated that among the 55.9 percent of the population who are vulnerable to poverty, 9.9 percent are transient poor with volatile levels of consumption. In addition, even though 7.7 percent of the population is non-poor, it is extremely vulnerable to chronic poverty in the face of a consumption shock. 2 8. The fuel price and global financial crises have also worsened households’ vulnerability to poverty. While fuel is an essential commodity for households in and of itself, it is also a critical input to production of other goods and services (transportation, manufacturing, marketing of export commodities, etc.) As such, a fuel price spike has a potential automatic impact on household welfare. The financial crisis has depressed global demand for Cameroon’s key export commodities (timber, rubber, oil, cotton, aluminum, etc.) – causing export prices to decline. Similarly, remittances, which make up a non-negligible 0.8 percent of GDP, as well as foreign direct investment, have fallen significantly. Figure 2: Evolution of Foreign Direct Investment Source: Assiga (2010). 9. In this context, social safety net programs are of particular importance. The high level of chronic poverty and unacceptable levels of malnutrition (especially in the northern regions of the country) call for targeted social safety net measures. 10. The purpose of this report is to: (i) assess the evolution and extent of poverty levels in Cameroon; (ii) provide a detailed, updated inventory of existing social safety net programs; (iii) identify their shortcomings; and (iv) propose suggestions/recommendations, based on international experience, for improving the coverage, efficiency, relevance and financial sustainability of the most important programs to set the basis for a coherent safety net system. B. Macroeconomic context 11. The Cameroonian economy is relatively diversified; however, economic growth has been lagging behind the average growth rate for sub-Saharan African countries. The 3 economy is primarily composed of the service sector (accounting for 44 percent of 2009 GDP), agriculture and manufacturing (19 percent each), and oil and mining (7 percent). The government had ambitious growth targets of 5.2 percent (5.5 percent in the non-oil sector) in 2003-2006, followed by 6.8 percent (6.9 percent for the non-oil sector) in 2007-2015. Actual average growth rate fell short in the period 2003-2006 (Please refer to Table 1). Growth picked up somewhat in 2007-2008 but still fell short of the average PRSP targets for the period 2007- 2015. Poor infrastructure, an unfavorable business environment, and weak governance hamper economic activity and make it difficult to reach the growth rates needed to reduce poverty in a sustainable manner. Figure 3: Economic structure and performance of Cameroon Source: Cameroon Economic Updates, January 2011. Table 1: Growth targets and performance since 1995 (percent) 1995/96-2002 2003-2006 2007-2015 2007-2008 2009 a/ PRSP growth targets Overall 5.2 6.8 Non-oil sector 5.5 6.9 Actual Overall 4.8 3.3 3.4 3.0 Non-oil sector 4.9 4.0 4.1 3.9 Source: Ministry of Finance a/ Projection from the authorities 12. Non-oil real GDP growth rate has averaged a respectable 4.2 percent since 2000, but with signs of a slowdown in the second half of the decade. Growth has been driven by the services sector and to a lesser extent by public works and higher public spending, the result of policy reforms as well as positive changes in the external environment. The growth of the non- oil sector – combined with a declining oil sector – has resulted in an average per capita income growth of one percent in 2000-2008, a decent performance in absolute terms but one that gives no comfort to the government of Cameroon. Indeed, at that pace, it would take about 70 years to 4 double per capita income, and the government has rightly set higher targets in the current poverty reduction strategy as well as in the new Vision 2035 and the new growth and job creation strategy (DSCE). There are further reasons for concern, as average per capita income growth in 2005-2008 was only 0.4 percent. Table 2: Selected economic indicators (2000-2009) 2000/01 2001/2002 2002 2003 2004 2005 2006 2007 2008 2009 National Accounts Percentage increase Proj. GDP 5.2 4.1 4.2 4.0 3.7 2.0 3.8 3.5 3.4 2.4 in which non-oil GDP 5.3 4.5 4.6 4.9 4.9 2.9 3.5 4.1 4.1 3.2 Percent of GDP Private Investment 12.8 14.7 17.5 15.8 15.7 14.7 15.1 14.3 13.4 12.1 Public Investment 1.9 2.4 2.3 2.3 2.6 3.1 2.9 3.9 5.7 5.7 Prices Percentage increase unless otherwise indicated Consumer prices 3.0 3.0 2.8 0.6 0.3 2.0 4.9 1.1 5.3 2.3 REER 3.0 4.7 1.1 2.9 0.1 -3.5 4.5 1.2 3.3 Terms of trade 4.5 -9.0 0.0 -0.8 -2.2 18.0 14.0 -1.6 8.7 -28.3 Oil (US$ per barrel) 25.7 20.7 23.6 27.3 34.9 50.4 61.6 69.6 94.3 52.7 Fiscal Account Percent of GDP Non-oil Revenue 13.6 13.2 12.9 14.2 11.3 12.4 12.2 12.5 12.6 13.3 Oil revenue 3.9 5.2 4.6 4.1 3.9 4.9 6.7 6.4 7.8 4.3 Recurrent expenditures 15.1 14.8 14.7 14.5 14.0 11.8 11.4 11.6 14.3 13.1 Capital expenditures 3.3 2.9 2.6 2.3 2.0 2.3 2.8 3.9 5.7 5.6 Overall balance, cash basis, -3.6 -4.5 0.9 0.9 -0.4 2.2 2.9 2.5 1.0 -1.0 excluding grants Domestic financing -1.2 -1.4 -1.9 -2.1 -0.4 -2.3 -4.8 -3.2 -2.0 0.6 External financing (net) 1.7 5.5 0.8 0.7 0.6 -0.4 2.0 -0.5 -0.1 0.2 External account Exports growth in volume 6.9 -0.7 -8.4 3.4 2.3 0.7 -0.5 Current account (excluding -4.5 -6.8 -7.3 -3.0 -4.0 -3.8 -1.3 -1.8 -2.0 -6.2 grants) (% of GDP) Reserves (in mos. of imports) 4.8 6.4 4.7 Debt Percent of GDP Stock of public debt 77.3 58.5 55.1 53.3 61.3 52.7 14.3 12.4 10.0 11.1 in which external debt 44.2 36.7 5.0 5.5 6.0 6.1 Source: World Bank (2010b). (Constructed from government and IMF staff estimates.) 13. Cameroon’s inflation has been low, as expected from its membership in a monetary zone with a supranational central bank. Inflation averaged 1.9 percent in 2000-2008, and has mitigated the impact on competitiveness of the appreciation of nominal exchange rate. Occasional hikes in overall prices have been the result of exogenous factors such as increases of world fuel and food prices and their pass-through to the domestic economy. According to the most recent IMF Article IV consultation report of June 2011, overall inflation is projected to remain below the regional convergence rate of 3 percent, largely due to several policy measures such as freezing retail oil prices and initiatives to boost agricultural production. When high international oil prices resulted in increased foreign assets and non-oil revenue, the Government limited monetary and price consequences by accumulating deposits and by significantly reducing its liabilities to the banking system. Net credit to the Government decreased by an annual average of 12 percent in the period 2005-2007. At end of 2008, government deposits in the banking system were equivalent to 4 percent of Gross Domestic Product (GDP). The latter policy stance was particularly sound given the unpreparedness of the public expenditure management system to effectively handle a large spending increase. The precautionary deposits also aided in addressing the consequences of the global financial crisis. 5 14. Low non-oil government revenue remains a significant macroeconomic risk in the medium-term. Given the volatility and exhaustibility of oil revenue and resources, the Government has been wise to pursue policies to increase non-oil revenue and achieve a sustainable non-oil fiscal primary balance. Unfortunately, however, the Government has failed to significantly increase non-oil revenue. Table 2 shows no evidence of upward trends in the share of non-oil revenue over total GDP between 2000 and 2008 (the ratio to non-oil GDP leads to similar conclusions). As a result, the Government has turned to spending to achieve non-oil primary fiscal balance targets. Nonwage recurrent expenditures and capital spending have borne the heaviest burden of these adjustments. Figure 4: Non-Oil government revenue in percent of non-oil GDP Source: IMF Article IV consultation, June 2011. 15. The external sector is not diversified and remains dominated by oil exports. Oil exports represented 40 percent and 45 percent of total exports respectively in 2003 and in 2007. Other major export commodities are cocoa, timber, aluminum, coffee and cotton. However, the export base and structure have remained broadly stable because of the poor business climate and eroding competitiveness, which have hurt manufacturing and agricultural exports. In that context, external sector outcomes have been driven by trends in international oil prices, and recently by the impact of the enhanced Heavily Indebted Poor Countries (HIPC) initiative and the Multilateral Debt Relief Initiative (MDRI). 6 Figure 5: Share of Oil in the economy, government revenues, and export earnings Source: Cameroon Economic Updates, January 2011. 16. Recent debt reductions obtained in 2006 under the HIPC and MDRI initiatives have provided additional fiscal space for poverty-targeted expenditures. Cameroon’s public debt- to-GDP ratio declined from 51.8 percent in 2005 to 9.8 percent in 2008 (US$2.28 billion). On domestic debt, substantial repayments were also made possible due to the use of the windfall gains from higher-than-expected oil prices in 2008. This has allowed the State to increase public spending and investment in a sustainable manner. Combined with the net oil exporter status of the country, the significant debt relief places Cameroon in a good position to launch safety net programs to assist the vulnerable and chronically poor. Figure 6: Public Debt as a Percentage of GDP 70 60 50 40 30 20 10 0 2004 2005 2006 2007 2008 2009 Source: Cameroon Economic Update, January 2011. 7 C. The definition of social protection and social safety nets used in this report 17. Social protection is understood as a set of measures that aim to alleviate poverty, manage individual risks, and promote equitable and sustainable growth through prevention, promotion, and protection. Social insurance programs such as health insurance schemes provide security to the vulnerable by preventing and/or reducing the impact of shocks. They not only contribute to better human capital, but also encourage high risk/ high return production choices that could directly reduce poverty. By expanding opportunities for higher productivity and incomes, social protection programs also promote productive activities. Among such policies are labor market regulations and active labor market policies, which – through improved access to good jobs – enhance the productive potential of the economy as a whole. Finally, by ensuring adequate support for the poor and vulnerable, safety net programs protect and build the human capital of the poor. Safety nets programs also play a role in reducing inequalities. 18. There is no overall consensus on a universal definition of social safety nets, on what they should address and on how to better tailor safety net programs to local circumstances. 6 Some players may use the different terminologies – social protection, social security, social assistance, social safety nets and social transfers – interchangeably. In Cameroon, however, social protection is to date understood as a set of contributory social security initiatives, in particular health insurance, pension programs for employees of the State, as well as mutual insurance programs to pool risks of illness, unemployment, etc. (DSCE 2003). Assistance to the vulnerable – handicapped, old-age people without income support, marginalized indigenous populations and tribes, etc. – is so far commonly understood to fall under special social service programs, rather than under well-designed social transfer programs. 19. In the present report, the term “social safety nets� refers to non-contributory transfer programs to the poor or vulnerable (Grosh et al., 2008). As defined in this report, “social safety nets,� aim at increasing consumption – either directly or through substitution effects – of basic commodities and essential services, and not at increasing resources per se. Income-generating activities and other livelihood programs thus fall outside the scope of this report. Such programs are important poverty reduction instruments but cannot ensure a direct increase in consumption, and are not classified as social safety net programs. 20. “Social safety nets� are targeted in some concerted manner at the poor and vulnerable, i.e., individuals living in poverty and unable to meet their own basic needs or in danger of falling into poverty, whether because of an external shock or socio-economical circumstances, such as age, illness, disability or discrimination. Safety nets may serve one or a combination of the following groups (Grosh et al., 2008): x Chronic poor, defined as people who lack the assets to earn sufficient income, even in good years; 6 Annex 1 clarifies key social policies and concepts used in this report to ensure a common understanding of terminology and ideas. 8 x Transient poor, defined as people who earn sufficient income in good years but fall into poverty, at least temporarily, as a result of idiosyncratic or covariate shocks ranging from an illness in the household or the loss of a job to drought or macroeconomic crisis; x Vulnerable groups, commonly including – but not limited to – people with disabilities, the elderly, orphans, widows, the displaced, refugees, and asylum seekers; and x Losers in reforms. 21. Policies and programs intended to improve access to basic services for the entire population (e.g., free primary education) thus fall outside the scope of the present report. As do transfer programs targeted at communities and associations for example, to build social assets in vulnerable communities, since they are not directed specifically at poor and vulnerable individuals or households. General subsidy programs like non-targeted rice subsidies may be considered as social safety nets if introduced with the intention of increasing the consumption of vulnerable households (e.g., low-income households affected by globally high food prices). 22. Instruments used to increase consumption include direct transfers, subsidies and fee waivers. Common types of social safety net programs may be classified as follows (Grosh et al., 2008): x Programs that provide unconditional transfers in cash or in kind: a. Cash transfers (e.g., child benefit, family allowances and social pensions) and near- cash transfers (e.g., food stamps and commodity vouchers); b. In-kind food transfers (e.g., school feeding and take-home rations) and other in-kind transfers (e.g., school supplies); c. General subsidies meant to benefit households, often for food, energy, housing or utilities. x Programs that provide an income: a. Public works in which the poor/vulnerable work for food or cash. x Programs that protect and enhance human capital and access to basic services: a. Conditional transfers, i.e. transfers in cash or in kind to poor/vulnerable households subject to compliance with specific conditions in relation to education and/or health; and b. Fee waivers for health and education to ensure access to essential public services (e.g., fee waivers for health care services, scholarships). 23. Safety net systems are usually woven of several programs, ideally complementing each other as well as complementing other public or social policies. They can be long-term predictable transfers or short-term emergency transfers. A good safety net system is more than a collection of well-designed and well-implemented programs. Rather, the social protection “systemic effect� can trigger more than the sum of the individual social programs. 24. Social safety nets form a subset of social protection policies and programs along with social insurance and social legislation, which ensures minimum civic standards to safeguard the interests of individuals (e.g., labor laws and health and safety standards). Social protection is a basic human right that directly tackles poverty and food insecurity and that contributes to 9 economic growth and human development. 25. Social safety nets are part of a broader poverty reduction strategy. Social safety nets interact with and work alongside of social insurance; health, education and financial services; the provision of utilities and roads; and other policies aimed at reducing poverty and managing risk (See Figure 7). Poverty reduction requires ensuring people’s access to consumption and food security, health, education, rights, voice, security, dignity and decent work. It involves a political process and requires dedicated efforts to empower the poor by strengthening their voice and fostering democratic accountability. In recent years, the concepts of “social protection� and “social safety nets� have increasingly become a central component of poverty reduction and food security strategies in developing countries. Moreover, lessons from global experience in responding to the recent set of food and fuel price as well as global financial crises indicate that countries that had a system of safety nets in place were able to respond better and quicker than those who did not have any programs. Figure 7: Position of Social Safety Nets in Larger Development Policy Source: Grosh et al., 2008. 26. At the core of many debates on social safety nets is the question of predictability and sustainability. An increasing number of development actors argue that social transfers should be predictable, i.e, paid or distributed regularly or in a predictable manner (e.g., whenever climate conditions inhibit good agricultural production); not as an ad-hoc reaction to a crisis, but as a pre-emptive initiative to allow recipients to prepare for and protect themselves in an effective way against unforeseeable catastrophes. In the past, safety nets were often viewed as simple relief transfers that helped poor people to alleviate the worst effects of shocks. However, now it is increasingly recognized that a social safety net is to be distinguished from individual social projects by the integration of many activities into a predictable, institutionalized social protection system based on a framework of vulnerability and risk, and supported by a rights-based approach. Simple relief transfers proved to have limited long-term benefits and involved the danger of creating dependency. Safety nets, if correctly implemented, have the potential not only 10 to protect but also to significantly promote the livelihoods of poor people. The analysis on safety nets expenditures in chapter III will delve into this dichotomy between emergency response and predictable safety nets in Cameroon. 27. Finally, because the main realm of public action transpires through the public sector, the present report concentrates on publicly financed social safety nets, i.e. those funded by a national or local government or by official international aid. In most developing countries, there are three basic forms of social transfer provisioning: (i) “formal� mechanisms which are provided by governments and are prescribed by law; (ii) “semi-formal� support provided by UN agencies or NGOs; and (iii) “informal� mechanisms supplied by households and communities. The present report does not cover informal social safety nets. D. Structure of the report 28. This synthesis report relies on several background papers based on primary and secondary sources of information. The background papers and the synthesis report are based on analysis of existing administrative and household survey data. Specifically, existing household budget surveys for various years (2001 and 2007) were used, and include the results of the recent poverty analysis. In addition, administrative and financial data as well as relevant information from various ministries, the government budget and other development partners (i.e., UNICEF, WFP, and NGOs) were used to prepare the inventory and stocktaking of the existing safety net programs. 29. The report is organized as follows. This chapter presents the rationale for report by providing a background as well as the macroeconomic context of the country. The chapter concludes by providing a review of the definition of social safety nets used for the purposes of this report. Chapter II reviews in detail the poverty profile of Cameroon and its evolution in the past decade, including the profile of chronic vs. transitory poverty. It will then highlight household vulnerability to shocks and risks as well as determinants/correlates of poverty and vulnerability in Cameroon before concluding with an analysis of the likely impact of the food price, fuel price, and financial crises on household welfare. Chapter III commences by investigating the level of social sector spending in Cameroon to situate the relative position of social safety nets (and social protection more broadly) within the fiscal space. It will then describe and assess existing safety nets interventions over the past five years with a particular emphasis on their level of coverage; targeting performance; and institutional set up. The chapter concludes with an analysis of program cost efficiency especially for universal price subsidy programs. Chapter IV provides a simulation exercise for the financial feasibility as well as political and institutional capacity considerations for expanding the safety nets system. Chapter V concludes with some recommendations. Finally, a range of support data analysis and good practice examples are included in the annexes. 11 CHAPTER II: POVERTY AND VULNERABILITY IN CAMEROON A good understanding of the population groups that need safety net programs on a permanent basis is crucial to guide policy makers in designing a good safety net system. Between 2001 and 2007, poverty level in Cameroon has remained stable at around 40 percent. However, a population growth rate of 2.7 percent has actually added an additional 1.1 million poor people who live under the monetary poverty line of 738 FCFA (1.64 USD). With the current poverty gap of 12.37 percent, it is unlikely that Cameroon will achieve many of the Millennium Development Goals (MDGs). There is, however, incredible variation in poverty rates across the different regions of Cameroon. Poverty primarily remains a rural phenomenon, increasing from 52.1 percent (2001) to 55 percent (2007) in most rural areas. In addition, four regions- Adamaoua, the East, the North, and Extreme Northern regions - have experienced significant increases in poverty levels. Of these, the Northern and extreme North regions saw the largest increases in poverty levels: 13.6 and 9.6 percentage points increases respectively. In addition, a majority of households classified in the poorest quintile of income distribution are concentrated in these two regions: 40 percent and 17 percent respectively in the extreme North and Northern regions of the country. The most important risks to which Cameroonian households find themselves vulnerable are environmental, economic and social risks. Environmental risks include flooding, droughts, desertification, and famine conditions, which are repeatedly realized in the extreme northern regions of Cameroon. In addition to macroeconomic risks – inflation, exchange rate fluctuation, export price volatility, depressed export demand, declines in remittances and foreign direct investment - that have become prominent in recent years, Cameroon is also vulnerable to risks emanating from the basic structure of the economy. These risks include overreliance on production of unprocessed primary goods, undiversified export base and high import dependency as well as low agricultural productivity. Chronic poverty – those who are currently poor and could not rise above the poverty line in the near future and particularly vulnerable to shocks - account for 26 percent of the population. Transient poverty, those who are not poor, but remain vulnerable to falling into deeper levels of poverty due to volatile consumption levels account for 9.9 percent of the population. Similarly to overall poverty, chronic poverty is also a rural phenomenon. In Cameroon, the most important correlates of chronic poverty are household size; gender as well as level of education of household head; and labor market characteristics. The chronic poor live in households with many children (between 5 and 15 years of age) that are headed by a household head with minimal education, and depend on informal agricultural activities. Finally, poverty is associated with food insecurity, which is likely to have been exacerbated by the recent set of food and fuel price crises as well as global financial crisis. 12 A. The evolution and extent of poverty levels 30. Analysis of evolution of and extent of poverty indicates that the poverty level has remained stable between 2001 (40.2 percent) and 2007 (39.9 percent). However, the actual number of poor people has increased due to an annual population growth rate of 2.7 percent. Of the total population, estimated at 15.5 million in 2001, 6.2 million were classified as poor. Analysis using ECAM3 data sets shows that of the estimated national population of 17.94 million people in 2007, 7.1 million live under the monetary poverty line of 738 FCFA (1.64 USD) per day – an increase by 1.1 million additional people. 31. Evolution of poverty gap 7 nationally indicates that poverty reduction target set by the first Millennium Development Goal will not be attained. The poverty gap has declined only approximately seven percentage points between 1996 and 2007: 19.09 percent (1996); 12.27 percent (2001); and 12.31 percent (2007). (Please refer to Table 5 for evolution of the poverty gap for each region of Cameroon). The poverty gap of 12.31 percent (corresponding to a poverty intensity of 31 percent) translates to an average cost of 83,500 FCFA per poor person (in prices of Yaoundé) to close the poverty gap. This compares with 73,950 FCFA in 2001. Recent information from the household survey datasets indicates that Cameroon could be off track for meeting the Millenium Development Goal (MDG) of net primary enrollment rate. Cameroon is also off track for meeting most of the health MDGs. Infant and child mortality rates have fallen to the levels of the early 1990s, remaining at high levels with an under-five mortality rate of 142 per 1,000 live births—far higher than the 123 per 1,000 in the average low-income country. 7 Poverty gap is the mean shortfall from the poverty line (counting the non-poor as having zero shortfall), expressed as a percentage of the poverty line. This measure reflects the depth of poverty as well as its incidence. 13 Table 3: Millennium Development Goals MDG Monitoring Indicators Baseline Target Current Status Level Year Level Year Level Year 1.Eradicate extreme 1. Proportion of population living below 40.2 2001 26.7 2015 39.9 2007 poverty and hunger the poverty line (poverty incidence) 2. Wasting rate among children 6.0 1998 1.5 2015 3. Malnutrition rate among children (12- 44.0 1998 2015 23 month) 4. Underweight rate among children 22.2 1998 8.0 2015 19.0 2004 2. Achieve universal 5. Net primary enrollment ratio (6-11 75.2 2001 100 66.7 2007 primary education years) 6. Primary school access rate 90.0 2000 100 2015 7. Primary school completion rate 56.0 2003 100 3. Promote gender 8. Gender parity index 85.0 2000 100 2015 equality o Secondary education gender parity 81.5 2000 100 2015 index o Secondary (general education) 87.5 100 o Secondary (vocational training) 61.7 100 4. Reduce child 9. Under-five mortality rate per 1.000 live 150.7 1998 42.1 2015 144 2004 mortality (under births fiver) 5. Improve maternal 10.Proportion of births attended by skilled 41.8 1998 70 2015 61.8 2004 health health personnel 11.Number of maternal deaths for 1.000 430 1998 350 2015 669 2004 live births 6. Combat HIV/- 12. HIV prevalence among sexually 11.8 2002 9 2015 5.5 2004 AIDS, malaria, active population (age 15to 49) and other diseases 13. Prevalence of malaria among 45.9 1997 25 2015 pregnant women and children (age 0 to 5) 7. Ensure environ- 14. Proportion of land area protected 10 1997 2015 mental sustainability 15. Proportion of population without 49.5 2001 29 2015 access to safe drinking water 16. Proportion of population with 5.7 2001 2015 7.6 2004 improved sanitation (flush lavatory. improve pit latrine) 8. Develop a global 17. Unemployment rate 17.1 2001 2015 partnership for 18. Telephone line per 1.000 people 6.5 2000 2015 development 19. Computers per 1.000 people 2015 Source: World Bank (2010b). 32. Four regions - Adamaoua, the East, the North, and Extreme North – experienced significant increases in poverty levels between 2001 and 2007. The Northern and extreme Northern regions saw the largest increases in poverty levels: respectively 13.6 and 9.6 percentage points increase. In these two regions, the extreme poverty rate is also high: 31 percent in the North and 41 percent in the extreme North. Moreover, nearly 40 percent of the individuals classified in the poorest quintile live in the extreme Northern region and 17 percent in the Northern region. Similarly, poverty levels for Eastern region and Adamaoua have increased respectively by 6.4 and 4.5 percentage points. Geographically, these northern regions of Cameroon are located in the sahelian and sudano-sahelian agro-ecological zones, which are subject to drought conditions, erratic rainfall patterns, and desertification. 8 8 WFP Emergency Operation (EMOP) Cameroon 2012. 14 Figure 8: Regions where incidence of poverty has increased between 2001 and 2007 (%) Source: UNDP (2010) 33. Conversely, as both Figure 9 and table 4 below demonstrate, poverty rates have significantly lowered in the following regions: South West, West, South, Coastal, and Central areas. The most significant decline in poverty rate is observed in the Western region where it declined from 40.3 percent in 2001 to 28.9 percent in 2007. Figure 9: Percentage Change in Poverty Rates 15 10 5 0 -5 -10 -15 Source: Cameroon Economic Updates, January 2011. 15 Table 4: Spatial distribution of the evolution of monetary poverty Poverty Incidence (%) Poverty Gap (%) Severity of Poverty (%) 2001 2007 2001 2007 2001 2007 Area of Residence Urban 17.9 12.2 4.3 2.8 1.6 1.0 Rural 52.1 55.0 17.3 17.5 7.7 7.2 Regions Douala 10.9 5.5 2.1 0.9 0.7 0.2 Yaoundé 13.3 5.9 2.7 1.0 0.9 0.2 Adamaoua 48.4 52.9 15.4 14.5 6.4 5.4 Center 48.2 41.2 15.0 9.5 6.6 3.1 East 44.0 50.4 15.4 15.7 6.7 6.2 Extreme North 56.3 65.9 18.8 24.6 8.2 11.2 Coastal 35.5 30.8 10.1 7.7 4.2 2.7 North 50.1 63.7 15.5 21.0 6.4 8.6 North West 52.5 51.0 20.9 16.6 10.7 6.8 West 40.3 28.9 11.1 6.6 4.2 2.3 South 31.5 29.3 7.4 7.4 2.4 2.6 South West 33.8 27.5 10.5 6.9 4.5 2.5 Cameroun 40.2 39.9 12.8 12.3 5.6 5.0 Source: Nguetse Tegoum (2010) based on ECAM3 and ECAM2 datasets. 34. A further disaggregation of poverty levels between rural and urban areas indicates an urban bias in poverty reduction. While the incidence of poverty in urban areas has generally decreased from 17.9 percent (2001) to 12.2 percent (2007), in rural areas, it has actually increased from 52.1 percent (2001) to 55 percent (2007). The two principal cities of Douala and Yaoundé have witnessed a dramatic decline in poverty rates during this period. Urban bias has been increasing over time across all quintiles of income distribution. In 2007, more than half of all poor individuals lived in rural areas whereas only 12.2 percent of the poor lived in urban centers of at least 50 thousand inhabitants. In Douala and Yaoundé, only one in twenty individuals are poor whereas in other cities the proportion increases to one in five. Close to 94 percent of all individuals found in the poorest quintile live in rural areas, whereas only 2 percent in Yaoundé; 2 percent in Douala; and 6 percent in other cities. 16 Figure 10: Evolution of Incidence of poverty between Urban and Rural Areas. 35. The most important determinants/correlates of poverty in Cameroon are: size of household; level of education; gender of household head; and labor market characteristics. The analysis of the household survey data sets (ECAM3) has allowed to gain some insights into the following characteristics associated with poverty: x Household size: Poor households have an average of six members vs. non-poor households who have an average of three members. Average fertility rate is around five children per woman. Not surprisingly, households with polygamous household heads are the most affected by poverty due to the correlation of poverty incidence with higher number of children. In fact, it is the only category of households where the poverty rate has significantly increased – from 50 percent (2001) to 60 percent (2007) (See Annex II for more details). x Level of education: Poverty progressively declines with the level of education of the household head. Between 2001 and 2007, strong increase in poverty levels is observed only in households where head of the household has never been to school whereas in other households, poverty rates have fallen by at least one percentage point. In general, a household headed by a university graduate is six times less likely to be poor as compared with a household whose household head has never been to school (ECAM3; Fambon et al., 2001). Finally, analysis using ECAM3 datasets shows that the higher the level of the household head’s education, the less often the household experiences food insecurity. x Gender of household head: Female headed households do not seem to be particularly affected by poverty, all other conditions held constant. Households headed by a male household head are found to suffer worse levels of poverty as compared to those headed by females. 17 Figure 11: Incidence of poverty according to household head characteristics 2001 2007 70 Percent of population group 60 50 40 30 20 10 0 Source: Nguetse Tegoum (2010) constructed from ECAM3 datasets. x Labor market characteristics: Households whose breadwinners are primarily engaged in informal agricultural activities suffer from higher levels of poverty. Indeed, as Table 5 below shows, households in all occupational categories, but informal agriculture, have experienced a decline in poverty. Table 5: Poverty Dynamics according to occupation of household head: 2001-2007 (Foster-Greer-Thorbeke Indices) 2001 2007 Headcount Gap Severity Headcount Gap Severity National 40.2 12.8 5.6 39.9 12.3 5.0 Occupation of the Head Public sector 16.7 4.8 2.1 10.0 2.5 0.9 Formal private sector 14.1 3.6 1.3 9.6 2.0 0.6 Informal agriculture sector 56.9 19.0 8.5 59.6 19.4 8.1 Informal rural off-farm 31.7 8.9 3.4 23.0 5.7 2.1 Unemployed 25.0 6.1 2.4 11.9 2.5 0.9 Retired 18.4 4.2 1.5 13.5 2.7 0.8 Other unemployed 43.9 15.3 7.0 34.2 10.3 4.3 Sources: Nguetse Tegoum (2010) using INS - ECAM2, ECAM3, INS B. Risks, Chronic and Transitory Poverty 36. Cameroonian household are vulnerable to a multitude of environmental, economic and social risks. Risks from environmental shocks have a direct impact on the livelihoods of 18 the population that is engaged in subsistence agriculture. Through a decline in aggregate food supply, environmental risks also have an indirect impact on the food security of the population in the country. In addition to macroeconomic risks – inflation, exchange rate fluctuation, export price volatility, depressed export demand, declines in remittances and foreign direct investment - that have become prominent in recent years, Cameroon is also vulnerable to risks emanating from the basic structure of the economy: reliance on production of unprocessed primary goods, undiversified export base and high import dependency as well as low agricultural productivity. x Environmental risks are by far the primary risks as environmental shocks have a direct impact on the livelihoods of 45 percent of the population that is engaged in subsistence agriculture. Through a decline in aggregate food supply, environmental risks also have an indirect impact on the food security of the population in the country. Foremost among these risks are risks of flooding, drought and desertification (as well as famine conditions) and are repeatedly realized in regions identified as the poorest: the north and extreme northern parts of the country. According to WFP study on food insecurity and vulnerability, close to 64 percent and 40 percent of households respectively in the North and the extreme Northern regions of Cameroon experience poor food consumption as a result of drought conditions (VAM 2007). x Macroeconomic risks have recently emerged as prominent following the set of fuel and food price crises as well as the recent international financial crisis. These include: risks of inflation; exchange rate fluctuation; volatility in export prices; depressed export demand; deterioration of terms of trade; decline in remittances as well as foreign direct investment (FDI). x Other economic risks are important determinants of poverty in the medium- to long-run. These important economic risks include: (i) overreliance on production of unprocessed primary goods (petrole, mines, wood, coffee, cacao, palm oil, cotton, banana, etc.) which are subject to price volatilities in international markets; (ii) limited diversification of export commodities 9; and (iii) low agricultural productivity that leads to high level of import dependency and vulnerabilities to external price shocks. Annual growth rate of agricultural production is only 2.4 percent, which is below the estimated population growth rate of 2.7 percent. Cameroon’s cereal import dependency rate stands at 43 percent and its cereal- vulnerability index stands at -1.26. The country depends on cereal imports for 29.6 percent of its cereal needs (mostly rice and wheat). In 2008 alone, cereal import need was evaluated at 630,000 tons (FAO 2008). The most imported food items in Cameroon are: rice, palm oil (both refined and unrefined); fish and shell fish; as well as milk and milk products. x Social and cultural risks are also an important source of vulnerability in Cameroon. Women are particularly subject to a number of social and cultural risks such as female genital mutilation; early arranged marriages, including into polygamous marriages; as well as trafficking, including child trafficking. Even though national prevalence rate is only at 1.4 percent, female genital mutilation is widely practiced in the south west and extreme north 9 As agriculture – making up 45 percent of national GDP - is a common means of subsistence, exposure of export agricultural commodities to negative price shocks increasingly makes rural areas vulnerable to falling into poverty 19 parts of the country (especially in the departments of Manyu, Logone, and Chari) – often influenced by religious convictions. Early marriages are common in the northern parts of the country, and usually end in divorce breaking the family structure. The majority of street children in Cameroon are from divorced parents, married early in their lives. In addition, polygamous marriages often result in large households leaving parents with inadequate means to fend for children and utilizing their labor on the field instead of sending them to school. Finally, according to an ILO study, 531,591 children have been victims of human trafficking (International Labor Organization 2002). 37. Besides high levels of chronic poverty, there is also a significant level of transient poverty in Cameroon. The national average for chronic poverty is at 26 percent while that of transient poverty is 9.9 percent. Chronic poverty refers to poor individuals with a high probability of remaining poor in the near future and are, in addition, extremely vulnerable to consumption shocks. Transient poverty, on the other hand, refers to currently poor individuals who could rise above the poverty line in the near future, but remain vulnerable to falling into deeper levels of poverty due to volatile consumption levels induced by various shocks. Figure 12: Chronic vs. Transient poverty Chronically Poor 26% Non-poor Transient Poor 60% 10% Other 4% Other denotes transient poor that have the possibility of rapidly getting out of the poverty line Source: Nguetse Tegoum (2010) constructed using ECAM3 databases. 38. Regional distribution of chronic and transitory poverty mirrors patterns of spatial differences in overall poverty rates. Primarily, chronic poverty is a rural phenomenon with over 38 percent (2007) of individuals in rural areas chronically under the poverty line whereas only 3.2 percent (2007) of the urban population is chronically under the poverty line. Furthermore, among the rural population considered above the poverty line – 45 percent – only 20 percent find themselves non-vulnerable to falling below the poverty line. Similarly, transitory poverty is pronounced more in rural areas (13.2 percent) than in urban areas (3.9 percent). The 20 urban regions of Douala and Yaoundé have virtually very small number of transient poor: 2 percent and 0.8 percent respectively. Figure 13: Regional disaggregation of transient and chronic poverty (2007) Transient Poverty Chronic Poverty South-west South West North-west North Coastal Extreme-north East Center Adamaoua Yaoundé Douala Rural Urban Cameroon 0 10 20 30 40 50 60 Percent of population Source: Nguetse Tegoum (2010) constructed from ECAM3 datasets. 39. Analysis of chronic poverty confirms the high levels of vulnerabilities faced by the North and extreme Northern regions of Cameroon, where more than half the population lives in extreme poverty: 51.8 percent and 53.7 percent respectively are chronically poor. Other regions with levels of chronic poverty above the national average include: Adamaoua (38.7 percent); the East (37.4 percent); and the North West (26.5 percent). 40. Among the most important characteristics of chronically poor households are level of education of household head, participation in informal agricultural activities and household composition. Households with a male household head (29.4 percent) with very little education (48.4 percent) constitute a larger share of chronically poor households nationwide. Furthermore, those whose primary income source is from informal subsistence farming constitute a larger proportion of chronically poor households (44.2 percent). Finally, chronically poor households tend to have a larger number of children aged 4 – 15 years old. (Please refer to Annex III for detailed treatment of factors that predict likelihood of a household being chronically poor). 21 Figure 14: Characteristics of chronic poverty in selected regions Adamaoua East Extreme North North Cameroon 70 60 50 40 30 Percent of Households 20 10 0 Male Female No Others Agricultural Others Yes No Rural Urban education Workers Gender of household head Level of education of household head Socioprofessional category of Presence of children 5-14 years old in Household residential household head the household area Source: Nguetse Tegoum (2010) constructed from ECAM3 datasets 22 C. Food insecurity and poverty 41. Poverty is associated with high levels of food insecurity, especially in rural areas. Results from vulnerability analysis using WFP’s approach to vulnerability through diversity and frequency of food consumption indicate that 27.6 percent of households have poor consumption of food, which translates to 3.38 million people (2.84 million in rural areas vs. 540 thousand in urban areas). In addition, only 37.1 percent of households enjoy food security while the remaining 35.7 percent of households live under limited food security. This approach to vulnerability analysis is based on a food consumption score used as a proxy for food insecurity. According to this approach, sufficient theoretical foundation exists to assimilate poor food consumption in terms of frequency and diversity of food consumption to current level of food insecurity. (Please refer to Box 1 for methodological details.) According to the Comprehensive Food Security and Vulnerability Analysis conducted by the WFP in 2007, the primary causes for high vulnerability and food insecurity in the northern regions of Cameroon are attributed to: poor agricultural production; low education and income levels; as well as inadequate infrastructure. Figure 15: Prevalence of Food Insecurity In Food Security Limited consumption levels Poor Consumption levels Poor Consumption In Food Security 27.6% 37.1% Limited consumption 35.3% Source: Nguetse Tegoum (2010) calculation based on ECAM3 datasets. 23 Box 1: Methodological note on the construction of food security indicator A households’ food consumption level is captured by a score, which is calculated based on a calculation of the frequency of daily consumption of a list of food items. According to the WFP methodology, these food items belong to 8 groups (Cereals and tuber, Legumes, Greens (vegetables), Fruits, Meat and fish, Milk products, Sugar, and Oil). And each represents different nutritional values according to a given weight. 10 The formula used to calculate the Food Consumption Score (SCA) is: Score = acerealxcereal+ alegmnsexlegmnse+ avegxveg+ afruitxfruit +ameatxmeat+ asugarxsugar+ amilkxmilk+ aoilxoil where: xi = Number of days each sub group of food item is consumed during the past 7 days ai = Weights attributed to group of food item. Food groups Food items Score Cereals and tuber Fresh maize, dry maize, rice, sorghum, tuber, bread, 2 doughnut, pasta Legumes légumineuses (beans. niébé. peanuts) 3 Greens (vegetables) Folon, Keleng keleng, Ndolé, Spinach, etc. 1 Fruits Mango, Pineapple, Citrus fruit. etc. 1 Meat and fish Fish (fresh. dried. or smoked), poultry, shrimp, fresh or 4 dried meat, eggs Milk products Milk (liquid, skim, powder), Cheese, Yogurt, etc 4 Sugar Sugar and honey 0.5 Oil Palm oil, refined oil 0.5 The scores calculated in this manner are reported on a scale with a maximum value of 112. The following benchmarks are used to determine three levels of for the quality of food security (which also takes into account consumption of oil and sugar): 6&$ ”   3RRU IRRG FRQVXPStion   6&$ ”   /imited Food Consumption SCA > 42 : In food security Source: WFP (2007). 42. Patterns of food consumption/expenditure show the vulnerability of poor households in poorer regions to staple food price increases. As Figure 16 below demonstrates, maize, millet, and manioc make up a significant percentage of poor households’ expenditure on food. These regions are home to high levels of chronic poverty and food insecurity. In the urban areas of Douala and Yaoundé, rice is an important staple food among a number of poor households. Therefore, an increase in price of different staple food items would have different negative consequence on household welfare depending on the location and pattern of consumption. For example, an increase in the price of rice would not have any impact on the level of expenditure of those in the northern regions, and a limited impact on the level of expenditure of the poor in the large urban areas. 10 Score de Consommation Alimentaire (SCA) 24 Figure 16: Structure of expenditure on staple food by poor households (% of budgets in food shares) Maize Millet Rice Manioc 30 Millet Maize 25 Percent spent on food items 20 Maize Maize 15 Rice Maize 10 Millet Manioc Rice Millet Manioc Manioc Manioc Maize 5 Rice Manioc Maize Maize Rice Rice Rice Rice Manioc Manioc Millet Millet Millet Millet 0 Extreme North Adamaoua Northwest Douala Yaoundé Cameroon North Source: Nguetse Tegoum (2010) constructed from ECAM3 datasets 43. Although there is wide regional variation, food insecurity is correlated with poverty levels. Overall, levels of food insecurity above the national average of 27.6 percent are observed in the following regions: South West (44.1 percent); North West (37.7 percent); North (34.8 percent); Adamaoua (32.9 percent); and extreme North (32.4 percent). According to the Food and Agriculture Organization (FAO), the North and extreme Northern regions of Cameroon – where food coverage varies widely from 25 to 80 percent - suffer from acute food insecurity and chronic food deficits. To illustrate, a Crop and Food Supply Assessment Mission (CFSAM) led by the Ministère de l’Agriculture et du Développement Rural (MINADER) estimated that the 2009 cereal harvest in the extreme Northern and Northern regions of the Cameroon were respectively 11 percent and 21 percent below their five-year average – and 9 percent and 14 percent respectively below the previous year’s production levels. Whereas the net regional cereal deficit for the years 2009-2010 was estimated by the World Food Program (WFP) at 250,000 metric tons, 70 percent of the total deficit (176,000 metric tons) was in the extreme Northern region of Cameroon. This drastic decline in food supply in the region is inevitably interlinked to the adverse climatic shocks, which further compound the coping capacity of the poor. 11 Furthermore, according to the same WFP assessment, flooded valleys, which serve as watering points for cattle, had dried out earlier than usual. This situation has compromised cattle breeding – an important income source for the population. Indeed, as the joint CILSS 12, FEWS NET 13, and WFP markets assessment in the eastern Sahelian basin made clear, the regional livestock market was in crisis, limiting the coping capacity of agro-pastoralist 11 As an example, the off-season production of local sorghum (or Mouskwari) was likely reduced because of a lack of surface water. 12 Comité permanent Inter-Etats de Lutte contre la Sécheresse dans le Sahel 13 Famine Early Warning Systems Network 25 livelihoods in northern Cameroon. In February 2010, the prices of cattle, sheep and goats in the key regional livestock markets in Maiduguri (Nigeria) – which influence northern Cameroon and Chad – were respectively 25 percent, 40 percent and 33 percent below their February 2009 levels. In addition, the 30 percent price increases of wheat bran (the main animal feed) over the same period made livestock sales as a coping mechanism less viable than in the past. 44. Households in regions generally viewed to have moderate levels of food insecurity could rapidly plunge into acute levels of food insecurity in the face of even a small consumption shock. These regions include the East, West, and Central Regions of the country. Overall food insecurity is much more severe in rural areas (33.3 percent of households) as opposed to urban areas (17.9 percent of households); and in poor households (33.8 percent) vs. non-poor households (25 percent). Please refer to Figure 17 below or table in Annex VII for more details. Figure 17: Household welfare according to levels of food security (% of households) Poor food consumption % Limited food consumption % In food security % 100 90 80 70 60 50 40 30 20 10 0 Source: Nguetse Tegoum (2010) constructed from ECAM3 datasets. 45. Malnutrition, especially in the North and extreme Northern regions of Cameroon, are severe. Nationally, it is estimated that 19.3 percent of children below 5 years of age suffer from hunger and food insecurity – a ratio that should be reduced to eight percent by 2015 to meet 26 the first Millennium Development Goal (MDG) of reducing extreme poverty and hunger. Indeed, malnutrition continues to pose a significant challenge with about a third of children in Cameroon estimated to be chronically malnourished. According to some estimates, up to 45 thousand children die of malnutrition alone annually (UN IRIN, April 2009). x Global Acute Malnutrition (GAM) rates are the highest among children under five years of age in the northern and extreme northern regions of Cameroon: 14.1 percent and 11.7 percent respectively. These figures exceed the critical thresholds, which indicate alarmingly high levels of malnutrition. In addition, these two regions also have the highest rates of Severe Acute Malnutrition rates at 2.9 percent and 2.8 percent respectively. (Please refer to Box 2 for methodological details for calculation of Global Acute Malnutrition (GAM) as well as Severe Acute Malnutrition (SAM) rates.) Figure 18: Evolution of Global Acute Malnutrition rates in selected regions, 1991-2006 1991 1998 2004 2006 16 Serious 14 levels of malnutrition 12 indicating emergency situations 10 Percent 8 6 4 2 0 East Adamoua North Extreme North Cameroon Source: Constructed using datasets from WFP & MICS 2006 x Global Chronic Malnutrition (GCM), which measures stunting (height-for-age) among children under five, is the highest in the two regions of the North and extreme North. These high rates, which were 44.4 percent (North) and 36.9 percent (extreme North) in 2004, remained relatively unchanged in 2006 at 43.3 percent (North) and 35.7 percent (extreme North). These rates exceed the national average of 30.4 percent (MICS 2006). (Please refer to Box 2 for methodological details for calculation of Global Chronic Malnutrition (GCM)). x The causes for high levels of malnutrition are many and varied, but are similar to those in many Sahel countries. According to a UN (IRIN) April 2009 report, among the most critical 27 causes are: lack of basic health care; lack of access to essential child survival services; poor infant feeding practices; overall food insecurity; and isolation of these regions which further compounds their vulnerability. x Malnutrition rates among pregnant and lactating women (PLW) are among the highest in the North and Extreme North regions: respectively 8.1 percent and 17.2 percent of PLW have a Body Mass Index (BMI) less than 18.5, much higher than the national average of 6.7 percent of PLW. 14 This is of particular concern, especially in the northern regions of Cameroon, as it leads to very low birth weight (LBW) as reported in UNICEF’s third round of Multiple Cluster (Household) Survey (MICS 3) data. LBW of 16.6 percent in the extreme North and 14.3 percent in the North are above the national average of 10.8 percent. 15 Furthermore, the LBW rate in the extreme North exceeds the 15 percent cut-off point, which is the internationally agreed threshold for triggering urgent population-wide interventions in humanitarian emergencies. Box 2: Methodological note on measures of acute malnutrition Global Acute Malnutrition (GAM) In an emergency situation, the weight and height of children between 6 and 59 months are measured and the results are used as a proxy indicator for the general health of the entire population. The index of weight for height, which reflects recent weight loss or gain, is the best indicator for acute malnutrition. Global Acute Malnutrition (GAM) is calculated with the Z-score defined as a weight-for-height index less than - 2 standard deviations from the mean weight of a reference population of children of the same height and/or having Oedema. Global Acute Malnutrition as calculated with the Median (%M) is defined as all children falling under 80% of the median in the index of weight-for-height median, and/or having Oedema, as compared to the median weight of children of the same height in the reference population. Thresholds Different GAM thresholds exist that can be used to categorize emergency situations. However, a GAM value of more than 10% generally identifies an emergency. Commonly used thresholds for GAM are: <5% = acceptable 5% to 9.9% = poor 10% to 14.9% = serious >15% = critical Global Chronic Malnutrition (GCM) Global Chronic Malnutrition (GCM) is calculated with the Z-score defined as a height-for-age index less than -2 standard deviations from the mean height of a reference population of children of the same age. Global Chronic Malnutrition as calculated with the Median (%M) is usually defined as all children falling under 90% of the median in the index of height-for-age median as compared to the median height of children of the same age in the reference population. Chronic malnutrition is also referred to as stunting. Severe Acute Malnutrition (SAM) Severe Acute Malnutrition (SAM) is calculated with the Z-score defined as a weight-for-height index less than - 3 standard deviations from the mean weight of a reference population of children of the same height and/or having Oedema. Severe Acute Malnutrition as calculated with the Median (%M) is defined as all children falling 14 Demographic and Health Survey (DHS) 2004. 15 Multiple Indicator Cluster Survey (MICS) 3, 2006. 28 under 70 percent of the median in the index of weight-for-height median, and/or having Oedema, as compared to the median weight of children of the same height in the reference population. Severe Chronic Malnutrition (SCM) Severe Chronic Malnutrition (SCM) is calculated with the Z-score defined as a height-for-age index less than -3 standard deviations from the mean weight of a reference population of children of the same height and/or having Oedema. Severe Chronic Malnutrition as calculated with the Median (%M) is defined as all children falling under 70 percent of the median in the index of weight-for-height median, and/or having Oedema, as compared to the median weight of children of the same height in the reference population. Source: Center for the Study of the Epidemiology of Disasters, Complex Emergency Database. D. Food and fuel price as well as the global financial crises 46. The recent food and fuel price as well as global financial crises have exacerbated household vulnerability to poverty. As established in the forgoing sections, a significant number of households in Cameroon – especially in the Northern and extreme Northern regions – are vulnerable to poor consumption of food and malnutrition. Higher staple food prices accentuate these risks even further (Next paragraph will illustrate the magnitude of staple food price inflation). Similarly, fuel is an essential commodity for household welfare as a critical input for essential economic activities. On the other hand, the global financial crisis of 2008 has affected Cameroon’s key export sectors and as a consequence, households dependent on revenues from these industries. In the same manner, a decline in foreign direct investment and remittances affects revenue flows to households dependent on them. 47. Food prices have risen faster than prices of non-food commodities. Between February 2007 and February 2008, food prices have generally increased by 57.6 percent. However, the highest increase has been on prices of cereals and milk products, which increased by 84.9 percent and 58 percent respectively during the same period. Among the most significant price increases, the price of wheat doubled during the same period attaining a price of 10 dollars per bushel while the price of rice has attained its highest levels in ten years. For meat products (beef, poultry, and pork, etc.), the increase in prices has reached up to 33.3 percent in the past three years – an average of at least a 10 percent increase annually. In general, the evolution of food prices reflects the inadequacy of domestic supply as well as international food price trends on imported food items. 29 Figure 19: Comparative evolution of price indices: food and non-food inflation, 2006-2010 Source: IMF Article IV Consultation, June 2011. Figure 20: Evolution of food prices Source: WFP (2007). 30 Figure 21: Imports of Staple Foods in Cameroon 250,000 200,000 Poissons et crustacés 150,000 Lait , en poudre ou concentré Maïs 100,000 Riz 50,000 Huiles brutes ou raffinées 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: WFP (2007). 48. Fuel prices have also increased dramatically. Between 2004 and 2008, the prices of gasoline, diesel oil and kerosene have, on average, increased 35 percent. While fuel is an essential commodity for households in and of itself, it is also critical input for the production of other goods and services. This in turn has an automatic impact on household welfare. 49. The global financial crisis and subsequent economic downturn are affecting Cameroon mainly through two channels. First, declining commodity prices and depressed global demand resulted in lower exports and revenue for the State- and as a consequence slower growth. Second, less external financing was available for Cameroon from remittances, private investors (Foreign Direct Investment and equity financing), and possibly Official Development Assistance (ODA). 16 Real Channel 50. Downturns in global demand have hit hard the timber and aluminum exports. Falling commodities prices are also worsening the real impact on export sectors. Oil prices in 2009 were projected at about US$53 the barrel, down by 44 percent compared to 2008. As the prices of other commodities (cocoa, coffee, and timber) also declined, the deterioration in the terms of trade was projected at -28 percent in 2009 (Table 2). The adverse demand and price shocks resulted in severe contraction in the export sectors and in the overall economy. 17 Non-oil real GDP in 2009 was only at 2.9 percent, 18down from 4.1 percent in 2008 and below the projected rate of 3.2 percent. The adverse impact on growth may appear modest, since the export sector as a share of GDP is low (timber is about 2.9 percent, cash crops 1.4 percent, and oil sector 8 percent), and forward and backward linkages with the rest of the economy are limited in the case of the oil sector. However, the fall in commodity prices could affect growth prospects in 16 World Bank (2010b). 17 In 2009 alone, for example, over 50 percent of timber orders from Europe were cancelled leading to a spike in unemployment in the sector. 18 IMF Article IV consultation, June 2011. 31 the outer years because it could delay investments in the oil and mining sectors. Marginal oil deposits are not profitable at current prices and this may slow down oil exploration. Furthermore, the profitability of planned mining projects (bauxite, aluminum, iron ore, nickel, and cobalt) is also in question, and thus are the prospects for their launching (World Bank 2010b). 51. The contraction of the economy is likely to result in lower revenue for the State. The decline in oil revenue was particularly marked, from 7.6 percent of GDP in 2008 down to 4.8 percent of GDP in 2009 (World Bank, 2010a). Therefore, maintaining fiscal sustainability following the measures taken in March 2008 to quell riots against high food and fuel prices remains the principal challenge. These measures, ranging from increase in civil services wages, exemption of basic commodities and freeze of fuel prices, were equivalent to 1.6 percent of GDP in 2008 (World Bank 2010b). Financial channel 52. Although the financial sector in Cameroon does not appear to be vulnerable to the global financial crisis, less financing may be available from other important sources. While remittances, representing a non-negligible 0.8 percent of GDP, are likely to decline, foreign direct investment (FDI) - at 94.4 billion FCFA in 2007 – sharply declined to 10.4 billion FCFA in 2008 (Please see Figure 2 in Chapter I). In addition, there could potentially be a drop in Official Development Assistance (ODA), reducing available financing sources for the country. E. Summary of key findings 53. Poverty level has remained stable from 2001 to 2007; however, poverty remains primarily a rural phenomenon and disproportionately affects the northern and extreme northern regions of the country. As compared to urban areas where poverty rates have declined, 94 percent of all individuals classified in the poorest quintiles live in rural areas. Similarly, while 38 percent of rural inhabitants are in chronic poverty, only 20 percent of rural inhabitants above the poverty line are deemed non-vulnerable to falling into chronic poverty. In terms of regional distribution, the Northern and extreme Northern regions of Cameroon have the highest levels of poverty and vulnerability. Of all individuals classified in the poorest quintiles of income distribution, 40 percent and 17 percent respectively live in the extreme Northern and Northern regions. In terms of evolution of poverty rates, these two regions have experienced the largest increases in poverty between 2001 and 2007: 13.6 percent in the extreme North and 9.6 percent in the Northern regions. 54. Poverty is correlated with food insecurity. The regions that have high levels of chronic poverty or have experienced a dramatic increase in poverty levels also suffer from high levels of food insecurity and malnutrition. 55. The food and fuel price crises as well as the recent financial crisis have significantly impacted household welfare. Cameroon is dependent on imports to satisfy its food needs and the recent increase in imported cereal prices has invariably affected the welfare of poor households and, in the absence of a safety net cushion, is likely to plunge the transient poor to deeper levels of poverty. Similarly, the fuel price and financial crises have a direct impact on the 32 economy as a whole and on poor households more specifically. Given the high level of vulnerability, the current situation makes the probability of risks being realized higher. 33 CHAPTER III: SOCIAL SAFETY NETS SYSTEMS REVIEW Cameroon has a very limited number of safety net programs whose scope and level of coverage are inadequate to address chronic poverty and vulnerability. The most important of these safety net programs in the past five years can be classified into seven major categories: school feeding programs; nutrition programs; labor intensive public works programs; emergency response initiatives; universal subsidy programs; unconditional cash transfers; and fee-waivers for basic services. Excluding the subsidy programs, the coverage of each individual program barely exceeds one percent of the total population and is close to only two-thirds of target beneficiaries identified as vulnerable. Relative to investments in education and health – which account for 96 percent of total social sector spending – expenditure on social protection is extremely limited. Combined the two sectors took up an average of 24 percent of government budget between 2006 and 2010, while social protection spending was only a small fraction of 0.76 percent of government budget allocated to social programs generally. Including universal price subsidies (for fuel, food, and transport costs), this figure could reach up to 7.4 percent of government’s budget. Excluding these expensive subsidies, total safety net investment is only 0.23 percent of GDP. With price subsidies, safety net spending level is close to 1.6 percent of GDP. However, 80 percent of the investment excluding subsidies is allocated to ad hoc emergency response initiatives rather than well-designed and efficiently targeted interventions. In the current program mix, the universal subsidy programs are the most expensive, yet highly regressive. Most of the subsidized food items and energy products are not in the consumption baskets of the bottom quintile of the income distribution. In addition, an increase in subsidy levels is reflected in corresponding decline in social sector spending, especially in health and education. Donors play a critical role in supporting safety net programs in Cameroon. Donor agencies have spent an average of 0.18 percent of GDP on safety net programs over the last three years. Among the most important donors are World Food Program (WFP), UNICEF as well as NGOs, including CARE and Catholic Relief Services (CRS). This chapter will start by situating social safety nets spending within the overall social sector expenditure and its evolution. Section B details the safety nets programs in the past five years and the principal actors while Section C provides a detailed description of each program. The design and performance of each program type is discussed, considering a set of key performance criteria, such as appropriateness, adequacy (coverage, benefit level, duration), and cost- effectiveness (efficiency and effectiveness) (Grosh et al., 2008). Sections D, E, and F will provide an analysis of expenditure efficiency on the most important programs. A. Social Sector Spending 56. Social Sector spending is heavily dominated by expenditure on education and health with spending on social protection constituting a very small fraction. Total allocation for the social sectors is around a quarter of total government budget. With 70 percent of all social sector 34 spending and close to 18 percent of annual government expenditure between 2006 and 2010, spending on education takes the lion’s share. Expenditure on health averages around 26 percent of overall social spending and close to 6 percent of government’s budget between 2006 and 2010. Expenditure by the Ministère des Affaires Sociales (MINAS) and other ministries makes up the difference constituting a very small fraction of total social sector spending. Figure 22: Evolution of level of government spending in different social sectors and in overall government budgets. Source: Borgarello (2011) 57. Allocation to social protection is only a fraction of the spending in overall social programs, which in 2010 stood around 0.76 percent of annual government budget (Please see Figure 22). However, as indicated during an ILO conference on social protection held in Dakar in June 2008, a minimum level of social protection (old age pension; disability pension; essential basic health care; minimum revenue for families with children; employment promotion) would cost Cameroon around six percent of GDP in 2010 and five percent of GDP by 2030. Excluding basic health care coverage, the costs would be around 3.25 percent and 2.15 percent of GDP respectively (UNDP 2010). B. Safety Net programs 58. The most important safety net programs that have been used in Cameroon in the past five years could be classified into seven major categories: a. School Feeding programs aimed at providing nutritional support to students in targeted schools in the northern parts of the country. b. Nutrition Programs as part of health interventions such as food distribution to malnourished children and pregnant women c. Labor intensive public works programs put in place in collaboration with national and international partners with the dual objective of infrastructure development and revenue generation on a temporary basis for poor households. 35 d. Emergency response initiatives such as distribution of food reserve stocks and timely interventions during droughts, flooding, influx of refugees, etc. e. Universal price subsidy programs for imported food items, energy products, as well as local transport. f. Unconditional cash transfer programs. g. Fee-waivers for basic services targeted at the poorest and most vulnerable population groups. 59. The principal actors in social safety nets programs in Cameroon are both local and international. While the government executes these programs through its various line ministries and specific bureaus, donors rely on intermediary organizations and non-governmental organizations. Within the government, the most active Ministries are the Ministère des Affaires Sociales (MINAS), the Ministère de l’Education de Base (MINEDUB) and the Ministère de la Santé Publique (MINSANTE). The latter two ministries are both primarily involved in nutritional support to vulnerable groups through emergency response initiatives, school feeding programs, and fee waiver programs for education and health. In addition, the Ministère de Finance supports all price subsidy programs, in particular for energy products as well as transport jointly with the relevant line Ministries. 60. Among the donors and international organizations, WFP and UNICEF are the most active in supporting social safety net programs in Cameroon. While WFP’s programmatic focus is in the areas of labor-intensive public works programs; school feeding programs; and emergency response programs; UNICEF is involved in supporting orphans, vulnerable children, and their families through a package of direct support (transport, food aid, school materials, etc.) and through productive activities such as ensuring families’ access to microfinance credit. 61. The nongovernmental organizations involved in Safety nets interventions are primarily CARE and Catholic Relief Services (CRS), both of which target orphans and vulnerable children through similar modalities as those of UNICEF’s. 36 Table 6: Summary of Social safety nets programs in Cameroon and the main actors Programs/projects Principal Actors School feeding WFP, MINEDUB Nutrition (food distribution) UNICEF, CARE, CRS, AWA, other NGOs Public work programs PAD-Y (ILO, AfDB), WFP Cash transfer MINAS Emergency interventions WFP, MINADER, UNICEF Price subsidies MINFI Fee waivers on basic services MINSANTE, MINEDUB Source: Authors’ analysis. 37 Table 7: Expenditure on Social Safety Net Programs: 2006-2010 (Million FCFA) 2006 2007 2008 2009 2010 School Feeding Programs School feeding MINEDUB 33 50 50 55 50 School feeding WFP 57 57 1,746 1,746 1,746 Fee Waiver Programs Hospital fees MINSANTE 1,400 1,600 4,400 1,600 1,600 School fees MINEDUB 4,800 4,800 Cash Transfer Programs Needy indigents MINAS 22 112 50 50 50 Street children MINAS Price Subsidies Energy products subsidy MINFI 136,900 22,500 112,500 Food price subsidies MINFI 56,800 73,000 51,000 51,000 Transport subsidies MINFI 1,600 2,600 3,200 3,200 3,200 Public Work Programs Food-for-work WFP 196 196 PAD-Y MINEPAT 600 600 PAD-Y AfDB 2,400 2,400 Emergency Cereal Stocks WFP 396 196 196 Emergency/Refugees WFP/UNICEF 25,713 6,354 14,597 Cereal Stocks BID/MINADER 329 215 215 100 Nutritional Support Programs OVC UNICEF 47 47 47 OVC NGOs 100 100 100 100 100 Total GoC 3,054 61,162 217,600 83,805 173,800 Total GoC (w/o subsidies) 1,454 1,454 1,762 4,500 2,305 Total donors/partners 486 372 27,999 11,255 19,383 Total 3,540 61,533 245,599 95,060 193,183 Total (w/o subsidies) 1,940 2,133 32,499 13,560 21,683 Source: Borgarello (2011) 38 C. Description of programs School Feeding Programs 62. School feeding programs are one of the main instruments used to link safety nets to educational attainment objectives. They are used to remedy nutritional deficiencies of school children and simultaneously attract the maximum number of children to school. In the context of Cameroon, fresh lunch meals are regularly served to children in schools for 165 days in a year and in addition, take home rations (50 kg of cereals per trimester) are provided to all girls attending at least elementary school. This program has a particular focus on enhancing the educational achievements of girls in priority zones for improving educational attainment levels. 63. Although school feeding programs are geographically targeted at regions with the lowest educational attainment (in particular of female students) and high levels of food insecurity, targeting efficiency is debatable. 64. In terms of gender balance in school enrollment, the North, extreme North, and Adamaoua regions have the lowest girl to boy proportion in the school system – 0.58 in the North, 0.62 in the extreme North, and 0.77 in Adamaoua regions. Educational attainment records are equally weak. Primary school attainment levels are at 32.9 percent in Adamaoua and 44.8 percent in extreme Northern regions. Regarding primary school enrollment of girls, only 17 percent in the extreme Northern region and 25 percent in Adamaoua region have attained primary school levels, as compared to 91 percent in the Western regions of the country and 84 percent in the South Western regions. Therefore, the focus on the northern regions of the country is rightfully justified given the dismal school enrollment records. However, the criteria for selecting the schools and students have not been assessed. 65. The School feeding programs in Cameroon are co-financed by the World Food Program (WFP) and the Ministère de l’Education de Base (MINEDUB). While WFP is charged with the management of the logistics of food provision as well as overall supervision of project implementation, MINEDUB handles the actual food distribution on the ground. In all the regions indicated above, a total of 391.65 tons of maize are distributed: 79.05 tons for Adamaoua; 191.1 tons for the extreme North region; and 121.5 tons for the Northern region. Table 8: School Feeding Programs co-financed by WFP and MINEDUB Beneficiaries Budget Cost per Beneficiary (Average annual (million FCFA) (2010 estimation, FCFA) 2008 – 2010) 2009 2010 WFP 1925 1925 55,366 students 35,000 MINEDUB 55 50 Source: Borgarello (2011). 66. In terms of coverage, on average 55,366 students (from 367 target schools in selected regions) have been beneficiaries in the last three years. Out of these, around 7,180 girls have 39 been beneficiaries of the take home rations of cereals. However, coverage is extremely limited since it only represents five percent of all primary school students in the three northern regions of the country. Nutrition Programs 67. The nutrition programs in Cameroon are mostly health related interventions categorically targeted to support orphans and vulnerable children (OVCs) – in particular those infected by HIV or have lost their parents to AIDS. In 2003, Cameroon has witnessed an increase of 230,000 orphans. The scale of the orphan crisis puts a big strain on extended families and community groups alike. 68. These nutritional support programs are mainly financed by international donors and NGOs – in particular, UNICEF, CARE, and CRS. On its third phase, the UNICEF program provides direct support to family associations as well as households by facilitating their access to micro-credit services. This is achieved through subsidizing access to microfinance loans (cost of opening an account, required level of savings, etc.) Average level of support is 16,190 FCFA per child or 65,515 FCFA per family. In addition to these two services, UNICEF also subsidizes health and educational costs of orphans and vulnerable children. 69. CARE provides two kinds of assistance. On the one hand, it caters to immediate needs of the orphans in terms of nutrition, health care costs, transport etc. On the other hand, it also provides productive help to community groups/associations. Eligibility to the program is conditional on passing an evaluation of the economic situation of beneficiaries (conducted by social workers) and the health status of sick children or parents. CRS is active in the north west of Cameroon (Diocèse de Kummo), where the number of orphans has dramatically increased in the past ten years (CRS 2007). The intervention of CRS is primarily focused on supporting OVCs through sponsoring their primary school fees as well as training for older OVCs; training for groups of single parents in business development; etc. Table 9: Nutritional Programs Beneficiaries Budget (Average annual (million FCFA) 2008 – 2010) 2008 2010 2,614 children UNICEF 40 - (585 families) NGOs (CARE, CRS) 100 100 Source: Borgarello (2011) 70. However, relative to the scale of the orphan crisis, coverage of those in need is extremely limited. From 2005 to the present time, the UNICEF project has supported only 2,614 children (585 families) in eight regions of the country (except in the North and extreme Northern regions). The CARE program assists only around 20,000 people annually, out of which only 3,000 are OVCs. The CRS program assists only 7,500 children countrywide: 6,000 in the North West; 400 in the South West; 550 in the East; and 550 in Central Cameroon. 40 Labor-intensive public work programs 71. Labor-intensive public works programs are normally short-term safety nets interventions that provide temporary employment opportunities in public infrastructure projects. They can be either cash-for-work or food-for-work. There are two principal public works initiatives in Cameroon: Projet d’Assinissement de Yaoundé (PAD- Y) (cash-for-work) and WFP projects (food-for-work). 72. Projet d’Assinissement de Yaoundé (PAD- Y) is launched in September 2006 for a project period of five years with a cost of 22.3 billion FCFA (approximately USD 50 million). Financed mostly by the African Development Bank (AfDB) and the Government of Cameroon, it primarily focuses on infrastructure cleaning projects in the city of Yaoundé. Table 10: Characteristics of Public Works Programs in Cameroon Budget Beneficiaries Salary (in million FCFA) PAD-Y 6,000 6,000 employees 300 FCFA/hr WFP 106 16,590 families 50 Kg of cereals/monthly Source: Borgarello (2011) 73. In the case of PAD-Y, the targeting efficiency is likely minimal as the daily remuneration rate of approximately 2,400 FCFA (equivalent to a monthly amount of 57,000 FCFA) is much higher than salaries of employed individuals (an average monthly amount of 29,000 FCFA). In addition, the selectivity conditionality is based only on residence in a target zone. This distorts labor market incentives since the level of salary paid would not facilitate the potential self targeting of the program as suggested by international best practices (See Box 3 below). In its current design, therefore, the PAD-Y seems more an employment program than a temporary labor-intensive public works program. 74. WFP project is mostly a food-for-work public works intervention in the North and extreme Northern regions of the country. Both regions suffer from chronic levels of food insecurity; deteriorating ecological conditions; as well as poor road networks. The project primarily deals with rural infrastructure upgrading, such as roads and small-scale irrigation structures. Participants are provided with 50 kg of cereals monthly, which is equivalent to 3,147 FCFA (in market value of 2008) comparable to 7 USD. 41 Box 3: Public Work Programs - Elements required for reaching the poor Self-targeting by setting the wage rate at an appropriate level. In a context where poverty targeting appears particularly challenging, and where financial and administrative capacities remain limited, relying on self-targeting is attractive. However, this will only be possible if the market wage is above the minimum wage. Indeed, the publicly funded program wage cannot be lower than the minimum wage and would hence be higher than the local wage for unskilled labor, thus likely to attract the non-poor to the public works program. So if the minimum wage is equal or above the market wage and restrictive employment laws prevent setting the wage below the minimum level, the possibility of using self-targeting is hindered and other targeting mechanisms need to be introduced. The use of pure self-selection might also be insufficient in reaching vulnerable groups in poor areas or when demand for participation is very large and some form of employment rationing is needed. The fact that in many places around the world youth aged 15-24 represent a significant number of the unemployed – with young women hit even harder than young men – may also suggest adopting targeting methods to reach these categories specifically. In addition, setting the program wage too low also presents the risk of excluding poor households that have higher opportunity costs of labor – if the program wage is below the reservation wage or the risk of missing program objectives (e.g., nutrition objective if the program wage is far below the cost of the minimum basket). It is crucial to ensure the program wage is set in relation to the project goals. Source: Grosh et al., 2008; del Ninno et al., 2009. Emergency Response Initiatives 75. Emergency Response initiatives are largely designed to respond to natural disasters – droughts, flooding, and refugee influx - that threaten the food security of large number of individuals. In Cameroon, this involved the creation of food stock reserves that are then distributed to vulnerable populations, including to refugees from the Central African Republic and Chad, in times of distress. 76. WFP and the Ministère de l’Agriculture et du Developpement Rural (MINADER) have been the primary actors in emergency food relief and related nutritional programs. With a budget of USD 21, 593, 854, WFP’s project has helped finance the creation of 133 cereal stocks in village communities – 64 percent of the total envisaged between 2007 and 2012. The allocated funds are used to cover the cost of procuring cereals (91 percent) and other direct and indirect costs associated with the distribution of food. The cereals are usually purchased domestically, particularly in the north and western regions of the country. Through l’Office Céréalier, the MINADER is responsible for setting up of cereal stocks and selling cereal at moderate prices to vulnerable populations in times of droughts, food crisis, and emergency situations. It has intervened in the following cities in the past: Kousseri (a structurally food deficit border city); Yagoua; Mokolo; Mora; Guider; Maroua; and Kaéle. However, the MINADER does not intervene in the market when cereal supply is optimal and prices are stable as well as affordable. 42 Table 11: Purchase and sale of cereal stock by the MINADER, 2002-2009 Total Purchase Total Sale Value in million Qty (tons) Qty (tons) Value in million FCFA FCFA 2002 314.6 36.7 904.8 144.2 2003 2919.3 348.5 0 0 2004 160 14.4 2079.2 190.3 2005 60 7.2 3066.25 49.7 2006 2400 328.8 0 0 2007 2148 214.8 0 0 2008 0 0 3580.1 549.6 2009 2148 214.8 72 1.4 Total 101 493 1 165 9 702.35 1 382 Source: Borgarello (2011). Data collected from MINADER. 77. In addition to the aforementioned country program, WFP also runs an emergency response programs to respond to: i) the needs of refugees from Central African Republic and Chad; and ii) risks of malnutrition caused by drought conditions in the North and extreme Northern regions of the country. This program started in March 2008 and concluded in July 2010 with a budget of USD 35,937,417. In this program, monthly food rations provide 2,100 kcal daily to each individual consisting of maize, pulses, corn-soya blend (CSB), vegetable oil, sugar, and iodized salt. Acutely vulnerable refugees are further included in the Supplementary Feeding Program (SFP) which provides an additional 1,281 kcal per day. 78. Program beneficiaries are selected from the household survey data in regions/zones suffering from major cases of food insecurity. In terms of coverage, total number of beneficiaries stood at 565,400 in 2008 and 94,457 in 2009 (WFP, 2009). The refugee assistance program of WFP, on the other hand, has assisted 760,940 refugees in 2008 and 227,655 in 2009. The refugees are mainly found in 72 sites in the east of the country and in Adamaoua region on the border with Central African Republic. Universal Price Subsidies 79. There are three types of universal price subsidies in Cameroon: price subsidies on imported food items; price subsidies on petroleum products; and transport cost subsidies in the cities of Yaoundé and Douala. Table 12: Price subsidy spending by the Government (2008-2010) Percentage of Government’s Budget % of GDP 2008 2009 2010 av 2008-10 av 2008-10 Energy price subsidy 5.52 0.98 4.67 3.72 0.83 Food price subsidy 2.94 2.22 2.12 2.42 0.53 Transport subsidy 0.13 0.14 0.13 0.13 0.03 Total 8.59 3.33 6.92 6.28 1.39 Source: Zamo 2010. See Table 7 for Expenditure on Social Safety net Programs. 43 80. Since 2004, the country has experienced an annual increase in staple food prices of around 5 percent, influenced by insufficient supply; strong external demand (especially from bordering countries of Gabon, Chad, and Equatorial Guinea); limited market access; as well as poor road and transport conditions/infrastructure that further limit timely food supply. To alleviate the impact of food price hikes, the government has reduced import as well as value- added taxes. Universal price subsidies – through tax exemption – have been the routine instruments utilized by the government to address food insecurity in the country. Food price subsidies have cost the government a revenue loss of 60 billion FCFA between 2007 and 2009. Table 13 below summarizes the main measures taken by the government to control the rising food prices. Table 13: Food price subsidies (2007-2009) Products Measures taken Years in effect Maize (fresh) A reduction in import taxes from 20 to 5% Since 2007 Flour (maize, crab, and A reduction in import taxes from 20 to 5% and Since 2007 others) elimination of value-added taxes 2007, 2008 Frozen fish (imported) A reduction in import taxes from 20 to 5% and elimination of value-added taxes Since 2009 Fresh fish (imported) Elimination of value-added and import taxes A reduction in import taxes from 20 to 5% and Starting in 2007 Rice exemption of value-added taxes Wheat Elimination of value-added and import taxes Starting in 2007 Other food products subject to similar measures: salt and milk products Source: Zamo (2010) 81. Subsidies for energy products are provided both: i) directly to the SONARA (the local petroleum refinery) through direct budgetary transfers from the treasury; and ii) indirectly through tax reductions on the prices of energy products. Subsidized energy products include: Gasoline, Diesel (Fuel) oil, Kerosene (for lighting), and LPG. 82. The budgetary transfer to the SONARA to cover consumer fuel subsidy is jointly calculated by SONARA and the Caisse de stabilisation des prix des produits pétroliers (CSPH) according to a pricing formula in place since 2007 (applied to three fuel products – gasoline, kerosene, and diesel). As Table 14 shows below, the formula calculates a local wholesale price for final products by adding to the prevailing world reference price: i) International transport and insurance costs (b) to arrive at an import parity price (c); ii) an adjustment coefficient (e) of 15 percent of the import parity price to provide compensation (de facto a producer subsidy) to the SONARA;2 iii) taxes (d) including a 10 per cent customs duty and 19.25 per cent VAT; and iv) coastal navigation costs (f). 83. The notional retail price is calculated by adding distribution costs and margins and a 44 specific tax – for gasoline and diesel only – to the wholesale price. The formula calculates the shortfall (subsidy) per liter of final product as the difference between the notional retail price and the fixed pump price. 19 Table 14: Cameroon Fuel pricing formula (March 2011), in FCFA per liter Designation Gasoline Kerosene Diesel a ) World reference price1 312.3 355.78 345.81 b) C.I.F. 22.97 24.84 26.27 c) Import parity price C.I.F. 335.27 380.62 372.08 d) Customs (10%) and VAT (19.25%) 106.04 120.21 117.58 e) Adjustment coefficient (margin for SONARA: 15% of (c)) 50.29 57.09 55.81 f) Coastal navigation costs 7.92 8.09 8.23 g) Wholesale price (c+d+e+f) 499.52 566.02 553.70 h) Distribution costs and margins 134.34 94.97 118.92 i) Special Tax on petroleum products 120.00 0.00 65.00 j) Notional retail price (g+h+i) 753.86 660.98 737.62 k) Fixed pump price 569.00 350.00 520.00 l) Shortfall (Required subsidy)(j-k) 184.86 310.98 217.62 Memorandum Item: Pump Price as a percentage of notional retail price (k/j) 75.48 52.95 70.50 1 Source: Platts’ European Marketscan Source: IMF Article IV Consultation, June 2011. 84. These price subsidies have cost the government 136 billion FCFA in 2008. In 2009, due to the rise in oil price, which increased the revenues of the SONARA, subsidy levels had declined to 22.527 billion FCFA. However, it has since increased to 145 billion FCFA in 2010 and projected to reach 240 billion FCFA in 2011. 85. However, as the analysis in Section D will demonstrate, greater selectivity of energy products subsidized would be required in order to ensure that the subsidies are progressive/pro- poor. Relative to the poor, the rich use disproportionately more Gasoline, Diesel (fuel) oil, and LPG. On the other hand, the poorest Cameroonians spend a large portion of their income on the consumption of LPG relative to the rich. Yet, the subsidies are universally applied to all four energy products. 86. Transport subsidies in the urban areas of Douala and Yaoundé are mostly used to subsidize mass transport costs for poor families, whereby the government provides subsidy for each ticket through the transport companies SOCATUR (in Douala) and le BUS (in Yaoundé). On a transport ticket price of 270 FCFA, the government subsidizes 120 FCFA for eligible beneficiaries, including students lacking necessary parental support. In terms of coverage, however, there are only around 10,000 beneficiaries daily, costing the government an average of 3.2 billion FCFA between 2007 and 2009. Unconditional Cash Transfers 19 Summarized from IMF Article IV Consultation, June 2011. 45 87. Generally speaking, cash transfers are not a common mode of social assistance in Cameroon; however, there are some direct transfer programs targeting the needy and indigents. In particular, the Ministère des Affaires Sociales (MINAS) is involved in assisting abandoned and street children; handicapped individuals; the elderly; as well as the vulnerable cultural minority groups. However, the involvement of MINAS is often in the form of supporting private institutions. 88. Because this type of assistance seems ad-hoc in nature, it is not well organized and the number of individuals covered is not easily ascertainable. There has not been any systematic evaluation of program effectiveness. However, information gathered from multiple sources indicates an average budget of around 50 million FCFA. Fee-waiver programs for basic services 89. Fee waiver programs in Cameroon are mainly addressed to education and health services; however, coverage is quite limited. The Ministère de la Santé Publique (MINSANTE) manages fee-waiver programs for the indigents and the needy, in particular for emergency hospital treatment and medical evacuation. Nonetheless, this fee-waiver often does not cover the entire cost of treatment. 90. For fee waiver programs in education, the Ministère de l’Education de Base (MINEDUB) and the Ministère de l’Enseignement Supérieur (MINESUP) run programs aimed at guaranteeing access to education. While the MINEDUB provides fee waivers to disadvantaged primary school students, the MINESUP provides fee-waiver privileges for higher education for needy students. In 2009, this program had a budget of 4800 million FCFA covering priority educational zones in the northern and western regions of the country. During the same year, fee- waivers for higher education have covered about 60,000 mostly handicapped students. Table 15: Subsidy of the state to cover education and health fee waivers (average 2008-10) Budget Ministry Type of subsidy Beneficiaries (million FCFA) MINSANTE Hospital fee waivers 2,533 201 MINEDUB, MINESUP School fee waivers 3,200 69,429 Source: Borgarello (2011). Data collected from MINSANTE, MINEDUB, and MINESUP D. Expenditure on Safety Nets 91. Overall analysis from available sources indicates that expenditure on social safety net initiatives is very limited. Between 2008 and 2010, spending on social safety nets averaged around 4.42 percent of social program expenditure, which translates to 1.07 percent of the government’s budget and only 0.23 percent of GDP. Taking into account price subsidies, however, this figure could reach around 7.4 percent of government’s budget, which translates to 1.63 percent of GDP and 30.77 percent of spending on social programs. While the price subsidies provided by the government consume around 6 percent of the budget, they are not well targeted. 46 Table 16: Spending on Social Safety Nets with and without subsidies (2008-10) As a percent of With Subsidies Without Subsidies SSN/Social Sector (%) 30.77 4.42 SSN/ Govt. Budget (%) 7.34 1.07 SSN/GDP (%) 1.63 0.23 Source: Borgarello (2011). Figure 23: Evolution of social sector and social safety net spending Source: Borgarello (2011). 92. Out of the 0.23 percent of GDP in social safety net expenditures, 77 percent (excluding price subsidies) is provided by donor organizations. 20 This translates, on average, to 0.18 percent of GDP over the past three years. However, including price subsidies, the government’s share is close 89 percent of social safety net expenditures. This suggests that price subsidies have been the most prominent policy instrument of the government in social safety net investment. This is clear in the analysis of the evolution of spending in social sector over the past three years vs. subsidy spending. The decline in social sector spending in 2009 is reflected in a corresponding increase in subsidy spending (See Figure 23 above). Table 17: Comparison of government and donor contribution in social safety net expenditures With Subsidies (%) Without Subsidies (%) Total GoC 89 23 Total Donors 11 77 Source: Borgarello (2011). 20 Among the most prominent donor organizations are WFP and UNICEF. 47 93. A disaggregation of safety nets expenditures indicates that 80 percent of government investment is allocated to emergency response to food insecurity induced by droughts, flooding, and other climatic shocks. This often includes stocking of food reserves used to distribute to the population at risk of food insecurity, in particular in the northern regions of the country; rural areas; and in some cases to target the most vulnerable population groups such as refugees. Investment in food stocks had seen a huge increase in 2008 in response to the food crisis of 2007, which caused intense public protests (DSCE, 2009). By contrast, investment in classic safety net interventions such as school feeding and labor-intensive public works programs, on average, represented a mere 20 percent of the total investment in the past three years. This barely makes up one percent of government budget allocation to social sector spending. Table 18: Expenditure in the different safety net programs Avg 2008-2010 With Subsidies Without Subsidies (in million (percent) (percent) FCFA) School feeding 1,976 1.1 9.9 Subsidies and fee waivers 157,900 88.8 - Public work programs 2,107 1.2 10.5 Emergency interventions 15,733 8.8 78.7 Nutrition programs 132 0.1 0.7 Cash transfers 50 0 0.3 Total with Subsidies 177,882 10 - Total without Subsidies 19,982 - 100 Source: Borgarello (2011). 94. International comparison places Cameroon at the lower end of the spectrum on safety nets spending levels. The average spending on safety nets in developing countries is around 1.9 percent of GDP whereas the median spending level is at 1.3 percent of GDP (Grosh et al., 2008). In Cameroon, the total spending for safety nets including subsidies is equal to 1.63 percent of GDP and is comparable to the average level of expenditure in developing countries. However, if we exclude the subsidies, Cameroon’s spending level of 0.23 percent of GDP is one of the lowest among African countries and below the spending level of comparator countries in a similar level of development: Burkina Faso (0.6 Percent); Mali (0.5 percent); and Tanzania (0.3 percent). In Ethiopia and Malawi, spending levels are both around 4.5 percent of GDP. Ethiopia’s Productive Safety Nets Program (PSNP), largely financed by donors, covers 7.6 million people that account for 10 percent of the population. In Malawi, the largest component is an agricultural program that covers 2.7 million farm families (2005 data), which accounts for 5 percent of the population. Other high spenders such as Mauritius and South Africa, which are at a much higher level of income, finance safety nets from domestic sources. 48 Figure 24: Spending on Safety Nets in selected countries Percent of GDP 8.5 8 7.5 7 6.5 6 5.5 5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 Cameroon Tanzania Mali Burkina Malawi Ethiopia South Mauritius Faso Africa Source: Data collected from various World Bank reports. E. Analysis of social safety net coverage 95. Generally speaking, the level of coverage by all existing safety nets programs is quite limited. Without considering the different subsidy programs, while the level of coverage of all safety nets interventions is around six percent of the population, the level of coverage of each individual program intervention hovers around one percent of the population. Moreover, taking into account data on vulnerability from ECAM3 datasets, the level of coverage by most programs (excluding price subsidies) is around two-thirds of target beneficiaries identified as vulnerable. 96. Therefore, in its current configuration safety nets spending is not well designed to address chronic poverty and food insecurity. With the vast majority of the resources going to address food emergency interventions, spending is aimed at alleviating short- term and temporary vulnerability. Finally, although the targeting efficiency of most of the small programs is not systematically assessed, the more relevant point as detailed above is that they are too small in scope to make any meaningful difference in poverty levels. 49 Table 19: Coverage of the Principal Social Safety Nets Programs, 2008 Program Target Beneficiaries Vulnerable Beneficiaries Coverage Reference Effective Effective Calculation % Ref. Group Group School Feeding Primary 68.5%* : rural poor 5-14 years old in School Feeding (WFP) 55.486 School 38.008 1.53 attending school school Children Fee Waiver Programs Hospital Fees (State) 142 Indigents 142 100% 0.00 together 61.7%*: vulnerable School Fees (State) 60.000 Students 37.020 1.16 5-14 yrs students Cash Transfers Nécessiteux Indigents 532 Indigents 532 100% 0.01 together (MINAS) Abandoned/Street 228 Children 228 100% 0.00 0-9 yrs children (MINAS) Subsidy on Energy Products Kerosene ND Universal 2.319.920 first and second 23.21 together Domestic Gas ND Universal 208.290 decile of the 2.08 together expenditure Gasoline, Gasoil, LPG ND Universal n/a distribution Food Price Subsidies Maize 13.152.000 Universal 5.266.000 40% 52.69 together Rice 12.712.000 Universal 3.871.000 30.5% 38.73 together Wheat 11.207.000 Universal 3.454.000 30.8% 34.56 together Fish 7.612.000 Universal 1.554.000 20.4% 15.55 together Public Transport 10.000/day Universal 4000/day 40% poor Public Works Vivre Contre Travail Under- rural and under- 3.770 3.770 100% 0.06 (WFP) employed employed HIMO/PADY Under- 657 657 100% 0.12 urban and under- (AfDB and Govt.) employed employed Emergency Cereal Stocks (WFP) 77 867.00 North and 50.713 65%** 0.57 rural Extreme Emergency/Refugees North 77 712.00 50.612 65%** 0.57 rural (WFP/UNICEF) Nutritional Rehabilitation OVC (UNICEF) 30 719.00 children 30.719 100% 0.62 children OVC (NGOs) 48 797.00 children 48.797 100% 0.98 children Source: INS and project documents. Note: * 67% young people between 5-14 yrs old are vulnerable and 70.4% of them attend school; 33% of young people are not vulnerable and 88.9% attend school (67*70.4% + 33* 88.9%) = 76.5 attend school. Therefore, ((67*70.4%)/76.5*100) = 61.7% of the students are poor. **The north and extreme north represent 27.9% of the population, among whom 65% are poor. 50 F. Efficiency of Universal Price Subsidies 97. A large share of the response to the spike in prices of staple food and energy products has mostly been in the form of universal price subsidies. The fiscal burden of all subsidies combined averaged around 6.28 percent of government budget and close to 1.39 percent of GDP between 2008 and 2010. In addition, it should be noted that half the cost went to subsidize energy products, which only minimally assisted the most vulnerable. Food Price Subsidies 98. The food price subsidies costing 60 billion FCFA between 2007 and 2009 are not efficiently targeted at the consumption baskets of the poorest households. The government provides price subsidies for maize, fish, rice, and wheat - as they are the major food items consumed by the population. However, only the maize price subsidy is pro-poor since those in the bottom quintile of the income distribution (20 percent of the population) spend a larger proportion (5.2 percent) of their total food expenditure on maize relative to households in the next four quintiles. The richest quintile spends about 1.2 percent of total consumption on maize, which indicates that in absolute terms, the poorest quintile spends close to five times more on the consumption of maize in percentage terms. By contrast, the richest quintile spends more than those in the poorest quintile spend on the consumption of fish, rice and wheat and wheat products making this price subsidy particularly regressive. On the other hand, for the other subsidized food items, not only is there minimal difference in the share of expenditure among the upper four quintiles, but also that poorest quintile does not benefit the most from the price subsidies Table 20: Household budget shares of subsidized goods relative to total consumption (%) Quintiles Total 1 2 3 4 5 Maize 5.16 4.71 3.23 2.13 1.18 3.28 Rice 1.33 2.05 2.63 2.50 2.13 2.13 Wheat products 0.88 1.47 2.06 2.61 2.79 1.96 Fish 1.30 1.77 2.12 2.27 2.18 1.93 Source: Zamo (2010). Note: Consumption here denotes consumption of food and non-alcoholic beverages 51 Table 21: Direct and indirect impact of food price subsidies on consumption levels Direct Impact of food Subsidies on household consumption (¨ in consumption for a given ¨ in prices) Quintiles 1 2 3 4 5 Total Rate of price Total Variation Maize 0.02 0.02 0.01 0.01 0.00 0.01 0.1256 Rice 0.35 0.54 0.69 0.66 0.56 0.56 0.2662 Wheat products 0.27 0.44 0.62 0.79 0.84 0.59 0.3011 Fish 0.34 0.47 0.56 0.60 0.57 0.51 0.2800 Direct effect 0.98 1.46 1.88 2.05 1.98 1.67 Indirect Impact of food Subsidies on household consumption Quintiles 1 2 3 4 5 Total Total indirect 0.35 0.36 0.41 0.59 0.73 0.49 effect Total Effect 1.32 1.82 2.29 2.63 2.70 2.15 % Indirect 34.63 25.81 21.67 23.65 25.77 26.25 effect Source: Zamo (2010). Energy Product Subsidies 99. Fuel price subsidy is badly targeted and the significant revenue loss could be utilized to better assist the poor. Energy subsidies have cost the government 137 billion FCFA in 2008 and are projected to cost 240 billion FCFA in 2011– a steep increase from 2004 levels estimated at 9.8 billion FCFA. However, as Table 22 below demonstrates, the subsidies for gasoline, gasoil (diesel fuel), or LPG are regressive – those in the richer quintile of the income distribution spend a greater proportion of their income to these commodities relative to those in the poorest quintile. By contrast, those in the poorest quintile spend 1.67 percent of their total expenditure to the purchase of Kerosene compared to those in the richest quintile who spend just 0.68 percent of their total consumption expenditure. Based on household expenditure levels, only Kerosene subsidies seem targeted at the poorest households, which spend almost three times more on its consumption than the richest quintile. However, according to a 2007 IMF assessment, 21 over 70 percent of fuel price subsidies accrue to the richest 40 percent of households in Cameroon. The report showed that the poorest 20 percent of households receive less than one percent of the subsidy for gasoline. In the case of Kerosene – typically assumed to be pro-poor – the poorest 20 percent of households receive only 13 percent of the subsidy. In addition, kerosene consumption is small compared to the consumption of gasoline and diesel. Therefore, eliminating subsidies on gasoline and diesel only – at the baseline price of USD 100 per barrel – could free resources equivalent to 1.8 percent of GDP for alternative uses, including mitigating the impact of fuel price increase on the poor (IMF Article IV Consultation, June 2011). 21 IMF (2007). 52 Table 22: Consumption expenditure on subsidized energy products (% of total consumption) by quintiles 1 2 3 4 5 Total Gasoline 0.13 0.16 0.30 0.58 1.15 0.46 Gasoil 0.00 0.01 0.01 0.00 0.13 0.03 Kerosene 1.67 1.66 1.31 1.06 0.68 1.27 LPG 0.00 0.05 0.17 0.45 0.85 0.30 Source: Zamo (2010) Table 23: Direct and indirect impact of fuel price subsidies on household consumption Direct Impact of fuel subsidies on household consumption Quintiles 1 2 3 4 5 Total Rate of price Total Variation Gasoline 0.018 0.022 0.042 0.080 0.159 0.064 0.1381 Gasoil 0.000 0.001 0.002 0.001 0.027 0.006 0.2088 Kerosene 0.446 0.445 0.351 0.284 0.181 0.341 0.2912 LPG 0.000 0.015 0.050 0.130 0.248 0.088 0.2678 Direct effect 0.484 0.506 0.489 0.580 0.785 0.569 Indirect Impact of fuel subsidies on household consumption Quintiles 1 2 3 4 5 Total Total indirect 0.307 0.305 0.314 0.335 0.366 0.326 effect Total Effect 0.791 0.811 0.803 0.915 1.152 0.894 % indirect effect 54.39 50.44 54.00 51.92 47.11 51.57 Source: Zamo (2010) 100. Finally, as evidenced in Figure 25 below, most of the fuel and food price subsidy amounts are captured by the richest quintile of the income distribution. 53 Figure 25: Subsidy amounts captured by each quintile Source: Zamo (2010) G. Summary of findings 101. In the current configuration, budgetary allocation to social safety net initiatives is very small. Social sector spending is heavily dominated by expenditure on Health and Education– as allocation to social safety nets programs detailed in this chapter are actually a very small fraction of the 0.76 percent of government budget allocated to all social programs generally. This suggests a weak consideration of social safety nets and other social protection measures in the overall poverty reduction agenda. This is all the more so given that close to 80 percent of the investment on social safety nets (excluding price subsidies) is allocated to ad hoc emergency response initiatives rather than well designed and efficiently targeted safety nets interventions that sustainably address chronic poverty and food insecurity. In general, safety net spending stands at 0.23 percent of GDP (excluding the price subsidies) as opposed to one to two percent of GDP in most developing countries (Grosh et al., 2008). 102. Food and fuel price subsidy programs are the most costly, yet are very poorly targeted at the poorest and most vulnerable. The fiscal burden of all subsidy programs has been an average of 6.28 percent of the government’s budget and 1.39 percent of GDP between 2008 and 2010. Furthermore, it should be noted that a spike in subsidy spending is reflected in a corresponding decline in social sector spending, especially in Education and Health. Yet, subsidy spending is mostly regressive as most of the subsidized items are not in the consumption basket of the bottom quintile of the income distribution. Only price subsidies on Maize and Kerosene are pro-poor. 103. Other safety nets interventions identified are limited in scope and coverage. Each individual program covers at best only one percent of the total population and only around 2/3 of individuals identified as vulnerable. 54 104. Several donors play a critical role in social safety nets provision in Cameroon. Of 0.23 percent of GDP spent on safety nets (excluding subsidies), 77 percent (or an average of 0.18 percent of GDP over the last three years), is provided by donors. WFP and UNICEF are the most important multilateral donors often engaged in food emergency response, school feeding, and nutrition programs. Other important NGOs include CARE and Catholic Relief Services (CRS). 55 CHAPTER IV: FINANCIAL, INSTITUTIONAL AND POLITICAL FEASIBILITY OF AN EXPANDED SOCIAL SAFETY NETS SYSTEM By introducing well-designed and efficiently targeted direct transfer and public works programs, it would be possible to expand Cameroon’s social safety net coverage to the majority of the chronically poor. Simulations show that such a scenario is possible within the existing budget envelope. For instance, by transferring an average annual amount of 24,000 FCFA per person annually, it would be feasible to cover all chronically poor households at a cost of about one percent of GDP. This can be achieved by re-allocating some of the current spending at the central level towards alternative safety net programs. Once functional, these safety net programs can provide a clear and credible alternative to otherwise expensive universal subsidy programs. However, their implementation should be preceded by careful feasibility studies that define their objectives and scope as well as provide adequate considerations to key design parameters: number of people to cover, length of coverage in months, payment modalities, seasons when they will be operational, etc. Reforming universal subsidies may be politically difficult given impending presidential (October 2011) and parliamentary (mid- 2012) elections. The government is rightfully cautious of rapid policy reforms that could negatively influence political outcomes. However, developing appropriately timed and well-planned strategies for launching pilots (that can provide valuable lessons for scaled up operations) could enable reforms to be undertaken with minimal political or social stress. Appropriate information campaigns will be necessary to sensitize the public about such alternative programs. Finally, there is a multitude of government ministries involved in some aspect of social protection provision. Successful social protection systems are often underpinned by a strong coordinating mechanism. A committee on social protection will need to play a lead role in coordinating the various government agencies. A. Expanding the coverage of social safety nets programs 105. A simple simulation exercise indicates that current spending level would be sufficient for covering the different vulnerable population groups. If the current average safety nets spending were uniformly distributed and perfectly targeted at a reference group of poor people, it would allow transferring a modest amount of money per individual to make a reasonable difference in their consumption levels. This is so particularly considering that the poverty gap is at 12.3 percent or 33,142 FCFA per poor person annually. However, in reality administrative costs often take a certain percentage of the allocated budget (10 – 20 percent is the norm in direct transfer programs) and that in reality uniform distribution and perfect targeting are unachievable. Table 24 below shows how much the chronically poor; other vulnerable groups (transient poor and non-poor vulnerable); and population below the monetary poverty ceiling would receive under the above assumptions. 56 Table 24: Current safety net expenditure per year per beneficiary in the case of uniform distribution Annual amount per beneficiary (FCFA) Safety nets spending Chronic poverty Other vulnerable Monetary poverty (39.9%) (26.1%) (29.8%) Average amount 2008-10 5,511 4,827 3,605 (22,580 million FCFA) Maximum amount (2008) 6,964 6,100 4,556 (32,499 million FCFA) Price subsidies expenditure (2008) 32,608 28,560 21,330 (213 billion FCFA) Source: Borgarello (2011) Note: Data on poverty and food insecurity refers to Nguetse Tegoum (2010); Total population used is 17.8 million. 106. Alternative forms of safety net interventions are possible within the current safety nets budget envelope. If 1,000 FCFA per person is to be distributed monthly, all individuals under the monetary poverty line could be covered with 86 billion FCFA annually. If we target only the chronically poor, the budget requirement would be just 56 billion FCFA annually whereas if we want to cover all vulnerable populations (chronically poor and other vulnerable groups), the annual budgetary requirement won’t exceed 120 billion FCFA. As Table 25 below illustrates, a monthly transfer of 1,000 FCFA per chronically poor individual is equivalent to only 0.5 percent of GDP (2010) - a figure much lower than the current average expenditure on safety nets, including price subsidies. Therefore, even after accounting for administrative costs, it would be feasible to cover all the individuals living in chronic poverty without significantly increasing the annual budget. Similarly, if we want to cover all individuals under the monetary poverty line with direct monthly cash transfer equivalent to 33,142 FCFA (the poverty gap per poor person annually), total expenditure won’t exceed 2.22 percent of GDP, which is the spending level in 2008 with price subsidies included. 57 Table 25: Amount of money to spend per different scenarios of transfer and coverage Scenario Beneficiaries (necessary amount for total coverage) Chronic poverty Other vulnerable Monetary (26.1%) (29.8%) poverty (39.9%) Scenario 1 12,000 per year (in billion FCFA) 56 64 86 (in USD Million) 113 129 173 % of GDP* 0.48 0.55 0.74 Scenario 2 24,000 per year (in billion FCFA) 112 128 171 (in USD Million) 226 258 346 % of GDP 0.97 1.11 1.48 Scenario 3 36,000 per year (in billion FCFA) 168 192 257 (in USD Million) 339 387 519 % of GDP 1.45 1.66 2.22 Source: Borgarello (2011) Note: Administrative costs are excluded and GDP figures used are from 2010. B. Possible new programs to introduce 107. Reform should aim to move towards an efficient system of safety nets. In addition to being well-designed, a good system of safety nets programs is: (i) adequate to meet the needs of various groups in need of assistance; (ii) equitable, yet provides more resources to the poorest (horizontal vs. vertical equity) 22; (iii) cost-effective, realizing economies of scale for administrative costs; (iv) incentive-compatible, ensuring positive behavior changes on households; and (v) financially sustainable as well as dynamic, evolving over time. The success of good safety net programs depends on the details of their implementation. A safety nets system must have sufficient administration capacity; good registry and Management Information Systems (MIS); as well as good monitoring and evaluation (M&E) systems. This will enable to minimize errors of inclusion as well as exclusion (Grosh et al., 2008). Furthermore, as the experience from the Productive Safety Nets program (PSNP) of Ethiopia shows (please refer to Annex X), good implementation requires flexibility and innovation adjusting to local circumstances as well as challenges on the ground. In the case of Cameroon, a safety net system should also balance between both direct cash transfers and public works programs as two of its key components. 108. A direct cash transfer distributed to individuals in situations of chronic poverty could create the basis for a social protection system in the long run. A possibility for this is to re-organize the social safety net spending by re-allocating a part of the resources at the central level towards direct cash transfers efficiently administered to maximize program impact. 22 Please refer to Annex XIII for the utilization of a successful variable benefit formula in Brazil’s Bolsa Familia program, which provides two types of benefits: a base benefit to all families in extreme poverty, and a variable benefits that depends on family composition and income. 58 However, efficiency in resource utilization depends on targeting accuracy, which can be difficult and requires strong administrative capacity. 109. Experience shows that it is possible to reallocate resources from expensive subsidy programs towards cash transfers for chronically poor individuals. For instance, in 2005, Indonesia reformed its fuel subsidy program to provide cash transfers to the poor (Please refer to Box 4). Indonesia’s universal fuel subsidies program cost the equivalent of five percent of GDP by 2005, but was regressive mostly benefiting the non-poor. In total, the benefits accruing to the richest ten percent from fuel subsidies were more than five times those accruing to the poorest ten percent. In fact, with the top 40 percent capturing 60 percent of the subsidy, total incidence of fuel subsidies on the poorest quintile was barely around five percent of the total allocated amount. In 2005, the government reduced the fuel subsidies by about USD 10 billion 23 and introduced cash transfer programs covering 28 percent of the population, which included the poor as well as the near poor. A monthly transfer amount of USD 10 translated to benefits equivalent to about 17 percent of per capita consumption of the poorest decile. Furthermore, the reduction in fuel subsidies was implemented without major public protests as the transfer programs had compensated households’ for potential welfare loss. 24 Box 4: Reform of Fuel Subsidies in Indonesia to assist the Poor through cash transfers Indonesia has traditionally had little in the way of targeted safety nets. For many years, Indonesia had universal price subsidies on fuel, with price levels fixed well below world prices. By 2005, with the rise in world fuel prices, the cost of the subsidy was equivalent to 5 percent of GDP. Between 1998 and 2005, fuel subsidies averaged three-quarters of the social protection system’s total subsidies and transfers. As common with such subsidies, they were highly regressive (see figure below). Incidence of Diesel, Gasoline, and Kerosene Subsidies, Indonesia, 2004 The government introduced the first large programs following the 1998 financial crisis. Some of these remain, but coverage of the scholarship and health card programs is quite low and the targeting is mediocre. Coverage 23 This was precipitated by the escalation in world oil prices along with a concomitant and ongoing reduction in domestic production capacity. 24 Summarized from World Bank (2006), Making the New Indonesia Work for the Poor. 59 of the rice subsidy is higher, but it has significant cost-effectiveness issues. In 2005, the government reduced fuel subsidies by about US$10 billion. It reduced total expenditures by half that amount. A quarter of the funds were used to fund a targeted, unconditional cash transfer program; and the remainder was used for block grants to schools, basic health care and health insurance for the poor, and a village improvement program. Given the concentration of people just above the poverty line, the government decided to target the cash transfer not just to the 16 percent who fall under the poverty line, but to the near poor as well. The cash transfer program thus reached 19 million poor and near poor households, or 28 percent of the population. Under the program, each beneficiary family received about US$10 per month paid quarterly. The benefit was equivalent to about 17 percent of per capita consumption of the poorest decile. The cash transfer program was rolled out rapidly, with the basic decision to implement the program being taken in August 2005 and the first quarterly payment being made in October. As expected with such a rapid rollout, some initial difficulties arose. The targeting was progressive and a dramatic improvement over the prior regressive fuel subsidies, but the haste with which the program was set up showed up in moderately high errors of inclusion (see next figure below). Early reports also showed that information provided to the public and participants about the program’s purpose and procedures was less than optimal, and channels for handling complaints were not well defined. The government worked on these issues, starting with an initial assessment of the program after the first payment in 2005, and initiated actions to improve program administration. Significant fuel price increases, including for kerosene, were implemented without major public protests. Coverage and Incidence of the Unconditional Cash Transfer Program, Indonesia, 2005 The compensation was intended to last just one year, and did last just that long. However, the experience led to interest in adding an element to Indonesia’s antipoverty policy, which has had little in the way of safety nets and no poverty-targeted cash transfers. In 2007, the authorities began piloting a CCT program that would build and improve on the former cash transfer program. Indonesia’s experience illustrates some of the lessons of safety nets in reform settings and in general. First, cash transfer programs can be useful for compensating households so that they do not suffer sharp changes in welfare. Second, they can reduce opposition to reform. Third, while mounting a program quickly is possible, perfecting it is likely to take longer. Sources: Grosh et al., 2008; del Ninno et al., 2009. 110. The cost that would be incurred to provide a similar cash transfer program in Cameroon is within recent spending levels. If the government launches a program that covers about 20 percent of the population (3.58 million people) at the simulated amount of 24,000 60 FCFA annually (please refer to Table 25), total cost would run around 95 billion FCFA (180 million USD) – close to one percent of GDP. Such a transfer of 24,000 FCFA per person corresponds to approximately 25 percent of annual expenditure of the people in the bottom quintile and 15 percent of people in the second quintile. However, unlike in Indonesia, where the poverty rate was at around 18 percent during the time of the reform, Cameroon’s poverty rate is approximately 40 percent. Thus creative approaches are necessary to target any cash transfer programs to the majority of the chronically poor (26 percent of the population). 111. Successful direct transfer programs will require feasibility studies that will establish the objectives and overall scope of the programs. The overall objective of cash transfer programs in Cameroon should aim to target chronically poor households and take into account institutional capacity to administer the programs. They should provide concrete proposals on key design parameters such as level of transfers, scope of coverage, length of coverage, assessment of conditionality considerations, and payment modalities. In addition, the studies should review and draw lessons from any current or past programs. 112. Complementing direct transfers with a well-conceived public works program can provide additional income to those in need and able to work. A large number of households in the Northern and extreme Northern regions of Cameroon are exposed to drought conditions and seasonal food shortages. A public works program can help those in chronic poverty and suffering from food insecurity to smooth their consumption during those times when job opportunities are scarce. Such public works programs would also enhance village infrastructure development such as roads, etc. that is beneficial to the community at large. 113. Objectives and scope of public works programs vary greatly. In some countries, like in Bangladesh for example, they are mostly used for a short period of the year to protect vulnerable population. In other places, such programs are run throughout the year with varying degree of intensity, thus providing insurance to poor households to find jobs whenever they stand in need of employment. And this is the case of the Employment Guarantee Scheme (EGS) in India. Other examples provide mix models. For instance, Ethiopia’s Productive Safety Nets Program (PSNP) program had evolved in recent years whereby those who are able to work are required to engage in public works programs to receive payments in-kind or in cash while those unable to work (generally not more than 20 percent of the total assisted) receive cash transfers (see Annex XX). 114. Launching effective public works programs will require feasibility studies to define the objectives and scope of such a program. The objective of a public works program in Cameroon should reflect the needs of the chronic poor and the specific situation of the labor market, especially in the northern part of the country. Concrete proposals should include some design elements such as the number of villages to be included, the number of people to be involved and the length of the projects in months. Typically 75 -300 people work on a public works project site for two to five months (see Box 5 for some key design elements for a successful public works project). Finally, identifying as many viable projects as possible would be necessary to cover the maximum number of villages possible. 61 Box 5: Public Works Programs: Elements Required for Reaching the Poor Self-targeting by setting the wage rate at an appropriate level. In a context where poverty targeting appears particularly challenging, and where financial and administrative capacities remain limited, relying on self-targeting is attractive. However, this will only be possible if the market wage is above the minimum wage. Indeed, the publicly funded program wage cannot be lower than the minimum wage and would hence be higher than the local wage for unskilled labor, thus likely to attract the non-poor to the public works program. So if the minimum wage is equal or above the market wage and restrictive employment laws prevent setting the wage below the minimum level, the possibility of using self-targeting is hindered and other targeting mechanisms need to be introduced. The use of pure self-selection might also be insufficient in reaching vulnerable groups in poor areas or when demand for participation is very large and some form of employment rationing is needed. The fact that youth aged 15 to 24 represent a third of the unemployed – with young women even hit harder than young men – may also suggest adopting targeting methods to reach these categories specifically. In addition, setting the program wage too low also presents the risk of excluding poor households that have higher opportunity costs of labor – if the program wage is below the reservation wage or the risk of missing program objective (e.g.. nutrition objective if the program wage is far below the cost of the minimum basket). It is crucial to ensure the program wage is set in relation to the project goals. Provision of quality public goods is crucial. Based on international experience, public works should only be promoted as a social safety net instrument if the public goods generated have a positive impact on the community and are built at a cost similar to that charged using hired contracting procedures. It should not be introduced as strategies to provide social transfers to ‘deserving’ poor. Public works projects may include traditional infrastructures or public environmental improvement projects (e.g.. sanitation projects to roll back malaria. natural disaster risk reduction projects), but also social activities (e.g.. South Africa’s home-based care workers and early childhood development workers) or economic activities (e.g.. small businesses and cooperatives). The public goods produced if relevant, well executed and maintained, could have an important role in alleviating constraints to higher returns for poor people, regardless of their participation in the program. Since 2004, the WFP has promoted synergies between FFW programs and school feeding and nutrition programs (e.g.. building classrooms. storage rooms. latrines. etc.). The WFP is also giving priority to community projects benefiting women. To address chronic poverty, public works programs should run throughout the year with varying degrees of intensity. A program run during agricultural slack seasons only, when the opportunity cost of labor is low, would provide “consumption-smoothing� for poor households but no insurance to find a job whenever it is needed. A program operating throughout the year with varying degrees of intensity will provide both “insurance� and “consumption-smoothing� for poor households. In countries with widespread levels of unemployment and underemployment, standard short-term public works programs proved unable to lift the chronic poor out of poverty. Brazil. Argentina. India and Bangladesh represent some good practice examples of countries where the program served the functions of insurance, consumption-smoothing and poverty reduction. To ensure additional coverage, the number of days worked can be rationed and a rotation system applied. For instance. India provides a legal guarantee of one hundred days of employment a year to any rural household willing to do public work for a statutory minimum wage, and Ethiopia assists over seven million chronically food-insecure people – about 10 percent of the population – through its Productive Safety Net Program’s employment schemes and food or cash transfers. This being said, high labor intensive public works projects can also be effectively used in the aftermath of natural disasters, for the rehabilitation and reconstruction of damaged or destroyed infrastructures. Source: Grosh et al., 2008; del Ninno et al., 2009. C. Institutional framework for safety nets and administrative capacity 115. Multiple ministries and departments are engaged in some aspect of social protection. Ministère des Affaires Sociales (MINAS) is among the primary Ministries involved in social protection and is responsible for devising social assistance and solidarity policies 62 of the government. The policies have mainly focused on assisting orphans and vulnerable children, the handicapped, old aged people as well as marginalized population groups. However, the ministry is limited by very weak implementation capacity. Ministère des Travaux Publics and Ministère du Développement Urbain et les Communes are active in the running labor-intensive public works programs in rural areas. These programs have mainly focused on road construction and repair projects. However, the limited number of programs speaks to weak financial and implementation capacity within both institutions. Ministère des Enseignements secondaire and the Ministère de l’Education de base (MINEDUB) are involved in implementing school feeding programs supported by donors to encourage school attendance among the vulnerable populations as well as school fee waivers. However, their programs are reliant on continuous donor funding. Ministère de la Santé Publique (MINSANTE) administers fee waiver programs for health. Ministère de l’Agriculture et du Développement Rural (MINADER) is involved in emergency food assistance programs in collaboration with donors, in particular WFP. It plays a coordinating role for allocation of resources for emergency food assistance programs. Ministère de la Promotion de la Femme et de la Famille (MINPROFF) is, among other things, preoccupied with promoting policies that reduce poverty among women and improving their living conditions. MINPROFF would be the primary ministry involved in mainstreaming gender-sensitive policies in social protection interventions. However, it has a limited contribution in the implementation of social protection programs. Ministère de l’Emploi et de la Formation Professionnelle and the Ministère de la Jeunesse are primarily responsible for promotion of employment policies for the country. Directly or through various directorates, they implement a number of projects that aim to improve the transparence of the labor markets and facilitate young people’s transition into the work force. Ministère des Finances implement the government’s policy on universal and transport subsidy programs. 116. Cross-ministerial coordination will be necessary for a strong system of social safety nets. Whereas the relative strengths of each relevant line ministry needs to be harnessed in developing a system of social safety net programs, a strong inter-ministerial coordination body needs to play a critical role both to guide the process and ease weaknesses of administrative capacity for scaled up safety nets operations. In a recent bid to revamp the safety nets system, this role is being played by the Technical Committee for Monitoring Economic Programs (CTS) of the Ministère de l’Économie, de la Planification et de l’Aménagement du Territoire (MINEPAT). In an eventual institutional arrangement, a social protection committee should assume this coordinating role. As experience from other countries indicates, however, a pragmatic approach should/may be followed to circumvent potential bureaucratic bottlenecks resulting from a multitude of ministerial stakeholders involved in the process. 63 117. Similarly, the financial, technical and human capacity of the primary ministries responsible for social protection will need to be enhanced. A scaled up social safety nets operations requires significant administrative and technical capacity, which is lacking within the existing ministries of the government. As described in Chapter III, level of coverage of most of the safety nets programs is very limited in scope and their expansion will inevitably require enhanced capacities. D. Political economy of safety net reforms 118. Although current spending levels would be sufficient to reform the safety net systems, completely eliminating universal subsidies might be politically difficult in the immediate future. Cameroon is less than a year away from presidential elections (October 2011), which will be followed by parliamentary elections soon after (mid 2012). The government is, therefore, cautious of rapid policy reforms that could have ramifications on political outcomes. Indeed, completely eliminating universal subsidy programs could potentially lead to social unrest (as seen in 2008 due to high fuel prices as well as generally high cost of living); resulting price increases could be perceived to have an adverse impact on low-income groups, given widespread poverty, youth unemployment, and increasing income and wealth inequalities. In turn, social instability could have implications for political stability. 119. Therefore, policy actions will need to strike the right balance by developing appropriately timed and well-planned strategies coupled with information campaign. One possibility is for the government to set up viable alternative targeted programs for the poorest income groups that can provide feasible alternatives. These alternative programs, such as direct transfers and public works programs briefly illustrated in the forgoing sections, could be initiated before the government undertakes universal subsidy reforms. These pilot programs could provide valuable lessons on their targeting performance, level of coverage, effectiveness of complaints resolution, etc. When functioning properly, they could provide a credible alternative for assisting the poor. In concert, information campaign on the programs could enable to sensitize the public. Approached in this way, the fiscal burden of universal subsidies could be reduced without creating political and social stress. 120. A clear and credible roadmap should outline the key steps that will lead to necessary reforms and garner political support. The road map should be anchored in thorough feasibility studies for each program that will be introduced, followed by pilots. The pilot programs should be rigorously evaluated to draw valuable lessons from their design features as well as implementation. This will provide a credible basis on which to consolidate political buy- in from decision makers as well as key stakeholders. 64 Figure 26: Key steps in political economy of safety nets reform E. Summary of key findings 121. Different scenarios of modest direct cash transfers indicate that it would be possible to cover a significant percentage of the poor within the current safety nets spending levels. If 12,000 FCFA were to be transferred annually to every chronically poor individual, the total cost would be a half percent of GDP (2010). If all vulnerable population groups were to be covered, the total cost would be just slightly over one percent of GDP. Finally, if all poor people under the monetary poverty line are to be covered by an amount equivalent to the poverty gap (33, 142 FCFA), total cost will hover around two percent of GDP. Therefore, it is feasible to transfer different amounts to cover a significant portion of the poor within the current budget envelope. 122. However, the political economy of subsidy reform should be carefully considered before embarking on rapid policy actions. Cameroon is less than a year away from presidential and parliamentary elections and completely eliminating universal subsidies could have social and political consequences. Therefore, the government will need to develop carefully planned strategies to be implemented within an optimal time frame and accompanied with information campaigns. This can be achieved by setting up viable alternative programs for the poorest income groups before undertaking subsidy reforms. When functioning properly, they can provide a credible alternative for the government. The information campaign will help in sensitizing the public about such programs. 123. Cross- ministerial coordination will be necessary for a strong system of social safety nets. There are currently a multitude of ministries involved in some aspect of social protection in Cameroon. While some provide leadership in policy formulation, others are involved in implementing and supervising social protection programs. Reform of the safety nets system will require exploiting the relative strength of each ministry. In recent years, the Technical Committee for Monitoring Economic Programs (CTS) of the Ministère de l’Économie, de la 65 Planification et de l’Aménagement du Territoire (MINEPAT) has been playing this coordination role. Eventually, a formal social protection committee should assume this coordinating role. As with any policy reform, moreover, the financial, human, and technical capacities of each ministry will need to be enhanced. 66 CHAPTER V: CONCLUSION AND RECOMMENDATIONS The analysis presented in previous chapters leads to the conclusion that the existing social safety net system in Cameroon is inadequate to respond to poverty and vulnerability. Coverage of existing programs is limited, and interventions are fairly small in scale and many are designed mainly as temporary programs. In addition, they suffer from poor targeting efficiency. In order to attack chronic poverty and sustainably address food insecurity, Cameroon needs to: i) develop a coherent safety nets strategy and set of programs; ii) introduce new safety net programs such as direct transfers and public works programs and move towards a well-coordinated set of programs; iii) shift from universal subsidy programs towards targeted programs in a few years time to underpin a successful safety nets reform. The first step in this direction is to develop a well-considered social protection strategy that identifies and maps risks to appropriate and necessary programs. Priorities need to be accorded to investments in human capital as well as geographic areas more adversely affected by poverty, i.e. the Northern and extreme Northern regions of the country. Finally, an implementation strategy should be developed to successfully carry out policy reforms. Such a strategy should aim to: i) strengthen the strategic and institutional framework for the design, implementation, and management of safety net programs; ii) increase access to basic social services by the poor and vulnerable through efficient safety net programs; iii) strengthen the financial framework for a national social protection system; and iv) establish a robust system of monitoring and evaluation to facilitate informed policy decisions. A. Summary of findings 124. Poverty rate in Cameroon is around 39.9 percent, while chronic poverty stood at 26.1 percent (2007 data). Chronic poverty and food insecurity are significant problems in Cameroon. Any social policy should fundamentally address the needs of chronically poor and food insecure people. At the national level, the most vulnerable group of people are young people up to the age of 15 with levels of vulnerabilities higher than the national average while rural areas both represent a disproportionate number of the poor and are particularly exposed to various shocks. Regionally, most chronic poor and food insecure live in the northern regions of Cameroon 125. Cameroon does not have a coordinated system of social safety net programs anchored in a national social protection policy, but only some isolated and ad-hoc interventions. It is crucial that the government, with the support of its donor partners, addresses the issue of chronic poverty and vulnerability in order to significantly reduce poverty. However, this has not been considered a strategic priority to date and the lack of an overall social protection strategy attests to this fact. 126. Expenditure on social safety nets is limited (0.21 percent of GDP and 0.93 percent of the national budget), but with price subsidies, it is at 1.63 percent of GDP or 7.35 percent of the national budget. Expenditure peaked to its highest levels in 2008 to 0.31percent of GDP (excluding subsidies) to coincide with the onset of food, fuel and financial crises. The price subsidies represented six percent of the government’s budget, but their distributional impact has been largely regressive. Similarly, school fee waiver programs (0.13 percent of the budget) were not well targeted at vulnerable households. 67 127. In the current spending configuration, there is a lack of efficiency in resource utilization vis-à-vis the categories of vulnerable people. The largest amount of resources is allocated to food and fuel price subsidies, which cost the government 213 billion FCFA in 2008. However, the better off segments of the population capture the most of the subsidies. In the other safety nets programs, geographic targeting and self-selection are utilized – reaching no more than two-thirds of the intended target beneficiaries. Because individual programs are small and poorly coordinated, each has an average coverage level of one percent of the population, with all the programs combined covering no more than six percent (exclusive of price subsidies) of the population. Other safety nets interventions are limited in scope and coverage. They include mostly emergency interventions in the form of food aid, and some school feeding, nutritional support, a few public works initiatives, some cash transfers, and fee waiver programs. Table 26: Safety Nets spending disaggregation by donors/partners (Average 2008-2010) Total GoC Donors/Partners % with % w/o Billion % with % w/o Billion subsidies Subsidies FCFA Subsidies Subsidies FCFA % School feeding 1.0 8.0 0.051 0.03% 1.70% 1.75 8.9 Price subsidies and school fee- waivers 87.3 - 155.37 98% - 0 0 Hospital fee waivers 1.4 11.2 2.53 1.6% 83.50% 0 0 Public Works 1.2 9.4 0.40 0.25% 13.20% 1.73 8.9 Emergency interventions 8.9 70.5 0 0.00% 0.00% 15.89 81.4 Nutrition 0.1 0.7 0 0.00% 0.00% 1.47 0.7 Cash Transfers 0.1 0.2 0.05 0.03% 1.65% 0 0 Total 100 100 158.40 100% 100% 19.51 100 Source: Borgarello (2011). 128. Donors and technical partners are the primary financing source. However, their total contribution to safety nets investment is in any case very limited (77 percent of total spending on safety nets, excluding price subsidies.) Donors have mainly invested in responding to food shortage emergencies and only spent 18 percent of their total budgetary allocation to public works and school feeding programs. In addition to subsidy spending, the government has spent some money on fee-waivers for hospital costs and modest contributions towards public works programs. B. Policy Recommendations 129. Develop a coherent safety net strategy and set of programs to address the chronic nature of poverty as well as food insecurity in Cameroon. Given the poor targeting performance of safety net interventions, a reallocation of funds – in particular, reduced spending on subsidies and increased spending in targeted programs – will likely make a meaningful difference in reducing poverty and vulnerability. Such an approach will not only make safety net interventions affordable, but it will also enable them to respond to emergencies. 68 130. Introduce new safety net programs to move towards a well-coordinated system of safety nets that efficiently targets resources to the poorest and most vulnerable. A direct cash transfer program that continuously transfers a set amount of money to vulnerable households throughout the year could significantly reduce vulnerabilities to chronic food insecurity. In addition, alternative forms of safety nets interventions, such as labor-intensive public works programs could help to respond to climate related shocks and other seasonal income shortfalls. 131. Move from universal subsidy programs to targeted safety net programs in a few years time. An effective system of safety net programs that covers the majority of target beneficiaries requires extensive financial resources. Since revenue sources are unlikely to create substantial fiscal space, it seems more realistic to reallocate expenditures from less efficient programs. However, the timing of universal subsidy reforms should consider political economy ramifications. C. Implementation Strategies 132. Four main policy objectives need to be implemented in short and medium terms to establish an effective social protection system. Based on the action plan discussed with the government, four main policy objectives have been identified: 1) strengthening the strategic and institutional framework for designing, implementing, and managing the safety net programs; 2) reducing poverty by supporting the consumption of the poor and vulnerable and increasing their access to Basic Social Services through an efficient safety net system; 3) strengthening the financial framework for a national social protection system; and 4) establishing a system of monitoring and evaluation for social protection. Specific recommendations have been proposed for achieving those objectives and detailed steps have been described in the action plan. 1. Strengthening the strategic and institutional framework for designing, implementing, and managing safety net programs (a) Provide policy guidance and coordination for the design, adoption and implementation of a national Social Protection strategy. Social protection covers issues relevant to several institutions and its coordination and supervision should not be limited to one ministry alone. Therefore, it is essential to ensure that a permanent inter-ministerial committee for social protection is operational. Given the nature of the social protection provision, the government of Cameroon set up the technical committee for monitoring of economic programs (CTS) under the Ministère de l’Economie, de la Planification et de l’Aménagement du Territoire (MINEPAT) that will be responsible for the development of the social protection strategy, supervising/coordinating the various initiatives (studies, pilot projects, etc.) and ensuring the required dynamic cross-sectoral dialogue among various sectoral ministries. While a formal social protection committee should eventually assume this role, a sub-committee responsible for safety nets should also be set up in order to define the type, role, and instruments suitable to address the needs of the poor and vulnerable population groups. In addition, policy formulation should give due consideration to clarifying links with other policies. Social safety net programs are meant to act in conjunction with other poverty reduction programs, notably labor market programs, pensions, health insurance, policies to ensure macroeconomic stability, rural development, and human capital formation. 69 (b) Strengthen the institutions implementing social protection and social safety net programs. Defining who, at an institutional level, will manage the design, implementation, and ongoing operation of a social transfer program is a crucial first step upon adoption of a social safety net program. The institution that gathers the following characteristics will be the best one to manage the program (Samson et al., 2006): (i) a durable political commitment to social protection; (ii) the political influence to secure resources and defend the program’s priority; and (iii) the institutional capacity to deliver an efficient social safety net system. Institutional arrangements need to be informed by a review of relevant institutions, the primary objective of the program (e.g. poverty reduction versus education), and any longer-term vision for social protection in Cameroon. Finally, capacity building support should be provided. Awareness efforts and training is required both at national and local levels to increase understanding, interest, and capacities in social safety nets and social protection in general. This may include on-the-job training as well as participation in international seminars and study tours in similar countries at advanced stages of implementing safety nets and social protection interventions. 2. Reduce poverty by supporting consumption of the poor and vulnerable and increase their access to basic social services through efficient social safety nets system (a) Design an effective safety nets system to address chronic poverty and food insecurity. This process should start by identifying priority groups that could benefit from safety nets based on the results of this report and additional analysis of 2007 household survey and defining the priority instruments to address needs of those priority groups. Appropriate targeting mechanisms also need to be developed to ensure the participation of those in need. Multiple targeting methods – geographical, community-based, categorical, self-targeting, and proxy- means testing – will make the identification of the neediest more accurate and comprehensive. (b) Improve the efficiency of selected safety net programs by conducting an in-depth critical review of selected programs to better inform necessary adjustments. This should primarily focus on improved coverage and targeting efficiency of universal programs and of food and nutrition programs. Alternative targeting methods – geographical, community-based, categorical, self-targeting, and proxy-means testing – should be explored, depending on the objectives and scale of the programs. Please refer to Annex XII for the use of different targeting methodologies in some good practice examples of safety net programs in Africa. (c) Launch new programs – direct cash transfers and public works programs – that meet the needs of the chronically poor and food insecure. Feasibility studies – which should establish the objectives and overall scope of the programs – will need to be conducted to pilot and expand effective direct transfer and public works programs. The overall objective of cash transfer and public works programs in Cameroon should aim to target chronically poor households and take into account institutional capacity to administer the programs. They should define the key design parameters such as level of transfers, scope of coverage, length of coverage, assessment of conditionality considerations, and payment modalities. In the case of public works programs, the studies should reflect labor market analysis as well as the number of people to be involved and the length of the projects in months. Finally, the studies should be presented and discussed to provide the opportunity to draw lessons and design new programs. 70 3. Strengthen the financial framework for the national social protection system. (a) Set up a sustainable financial framework for financing social protection and safety nets programs. This should start by determining the budget envelope needed for a comprehensive safety nets and establishing rigorous tracking system of social protection expenditures. Once the fiscal space is determined, identifying the sources of sustainable financing (budget, development partners, local collectivities, NGOs, and private sector) would be essential. 4. Establish a system of monitoring and evaluation for social protection. (a) Design and set in place a robust monitoring and evaluation (M&E) system for safety nets to facilitate informed policy decisions. The specific objectives of an M&E system are to: inform the implementation of the program and any necessary adjustments in a timely manner; demonstrate program impact to policy-makers, development partners, and general public; and feed into the global lessons of experience. The evaluation function is particularly critical to inform an evidence-based policy development. A lack of evidence impedes a greater mobilization of political and financial support to these programs. Robust monitoring and evaluation will be particularly crucial in envisioned pilot projects (e.g., on cash transfers, public works, and fee waivers). In particular, six priority actions should be considered: (i) develop a program monitoring and evaluation system to assess cost-effectiveness of social safety nets, including a cost estimate for such an investment; (ii) set up minimum reporting requirements for safety net programs to allow evaluation of effectiveness; (iii) broaden monitoring and evaluation to incorporate rigorous impact measurements; (iv) involve civil society in monitoring and evaluation; (vi) transmit systematically program evaluation reports to the sectoral ministries responsible for social protection and social safety nets and maintenance of a database on programs to facilitate better-informed decision-making for policy-makers; (vi) strengthen the sectoral ministries’ capacities for monitoring and evaluation and provide training for program managers in monitoring and evaluation techniques coupled with a mechanism for exchange of experience across programs. 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Banque Mondiale. 74 ANNEXES Annex I Glossary of Terms Annex II Evolution of monetary poverty according to the socio-demographic characteristics of household heads Annex III Factors that predict likelihood of chronic poverty Annex IV Structure of the population as a function of the strata of chronic poverty and vulnerability (2007) Annex V Incidence of chronic poverty by regions and principal variables of interest (%) Annex VI Households' access to services and certain assets by strata of levels of chronic poverty and vulnerability Annex VII Spatial evolution of Vulnerability between 2001 and 2007 Annex VIII Household welfare according to levels of food security Annex IX Food Security according to the socio-demographic characteristics of household heads Annex X Social Sector Spending: Education, Health, and Social Protection Annex XI Social Safety Nets: Beneficiaries, 2006 -2010 Annex XII Some Country Examples of Good Practice in Safety Net Programs in Africa Ethiopia’s Productive Safety Net Program (PSNP) Kenya Cash Transfer Program for Orphans and Vulnerable Children (CT- OVC) Malawi Cash Transfer Programs Annex XIII Good Practice Design Features for Direct Support drawn from International Experience Selection of Households for Direct Support Determining Benefit Levels Monitoring and Evaluation of Cash Transfer Programs 75 ANNEX I: GLOSSARY OF TERMS For many specific terms used in this report, there is no overall consensus on a universal definition. In order to avoid misunderstanding, definitions used in this report are presented below. Poverty and vulnerability Chronic poverty Poverty that endures year after year, usually as a result of long-term structural factors faced by the household, such as low assets or location in a poor area remote from thriving markets and services. Transient poverty Poverty among households who are poor in some years but not all. They may be poor in some years due to idiosyncratic or covariate temporary shocks ranging from an illness in the household or the loss of a job to drought or macroeconomic crisis. Vulnerability The likelihood or probability that a household will pass below the defined acceptable threshold of a given indicator and fall into poverty. Social protection Social protection The set of public interventions aimed at supporting the poorer and more vulnerable members of society, as well as helping individuals, families, and communities manage risks. Social protection includes safety nets (social assistance), social insurance, labor market policies, social funds, and social services. Social assistance Synonymous to “social safety net.� Social safety net Noncontributory transfer programs targeted in some manner to the poor and those vulnerable to poverty and shocks. Social insurance Contributory programs designed to help households insure themselves against sudden reductions in income. Types of social insurance include publicly provided or mandated insurance against unemployment, old age (pensions), disability, the death of the main provider, and sickness. 76 Program evaluation Effectiveness The extent to which the program objectives were achieved, or are expected to be achieved. taking into account their relative importance. Efficiency An economic term, which signifies that the intervention is using the least costly resources possible to achieve the desired results. Efficiency measures qualitative and quantitative outputs in relation to results. Impact Long-term effects, positive or negative. Sustainability Continuation of benefits after the end of the intervention. Probability to obtain benefits in the long term. 77 ANNEX II: EVOLUTION OF MONETARY POVERTY ACCORDING TO THE SOCIO-DEMOGRAPHIC CHARACTERISTICS OF HOUSEHOLD HEADS Incidence of Poverty Poverty gap 2001 2007 2001 2007 Sex Male 40.9 41.6 13.2 13.0 Female 36.8 33.4 11.0 9.6 Age Less than 30 yrs old 31.4 28.1 9.7 7.9 30-39 yrs old 33.3 34.8 10.1 9.9 40-49 yrs old 40.5 42.5 12.7 14.1 50-59 yrs old 45.2 45.4 14.7 14.2 60+ yrs old 49.2 48.6 16.4 15.3 Level of education Uneducated 56.3 64.0 18.8 21.9 Primary 45.6 42.3 14.8 12.4 Secondaire 1er cycle 27.5 24.2 7.5 6.0 Secondaire 2nd cycle 12.8 11.9 3.3 2.4 Higher education 6.2 4.2 0.8 1.1 Marital status Single 21.3 14.1 6.3 3.3 In a monogamous marriage 39.4 39.6 12.5 12.2 In a polygamous marriage 49.7 59.1 16.4 19.6 Widow(er) 40.9 40.7 12.6 12.1 Divorced/Separated 34.7 32.6 10.5 9.9 En union libre 30.2 23.8 8.1 5.5 Socio-economic group Public 16.7 10.0 4.8 2.5 Private formal sector 14.1 9.6 3.6 2.0 Informal (agriculture) 56.9 59.6 19.0 19.4 Informal (non-agricultural) 31.7 23.0 8.9 5.7 Unemployed 25.0 11.9 6.1 2.5 Retired 18.4 13.5 4.2 2.7 Other inactive 43.9 34.2 15.3 10.3 Cameroon 40.2 39.9 12.8 12.3 Source: Nguetse Tegoum (2010) - ECAM3 and authors’ calculations based on ECAM2. 78 2001 2007 Household Head Chronic Other Non- Chronic Other Non- Total Total Characteristics Poor Vulnerables vulnerable Poor Vulnerables vulnerable Sex Male 28.7 33.1 38.2 100.0 29.4 29.5 41.1 100.0 Female 15.9 32.8 51.3 100.0 13.8 30.7 55.5 100.0 Age Less than 30 yrs old 13.4 32.1 54.5 100.0 11.9 27.5 60.6 100.0 30-39 yrs old 20.9 31.6 47.5 100.0 22.5 26.3 51.2 100.0 40-49 yrs old 29.5 32.0 38.4 100.0 31.7 28.0 40.3 100.0 50-59 yrs old 31.9 34.9 33.2 100.0 30.8 34.7 34.5 100.0 Level of Education Uneducated 40.0 40.0 20.0 100.0 48.4 36.0 15.7 100.0 Primary 30.8 38.6 30.6 100.0 25.8 36.8 37.4 100.0 Secondaire 1er cycle 14.2 26.5 59.2 100.0 12.1 24.9 63.0 100.0 Secondaire 2nd cycle 3.9 20.4 75.6 100.0 2.8 13.0 84.2 100.0 Higher education 1.2 3.5 95.3 100.0 1.6 3.6 94.7 100.0 Marital Status Single 6.9 17.7 75.5 100.0 2.9 12.0 85.2 100.0 In a monogamous 25.7 32.8 41.5 100.0 26.1 31.0 42.9 100.0 marriage In a polygamous 41.1 36.4 22.5 100.0 50.3 32.3 17.4 100.0 marriage Widow(er) 16.1 40.9 43.0 100.0 17.3 34.8 47.9 100.0 Divorced/separated 15.7 27.5 56.8 100.0 13.0 35.6 51.4 100.0 Living together 13.5 29.3 57.3 100.0 8.4 24.3 67.4 100.0 79 2001 2007 Household Head Chronic Other Non- Chronic Other Non- Total Total Characteristics Poor Vulnerables vulnerable Poor Vulnerables vulnerable Socioeconomic group Public 7.3 20.0 72.8 100.0 3.7 17.5 78.8 100.0 Private formal sector 5.5 19.9 74.6 100.0 3.2 12.1 84.7 100.0 Informal 41.4 41.7 17.0 100.0 44.2 38.4 17.4 100.0 (agriculture) Informal (non- 17.3 27.8 54.9 100.0 8.6 23.3 68.1 100.0 agricultural) Unemployed 11.3 26.1 62.6 100.0 3.1 11.8 85.1 100.0 Retired 9.0 33.6 57.4 100.0 2.7 27.5 69.8 100.0 Other inactive 25.1 33.0 41.9 100.0 14.8 25.5 59.8 100.0 Household size 1 person 0.0 5.0 95.0 100.0 0.0 9.6 90.4 100.0 2-3 persons 0.4 24.8 74.8 100.0 2.2 25.9 71.9 100.0 4-5 persons 10.0 42.1 48.0 100.0 12.7 35.1 52.2 100.0 6-7 persons 26.8 35.6 37.5 100.0 29.9 31.0 39.1 100.0 8-9 persons 35.1 31.5 33.4 100.0 41.4 28.0 30.7 100.0 10+ persons 52.6 30.9 16.5 100.0 58.6 29.4 12.0 100.0 Cameroon 26.4 33.0 40.6 100.0 26.1 29.7 44.1 100.0 Source: Nguetse Tegoum (2010) - ECAM3 and authors’ calculations based on ECAM2 80 ANNEX III: FACTORS THAT PREDICT LIKELIHOOD OF CHRONIC POVERTY 133. Factors that predict the likelihood of chronic poverty status include characteristics of the household head, household composition, educational attainment, residential area, and access to certain services. Characteristics of household head: Households headed by a male are four times more likely to be at risk of chronic poverty as compared to households headed by a female. In addition, households whose breadwinner participates in non-agricultural activities have a much higher likelihood of escaping chronic poverty. For instance, a household whose breadwinner works in the formal sector has zero chance of being chronically poor. Residential area: Relative to urban households, households in rural areas have a much higher likelihood of vulnerability and being chronically poor. Urban households are mainly less exposed to certain kinds of risks that rural households are exposed to, in particular over-reliance on agricultural activities, often subsistence agriculture. This high dependence on subsistence agriculture of rural households makes them the first victims to climatic shocks. Access to certain important services: Access to electricity, potable water, and health services is significantly associated with a reduction in household vulnerability and likelihood of chronic poverty. Access to clean water improves health status and prevents bacterial infections (such as typhoid. cholera. etc.). Access to electricity could allow households to engage in productive economic activities they won’t otherwise be able to. Results from the regression analysis shows that a household that has no access to electricity has a risk of vulnerability at least 16 times more than a household with access to electricity. Similarly, a household within 5 kms of a health center is 1.5 times more vulnerable than a household living close to a hospital or an integrated health center. (Please refer to Annex IV for more details on evolution of access to services). Educational attainment and household composition: Successful completion of an additional year of school is associated with 0.8 percent reduction in the probability of being chronically poor. Similarly, household composition plays a role in a household’s likelihood of chronic poverty and vulnerability. As results from the model on Table 3 demonstrate, households with many children within the age bracket of 5-14 yrs. have a higher likelihood of being in chronic poverty. 81 Table 27: Likelihood of access by households to some basic commodities by strata of chronic poverty and vulnerability Chronically Other Variables Modalities Poor vulnerable 25 Odds ratio Odds ratio Sex (ref.: female) Male 4.16*** 2.25*** Age 1.02 0.98* Age2 1.00 1.00* Education Number of years of schooling 0.82*** 0.87*** Religion (Ref.: other religions) Muslim 0.66*** 1.13 Marital Status Married 0.88 0.78*** Official in a formal sector 0.00*** 0.02*** Employee in a formal sector 0.02*** 0.12*** Socioeconomic group (ref.: Independents of non-agricultural informal 0.12*** 0.26*** dependant on agriculture) sector Dependents of non-agricultural informal 0.28*** 0.64*** sector Unemployed/inactive 0.33*** 0.45*** Number of people 0-4 yrs 2.60*** 2.00*** Number of people 5-14 yrs 7.36*** 3.57*** Composition of household Number of people 15-59 yrs 3.38*** 2.30*** Number of people 60+ yrs 3.07*** 1.91*** Residential area (ref.: urban) Rural 14.83*** 5.30*** State of Nutrition Poor or limited food consumption 3.32*** 1.56*** No access to electricity 30.66*** 16.75*** No access to potable water 2.48*** 1.96*** Situated at least 5 km from a health center 1.58*** 1.50*** Model statistics Number of observations 11,391 Prob > chi2 0.0000 Log likelihood -4096.9672 Pseudo R2 56.8 Source: Nguetse Tegoum (2010) Constructed from ECAM3 datasets *: significant at 10 % level; **: significant at 5 % level; ***: significant at 1 % level. 25 The odds ratio measures the relationship between the likelihood of a given modality and a modality used as a reference. 82 ANNEX IV: STRUCTURE OF THE POPULATION AS A FUNCTION OF THE STRATA OF CHRONIC POVERTY AND VULNERABILITY (2007) Poor Non-poor Transient Vulnerable Total Non Chronic and Vulnerable & Vulnerable vulnerable vulnerable Precarious Area of residence Urban 3.2 3.9 5.1 3.6 6.7 77.6 100.0 Rural 38.6 13.2 3.2 10.0 15.1 19.9 100.0 Regions Douala 0.0 2.0 3.5 1.2 3.8 89.5 100.0 Yaoundé 0.4 0.8 4.8 0.5 2.9 90.7 100.0 Adamaoua 38.7 10.5 3.8 14.3 13.6 19.1 100.0 Centre 19.5 13.7 8.0 6.2 15.7 37.0 100.0 East 37.4 11.4 1.6 14.7 16.0 18.9 100.0 Extreme-north 53.7 10.4 1.7 14.6 10.1 9.5 100.0 Coastal 9.5 11.2 10.1 4.0 13.9 51.3 100.0 North 51.8 10.8 1.1 10.0 11.3 15.1 100.0 North-west 26.5 20.2 4.2 2.8 14.8 31.4 100.0 West 12.3 10.9 5.8 7.5 18.6 44.9 100.0 South 15.7 9.3 4.2 7.0 19.7 44.1 100.0 South-west 15.8 8.5 3.2 8.2 16.9 47.4 100.0 Cameroon 26.1 9.9 3.9 7.7 12.1 40.3 100.0 Source: Nguetse Tegoum (2010). Calculations using ECAM3. 83 ANNEX V: INCIDENCE OF CHRONIC POVERTY BY REGIONS AND PRINCIPAL VARIABLES OF INTEREST (%) Principal variable of Extreme Douala Yaoundé Adamaoua Centre East Littoral North Northwest West South Southwest Cameroon interest North Male 0.0 0.6 41.7 20.5 39.1 56.4 10.9 53.7 30.1 13.6 16.1 16.4 29.4 Gender of household head Female 0.0 0.0 23.4 16.6 27.4 30.3 6.1 34.3 18.0 9.7 14.2 13.9 13.8 No education 0.0 0.0 50.9 8.5 51.0 59.7 14.5 60.2 35.9 14.7 21.3 27.5 48.4 Level of education of household head Others 0.0 0.5 21.8 20.5 31.6 40.9 8.7 42.2 22.0 11.7 15.5 13.9 16.4 Agricultural Workers 0.0 0.0 54.9 25.7 49.5 65.1 17.4 64.9 34.5 17.2 26.4 24.6 44.2 Socioprofessional category of household head Others 0.0 0.5 16.1 8.7 14.5 22.7 1.8 15.6 14.1 7.2 8.1 1.6 7.3 Yes 0.0 0.7 45.2 28.1 48.3 62.0 13.8 62.3 33.7 15.2 19.2 22.0 33.6 Presence of children 5-14 years old in the household No 0.0 0.0 6.7 0.6 2.6 16.8 1.2 10.3 2.5 0.8 0.0 2.4 4.0 Yes 0.0 0.6 46.0 14.6 42.7 61.3 10.7 58.6 29.1 13.6 12.5 18.5 33.8 Level of food insecurity in household No 0.0 0.4 26.8 24.4 28.7 39.9 8.8 40.8 18.9 11.0 16.9 11.8 17.4 Rural - - 47.8 20.5 42.5 60.2 10.8 62.3 31.3 15.8 16.7 20.1 38.6 Household residential area Urban 0 0.4 6.6 9.8 7.8 10.5 7.9 10.8 5.8 4.9 5.4 1.6 3.2 Together 0.0 0.4 38.7 19.5 37.3 53.7 9.5 51.8 26.5 12.3 15.7 15.8 26.1 Source: Nguetse Tegoum (2010) 84 ANNEX VI: HOUSEHOLDS’ ACCESS TO SERVICES AND CERTAIN ASSETS BY STRATA OF LEVELS OF CHRONIC POVERTY AND VULNERABILITY 2001 2007 Chronic Other Non Chronic Other Non- National National poor vulnerables vulnerable poor vulnerables vulnerable % % % % % % % % Access to potable 14.8 21.3 59.9 41.9 17.0 25.0 67.6 48.8 water Access to electricity 14.7 22.5 68.1 46.8 6.2 17.8 72.6 48.2 Decent toilet 14.5 25.2 59.5 42.8 4.7 9.5 51.7 33.6 Walls made from definitive materials 66.9 64.0 65.8 65.5 70.4 69.1 74.5 72.5 Floors made from 14.6 25.9 70.7 49.2 11.0 20.0 74.5 50.6 definitive materials Roofs made from 58.5 66.1 89.2 77.9 35.1 57.7 97.1 77.5 definitive materials Possession of 0.2 0.8 13.1 7.6 12.3 22.4 63.3 44.9 mobile telephone Source: Nguetse Tegoum (2010). Calculations using datasets from ECAM2 and ECAM3 85 ANNEX VII: SPATIAL EVOLUTION OF VULNERABILITY BETWEEN 2001 AND 2007 2001 2007 Effective Effective Variation in the number of number of incidence of vulnerable Incidence of vulnerable Incidence of vulnerability people vulnerability people vulnerability Area of residence Urban 1 463 454 27.2 1 091 915 17.3 9.9 Rural 7 725 334 76.6 8 895 346 76.9 -0.3 Regions Douala 250 263 16.7 123695 6.9 9.7 Yaoundé 264 089 19.6 78 919 4.6 15.0 Adamaoua 451 207 65.2 714 428 77.1 -11.9 Center 813 866 67.0 750 666 55.0 12.0 East 535 276 71.9 661 762 79.5 -7.6 Extreme North 2 331 990 84.9 2 874 215 88.8 -3.8 Coastal 329115 43.6 241 203 38.6 5.0 North 864124 76.9 1 476 350 83.9 -6.9 Northwest 1 185 713 66.5 1 167 416 64.4 2.2 West 1 302 002 69.8 933 077 49.3 20.4 South 275 760 51.6 300 123 51.8 -0.2 SouthWest 585 383 50.3 665 407 49.3 0.9 Cameroon 9 188 788 59.4 9 987 261 55.9 3.5 Source: Nguetse Tegoum (2010). Calculations from ECAM2 and ECAM3 86 ANNEX VIII: HOUSEHOLD WELFARE ACCORDING TO LEVELS OF FOOD SECURITY Poor food Limited food Sociodemographic In food security consumption consumption Total characteristics % % % Gender of household head Male 27.4 35.0 37.6 100.0 Female 28.1 36.2 35.7 100.0 Poverty level Poor 33.8 42.1 24.1 100.0 Non-poor 25.0 32.5 42.5 100.0 Regions Douala 17.2 24.6 58.2 100.0 Yaoundé 17.3 30.8 51.9 100.0 Adamaoua 32.9 37.6 29.6 100.0 Center 24.5 40.0 35.5 100.0 East 26.3 43.9 29.8 100.0 Extreme North 32.4 38.9 28.7 100.0 Coastal 21.2 29.9 48.8 100.0 North 34.8 37.0 28.2 100.0 North west 37.7 42.1 20.2 100.0 West 20.0 41.7 38.3 100.0 South 9.5 29.9 60.6 100.0 Southwest 44.1 26.5 29.4 100.0 Residential area Urban 17.9 28.1 54.0 100.0 Rural 33.3 39.6 27.1 100.0 Cameroon 27.6 35.3 37.1 100.0 Source: Nguetse Tegoum (2010). Calculation using ECAM3 data. 87 ANNEX IX: FOOD SECURITY ACCORDING TO THE SOCIO- DEMOGRAPHIC CHARACTERISTICS OF HOUSEHOLD HEADS Limited food Sociodemographic characteristics Poor food consumption In food security Total consumption Groupe socioéconomique du chef de ménage Public 14.9 28.8 56.3 100.0 Private formal 19.6 27.4 53.0 100.0 Informal (agricultural) 33.3 40.4 26.3 100.0 Informal (non-agricultural) 23.6 30.7 45.7 100.0 Unemployed 17.6 33.7 48.8 100.0 Retired 10.3 25.0 64.7 100.0 Inactive 32.9 37.0 30.2 100.0 Household size 1 person 36.9 38.4 24.6 100.0 2-3 persons 26.1 37.3 36.6 100.0 4-5 persons 22.8 33.7 43.5 100.0 6-7 persons 21.7 28.5 49.7 100.0 8+ persons 21.5 30.0 48.5 100.0 Education level of household head Uneducated 63.3 27.8 8.9 100.0 Primary 28.8 41.4 29.8 100.0 Secondaire 1er cycle 18.5 37.9 43.6 100.0 Secondaire 2nd cycle 15.6 32.5 52.0 100.0 Higher education 12.5 31.1 56.4 100.0 Age of household head Less than 30 yrs 36.3 36.9 26.8 100.0 30 - 39 yrs 22.8 35.1 42.1 100.0 40 - 49 yrs 21.0 34.8 44.2 100.0 50+ yrs 29.3 34.6 36.1 100.0 Cameroon 27.6 35.3 37.1 100.0 Source: Nguetse Tegoum (2010) calculations based on ECAM3 88 ANNEX X: SOCIAL SECTOR SPENDING: EDUCATION, HEALTH, AND SOCIAL PROTECTION 2006 2007 2008 2009 2010 Education 322,928,592 363,915,697,401 415,701,378,614 450,103,734,790 445,536,101,000 Health 97,942,895,206 114,098,714,802 99,611,783,561 162,633,385,926 156,816,100,000 Social Affairs 11,476,949,800 16,064,613,715 16,168,450,000 21,053,731,600 18,202,500,000 Tot Social Sector 426,742,773,598 494,079,025,918 531,481,612,175 633,790,852,316 620,554,701,000 Social Sector/State Budget (%) 22.93% 21.95% 21.41% 27.54% 25.75% Total Gov’t expenditure 1,861,000,000,000 2,251,011,081,300 2,481,998,000,000 2,301,400,000,000 2,410,000,000,000 GDP 9,387,500,000,000 9,792,300,000,000 10,443,800,000,000 11,040,300,000,000 11,553,700,000,000 Source: Ministère des Finances (2010). Exercices Budgétaires: 44-39. Budget 2010 - 2005 89 ANNEX XI: SOCIAL SAFETY NETS: BENEFICIARIES, 2006 -2010 2006 2007 2008 2009 2010 School Feeding Programs School feeding WFP 55.246 55. 486 55.246 Fee Waiver Programs Hospital fees MINSANTE 138 171 216 142 246 School fees MINEDUB 34 613 62 838 52 288 60 000 96 000 Cash Transfer Programs Needy and indigents MINAS 532 Abandoned and street children MINAS 0 228 0 Price Subsidies Energy products MINFI Kerosene 3.604.215 2.319.920 3.381.097 472.180 208.290 433. 256 LPG Food price subsidies MINFI 4.471.277 5.002.741 7.554.929 8 288.176 Transport subsidies MINFI 6.250/day 10.000/day 10.000/day 10.000/day 10.000/day Public Work Programs Food-for-work WFP 16 589 16 590 16 591 PAD-Y AfDB 52 52 657 657 Emergency Programs Cereal stocks WFP 77.868 77.867 77.866 Emergency/refugees WFP/UNICEF 611.237 77.712 313.327.27 Nutrition Programs OVCs UNICEF 30.719 OVCs NGOs 183.523 45.186 61.670 48.797 Source: Borgarello (2011). 90 ANNEX XII: SOME COUNTRY EXAMPLES OF GOOD PRACTICE IN SAFETY NET PROGRAMS IN AFRICA 134. Recent financial crises and price hikes have increased policy-makers’ interest in finding ways to address persistent, and often deepening vulnerabilities. The success of cash transfer programs in many parts of the world has led many leaders to ask whether cash transfer programs could be successful in addressing the major challenges present in Sub-Saharan Africa (SSA). This section examines how cash transfers have been used throughout the region and highlights the lessons that have already been learned through existing cash transfer programs. Taking into account the context of Cameroon, the following selected country case examples could provide valuable lessons in understanding how programs are implemented in other African countries. Ethiopia’s Productive Safety Net Program (PSNP) 135. In Ethiopia, over 40 percent of the population lives below the national poverty line and over 20 percent of the population is extremely poor (below 1.650 kilocalories per person per day). Since the variability in rainfall is among the highest in the world, and fluctuations in rainfall are inversely related to mean incomes, every year for more than two decades the government of Ethiopia has launched an international emergency appeal for food aid. This annual emergency assistance was designed to meet the consumption needs of both chronically and transitorily food-insecure households. Despite a substantial amount of humanitarian assistance, evaluations have shown that emergency assistance was unpredictable for both planners and households, often arriving late relative to need. As a result of the delays and uncertainties, the emergency aid could not be used effectively and did little to protect livelihoods, prevent environmental degradation, generate community assets, or preserve household assets (physical or human capital). 136. Characteristics of the program. Given these shortcomings of the emergency aid regime, in 2005 the Ethiopian government started implementation of a new program, the Productive Safety Net Program (PSNP). The PSNP replaced the emergency humanitarian appeal system as the chief instrument in the country’s safety net. The program is currently operational in 234 chronically food-insecure districts (of a total of 692 districts), and targeted about 7 million people in 2006. The PSNP provides resources to chronically food-insecure households in two ways: (i) through payments to the able-bodied for participation in labor intensive public works activities; and (ii) through direct grants to households composed of the elderly or those who cannot work for other reasons. 137. Impact of the PSNP. A 2005 beneficiary survey found that the PSNP had a significant positive effect on beneficiaries’ well-being as calculated by both subjective and objective indicators. The survey found that three in five beneficiaries avoided having to sell assets to buy food in 2005, and according to 90 percent of the households, this was a result of their participation in the PSNP. Moreover, almost half the beneficiaries surveyed stated that they had used health care facilities more and 76 percent of these households credited the PSNP with this enhanced access. More than one-third of surveyed households enrolled more of their children in school and 80 percent of them attributed this to participation in the PSNP. 91 138. Ongoing reforms. Significant work is planned to further improve implementation capacity and bring systems to a level of functioning not previously possible with fragmented and temporary programs. Work is also beginning on a contingent grant mechanism (conditional cash transfer) to provide resources in the same districts to help transient food-insecure households during periods of drought. The mechanism will use a rainfall-based index that uses 30 years of rainfall data to trigger funding. Moreover, the PSNP is complemented by a larger food security program that tries to help households raise incomes by means of resettlement grants, household income-generating packages, and water harvesting. Households that benefit from the PSNP are also entitled to assistance under other parts of the food security program. Food security interventions financed by donors that fall outside the PSNP are, however, rarely coordinated at local levels, and their links to basic rural services are also weak. 139. Lessons learned. The PSNP illustrates many of the issues that surround safety nets in very low-income countries, namely: ¾ The program is moving in a clearly beneficial direction by means of a basic design that not only seeks to use resources in ways that save lives, but also assist in livelihoods. The progress in implementation to date suggests that this is possible even in a very low-income setting. ¾ The design process and implementation planning have undergone a fairly harsh triage. Even when fully realized, the program will only provide a safety net in about a third of the country. The districts selected are appropriately the poorest, but many poor people also live in the unserved districts. Moreover, the program has phased its implementation. It is focusing first on consolidating the basic PSNP. It hopes to enrich it eventually in a number of dimensions. But program managers and donors have realized that everything could not be accomplished right away. Thus, for example, the contingent fund for droughts was not implemented until the third year of the PSNP. ¾ Good implementation requires diligent and sustained effort. By 2007, the program had many positive outcomes, and early qualitative assessments of its targeting and impacts are positive, but more remains to be done to consolidate implementation. Good implementation also requires flexibility and innovation. For example, the government was initially having problems with the program’s monitoring system, but in the interim, it deployed so-called rapid response teams to visit districts to identify and solve implementation problems. This gave managers a sense of what was going well and what was not and whether adjustments were needed in individual districts or at a more systemic level. Meanwhile, the design of the monitoring system was simplified and a pilot to computerize it is under way. ¾ An important part of the reform is the shift to a multidonor, multiyear framework rather than an annual emergency appeal system with each donor running a separate initiative. This is complemented by the decision to deliver the program through regular government systems rather than special implementation units common in donor-funded programs. The multiyear framework and the reduction in fragmentation should permit the development of much more effective administrative systems. The multi-donor framework should also aid in resilience, in that withdrawal or a reduced commitment by a single donor will have a less deleterious effect. 92 Kenya Cash Transfer Program for Orphans and Vulnerable Children (CT-OVC) 140. This transfer programs began as a pre-pilot in 2004. It has since gone through a five-year pilot project and scaled up from a very small budget to a projected US$ 26m budget for fiscal year 2010 (World Bank, 2009). Extensively documented, the program has provided valuable experience in advocacy, design, and implementation of conditional cash transfers in SSA settings. It is a key component of Kenya’s broader social protection strategy, as it addresses risks to children in communities where large number of OVCs, exasperated by adult deaths from AIDS, has begun to overwhelm informal safety net systems. In addition to donor interest, the CT-OVC initiatives have received strong domestic political support, including pressures to quickly scale up of the program. 141. Objectives of the pre-pilot program. The goal of the pre-pilot was to generate evidence regarding the applicability of a cash transfer program to support OVCs in Kenya. The pre-pilot phase began in December of 2004, initially reaching 500 children. It was later expanded to reach at least 5,000 children. The pre-pilot was supported through UNICEF and SIDA and administered from the Department of Children Services (World Bank, 2009). The program’s initial districts – Nairobi, Kwale, and Garissa - were selected because they were areas where UNICEF and SIDA already had ground-level knowledge and experience. The pre-pilot targeted poor households and households with OVCs that did not receive other formal support. Beneficiaries received Ksh 500/US$ 6.25 monthly per child (SCUK et al. 2005). Technically, the pre-pilot transfers had conditions attached but there were no consequences for non- compliance (World Bank, 2009). Concerns that children would be separated from their households in order to meet program requirements led the pre-pilot to drop enforcement of conditions (World Bank, 2009). However, communities and some donors requested that the transfers be conditioned, particularly as the program expanded to the west in areas with higher HIV levels. 142. CT-OVC redesigned for full pilot. Drawing on pre-pilot experiences, the official pilot of the CT-OVC program began in 2005 and ran through mid-2009. The program specifically focuses on households with OVCs, with the goal of keeping children within families and encouraging investment in their human capital. The specific program goals are very similar to those seen in other well-known CCT programs in Latin America, including improving health, nutrition, education, and awareness of these issues. The pilot program envisaged reaching seven districts with the support from the Government of Kenya, DFID, UNICEF, and SIDA (World Bank, 2009). Funds from development partners in the pilot reached 17,500 households that are still being covered by benefits. Between 1,000 and 4,600 beneficiary households are covered in each of the districts. By the end of Phase 2 (June, 2009), benefits reached 70,000 households. 143. Targeting takes a complex five-step approach including community committees. Targeting in the pilot was refined from pre-pilot methods. The targeting is completed through five steps (World Bank, 2009). Geographic targeting selects program districts based on poverty and HIV/AIDS levels. The districts are ranked based on the number of extremely poor OVC households in the district. Within the districts, the number of households with OVCs is calculated. Communities are selected to belong to the program provided there are more than 5,000 community members, of which at least 60 percent have to live below the poverty line (Hussein, 2006). Community committees (Location OVC Committees) were created to select 93 eligible households. The households must not be able to meet all of their basic needs, and they must have a permanent OVC member under 17 years old in the household who is not receiving benefits from another cash transfer program (Government of Kenya, 2006). Within this group of eligible households, Location OVC Committees decide which households meet three of a list of over ten items related to poverty (such as whether the household has access to a safe water source, members are in poor health, or members eat one or fewer meals per day). Households meeting at least three of the criteria are considered poor (World Bank, 2009). 144. Post office functions well for transfers. The transfer size was set at a level that was believed to cover enough of the needs of OVCs to help keep them within their households. Transfer values vary by the number of OVCs in the household. Ksh 1,000 (US$ 14) is given in households with one or two OVCs. Ksh 2000 (US$ 28) is given to households with three or four OVCs, and Ksh 3,000 (US$ 42) is given to households with five or more OVCs (World Bank, 2009). Using Ksh 1,500 (US$ 20) as a reference transfer value, the transfer is sizable compared to the average of Ksh 1,800 per adult equivalent for consumption. The transfer is, therefore, approximately equal to 20 percent of poor Kenyan households’ expenditures (World Bank, 2009). However, the transfers have not been indexed to inflation, so their value has eroded as food prices have grown. Transfers in the pilot districts are delivered using the Postal Cooperation of Kenya, which was found to function well. Payments are awarded once every two months (OVC, 2006). The transfers are supplied along with a receipt outlining if the household received the full possible payment, and if not, why (Government of Kenya, 2006). They are given to the household’s mother or female head/caretaker whenever possible. 145. Soft enforcement of condition. Similar to conditions in cash transfer programs in Latin America, Kenya’s CT-OVC beneficiaries have responsibilities relating to child health and education: beneficiaries under one year old must attend a local clinic six times within their first year to receive immunizations, vitamin A supplements, and to have their growth monitored; beneficiaries between one and three years old must have a growth-monitoring check-up and receive vitamin A supplements twice per year; children between 6 and 17 years old must enroll in school and maintain attendance for 80 percent of all days; and caretakers must attend educational seminars at least once annually (World Bank, 2009). However, until very recently, these conditions have not been applied in the program; it has essentially been an unconditional transfer. Part of the program’s design was to test a conditional versus an unconditional transfer, but this design component did not begin to be tested until late 2008. Thus far, there has been confusion over how to apply health conditions, and hence only education conditions have been applied. In areas where conditions are applied, the reduction in transfer, for non-compliance, is Ksh 400 per child or adult that does not comply with co-responsibilities (World Bank, 2009). Program exit occurs if there is no longer an OVC in the household under 17 years old or the household is reassessed and no longer deemed to be poor. Households that migrate from the program area voluntarily withdraw, or are found to have falsified information are also no longer in the program (World Bank, 2009). Finally, after three consecutive periods of failing to fulfill co-responsibilities, households are supposed to exit the program. 146. Organization and management system requires inter-sectoral coordination. The pilot’s Central Program Unit, comprised of units for operations, monitoring and evaluation, administration/finance, and information systems, was originally situated within the Department 94 of Children’s Services in Kenya’s Ministry of Home Affairs (Government of Kenya, 2006). The Vice-President holds ultimate control over the program (Hussein, 2006). Enforcement of conditions requires close coordination by line ministries with the program, as the education objectives are to be executed by the Ministry of Education, and the health objectives are executed by the Ministry of Public Health and Sanitation. Other coordination with the Ministry of Medical Services and Ministry of Immigration and Registration of Persons are also being supported (World Bank, 2009). 147. Analysis of results awaited from experimental evaluation design. The pilot has taken significant measures to maintain adequate controls, including the use of an extensive management information system (MIS). The current MIS is centered at the national level but will later be decentralized to the districts (World Bank, 2009). Teachers and health care workers fill out forms reporting school attendance and health center visits. The central MIS tracks information by district. Conditions are monitored every two months for children ages zero to one, every six months for children ages one through five, every three months for the educational conditions, and once every year for the adult training sessions. Conditionality monitoring also is supposed to work through this system. Application of conditions is supposed to be spot checked, including through visits to beneficiary households to ensure program compliance. Appeals may be submitted to the District Children Office, who also accepts complaints concerning payment quantities and quality of supply side services. 148. Impact evaluation of the program. The pilot program in the original seven districts is subject to an impact evaluation, conducted by Oxford Policy Management, with qualitative and quantitative components. The evaluation design of the program is experimental (although there were significant differences across the treatment and control groups), in which two treatment locations and two control locations are randomly selected within each of the seven districts. The unconditional/conditional design was also randomly assigned (Hurrell, Ward, and Merttens, 2008). The baseline sample includes 2.759 households. Its analysis of targeting revealed that most selected households did have an OVC (98 percent), and most of these households were poor. However, the extremely poor were underrepresented in the program (Hurrell, Ward, and Merttens, 2008). 149. Strong government ownership and funding and expansion included in medium-term plan. The CT for OVCs is included in Kenya’s Medium-Term Plan and Vision 2030. The Kenyan government funded the CT-OVC program in 2005-2006 using US$ 675,000, or KShs. 48,000,000 (Hussein, 2006). Due to its expansion, the program is expected to cost US$ 26m in FY10. This figure is 0.08 percent of nominal GDP and 0.31 percent of government expenditures. When the program reaches 100.000 households it is expected to cost between US$ 32m and US$ 35m. or approximately 0.07 percent of nominal GDP and 0.28 percent of government expenditures (World Bank, 2009). Administrative costs in the program are expected to be approximately 25 percent by 2012, and they are expected to continue to drop. This percentage is much lower than the 40 percent administrative costs in the pre-pilot. 150. CT-OVC adaptations for phase three scaling up. The political pressures for more rapid expansion of the CT-OVC pilot into additional districts have resulted in two parallel programs running alongside each other. A new (third) program phase now seeks to harmonize the 95 programs and build the capacity for their effective implementation. The goal of the Government of Kenya is to cover 100,000 poor households with OVCs by 2012 (approximately 2,000 households per district), in order to cover approximately half of the 600.000 extremely poor OVCs in the country (World Bank, 2009). During the third phase the following measures will be introduced: ¾ The targeting mechanism will be adjusted based on results from evaluations. Kenya’s Integrated Household Budget Survey, the MIS, and baseline data. Improvements will be made to the standardized program based on lessons learned in the second phase. ¾ The MIS will be upgraded to enable it to efficiently handle the greatly increased system demands from the rapid scale-up, and an organization will be contracted to provide external monitoring. That external monitoring will spot check the program, conduct community censuses to evaluate the quality of Local OVC Committees, and conduct so-called “citizen report cards� that will determine beneficiary and non-beneficiary opinions and satisfaction with the program. This improved accountability is particularly important in light of concerns over governance and corruption in Kenya (World Bank, 2009). ¾ Extensive effort will be made to improve communication about the program to both beneficiaries and non-beneficiaries. Implementation and monitoring of the co- responsibilities is expected to improve. ¾ By mid- to late 2010, testing regarding the use of penalties resulting from non-compliance with co-responsibilities should be complete (World Bank, 2009). ¾ Evaluations of supply side capacity will also be conducted. This capacity building is crucial; program officials have made notable achievements in implementing the program and improving capacity already, but more must be done to meet the challenges of continued scaling up (World Bank, 2009). Malawi Cash Transfer Programs 151. The Social Cash Transfer program began with UNICEF support as a pilot in Mchinji District in 2006, with goals to scale up eventually to a national program. Its objective is to decrease poverty, hunger, and starvation of the extremely poor and those without an eligible member able to participate in the labor force. This includes many households with Orphans and Vulnerable children (OVCs). 152. Characteristics of the program. The objective of the Mchinji Social Cash Transfer Pilot was to address extreme poverty. Schubert and Huijbregts (2006) report that around 10 percent of all Malawian households (250,000) are extremely poor and incapable to work (i.e.. labor constrained or labor incapacitated). It was suggested that if that 10 percent of households all received social cash transfers, the country’s extreme poverty rate would decrease from 22 percent to 12 percent, at a cost of US$ 41m per year. This analysis contributed to the decision to target 10 percent of extremely poor households in the targeted pilot area of Mchinji, equal to approximately 3,000 households/15,000 individuals (Chipeta and Mwamlima 2007). In addition to its objective related to poverty reduction, the program sought to improve beneficiary 96 children’s enrolment and attendance at schools, to provide information about how well a cash transfer program could fit into Malawi’s social protection agenda (Chipeta and Mwamlima, 2007), and to test whether District Assemblies could implement cash transfer programs that were both cost-effective and able to reach targeted household groups (Schubert and Huijbregts, 2006). Mchinji was chosen for the pilot due to its strong District Team, average poverty levels, and relatively close location to the capital of Lilongwe. 153. Targeting of the Mchinji pilot includes elected village committees. Targeting criteria classified the extremely poor as those who reside in the bottom expenditure quintile and below the national extreme poverty line. Based on this definition, beneficiary households should be unable to purchase needed non-food goods. Labor constrained households are those with a dependency ratio of over three (Schubert and Huijbregts, 2006). To select these households, local committees known as Community Social Protection Committees first create a list of all households they think may fulfill the program’s requirement that they be “ultra poor� or “labor constrained.� These committees are selected through community elections during the initial program meeting (Schubert, 2007). Village headmen are not allowed to be on the committees. The committees must then call on and interview all potential beneficiary households; the village headman must verify this information, and the committees rank identified households according to their level of neediness. The ranking is discussed and approved or changed in a community meeting. The information is passed to the Secretariat and a Social Protection Sub-Committee, who must approve or disapprove of the list. The lists are supposed to contain the 10 percent of households in the community agreed to be most needy. 154. Design and delivery of transfers. Monthly transfers in Mchinji, all unconditional, were graduated by household size and number of children in school. One-person households received MK 600 (about US$ 4), two-person households received MK 1,000 (US$ 6.67), three-person households received MK 1.400 (US$ 9.33), and four person households or larger received MK 1,800 (US$ 12) (Schubert and Huijbregts, 2006). Households with children in primary school received MK 200 (US$ 1.33) additionally per child, and households with children in secondary school earned an additional MK 400 (US$ 2.67) per child. This bonus was not tied to school attendance. It was simply given when school aged children were in the household. The average transfer value was MK 1,700 (US$ 11.33) 26 per household monthly, which was deemed large enough to fill the extreme poverty gap in targeted households (Schubert and Huijbregts, 2006). There were 3,000 household beneficiaries by the beginning of 2008 and expenditures were US$ 43,000 monthly (Miller et al., 2008). The pilot scale up was postponed due to funding delays; however, it was able to reach seven districts by the end of 2008 (Horvath et al., 2008). As of April 2009, the scheme reached 92,786 beneficiaries in 23,561 households in seven districts (UNICEF/GOM, 2009). 155. Implementation mechanisms and financing. The Social Cash Transfer program was implemented locally. The Ministry of Women and Child Development and the Department of Poverty and Disaster Management coordinated the pilot with help from UNICEF (Chipeta and Mwamlima, 2007). The Mchinji pilot was implemented by the Local Assembly, whose District Executive Committee had a Sub-Committee on Social Protection with line ministry 26 Standardizing the exchange rate to that reported previously; this is slightly different from the 2006 report by Schubert and Huijbregts. 97 representatives. This sub-committee approved applications to the program. The Malawi district structure has officers that come from various departments and are able to support the program. Capacity is limited at the district level, but not as constrained as in some other countries (e.g. Zambia) implementing a similar program (Schubert and Huijbregts, 2006). Below the Sub- Committee is the Social Cash Transfer Scheme Secretariat with personnel who implement the program, control the budget, and perform periodic monitoring. Below this, the Village Development Committee is in charge of the Community Social Protection Committee, which both targets and tracks beneficiaries (Schubert and Huijbregts, 2006). The Community Social Protection Committee teams receive remuneration to compensate them for some activities performed (Schubert, 2007). 156. For the pilot, UNICEF provided technical assistance, supported program setup, funded the transfers until December of 2006, and supported advocacy and capacity building in Malawi. This included funding visits of government representatives to Brazil and Zambia, holding workshops, and conducting field trips to Mchinji. Additional funding to scale up the program in 2008 and 2009 came from the National AIDS Commission through The Global Fund to Fight AIDS, Tuberculosis and Malaria. The Global Fund’s contributions to the scale up were around US$ 8.8 million, and National AIDS Commission funds were used since approximately 70 percent of beneficiary households have been affected by HIV/AIDS (Schubert, 2007). The EU planned to fund external monitoring and evaluation. The country has expressed interest in obtaining further financing from development partners through a basket fund after the Social Cash Transfer has been incorporated into the National Social Protection Strategy and received full Cabinet support (Schubert and Huijbregts, 2006). Other donors in a pool fund were expected to be the World Bank, DFID, CIDA, and NORAD (Horvath et al., 2008). 157. Challenges in evaluation design. Internal monitoring is completed through the production of monthly reports on costs, activities, outputs, and more. UNICEF and USAID support a joint external program evaluation conducted by Boston University and the Center for Social Research in Malawi (Miller et al., 2008). Targeting evaluations were completed in March and June of 2007, and a systems evaluation was conducted in October of 2007. The baseline household survey was conducted in treatment and comparison village groups in March of 2007 before treatment households received a grant. Follow-up surveys were carried out in August- September 2007 and March 2008, and qualitative data was collected from October-November 2007. However, it appears that experimental methods were compromised in the evaluation. The Mchinji District Secretariat chose which village groups were treatment and comparison groups; both treatment and comparison households were selected using the community targeting methods, and comparison households did not understand that the research was unrelated to their grant receipt. 158. Lessons learned. The targeting evaluation of the Mchinji Program found much need for improvement. ¾ Almost one-third of community members in program areas thought targeting was not fair. The evaluation suggested that less subjective indicators be used to determine program beneficiaries: targeting should be more objective, standardized, and transparent (Miller et 98 al. 2008). Depending on their definition of eligibility, the exclusion errors in communities ranged from 37 percent through 68 percent. ¾ Beneficiaries’ food consumption and diversity had improved over that of the comparison group. In addition, the health of both children and adult has improved, and the self- reported school attendance and capacity to study of children has increased. Child labor had also decreased significantly in the treatment group, while the comparison group’s labor did not change. The evaluation also concluded that household productivity had increased since they received the transfers. ¾ The expected cost of scaling up the program nationally to 273,000 households (1.2 million individuals. of which 60 percent are expected to be OVCs), is around US$ 55 million annually, or 1.4 percent of GDP (Schubert, 2007). In June of 2007, delivery of the transfers cost less than 2.5 percent of program costs, and administrative costs were less than 15 percent of the program costs (Horvath et al., 2008). ¾ The program has faced significant challenges, including: (i) the need for more, better trained district level staff; (ii) ongoing concerns over household dependency and corruption in the program (Chipeta and Mwamlima, 2007); (iii) dealing with high turnover of government employees; (iv) the need for improved financial mechanisms to transfer funds at high levels. and improved MIS system that connected district and national level data; (v) the need to put a complaints/appeals procedure in place (UNICEF, 2009); and (vi) scaling up the program necessitates increased government commitment, particularly from the Ministry of Finance, and additional capacity building at all levels of government. 99 ANNEX XIII: GOOD PRACTICE DESIGN FEATURES FOR DIRECT SUPPORT DRAWN FROM INTERNATIONAL EXPERIENCE 159. Based on good practices in the design of social assistance (direct support) programs, four design features are fundamental to the discussion: Selection of Households for Direct Support 160. It is common knowledge that the more generous the definition of eligibility, the larger will be the pool of applicants for social assistance and the cost of the program. The cost of the program also depends on the level and duration of benefits (discussed in the section below). For example, for the old age social assistance pension program, Nepal defined the cut-off age limit for eligibility as 75. This undoubtedly restricted the pool of beneficiaries and kept the program within the limits set by the available budget, but the program could not reach some of the critical vulnerable groups even slightly below the age of 75. On the other hand, some countries set the limit for eligibility low at 60 (or even lower), leading to the opposite effect of too many beneficiaries and a very large budget. To overcome difficulties of this kind, many countries now resort to limiting the cash transfer social assistance to, say, the poorest 10 percent of the population. One such example is the Kalomo District Pilot Social Cash Transfer program in Zambia, which limited the outreach to the bottom 10 percent of the population. 161. Determining the eligibility and selection of eligible beneficiaries has varied a great deal from one country to another, depending upon (i) administrative feasibility, and (ii) the available information. Where both these sets of conditions are weak, countries (such as Rwanda) have resorted to community targeting approaches. However, good practice dictates validation of such selections via a transparent communication system. For example, in Mexico’s conditional cash transfer program, Oportunidades, beneficiary lists are presented at community meetings which has given communities a chance to pick both exclusion and inclusion errors. In all cases, a complaints mechanism is critical for ensuring community satisfaction with the targeting approach. 162. Where the information constraint is less severe, countries have adopted a proxy means test (PMT). This is a targeting method by which a score for each applicant is generated based on household characteristics that are fairly easy to observe, usually non-income characteristics such as the location and quality of housing unit, ownership of durable assets, number of children, level of education, etc. A threshold score level is set below which a household becomes eligible for the benefit. When a community targeting approach such as the one described in paragraph 3 above is adopted, it is still possible to move gradually to a PMT method, short-list households for the benefit, and then use community meetings to ensure transparency and avoid exclusion and inclusion errors. Many low-income countries are resorting to this combination of a PMT and community validation as a means to select beneficiaries for social safety net programs generally. A recent example is Bangladesh, which is now sponsoring a social safety net program using a combination of PMT and community validation. Determining Benefit Levels 163. Determining the size of social assistance direct support is a tricky issue in all countries. It 100 is hard to provide clear-cut policy advice based on international experience, but some guiding principles can be offered. Typically, in last resort programs such as the one proposed for Rwanda, which aims to reduce extreme poverty, the benefit levels are set as a fraction of the income gap of target beneficiaries. How high or low that fraction should be depends on the available budget and the number of people in extreme poverty. Using a proxy means test, Armenia and Georgia have used this principle. 164. In this regard, some number crunching might be helpful with the available household level information. For example, information on the number of extremely poor households can be combined with information on their income (poverty) gap and, from both these sets of information, one can derive the financial requirements for a given level of benefit. One can then see the feasibility (affordability) of alternative benefit levels and decide on the level that can be defended within the available budget envelope. 165. Benefit levels need not be fixed at a flat level for all types of households. Instead, the levels can be varied. Variable benefit formulas are often the norm in many countries, mainly because such formulas allow for variation in household circumstances (such as number of children. presence of a disabled child or person, long-term sickness of a household head, etc.). A very good (successful) example of such a variable benefit formula is that of Brazil’s Bolsa Familia program. It provides two types of benefits: a base benefit to all families in extreme poverty, and a variable benefit that depends on family composition and income. 166. Whatever method is adopted to determine the benefit level, it is useful to assess the level of benefit as a percentage of the consumption expenditure of extremely poor households. How generous the program is can be assessed from this proportion. The higher the benefit level as a percentage of the household’s consumption expenditure, the more generous the program. Maintaining a generous benefit level is likely to impact on labor supply through adverse disincentive effects; that is, households, even when provided with opportunities to work in the labor market may opt to stay in the “generous� program. While this concern for the impact of benefit levels on work disincentives is theoretically valid, it does not apply to programs that target extremely poor households with no adult labor to participate in the labor market, the disabled, or the elderly. Delivery Mechanisms and Payment Modalities 167. Four principles generally guide the delivery mechanism: (i) ensuring reliability and regularity of payments; (ii) maintaining accountability (governance issues) and prevention of fraud; (iii) reducing transaction costs to the beneficiaries; and (iv) minimizing the administrative cost of delivery. While a number of delivery agencies or routes are available – bank branches, mobile banks, post offices, decentralized government agencies. NGOs – the selection of the delivery mode eventually must satisfy the above four principles, and be available and suitable for a given country situation. Not surprisingly, countries have varied a great deal in this regard. If contractors or a specific agency are/is selected, performance-based incentive contracts can be developed as was done in the Brazil’s Bolsa Familia program. Kenya has tried a pilot program for a cash transfer to orphans and vulnerable children through a bidding process to select a lowest-cost service agency. The advantage of these contract-based service agencies is that the contracts can be revised based on performance. In countries with somewhat developed IT 101 infrastructure, debit cards and smart cards are being used to transfer cash assistance. In the state of Gujarat in India, a pilot program is being tried to use smart cards to transfer in kind social assistance. It is hard to recommend one specific option or delivery mechanism: the main challenge is to adapt any one reliable mechanism to country circumstances and avoid any unintended adverse effects. Monitoring and Evaluation of Cash Transfer Programs 168. Program monitoring is extremely important for any safety net program and especially for cash transfer programs. Systematic monitoring helps one to assess how well the program is being implemented at all levels, and helps mid-course correction in the event of poor implementation. Evaluation complements the monitoring system, inasmuch as it allows an assessment of the distributive effects of cash transfer programs. Despite the critical importance of monitoring and evaluation, unfortunately most safety net programs lack a credible monitoring and evaluation system in place. 169. Monitoring is a continuous activity, and is typically done at all levels – village, district, and national. Its main role is to assess whether or not the program is being implemented in accordance with its design with outcomes as expected. Its annual cost must be factored into the program costs and it must become an integral part of the programmatic framework. A good monitoring system must collect information on the program’s key outcomes. A good practice procedure is that monitoring should be done by an independent agency, outside of the agency or institution implementing the program. A well-documented international experience of good monitoring is from Zambia. The Kalmo District Pilot Social Cash Transfer program (which operated with technical assistance from Germany) implemented third-party monitoring that focused on the quality of program management, the effectiveness of targeting, regularity of transfer payments, and even beneficiaries’ use of the transfers. 170. It is not enough to know the program’s outcomes; it is important also to know the impact of the program on household welfare, which is the ultimate goal of a cash transfer program. Several techniques are available to do an impact evaluation. Two approaches can be distinguished. One is a quantitative approach that collects information on a random sample of households belonging to both the treatment group and the control group, both at the launch of the program and after a given period of time (say. one year). Econometric techniques are then used to assess the impact of the program. 27 A complementary approach is qualitative evaluation, which is based on focus group interviews, key informant interviews, and direct observation. Though qualitative evaluations are not representative, they do offer rich information on the program’s functioning, merits, and shortcomings. 171. A variant of descriptive evaluation is “process evaluation.� which is probably the most common evaluation technique followed in many countries. Its approach is to assess and document how each of the processes underlying a cash transfer program is being implemented. 27 For a thorough understanding of the techniques and applications of the impact evaluation. visit the World Bank website on Impact Evaluation: http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTPOVERTY/EXTISPMA/0..menuPK:384336~pageP K:149018~piPK:149093~theSitePK:384329.00.html 102 It helps address the question. What is happening through the program? Process evaluation strongly complements, but does not substitute for, an internal monitoring system and other evaluations mentioned above. For example, the Zambia example is worth repeating: It included a process evaluation by external evaluators in addition to other evaluations which helped improve the monitoring capacity as it revealed specific flaws in specific processes underlying the program’s implementation. 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