74900 Cameroon Economic Update Mitigating Poverty, Vulnerability, and Risk A Special Focus on Social Safety Nets January 2013 © 2013 International Bank for Reconstruction and Development/The World Bank 1818 H Street NW, Washington DC 20433, USA Telephone: +1 (202) 473-1000; Internet: www.worldbank.org Some rights reserved. This work is a product of the staff of The World Bank with external contributions. Note that The World Bank does not necessarily own each component of the content included in the work. The World Bank therefore does not warrant that the use of the content contained in the work will not infringe on the rights of third parties. The risk of claims resulting from such infringement rests solely with you. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved. Photo credits © Raju Singh/World Bank Table of Contents Abbreviations and acronyms........................................................................................... v ACKNOWLEDGEMENTs............................................................................................................ vii .......................................................................................................................... 1 INTRODUCTION. RECENT ECONOMIC DEVELOPMENTS.....................................................................................3 Growth..................................................................................................................................................... 3 Inflation................................................................................................................................................... 4 Fiscal Performance................................................................................................................................. 5 Outlook 2013..............................................................................................................................................6 SOCIAL SAFETY NETS IN CAMEROON.....................................................................................9 Introduction............................................................................................................................................ 9 Poverty and Vulnerability...................................................................................................................... 11 Existing Programs................................................................................................................................. 13 Going Forward........................................................................................................................................ 14 REFERENCES............................................................................................................................. 17 Abbreviations and acronyms BEAC Banque des États d’Afrique centrale (Central Bank of Central African States) CEMAC Communauté économique et monétaire de l’Afrique centrale (Economic and Monetary Community of Central Africa) CFAF CFA Franc CPI Consumer Price Index CTS Comité Technique de Suivi ( Technical Monitoring Committee) DSCE Document de stratégie pour la croissance et l’emploi (Growth and Employment Strategy) ECAM III Troisième enquête camerounaise auprès des ménages (Third National Household Survey) ECB European Central Bank EITI Extractive Industries Transparency Initiative GDP Gross Domestic Product HIV-AIDS Human Immunodeficiency Virus Infection / Acquired Immunodeficiency Syndrome IMF International Monetary Fund LdF Loi de finances (Budget) LICs Low Income Countries MICs Middle Income Countries PAD-Y Projet d’assainissement de Yaoundé (Sanitation Project of Yaoundé) SNH Société Nationale des Hydrocarbures (national oil company) SONARA Société Nationale de Raffinage (national refinery) US United States USD United States Dollar WEO World Economic Outlook WFP World Food Program Cameroon Economic Update v ACKNOWLEDGEMENTS The Cameroon Economic Updates are produced by a Team led by Raju Jan Singh, Lead Economist for Central Africa. Chaitri Hapugalle helped prepare the chapter on the social safety nets. Other Team members include Abel Bove, Simon Dietrich, Thomas Dickinson, Ousmane Kolie, Sylvie Ndze, Peter Osei, Adam Broadfoot, Cécile Jannotin, and Manuella Lea Palmioli. The Team has built upon recent work on social safety nets in Cameroon, led by Carlo del Ninno. This work, published recently as a World Bank report, responds to the government’s strong interest in strengthening its social safety net programs to support the poorest and the most vulnerable. It is based on extensive discussions with the government and development partners. The Team has also drawn heavily on ongoing research at the Bank on social safety nets in Africa more broadly and is very grateful to Margaret Grosh, Victoria Monchuk, and Lynne Sherbune-Benz for sharing their preliminary observations and data, as well as commenting on earlier versions of this document. The Team has also benefited from the Officer) provided guidance and advice, and have research carried out by Prof. Assiga Ateba from the been an invaluable source of encouragement. University of Douala and Prof. Zamo Akono from the University of Yaoundé II – Soa. T h e Te a m h a s a ls o g re a tl y b e n ef i te d f ro m consultations with Cameroon’s key policy makers Comments received from Punam Chuhan-Pole, and analysts, who provided important insights, in Allen Dennis, Alain D’Hoore, Faustin-Ange Koyasse, particular the following institutions: the BEAC, the Pierre Nguetse, Carlo del Ninno, Manievel Sene, Technical Monitoring Committee (CTS), the Ministry Gaston Sorgho, Quentin Stoeffler, and Erik von of Economy and Planning, the Ministry of Finance, Uexkull are gratefully acknowledged. Greg Binkert and the National Institute of Statistics. The Team is (Country Director for Cameroon), Mark Thomas also grateful to their colleagues at the International (Sector Manager), and Cia Sjetnan (Senior Country Monetary Fund. Cameroon Economic Update vii 1 INTRODUCTION With this Cameroon Economic Update, the World Bank is pursuing a program of short and frequent country economic reports. These Economic Updates provide an analysis of the trends and constraints in Cameroon’s economic development. Each issue, produced bi-annually, provides an update of recent economic developments, as well as a special focus on a topical issue. The Economic Updates aim to share knowledge and stimulate debate among those interested in improving the economic management of Cameroon and unleashing its enormous potential. The notes thereby offer another voice on economic issues in Cameroon, and an additional platform for engagement, learning and change. This fifth issue of the Cameroon Economic Update is entitled Mitigating Poverty, Vulnerability, and Risk – A Special Focus on Social Safety Nets. Cameroon’s overall poverty rate has not declined and has even increased in the poorest regions. Food security is also problematic in those regions. Yet, Cameroon has a number of small-scale and ad hoc safety net programs which are not appropriately On the contrary, recipients seem to use the money designed to address either chronic or transient to search for jobs. poverty. Too few resources are put into these programs for the moment to make a real difference Going forward, in addition to continued efforts with most of these limited resources allocated to to foster faster economic growth, an efficient, emergency initiatives. equitable, and financially-sustainable social safety net strategy should be developed that combines Social safety nets build households’ productive assets different forms of interventions to deal with the and expand their income-earning opportunities by specific needs of the poor and the vulnerable, building their skills and enabling them to engage and includes an effective monitoring system to in higher risk and higher return activities. There is improve the quality programs. Recognizing this, little evidence, for instance, that cash transfers to the authorities have started work on a strategy and poor households discourage them from working. pilot cash transfer programs. Cameroon Economic Update 1 RECENT ECONOMIC DEVELOPMENTS Growth Consistent with this picture, continued strong performance was observed in agribusiness over the While economic activity in many parts of the world first half of the year, while momentum was growing in has slowed in 2012, economic growth has continued construction equipment and wood-related products. to gain momentum in Cameroon, as in sub-Saharan At the end of the second quarter of 2012, industrial Africa in general. Preliminary indications would production was up by about 8.5 percent compared to suggest that economic growth could reach about the same period the year before (Figure 2). 5 percent in 2012 (compared to 4.2 percent in 2011), as expected in the July 2012 issue of our Cameroon Economic Update. Figure 2: Industrial Production, 2009–12 (change in percent) 10 As in 2011, the main drivers come from the non-oil economy (expected to expand by 5 percent). More 5 particularly, growth in the tertiary sector is estimated 0 to have contributed the most to the expansion in economic activity in 2012 (Figure 1). The primary –5 and secondary sectors have also sustained the –10 momentum, with continued efforts in agriculture to enhance productivity and the construction of new –15 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 09 09 09 09 10 10 10 10 11 11 11 11 12 12 infrastructure projects. Sources: Cameroonian authorities and Bank Staff calculations. Figure 1: Sectoral Contributions to GDP Growth, 2007–12 In addition, as mentioned in our July 2012 issue, the (in percent) downward trend observed in oil production over the 6 past years has reversed. Oil production is expected to 4 expand by about 9 percent in 2012 (Figure 3). Private operators account for this increase, on the back of 2 significant exploration in the past years and a more intense exploitation to take advantage of the current 0 high international oil prices. –2 2007 2008 2009 2010 2011 2012 Primary Sector Secondary Sector (excl. oil) Oil While impor t volumes are estimated to have Tertiary Sector GDP Growth plummeted in the Euro Area in 2012, demand for Sources: Cameroonian authorities and Bank Staff calculations. imports has been more resilient in developing Cameroon Economic Update 3 Figure 3: Oil Production 2009–12 (Figure 5). By contrast, other items more geared to (in mio barrels) emerging Asian economies, such as cotton, have 7.5 substantially expanded. 7.0 6.5 Economic growth remains nevertheless disappointing 6.0 in Cameroon. Poor infrastructure, an unfavorable 5.5 business environment, and weak governance 5.0 continue to hamper economic activity and make it 4.5 difficult to reach the growth rates needed to reduce 4.0 poverty in a sustainable manner. While growth in Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 09 09 09 09 10 10 10 10 11 11 11 11 12 12 12 Cameroon has on average over the past decade Source: SNH. hovered around 3 percent, the average oil-exporting country, MIC and LIC in sub-Saharan Africa have experienced expansions of about 7.5  percent, countries in Asia and in sub-Saharan Africa (Figure 4). 5.5 percent, and 6.5 percent, respectively (Figure 6). As a result, over the first three quarters of 2012, export volumes from Cameroon for products heavily exposed to Europe, such as cocoa, have declined Figure 6: GDP Growth, 2003–2012 (Index 100= 2003) 190 Figure 4: Import Volume of Goods and Services, 2011–12 (in percent change) 140 10 8 90 6 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Cameroon Oil-exporting Countries 4 Middle-income Countries Low-income Countries (excl. South Africa) (excl. fragile States) 2 Sources: International Monetary Fund and Bank Staff calculations. 0 –2 Euro area Developing Asia Sub-Saharan Africa 2011 2012 Inflation Source: International Monetray Fund, WEO database, October 2012. Price pressures observed during the Spring have Figure 5: Export Performance, Q1–Q3 2012 tapered off and the inflation rate is expected to end (y-o-y percent change in volume) the year below the regional convergence criterion of 50 3 percent (Figure 7). Inflation reached 1.9 percent in 40 September (year-on-year), compared to 3  percent 30 over the same period in 2011. These pressures were 20 gaining momentum over the Spring (increasing at 10 their peak by 4.5 percent year-on-year in May). They 0 subsided in recent months on the back of improved –10 food distribution and good harvests. Food inflation is –20 estimated to have reached 3 percent (year-on-year) Cocoa Logs and Rubber Coffee Cotton Wood Products in September, compared to 4.7  percent during the Sources: Cameroonian authorities and Bank Staff calculations. same period in 2011. 4 Cameroon Economic Update Figure 7: Selected Prices, 2006–12 as a ratio to GDP observed over the past years is (y-o-y change in percent) projected to reverse with current spending declining 14 from 15.4  percent of GDP to 13.5  percent of GDP. 12 This spending restraint on a cash basis has provided 10 fiscal space for capital expenditure to be maintained 8 6 at about the same level observed in 2011, which 4 represented a substantial increase compared to the 2 2010 outcome (4.5 percent of GDP). 0 –2 –4 As a result, the overall fiscal deficit on a cash basis Dec-06 Apr-07 Aug-07 Dec-07 Apr-08 Aug-08 Dec-08 Apr-09 Aug-09 Dec-09 Apr-10 Aug-10 Dec-10 Apr-11 Aug-11 Dec-11 Apr-12 Aug-12 (incl. grants and before payment obligations) is expected to narrow in 2012  to a bit less than one Total (Headline) CPI Food Price Index percent of GDP (compared to a budgeted deficit Sources: Cameroonian authorities and Bank Staff calculations. of 2.2  percent of GDP and a deficit of 3.0  percent of GDP observed in 2011). This narrower overall fiscal deficit on a cash basis reflects, however, a Fiscal Performance continued accumulation of new payment obligations (particularly related to fuel subsidies), which could On the basis of the fiscal performance observed over amount to about 0.5 percent of GDP. the first three quarters of the year, fiscal revenues— both oil and non-oil—are projected to be higher than This accumulation combined with delays in the budgeted for the year as whole (Table below). Better oil issuance of a new government bond will put pressure revenue stemmed from higher international prices than on the government’s cash position. SONARA, budgeted for crude, while tighter control on exemptions the national oil refinery, faces revenue shortfalls seems to have driven higher non-oil revenue. stemming from the government’s policy to freeze retail prices of petroleum products. As mentioned Expenditure meanwhile is projected to remain in in the July 2012 issue of our Economic Update, the line with the budget. The rise of current expenditure budgeted amount for compensating SONARA is Fiscal Performance, 2011–12 (in percent of GDP) 2011 2012 2012 2012 Est. Budget July Proj. Proj. Revenue and Grants 18.8 17.8 18.9 18.9 Oil Revenue 5.3 4.4 5.5 5.1 Non-oil Revenue 13.0 12.9 12.9 13.2 Grants 0.5 0.5 0.5 0.5 Total Spending 21.8 20.0 21.4 19.7 Current Spending 15.4 13.8 15.2 13.5 Capital Spending 6.4 6.2 6.1 6.2 Overall Balance –3.0 –2.2 –2.5 –0.8 Payment Obligations –0.5 –0.2 –0.2 –0.2 Overall Balance on a cash basis –3.5 –2.4 –2.7 –1.0 Sources: Cameroonian authorities and Bank Staff calculations. RECENT ECONOMIC DEVELOPMENTS 5 expected to fall short: an estimated CFAF 450 billion weaker confidence and the potential unsettling of (3.5 percent of GDP) being needed in 2012 instead global financial and commodity markets, would likely of the CFAF 170 billion budgeted. have a strong impact on economic growth in sub- Saharan Africa. Outlook 2013 Finally, a third source of uncertainty stems from the possibility of a disorderly unwinding of China’s The economic momentum observed in 2012  is unusually high investment rate. With Chinese demand expected to carry over into 2013 with the construction accounting for a large share of many commodities of large infrastructure projects and continued efforts exported from Africa, a sharper than envisaged to improve agricultural productivity. The production downturn there could lead to a slump in commodity at the Kribi gas station is expected to contribute prices which would adversely affect the exporters of to alleviating power bottlenecks. Furthermore, natural resources in the region. production in the oil sector is expected to continue its recovery, increasing by a further 9 percent in 2013. As discussed in the previous issues of the Cameroon Economic Update, the main transmission channel Uncertainty will continue, however, to surround of these events to Cameroon’s economy would be developments in advanced economies, making any through exports and remittances. The global linkages projection particularly challenging. According to the of the financial system of the CEMAC region are still most recent release from the European Commission, limited, and the banking sector remains sufficiently confidence, although improving, remains weak in the liquid to meet the credit needs of the government Eurozone and will continue to weigh on investment and the private sector. Furthermore, the budget of and big-ticket consumption decisions (Figure 8). Cameroon does not rely heavily on foreign aid, hence any adverse impact from lower aid following fiscal Figure 8: Euro-zone – Economic Sentiment austerity measures in the Euro zone should be limited. Indicator, 2010–2012 110 The Euro zone is still, however, the largest market for 105 Cameroon’s exports and hosts the largest community of Cameroonians abroad. With slower economic 100 growth, demand for products using Cameroonian 95 inputs such as housing (wood) or cars (rubber) could 90 decline. The diaspora may have less money to transfer 85 back to their relatives or may even return, should they 80 be laid off and/or migration regulations tightened. Jan-10 Mar-10 May-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Sep-12 Nov-12 Although direct trade with the US remains limited, exchanges with China—and hence Cameroon’s Source: European Commission. exposure—have been recently expanding. Against this backdrop, economic growth in Cameroon could In addition, despite the January agreement averting amount to about 5 percent in 2013. automatic tax hikes on all US taxpayers, current US legislation unless amended in the next two months Inflation is expected to remain below the regional would impose a sharp 4–5  percent of GDP fiscal convergence criterion of 3 percent in 2013. Ongoing adjustment that would substantially weigh on the US initiatives to boost agricultural production are likely economy in 2013. Given the importance of the US to continue to moderate the impact from possible economy in global markets, the direct effect through increases in world food prices. Nevertheless, with the trade channel, as well as indirect ones through international wheat and maize stocks at their current 6 Cameroon Economic Update low levels, even a small additional supply shock could subject to downside risks (Figure 11). For instance, trigger a large price spike in international markets, a USD 10  lower price for international crude oil while higher oil prices could make maize-based would reduce oil revenues by 0.5  percent of GDP. ethanol an attractive alternative. Furthermore, the cost of fuel subsidies remains under budgeted, which undermines transparency, and will Turning to fiscal policy, preliminary information would weigh again on the cash position and execution of indicate that the 2013  Budget aims at containing the budget. A continued freeze of retail fuel prices the deterioration of the overall fiscal deficit to would require an estimated CFAF 400 billion (about 2.3 percent of GDP on a cash basis (including grants 3  percent of GDP), but only CFAF 220  billion have and before payment of obligations). This would been budgeted. Upcoming elections could add reflect a continued expansion in public investment further pressure on spending, as could the resolution (to 6.9 percent of GDP) in line with the objectives of of the couple of financially troubled banks. the DSCE, while also providing fiscal space for current spending to expand (Figures 9 and 10). Figure 11: Non-Oil Revenue, 2005–13 (in percent of non-oil GDP) Figure 9: Current Expenditure, 2005–13 15.0 (in percent of GDP) 16 14.5 15 13.5 14 13 13.0 12 12.5 2005 2006 2007 2008 2009 2010 2011 2012 2013 11 Proj. LdF 10 Sources: Cameroonian authorities and Bank Staff calculations. 2005 2006 2007 2008 2009 2010 2011 2012 2013 Proj. LdF Sources: Cameroonian authorities and Bank Staff calculations. In this potentially volatile environment, developing countries are encouraged to rebuild buffers and pursue cautious macroeconomic policies. For many Figure 10: Capital Expenditure, 2005–13 developing countries this means rebuilding the (in percent of GDP) fiscal buffers that were consumed during the 8 2008–09 crisis so that if some of the risks facing the 7 global economy materialize, they would once again 6 be in a position to respond forcefully. 5 4 3 For Cameroon, this would mean building up its 2 government deposits at the regional central bank. 1 During the 2008–09  crisis, public spending could 0 have been protected and supportive fiscal measures 2005 2006 2007 2008 2009 2010 2011 2012 2013 Proj. LdF introduced using the fiscal savings that had been Sources: Cameroonian authorities and Bank Staff calculations. accumulated in previous years. At the current reduced level, the remaining government deposits The budgeted revenues are, however, based on at the regional central bank will only provide a limited ambitious expectations for the country’s economic buffer, should matters become worse than currently growth and for international prices for crude oil, and projected. RECENT ECONOMIC DEVELOPMENTS 7 The introduction of program budgeting starting in 2013 should improve efficiency of public spending. The new approach places the line ministries at the center of the budget cycle. These ministries will have now more flexibility in preparing and executing their budgets, but in return will be held accountable for the results. Program budgeting addresses, thus, most of the critical short-comings that affected the country’s public expenditure management: excessive centralization of the budget processes, leading to low budget execution and poor strategic allocation of resources; and poor value-for-money and quality of service delivery. Turning to the composition of public spending, the need for subsidies, particularly for food and fuel, should be openly and candidly discussed. Data show that these subsidies mostly favor the rich and are largely ineffective in protecting the consumption of the poorest. As already mentioned in the previous issues of our Cameroon Economic Update, the richest 20  percent of the population captures most of the subsidies on gasoline and diesel, and over 40 percent of the subsidies on rice, wheat, and fish. Commodity exporting countries may also need to take a close look at expenditures and revenues This is not to say that the poor or the vulnerable do to ensure that long-run spending commitments not benefit from the freeze of retail fuel prices. There could still be met even if commodity prices and may, however, be more targeted ways to provide associated revenues were to decline. In this regard, the same assistance to the poor and the vulnerable, ongoing efforts to improve both the efficiency and while charging the full price for petroleum products the composition of public spending will need to be to those who can afford it. Possible options in this continued in Cameroon. regard could include subsidies to the urban public transport or targeted social safety net programs In the health sector for instance, while Cameroon has (see next chapter). a level of health spending of USD 61 per capita per year, its epidemiological profile corresponds more Such targeted measures would allow to free public to countries with extremely low per capita spending resources to be reallocated to priority areas. (in the order of USD 10–15 per capita per year). This This is where ensuring fiscal transparency and outcome is a reflection of profound inefficiencies clear communication plays a critical role. Policy in the use of the resources available for health, and changes should be discussed with a broad range lead to significant geographic and socio-economic of stakeholders, and communicated effectively to inequities in access to essential health services. the public in a way that takes into consideration the The 2009 budget tracking exercise—tracing public perceptions and expectations of different segments funds through the administration—observed that of society. The use of any savings should be clearly 35–40 percent of budgetary resources were declared identified and transparently monitored in order to never to reach local health units. build trust in the process of change. 8 Cameroon Economic Update SOCIAL SAFETY NETS IN CAMEROON Introduction The benefits of economic growth in Africa have not always reached the poorest people, and, as a result, poverty still remains high. In addition, men and women across the continent remain vulnerable to a range of shocks like drought, floods, conflict, and ill health. The droughts in the Horn of Africa and Sahel in 2011  were stark reminders of this vulnerability. Climate change, population pressure, and an increasingly fast changing world mean that, for many Africans, life is becoming more uncertain. As a result, while efforts will continue to be called for to accelerate economic growth, especially in Cameroon, there is a pressing need for countries to establish and expand social protection systems. Social safety nets help to mitigate poverty and vulnerability stemming from external shock or socio-economic circumstances, such as age, illness, disability or discrimination.1 More and more African governments have already invested in safety net programs that are proving to be effective. A growing body of evidence from African countries the poor and offer them access to opportunities. shows that social safety nets directly reduce chronic During crises, they can be extended to protect the poverty and vulnerability, as these programs enable affected population. poor households to meet their basic consumption needs, protect their assets, and achieve better health, Social safety nets—when in place—seem to have nutrition, and education outcomes. Findings show played an important role in mitigating the trade that well-designed social safety nets allow to protect shock resulting from the 2008/09 global economic crisis, for instance, both in terms of their direct people and complement macro-economic measures aimed at stabilizing the economy. Once in place, safety nets are also a critical part of a government’s 1 The term “social safety nets� refers here to non-contributory transfer programs targeted to the poor or vulnerable, such capacity to respond to shocks. During times of as cash transfers, school feeding programs, public works prosperity, these programs can effectively protect programs or in-kind support. Cameroon Economic Update 9 impact on the poor and as automatic demand stabilizers. When  such programs were already in place, governments were much more effective in responding to the crisis by scaling up existing measures rather than having to introduce new ones. Social safety nets could be a powerful way to promote growth. These programs build households’ productive assets and expand their income-earning opportunities by building their skills and enabling them to engage in higher risk and higher return activities. Social safety nets contribute to local economic development by stimulating local markets through cash transfers and creating community infrastructure. Interestingly, there is little evidence that cash transfers for instance discourage people from working. On the contrary, recipients seem to use the money to create opportunities and search for jobs. For example, the Youth Opportunities Project in Uganda resulted in a significant increase in the number of hours that participating youths were employed outside of the house (Box 1). Roughly two years after participating in the project, nearly three- program. In South Africa, cash transfers made finding quarters of these young people were engaged in new work more feasible, as recipients could afford bus skilled work. Participants of cash transfers in Mexico fares, work clothes and funds for migration to urban and Colombia have demonstrated sustained income areas. It was also associated with an increase in the gains after leaving the programs. In Malawi, the Dowa labor force participation of mothers. In Zambia, as Emergency Cash Transfer increased local incomes much as one-third of the cash transfers to destitute by USD2–USD2.25 for each USD1 transferred by the households affected by HIV/AIDS were invested in Box 1 – Northern Uganda Social Action Fund – Youth Opportunities Program The Youth Opportunities Program (YOP), a component of the Northern Uganda Social Action Fund, provided cash grants to young men and women to invest in skills training and in setting up small businesses. Applicants formed groups consisting of roughly 20 to 30 young adults interested in a vocation and submitted proposals for purchasing skills training, tools, and other materials required to start an enterprise. The successful groups received a lump sum cash transfer of roughly USD 7,100, or USD 374 per person, which they deposited in a jointly held bank account and were free to spend as they saw fit with no supervision or oversight. The impact evaluation found that, as a result of the program, both men and women increased their hours in employment outside the home, by about 25 percent among men and by 50 percent among women. Two years after the grant, nearly three-quarters of the participants were engaged in skilled work, compared to just over one third for those who had not participated in the program. Men in particular earned high returns, by about USD 16 extra per month, equivalent to a 55 percent increase over men who had not participated in the program. Sources: Blattman et al. (2011) and World Bank (2010). 10 Cameroon Economic Update small livestock, farming and other small business or drought; and (iii) vulnerable groups, including—but opportunities. not limited to—people with disabilities, the elderly, orphans, widows, refugees, and asylum seekers. Perhaps most importantly, experience shows that social safety nets are affordable in low-income Overall, poverty rates in Cameroon virtually stagnated countries. Across the world, non-contributory safety between 2001  and 2007—at close to 40  percent. nets rarely account for more than one to two percent With a population growing at about 3  percent, the of GDP, even in countries with generous systems. rates of economic growth observed over the recent Flagship safety net programs in Mexico or Brazil cost past have not been fast enough to deliver tangible just around 0.5 percent of GDP. improvements in the living conditions for the average Cameroonian (Figure 12). Meanwhile, many Yet in many developing countries, safety nets are other African countries have managed to reduce insufficient or nonexistent. In low-income countries, their poverty rates, sometimes quite substantially safety net programs are either absent, or piece-meal (Figure 13). and uncoordinated, with uncertain financing and limited coverage. Many middle-income countries have more effective safety net structures in place, yet also experience substantial financing shortfalls, Figure 12: GDP per capita, 2003–12 poor targeting, limited impacts, and coordination (Index 100 = 2003) 150 failures among multiple programs. In all countries, the challenge of responding adequately to protect 140 people from the effects of shocks—whether from 130 economic factors, natural disasters, or household- 120 specific crises—is largely unmet. 110 100 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Cameroon Oil-exporting Countries Poverty and Vulnerability Middle-income Countries Low-income Countries (excl. South Africa) (excl. fragile States) Cameroon’s economy remains vulnerable to a variety Sources: International Monetary Fund and Bank Staff calculations. of internal and external shocks. With 45 percent of its population engaged in subsistence agriculture, the country is particularly vulnerable to environmental risks such as flooding, drought, and desertification. Figure 13: Selected Countries – Poverty Rates Macroeconomic risks are also to be taken into account, (in percent of population) as the 2008–09  global crisis has demonstrated. 80 Limited export diversification in terms of products and markets exposes the economy and its people to 60 the volatility of prices and demand for its key exports. 40 Well-designed social safety nets should serve one or 20 a combination of the following groups: (i) the chronic poor, defined as people who do not earn sufficient 0 Cameroon Tanzania Burkina Faso Benin Swaziland Zambia Mali Botswana Rwanda income, even in good years; (ii) the transient poor defined as people who earn sufficient income in good years, but fall into poverty, at least temporarily, as a Early 2000’s Late 2000’s result of adverse shocks such as illness, the loss of a job Sources: Cameroonian authorities and Bank staff calculations. SOCIAL SAFETY NETS IN CAMEROON 11 Although overall poverty has not changed, poverty urban population. More than half of the population in in urban areas has declined over the past decade. the regions of the North and Far North are chronically Comparing the results of the two household surveys poor. Other regions with levels of chronic poverty in 2001 and 2007, one observes that poverty rates above the national average include the Adamawa, in urban areas have decreased by a bit less than the East and the North West. 6 percentage points (Figure 14). Poverty rates have Furthermore, the majority of Cameroon’s population makes its living from the land and is particularly Figure 14: Change in Poverty, 2001–2007 vulnerable to climate shocks and natural disasters. (in percent) Transient poverty is, therefore, higher in rural areas. 40 Nevertheless, this phenomenon seems to be a national 20 problem rather than limited to the poorest regions. In most of the regions, about ten percent of the population 0 is vulnerable to temporary poverty (Figure 16). This –20 number climbs to a bit below 15 percent in the Center –40 and peaks at about 20 percent in the North West. –60 Yaounde Douala West South West Center Littoral South North West Adamawa East Far North North Urban Rural Figure 16: Transient Poverty Rates, 2007 (in percent of the population) Sources: Cameroonian authorities and Bank staff calculations. 25 20 also declined most significantly in the West, South West, South, Littoral, and Central regions. In rural 15 areas, however, poverty has actually increased, as 10 well as in the Adamawa, East, North, and Far North. 5 Chronic poverty in Cameroon is primarily a rural 0 South West South Far North Adamawa North West Littoral East Center North West Rural phenomenon and is wide-spread in the Northern Urban Regions (Figure 15). According to ECAM III, 38 percent of individuals in rural areas are chronically under the Sources: Cameroonian authorities and Bank staff calculations. poverty line, as opposed to only 3.2 percent of the Figure 15: Chronic Poverty Rates, 2007 Figure 17: Food Insecurity, 2011 (in percent of the population) (in percent of the population) 60 20 50 15 40 30 10 20 5 10 0 0 Littoral West South South West Center North West East Adamawa North Far North Rural Urban South West North West Center Littoral South Adamawa West East North Far North Sources: Cameroonian authorities and Bank staff calculations. Source: World Food Program. 12 Cameroon Economic Update Looking at food security, the World Food Program Figure 19: Social Safety Net Spending* observes that the Northern and Eastern regions of (in percent of GDP) Cameroon have the highest share of households 5.0 considered food insecure (Figure 17). This means they 4.5 4.0 do not produce enough for their own consumption 3.5 and their poverty levels prevent them from accessing 3.0 2.5 sufficient quantities of quality food. 2.0 1.5 The Northern and Eastern regions are also the most 1.0 0.5 vulnerable to food insecurity (Figure 18). The North, 0 Mauritius Sierra Leone South Africa Botswana Mozambique Burkina Faso Togo Benin Cameroon LICs MICs which is characterized by an agro-ecological Sahelian climate, has experienced recurrent shocks in the last years, including droughts in 2004 and 2009, floods * Most recent data 2008–11. in 2009  and a cholera outbreak in 2010  and 2011. Sources: Cameroonian authorities and Bank staff calculations. More than 30 percent of households are vulnerable in the Adamawa. This number climbs to more than and vulnerability. According to the most recent data, 60  percent in the North and Far North. Their food Cameroon spends 0.2  percent of GDP on social safety nets—one of the lowest ratio in Africa—while Figure 18: Food Vulnerability, 2011 the average low-income country spends seven times (in percent of the population) that amount and the average middle-income country 70 more than ten times. 60 50 Furthermore, there is a lack of coherent social 40 protection strategy and effective basic safety net 30 programs to address chronic poverty and food 20 insecurity. The very limited resources available for 10 social safety nets are spread over programs falling into 0 six major categories: (i) unconditional cash transfers; Center South South West Littoral North West West East Adamawa Far North North (ii) labor-intensive public works; (iii) emergency Source: World Food Program. Figure 20: Composition of Social Safet Nets* (in percent of total) 100% consumption is currently acceptable, but in case 90% 80% of recurrent shocks, they tend to adopt coping 70% strategies such as buying cheaper food, reducing 60% meal sizes and/or cutting the number of meals. 50% 40% 30% 20% 10% Existing Programs 0% Togo Cameroon Mali Sierra Leone Liberia Benin Botswana Mauritius Despite the high level of chronic poverty and food insecurity, very little spending in Cameroon goes to School Feeding Fee Waivers Emergency Other safety net programs (Figure 19). As a result, these Public Works Cash Transfers Nutrition programs are too small to make any meaningful * Most recent data 2008–11. difference to reduce poverty levels, food insecurity, Sources: Cameroonian authorities and Bank staff calculations. SOCIAL SAFETY NETS IN CAMEROON 13 Box 2 – Social Safety Nets in Cameroon Unconditional cash transfers There is not much experience with cash transfers in Cameroon. There are some direct transfer programs targeting the needy and indigent. The Ministry of Social Affairs is involved in assisting abandoned and street children, handicapped individuals, the elderly, as well as the vulnerable cultural minority groups. The involvement of the Ministry, however, is often in the form of supporting non-government institutions, including private. This type of assistance seems to be ad-hoc, not well organized, and the coverage and beneficiaries are not well documented. Labor-intensive public work programs Labor-intensive public works programs are normally short-term safety nets interventions that provide temporary employment opportunities in small scale community infrastructure projects. They can be either cash-for-work or food- for-work. There have been two principal public work initiatives in Cameroon: one run in Yaoundé (Projet d’Assainissement de Yaoundé – PAD-Y), another run by the World Food Program in the North and Far North. PAD-Y focused on cleaning infrastructure projects in the city of Yaoundé, while the WFP project primarily deals with rural infrastructure upgrading, such as roads and small-scale irrigation structures. The PAD-Y appeared, however, to be more an employment program than a temporary labor-intensive public works program. With its high daily wages and residency-conditions, the program could not target effectively the poor or the vulnerable. The WFP project was mostly a food-for-work public works intervention. Emergency response initiative Emergency response initiatives are largely designed to respond to national disasters (droughts, flooding or refugees). Considerable resources are allocated to food emergency response initiatives, often under the purview of the WFP. These programs involve the creation of cereal stocks in villages, which are then drawn upon at times of distress. School feeding programs School feeding programs are in place in the Adamawa, the North, and the Far North. These programs aim at simultaneously encouraging more children to attend school, especially girls, and remedy nutritional deficiencies for children already attending. Although school feeding programs are geographically appropriately targeted to regions with the lowest educational attainment rates and highest levels of food insecurity, only five percent of all primary school students are covered. Nutrition programs The nutrition programs in Cameroon are mostly health-related interventions targeted to support orphans and vulnerable children, in particular those infected by HIV/AIDS or having lost their parent to AIDS. In light of the scale of the orphan issue, the coverage of these programs is extremely limited. Fee-waiver programs for basic services Fee-waiver programs in Cameroon mainly address education and health services. The Ministry of Health manages fee- waiver programs for the indigents and the needy, in particular for emergency hospital treatment and medical evacuation, as well as for malaria diagnosis and treatment for children under the age of 5. This fee-waiver program often does not cover, however, the full cost of the treatment. Fee-waiver programs also exist for disadvantaged primary and secondary school students, and cover about 60,000 mostly handicapped students in the Northern and Western regions. response initiatives programs; (iv) school feeding the largest share of spending is allocated on cash programs; (v) nutrition programs; and (vi) fee- transfers. waivers for basic services (Box 2). The vast majority of these resources are going, however, to address The programs are also spread over a multiplicity of food emergency interventions, with spending aimed ministries and departments, making coordination at alleviating short-term and temporary vulnerability and effective monitoring problematic. There is no (Figure 20). By contrast, in several MICs in southern mechanism to identify risks and vulnerabilities, and Africa, such as Botswana, Lesotho, and Mauritius, map them to appropriate programs. 14 Cameroon Economic Update Going Forward Against this backdrop, there is a need for a coherent social safety net strategy to address effectively chronic pover ty, as well as food insecurity in Cameroon. This strategy should identify risks and vulnerabilities, and map them to appropriate instruments and programs. Priority groups should be identified that could benefit from safety net programs. Appropriate targeting mechanisms also need to be developed to ensure the participation of those in need. In this regard, several characteristics are needed for a well-functioning social safety net system. Equity should be ensured in terms of benefits and financing. The system should also be fiscally sustainable. It should be scalable so that it can be expanded to respond quickly to growing needs if a shock arises. Finally, the system should be compatible with incentives for individuals to work and save. Different forms of safety net programs could be combined to address the specific needs of the poor and vulnerable. Best practices show that a direct cash transfer program that transfers a set amount of money to vulnerable households throughout the year to be able to manage large-scale, coordinated could significantly reduce vulnerabilities to chronic interventions. The national system will be tested food insecurity. In addition, alternative forms of through the implementation of two programs: a safety net interventions aimed at helping households cash transfer program covering 40,000 vulnerable mitigate shocks could assist in responding to climate- households and a public works program covering related shocks and other seasonal income shortfalls. 30,000  poor households in areas with the highest poverty rates in the country according to ECAM Finally, monitoring systems supporting safety net III. Urban areas in Yaoundé and Douala will also be programs need to be improved to collect core data included to test interventions best suited to urban on the number and type of beneficiaries reached, areas. money flows, as well as information about program outcomes and impacts. This information would be Meanwhile, the authorities are preparing a small- critical to improve program design and coordination, scale pilot project to build experience and develop inform decision makers, build trust, and attract instruments ahead of the larger scale ones. A cash financial resources and donor support. transfer program will be implemented in the Far North and North West, covering 2,000 beneficiaries. In this regard, the authorities are in the process of The program will give a special focus on assisting developing a national social safety net system. This households in learning income-generating skills system will include appropriate targeting, monitoring, to support themselves and become productive and information management. It will be designed members in their communities. SOCIAL SAFETY NETS IN CAMEROON 15 REFERENCES Blattman, C., N. Fiala, and S. 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