Rédaction Africa Links 24 with Expresso das Ilhas
Published on 2024-03-05 09:31:49
The limited competitive environment, transportation and logistics, and energy are the constraints on private investment in Cape Verde identified in the National Private Sector Diagnostic (DSPN) conducted by the International Finance Corporation (IFC) and the World Bank.
According to the report that will help shape the partnership framework with the Government of Cape Verde, the World Bank warns the Government about the need to eliminate regulatory barriers that still hinder private investment.
The document implies the need to strengthen institutional capacities to implement regulations that promote market competition potential, which is essential to attract investments that increase productivity, expand the economic base, and empower more companies and entrepreneurs to compete globally in terms of prices and quality.
“Being a small island economy, Cape Verde is structurally prone to market concentration with limited competition. Companies in Cape Verde face risks due to the presence of the State in various sectors, regulations that increase operational costs, and weak enforcement of competition and sectoral regulations,” the document states.
The report of the study conducted jointly by the IFC and the World Bank suggests that the Government’s “significant role” as a regulator and market participant in competitive sectors needs to be rebalanced to allow increased competition through private entry.
“Companies with direct and indirect public ownership equal to or exceeding 10 percent, referred to as ‘state businesses,’ held stakes in 33 companies, representing 18 percent of GDP and employing more than 3,100 workers (3.5 percent of formal employment) in 2019,” it says.
According to the same source, the rebalancing should focus on separating vertically integrated services, liberalizing markets through public-private partnerships (PPPs), and implementing divestment measures when appropriate.
On the other hand, the World Bank and IFC propose further liberalizing the market, considering it essential to introduce risk-based licensing, adjust price controls, and facilitate infrastructure sharing in essential enabling sectors.
“Limited competition in key production factor markets not only results in high internet and energy costs and unreliable air and sea services (passengers and maritime transport), but also diminishes Cape Verde’s attractiveness to tourists,” the two entities warned.
The report, presented on Monday in Praia, highlights that the creation of a new competition authority in 2022 is a positive step towards improving the competitive environment.
However, it suggests that the authority needs further strengthening through additional human and capital resources and clear delineation of functions between sectoral regulators to oversee markets more effectively.
“A strong competition policy is essential to allow private investment and enforce pro-competition rules that ensure fair competition conditions. Cape Verde can seize significant opportunities by opening its markets to private investment, reforming its regulatory environment to create fair competition conditions.
This DSPN evaluated sectors where targeted reforms could increase private investment, contribute to growth, and support job creation, aligning with the Government’s strategic vision.
Tourism, the blue economy, and digital services were identified as the main sectors where there are opportunities for private investment.
Read the original article(Portuguese) on Expresso das Ilhas
