Africa’s jewel in the Atlantic

CAPE VERDE: Africa’s jewel in the Atlantic

Ford, Neil

Cape Verde, comprising a collection of small islands off the coast of Africa in the Atlantic, has been quietly but surely growing in prosperity and must now be ranked with Africa’s other economically successful states. Neil Ford reports on what makes Cape Verde tick.

Botswana, Tunisia and Mauritius usually head the list of African economic successes but, almost unnoticed, another nation, off the north-west coast of the continent, might be about to join the list.

One of Cape Verde’s biggest economic problems is learning how to deal with the expected drop-off in external financial support as it makes the transition from developing to middle income country.

Its economic success is complemented by a high level of political stability, confirmed by the recent presidential and legislative elections.

Many Cape Verdeans live and work overseas and the remittances they send home to their families comprise an important strand of national income, estimated at 10%-15% of GDP. The expatriates’ ability to vote also seems to have determined the result of the February presidential election. Cape Verde’s President Pedro Pires won the poll by a wafer-thin majority, taking 51% of the vote to the 49% secured by his rival Carlos Veiga.

The two men have battled for political supremacy throughout the country’s 31 years of independence. Pires came to power in 1975, to lead what was then a one party state, while Veiga and his Movement for Democracy won the first multi-party election in 1990. Pires returned to power in 2001.

Part of Pires’ popularity stems from his key role in leading the campaign for independence, which finally came to fruition in 1975. Yet his 2,856 vote victory was a much larger majority than the 12-vote win over Veiga at the last election in 2001. In both cases, around two-thirds of the Cape Verdeans living abroad are understood to have backed Pires. It is understood that around 20% of the Cape Verdeans included on the electoral role, out of a total population of 325,000, live overseas. Despite Cape Verde’s economic success, the rates of unemployment and underemployment are high and there are relatively few opportunities for young people.

In addition, relatively high population densities have led to soil degradation, in line with the experience of another former Portuguese colony, Sao Tome and Principe. In common with island inhabitants the world over, Cape Verdeans have therefore voted with their feet, to find employment in Portugal and elsewhere overseas.

Pires’ victory followed the success of his African Party for the Independence of Cape Verde (PAICV), which won the parliamentary elections one month earlier with 52% of the vote on a turnout of 58%. Prime Minister Jose Maria Neves commented: “I thank voters for having confidence in us by voting massively for the PAICV. It is obvious that we have not been able to do everything in a five-year term but by renewing your confidence in us you push us to do more.”

As an indication of the success of the country’s political system and the maturity of Cape Verde’s political elite, the chairman of the Movement for Democracy, Agostinho Lopes, congratulated the PAICV on its victory.

The country’s political stability contrasts sharply with the fate of the other four lusophone states in Africa. Mozambique and Angola both suffered from devastating civil wars, Guinea-Bissau has been plagued by political instability and Sao Tome and Principe’s prospective oil boom has prompted a series of political and economic problems, as the prospect of vast oil revenues drives additional wedges between the country’s already divided political elite.

Progress on liberal economic regime

In common with many other major parties in Africa, the PAICV seems to have completed its transition from Marxism to market-orientated economics. The party began to move away from its leftwing roots during the 1980s, although its support remains strongest in rural areas and overseas, while the Movement for Democracy is more popular in urban areas. Despite the PAICV’s conversion, the latter is still considered to be more pro-business and campaigns for more deepseated economic reforms and a bigger role for the private sector.

However, sufficient progress towards developing a liberal economy has been made for the US to include Cape Verde on its list of Millennium Challenge Account (MCA) recipients. MCA investment is only being made in countries that have forged ahead with political and economic reform. Washington has pledged to provide $110m to support a variety of projects in the archipelago and this investment could make a big difference in such a small country.

As a result of its geography, Cape Verde has limited agricultural land, while the lack of known mineral deposits means that it is generally regarded as being of little worth when natural resources are discussed. However, the country is now making the most of the natural resources that it does possesses, in terms of natural beauty, in order to create a sizeable tourist sector.

Cape Verde is located relatively close to Western Europe and so can market itself in the same way as the Atlantic island territories that remain under Spanish and Portuguese rule, such as Madeira or the Canary Islands.

In addition, it is able to offer year-round warm weather and could establish itself as a favoured destination for European tourists seeking a holiday during the northern hemisphere winter.

Successive IMF reports have pointed to the tourist industry as the country’s best hope for longterm economic growth. Visitor numbers have risen by an average of 25% a year since 2001, with total tourist numbers reaching 178,000 in 2004, on the back of greater investment in international marketing.

The growth in the tourist sector is likely to continue as a result of the completion of a new international airport outside the Cape Verdean capital Praia on the island of Sao Tiago. The country now has two airports capable of serving planes from Europe: the facility on the main tourist island of Sal is the country’s other international airport.

Large-scale investment in new luxury hotels and other tourist infrastructure is already underway close to Praia. This could have a major impact on employment opportunities in the country, as over half the Cape Verdean population lives on Sao Tiago, the largest island in the archipelago.

The country’s economic development has not been an overnight success. Annual GDP growth averaged 7% during the 1990s, allowing for a steady rise in the standard of living rather than the kind of economic boom that is often generated by oil discoveries and which can have a negative impact on political, social and economic stability. Average life expectancy has risen to over 70 years and more than 99% of all children now attend primary school.

Cape Verde exhibits many of the characteristics of more prosperous countries, cementing its position in second place on the UNDP’s Human Development Index for sub-Saharan Africa.

Cape Verde’s European ambitions

The PAICVs ambitions have changed so much over the past 20 years that the government is now considering applying for membership of both the EU and the eurozone.

A spokesperson for the Bank of Cape Verde has indicated that the country’s foreign reserves would have to be increased from the current level of 13m euros to 20m euros in order to achieve the latter but added that the switch from the Cape Verde escudo was certainly being considered and was feasible.

Even if the government gives the go-ahead for the change, many years of negotiation with the EU will be required before the country could join but its accession would make it the first African EU member.

Adopting the euro could also help to attract tourists from within the eurozone and the move has been backed by Portugal, probably partly on the grounds that it would result in another Portuguese speaking member of the EU. Such external support has certainly helped to make Cape Verde the political and economic success that it undoubtedly is, but most credit must go to the people of the country.

Quite why Africa’s island states have prospered more than their continental counterparts remains to be seen. Perhaps it is something to do with island identity or tourist potential but it might also be that external donors and lenders favour small states where the benefits are more apparent.

Now that Cape Verde is becoming more prosperous, it may have to make do with far less financial support, although as the experiences of Portugal and Greece have demonstrated, EU membership would certainly attract a whole new tranche of development funding.

Copyright International Communications Apr 2006

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