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Opportunities and challenges for Cabo Verde

During the second leg of our visit the UK parliamentary delegation was given the opportunity to understand the political, economic (and some of the) sustainability opportunities and challenges for Cabo Verde. It was clear that there was a desire to strengthen formal links with UK. Given it was fifteen years since the last parliamentary delegation from the UK to Cabo Verde, the hospitality and seniority of meetings offered was considerable, and we felt extremely welcome. In particular, thanks must be given to the Speaker and his personal involvement to ensure the success of the visit, to the two MPs who accompanied us throughout our entire visit, as well as to the very efficient protocol team at the Cabo Verdean parliament.

In addition to appropriate protocol meetings the delegation met with those engaged in promoting Cabo Verde as a tourist and inward investment location. The UK is already the largest provider of tourists to the islands of Cabo Verde and this is set to grow. The growth in numbers in the last two years has been assisted with the diversion of UK tourists from Egypt, Tunisia and Turkey. The Cabo Verdeans are aware of this and are working hard to retain the visitor numbers once other destinations are open again. Clearly the investment we saw during our visit to the island of Sal suggests private sector confidence that growth will continue.

It is obvious that the political stability (and pride in their democratic credentials), low crime levels, friendly population and good air links, in addition to minimal time difference to Western Europe and obvious good weather all year round provide a good basis for tourism and economic development growth. But Cabo Verde retains significant social development challenges and low domestic revenue, so whether this growth actually happens and meets the Cabo Verdean ambitions is yet to be seen. The potential of growth in the economy is still limited by low levels of liberalisation and a virtually non-existent investment community. In addition to this, the legal system is strained and in need of reform and there continues to be a lack of full confidence in Cabo Verde’s contact law environment. The Portuguese provide some support for reform and improvement but evidence given to us suggested it was still not a very easy location to conduct business, or to access Cabo Verdean markets.

While there is clearly strong ambition and enthusiasm, Cabo Verde still lacks detailed, evidence based strategic planning policies plans. The staff in their promotion body we met are impressive and wonderfully engaging, and clearly this new body established by the new government shows its commitment to economic growth. But what we saw was mostly the estimated capital investment value for projects (information provided by the developer) rather than wider net present value of the development with the wider and longer term economic benefit. They lack the social development plans associated with this and therefore have limited capacity in planning ahead for the wider social development in skills, health and transport links. This is something the UK could assist with.

This limited capacity to plan strategically – with no spatial plans, no Cabo Verde environmental and sustainability strategy alongside a planning strategy and infrastructure plan – was fascinating to see first hand. It shows the constraints on a country with such rich potential but limited capacity. A concern would remain that in the absence of such plans (agreed after appropriate parliamentary scrutiny and oversight) the natural beauty of Cabo Verde may be threatened, and domestic job opportunities may not materialise if labour is imported, and appropriate tax and revenue agreements are secured to secure additional revenue. When we were briefed on the tax regime for new tourism investments it seemed that the business fiscal regime was designed to be attractive to new investment but didn’t seem to part of an overall longer-term strategy. The desire for rapid investment growth was palpable.

Similar observations can be made for energy and wider sustainability. The potential for and the commitment to a significant scale up on the use of renewable energy is clearly there, which was evident during our meeting with Cabeolica S.A., the first commercial-scale, privately financed, public private partnership (PPP) wind farm in sub–Saharan Africa, that has received substantial DFID funding in the past. But the large tourist developments will put a strain on energy consumption, as well as potable water. It was clear that the Cabo Verdeans are aware of this problem and are working towards solutions, but the capacity of officials in government, and then for their proposals to receive oversight in parliament, to overcome this with long term planning policies seems a big challenge.

It was also most interesting to see first hand that in the absence of an ability to lever in private sector investment (or government investment itself), and the lack of a domestic finance community, Cabo Verde relies so heavily on the China Africa Development Fund (CADFUND). Concern has been raised repeatedly about the lack of transparency in how CADFUND operates. It is exceptionally hard to access its investment plans and there is no consistency in how it operates. This is in stark comparison with direct DFID investment support elsewhere but also how equity investment funds such as CDC operate.

CADFUND have not only constructed school and health facilities on the islands but it is also refurbishing the parliament building. The visit to the parliament refurbishment project was most interesting as it demonstrated how a project is delivered by a Chinese company operating directly under a CADFUND project. Such a signature and high profile project for the country could have been a showcase for local labour, learning and skills development in modern high quality construction projects and renewable energy. The project itself could have been used to reflect how Cabo Verde wants to be seen as a place of doing international business to high ethical standards and with longer term benefits for training and skills, but the tour of the facility, and indeed the way the site was managed also, showed that this didn’t seem to be the case.

Clearly there is a strong feeling of goodwill and expectations to the UK from the people of Cabo Verde to the highest levels. The UK could and should offer much more in technical assistance and capacity support, and not just an ever increasing number of tourists.

Lord Purvis of Tweed