News Archive

Investor's Guide Aims to Open West African Nation

São Tomé and Principe Offers Agriculture, Tourism, Oil

2008-09-19
With its strategic location and good soils, the nation is said to have strong potential for high-value agriculture.

With its strategic location and good soils, the nation is said to have strong potential for high-value agriculture.

Analysts at Columbia University’s Earth Institute say that São Tomé and Príncipe, a small, developing island nation off west Africa, offers substantial opportunities for investors worldwide. They particularly target cocoa and other crops for export, eco-tourism, fisheries, regional transshipment and petroleum. Their findings are contained in the new Investor’s Guide to São Tomé and Príncipe. A collaboration between the Earth Institute’s Sao Tome e Principe Advisory Project and the Vale Columbia Center on Sustainable International Investment, the guide is being released in Lisbon on Sept. 19 by Portugal’s business agency, the Agência para o Investimento e Comércio Externo de Portugal, and in New York City on Sept. 22, 2008 during a dinner for STP president H.E. Fradique de Menezes.

”São Tomé and Príncipe is off the beaten track for most investors. They may well miss out on some interesting opportunities,” said Karl P. Sauvant, executive director of the Vale Columbia Center. Since mid-2003, the Earth Institute has led a diverse team of experts advising the nation on how to achieve economic growth and sustainable development, while also promoting transparency and good governance.

“Although the guide is aimed primarily at potential investors, we hope that it will also be useful to the development community, civil society and diplomatic missions,” said Jeffrey D. Sachs, director of the Earth Institute. “While by no means the sole driver of growth and development, foreign direct investment does have a distinctive contribution to make. Apart from much needed capital, it can bring know-how, technology, and access to foreign markets.”

Agriculture is the dominant sector in terms of employment (around 70%), although it accounts for less than 20% of the gross domestic product. São Tomean cocoa is prized for its high quality, and is often blended with lower quality cocoas to improve the overall product. There is also a growing organic cocoa sector. The potential for other high-income crops, including flowers, fruits and vegetables is considerable says the report, given the high-quality soil and plentiful rainfall. Markets for such products can be found along the coast of west Africa and abroad.

STP’s historic focus on agriculture is surprising, given the size of the nation’s territorial waters, which span 130,000 square kilometers—well over 100 times the nation’s land area. Biodiversity surveys indicate that the country’s waters include 185 species of fish from 67 families. Studies indicate a potential fisheries biomass of 12,000 tons annually. Among the most abundant fish are seabream, flying gurnards, squid, cornet fish, snapper, grouper and grunts.

STP also has considerable advantages as a tourist location, says the report. It is a classic tropical island with palm-fringed beaches, turquoise seas, waterfalls, rivers, and more endemic species of plants and animals than almost anywhere on earth. Perhaps most important in an African context, it has no political violence and little crime. Hotel capacity is growing rapidly. Portugal’s Grupo Pestana has built a 5-star hotel with a casino in the capital city, São Tomé. This joins a resort the company already manages on the southern tip of São Tomé island.

In August 2008, STP signed a USD $400 million contract with Terminal Link, a wholly owned subsidiary of the French shipping giant CMA-CGM, for construction of a new deep-water port that should make the country a regional hub for container shipping in West Africa.

STP has also adopted a new investment code, which includes:

  • 75% reduction in property transfer tax on investment projects
  • 50% reduction in corporate income tax for the first seven years
  • exemption from all customs fees on imported capital goods;
  • permission to amortize over three years the expense of training of domestic personnel
  • use of state property for projects, if there is no harmful social or ecological impact
  • right to transfer after-tax profits abroad up to an annual 15% of foreign capital invested
  • exemption from tax on bank transactions involving foreign capital for the project.

STP has signed bilateral trade agreements with Angola, Gabon and Nigeria. It also has preferential access to the European Union under the Everything But Arms initiative, which grants the most favorable terms to the least developed nations such as STP. STP’s access to the U.S. market is also guaranteed, by the African Growth and Opportunity Act, which covers more than 6,400 items.

President de Menezes said he welcomes efforts to attract more investment. “We stand ready to assist potential investors,” he said. “We offer excellent opportunities, and we are open to any other suggestions you might bring us.” The guide also has support from the Corporate Council on Africa and the European Business Council for Africa and the Mediterranean.

While the operating environment in STP has challenges, things have been improving steadily, says the report. The nation has a stable democracy, no serious ethnic, linguistic, religious, or tribal tensions, and has the highest literacy and life expectancy rates in sub-Saharan Africa. It is strategically located in the Gulf of Guinea—the geographic center of the huge markets of west and central Africa.

The guide is available in English and in Portuguese. For more information, contact Paulo Cunha, 646-884-7422, or pmc2105@columbia.edu.