Islands of Sun and Freedom in a Sea of Opportunities

Arnout Nuijt, Editor-in-Chief of Atlantico Weekly and CEO of Atlantico Business Development (an international consultancy specialized in Portuguese speaking Africa), spoke with Cape Verde’s Prime Minister José Maria Neves.

Prime-minister, thank you for talking to Atlantico Weekly. First of all allow me to congratulate you on the 38th anniversary of your country’s independence from Portugal. Cape Verde has made great economic gains over the last few years. How will you maintain economic growth in the future? Thank you. Our strategy is to become an international services hub. Cape Verde does not possess any natural resources, like oil or diamonds. We have our people and we have sun, freedom and lots of opportunities. Our tourism sector grows by 25% annually and we will probably reach the one million tourists per year mark by 2017. Our maritime opportunities are huge too. With our new maritime borders we will control around 1 million square miles of sea, covering strategic international shipping lanes.

We are developing our economy around various clusters of opportunities. Let me mention for instance the Sea Cluster, which brings together our opportunities in logistics, fisheries, ship repair, bunkering, cruise terminals, etc. Next we have the cluster for renewable energies. It’s our aim to reach up to 100% energy dependency on renewables by 2020. We are now at 30% by the way. We don’t have an oil company like Sonangol in Angola, but we will build our own Sonangol in renewable energies, out of our excellent wind and sun supply. We are becoming a centre of expertise in this area for the whole West African region, with research, production, training and repair. We also promote our creative sector, our ICT cluster and our sports sector. Agribusiness is another cluster with huge potential and we are steadily improving our water supply for the agricultural sector. We will have constructed nine water reservoirs by 2015, while a further ten are being planned.

In principle, we believe our country should be developed by the private sector and we will support this with infrastructural projects, tax incentives, our special economic zones and other tax advantages. Note that a lot of things are in take off stage, so there are still lots of opportunities for private and foreign investors. You could say we are a start-up nation!

The tourist sector growth figures are very good indeed, but so far most developments have taken place on just two islands: Sal and Boa Vista. How will you develop tourism on the other islands that have great potential, like São Vicente, Fogo, Santo Antão, etc? It’s only natural that from the beginning tourism grew on Sal and Boa Vista Islands. There you can find sun and beach tourism, which also is a kind of tourism that brings you quick returns. But while tourism is growing on these two islands, we will create opportunities on other islands, where tourism will be essentially more connected to both culture and nature. We are now encouraging the creative industries in Cape Verde and we are building the necessary infrastructure. I am talking about ports, airports and roads, that will create investment opportunities for the private sector and encourage the growth of tourism in those other islands. Fogo and Santo Antão already start to emerge as tourist destinations in their own way and quite differentiated from Sal and Boa Vista.

Word is out about a new airport on Santo Antão. Is this indeed part of your strategy? It certainly is. We are still in the study phase, but the midterm perspective is to build a new midsized airport in Santo Antão and stimulate tourism on that island.

And what is happening in São Vicente? That island has such great potential for tourism, but it has not yet taken off. What should we make of that situation? São Vicente finds itself in a paradoxical situation, because it really has great potential. The island does not only have some good beaches, but it also boasts intense cultural activity. But tourism has not yet advanced, essentially because of the international crisis. When the projects for São Vicente were already ripening, the crisis struck their development. Right now we are looking for an investor, a prime player, who can kick start the island’s growth again. We are talking to various investors to see if we can find one who has the capacity to lift off the tourist sector on São Vicente.

You said Cape Verde is betting on the private sector for the development of the economy. Will you also create opportunities for the private sector by privatizing state companies? Yes, we will. Right now we have among those state enterprises to be privatised first of all TACV, our national airline. We are studying various scenarios for the restructuring of TACV. The most likely scenario is to split the company in three parts. A maintenance company, another for handling and a third company for air transport, obviously TACV’s core business. Then we will look for partners for each of those three companies. The maintenance company could even enter the regional market and do work on foreign planes in Cape Verde. We already have some expertise in this field. We will be looking separately for partners for the air transport section.

With regard to another state enterprise, energy company Electra, we already carried out a first restructuring. We split up Electra in several companies: Electra Norte (based in Mindelo) and Electra Sul (in Praia). Next step is the launch of Electra Renovável, that will focus on renewable energies. Besides these three enterprises there will be Electra SGPS, the holding company for all of them. For all these companies we are looking for partners.

Lastly I would like to mention Enapor, our national port company, which in the future will be strictly a port authority, while we will split off and privatize Enapor’s port operations. TACV, Electra en Enapor are the three enterprises we want to privatize at the moment.

But on the other hand your government said it will enter the capital of the Cabo Verde Fast Ferry company (CVFF). Why are you doing that? Cabo Verde Fast Ferry is in financial difficulties, that are blocking the acquisition of its second vessel, the Liberdadi, and preventing it from operating in a normal way. Look, the development of Cape Verde, an island nation, depends heavily on inter island transport. So for strategic reasons the government decided to enter CVFF’s capital  in order to unchain the company’s development. We brought in two vessels, the Praia d’Aguada and the Três de Janeiro. This way we are making the final purchase of the fast vessel Liberdadi possible, as well as making sure that the company will gain substance and find its way back to development.  We will be increasing the efficiency of maritime inter island transport. But let it be clear that, from the very moment there will be better conditions, the state will exit and leave the floor to private parties so they can take full responsibility of the company. The government’s entry only happened to fill a gap left by the private sector. The state will be temporarily part of CVFF, acting like risk capital.

Cape Verde’s trump card will definitely be the establishment of the International Business Centre, a new tax system designed to attract international companies. But Cape Verde appears also to be creating new taxes like the Tourist Tax. Recently you have also announced a new Property Tax law. What will you change? Property Tax or IUP (Imposto Único sobre Património – AW) is not a new tax. The IUP already exists for a long time as a municipal tax. But right now there are many problems surrounding our IUP. Municipalities have been raising their property tax considerably, something that is threatening investments, above all in the tourist sector. Companies are paying very high property taxes to our municipalities. So we will reform the law underlying the IUP, making sure that this tax is set at a much lower rate in order to facilitate the business climate in Cape Verde. It’s a reform and not the introduction of a new tax.

The Tourist Tax, which is a levy per person per night, is meant to improve our country as a tourist destination. All the yields that will be collected this way are earmarked for the development of the tourist sector. We will use the tax to build new infrastructure or for training our human capital. It’s a fund that will improve the development of tourism in Cape Verde.

Let’s change the subject to the international perspective. We are seeing not just a crisis in Southern Europe, but also lots of problems in emerging countries, the so called BRICs. For the future we can expect a new trade agreement between the US and the European Union, something that will create the world’s biggest economic block. How do you think these developments will affect the position of Cape Verde? Look, the world is changing enormously and in this process there will be for sure at a certain point a reassessment of Cape Verde’s international strategy. This crisis is of course not helpful to a small emerging economy like Cape Verde. But if we are smart we could benefit from great opportunities arising from this crisis and find small niches that can make our economy grow. We are living a very complex and delicate moment. But I am convinced that in the next two, three years we can keep the economy growing and grab the opportunities that will be presented by the changing international economic environment.

Cape Verde now has a Special Partnership with the European Union. How do you see the relationship of your country with the EU in the future? We want to expand the Special Partnership  and bring it to a higher level. We can’t be part of Europe, because we are not Europe. So we want everything from the European Union, except institutions. That’s basically what we are fighting for, but it won’t be easy. However I am sure it’s a win-win situation.

Cape Verde is also promoting its sports sector. The Blue Sharks, Cape Verde’s national team and national pride, did very well at the Africa’s Cup this year. Have you ever thought about organising the Africa’s Cup in Cape Verde? We did give it a thought, indeed. We want to bring bigger sports events to Cape Verde, but at this point we do not have the infrastructure needed for the Africa’s Cup. We don’t have the stadiums and heavy investments will be needed for those. But we can organize more modest events and championships, like for example Afrobasket. We can also host nautical sports events and international soccer tournaments in Cape Verde. That way we can gradually improve our capacity for hosting big events.

Prime-Minister, thank you so much for your time! It was my pleasure.

This interview was recorded on Saturday July 6th 2013 in Rotterdam, the Netherlands. All rights reserved by Atlantico Weekly/Rotterdam Week.

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