Cabo Verde’s Economic GrowthSince gaining independence in 1975, Cabo Verde’s economic growth has brought about great improvements to the welfare of the poorest in the country. During the 1970s, the GDP per capita was $190; this figure rocketed dramatically to over $3,600 before the 2010s ended. However, despite the growth to a middle-income country, the nation still had 35% of the population living below the poverty line in 2019. Here are the main reasons why the economic growth of the island is promising not only for Cabo Verde’s poorest but also for the rest of Africa.

A Lack of Natural Resources

Cabo Verde cannot rely on its natural resources as it is lacking compared to the countries closest to it. Only 11% of all of its land mass is suitable for agriculture, fresh water has very few sources, and frequent draughts prove to be major issues in the conservation of resources. The main natural valuables of the nation only include salt, limestone and pozzolana — used in making cement.

Due to these limitations, Cabo Verde has had to use clever strategies to ensure resources do not become scarce. 90% of all food is imported, so the only food source that they have an abundance of — fish — is protected. 21% of all foreign investment from 1994 – 2000 was used on fishing infrastructure, including developing large processing plants for the freezing and storage of fresh fish.

Energy demands are almost entirely met by imported petroleum fuel. The ECOWAS Center for Renewable Energy and Energy Efficiency, established in 2009, was created to improve the renewable energy capability of Cabo Verde. Strong wind has enabled the use of wind turbines on the national grid, solar-powered systems have been introduced into villages, and a 20-70kW/m wave strength allows for untapped potential into a new avenue.

The natural problems of Cabo Verde should serve as an indication for other countries on how to effectively preserve resources to boost the economy. Despite having very little, Cabo Verde’s economic growth has been contributed to by the smart planning of the postcolonial government.

The Focus on Tourism

Tourism is the single most important sector of Cabo Verde’s economy. Nearly 5% of the economic growth in 2022 was due to the service of accommodation and restaurants — the highest of any category.

Over 700,000 tourists visited Cabo Verde in 2022, 90% of the record-breaking 819,000 figure from 2019. An impressive vaccination program allowed Cabo Verde to speed up its reopening to visitors in 2021. The Cabo Verde government is expecting these numbers to surpass 1.2 million in 2026 as the funding for tourism sites and resorts grows each year.

An increase in tourism only brings positivity to the nation as, in 2019, 39% of total employment was in the travel and tourism sector. (From January to September 2022, around $105 million was generated in foreign investment, compared to only $60 million in the same period for 2021. With a majority of this investment directly impacting tourism, the number of jobs will increase, and thousands more will be employed, impacting the lives of those living along the poverty line.

Cabo Verde still has a way to go if it wants to be as successful as another African island nation in terms of tourism — the Seychelles. Seychelles has a much lower poverty rate than Cabo Verde so the success story has already been created, and with more time the government is hoping to further boost the economy and lower the poverty rate again.

Consistent Fall of Poverty

In 2001, the poverty rate was just under 60%. Only 14 years later the number was 35%. Almost a decrease of half in less than two decades is incredibly impressive and highlights how the work of strategic implementations can allow an economy to thrive and people to succeed.

Cabo Verde’s location makes the country very vulnerable to key natural hazards so the economy is still volatile. The World Bank introduced a Catastrophic Deferred Drawdown Option (Cat DDO) to provide Cabo Verde with the funding necessary to deal with a natural disaster. Since 2018, the Cat DDO has been utilized to introduce policy reforms and update the data systems used to identify risks.

Even with the highly susceptible environmental conditions, Cabo Verde has had a consistent fall in poverty since gaining independence. In 1989, the number of people living in extreme poverty was around 14%. In 2015, the figure was just over 2%.

There is no sign of stopping the reduction in poverty from the government. Prime Minister Ulisses Correia e Silva made a statement in February highlighting the need to eradicate extreme poverty from Cabo Verde by 2026.

He stated, “We must eliminate extreme poverty in Cabo Verde, reduce absolute poverty, in the name of human dignity, but also of the positive impacts at the level of people’s quality of life, public security, increased productivity of families and happiness of people.”

Cabo Verde’s economic growth is a testament to the dedication of the government, foreign aid workers and investors that envision a more prosperous future for the nation. Other countries in the region can certainly benefit from the knowledge and experience of plans carried out by Cabo Verde, especially regarding conservation and creating tourism spots that will get their economies thriving.

– Oliver Rayner
Photo: Flickr