Cape Verde is Quietly Experimenting with Sound Economic Reforms

After decades of economic and geographical disadvantage, Cape Verde is turning its problems into opportunities. Having suffered from a crushing debt in the past, the small insular nation has found development leverage in the privatization of its airline and the upcoming concession of airports. It aims to develop its tourism industry and hopefully become Africa’ air transportation hub.

After the recent privatization of Cape Verde’s national airline, the government is bringing its strategy to the next step with the concession of Amilcar International airport, which is the country’s main aerial infrastructure. Despite the complexity of the transaction, Prime Minister Ulisses Correia e Silva has pressed on to make sure that the development plan comes through.

The airport privatization plan is not only a mere commercial operation, but it will open the way to a strategic ambition for Cape Verde. PM Correia da Silva has long been aware that there is no airline “mega-hub” in the area (large international airports that act as intersections in aerial routes). The nation’s geographic position could, therefore, be an opportunity to turn the island into a waypoint for all transatlantic flights in the southern hemisphere.

Aerial specialist Jorge Duarte believes we “…are in a stage of development where, if we take the airport business in isolation, non-aeronautical revenues account for about 10 percent of the business. There are already airports in the world where non-aeronautical revenues account for more than 50 percent.

The quick response from international markets to address the project seems to validate the relevance of the plan. So far, mega hubs are present in Asia, North America, and Europe, but Africa lacks many, and the largest airports Africa has, are scattered far away from the main routes.

In time, the PM was able to cast light on the obvious benefits which the plan carried for the nation, and public support was secured for the project.

Economic journalist Humberto Cardoso wrote in response to Silva’s move:

The political environment is almost always tense and it is difficult to build agreements on fundamental matters. Examples of this are not lacking: Discussions on [the] privatization of companies that should address the opportunity to eliminate fiscal risks, attract foreign direct investment, and obtain comprehensive benefits for the economy easily degenerate into land sale allegations.

This move is only one in a series of bold policies aiming to align the small West African nation with its own geographical strength and connect it to the global trade while turning its problems into opportunities.

Until now, though, Cape Verde has suffered from its geographic isolation and poor infrastructure. But insightful measures launched by the leadership duo represented by PM Ulisses Correia e Silva and deputy PM Olavo Correia have led the insular country to liberate growth in recent years. Local newspaper, Presstur, consent to this change noting:

Ulisses Correia e Silva, who paid a visit today to the Lisbon Tourism Exchange (BTL), told Lusa that the privatization of TACV is only “an instrument of operationalization of a much larger program,” which involves the development of a hub on the island of Sal, the concession of the airports “still this year” and the concession of handling services.

In fact, Cape Verde has been on the development track since the 90s, with a record-breaking 7 percent annual growth rate for GDP in 2010 decade. More so, the current government is continuing the string of reforms which has hoisted the island to the top of the regional ranking for standards of living.

So far, every time Cape Verde’s government has launched a market-oriented reform, the international market has responded positively– significantly with about $400 million flowing into the country’s tourism industry.

Also, Correia da Silva is a political leader experienced enough to know that he cannot simply rely on the most probable outcome and that goals must be secured. The airport concession contract, therefore, secures minimal taxation, so as to ensure that the operation will be profitable for the nation.

Deputy PM Olavo Correia, who is also acting Finance Minister, needs to make sure that the nation is associated with the airport’s commercial potential, whether the venture is a moderate or a vigorous success. But some policymakers are, as it seems, rather shrewd. Private operators will do the hard and costly development work and, whatever their return on investment, Cape Verde wins either way. Icelandic business investors have already responded and agreed with the strategy.

In the past couple of decades, the entire CPLP (former Portuguese colonies) has posted impressive growth rates, from Mozambique to Eastern Timor. Cape Verde is no exception to that trend, and the nation’s government is showing energetic and bold leadership in seizing opportunities to intertwine the country’s interest with the fabric of global trade. If investors come knocking on Cape Verde’s door, as it seems likely they will, Cape Verde will press on to become the Heathrow or JFK of the Western African coast.

Photo Credit: Savannah Koomen