Economy of São Tomé and Príncipe
Encyclopedia
The economy of São Tomé and Príncipe
, while traditionally dependent on cocoa, is experiencing considerable changes due to investment in the development of its oil industry its territorial waters in the oil-rich waters of the Gulf of Guinea
. In 2003, the government agreed a Joint Development Zone over the area which gives Sao Tome 40% of revenues.
) holds more than 10 billion barrels (1.6 km³) of oil, although no reserves have yet been proved. A joint oil project with Nigeria in 2005 is likely to contribute $50 million of revenues to the government from the exploration licence signing fees. This represents four times government revenues in 2004. São Tomé is optimistic that significant petroleum discoveries under the exploration licence are forthcoming.
Government corruption has been identified as a potential threat to the development of the economy and the prospect that the oil wealth will be distributed among a very poor community. In order to combat corruption, a revenue management law was enacted in 2004. It was drafted by a team of academics from the United States' Columbia University and establishes an oversight committee of oil revenues and mandates the priority of poverty reduction, health, education and infrastructure spending.
The Joint Development Authority administering the offshore oil zone itself was rocked by a corruption scandal in 2004. The government removed two of its appointees to the authority and insisted on replacing the Nigerian chair. Later the authority issued a statement saying that it would not tolerate bribery or attempted bribery of its officials. Nigeria's history of official corruption represents a significant challenge to the authority.
American involvement has attracted its critics, accusing US oil giants and government of corruption that exceeds the worst of local officials. Because countries like Gabon and Nigeria account for as much as 15% of US crude oil imports, US companies are believed to regard the area as highly prospective. Officials of the US Government and its largest oil transnational corporations and have funded feasibility studies for a deep-water harbor necessary for oil tankers.
After lengthy negotiations, on February 1, 2005, the Nigerian and Sao Tomé governments entered into an exploration and production sharing agreement over the first of six different exploration blocs with a US dominated consortium led by ChevronTexaco with 51 % of the equity, ExxonMobil with 40 % and Dangote Energy Equity Resources, a small Nigerian and Norwegian company with the remaining 9%. The contract allows a period of eight years for exploration and up to 20 years of production. The bloc is 190 miles (306 km) north of Sao Tomé in 5,700 ft (1.7 km) of water in the Gulf of Guinea.
In 2006, the first tests in the deep-water block struck oil, but not in commercially viable quantities.
and mismanagement. The resulting shortage of cocoa for export has created a persistent balance-of-payments problem. São Tomé has to import all fuels, most manufactured goods, consumer goods, and a significant amount of food. Over the years, it has been unable to service its external debt and has had to depend on concessional aid and debt rescheduling. Considerable potential exists for development of a tourist industry, and the government has taken steps to expand facilities in recent years. The government also has attempted to reduce price controls and subsidies, but economic growth has remained sluggish.
Since the 1800s, the economy of São Tomé and Príncipe has been based on plantation agriculture. At the time of independence, Portuguese
-owned plantations occupied 90% of the cultivated area. After independence, control of these plantations passed to various state-owned agricultural enterprises. The dominant crop on São Tomé is cocoa, representing about 95% of exports. Other export crops include copra, palm kernels, and coffee.
Domestic food-crop production is inadequate to meet local consumption, so the country imports some of its food. Efforts have been made by the government in recent years to expand food production, and several projects have been undertaken, largely financed by foreign donors.
Other than agriculture
, the main economic activities are fishing
and a small industrial sector engaged in processing local agricultural products and producing a few basic consumer goods. The scenic islands have potential for tourism, and the government is attempting to improve its rudimentary tourist industry infrastructure. The government sector accounts for about 11% of employment.
Following independence, the country had a centrally directed economy with most means of production owned and controlled by the state. The original constitution guaranteed a "mixed economy
", with privately owned cooperative
s combined with publicly owned property and means of production. In the 1980s and 1990s, the economy of São Tomé encountered major difficulties. Economic growth stagnated, and cocoa exports dropped in both value and volume, creating large balance-of-payments deficits. Efforts to redistribute plantation land resulted in decreased cocoa production. At the same time, the international price of cocoa slumped.
structural adjustment program, and invited greater private participation in management of the parastatals, as well as in the agricultural, commercial, banking, and tourism sectors. The focus of economic reform since the early 1990s has been widespread privatization, especially of the state-run agricultural and industrial sectors.
In April 2000, in association with the central Banco Nacional de São Tomé e Príncipe, the IMF approved a poverty reduction and growth facility for São Tomé aimed at reducing inflation to 3% for 2001, raising deal growth to 4%, and reducing the fiscal deficit. In December 2000, São Tomé received significant debt reduction under the IMF-World Bank
's Heavily Indebted Poor Countries
(HIPC) initiative. The reduction should free additional resources for poverty reduction and public investment although many argue that all Sao Tomean government debt should be waived to alleviate poverty.
São Tomé's success in implementing structural reforms has been rewarded by international donors, who have pledged increased assistance in 2001. The São Toméan Government has traditionally obtained foreign assistance from various donors, including the UN Development Programme, the World Bank, the European Union
, Portugal, Taiwan
and the African Development Bank
.
Portugal remains one of São Tomé's major trading partners, particularly as a source of imports. Food, manufactured articles, machinery, and transportation equipment are imported primarily from the EU.
:
purchasing power parity
- $316.9 million (2010 est.), $214 million (2003 est.)
GDP - real growth rate: 6% (2010 est.), 5% (2004 est.)
GDP - per capita:
purchasing power parity - $1,800 (2010 est.), $1,200 (2003 est.)
GDP - composition by sector: (2010 est.)
Population below poverty line:
NA%
Household income or consumption by percentage share:
Inflation rate (consumer prices): 13% (2010 est.)
Labor force - by occupation:
population mainly engaged in subsistence agriculture and fishing
note:
shortages of skilled workers
Unemployment rate: 50% in the formal business sector (1998 est.)
Budget:
Industries: light construction, textiles, soap, beer; fish processing
; timber
Industrial production growth rate: NA%
Electricity - production: 15 million kWh (1998)
Electricity - production by source:
Electricity - consumption:
14 GWh (1998)
Electricity - exports:
0 kWh (1998)
Electricity - imports:
0 kWh (1998)
Agriculture - products:
cocoa, coconut
s, palm kernels, copra
, cinnamon
, pepper
, coffee
, banana
s, papaya
s, bean
s; poultry
; fish
Exports:
$13 million (2010 est.)
Exports - commodities:
cocoa 80%, copra
, coffee
, palm oil (2009)
Exports - partners:
United Kingdom
32.99%, Netherlands
26.93%, Belgium
21.04%, Portugal
4.31% (2009)
Imports:
$99 million (2010 est.)
Imports - commodities:
machinery and electrical equipment, food products, petroleum products
Imports - partners:
Portugal
58.9%, Brazil
6.68%, United States of America 4.71%, Japan
4.49% (2009)
Debt - external:
$318 million (2002)
Economic aid - recipient:
$57.3 million (1995)
Currency:
1 dobra (Db) = 100 centimos
Exchange rates:
dobras (Db) per US$1 – 19,641 (2010)
Fiscal year:
calendar year
São Tomé and Príncipe
São Tomé and Príncipe, officially the Democratic Republic of São Tomé and Príncipe, is a Portuguese-speaking island nation in the Gulf of Guinea, off the western equatorial coast of Central Africa. It consists of two islands: São Tomé and Príncipe, located about apart and about , respectively, off...
, while traditionally dependent on cocoa, is experiencing considerable changes due to investment in the development of its oil industry its territorial waters in the oil-rich waters of the Gulf of Guinea
Gulf of Guinea
The Gulf of Guinea is the northeasternmost part of the tropical Atlantic Ocean between Cape Lopez in Gabon, north and west to Cape Palmas in Liberia. The intersection of the Equator and Prime Meridian is in the gulf....
. In 2003, the government agreed a Joint Development Zone over the area which gives Sao Tome 40% of revenues.
Massive oil reserves
Geologists estimate that the Gulf of Guinea zone (Niger Delta provinceNiger Delta province
The Niger Delta province is a geologic province in the Niger Delta of West Africa also known as the Niger Delta Basin. The province contains one petroleum system, the "Tertiary Niger Delta Petroleum System" , the majority of which lies within the borders of Nigeria, with suspected or proven...
) holds more than 10 billion barrels (1.6 km³) of oil, although no reserves have yet been proved. A joint oil project with Nigeria in 2005 is likely to contribute $50 million of revenues to the government from the exploration licence signing fees. This represents four times government revenues in 2004. São Tomé is optimistic that significant petroleum discoveries under the exploration licence are forthcoming.
Government corruption has been identified as a potential threat to the development of the economy and the prospect that the oil wealth will be distributed among a very poor community. In order to combat corruption, a revenue management law was enacted in 2004. It was drafted by a team of academics from the United States' Columbia University and establishes an oversight committee of oil revenues and mandates the priority of poverty reduction, health, education and infrastructure spending.
The Joint Development Authority administering the offshore oil zone itself was rocked by a corruption scandal in 2004. The government removed two of its appointees to the authority and insisted on replacing the Nigerian chair. Later the authority issued a statement saying that it would not tolerate bribery or attempted bribery of its officials. Nigeria's history of official corruption represents a significant challenge to the authority.
American involvement has attracted its critics, accusing US oil giants and government of corruption that exceeds the worst of local officials. Because countries like Gabon and Nigeria account for as much as 15% of US crude oil imports, US companies are believed to regard the area as highly prospective. Officials of the US Government and its largest oil transnational corporations and have funded feasibility studies for a deep-water harbor necessary for oil tankers.
After lengthy negotiations, on February 1, 2005, the Nigerian and Sao Tomé governments entered into an exploration and production sharing agreement over the first of six different exploration blocs with a US dominated consortium led by ChevronTexaco with 51 % of the equity, ExxonMobil with 40 % and Dangote Energy Equity Resources, a small Nigerian and Norwegian company with the remaining 9%. The contract allows a period of eight years for exploration and up to 20 years of production. The bloc is 190 miles (306 km) north of Sao Tomé in 5,700 ft (1.7 km) of water in the Gulf of Guinea.
In 2006, the first tests in the deep-water block struck oil, but not in commercially viable quantities.
Struggling agricultural economy
These revenues arrive at a critical time for the Sao Tome economy. Cocoa production has substantially declined because of droughtDrought
A drought is an extended period of months or years when a region notes a deficiency in its water supply. Generally, this occurs when a region receives consistently below average precipitation. It can have a substantial impact on the ecosystem and agriculture of the affected region...
and mismanagement. The resulting shortage of cocoa for export has created a persistent balance-of-payments problem. São Tomé has to import all fuels, most manufactured goods, consumer goods, and a significant amount of food. Over the years, it has been unable to service its external debt and has had to depend on concessional aid and debt rescheduling. Considerable potential exists for development of a tourist industry, and the government has taken steps to expand facilities in recent years. The government also has attempted to reduce price controls and subsidies, but economic growth has remained sluggish.
Since the 1800s, the economy of São Tomé and Príncipe has been based on plantation agriculture. At the time of independence, Portuguese
Portugal
Portugal , officially the Portuguese Republic is a country situated in southwestern Europe on the Iberian Peninsula. Portugal is the westernmost country of Europe, and is bordered by the Atlantic Ocean to the West and South and by Spain to the North and East. The Atlantic archipelagos of the...
-owned plantations occupied 90% of the cultivated area. After independence, control of these plantations passed to various state-owned agricultural enterprises. The dominant crop on São Tomé is cocoa, representing about 95% of exports. Other export crops include copra, palm kernels, and coffee.
Domestic food-crop production is inadequate to meet local consumption, so the country imports some of its food. Efforts have been made by the government in recent years to expand food production, and several projects have been undertaken, largely financed by foreign donors.
Other than agriculture
Agriculture
Agriculture is the cultivation of animals, plants, fungi and other life forms for food, fiber, and other products used to sustain life. Agriculture was the key implement in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that nurtured the...
, the main economic activities are fishing
Fishing
Fishing is the activity of trying to catch wild fish. Fish are normally caught in the wild. Techniques for catching fish include hand gathering, spearing, netting, angling and trapping....
and a small industrial sector engaged in processing local agricultural products and producing a few basic consumer goods. The scenic islands have potential for tourism, and the government is attempting to improve its rudimentary tourist industry infrastructure. The government sector accounts for about 11% of employment.
Following independence, the country had a centrally directed economy with most means of production owned and controlled by the state. The original constitution guaranteed a "mixed economy
Mixed economy
Mixed economy is an economic system in which both the state and private sector direct the economy, reflecting characteristics of both market economies and planned economies. Most mixed economies can be described as market economies with strong regulatory oversight, in addition to having a variety...
", with privately owned cooperative
Cooperative
A cooperative is a business organization owned and operated by a group of individuals for their mutual benefit...
s combined with publicly owned property and means of production. In the 1980s and 1990s, the economy of São Tomé encountered major difficulties. Economic growth stagnated, and cocoa exports dropped in both value and volume, creating large balance-of-payments deficits. Efforts to redistribute plantation land resulted in decreased cocoa production. At the same time, the international price of cocoa slumped.
Economic reforms in response to IMF loan conditions
In response to its economic downturn, the government undertook a series of far-reaching economic reforms. In 1987, the government implemented an International Monetary FundInternational Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
structural adjustment program, and invited greater private participation in management of the parastatals, as well as in the agricultural, commercial, banking, and tourism sectors. The focus of economic reform since the early 1990s has been widespread privatization, especially of the state-run agricultural and industrial sectors.
In April 2000, in association with the central Banco Nacional de São Tomé e Príncipe, the IMF approved a poverty reduction and growth facility for São Tomé aimed at reducing inflation to 3% for 2001, raising deal growth to 4%, and reducing the fiscal deficit. In December 2000, São Tomé received significant debt reduction under the IMF-World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
's Heavily Indebted Poor Countries
Heavily Indebted Poor Countries
Heavily Indebted Poor Countries is a group of 40 developing countries with high levels of poverty and debt overhang which are eligible for special assistance from the International Monetary Fund and the World Bank.- History and structure :...
(HIPC) initiative. The reduction should free additional resources for poverty reduction and public investment although many argue that all Sao Tomean government debt should be waived to alleviate poverty.
São Tomé's success in implementing structural reforms has been rewarded by international donors, who have pledged increased assistance in 2001. The São Toméan Government has traditionally obtained foreign assistance from various donors, including the UN Development Programme, the World Bank, the European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
, Portugal, Taiwan
Republic of China
The Republic of China , commonly known as Taiwan , is a unitary sovereign state located in East Asia. Originally based in mainland China, the Republic of China currently governs the island of Taiwan , which forms over 99% of its current territory, as well as Penghu, Kinmen, Matsu and other minor...
and the African Development Bank
African Development Bank
The African Development Bank Group is a development bank established in 1964 with the intention of promoting economic and social development in Africa...
.
Portugal remains one of São Tomé's major trading partners, particularly as a source of imports. Food, manufactured articles, machinery, and transportation equipment are imported primarily from the EU.
Data
Gross domestic productGross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
:
purchasing power parity
Purchasing power parity
In economics, purchasing power parity is a condition between countries where an amount of money has the same purchasing power in different countries. The prices of the goods between the countries would only reflect the exchange rates...
- $316.9 million (2010 est.), $214 million (2003 est.)
GDP - real growth rate: 6% (2010 est.), 5% (2004 est.)
GDP - per capita:
purchasing power parity - $1,800 (2010 est.), $1,200 (2003 est.)
GDP - composition by sector: (2010 est.)
- agriculture: 14.7
- industry: 22.9%
- services: 62.4%
Population below poverty line:
NA%
Household income or consumption by percentage share:
- lowest 10%: NA%
- highest 10%: NA%
Inflation rate (consumer prices): 13% (2010 est.)
Labor force - by occupation:
population mainly engaged in subsistence agriculture and fishing
note:
shortages of skilled workers
Unemployment rate: 50% in the formal business sector (1998 est.)
Budget:
- revenues: $58 million
- expenditures: $114 million, including capital expenditures of $54 million (1993 est.)
Industries: light construction, textiles, soap, beer; fish processing
Fish processing
The term fish processing refers to the processes associated with fish and fish products between the time fish are caught or harvested, and the time the final product is delivered to the customer...
; timber
Industrial production growth rate: NA%
Electricity - production: 15 million kWh (1998)
Electricity - production by source:
- fossil fuel: 46.67%
- hydro: 53.33%
- nuclear: 0%
- other: 0% (1998)
Electricity - consumption:
14 GWh (1998)
Electricity - exports:
0 kWh (1998)
Electricity - imports:
0 kWh (1998)
Agriculture - products:
cocoa, coconut
Coconut
The coconut palm, Cocos nucifera, is a member of the family Arecaceae . It is the only accepted species in the genus Cocos. The term coconut can refer to the entire coconut palm, the seed, or the fruit, which is not a botanical nut. The spelling cocoanut is an old-fashioned form of the word...
s, palm kernels, copra
Copra
Copra is the dried meat, or kernel, of the coconut. Coconut oil extracted from it has made copra an important agricultural commodity for many coconut-producing countries. It also yields coconut cake which is mainly used as feed for livestock.-Production:...
, cinnamon
Cinnamon
Cinnamon is a spice obtained from the inner bark of several trees from the genus Cinnamomum that is used in both sweet and savoury foods...
, pepper
Black pepper
Black pepper is a flowering vine in the family Piperaceae, cultivated for its fruit, which is usually dried and used as a spice and seasoning. The fruit, known as a peppercorn when dried, is approximately in diameter, dark red when fully mature, and, like all drupes, contains a single seed...
, coffee
Coffee
Coffee is a brewed beverage with a dark,init brooo acidic flavor prepared from the roasted seeds of the coffee plant, colloquially called coffee beans. The beans are found in coffee cherries, which grow on trees cultivated in over 70 countries, primarily in equatorial Latin America, Southeast Asia,...
, banana
Banana
Banana is the common name for herbaceous plants of the genus Musa and for the fruit they produce. Bananas come in a variety of sizes and colors when ripe, including yellow, purple, and red....
s, papaya
Papaya
The papaya , papaw, or pawpaw is the fruit of the plant Carica papaya, the sole species in the genus Carica of the plant family Caricaceae...
s, bean
Bean
Bean is a common name for large plant seeds of several genera of the family Fabaceae used for human food or animal feed....
s; poultry
Poultry
Poultry are domesticated birds kept by humans for the purpose of producing eggs, meat, and/or feathers. These most typically are members of the superorder Galloanserae , especially the order Galliformes and the family Anatidae , commonly known as "waterfowl"...
; fish
Fish
Fish are a paraphyletic group of organisms that consist of all gill-bearing aquatic vertebrate animals that lack limbs with digits. Included in this definition are the living hagfish, lampreys, and cartilaginous and bony fish, as well as various extinct related groups...
Exports:
$13 million (2010 est.)
Exports - commodities:
cocoa 80%, copra
Copra
Copra is the dried meat, or kernel, of the coconut. Coconut oil extracted from it has made copra an important agricultural commodity for many coconut-producing countries. It also yields coconut cake which is mainly used as feed for livestock.-Production:...
, coffee
Coffee
Coffee is a brewed beverage with a dark,init brooo acidic flavor prepared from the roasted seeds of the coffee plant, colloquially called coffee beans. The beans are found in coffee cherries, which grow on trees cultivated in over 70 countries, primarily in equatorial Latin America, Southeast Asia,...
, palm oil (2009)
Exports - partners:
United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
32.99%, Netherlands
Netherlands
The Netherlands is a constituent country of the Kingdom of the Netherlands, located mainly in North-West Europe and with several islands in the Caribbean. Mainland Netherlands borders the North Sea to the north and west, Belgium to the south, and Germany to the east, and shares maritime borders...
26.93%, Belgium
Belgium
Belgium , officially the Kingdom of Belgium, is a federal state in Western Europe. It is a founding member of the European Union and hosts the EU's headquarters, and those of several other major international organisations such as NATO.Belgium is also a member of, or affiliated to, many...
21.04%, Portugal
Portugal
Portugal , officially the Portuguese Republic is a country situated in southwestern Europe on the Iberian Peninsula. Portugal is the westernmost country of Europe, and is bordered by the Atlantic Ocean to the West and South and by Spain to the North and East. The Atlantic archipelagos of the...
4.31% (2009)
Imports:
$99 million (2010 est.)
Imports - commodities:
machinery and electrical equipment, food products, petroleum products
Imports - partners:
Portugal
Portugal
Portugal , officially the Portuguese Republic is a country situated in southwestern Europe on the Iberian Peninsula. Portugal is the westernmost country of Europe, and is bordered by the Atlantic Ocean to the West and South and by Spain to the North and East. The Atlantic archipelagos of the...
58.9%, Brazil
Brazil
Brazil , officially the Federative Republic of Brazil , is the largest country in South America. It is the world's fifth largest country, both by geographical area and by population with over 192 million people...
6.68%, United States of America 4.71%, Japan
Japan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
4.49% (2009)
Debt - external:
$318 million (2002)
Economic aid - recipient:
$57.3 million (1995)
Currency:
1 dobra (Db) = 100 centimos
Exchange rates:
dobras (Db) per US$1 – 19,641 (2010)
Fiscal year:
calendar year