On a continent that has so many countries still taking their first steps towards economic development, the example being set by small Cape Verde is an illuminating example to the rest of the continent.
Spread over an archipelago of 8 island, Cape Verde is a country with a population of just over 500 000. The last 25 years have seen this country rise from the tag of a Low Income Country, to a Middle Income Country, thus moving to a GDP per capita that exceeds US$3 000. In 2008, they finally attained that status, and what is remarkable is that they have achieved this through non-resource led growth. Last week, African Development Bank president, Donald Kaberuka praised the country on being the first to have policy induced graduation.
Instead, the drive has been on tourism, infrastructure, remittances, and good governance. Whilst other countries that are well endowed in natural resources, but which do not facilitate development, Cape Verde has had to use meagre resources to make do. The country has developed the individual islands for tourism, building airports and roads and hotels. The location as well makes the island a strategic point for logistics, located close to both mainland Africa and Europe. This investment has seen tourist numbers jump from 67 000 in 1999, to 285 000 in 2008.
These advances have seen funding come in, Cape Verde has 8 operations funded by the African Development Bank to the cost of €185m, the European Union has pledged to support Cape Verde from 2008-2013 to the tune of €54m from the European Development Fund.
Despite the success of tourism, the economy still needs to diversify if it is to keep making forward strides. 13% of GDP ( €130m) is from remittances, there are more citizens of Cape Verde in the Diaspora than actually live on the island. The global financial crisis of 2007-2008 saw these figures reduced, and with lower remittances, the gains made in driving absolute poverty down to 25% could be in jeopardy. Fewer tourists in the future would also hamper growth which has been spectacular, 7.8% in 2007 and 5.9% in 2008. Trade deficit is also a problem that could be exacerbated as the population grows and if a manufacturing base is not built up. At present, it stands at a worrying -US$205m, mostly due to around 85% of the food being imported.