close this bookThe Courier - N°158 - July - August 1996 Dossier Communication and the media - Country report Cape Verde
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close this folderCape Verde
View the documentMaking the best of history
View the documentThe economy: too weak to worsen
View the documentInterview with President Antonio Mascarenhas Monteiro
View the documentA portrait of towns and cities with atmosphere
View the documentCape Verd-EU Cooperation
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The economy: too weak to worsen

The arrival in Praia on 30 April of a throng of IMF officials cannot have failed to cause the government some concern, despite its air of calm. Ministers repeated publicly that Cape Verde had already carried out its own programme of structural adjustments, that they were on the same wavelength as the Bretton Woods institutions, and that they could not, therefore, see any reason why any further adjustments should be imposed upon them. Nevertheless, the fact that the Cape Verde escudo has had rather a bumpy ride since last year's elections, trading sometimes by as much as 15% under its official rate on the parallel market, caused a certain degree of anxiety within financial circles, with the banks taking action by freezing certain credit facilities.

The government insists that this situation has by no means arisen because of a sudden anxiety raised by opposition parties as to the effects of possible devaluation The truth is that there is a genuine structural imbalance caused by the trade deficit, a disequilibrium which is only being partially offset by official development assistance and the transfer of currency by Cape Verde emigres. As a percentage of the GDP, the overall budgetary deficit has tripled between 1993 and 1994 (increasing from 3.3% to 13.6%). For a country which could always be relied upon to pay its debts promptly, Cape Verde is now, for the first time, in arrears with its payments (see the 1995 report of the Bank of Portugal). The servicing of external debts represents 25.7% of goods and services exported - although these are relatvely small compared with neighbouring countries - the country's total outstanding debt is now nearing $200 million.

Although Cape Verde is one of the LDCs (least developed countries) with a total GNP of approximately $850 per capita, out of a total of 174 States, it actually ranks 123 in the Human Development Indicator Tables, which take into account various factors such as life expectancy, education, etc. Its position near the middle of these tables clearly shows that, although the country is poor, its affairs are nevertheless being managed fairly efficiently. Boasting an adult literacy rate of 66% and a life expectancy of 64.7 years, Cape Verde is well ahead of those countries at the bottom of the list, which include a number of its Sahelian neighbours. Efficient administration of the State and the absence of rampant corruption are further feathers in the nation's cap. These achievements have earned Cape Verde much esteem from its sponsors, which goes to explain the prudence of the Bretton Woods institutions and their relative sympathies towards the country.

Unkind Mother Nature

Cape Verde's history has been punctuated by great famines. Between the sixteenth and nineteenth centuries the country suffered no less than 30 famines, with this century seeing some of the cruellest: 16 000 people died in 1903-1904, the death toll in 1921 was 17000, in 1941-43 it was 25000 and between 1946-48 famine claimed 20 000 lives - a figure which at the time represented 20% of the total population of the archipelago. After the last famine, the colonial authorities, under pressure from international opinion, adopted food programmes which made the country more able to cope with the consequences of subsequent droughts. The last great famine ended 50 years ago. The nation may no longer be hungry, but the factors which make its inhabitants' lives so difficult remain. The main reason lies in the country's geography. Cape Verde has virtually no permanent springs and the topography of most of the islands, which are very mountainous, means that heavy rain simply runs down to the sea, the parched soil being unable to absorb it sufficiently. What is more, these downpours simultaneously wash away the little arable land that do" exist, thereby aggravating erosion. The whole situation is further worsened by the fact that the winter in this Sahelian region is very short. Despite huge efforts by successive governments, barely half the population has access to drinking water, with this figure barely reaching 25% in rural areas.

With a population of less than 400 000, there are just not enough people to pull off the miracle of making such an unforgiving soil bear fruit. Hence, although providing 50% of all jobs, agriculture represents only 17% of the nation's gross domestic product and produces only 10% of food consumed locally. The mountainous islands that make up Cape Verde are like teeth jutting out of the sea, and with virtually no continental shelf to speak of, small scale fishing is extremely difficult. Even with industrial equipment such as that installed on board large trawlers, catches are small - so small in fact that the country's fisheries agreement with the European Commission brings it only one million ECU over three years, one tenth of the proportional amount earned by neighbouring Senegal. Fishing thus represents less than 4% of the GDP.

Mere survival - a

Herculean task

Transport difficulties are another handicap for the economy. The sheer force of the harmattan, the strong ocean currents and the fog which often covers the region, make journeying by boat between the islands frequently hazardous. In addition, the volcanic relief of the islands makes them difficult to reach and means that there are very few locations that make suitable har bours. construction is both complex and costly due to the steep rocky barriers that seal off deep valleys. Those roads which have been built under the FAIMO scheme (Highly Labour-lntensive Projects) have sometimes turned into real labours of Hercules, and many areas, especially those on sparsely-populated islands, remain completely cut-off. The use of aeroplanes only partly solves the problem. Although competitive, the prices charged by the national airline, TAICV, are still too high for the average inhabitant.

Not only does the soil on Cape Verde contain very little water, it has virtually no natural resources: a few stones, lime, pozzolana and a little salt. Within the manufacturing sector (which makes up less than 20% of the GDP), only the construction and civil engineering industries, representing more than 10% of the GDP, contribute in any significant way to the economy, thanks partly to the transfer of currency from emigres who invest in the construction sector and works with wide public interest. These works, known as FAIMO schemes, have to some extent given this impoverished country a gloss that masks its poverty. Launched after Cape Verde gained its independence, they employ more than 25 000 people for up to ten months of the year in the construction of paved roads or in reafforestation projects, and ensure the survival of one hundred thousand people - over one quarter of the population. The workers are on the whole recruited from among farm labourers, with another large section of the workforce being made up of 'Solteiras' or 'single women', numerous in a country where the male population is constantly emigrating. Unfortunately, the liberal option adopted by the present government has cast some doubt as to whether these projects will continue and this year, for the first time, work ceased in April - three months ahead of the usual termination date. Yet the poor wages which these seasonal jobs pay (ECU 2 per day) are sometimes the only source of income for some families.

Only the tertiary sector shows a healthy balance of trade, accounting for more than 60% of the country's gross domestic production, with the biggest slice of the sector going to the hotel industry, followed by the transport industry. Although, overall, Cape Verde's balance of trade records a large deficit, the balance of trade for the services sector generally shows a profit, with the transport services provided by the international airport, Amilcar Cabral de Sal, alone accounting for 13% of exports.

Barely 10% of commercial goods are domestically produced and this has at times fallen below 5%. Cape Verde is therefore genuinely dependent upon foreign aid. Official development assistance represents 27.8% of the GNP (1989 figures), having risen from 17.7% to 27.2% of the GNP between 1980 and 1986. Cape Verde also relies on a second source of income - its emigrant population. In 1990 the currency transfers of its emigres represented nearly 20% of the GNP.

The colonial heritage

Contributing too to the country's poverty are relatively low educational standards. In this area too, successive governments have continued their predecessors' efforts to improve standards of education. However, at the time the country achieved independence, it was in a deplorable state. The reputation of a small intellectual elite of Cape Verdians had, over several decades, led the world to believe that Portuguese colonial rule had been 'enlightened'. This was a mere illusion. It was not until 1917, when the Mindelo grammar school was founded, that the country was able to claim an educational establishment of any cultural sophistication. The Mindelo school was the first state school in the country and it was to provide the nation with its first batch of 'home-grown' intellectuals. Until the middle of the nineteenth century, the Church, which was in charge of all matters educational, had provided basic primary education; then, at the end of the last century, it opened two secondary schools with the purpose of training students for positions in government and the civil service.

Even so, the Mindelo school remained an exception until the middle of this century. In 1950, no more than 5000 children received primary education and no more than 400 went to secondary school. Thirty years earlier, the figure was slightly higher, but Salazar, with his retrograde ideologies, saw education as dangerous and threatening and trimmed the number of schools on the islands from 150 to 60. True, Cape Verde was undoubtedly in a better state than other Portuguese colonies, but, with an illiteracy rate of 80% at the beginning of the 1960s, its position was nevertheless far from enviable. It was not until independence that any real progress was made, with 60% of children attending primary school in 1989 (the average for LDCs is 54%). However, this figure is still well below the average for developing countries, which stands at 90%, and even now, only 13 % of children have access to secondary education. As for higher education, this is virtually only available abroad; in Europe, Brazil, USA and Cuba, in particular.

Serious health problems still exist, exacerbated in particular by the scarcity of water. The cholera epidemic which has struck several African countries over the last two years has killed over 150 people in Cape Verde. The prevalence of AIDS exceeds the average for sub-Saharan Africa, with more than 2000 people being HIV positive and with some one hundred having developed the full-blown disease. According to official figures, 70 have died of the disease. The cholera epidemic which, unlike previous epidemics has affected towns much more than rural areas, is a sign of the deterioration of sanitary conditions in towns - particularly in Praia - affected by a lack of water, a dilapidated sewerage system and overcrowding.

Anchoring the country's economy in its culture

Yet, through all the doom and gloom, a small miracle is taking place in Cape Verde. Despite such a heavy burden of poverty, the country has, since gaining independence 20 years ago, managed to clamber up the league tables notably in the essential areas of health and education. Life expectancy at birth, which was only 52 years in 1950, had increased in 1992 to 64.7 years, better than the average for developing countries and 13 years more than the average for sub-Saharan Africa. The infant mortality rate which stood at 110 per thousand in 1960, had dropped drastically to 50 per thousand by 1992, while virtually all children now receive essential vaccinations. Malaria is also now rare. In 1988 the GDP of Cape Verde amounted to only C.V.Esc 20 billion ($289 million), in other words, 6.9% of the GDP of Trinidad and Tobago, and 16.6% of that of Mauritius. But it is growing steadily. From 1980 to 1988, it grew by 6% per annum, compared with 3% per annum for the Sahel, and since 1980 the GDP per capita has doubled.

The solution the nation's leaders should be seeking is greater integration in the global economy context by encouraging foreign investment. They do not need to create free zones but free enterprise, such as the shoe manufacturing concerns which, over the last two years, have contributed to achieving a considerable increase in exports. Various steps have been taken to attract investors, such as the adoption of the principle of tacit acceptance of applications for investment within 30 days. The Prime Minister, Carlos Veiga, and the 'Super-Minister' for Economic Coordination, Antonio Guelberto do Rosario, have highlighted the service, tourism and fishing industries as top government priorities. In order to develop these areas they intend to invest in infrastructures, with the aid, of course, of foreign backers. The modernisation of the port of São Vicente and of the international airport of Sal are currently underway, and the telecommunications project to link the islands by cable has also already been launched. The government's short-term plans also include the development of industries connected with the islands' culture. In the words of Mr Veiga: 'We in Cape Verde should develop our culture and use it as our anchor, to prevent our country drifting into oblivion. That way, our tiny country, which is fortunate enough to have a strong cultural identity, will be a Nation rather than a just a State'.

H.G.

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