According to 2020 United Nations estimates, So Tomé and Principe (STP) is a small island republic in the Gulf of Guinea with a population of roughly 220,000 people.
In 1975, the country declared independence from Portugal. The two countries have strong economic, political, and cultural links to this day.
Elections are typically held in STP in a free, fair, and transparent manner. The first round of the presidential election was held on July 18, 2021, but there was no agreement on the results, which resulted in a standoff. Carlos Vila Nova, who was backed by the Independent Democratic Action (ADI) Party, was named the victor of the presidential contest in September 2021 and took office a month later. President Vila Nova hailed collaboration with the United States and backed protecting the environment and investments in his inaugural speech. After taking office in December 2018, Prime Minister Jorge Bom Jesus prioritized FDI recruitment, economic growth promotion, business environment improvement, and corruption prevention.
Market Opportunities
After several unsuccessful tries, STP may finally succeed in joining the list of nations that produce oil in the middle of this century. In 2016, Kosmos Energy, a company based in the United States, carried out seismic surveys of offshore economic exclusive zone (EEZ) blocks. In 2018, BP and Kosmos were successful in acquiring the rights to two additional blocks. Even in the most optimistic scenario, which assumes that the first exploratory well that Kosmos drills turn out to be successful, the company does not anticipate that it will begin producing oil for at least another five years. In 2019, the French company Total Petroleum, in conjunction with the Angolan company Sonangol, made a joint purchase of a 55 percent ownership stake in the oil block 1 located within the STP EZZ. The preparations for drilling within their block were started by Royal Dutch Shell and Galp Energy in April of 2022.
Reforms of the business climate, as well as the tax and customs procedures, have been driven by the Millennium Challenge Account (MCC), which has led to an increase in the desirability of STP as a destination for investment.
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The International Monetary Fund (IMF) claimed that the country’s GDP fell by 6.5 percent in 2020 as a result of the Covid-19 pandemic, compared to the positive 3.5 percent growth witnessed in 2019. In June 2022, the Central Bank of So Tomé and Principe (BCSTP) predicted that growth would decrease to 1.4 percent for the year, down from 2.4 percent in 2021. The Central Bank also predicted an increase in inflation from 9 to 15%, citing the war in Ukraine, an increase in gasoline prices, and floods that struck the country in late 2021 and early 2022 as the main culprits. Furthermore, the Central Bank raised the reference rate from 9 to 10% to manage inflation, maintain stability in the exchange rate system, and assure price stability.
Market Challenges
Approximately 90% of the government’s budget comes from foreign sources. Aside from support from donors, the economy is still heavily reliant on agriculture, with tourism making a tiny but increasing contribution.
The private sector primarily consists of nebulous actors, micro- and small businesses, and agricultural activities, to a lesser extent, with limited investment potential.
According to recent World Bank estimates, more than two-thirds of the population is considered poor (using a poverty level of $3.2 per day) and about one-third of the population lives on less than $1.90 per day. Poverty rates are higher in urban regions and southern districts like Caué and Lembá.
Exports
Gas Turbines ($8.77M), Cocoa Beans ($3.85M), Aircraft Parts ($3.52M), Palm Oil ($3.11M), and Iron Fasteners ($557k) are the major exports of Sao Tome and Principe. The majority of these goods are shipped to Singapore ($7.13M), Switzerland ($6.05M), the Netherlands ($1.62M), France ($1.54M), and Poland ($1.54M).
