São Tomé and Príncipe

São Tomé and Principe are two small islands in the Gulf of Guinea, and the second smallest country in Africa. Small oil discoveries, and expectations of more, off the coast of the islands have given people hope for the future and brought international interest. However, what implications the oil will have for the shared and politically unstable political system on the islands is unclear, especially since it is still uncertain whether commercial oil production will ever be on the islands.

Politics in São Tomé and Príncipe have long been deeply divided. In recent years, no parties have gained a majority, and various unstable coalitions have competed to be in government. Despite episodes of internal disagreement and several corruption scandals, the coalition government led by Prime Minister Joaquim Rafael Branco, leader of the Movimento de Libertação de São Tomé e Príncipe – Partido Social Demócrata (MLSTP-PSD) party, has enjoyed a period of relative political stability. Partido da Convergência Democrática (PCD) and Movimento Democrático Forças da Mudança / Partido Liberal (MDFM-PL) are coalition partners in government, but they also rely heavily on the support of the third largest party, Acção Democrática Independente(ADI), for impact. The President, Fradique de Menezes, has contributed as a stabilizing force during the period when the President and Prime Minister were for the first time from the same party.

Increased political instability is expected in 2010 and 2011, as the country will conduct three elections – parliamentary elections, local elections and presidential elections. The result is likely to be yet another unstable and short-lived coalition government, which will make it difficult to implement political measures. Furthermore, there are many indications that the elections will be postponed, as donor money has not been secured for any of the elections and voter registration has already been delayed, partly because of a break-in at the Election Commission, where computers with voter registers were stolen. Delays in local elections could call into question the administration’s legitimacy – especially on the island of Príncipe, where regional authorities threaten to withdraw in protest of several delays. The delays will hardly be so unpopular among the population,

Corruption has been a recurring theme on the islands. Norway has been involved through its Oil for Development program to ensure that future oil revenues are used for development purposes. In 2010, a new police force to investigate financial crime will be established.

Oil hopes and economy

Despite strong growth over the past three years, São Tomé has a small economy that has been mainly based on cocoa exports. Cocoa production has dropped drastically in recent years, as a result of falling cocoa prices and land reform that has divided formerly enormous goods into smaller rural areas, thus reducing efficiency. The economy is also limited by a narrow domestic market and geographical isolation. Growth has been impacted by the global economic crisis, but investment is expected to increase with the discovery of significant oil and gas reserves in the Nigeria-São Tomé zone. In any case, the country needs to create a more versatile economy and reduce food imports, which accounted for nearly a third of imports in 2006. The economy is also heavily dependent on aid money, which accounts for about 80 percent of state revenue, according to The Economist.

The Portuguese Ministry of Finance will facilitate a fixed exchange rate system between the local dobra and the euro, which will come into force during 2010. This could reduce inflation, which has been very high in recent years. A fixed exchange rate system could facilitate foreign trade and reduce imported inflation, but would in fact give control of monetary policy to the European Central Bank.

Oil production has a major impact on the economy of the islands. Although production itself is not expected to start until early 2011, since 2005 there has been a steady flow of cash into the country for drilling licenses and other investments. Many have high hopes for revenue from recovery, but it is still unclear how much can be exploited commercially. Even in the best conceivable scenario, business taxes will not matter to the tax level for many years, given the typical time lag between discovery of exploitable fields and final recovery. In addition, disagreements over rights come to some of the fields between Nigeria and São Tomé and Príncipe, which are unlikely to be resolved until a new licensing round is completed.

The natural beauty of the islands, empty beaches, evergreen bird species and old plantation buildings offer a potential for tourism. The tourism industry has so far been limited by the island’s isolation, expensive airline tickets and poor infrastructure.

Foreign interest

Several countries are showing increased interest in the country, motivated by strategic interests in the oil resources. The United States has established a radar monitoring station on the island of São Tomé, and it is rumored that a temporary military base is being planned here, to protect the stability of the oil-rich Guinea Bay. Nigeria and Angola compete for influence in the development of São Tomé’s oil resources through shared development zones and by actively interfering with the island’s policies to safeguard their own interests.

The historically good relationship with Taiwan, which has long provided the islands with assistance in exchange for diplomatic recognition, may become more problematic in the future, as China plans to become the largest main investor in the archipelago through the Chinese oil company Sinopec.

A complex and young population

São Tomé and Príncipe have a population composed of descendants of Portuguese, slaves and contract workers from Cape Verde, Angola and Mozambique, who were brought to the islands to work on the Portuguese plantations. Almost half of the small population of just under 150,000 is under 15. The population is generally poor, but the United Nations places São Tomé and Príncipe as the fifth best country in sub-Saharan Africa on the Human Development Index (HDI). Life expectancy is also relatively high, with an average of 65 years. It is high child mortality, much because of the high incidence of malaria, which is the most frequent cause of death. HIV / AIDS figures are currently relatively low.

The islands have their own state television channel and several local newspapers. Censorship and political repression are not a theme. There are also several online newspapers, including Téla Nón and Jornal de São Tomé e Príncipe. However, São Tomé is in a deep power crisis. In September 2009, more than 70 percent of the country was without electricity. This makes Internet access difficult, and there are no quick fixes to the problem.

Country facts:

Area: 964 km2 (second least, no. 53)

Population: 160,000

Population density: 166 per km2

Urban population: 60 percent

Largest city: São Tomé – approx. 58 000

GDP per capita: $ 1108

Economic growth: 5.8 percent

HDI Position: 131

Credit: www.countryaah.com

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