São Tomé and Príncipe: key economic sectors

São Tomé and Príncipe is on a transformative journey with its strategic focus on agriculture, oil and renewable energy, tourism, and expanding service and manufacturing sectors. Addressing structural challenges through sustainable practices, enhanced infrastructure, and education will be key to unlocking the full potential of this promising island nation. 

Agriculture: The Cornerstone of São Tomé and Príncipe's Economy

Agriculture remains a vital pillar of São Tomé and Príncipe's economy, thriving due to the equatorial climate and fertile volcanic soils. It heavily dominates the landscape and economic activity. Cocoa is the top cash crop, constituting 70-80% of exports. In 2021, São Tomé and Príncipe exported $17 million in Cocoa Beans, standing as the 28th largest exporter globally. Other significant crops include sugar, coffee, palm oil, and diverse tropical fruits, supporting the growing food processing industries like fish processing.

Despite its essential role, the agriculture sector faces numerous challenges. The dependency on foreign food aid, poorly maintained plantation lands, limited access to credit facilities, and infrastructure gaps hinder productivity. Additionally, the climatic conditions and traditional farming methods restrict the sector's growth. However, future prospects are promising. President Carlos Manuel Vila's visit to sustainable fish processing facilities in Uganda in October 2023 highlights potential industry expansion. Modernizing farming techniques and improving transportation networks remain critical to enhancing productivity and food security.

Oil and Energy: Ambitious Exploration and Renewable Initiatives

The potential revenue from offshore oil exploration could be a game-changer for São Tomé and Príncipe. Joint exploration with Nigeria began in 2018, and in 2022, a landmark project involving major stakeholders such as Sonangol, TotalEnergies, Shell, and Galp Energia was finalized. This collaboration anticipates significant revenue from ten oil blocks currently under exploration.

In parallel, São Tomé and Príncipe is investing in renewable energy initiatives. The nation's collaboration with Global OTEC Resources, alongside the UN Industrial Development Organization and Portuguese engineering firms, indicates a solid move towards sustainable energy. This project focuses on a floating ocean thermal energy conversion (OTEC) platform, which could significantly boost the energy supply using the ocean's thermal gradient. Thus, these dual pathways—oil exploration and renewable energy initiatives—could jointly fortify the country's energy sector.

Tourism: Tapping into Natural Beauty

Tourism presents a robust growth avenue for São Tomé and Príncipe. The number of tourists rose to 35,000 in the 2010s, drawn by the islands' pristine rainforests, unique wildlife, and equatorial landscapes. Tourism's economic contribution was substantial, amounting to US$0.25 billion in 2019 and projected to rise to $670 million by 2043.

To harness this potential, the government has prioritized developers to invest in sustainable tourism practices to protect the natural splendor that attracts visitors. Infrastructure development, such as expanding the international airport and improving accommodations, is essential to handle the increasing tourist numbers while preserving environmental integrity. The emphasis on sustainable tourism aligns with President Vila Nova's environmental protection advocacy, aiming to balance growth with ecological preservation.

Services and Manufacturing

The service sector, predominantly driven by tourism, remains the largest contributor to São Tomé and Príncipe's GDP. In 2019, it accounted for 71.1% of the GDP, a clear indicator of its dominance. By 2043, this contribution is expected to increase to 74%, underscoring tourism's centrality to the economic framework.

In contrast, the manufacturing sector, though currently contributing a smaller 10.2% to GDP, showcases significant growth potential. It includes small-scale factories producing foodstuffs, beverages, soap, bricks, and sawn wood largely for domestic consumption. With the right investments in skill development and infrastructure, manufacturing is expected to surpass agriculture, becoming the second-largest contributor to GDP by 2043. This shift from a primarily agricultural economy to one with a robust manufacturing base points to a diversifying economic landscape.

Financial Insights and Development Strategies

Despite São Tomé and Príncipe's high dependency on foreign aid and external financing, strategic reforms are underway to stabilize and grow the economy. The nation faces structural vulnerabilities, such as limited domestic revenue and a declining rate of external financing. Initiatives to improve human capital through education and vocational training are underway, aiming to build a more skilled workforce. Infrastructure investments, particularly in energy reforms and transportation, are critical to facilitating economic growth.

Fiscal reforms, including the introduction of VAT and better fiscal management, are expected to reduce deficits. The government's focus on improving the business environment and attracting foreign direct investment (FDI) aligns with Prime Minister Jorge Bom Jesus's development agenda. By addressing these structural challenges, São Tomé and Príncipe aims to create a sustainable economic model less reliant on external aid.