Tourist Development in Cape Verde
The policy challenge of coping with success
Report on the tourism component of the Cape Verde Diagnostic
Trade Integration Study of the Integrated Framework for traderelated technical assistance to Least Developed Countries, coordinated by the United Nations Development Programme
Jonathan Mitchell
17 June 2008
* Disclaimer: The views presented in this paper are those of the authors and do not necessarily represent the views of [United Nations Development Programme]
Overseas Development Institute
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Tourist development in Cape Verde – the policy challenge of coping with success
Contents
1. Introduction...........................................................................................................1
1.1 Objective ......................................................................................................1
1.2 Strategic approach .......................................................................................1
1.3 Research methods .......................................................................................3
1.4 Definitions and conceptual approaches .......................................................3
1.5 Structure of the Report.................................................................................5
2. Overview of tourism in Cape Verde ..................................................................6
2.1 Supply ..........................................................................................................6
2.2 Demand......................................................................................................11
3. Does tourism benefit Cape Verde?.................................................................17
3.1 Tourism demand and supply......................................................................17
3.2 Leakages and linkages...............................................................................20
4. Does tourism benefit the poor?........................................................................23
4.1 Direct jobs in tourist sector.........................................................................25
4.2 Construction ...............................................................................................26
4.3 Agricultural supplies ...................................................................................27
4.4 Taxation......................................................................................................28
5. Enabling environment .......................................................................................29
5.1 Policy-making governance......................................................................29
5.2 Infrastructure ..............................................................................................31
6. Recommendations.............................................................................................38
Annex A: Terms of Reference ...............................................................................39
Annex B: Stakeholders consulted .........................................................................42
Annex C: Hotel survey............................................................................................43
Annex D:...................................................................................................................45
List of boxes
Box 1: Concerns with the enabling environment for tourism........................................3
Box 2: Foreign tourist arrivals in Cape Verde ............................................................11
Box 3: Declining spending per tourist in competitor destinations...............................13
Box 4: Impact on passenger loads of air transport liberalisation................................32
List of figures
Figure 1: Location of Cape Verde ................................................................................1
Figure 2: Growth of tourism receipts............................................................................2
Figure 3: How the benefits of tourism reach poor people ............................................5
Figure 4: Tourist bed-nights spent in 2007, by island ..................................................6
Figure 5: Foreign investment approvals.......................................................................7
Figure 6: Number of hotel staff, rooms and establishments, 1999 to 2007................10
Figure 7: Tourism arrival and expenditure statistics...................................................12
Figure 8: Number of days stay for overnight visitors to Cape Verde..........................13
Figure 9: Contracted room rates for different types of accommodation, 2008...........15
Figure 10: Visitor bed-nights in tourist accommodation by source market in 2007....16
Figure 11: Seasonality of tourist demand in 2007......................................................17
Figure 12: Tourism staff employed in 2007................................................................17 Tourist development in Cape Verde – the policy challenge of coping with success
Figure 13: Estimate of Tourism Satellite Account for Cape Verde in 2007................19
Figure 14: Cost structure of hotels in 2008 ................................................................27
List of tables
Table 1: Bed stock in 2007...........................................................................................7
Table 2: Approved tourism-related foreign investments Cape Verde, 2000-2006 .......8
Table 3: African Inbound Tourism from Larger EU Markets, 2003.............................14
Table 4: Socio-agricultural statistics 2004..................................................................24
1. Introduction
1.1 Objective
This report constitutes the tourism component of the Diagnostic Trade Integration
Study (DTIS) conducted in Cape Verde as part of the Integrated Framework for
trade-related technical assistance to least-developed countries. The Integrated
Framework1 is a multi-agency, multi-donor programme that assists the Least
Developed Countries (LDCs) to expand their participation in the global economy to accelerate growth and reduce poverty.
This study focuses upon investigating, the: contemporary trends in tourism; extent of current and potential linkages; pro-poor impact of tourism; and the enabling environment. The motivation for this study is not, however, simply research curiosity.
Specific recommendations will be made on how to develop a programme of feasible interventions to improve the developmental impact of tourism in Cape Verde (see
Terms of Reference in Annex A).
Figure 1: Location of Cape Verde
1.2 Strategic approach
Researchers must define clearly the problem they are seeking to address. This is particularly important in the case of tourism development in Cape Verde because, to
1
Main IF collaborating agencies are the International Monetary Fund (IMF), the International
Trade Centre (ITC), the United Nations Conference for Trade and Development (UNCTAD), the United Nations Development Programme (UNDP), the World Bank (WB) and World Trade
Organisation (WTO).
1
Tourist development in Cape Verde – the policy challenge of coping with success many developing country policy makers, the story of tourism in Cape Verde is one of almost unparalleled success.
In the decade since international tourism started in Cape Verde, the growth in tourism receipts has been dramatic – both in absolute terms and also relative to the broader economy. In Cape Verde, tourism receipts constitute about one-fifth of the economy and a high proportion of total exports.
Figure 2: Growth of tourism receipts
25 25
20 20
15 15
10 10
55
Tourism receipts
Reciepts as % GDP
00
Source: Direccao Geral de Desenvolvimento Turistico (March 2008) Perfil de tourismo em
Cabo Verde
The result of this growth in tourism receipts has been to transform the Cape Verdean economy2. For many years the economy has had an almost surreal quality – reflecting the fact that the main financial flows are largely in the hands of external actors. Migrant remittances, air transport receipts and official transfers (i.e. aid) dominated the economy and had little to do with anything the population did in Cape
Verde. Subsistence agriculture and artisanal fishing providing a safety net for those choosing not to embark on any of the three main livelihoods strategies of Cape
Verde’s population: emigration abroad; links with the diaspora and migration to urban centres.
In other words, tourism is the first significant economic activity that has taken place in
Cape Verde that is both globally competitive and reflects something that happens in
Cape Verde rather than just to Cape Verde. It therefore represents something much more important than money. A successful tourist sector in Cape Verde offers the prospect of independence and not having to leave home to earn a living - because the market is coming to Cape Verde rather than Cape Verdeans having to go to the market.
However, in spite of this macro-economic success, people perceive problems.
Across a broad range of stakeholders, from policy-makers to people working in the tourist sector and ordinary Cape Verdeans, there is a keenly-felt concern that tourism is not really benefiting the Country.
•
The benefits of tourism are just ‘leaking’ away to the off-shore accounts of international operators and overseas companies supplying the tourist industry because of a lack of linkage between the tourist and non-tourist economies;
2 See excellent graphical presentation on page 12 of Jorgen Carling (2008) ‘Policy Challenges
Facing Cape Verde in the Areas of Migration and Diaspora Contributions to Development’
2
Tourist development in Cape Verde – the policy challenge of coping with success
•
•
Tourism has few links with Cape Verdean culture and tourists are isolated from the host culture in large, foreign-owned, all-inclusive resorts; and Tourism is threatening the environment and society of Cape Verde through unplanned development and encouraging crimes such as prostitution and gun crime.
In addition, as part of the process leading up to a tourism master planning exercise, the following issues relating to the enabling environment for tourism have been raised by the tourism department.
Box 1: Concerns with the enabling environment for tourism
1. shortages of water and electricity;
2. transport, principally inter-island which is critical for the spatial diversification of tourism :
3. lack of tourist promotional material
4. lack of tourist infrastructure;
5. intersectoral linkages are needed between tourism and energy; transport; agriculture; the environment; environment and the private sector
6. lack of a strategic tourism plan.
Source: Direccao Geral De Desenvolvimento Turistico (2008) Perfil de Turismo em Cabo
Verde
This study seeks to address these issues at these two different levels.
First, at a strategic level, it examines linkages between the tourist and non-tourist economies to investigate how the tourist sector currently benefits Cape Verde – and poor people within it.
Second, at a more operational level, the study assesses the enabling environment for tourism and outlines how this can be enhanced.
1.3 Research methods
This report is based upon evidence collected during a mission to Cape Verde from
18th to 28th April 2008. During this time the author visited the islands of Santiago, Sal,
Sao Vincente, Santo Antao and Boa Vista.
Interviews were conducted with about thirty key stakeholders in the tourist sector including: official policy-makers, tour operators, parastatals, suppliers such as hoteliers, NGOs and other representatives of the industry (see Annex B for a list of people interviewed). These interviews included formal hotel surveys (see Annex C).
Sensitive information was provide on a confidential basis, so statements are not attributed to specific individuals. A copy of this report will be sent to all participants to allow them to validate the information contained within it.
1.4 Definitions and conceptual approaches
This study has one important definition and two conceptual issues.
Tourism is defined as the activities of persons travelling to and staying in places outside their usual environment for up to one year, for leisure, business
3
Tourist development in Cape Verde – the policy challenge of coping with success or other purposes that is not remunerated from the place visited. This definition raises two immediate issues of relevance to for Cape Verde. First, migrant workers (whether from Portugal to manage hotels or from Ginnea-
Bissau to build them) are not tourists – they are workers and should be excluded from tourist statistics (see Section 2.2 for more detailed discussion).
Second, visitors from the diaspora – so-called emigrants – who typically return from the countries they are living and working in every few years to visit friends and relations are indeed ‘tourists’ and an important element of tourism in Cape Verde. There is a reluctance to acknowledge the importance of the diaspora as either tourists or investors in tourist facilities in Cape Verde.
The two important conceptual issues are: pro-poor tourism; and, a framework for the different ways that the tourist economy can link to the non-tourist economy.
Pro-poor tourism is a concept which focuses upon the net flow of benefits from tourism to poor people. It was developed around the turn of the new Millennium and sought to broaden the application of tourism as a tool of development beyond the traditional domain of community-based tourism and eco-tourism to more mainstream types of tourism. Pro-poor tourism is based upon three hypothesis:
•
•
•
Tourism can be pro-poor;
Through deliberate interventions, tourism can be made more pro-poor; and Any kind of tourism can be pro-poor.
A number of empirical studies have been undertaken recently by organisations such as the International Finance Corporation (IFC), SNV and ODI to test these hypotheses. Although there is much to be done to strengthen the empirical foundation of findings, it appears that these hypotheses generally are robust for a broad variety of tourist destinations3.
How tourism can reduce poverty? Tourism can reduce poverty in several different ways – or via several different pathways – as Figure 3 represents overleaf.
The most obvious linkage between tourism and the poor are direct links – such as when poor people find jobs in hotels and restaurants in the tourist sector, or when communities benefit from a private sector concession to develop tourism on their land. These direct linkages tend to be most significant in places with relatively high wage levels and relatively low levels of linkage between tourism and the local economy – for instance in South Africa.
In economies with low formal sector wages and a vibrant local economy, indirect links often have a larger impact on poor people living around a tourist destination than direct links. For instance, in much of South East Asia, formal sector wages in hotels are often $1-$2 a day and there is a rich network of links to the non-tourism
(i.e. craft and food) economy. Another form of indirect linkage between tourism and the poor is induced links, where non-poor people that derive their earnings from tourism spend these wages in a way that brings benefits to the poor.
3
See Mitchell and Ashley (forthcoming 2008) ‘Pathways to Prosperity – how tourism can reduce poverty?’ report for the World Bank
4
Tourist development in Cape Verde – the policy challenge of coping with success
Finally, the dynamic effects of tourism are the longer-term effects. For example, raising additional tax from tourism that can benefit the poor through government expenditure.
There is also an emerging body of knowledge that international tourism helps economies to diversify and improve their exports precisely because it exposes indigenous entrepreneurs to international tastes within their own borders4.
Dynamic affect have great relevance for a country like Cape Verde because even a very modest tax take from the tourist sector could have a dramatic influence on government finances. Perhaps even more significant, though, is the potential benefit of international tourism in assisting Cape Verdeans realise their compelling national vision of moving from an economy of subsistence primary producers dependent on handouts from outsiders to a globally competitive service sector economy.
Figure 3: How the benefits of tourism reach poor people
Tourist
Sector
At
Destinat
ion
Non-Poor
Househol ds
Intersectoral
Linkages
Outside
Destinat
ion
Non-
Tourist
Sector
Key
Effects
Longer-term Dynamic Induced
Effects
Direct Indirect
Effects
Eff
t
1.5 Structure of the Report
This report comprises five main sections.
The overview of tourism in Cape Verde focuses on contemporary trends on the supply and demand side of the tourist industry. On the supply side this includes an analysis of Cape Verde’s current bed stock and an indication of the current level of investment in the sector. On the demand side, tourism arrival statistics are analysed
4
Lajaranga and Walkenhorst (2007) ‘Of linkages and leakages: how tourism can foster economic diversification’ Wold Bank research paper
5
Tourist development in Cape Verde – the policy challenge of coping with success to assess the source markets, number, length of stay and expenditure of visitors to
Cape Verde.
In the Section on tourism benefits to Cape Verde, the issue of linkages between tourism and the rest of the economy are outlined and the issue of the ‘leakage’ of tourism benefits to the poor is discussed.
The Section on tourism benefits to the poor explores linkages between tourism and poor people. In this section an attempt is made to quantify the proportion of total tourist receipts in Cape Verde that accrue to people from poor backgrounds.
Whilst tourism is a predominantly private sector activity, the role of the state in providing a supportive enabling environment is important in terms of encouraging a specific scale and pattern of tourist development.
Finally, the recommendations that are presented throughout the Sections above, are drawn together in the final Section and distilled into an series of twelve concrete and practical interventions for consideration by the study partners.
2. Overview of tourism in Cape Verde
2.1 Supply
Although tourists visiting Cape Verde come from a rich diversity of origins, their destinations within the Archipelago are limited. The concentration of tourist activity on one or two centres on just four islands is striking.
Over three-quarters of all tourist bed-nights in Cape Verde (1.1m nights out of a national total of 1.4m in 2007) were spent on the island of Sal and over 80% of the tourist rooms on Sal are located in the small town of Santa Maria.
Figure 4: Tourist bed-nights spent in 2007, by island
80
Sal
70
Santiago
60
Bao Vista
50
40
30
20
10
0
Sao Vincente
Sao Antao
Fogo
Sao Nicola
Maio
Brava
Source: INE (2008)
Figure 4 illustrates the degree of concentration of Cape Verde’s bed stock. Well over half the registered national bed stock – which comprises some 10,000 beds in 5,000 rooms - is located in the ten large hotels on the islands of Sal, Santiago and Boa
Vista.
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Tourist development in Cape Verde – the policy challenge of coping with success
Table 1: Bed stock in 2007
Island No. No. No. Concentration
establishments rooms beds
Total
Sal 37 2,931 6,422 5 large ( 200 room) hotels account for
1,701 rooms - or 58% of island total
Santiago 38 727 1,336 2 large ( 100 room) hotels account for
227 rooms – or 31% of island total
Bao Vista 15 809 1,579 3 large ( 100 rooms) hotels account for
619 rooms – or 77% of island total
Sao 20 443 808
Largest hotel has 90 rooms
Vincente
Antao
Santo 21 250 353
Largest hotel has 26 rooms
Fogo 13 136 228
Largest hotel has 39 rooms
Maio 366 134 Largest hotel has 80 rooms
Sao 872 101 Largest hotel has 15 rooms.
Nicolau
Total 142 4,836 10,450
Brava 545 65 Largest hotel has 12 rooms
Source: Cape Verde Investments (May 2007) Cape Verde: The Country - Facts
There is certainly a building boom taking place in tourist accommodation in Cape
Verde, driven principally by foreign investors. Encouraged by duty free imports of construction materials for tourism projects approved by Cape Verde Investments
(CI); a five year holiday on corporate tax; and strong tourism demand, it has been estimated that tourism investments make up 95% of all foreign direct investment
(FDI).
Figure 5 is based upon 2006 investment data. Whilst slightly dated, it does illustrate several important points relating to FDI in Cape Verde. First, such investments appear to be growing at an accelerating rate. Second, even two years ago the volume of investment already taking place is highly significant for a small country with a population of 430,000 and GDP of about €1bn. Third, there is little evidence of foreign investors withholding land with approved projects whilst seeking speculative gains in land prices, as is observed in other developing country contexts. It would appear that there is only a 2-3 year lag between development approval and implementation.
Figure 5: Foreign investment approvals
3 000
2 500
2 000
1 500
1 000
500
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Actual and Projected Investment Approvals Projected Investment realisation
Source: CVI cited in Grant Thornton (2007)
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Tourist development in Cape Verde – the policy challenge of coping with success
As with the current stock of tourism accommodation, however, these approved investments are highly concentrated geographically. Half of the total is on the island of Sal and half of the rest is on Boa Vista, with the rest split between Santiago and Sao Vincente.
Table 2: Approved tourism-related foreign investments Cape Verde, 2000-2006
Island No. of Value of investments % of total
(€ millions) investments investment value
Sal 348.1 49.4% 27
Boa Vista 14 164.0 23.3%
Santiago 14 93.9 13.3%
78.5 Sao Vincente 19 11.1%
10.9 Sao Nicolau 21.3%
4Maio 5.4 0.8%
Fogo 23.1 0.4%
Santa Antao 10.5 0.1%
Brava 10.1 0.0%
Total 84 704.7 100%
Source: Grant Thorton (2007)
These supply-side trends raise three important issues, the:
•
•
•
Geographical spread of Cape Verde’s tourism industry;
The rate of growth of tourism; and The type of tourist development in terms of scale, ownership and type.
In terms of the geographical location of the tourist industry, current trends suggest the development of three different tourism products in Cape Verde.
First, the great majority of tourist activity - at least 80% of bed nights based upon current patterns of usage and the scale of investments over the next five years and perhaps 70% expenditure - will be in European package tourists staying at large beach hotels on the islands of Sal and Boa Vista.
Second, almost all the remaining 20% of bed nights and tourist expenditure will be on the islands of Santiago and Sao Vincente. Because these islands have a much more significant host population and economic base, there will be greater opportunity in these places for tourists to link up with Cape Verdean culture and somewhat stronger links to the non-tourist economy. Domestic (business and leisure) and diaspora tourism will become increasingly important trends in these places. The diaspora are not only important as tourists but also tourism investors. In Sao Vincente, for instance, about half of the smaller tourist developments (pousadas and residenciais) have been established by returning emigrants.
At present the taxation regime is very generous for approved foreign investors (5 years holiday from corporation tax and 2 years exemption from importation duty).