Cape Verde: Investing
FDI flows to Cabo Verde have declined significantly due to the Covid-19 pandemic (-44.7% y-o-y in 2020), given the predominantly EU origin and focus on the tourism sector. Nevertheless, according to UNCTAD’s World Investment Report 2023, FDI inflows recovered in 2021 (USD 104 million) and 2022 (USD 136 million). At the end of 2022, the total stock of FDI was estimated at USD 2.3 billion, around 103% of the country’s GDP. The primary sectors attracting FDI in Cabo Verde include tourism, renewable energy, and real estate. Other sectors that have received FDI include agriculture, fisheries, and services. In terms of countries investing in Cabo Verde, Portugal is the largest foreign investor, followed by Spain, the Netherlands, and France. Other countries that have invested in Cabo Verde include Brazil, China, and the United States. Investments from China are on the rise, focusing on the tourism and infrastructure sectors, as well as the construction of a special economic zone (Coface). Some notable FDI projects in Cabo Verde include the construction of a new international airport on the island of São Vicente, the development of a wind farm on the island of Santiago, and the construction of several new hotels and resorts throughout the country. According to the latest statistical report from the Bank of Cabo Verde (BCV), from January to March 2023, the archipelago received nearly 27.8 million euros in foreign investment, primarily directed towards the tourism sector, compared to almost 25.6 million euros in the first quarter of 2022. During this period, Portugal's foreign direct investment (FDI) in Cabo Verde rose by 11%, climbing from 7.3 million euros in the first quarter of 2022 to 8.1 million euros from January to March.
The country enjoys remarkable political and economic stability, as well as robust institutions. Moreover, growth in some sectors, such as public works, tourism, and fishing, has created new opportunities. Both foreign and domestic investors are subject to the Investment Law, which guarantees the freedom to invest irrespective of nationality. However, certain sectors have their own legislation, which mandates that foreign investors in the fisheries sector must have a minimum of 51% participation from Cabo Verdean partners, while interisland maritime transport requires a minimum of 25%. However, as an archipelago state, Cabo Verde is highly fragile and vulnerable to climate change, thus requiring additional resources to build resilience. The Government has continued to implement its privatization programme, even though few investors have shown interest. Additionally, the State has decided to reduce taxes and administrative procedures, while also improving electrical infrastructure. Even though there is room for improvement, the regulatory environment and incentives are attracting tourism investors and major new projects. Under the Investment Law and the Law of Industrial Development, national and foreign investors are treated equally. Additionally, Cabo Verde has been actively seeking foreign investment through various initiatives. Companies seeking to operate within special economic zones must first secure authorization and define their intended economic activities in industrial, commercial, or financial services. Eligibility for participation in the government's Maritime Special Economic Zone in Sao Vicente (ZEEEM-SV) will entail receiving fiscal benefits and incentives, granted on a case-by-case basis. Oversight of new industrial, commercial, and export-focused endeavors falls under the purview of the International Business Center, which evaluates applicable investments and incentives. In May 2022, the Cabo Verdean government sanctioned a decree-law establishing a Special Economic Zone for Technology (ZEET), with a central hub in Praia and an extension on São Vicente Island. The ZEET aims to attract major technology firms to develop services in Cabo Verde for global markets. Investors in the ZEET will enjoy tax advantages and other conveniences, while fostering opportunities for local talent in the Information and Communication Technologies (ICT) sector. In February 2020, Cabo Verde was removed from the "blacklist" of tax havens in the European Union. Cabo Verde ranks 30th among the 180 economies on the 2023 Corruption Perception Index and 57th out of 184 countries on the latest Index of Economic Freedom.
| Cape Verde | Sub-Saharan Africa | United States | Germany | |
|---|---|---|---|---|
| Index of Transaction Transparency* | 1.0 | 5.5 | 7.0 | 5.0 |
| Index of Manager’s Responsibility** | 5.0 | 3.5 | 9.0 | 5.0 |
| Index of Shareholders’ Power*** | 6.0 | 5.5 | 9.0 | 5.0 |
Source: Doing Business - Latest available data.
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.
| Foreign Direct Investment | 2020 | 2021 | 2022 |
|---|---|---|---|
| FDI Inward Flow (million USD) | 68 | 104 | 136 |
| FDI Stock (million USD) | 2,470.3 | 2,373.2 | 2,290.9 |
| Number of Greenfield Investments* | 1.0 | 0.0 | 1.0 |
| Value of Greenfield Investments (million USD) | 28 | 0 | 11 |
Source: UNCTAD - Latest available data
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
Zero-rated items include: import of goods whose supply qualifies for exemption; services in connection with the import of goods where the value of such services is included in the taxable amount; import of gold by the central bank; import into ports by sea fishing undertakings of their catches, unprocessed or after undergoing preservation for marketing but before being supplied; import of goods under diplomatic and consular arrangements that qualify for exemption from customs duties; import of goods for the fuelling and provisioning of sea-going vessels and aircraft; supply, modification, repair, maintenance, chartering, and hiring of aircraft used by airlines operating both on domestic and international routes, and the supply, hiring, repair, and maintenance of equipment incorporated or used therein; the supply of goods for the fuelling and provisioning of such aircraft; services meeting the direct needs of such aircraft or their cargoes; etc.
| Single Income Tax (IUR) | Progressive rate from 16.5% to 27.5% An exemption from taxation applies to net income of up to CVE 220,000/year |
| CVE 0 - 960,000 | 16.5% |
| CVE 960,001 - 1,800,000 | 23.1% |
| CVE 1,800,000 and above | 27.5% |
| Cape Verde | Sub-Saharan Africa | United States | Germany | |
|---|---|---|---|---|
| Number of Payments of Taxes per Year | 30.0 | 36.6 | 10.6 | 9.0 |
| Time Taken For Administrative Formalities (Hours) | 180.0 | 284.8 | 175.0 | 218.0 |
| Total Share of Taxes (% of Profit) | 37.5 | 47.3 | 36.6 | 48.8 |
Source: Doing Business - Latest available data.
| Setting Up a Company | Cape Verde | Sub-Saharan Africa |
|---|---|---|
| Procedures (number) | 9.00 | 7.51 |
| Time (days) | 9.00 | 21.30 |
Source: Doing Business.
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Latest Update: May 2024
