Cape Verde: Investing
FDI flows to Cape Verde have declined significantly due to the Covid-19 pandemic, given the predominantly EU origin and focus on the tourism sector. According to UNCTAD’s World Investment Report 2021, FDI inflows decreased by 31% to USD 73 million in 2020. Delays in investment projects were observed not only in tourism, but also in transportation and ICT. The total stock of FDI was estimated at USD 2.5 billion in 2020. In 2021, global FDI flows rebounded strongly, but FDI flows to African countries (excluding South Africa) rose only moderately (UNCTAD’ Investment Trends Monitor). Overall, tourism is the sector that attracts the most FDI and the main investors are Western European countries (UK, Portugal, Italy and Spain). Investments from China have are on the rise, focusing on the tourism and infrastructure sectors, as well as the construction of a special economic zone (Coface). As the authorities aim to prioritise sustainability and economic diversification, the green energy sector is expected to attract new investments in the future.
Cape Verde ranks 137th out of 190 in the World Bank's 2020 Doing Business report, a six-spot decrease compared to the previous year. 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. However, as an archipelago state, Cape Verde is highly fragile and vulnerable to climate change, thus requiring additional resources to build resilience. The Government has continued to implement its privatisation 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. In February 2020, Cape Verde was removed from `blacklist` of tax havens in the European Union.
| 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 | 2019 | 2020 | 2021 |
|---|---|---|---|
| FDI Inward Flow (million USD) | 103 | 74 | 118 |
| FDI Stock (million USD) | 2,172.6 | 2,464.1 | 2,452.8 |
| Number of Greenfield Investments* | 3.0 | 1.0 | 0.0 |
| Value of Greenfield Investments (million USD) | 211 | 22 | 0 |
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: February 2023
