Startups in Cape Verde.

Cape Verde was mentioned by Pliny the Elder in its legendary tale about three hair-snakes sisters Gorgons, which were turned to stones by Perseus there.

First permanent settlers on Cape Verde were Portuguese sailors (1456). In XVI century islands were mostly used as the harbor for African slavers crossing the Atlantic. The importance of Verde for cross-Atlantic trade roots had kept the economy of Cape going for centuries.

However, in mid-XXth gigantic sea liners and tankers no longer needed to pause for re-feeling to reach Americas from Europe. The technological progress had ruined Cape and made islanders over-dependent from tourism and international remittances.

In 1970th Amílcar Lopes da Costa Cabral started ‘the proletariat revolution against the Capitalism in Africa’. His brother — Luis Cabral, and Partido Africano da Independência de Cabo Verde (PAICV) had led the country into the socialist experiment, which lasted from 1975 to 1990 and resulted in economic and social collapses.

In 1990th democratic reforms were implemented. In 2007 the Republic joined the WTO. A year after that the United Nation recognized Cape Verde as the middle income country.

Today Cape Verde is stable semi-presidential Republic. Cabo Verdean Parliament — 72-members Assembleia Nacional — is dominated by two political parties: pro-government Movimento para Democracia — MpD (center-right) (32 seats) and opposition PAICV (left) (38 seats).

Hot Sahara’s winds cause droughts, which periodically destroy all crops on Cape. As a result, 70% of food products are exported.

Cape Verde’s small population and tiny economy is not suited for hosting large e-companies. At the same time, thanks to its enhanced infrastructure and relative political stability Cape Verde can serve as a ground-base for Internet enterprises orientated to the Western African markets.

However, there are a number of other limiting factors negatively affecting local startup ecosystem. High administrative barriers, shortage of qualified personnel, lack of CV financing, over-reliance on exported goods, high taxes as well as high interest rate are among them. Not to mention that Cape’s geographical isolation leads to high prices for majority of goods (including foods) and materials. It significantly affects the cost of doing business there.

Business Notes for Startups Founders:

  • political climate: moderately friendly;
  • economic climate: not friendly;
  • regions to focus: Western Africa;
  • industries to focus: FinTech, E-commerce (tourism);
  • major limitations: small country size (halve of million people, GDP $1.7 billion), relative geographical isolation, high level of unemployment among youth, high level of inequality (Gini 47), absence of seed and VC capitals, high CB interest rate (7%), very high administrative and legal barriers for SME, high taxes (individual income tax at 35%), relatively high costs (most of goods and foods are imported), shortage of qualified personnel;
  • stimulus: political and social stability, middle-income population (per-capita more than $3,000), low inflation (1%), relatively high Internet penetration rate (above 40%), low competition;
  • opportunities: to launch an e-business aimed at the Western African markets.
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