São Tomé and Príncipe’s ranking returns to form when it comes to contract enforcement, where it ranks 179^th out of 183 countries ranked on this issue by the Bank. On average, reports World Bank analysts, it takes a total of 43 legal procedures to take a contract from dispute to resolution, at the cost of 1,185 days spent in court or otherwise attending to legal issues. The financial cost of pursing a contract claim, says the Bank, typically accounts for 50.5-percent of the value of the claim.

Finally, in terms of closing or liquidating a business São Tomé and Príncipe ranks 183^rd out of 183 countries as there is not history of the practice.

Table 1 presents a summary of these rankings as well as São Tomé and Príncipe’s overall ease-of-doing business rating.  As can be seen, the numbers indicate the country is one of the worst in the world in terms of doing business.  On nearly every measure it ranks well below the median—indeed near the bottom—on these measures.  If there is any category it does well in, however, it is in the area of cross-border trade where it does the least poorly.

Table 1:

World Bank Ease of Doing Business

Assessment and Rankings: São Tomé and Príncipe

 

Prospects

As Africa’s second-smallest country and an island-state to boot, one would expect São Tomé and Príncipe to be a relatively sleepy place that is of little interest to foreign investors.  While it is true that in most respects the country remains something of a backwater mostly dominated by large plantations and a cash-crop economy, there is some interesting work being done in the country’s oil and gas sector.

Presently, São Tomé and Príncipe have no proven reserves of oil and gas in its offshore areas.  Periodic exploration of its waters has turned up little and a well drilled by Chevron early in the last decade found only non-commercial quantities of oil and gas.

However, the Gulf of Guinea is itself thought to hold around 10 billion barrels of oil and exploration work in the country’s offshore areas is again seeing an uptick in both activity and interest. Since 2010 the island-state’s government has awarded offshore license grants to several companies and seismic work by at least one of them is likely to begin in 2015.

Figure 3:

 São Tomé and Príncipe Economic Growth,

Percent Increase, 2003 – 2013

So, in some respects São Tomé and Príncipe represents something of a ground-floor opportunity for the risk-seeking investor.  Until commercial quantities of oil and gas are discovered the island’s economy will remain a low-price, agriculture-dependent economy with some potential as a tourist destination.

Once oil is discovered, however, the country’s low prices and cheap real estate will begin to disappear and a more high-end retail and service economy will emerge.  Depending upon how confident one is about the likelihood of oil being discovered, getting in now while no one is there could lead the savvy investor to reap a bundle when the islands’ economy takes off from oil-and-gas riches.

If, that is, politics remains stable—the government there said it put down another coup attempt in 2009—oil is actually discovered, and one is able to make headway against the country’s stifling bureaucracy and relative isolation. But, that’s par for the course in emerging Africa, where the name of the game is all about balancing significant risks against the possibility of significant rewards.

 

Jeffrey Cavanaugh holds a Ph.D. in political science with a specialization in international relations from the University of Illinois at Urbana-Champaign. Formerly an assistant professor of political science and public administration at Mississippi State University, he writes on global affairs and international economics for AFK Insider, Mint Press News and BAM South.