BUSINESS NEWS
BUSINESS ENVIRONMENT OUTLOOK
Context
This analysis aims to provide an overview of the São Tomé and Príncipe business environment and help you identify potential factors that may influence your business due to possible market changes. It considers both the opportunities and threats that may arise and examines how your business can adapt to these variables to ensure its success. We recommend conducting specific studies tailored to particular industries for a more comprehensive understanding.
POLITICAL
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São Tomé and Príncipe is widely recognized as one of the most stable constitutional states within the Economic Community of Central African States (ECCAS). This political stability serves as a notable example of effective democratic transitions in Central Africa and provides investors with a degree of predictability regarding their business ventures, as well as assurance concerning fundamental principles such as private property rights and economic freedom.
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Changes in the dynamics of global relations between countries or companies could directly impact economic agreements.
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As part of the drive to promote and give credibility to the private sector, the country's chamber of commerce and industry has become more prominent, and an arbitration court has been set up to resolve business disputes swiftly and confidentially.
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As a way of boosting the movement of goods through the reduction of trade barriers, transparency, equal treatment of competitors, and commercial legality, São Tomé and Príncipe has been implementing the trade facilitation agreement with many ECCAS countries.
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Development and implementation of a National Sustainable Development plan aimed at reducing dependence on foreign aid to finance the economy (ongoing).
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Aware of the importance of foreign direct investment for sustainable development, the government, in line with the national development plan, has established a policy of incentives to encourage foreign investors and transnational companies to invest in sectors considered key in the country.
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O govern tem vindo a trabalhar na melhoria das infraestruturas críticas como energética, Aeroportuária, e de comunicação para a melhoria do ambiente empresarial.
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Since 2024, STP has belonged to the group of middle-income countries.
ECONOMIC
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The Euro and the United States Dollar are the primary foreign currencies utilized for international transactions within the country. Since 2012, São Tomé and Príncipe has established an exchange rate parity policy agreement, which facilitates greater stabilization of the local currency, the Dobra, to the Euro. This agreement mitigates the effects on international trade and enhances the country's competitive position in the global market.
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According to data from the Central Bank of São Tomé and Príncipe, the projected economic growth 2024 was anticipated to be below 1%. However, a gradual acceleration in growth is expected, culminating in a rate of 3.1% by the end of 2025 and 4.8% by 2026. According to the same source, a reduction in inflation to 10.9% in 2024 and the maintenance of a level of 5% in the medium term” was anticipated.
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São Tomé and Príncipe faces significant challenges in achieving sustainable development, primarily due to the high trade costs associated with its geographic isolation and insular nature. The economy remains heavily reliant on Official Development Assistance (ODA), highlighting the critical importance of foreign direct investment (FDI) as a catalyst for economic enhancement.
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The economic sector continues to exhibit vulnerability and lacks diversification, primarily relying on cocoa production and export. This sector accounts for approximately 90% of total export revenues, underscoring the need for broader economic development strategies.
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The third sector primarily operates informally, contributing roughly 60% to the country's GDP and providing jobs for about 60% of the workforce. In contrast, the combined contributions of the primary and secondary sectors account for around 40% of GDP. A collaborative initiative with the International Labour Organization (ILO) is currently in progress, and substantial advancements have been made in implementing a strategy aimed at the formalization of the informal sector.
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According to data from Trading Economics, exports from São Tomé and Príncipe decreased to 0.98 million dollars in January 2024, a decline from the 2.07 million dollars reported in December 2024. From 1999 to 2024, the average export value for São Tomé and Príncipe was 1.25 million US dollars, with a peak of 5.55 million US dollars in November 2024 and a trough of 0.01 million US dollars in April 2016.
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The local private investment market demonstrates a level of fragility regarding the capability to secure the funds necessary for capitalizing on the diverse business opportunities available across various sectors of the economy.
SOCIOCULTURAL
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The population of São Tomé and Príncipe is predominantly young and experiencing growth, with the average age approximately 18 years. This demographic exhibits openness and a strong desire for employment opportunities and the adoption of new technological advancements. The literacy rate in the country exceeds 90%, and the public sector remains the primary employer within the economy.
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The primary language of communication in the region is Portuguese, which serves as the official language. Additionally, French is widely spoken among the population. A significant challenge presents itself with the English language, as the number of proficient speakers is relatively low. Nevertheless, an initiative is currently being implemented to promote English language acquisition as a means of enhancing business communication.
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The cultural bases are predominantly influenced by Portuguese, Brazilian, and African traditions, resulting in distinct habits and customs that reflect these geographical regions. Clothing is mainly European in orientation, while culinary practices display a synthesis of European and African influences.
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The business culture predominantly emphasizes principles of trust, respect for hierarchical structures, and peaceful conflict resolution. Decision-making is generally conducted through consultation with higher levels of authority. While the capacity for teamwork remains an area requiring enhancement, certain ethical practices are well-established. These include adjusting attire to align with the nature of the business activity, the customary greeting of a handshake, and the frequent offering of business lunches. Business cards are typically exchanged using one hand, and maintaining eye contact is deemed essential for fostering engagement and building empathy.
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Purchasing power is influenced by work sector, qualifications, and contract type. A significant portion of the population experiences relatively low purchasing power.
TECHNOLOGICAL
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The STP-DIGITAL project is being implemented with the support of the World Bank, and it holds a value exceeding 23 million USD. This initiative aims to serve as a foundational catalyst for enhancing technological innovation in São Tomé and Príncipe through the digitization and interoperability of government platforms. The objective is to improve the delivery of both public and private services, facilitate the development of the broadband market, and enhance connectivity across the islands, including inter-island communications and educational institutions. Ultimately, this project is poised to significantly contribute to the country's competitiveness relative to other investment destinations while fostering the advancement of the new digital era that São Tomé and Príncipe is currently experiencing.
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In order to enhance the attractiveness of the foreign direct investment (FDI) landscape, automation has emerged as a significant technological factor within the country's overall technological environment, particularly in the services sector. The government has recently initiated several programs aimed at expediting processes, reducing operational costs, eliminating unnecessary redundancies, and shortening delivery timelines. This comprehensive initiative has generated a ripple effect across various sectors, promising to serve as a pivotal moment for enhancing competitiveness among markets. From an environmental standpoint, the energy sector is currently transforming through the adoption of more sustainable technologies, aimed at fostering a more resilient ecological framework.
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While technological development in São Tomé and Príncipe has yet to reach a fully mature stage, it is increasingly fostering awareness of its potential. Consequently, new business models have emerged, particularly within the banking, services, and agro-industry sectors. This evolution has notably influenced competition among companies operating within the same sector, as well as customer behavior and decision-making processes, among other factors.
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As part of the STP-DIGITAL project, which is funded by the World Bank, São Tomé and Príncipe has successfully developed and implemented a comprehensive national cybersecurity plan. This initiative includes the establishment of legal frameworks addressing cybercrime and the creation of a National Computer Security Incident Response Team (CSIRT). These measures aim to enhance the security of enterprises, individuals, and data within the country. Additionally, São Tomé and Príncipe is supported by a national personal data protection agency that oversees the principles governing the processing of personal data.
ENVIRONMENTAL
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As an island nation, São Tomé and Príncipe, similar to other member countries of the Small Island Developing States (SIDS), is particularly susceptible to the impacts of climate change. The nation is characterized by its dense, pristine tropical forests, which, in conjunction with the Congo Basin, form a significant natural carbon sink. According to data from the World Bank, the per capita carbon dioxide emissions in 2022 were reported at 0.70 metric tons.
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São Tomé and Príncipe is actively implementing a national sustainable development plan aligned with the 2030 transformation agenda. In this context, the government has undertaken concrete measures to foster sustainability among both the public and private sectors. This initiative includes the ratification of international conventions and the development and enforcement of legal frameworks designed to ensure socio-economic progress while safeguarding the needs of future generations. A notable example of this commitment is the recent enactment of legislation prohibiting the use of plastics.
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Thirty percent of the nation's land area is designated as protected zones, encompassing 25,274 hectares on the island of São Tomé and 6,500 hectares on the island of Príncipe. The island of Príncipe has earned recognition as a UNESCO World Biosphere Reserve since 2012, which includes the island itself, marine habitats, and adjacent islets, amounting to approximately 71,592.5 hectares in total.
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The islands of São Tomé and Príncipe are characterized by their rich ecosystems and extensive biodiversity, earning the nation recognition as one of the countries with the highest concentrations of endemic species globally. The protected area has been designated as the 32nd most significant protected area in terms of the conservation of mammals, birds, and amphibians, and ranks 17th when considering only threatened species. It is estimated that the archipelago is home to approximately 1,200 plant species, of which around 900 are indigenous, 300 are introduced, and 148 are endemic, representing approximately 14% of the national flora. Learn more here.
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São Tomé and Príncipe has established two significant initiatives pertaining to its energy sector: the National Renewable Energy Action Plan and the National Energy Efficiency Action Plan. These plans, which span the periods from 2021 to 2030 and 2021 to 2050, respectively, are integral to the nation's energy policy. They are designed to assist in achieving the overarching objective of attaining zero global emissions by the year 2050.
LEGAL
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São Tomé and Príncipe has established a comprehensive framework of environmental legal instruments designed to mitigate deleterious effects on the environment and safeguard protected areas, forests, flora, fauna, and wind resources. Entities operating within the country are required to comply with the applicable regulations and adopt sustainable practices that contribute to the mitigation and adaptation to climate change within the nation.
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Entities operating within the country must adhere to the relevant labor legislation designed to promote sustainable practices that protect workers' rights and ensure equitable and safe working conditions. Employment contracts must be executed in written form; however, verbal agreements are also considered valid in the event of a legal dispute.
- The regulations governing Intellectual and Industrial Property in São Tomé and Príncipe are encapsulated in Decree Law No. 23/2016. This legislation established an administrative framework dedicated to the protection of industrial property rights, encompassing all areas of commerce, services, and industry, including agro-industry, fishing, forestry, food production, construction, and extractive industries. It mandates compliance from all entities, whether individuals or corporations, both São Toméan and foreign, as well as nationals from countries belonging to international or regional organizations of which São Tomé and Príncipe is a member. Compliance with these regulations is required irrespective of the domicile or establishment of the entities involved.
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The regulation of competition is implemented in specific sectors such as telecommunications, water and electricity, and aviation. In these sectors, oversight is conducted either by a designated Institute or by a regulatory authority endowed with the necessary powers and legal instruments to ensure fair competition and prevent monopolistic practices. Companies operating within these sectors must remain cognizant of these regulations to ensure compliance. In contrast to these regulated fields, there exists no structural framework to limit competition in other sectors.
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The fiscal and tax regulations of São Tomé and Príncipe are governed by specific laws and decrees that delineate the applicable taxes, rates, collection procedures, and available tax exemptions or benefits. The tax framework encompasses several components, including Value Added Tax (VAT), Personal Income Tax (IRS), and Corporate Income Tax (IRC), along with various specific levies. To promote foreign direct investment (FDI), the government has established incentives targeting sectors deemed strategic for national development.
