The graduation of Cape Verde from a low-income to a middle-income country in 2007 can be attributed in large part to the development of the tourism industry. As in Seychelles and Mauritius, tourism has had important spillover effects over the entire economy.
- Tourism is Cape Verde’s fastest growing sector.
- In 1990, this sector contributed less than 2% to GDP. In 2008, tourism in Cape Verde accounted for nearly 16% of GDP (World Travel and Tourism Council) and for 14 000 jobs, representing 14.6 per cent of total employment.
- Since travel and tourism touches all aspects of this island economy, its real impact is even larger. WTTC estimates that tourism gross contribution to GDP was over 27%, in 2008.
- Tourism was also estimated to have accounted for 99% of foreign direct investment inflows in 2008.
- Since 1991, the Government has undertaken a series of initiatives with the aim of transforming a centralized economy into a market economy. A direct result of this new strategy was a focus on: privatization, FDI inflows, exports and tourism to compensate for the declining trend in development assistance.
- The Cape Verdean government has identified tourism as an important instrument of economic development and it has created several incentives to attract investors to this sector and to improve the business climate. These incentives include: a 100% fiscal exemption in the first five years of investment; a 50% discount in taxes in the following 10-year period; an exemption of import taxes on all the materials used in the construction and exploitation of the hotel and tourist facilities; and reduced taxes on profits that are reinvested in the same sector.
- The government of Cape Verde has established zones for integrated tourism development, where an investor can purchase the land from the state, and the state will reimburse the landowners. The purpose of these zones is also to target tourism investment in particular areas.
- The island’s tourism sector is benefiting from its location (proximity to major European cities), its well developed transportation infrastructures, and its Diaspora.
- The downside risk of strong dependency on tourism is the sensitivity of the sector to economic conditions in tourists’ home countries. This underscores the importance of promoting high-value tourism and expanding the customer base, which has so far been dominated by visitors from Europe".