Overview of Sao Tome’s Economy
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São Tomé and Príncipe is a small island nation in the Gulf of Guinea with a rich natural environment and fertile volcanic soils. These features make it a prime location for agriculture, especially for crops like sugar, coffee, and cocoa.
This Portuguese-speaking country is home to about 237,328 people. Agriculture plays an important role in São Tomé and Príncipe’s economy, with cocoa leading the way as the top cash crop, accounting for 70–80% of export value.
“In 2021, São Tomé and Príncipe exported USD17 million in Cocoa Beans, making it the 28th largest exporter of cocoa beans in the world.”
Farmers also grow crops like taro, cocoyam, bananas, oil palm, and breadfruit, depending on altitude. While rural areas depend heavily on agriculture, food processing industries, especially fish processing, have started to take root, pointing to potential diversification.
Tourism is another growing sector. From nearly no visitors in the early 2000s, the number of tourists reached 35,000 by the end of the 2010s. This is significant for a nation with a small population, showing tourism’s potential to drive growth.
Efforts to expand industries like fisheries and food processing recently gained momentum. In October 2023, President Carlos Manuel Vila visited sustainable fish processing facilities in Uganda, signaling the country’s interest in sustainable practices and sectoral growth.
Despite progress, the country faces challenges. Over two-thirds of the population live in poverty, and income per head has declined since the mid-1990s.
Services now dominate the economy, contributing 81.5% of GDP, followed by agriculture at 13.4% and industry at just 5.1%. The few medium-sized manufacturing companies focus mainly on cacao, beverages, vanilla, and timber, thereby leaving the economy vulnerable to external and climate-related shocks.
With its natural resources and growing tourism, São Tomé and Príncipe has the potential for steady growth. However, diversifying its economy remains key to reducing poverty and ensuring resilience.
Current State of Crypto Adoption in São Tomé and Príncipe
Source: Freepik
Cryptocurrency is yet to find a place in São Tomé and Príncipe, as it holds no legal status and remains unregulated. The government has taken no public stance on crypto, and there are no crypto service providers operating in the country.
The country also faces challenges in tackling issues like money laundering and terrorist financing, which need to be addressed before it can consider regulating digital currencies. São Tomé and Príncipe have promised to work with international organizations, such as the Financial Action Task Force (FATF), to fix these problems. However, progress has been slow.
The FATF has urged São Tomé and Príncipe to work harder on these issues. Once these steps are in place, the country might be better prepared to explore cryptocurrency in the future.
For now, digital currencies remain off the table. However, fixing these challenges could set the stage for crypto adoption in São Tomé and Príncipe in the years to come.
Challenges to Crypto Adoption in São Tomé and Príncipe
Source: Freepik
While cryptocurrency has the potential to bring significant benefits to São Tomé and Príncipe, there are a few notable hurdles the country must overcome before embracing it fully.
Let’s take a closer look at the challenges that could slow down crypto adoption in São Tomé and Príncipe:
Limited Internet Penetration
As of early 2024, São Tomé and Príncipe had 133.4 thousand internet users, which translates to an internet penetration rate of 57%. While this is a promising figure, nearly half of the population remains offline.
Cryptocurrency transactions rely heavily on internet access, and without universal connectivity, many residents would be excluded from participating in the digital currency economy. Expanding affordable and reliable internet services is critical for broader crypto adoption.
Low Awareness and Education
Cryptocurrency is still a relatively new concept for many people worldwide, and São Tomé and Príncipe is no exception. With only 63.1 thousand social media users (26.9% of the population), the reach of digital education and awareness campaigns is limited.
Additionally, a lack of understanding about how cryptocurrencies work and their potential benefits can breed hesitation among the population.
Regulatory Uncertainty
As mentioned earlier, São Tomé and Príncipe has yet to establish clear regulations for cryptocurrency. The country’s legal framework is still evolving, and without proper regulation, there is a lack of security for investors and users.
The absence of laws that specifically address digital currencies can deter people from engaging with cryptocurrencies. Until the government establishes a more comprehensive legal framework, the crypto market in São Tomé and Príncipe is likely to remain in limbo.
Weak Financial Infrastructure
The country’s financial infrastructure is still developing, with limited banking services and financial institutions. This gap makes it difficult for cryptocurrencies to integrate smoothly into the economy. For example, there are no established crypto exchanges or service providers in São Tomé and Príncipe.
Political Instability
Political instability can be a major deterrent to cryptocurrency adoption. São Tomé and Príncipe has faced several attempted coups, which can create an environment of mistrust and reluctance to adopt new technologies. Stable governance is crucial to fostering confidence in any system, including cryptocurrency adoption.
"I want to reassure the population that the situation is under control and I want to take this opportunity to congratulate the armed forces who managed to put an end to this operation carried out by civilians who are mercenaries. As I speak, everything indicates that they were under the command of certain personalities."
Limited Smartphone and Device Access
In addition to internet access, there’s the matter of technology infrastructure. Mobile phone penetration is relatively high in the country, with 71.6% of the population having active mobile connections.
However, the country still faces barriers in terms of access to smartphones capable of supporting crypto wallets and apps. With many people using basic mobile phones, the adoption of crypto may be limited unless technology becomes more accessible to the general public.
Economic Vulnerabilities
São Tomé and Príncipe’s economy faces challenges like poverty, inflation, and limited economic diversification, which can undermine the stability needed for crypto adoption. Cryptocurrencies are often seen as a hedge against inflation and currency devaluation.
However, the volatility of many digital currencies makes them a risky option in countries where economic stability is already fragile. If the local currency is weak, people may be hesitant to adopt a form of money that could fluctuate wildly in value.
Potential Benefits of Crypto Adoption in São Tomé and Príncipe
Alt text: Golden Bitcoin over the slot of a white piggybank
Source: Freepik
Cryptocurrency has not found its place in São Tomé and Príncipe. However, there are several compelling reasons why adopting it could benefit the country in the future.
Here are some of the key advantages that could come with embracing digital currencies:
Increased Financial Inclusion
One of the most significant benefits of crypto adoption in São Tomé and Príncipeis is financial inclusion. As mentioned earlier, a significant portion of the population lives in poverty.
Additionally, many people have limited access to traditional banking services. Cryptocurrencies, with their decentralized nature, can however provide a solution to this problem.
People can store, send, and receive money directly through their smartphones, bypassing the need for banks. This can give individuals without access to banking services the ability to participate in the global economy.
Attracting Investment and Innovation
As global interest in cryptocurrency and blockchain technology grows, São Tomé and Príncipe could tap into new investment opportunities. By adopting crypto regulations, the country could attract crypto-based startups and investors who are looking for friendly environments to innovate.
This could lead to the creation of a new industry within the country. Thus, there will be opportunities for job creation and economic diversification, especially in the tech and financial sectors.
Diversification of the Economy
São Tomé and Príncipe has a small and fragile economy, heavily reliant on agriculture, particularly cocoa. Cryptocurrency adoption could be an avenue for economic diversification.
By entering the world of digital finance, the country could introduce new industries and economic activities. These new sectors could provide much-needed stability to the economy.
Increased Tourism
Tourism is a growing sector in São Tomé and Príncipe, and cryptocurrencies could make it even more attractive to international visitors. By accepting cryptocurrencies as payment, the country could appeal to crypto enthusiasts, especially those who prefer to spend their digital assets while traveling.
Conclusion
As a small island nation with a fragile yet developing economy, São Tomé and Príncipe has much to gain from embracing digital currencies. From boosting financial inclusion to attracting international investment, crypto holds promising potential for the country's future.
However, as we’ve seen, several challenges stand in the way of widespread crypto adoption. Limited internet access, a lack of awareness, and unclear regulations are just a few of the issues that need to be addressed.
For crypto to truly thrive in the country, the government, private sector, and international partners must work together. They also need to create an environment that supports education, infrastructure development, and regulatory clarity.
In the end, the journey towards crypto adoption in São Tomé and Príncipe is just beginning. However, with the right steps, it could lead to an exciting new chapter in the country's economic and technological growth.
