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Cape Verde - new development and investment opportunities

publication date: Nov 6, 2009
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Costa VerdeCape Verde (CV) is an archipelago of ten volcanic islands and islets scattered off the west coast of Africa. A former Portuguese colony, it gained independence in 1975. With year-round sunshine, white sandy beaches and a Creole culture, it’s been affectionately dubbed the ‘new Carribean’ since the government turned its attention to tourism in the early 1990s. Government reforms have done much to welcome foreign investment here so economic growth remains stable.

Whilst Cape Verde remains a potentially golden investment opportunity it is very much still a ‘developing’ region so economists advise property investors to follow a long-term investment strategy. According to property development company Aston Lloyd, “The main concerns involving investing in CV relate to the republic still being in the early stages of the development process, making it difficult for investors to comfortably assume high returns.” The company also cites concerns in that there is little public transport available, few locals can afford to buy property, re-selling can prove difficult and it may take considerable time for industry to develop here.


However, whilst the cost of flights from Europe remains high, the development of international airports on the islands has facilitated significant growth in tourism which is increasing at 22 per cent per year. The National Statistics Institute suggests that by 2015, around one million tourists will be visiting the islands and planned resorts on the main tourist islands of Sal and Boa Vista will occupy 17 per cent and 15 per cent of the islands’ surfaces. Tourism is expected to contribute 32.1 per cent of GDP by 2018 (World Travel & Tourism Council, 2009) and although it’s questionable what proportion of the ‘tourists’ are in fact investors on inspection visits, Expedia customers have voted Cape Verde fourth best destination in the world again this year, placing it firmly in its top ten list of holiday destinations.

Estate agents and developers have been quick to leverage the opportunities in this emerging market and whilst some have chosen to buy off-plan, others have left the UK to actually live and work on the islands permanently. Paul Akwei is Managing Director of Noscasa, one of Cape Verde’s leading estate agents and having moved to CV in 2006, arrived with fifteen years of experience in the UK property market. “I realised Akweithe numbers no longer stacked up in the UK and also wanted to live and work by the beach,” says Paul, who grew up in Togo and Nigeria before going to boarding school outside Oxford. “I fondly remember the tranquillity there and large family suppers by the sea. I was in search of that closer to Europe so looked at Morocco, Mozambique and CV. CV was ideal with no religious conflicts, proximity to family in England and the Czech Republic, year round weather of 25°C – and no rain!”

Like any investor, Paul did not take the decision to plough everything into CV lightly – Noscasa was established after three years of research. “It was based on the rise in tourist numbers targeted by the government as well as price comparisons with the south coast of Spain and the Canaries. I made numerous visits to the islands, where I met with Government officials, read IMF, World Bank and CIA reports and spent hours talking with every Cape Verdean I came across – from taxi drivers to barmen, doctors and real estate investors. Back in 2006 I felt we could see close to 20 per cent rises in property values per annum and this certainly occurred. A few years ago, a well located front line plot in Santa Maria would have sold for €100,000. The price rocketed to €290,000 and although values have declined in recent months, today it is still worth €250,000.” Paul and his wife Alena, choose to live in Santa Maria on Sal island which, along with Boa Vista, is where the majority of tourist development is taking place.


Whilst the risk of investment remains relatively high CV is one of the biggest receivers of foreign aid in the world and financial aid from the EU, IMF and World Bank has been used to fund significant infrastructure developments. Although the global downturn is likely to deter foreign investment in countries outside the EU, as EU countries focus on growth internally first, the Deputy Managing Director of the IMF, Marilo Portugal, recently applauded CV’s 2009 budget saying, “Cape Verde’s prudent economic management in recent years is now paying dividends, putting the country in a position of strength to face the current global economic challenges.” Paul Akwei adds, “Based on the level of Chinese, Middle Eastern, USA and European Government investments made in recent years, any decrease [in investment] will not be significant enough to cause concern.

Costa VerdeThe democratic government here is doing much to capitalise on CV’s strong location in the middle of mid-Atlantic air and sea lanes and it’s significant that the islands were granted ascension into the World Trade Organisation last July. Further development of the islands has also been aided by the introduction of anti money laundering reforms and a Financial Intelligence Unit established in 2008. GDP has been steadily growing since 2004 and whilst public and corporate tax cuts are being put in place to boost the economy, business registration has been simplified. “There were no delays in registration that I wouldn’t have expected anywhere else in the world,” says Paul Akwei.

“Looking back I would say opening Noscasa in 2006 was a much greater risk than today. In recent years, three further international airports have opened, the Cape Verde Investment Bureau has been set up to attract more foreign investment, the foreign investor tax status has been initiated and infrastructure now includes ring roads, new dams and local canalisation.”

Having started trading out of one office in Sal, Noscasa now has branches in Santiago, Boa Vista and Mindelo and is known, along with Century 21, as the only local real estate agency in the area. It’s vital investors use established professionals here because as Paul explains, “The islands have a good reputation for the majority [but] as well as many overseas property agents like MRI there are agents in disguise as property Rob Jarrettportals or travel agents. There has been misleading marketing that has led some visitors to believe the islands were more developed than they were. Buyers and investors need to get the best independent advice and we are very well positioned to provide it.”

Chairman of The Resort Group plc, Rob Jarrett, has also done much to counter the issue of ‘trust’ facing foreign investors to CV. Many have been put off by evidence of poor build quality, stories of developers stealing sand from the beaches and flat-packed kitchens in low-standard newbuilds so the Group entered the market to develop the finest quality residential developments in Cape Verde. Tortuga Beach Resort & Spa is currently under construction next to Ponta Preta Beach, near Santa Maria in Sal. Having purchased the land in 2006 the resort’s 358 properties are already 100 per cent sold. The Group currently has just 40 per cent left to sell at its nearby Dunas Beach Resort, which was launched simultaneously and has a third project located between the two.


Rob is firmly grounded in the belief that, “Success is achieved when the client takes precedence over capitalism. Buying offplan is a trust issue,” he explains. His vast experience, which stems from a solid background in banking, led him to establish a financial services business and act for investors looking to purchase overseas. “Back then were selling a lot of properties but didn’t know much about the developers. I wondered how to take that problem away and the only answer was to become the developer.”

Having developed successfully in Spain and gone on to sell one of Donald Trump’s infamous towers, Rob had no hesitation in purchasing beach-front land in CV because he says, “It will never be another Canaries. No developer will be given dispensation to build a monstrosity by the beach so nothing in the front line will be overdeveloped. Low building density is required and with Tortuga and Dunas having land occupancy of 25 per cent and 20 per cent respectively, this is very low.”

The Resort Group expects market growth at Ponta Preta to deliver 25 per cent growth in capital value over the two years from purchase to build and a nine per cent yield from year two based on a prudent 68 per cent occupancy level. The key, according to Rob, is that everything is done with quality in mind.

Costa Verde“Whereas other developments fail to achieve effective flow between the hotel, restaurants, bars and apartments, we’re ensuring there are central focus points throughout the resort as well as a high-end spa and state-of-the-art gym. We’ve invested €4.2m in lagoon-style pools alone.” The Group is currently in talks with International hotel chains Marriott and Sol Melia with regard to operating the resorts and although half of the Tortuga Beach Resort was sold on a 4-star basis, the Group is delivering a 5-star product to acheive the right occupancy levels.

Prime front line property in CV has held its value on the islands of Sal, Sao Vicente and Santiago; developments such as Porto Antigo and Salinas Sea are still doing well. Paul Akwei agrees but says that other property prices in Sal have dropped by around 30 per cent since mid 2008. “Lower price range properties have suffered the most over the last year and, again with the focus on Sal, have lost up to 45 per cent in value as demand becomes more concentrated to the front line. Property prices in the medium price range have typically fallen 20–30 per cent in the last year and May on May, the number of house transactions is down 40 per cent.

“With corrections having taken place, I envisage modest growth will now be in the region of 4-5 per cent per annum. The global economic crisis has allowed for a slowdown to occur and for the government to address issues associated with infrastructure and the unprecedented construction boom. Today, we don’t have over-supply and properties are being absorbed by market demand. In today’s market, locals are seeking three bedroom apartments, holiday homeowners want one and two bedroom properties and investors are after studios.”


In addition to foreign investors, Noscasa has seen significant increases in local demand from public sector workers, bankers, business owners, immigrants and Cape Verdeans returning home. There is reinvestment from those who sold during the height of the market. Half of the 482,000 population of CV live on the island of Santiago and are unable to rely on agriculture due to lack of rain, 72 per cent of food is imported (CIA World Factbook, 2009) whilst 70 per cent of GDP comes from commerce, transport and public services.

Costa VerdeProperties at the Group’s Dunas Beach resort start at €90,000 for a one bed and peak at €700,000 for a five bed detached villa with pool and 500sq m of grounds. At such high values, The Resort Group must ensure that the land acquisition value stacks up along with the deposit ratios to facilitate much-needed cash flow. For this reason, payment plans follow the Spanish model and products were launched with a high deposit rate of between 50 and 85 per cent. Buyers who stump up the full 85 per cent deposit are relieved of the remaining 15 per cent which is written off. “We help our clients wherever we can,” says Rob. “In addition to ensuring they are not exposed to currency fluctuations by offering guaranteed exchange rates, the Group pays client’s mortgage payments for the period in which they are advanced and gives buyers who make a complete down payment a six per cent interest on their capital during construction.” Hotel Excellence packs are also on offer via certain payment options and are equivalent to over €26,000 – which is certainly an attractive proposition for many investors.

Whilst other developers have acquired low-cost land on other islands, Rob is confident in the growth potential of Sal, which is home to CV’s principal international airport and fully equipped to refuel aircraft. Outbound flights from other islands, stopping at Sal to refuel, will add further delays to flight times and adversely affect property values to some degree. The Group is seeing the Prime Minister again in June and Rob will also meet the Minister of Tourism to discuss aircraft capacity amongst other issues.


Long-term, capital growth and lifestyle choices are both good reasons to invest in CV but whatever investment is placed it should only be made when fully informed about the islands. The pitfalls here are many! Buyers should avoid high risk ‘buy direct’ discount offers and gravitate towards lower risk developments built by established developers with a successful track record in CV. Port expansion and growth of the energy and water sectors look set to promote further private sector activity (Economist Intelligence Unit, January 2009), but it will be a long time before CV catches up with the Caribbean. With any luck, the government will continue to insist on zoning and planning restrictions and these beautiful islands will never be over commercialised.

Danielle Simpson (BSc) is Creative Director of thebrandeffect.