São Tomé and Principe-EU cooperation:
A lack of infrastructures

Full text of an article from The Courier ACP-EU
No. 168, March-April: pages 48-49

The relationship between São Tomé and Principe and the EU can be traced back to 1975, when the country gained its independence and acceded to the first Lomé Convention. Cooperation between the two partners has increased steadily since then, as is shown by the marked increase in funds allocated under the National Indicative Programme (NIP) for the 8th EDF (ECU 9.5 million compared with ECU 8 million for the previous NIP). Although a wide range of operations of different types have been financed over more than 20 years, two sectors have benefited in particular from European support: agriculture and infrastructures.

Agriculture is clearly the most important economic sector in São Tomé, providing employment for the bulk of the population. It has experienced serious structural problems for a number of years, however, and the country is not self-sufficient in food. Agriculture is dominated by a single crop, cocoa, to the exclusion of virtually all others. But the cocoa business has been in freefall since independence and export income has declined inexorably. This is due both to the drop in prices on the international market and to persistent poor management. Many of the country's current problems relating to poverty and the public finances are due to this decline in the cocoa business and the government's inability to diversify farming.

To assist in the initial diversification of agriculture, a large proportion of the NlPs for the 5th and 6th EDFs (amounting to approximately ECU 6 million in total) was used to finance the planting of 650 hectares of oil palms in Ribeira Peixe, in the south of the island of São Tomé. A loan of ECU 2 million of venture capital by the EIB has made it possible to set up a palm oil mill (EMOLVE) with sufficient capacity to satisfy the foodrelated table-oil needs of the entire population. The results of these two complementary projects have been generally favourable, despite the fact that the planned privatisation of EMOLVE has still not been carried out by the government. EDF support will, however, come to an end during 1998, after the delivery in the immediate future of spare parts intended to enable the works to continue to function.

The cocoa business has, in particular, benefited from assistance in the form of Stabex transfers. Meanwhile, counterpart funds generated from a food aid programme (implemented in 1997) should help to increase the food security of São Tomé and Principe.

Water, roads and public health

One important bottleneck affecting the development of the country is the absence, or poor condition, of infrastructures. This is particularly the case for roads (crucial for the distribution of agricultural goods), power supplies and drinking water systems. It was therefore decided that financing under the NIP for the 7th EDF should concentrate on infrastructures. The lion's share (ECU 3.9 million) was set aside for a programme to distribute water within the capital. The objectives were to improve the extraction of spring water, upgrade and extend the distribution network and increase the number of individual branchpipes. Although implementation of this project has not been without difficulty, most of its objectives have been achieved. A second stage in the extension of the network (covering the Quinta area of Santo Antonio) is currently being prepared and implementation will begin shortly.

Other actions foreseen under the 7th EDF include the asphalting of a section of road between the village of São João dos Angolares and Ribeira Peixe, to facilitate the transport of palm oil from EMOLVE to the capital, and the provision of technical assistance for the staff of the National Authorising Officer. Given the lack of resources available to the authorities, the latter assistance was seen as essential to ensure projects were managed and monitored properly.

Infrastructure is also given priority under the NIP for the 8th EDF, 75% of the total resources being allocated to this area. The intention is for the money to be used to finance three programmes covering water distribution, rural roads and power supplies. Project profiles (financed from the outstanding balances of previous NlPs) are being prepared for these three areas. The power scheme (probably to be jointly financed with the EIB and the ADB) aims at renovating the Contador hydroelectric power station, giving it the capacity to produce 25% of national electricity needs.

It is agreed that under the 8th EDF, particular attention should be paid to the island of Principe. This is probably the most impoverished part of the country.

In response to the above mentioned commitments, the government has promised to improve significantly its policies in the road, water and power sectors. By way of example the water and electrical power company (EMAE) will be extensively restructured and more realistic user-charges will be levied.

The second main focus of the 8th EDF programme is public health. Malaria is one disease which has given increasing cause for concern over the past decade. More generally, the population has risen rapidly while the health care system has been in disarray. The EU plans to provide institutional support for the Minister of Public Health to help improve health care planning and draw up a national public health plan. 12% of NIP resources have provisionally been earmarked for this purpose.

Sectors outside the NIP's main focus include protecting the environment, technical assistance, support for SMEs and decentralised cooperation.

Other forms of cooperation

São Tomé and Principe benefits from funds allocated to regional cooperation in Central Africa, via a number of different operations. These include ECOFAC, a programme to encourage the conservation and rational use of forest and fish resources; the Bantu cultural programme which aims to enhance and revitalize Bantu cultural expression; and improvements to the port of São Tomé.

As a Portuguese-speaking country, São Tomé and Principe is covered by the PALOP programme (African countries having Portuguese as an official language). Within this, it takes the lead management role in the consolidation of education structures. The first PALOP programme was financed from funds provided under the 7th EDF and this funding will be continued under the 8th EDF.

Since acceding to the Lomé Convention, the country has also benefited from a number of cooperation instruments that do not involve programmable resources. The Structural Adjustment Facility (SAF) and Stabex are the most important of these.

The government of São Tomé entered a structural adjustment programme in 1987. Since then, its efforts have been assisted on several occasions by budgetary support under the SAF, sometimes supplemented by resources from the NIP. One example of this is the most recent structural adjustment operation, conducted in late 1996/early-1997 which entailed a gas/oil import programme. The counterpart funds generated from the sale of fuel are being used as budgetary support, making it possible to cover the (non-salary) operating expenses of the health and education ministries and the severance allowances of public sector workers who have been made redundant. Total disbursements in support of structural adjustment exceeded ECU 3.5 million under the 6th and 7th EDFs.

São Tomé and Principe has, on several occasions, received Stabex payments arising from lower cocoa export earnings. This has resulted in the allocation of about ECU 4.5 million to the agriculture sector since 1985. Objectives have included the rehabilitation of nine rural state enterprises (roças) and the improvement of living conditions in rural communities (people working in roças and small farmers). Actions taken in the latter areas have been particularly appreciated by local people.

A food aid programme was agreed for São Tomé and Principe in 1996, following shortages of certain foodstuffs. Under this programme, milk, sugar, rice, wheatflour and meat, with a total value of ECU 1.9 million, were provided for sale locally. The counterpart funds generated by this assistance will be used to finance projects aimed at improving food security.

The main operations financed under the European Community's own budget involved joint financing with European NGOs (especially in the health sector) and environmental schemes.

Finally, one should not forget the country's fisheries agreements with the EU. The current one runs from 1996 to 1999, and under it, São Tomé and Principe will receive budgetary support worth more than ECU 2 million.

The future

1998 will be crucial for the economic future of this small island nation in the Atlantic. The Bretton Woods institutions will decide by September at the latest whether the country is eligible for a substantial remission of its external debt. If the government fulfils its commitments under the NIP and applies the recommendations of the IMF and the World Bank, the EU will do everything it can to assist the country achieve economic improvements. Helping highly vulnerable countries such as São Tomé and Principe is, after all, what the Lomé Convention is all about.

Updated on April 21, 1998

Developer's Note: These pages were developed for use on the Netscape browser. Please address comments to Peter Ballantyne, ECDPM