Agribusiness in Cabo Verde

Cabo Verde's Agricultural Paradox: A €60m Market Nobody Can Supply

Cabo Verde imports up to 90 per cent of its food. Hotels and resorts bring in roughly 80 per cent of what they serve. The tourism sector alone represents a potential €60m annual market for local farmers and food processors.

Yet domestic agriculture contributes just 5 per cent of GDP. Only 10 per cent of land is suitable for cultivation, and of that, a mere 8.6 per cent can be irrigated. Labour productivity in agriculture runs at about half the level seen in industry or services.

This is the central tension for investors considering commercial agriculture in Cabo Verde: enormous demand met by negligible supply, with structural constraints that won't disappear through capital injection alone.

The Opportunity Is Real

The numbers are compelling. Tourists account for 17 to 20 per cent of total domestic consumption of meat, fish and fruits. Local production covers only 36 per cent of meat demand—the rest is imported. Poultry production meets just 11 per cent of annual consumption.

The government wants to capture at least 30 per cent of the potential €60m tourism food market. That ambition has translated into substantial tax incentives.

Investors receive a tax credit equal to 30 per cent of eligible investment amounts in agriculture, livestock and fishing. This credit can be carried forward for 10 years and can offset up to 50 per cent of tax due in any fiscal year.

Companies focused exclusively on agricultural, livestock or fishery activities using organised accounting get a 50 per cent exemption on taxable profits.

Import duties and value-added tax are waived on essential inputs: improved animal breeds, seeds, fertilisers, pesticides, irrigation equipment, greenhouse materials, and specialised food transport containers. Water and electricity for certified farmers are exempt from VAT.

Property taxes are waived on rural land transfers intended for commercial or industrial agriculture. Stamp tax and notary fees for regularising rural property registration are eliminated.

The government operates a one-stop shop through Cabo Verde TradeInvest to facilitate investment procedures, with a 75-day maximum processing time for projects. Larger investments can negotiate bespoke establishment agreements defining specific benefits and incentives.

Between 2020 and 2023, cumulative foreign direct investment in agro-processing totalled €25m. The government has identified a potential €10m fish processing facility in São Vicente that could yield 20 per cent return on investment within three years, targeting West African markets.

Why Supply Remains Constrained

The incentives exist because the constraints are severe.

Agriculture in Cabo Verde is dominated by subsistence family farming. Some 99.87 per cent of farms recorded in 2004 were family-owned. The sector grew 7.3 per cent in 2021, but that followed contractions of 6.6 per cent in 2020 and 2.7 per cent in 2019. Volatility reflects dependence on rainfall in a country highly vulnerable to climate change.

A one standard deviation decrease in annual precipitation is associated with a 3.11 percentage point reduction in agricultural output growth. Droughts are periodic. Rainfall is irregular and insufficient.

Water scarcity is the binding constraint. Less than 9 per cent of arable land can be irrigated. Commercial agriculture requires reliable water supply. Cabo Verde cannot provide it at scale.

The geography compounds the problem. The archipelago's nine inhabited islands are separated by ocean. The producing islands—Santiago, Santo Antão, Fogo—are not the consuming islands. The main tourist destinations are Sal and Boa Vista.

Inter-island maritime transport is unreliable. Cold storage capacity is insufficient. Fresh produce is highly perishable. Moving it from farm to resort kitchen without losses requires logistics infrastructure that doesn't exist.

An estimated 30 per cent of locally produced fresh products are rejected due to quality issues. Post-harvest losses may reach 40 per cent. Hotels and all-inclusive resorts require consistent quality and reliable delivery schedules. Local producers struggle to meet either standard.

The Scale Problem

Even where production succeeds, scale remains elusive. The sector accounted for 7.6 per cent of total employment in 2024, down from about 9 per cent in 2010. Value added from agriculture represented just 3.5 per cent of the economy in 2024.

These are not figures that suggest a sector poised for rapid expansion. They reflect an activity constrained by natural resource limitations in a small island state.

The government promotes technological solutions: hydroponics, greenhouses, drip irrigation. These can mitigate some constraints. Hydroponics reduces water requirements. Greenhouses extend growing seasons and improve quality control. Drip irrigation maximises efficiency.

But technology cannot create arable land where none exists. It cannot make rainfall reliable. And it cannot solve the inter-island logistics challenge without substantial investment in cold chain infrastructure and regular ferry services—investments that require coordination beyond any single agricultural project.

Where Investment Makes Sense

Agro-processing offers better prospects than primary production. Processing adds value, extends shelf life, and reduces logistics constraints. Canned tuna, packaged coffee, bottled rum, dried fruits, and fruit juices can be stored and transported more easily than fresh fish, raw coffee beans, or ripe mangoes.

The government identifies processing as a priority. There's logic to this. Cabo Verde may never grow enough wheat to reduce bread imports. But it could process locally caught tuna for export to West African markets where demand is growing.

Niche markets present another avenue. Organic certification, fair trade labels, and ethnic speciality products command premium prices. Small production volumes become an advantage rather than a liability. Specialised cheeses, estate wines, and single-origin coffee can justify higher transport costs if quality and branding are strong.

High-value crops suited to local conditions—certain tropical fruits, speciality vegetables for resort kitchens—can work if producers establish direct supply relationships with hotel groups. Contracts providing price certainty and volume commitments reduce risk on both sides.

The Public-Private Partnership Model

The government is planning a mixed public-private company to manage agricultural logistics and commercialisation. The aim is to link rural producers directly to markets, creating value throughout the chain.

This model acknowledges that individual farmers and small processors cannot solve logistics problems alone. A coordinated platform with cold storage, transport scheduling, quality control, and bulk purchasing power could address market failures that pure private investment won't fix.

Whether such an entity can operate efficiently with public sector involvement is an open question. State-owned enterprises in competitive sectors have created unequal competition elsewhere in Cabo Verde's economy. But agriculture's structural constraints may justify public coordination where pure markets fail.

Financing Remains Difficult

Access to credit is challenging. Banks are reluctant to lend to agriculture without real estate collateral. Farming assets—livestock, equipment, crops in the ground—don't satisfy bank risk departments.

Pró-Empresa provides entrepreneurial support and training. Microfinance institutions offer small loans. But commercial-scale agriculture requires commercial-scale capital, and local banks remain risk-averse.

Foreign investors with their own capital have an advantage. Diaspora investors, who receive full exemption from corporate income tax on profits from authorised external investments, have a further edge.

The Realistic Assessment

Cabo Verde's agricultural investment proposition is not transformation through farming. It's incremental import substitution in carefully selected niches where natural constraints can be managed and where tourism demand provides a captive premium market.

The €60m opportunity is real but won't be captured entirely. Achieving the government's 30 per cent target—roughly €18m annually—would represent significant progress. Even that requires solving logistics problems that have persisted for decades.

The tax incentives are generous because the challenges are substantial. Water scarcity, land limitations, climate vulnerability, and inter-island transport constraints are not temporary obstacles. They're permanent features of the operating environment.

Investors who understand these constraints and structure projects accordingly—focusing on processing rather than primary production, targeting niche markets rather than commodity volumes, securing water access before breaking ground, establishing direct relationships with hotel buyers—can find opportunities.

Those who expect incentives to overcome structural limitations will discover that no tax credit can make rain fall or ferries run on time.