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27/07/2006 | Election 2006: The Presidential Election and Impending Oil Wealth in Sao Tome

Global Insight Staff

Three candidates will be competing for the top political spot in Sao Tome in elections scheduled for Sunday (30 July). With an impending oil boom set to transform this isolated island nation into an international energy producer, the stakes are high for the politicians engaged in the race.

 

Global Insight Perspective

Significance

The next president will oversee the first shipments of oil out of Sao Tome and preside over a radical transformation of the state's political economy.

Implications

Sao Tome, despite having held several multiparty elections, remains an unstable democracy. The latest military coup dates from July 2003, when the military junta attempted to overthrow the democratically elected Menezes. With oil wealth becoming a reality in Sao Tome, however, capture of the state will become increasingly desirable.

Outlook

Unless strong domestic institutions are created or international organisations oversee the management of wealth creation related to oil activities in Sao Tome, corruption will thrive.

The Candidates

Fradique de Menezes, the presidential incumbent, appears to be the favoured candidate in the contest. He won the last election, defeating the expected favourite candidate Manuel Pinto da Costa. His appeal lies in his highly successful business endeavours and political absenteeism from the corruption of Sao Tomean politics. His current mandate, which started in 2001, has been rocky, with the Movement for the Liberation of Sao Tome and Principe (MLSTP) parliamentary majority blocking many of his reforms. Now that his Democratic Movement of Forces for Change (MDFM) has won the latest legislative elections, his agenda will be to implement finally his previously blocked programme. He stands in favour of strong presidential prerogatives, as has been made clear through his many clashes with the National Assembly during this current mandate.

Menezes's most serious challenger is Patrice Trovoada, the son of former president Miguel Trovoada. He will be running for the Independent Democratic Action (ADI) and has garnered the support of the MLSTP. He resigned from his post as foreign minister in Menezes's government in 2002, and was later appointed special advisor on petroleum affairs. He is an unavoidable political force in Sao Tome, and will become even more so as he has extensive contacts with oil majors and prominent regional politicians. His commitment to transparent governance is questionable, however, given his recent involvement in an oil-licence attribution scandal.

Nilo Guimaraes is the third candidate and least likely victor in this election. He is unaffiliated with any political party and derives most of his appeal from his entrepreneurial achievements. He derives the same type of legitimacy and credibility as Menezes did in 2001, but has been far less successful in developing his political network.

The Stakes

Sao Tome's economy is heavily reliant on foreign aid, with this source of income representing 75% of the government's budget. The state is also heavily indebted, with the country's GDP amounting to a mere fourth of the US$303 million owed to foreign creditors. Agriculture, notably cocoa and coffee, has traditionally employed most of the country's labour, but low commodity prices have for the most part destroyed this sector of the economy. Poverty is rampant and recent outbreaks of cholera have emphasised the country's mediocre infrastructure and government.

This could very well come to an end, as Sao Tome discovered its first traces of oil in May. The first oil-exploration licences were attributed in 2004 and have already doubled the government's budget. The first shipments of oil are set to sail out of Sao Tome by 2010.

Outlook and Implications

Sao Tome, despite having held several multiparty elections, remains an unstable democracy. The latest military coup dates from July 2003, when the military junta attempted to overthrow the democratically elected Menezes. It took foreign mediation to put an end to the coup. With oil wealth becoming a reality in Sao Tome, however, capture of the state will become increasingly desirable. The island only has 140,000 inhabitants, and with the right domestic support and alliances with the oil majors, a skilful tactician could very well pull off the stunt.

The prospect of a coup, however, seems unlikely in the medium term. Menezes will most probably be re-elected and exploit the parliamentary plurality he enjoys with his MDFM party holding 23 of the 55 seats (the MLSTP holds 20 seats) in the assembly. His party's recent electoral victory in the March legislative election seems to point in that direction. His entrepreneurial abilities will also play to his advantage, given the potential for development that oil money provides for the Sao Tomean economy.

The implications of oil are manifold and the impact that it will have on Sao Tome will depend on a variety of factors. Judging from the experience of its neighbours, however, we can draw a few assumptions. The first assumption is that inflation will probably be a recurring problem for Sao Tome. The large influx of foreign capital will hike local wages and prices up considerably. This will probably serve to crowd out the agricultural and tourism industries that underpin the current Sao Tomean economy. It will also serve to crowd out any other non-oil-related economic activity, as it has in the Congo, Angola, Gabon, and Equatorial Guinea.

We can also predict that unless strong domestic institutions or international organisations oversee the transparency of wealth creation related to oil activities in Sao Tome, corruption will thrive. Given the small population (140,000), corruption will be highly personalised and centre on a handful of personalities with access to the state. The government's ability to maintain power will also be reinforced by the small geographical size of Sao Tome, but it will be highly reliant on the oil majors operating in the country.

On a positive note, however, oil wealth will allow Sao Tome to reduce its debt burden and build an infrastructure that will allow oil-related commerce to thrive. The development of social services will probably be entirely dependent on the political will of specific political actors.

 

Raul Dary

24 Hartwell Ave.
Lexington, MA 02421, USA
Tel: 781.301.9314
Cel: 857.222.0556
Fax: 781.301.9416
raul.dary@globalinsight.com

www.globalinsight.com and www.wmrc.com

 

Global Insight (Reino Unido)

 


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