The FDI angle

• Cape Verde has prioritised digitisation and tech entrepreneurship to diversify its tourism-dependent economy.
• Startup Blink recognises its tech ecosystem as the second-strongest in west Africa behind Nigeria.

Why it matters: Cape Verde's focus on digitization and tech-friendly regulations positions it as an emerging hub for foreign tech investment and a digital gateway to West Africa, attracting both local talent and diaspora entrepreneurs.

Olugbenga Adesida broke new ground in Cape Verde back in 2012 when he set up mobile game development start-up Bonako. The dream of the Nigerian entrepreneur, who had “fallen in love” with the idyllic island nation, was to “turn African stories into products that people can codify, digitise and sell to the rest of the world”.

Mr Adesida relocated to Cape Verde in 2007, after becoming an adviser to José Brito, the country’s former minister of economy, growth and competitiveness. “The big challenge was that nobody in Cape Verde had built a game before,” he recalls. “No one had worked in that sector before.”

After six months of learning through online Udemy courses and intensive development, Mr Adesida and his team released four games in December 2013, including a car racing game that digitised three neighbourhoods of Praia, Cape Verde’s capital city on its largest island, Santiago. “The excitement was beyond our imagination,” Mr Adesida says, in a nod to the appetite for new digital solutions and applications in Cape Verde, particularly among young people.

More than a decade later, the west African nation of 10 volcanic islands has ambitions for many more local and foreign entrepreneurs to follow in Mr Adesida’s footsteps. The nation of 500,000 people has prioritised digitisation and tech entrepreneurship in its bid to diversify its tourism-dependent economy and stem generations of brain drain, when people seek new job opportunities abroad.

Cape Verde has received international accolades for its efforts. Startup Blink recognises its tech ecosystem as the second-strongest in west Africa behind Nigeria. It also performed well in the 2024 African Entrepreneurial Ecosystem Index (AEEI) of 29 countries produced by researchers at Utrecht University in the Netherlands, the pan-African non-governmental organisation Innovation for Policy Foundation, and Stellenbosch University in South Africa. Cape Verde ranked fifth in the AEEI — behind Mauritius and South Africa, but ahead of Egypt and Senegal, its closest continental neighbour.  

But for Cape Verde to level up its nascent tech ecosystem and achieve its aim to be a digital bridge into west Africa, entrepreneurs say more needs to be done to stem brain drain, improve the availability of start-up funding and put more emphasis on building business ties with the African continent.

Nosi flywheel effect

The origins of the Cape Verdean start-up ecosystem are rooted in the Nucleus Operational of the Information Society, or Nosi, a public agency set up in 1998 to digitise government services in Cape Verde. Nosi applications include a financial information management system and platform for municipal governments to manage budgets, elections and identification and passport systems.

Despite its limited resources, Nosi has a track record in developing e-government solutions and signifies the “transition of Cape Verde from paper to digitalisation”, says Nadia Monteiro, a trade and investment consultant who until March 2020 led national investment promotion agency Cabo Verde TradeInvest. 

As Nosi grew, some of its former employees left to become entrepreneurs, starting companies such as fintech Pagali, land management platform Prime Consulting and Zing Developers, a software development outsourcing company. 

“For the first time, there is definitely a focus on building an ecosystem from the ground up, step by step,” says Ms Monteiro, who cautions that despite progress there remain deficiencies in areas like cyber security, intellectual property rights and other rules and regulations. 

Foreign entrepreneurs with experience in the country are nonetheless impressed by its favourable start-up regulations and progress. Laurent Gachnang, a Swiss founder and start-up mentor, says that in Cape Verde he was able to “create a company within two days without any problems”. Other observers say that Cape Verde holds lessons for digitisation in the rest of Africa. 

Lanre Osibona, CEO of The Foresight Group, a digital transformation consultancy, says it is “a great sandbox” for developing and testing new technologies: “Cape Verde comes with a valid proposition that needs to be looked at irrespective of its size.” 

Diaspora attraction

The efforts to develop the country’s ecosystem are coordinated by Cape Verde Digital, a public agency with the ultimate aim of making the country a digital gateway to fast-growing markets in the Economic Community of West African States (Ecowas), a regional trade bloc. 

Milton Cabral, program officer at Cape Verde Digital, tells fDi that this “strategic” movement is a recognition that the country needs to overcome its small domestic market, lack of natural resources and dependence on tourism and remittances.

The government of Ulisses Correia e Silva, a former mayor of Praia who has served as prime minister since 2016, aims to achieve this digital vision through favourable tech regulations and investment into infrastructure, including the Praia Tech Park, telecoms networks and internet connection points. The scheme aims to provide overseas opportunities for local talent and attract Cape Verde’s vast diaspora, which is estimated to be double the size of the country’s population. 

“The vision of attracting the diaspora is to bring a new kind of sustainable value rather than just sending remittances and money [back home],” he says. Personal remittances received in 2023 accounted for 12.2% of Cape Verde’s gross domestic product, significantly higher than the 2.6% average for sub-Saharan Africa, according to World Bank figures.

But for the country to achieve its goal of being a bridge into the African continent, entrepreneurs argue more must be done. The government “need to start encouraging Cape Verdeans to look towards Africa as opposed to looking towards Europe,” says George Ayinde, CEO of blockchain start-up 1Tribe, who has organised tech meet-ups and classes since relocating to Cape Verde in 2020.

Stemming brain drain

Efforts to develop the start-up ecosystem are an attempt to stem young people leaving the country. There is still brain drain in the country “due to a one-sided perception that there is a lack of jobs”, but there are many different companies looking for trained talent with the right work ethic, says Ms Monteiro. 

Among African countries, Cape Verde had the fourth-highest human capital and brain drain score in the 2024 Fragile States Index compiled by The Fund for Peace, after Eritrea, Somalia and Sudan. Globally, Cape Verde ranked 13th.

For others, brain drain can be stopped by encouraging more young Cape Verdeans to be involved in the country’s development. Hélio Africano Varela, a former Nosi manager and technology leader, wrote on Facebook that older generations were “failing” to empower young Cape Verdeans in the digital economy.

“If we really understand what characterises this new generation, it will be easier to understand this ‘brain drain’ that is happening, instead of lightly accusing those in power or equally lightly defending that this evasion is normal,” he wrote.

Aside from Cape Verde’s inherent challenges, entrepreneurs are positive about its future. Mr Adesida says that people need to visit Cape Verde to understand it is much more than just a holiday destination. “A lot of innovation and creativity is happening here in tourism, tech, art and other different sectors,” he concludes.

Do you want more FDI stories delivered directly to your inbox? Subscribe to our newsletters.

This article first appeared in the October/November 2024 print edition of fDi Intelligence