Sao Tome and Principe Employment Reality

São Tomé and Príncipe 2025: The Jobs Crisis That Explains Everything

When investors evaluate São Tomé and Príncipe, they encounter a confusing array of challenges: fiscal instability, energy sector collapse, foreign exchange shortages, and external imbalances. These appear as separate problems requiring separate solutions. But they're not. They're all symptoms of a single core problem: the economy cannot create jobs.

Understanding why this matters more than debt ratios or GDP growth projections is essential for any investment decision.

The Numbers That Tell the Story

Demographics:

• 62% of population under age 25
• Median age: 18.9 years
• 4,500-5,500 youth enter working age annually

This should be a "demographic dividend"—a surge of young workers driving economic growth. Instead, it's a crisis:

Employment Reality:

• National unemployment: 15.7%
• Youth unemployment (15-24): 21.3%
• Women's unemployment: 14.6% vs. men's 5.1%
• Only 21% of working-age adults formally employed

That last figure reveals the real problem: 79% of working-age people are either unemployed, stuck in subsistence activities, or have given up looking for work.

The Exodus:

• Over 50,000 people emigrated post-COVID (25% of total population)
• 24,156 left in 2023 alone (>10% of population in one year)
• 85,000 São Toméans living abroad (2017)
• Primary destination: Portugal (52%)

The country isn't just failing to employ its youth—it's losing them entirely.

Why the Economy Creates No Jobs

The private sector should absorb 4,500-5,500 new workers annually. Instead, it absorbs almost none:

• 90% of private sector is micro/small enterprises
• Only 15% of formal companies have more than 10 employees
• 62% of businesses operate informally (avoiding taxes but unable to scale)
• 60% of poorest households depend on subsistence self-employment

The public sector, traditionally the employer of last resort, cannot expand due to fiscal constraints. It already employs 70% of workers with post-secondary education but has no capacity to hire more.

What prevents private sector job creation?

1. Unreliable electricity (EMAE crisis causes 75% supply reductions during crises)
2. High energy costs (diesel generation at $0.34/kWh vs. $0.22 tariff)
3. Foreign exchange scarcity (businesses cannot access dollars for imports)
4. Poor infrastructure (roads, ports, digital connectivity)
5. Weak business environment (ranked 170/190 globally)
6. Small domestic market (220,000 people limits scale)

Result: businesses cannot operate profitably, so they don't expand or hire.

The Emigration Death Spiral

When young São Toméans face choice between subsistence farming earning $100-200/month irregularly or hotel work in Portugal earning €1,000-1,500/month with stable income, the decision is economically rational.

The problem: individual rationality creates collective catastrophe.

Who leaves:

• Young adults (productive years ahead)
• Educated workers (especially those with post-secondary degrees)
• Skilled professionals (education, health, construction hit hardest)
• Women seeking opportunity (facing 3× male unemployment rates)

Impact on key sectors:

Tourism: Hotels train workers in hospitality → workers use skills to emigrate to Portugal's tourism sector → constant costly turnover → cannot build experienced workforce

Healthcare: Doctors and nurses leave → system understaffed → quality declines

Education: Teachers emigrate → quality falls → future workforce less productive

Construction: Skilled tradesmen leave → infrastructure projects face labor shortages and cost increases

This creates a vicious cycle: poor services/infrastructure → fewer opportunities → more emigration → worse skills shortages → even fewer opportunities.

Why This Is THE Core Problem

Every other challenge traces back to the jobs crisis:

Fiscal sustainability? Cannot achieve when your tax base emigrates and 79% work informally paying no taxes.

Energy sector reform? Requires skilled technicians and managers—exactly who's emigrating.

Economic diversification? Tourism needs hospitality workers (emigrating), fisheries need processing workers (emigrating), agriculture needs skilled operators (emigrating).

External balance? Productive young workers leaving means lower GDP, smaller export capacity, structural trade deficits.

Debt management? Without economic growth driven by productive employment, debt-to-GDP ratios cannot improve sustainably.

The country needs 10%+ annual growth to create sufficient jobs. It's projecting 2.9-3.8%. The math doesn't work.

Investment Implications

For labor-intensive sectors (tourism, agriculture, manufacturing):

• Plan for 30-40% higher labor costs than regional comparators
• Expect 50-60% annual turnover in trained positions
• Budget continuous recruitment and training costs
• Consider capital-intensive alternatives where possible

For skill-intensive sectors (finance, ICT, professional services):

• Expect to import significant expatriate expertise (increasing costs)
• Don't rely on deep local talent pool—it doesn't exist
• Realistic timeline for local capacity building: 5-7 years minimum

For all sectors:

• Labor availability is a binding constraint on growth
• Success requires contributing to job creation that reduces emigration
• Operations that train-then-lose workers to Portugal face poor economics
• Consider regional hiring from other Portuguese-speaking countries

summary

São Tomé and Príncipe's 2025 outlook ultimately depends on one question: Can the economy start creating the 4,500-5,500 jobs annually needed to absorb youth entering the workforce?

Currently, the answer is no. The structural barriers—unreliable electricity, high costs, foreign exchange scarcity, poor infrastructure—prevent businesses from operating profitably enough to expand and hire.

The December 2025 EMAE restructuring deadline represents the critical test. Energy reform alone won't solve unemployment, but nothing else can be solved without it. You cannot build tourism without reliable power. You cannot process agricultural products without electricity. You cannot attract manufacturing without affordable energy.

For investors, this means 2025-2026 is a transition period where the fundamentals will either improve (enabling job-creating investments) or stagnate (maintaining the emigration spiral). The Príncipe example proves that quality jobs reverse emigration and enable growth. The challenge is creating those jobs at scale.

Any investment thesis must account for labor as the binding constraint and contribute to—not just extract from—the limited pool of skilled workers. Until emigration slows and formal employment rises above 21%, growth will remain structurally constrained regardless of other reforms.

The youth aren't leaving because they lack patriotism. They're leaving because they lack opportunity. Create the opportunity, and the demographic dividend becomes possible. Fail, and the country continues losing its most valuable resource: its people.