Waiting for oil in São Tomé. (Courtesy Creative Commons)

A two-island nation in the Gulf of Guinea, São Tomé and Príncipe is Africa's second-smallest country, with a total population of 187,000. It is a peaceful Creole society without ethnic, religious, or linguistic cleavages. Yet São Tomé and Príncipe is an impoverished country -- as of 2011, it possessed the world's third smallest national economy, and its GDP per capita was just $1,473.

São Tomé and Príncipe generates some income, primarily from cocoa production and tourism, but it remains heavily dependent on foreign aid. (Neighboring oil-rich countries and Western donors finance about 90 percent of the national budget, which is $150 million for 2013.) Since 1997, when the Environmental Remediation Holding Corporation, a small U.S.-based (and currently Nigerian-owned) company, was awarded the country's first offshore oil exploration contract, hopes have been high that the country would become a major oil producer. In the intervening years, however, that hope has not been fulfilled. Nevertheless, in anticipation of increases in oil production, Business Insider forecasts São Tomé and Príncipe as the world's fastest-growing economy over the next five years. Such optimism is unwarranted: there is no guarantee that the country will produce even one drop of oil during this period.

After transitioning from single-party socialist rule to multiparty democracy in 1991, São Tomé and Príncipe has been marked by continuous instability, resulting in 17 different governments in 22 years. The volatility has hampered socioeconomic development in a country already plagued by weak institutions. Clientelism, rent-seeking, and corruption permeate politics. The prominent local lawyer Filinto Costa Alegre has suggested that three V's -- viaturas, vivendas, and viagens (cars, villas, and traveling) -- make up the political elite's ideology.

São Tomé and Príncipe has a long history of agricultural production. In the sixteenth century, the islands became the world's first tropical plantation economy, and in the early twentieth century, São Tomé and Príncipe was briefly the world's largest cocoa producer. In 1975, the country's socialist regime nationalized the islands' plantations and regrouped them into 15 large agricultural enterprises -- a move that sharply stifled cocoa production, because the newly independent country lacked know-how and trained personnel. The regime reversed course, liberalized the economy, and embarked on a World Bank-funded cocoa rehabilitation program in the mid-1980s, but cocoa production has never fully recovered; even so, the crop still accounts for more than 90 percent of the country's exports.

In 1999, seismic surveys revealed that there was a high probability of deep-sea oil reserves in São Tomé and Príncipe's territorial waters. This news was welcomed by an elated country, which had seen its revenues from cocoa production dry up. São Tomé and Príncipe quickly claimed its 200-mile Exclusive Economic Zone (EEZ) and signed agreements to recognize maritime borders with Gabon and Equatorial Guinea. When similar negotiations with Nigeria failed, the two countries solved the problem by establishing a Joint Development Zone (JDZ) in the disputed territorial waters. According to the treaty, which the two countries signed in 2001, they will share the income and expenditures of the JDZ, with 40 percent going to São Tomé and Príncipe and 60 percent going to Nigeria.

Figures circulating at the time estimated that the oil reserves of the 23 deep-water exploration blocks in the JDZ had about 14 billion barrels. Excitement about the country's potential oil wealth reached its climax in October 2003 during the first licensing round for exploration blocks in the JDZ, when the highest bids submitted by oil companies for seven blocks reached $500 million. Some analysts even speculated that the future oil revenues could soon turn the entire population of São Tomé and Príncipe into millionaires. Such speculations prompted the economist Jeffrey Sachs, director of the Earth Institute at Colombia University, to travel there with a self-styled advisory team to assist local authorities. The group hoped to help São Tomé and Príncipe avoid the oil curse by reinvesting its energy profits in socioeconomic development projects that would benefit the entire population.

This euphoria, however, did not last long. The development of the country's oil sector has been plagued by delays and setbacks from the start. The greatest blow to São Tomé and Príncipe's oil expectations came in 2006, when Chevron announced that exploration drillings in JDZ Block 1 had not resulted in the discovery of commercially viable oil. In 2008, Sachs's advisory team left the country unceremoniously; there has been little cause for optimism ever since. On the contrary, due to disappointing drilling results, in 2012, China's Sinopec and other oil companies abandoned JDZ Blocks 2, 3, and 4. Meanwhile, new hopes have been vested in JDZ Block 1, where France's Total carried out exploration drillings last year. (The results of those efforts will not be revealed until September 2013.) Time and again, analysts have revised and postponed predictions for the beginning of commercial oil production in São Tomé and Príncipe, and it has become clear that nobody really knows if and when oil production will start.

As the country's oil industry has struggled to get off the ground, the tourism sector has surpassed cocoa exports as a source of income. From 2008 to 2011, annual income from tourism increased from $7.7 million to an estimated $15.1 million. The country's appeal stems from its beautiful tropical scenery, its unique flora and fauna, the friendliness of the local people, and a low crime rate. But a number of factors -- including expensive flights, poor infrastructure, insufficiently trained personnel, and a lack of publicity -- still hamper the development of the tourist industry.

Will São Tomé and Príncipe really have the world's fastest-growing economy over the next five years? The fact that such predictions are largely based on speculations about oil -- which has not yet been discovered, let alone produced -- should temper expectations. Absent the hoped-for oil bonanza, annual GDP growth has hovered around 4.5 percent in recent years, mainly generated by tourism and construction. And despite steady economic growth and considerable inflows of foreign aid, poverty is on the rise. From 2001 to 2009, the percentage of the population living in poverty increased from 54 percent to 66 percent; in 1991, it was 36 percent. Even if the bold predictions for economic growth come true, therefore, gains in GDP will not necessarily benefit São Tomé and Príncipe's impoverished majority.