The economy of Senegal
SENEGAL: THE ECONOMY ON THE WAY OF EMERGENCE
Second economy of the West African Economic and Monetary Union (UEMOA) and fourth of the Economic Community of West African States (ECOWAS), Senegal enjoys political stability with a democracy consolidated by two peaceful alternations in 2000 and 2012. The Senegalese economy is based on agriculture, fishing (12.3% of export earnings), services, telecoms and tourism (second largest foreign exchange earner after fishing). Not being a major mining exporter, the country did not benefit from the economic boom of Africa between 2000 and 2012 when the GDP of the countries of the subregion of the region increased by 6% on average. Over this period, Senegal's average growth rate has evolved around the 4% average.
Upon his election in March 2012, President Macky Sall pledged to implement the necessary reforms to lead Senegal towards the emergence of the country by 2035. This long-term vision, detailed in the Senegal Emergent Plan (PSE) consists of three steps.
A first so-called breaking phase, from 2014 to 2017, before a second phase of acceleration from 2017 to 2023 and finally a consolidation of achievements to reach the emergence in 2035.
To do this, the State favours on the one hand major infrastructure projects, investments in key sectors and reforms of the business environment while conducting targeted social actions against extreme poverty in the image the creation of family scholarships.
Forecasts and strategic orientations
Senegal expects a growth of 4.9% in 2014 and 6.8% in 2015 in a relatively stable macroeconomic environment, according to data from the Directorate General of Forecasting and Economic Studies (DPEE).
The good performance of the public accounts is also mentioned by the IMF which notes a "low risk of over-indebtedness" in its report (June 2014) of the 7th review of the instrument of support for the economic policy. The ratio of public debt to GDP is 47%. Debt service stands at 9% of exports in 2013. This reflects the government's ability to solicit the international debt market and direct investment towards the productive sectors. All these indicators are conducive to the deployment of the PSE, which aims at the emergence by 2035. This program counts on an investment of 10 287.6 billion CFA largely covered in terms of commitments by the donors during the round table on Senegal organized in Paris in February 2014.
The country's strategic orientations focuses on investment in agriculture, transport infrastructure (roads, motorways, railways, airport infrastructures), energy and, among others, social housing. Between 10,000 and 15,000 homes a year are to be built in the next ten years, says the Ministry of Housing. In 2014, the urban hub of Diamniadio (near Dakar, a future urban centre destined to unclog the capital) will see the construction of 40,000 housing units of all categories.
Strong partnership between APIX and CIES to attract investors and achieve PSE goals
DAs part of its policy of attracting foreign direct investment, the Agency for the Promotion of Investment and Major Works (APIX) sealed on July 4, 2014 a partnership agreement with the Council of European Investors in Senegal (CIES).
Based on two main lines of collaboration, improving the business environment (axis 1) and promoting investments (axis 2). This partnership aims to create a synergy that can contribute to boosting the economic fabric of the country.
"The CIES supports Senegal in its march towards an emerging economy (...) This pact must contribute significantly to achieving the objectives of the PSE," said Mountaga SY, Director General of APIX, in the presence of Gérard SENAC, President of CIES, when signing the Memorandum of Understanding binding the two partners.
Mr. SY also recalled the weight of the 140 CIES member companies in Senegal's economy: "In 2013, CIES accounted for nearly 34% of GDP, 20% of exports and almost 18% of gross training of the fixed capital of our country. Taxation of the CIES companies have accounted for 31% of the country's tax revenue.
The problematic of energy
To carry out the PSE, Senegal must solve the problem of electricity supply.
The authorities intend to reduce the cost of electricity produced from CFA 110 to CFA 66 per kWh. Three coal-fired power plants, with a total capacity of 645 MW, will gradually take over from the current production of diesel power plants and gas turbines, fuelled in fact by fuel, for lack of sufficient gas in Senegal.
A service hub
Essentially agricultural but with an interesting mining potential (gold, iron, phosphates), Senegal seeks to position itself as a leading tourist destination.
APIX is currently developing a Special Integrated Economic Zone, located 45 minutes from Dakar, in the immediate vicinity of the Blaise Diagne International Airport. The project goes beyond the concept of Industrial Free Zone and aims to position Senegal as the "hub" of business for West Africa. The Zone will comprise an industrial park, service areas, offices and a logistics platform, but also, later, a commercial area, tourist complexes and residential areas.
In May 2014, President Macky Sall laid the foundation stone of the Diamniadio Urban Pole, a major PSE project whose aim is to breathe new life into Dakar. Extensive 1,946 hectares, this new city will be organized around seven areas of activity and include a residential area of 40,000 economic units, medium and high standing, with ten hotels including a five-star, an administrative city and the second university of Dakar.
UEMOA's second-largest economy in terms of GDP (market of 80 million players) and member of ECOWAS (300 million inhabitants), Senegal is positioning itself as the gateway to West Africa .
Beyond the regional perspective, the country pursues a strategy of integration into the value chains of globalization by attracting foreign direct investment (FDI) from Europe, the Maghreb, the Middle East and Asia mainly.
Among the assets of the Senegal destination include a clean business environment, the services of APIX (one-stop shop, business creation office, etc.) and tax incentives (Investment Code and Export Free Company) and confirm: "In any case, Senegal can count on certain comparative advantages, to better position itself as a competitive regional pole in logistics and international outsourcing. It also has assets to improve its local and regional supply chains for tropical fruits and vegetables for re-export to the requesting markets. Transport infrastructure (port, airport, rail and roads) is relatively good and the telecommunications system is of good quality. These assets can be used to make Senegal a <business park> and <a regional campus of excellence>, notes the report Economic Program for Africa 2014 produced by the United Nations Office for Africa (UNECA) in partnership with the African Development Bank (AfDB) and the African Union.
The government's focus is on improving the business environment. Out of the 56 planned reforms, 30 have already been executed reported last June the APIX which provides the secretariat of the Presidential Council of Investment (CPI).
The reforms cover commercial justice, taxation and the adoption of the Customs and Tax Code. Other ongoing reforms concern land and public-private partnerships. In addition, projects are engaged for the dematerialization of administrative procedures and the adoption of an arbitration framework. In addition, the reform of the procedures for setting up companies with the reduction of the minimum capital of the limited liability company (SARL) from CFA 1 million to CFA 100,000 constitutes an important call for the private sector and project promoters. Another positive signal is the government's willingness to pay off domestic debt through a so-called stimulus fund worth USD 726 million.