Senegal - Economy
Senegal is experiencing a huge oil rush and has been since Edinburgh-based Cairn Energy struck oil in its deep waters in 2014. Since then the country has seen multinationals flock to its deep and ultra-deep offshores. French oil giant Total is the most recent. Senegal signed two agreements with the company back in May 2016 allowing it to contribute to its exploration activities. Senegal in the past has faced a severe electricity crisis which resulted in regular power cuts that sparked demonstrations, sometimes violent, in Dakar and its suburbs, home to a quarter of the population.
Senegal serves as a regional business center for Francophone West Africa. The former capital of French West Africa, Senegal is a semi-arid country located on the westernmost point of Africa. Predominantly rural and with limited natural resources, the country earns foreign exchange from fish, phosphates, peanuts, tourism, and services. Its economy is highly vulnerable to variations in rainfall and changes in world commodity prices. Senegal depends heavily on foreign assistance, which in 2007 represented about 23% of overall government spending--including both current expenditures and capital investments--or African Financial Community franc (CFA) 315 billion (U.S. $630 million).
Although Senegal has a diversified economy by West African standards, it remains one of the poorest of the world’s nations. A major problem over the past 40 years has been recurrent drought, which has limited plans to increase agricultural production and expand industrialization.
Remittances in 2010 reached $1.4 billion and were worth 10% of Senegal’s GDP.
Senegal has an abundant supply of unskilled and semi-skilled labor, with a more limited supply of skilled workers in engineering and technical fields. While Senegal has one of the best higher educational systems in West Africa and produces a substantial pool of educated workers, limited job opportunities in Senegal lead many to look outside of the country for employment.
Senegal’s low ranking (153th out of 189 countries) in the 2016 World Bank Doing Business Report highlighted the bureaucratic challenges that foreign investors can face when pursuing projects in Senegal. After an even lower Doing Business ranking of 178 in 2014, Senegal was cited as a top performer in 2015 and 2016 for improving its business climate to raise its ranking. The Government of Senegal is continuing to implement a multi-year program to streamline procedures and reduce costs involved in setting up a business. The development of a Special Economic Zone is also intended to provide an easier environment for private investment.
Senegal's mineral resources are poor, mainly phosphate, iron, gold, copper, diamonds, titanium and so on. Calcium phosphate reserves of about 100 million tons, aluminum phosphate reserves of about 5000 to 70 million tons. Zircon reserves of about 800 million tons. As the mining law promulgated in 2003 on the exploration stage of enterprises to implement tax incentives such as tax relief, mining mining in recent years achieved rapid development.
From 2009 to 2012, investment in the mining sector increased by 700 billion CFA francs, signed a total of 75 mining contracts, involving gold, phosphate, uranium, attapulgite, zircon and so on. Inland gas reserves of about 10 billion cubic meters, coastal oil reserves estimated at more than 1 billion barrels, has not yet achieved commercial development. Forest area of ??about 620.5 million hectares, accounting for 32% of land area. (Organizational pour la Mise en Valeur du Fleuve Sénégal, referred to as OMVS), with the establishment of the "Gambia River Development Organization" (Gambia River Development Organization) with Gambia, Guinea and Guinea-Bissau, with the establishment of the "Senegal River Development Organization" (Mali, Mauritania and Guinea) Mise en Valeur du Fleuve Gambie, referred to as OMVG).
According to the International Labor Organization, as of 2020 nine of 10 workers were in informal employment and 97 percent of nonagricultural economic units operated in the informal economy. With increasing urbanization, the country’s economy was shifting from agriculture to informal commerce, per World Bank data. The informal sector included agriculture, self-employment, construction, services, restaurants, home-based producers, laborers, domestic workers, hotels and hospitality, tourism, fishmongers, street vendors, market vendors, laundries, waste picking, beauty salons, tailoring, transport, and private education.
Some labor laws apply to informal and part time workers, but only to those with an employment contract, not self-employed workers. Workers in the informal sector generally had no employment contracts, or contracts that did not comply with legal provisions, and their employers do not contribute to social security on their behalf as required in the Integrated National Strategy for the Formalization of the Economy and Action Plan of the Ministry of Handicrafts and Informal Sector Transformation. Informal workers were often exposed to excessive working hours, a majority working more than 40 hours per week, and some more than 60. Salaries, if they were fixed, were often below the minimum wage. Many did not receive paid annual leave and were not covered by contributory social security through their employment. Many companies cited the very high overall rate of tax and social charges on wages borne by the company as a reason for not formalizing employment.
Laws regulating informal workers’ activities were not effectively enforced; legislation prohibiting street vending in public spaces contributed to discrimination against informal workers. Domestic workers are protected by some labor laws, but the law provides them fewer benefits and protections than other workers, and penalties were seldom enforced. Worker rights groups criticized the government’s Senegal emergent (Senegal Rising) plan to regularize informal sector tradespersons, because it covered small businesses but not the self-employed, who represented more than 90 percent of informal workers.
Informal workers had difficulty accessing social protection and public health care. The law allows self-employed workers to contribute to self-financed health care, disability, and old age pension coverage, but informal economy workers had difficulty accessing contribution systems and social assistance programs such as food relief. Although the government set up Universal Health Coverage granting free health care to young children and basic health-care coverage for adults through mutual insurance programs, most informal workers remained uninsured. The government included trade unions representing informal workers on its committee established to monitor the COVID-19 Response Fund.
There is an important herding tradition among some groups in Senegal. Cattle, sheep, and goats are found throughout much of the country. Chickens and other fowl are also prevalent. In Catholic and animist areas of the country, pigs are raised in limited numbers. Camels are also raised in northern parts of the country.
The New Agricultural Policy (Nouvelle Politique Agricole) and its followup, the Cereal Plan (Plan Céréalier), were the centerpiece of government policy in this sector. The major objectives were the complete phase out of state-run regional development agencies, privatization of the agricultural sector, and progress toward food security. These policies did not achieve the desired results and the government is still seeking a way to address its agricultural needs.
About 70 percent of Senegal’s population is engaged in agriculture, but the performance of the agricultural sector has been steadily worsening, and it now contributes less than 25 percent of gross domestic product. Sugar production and diversification into nontraditional and vegetable crops have been promoted in recent years, but there has been limited success. Rice production in the north and south is hampered by both growing and marketing conditions. With the population increasing at a nearly 3 percent annual rate and cereal production declining in many areas, Senegal is finding it more difficult to attain selfsufficiency in rice crops, although millet and corn production tend to be adequate to meet the country's overall needs. Senegal has relied increasingly on imports and transfers of money from Senegalese living abroad to satisfy its growing demand for rice and wheat.
Peanut cultivation and refining have seen a tremendous decline over the past two decades. Once the country’s leading foreign currency earner, the peanut industry now accounts for only 25 percent of exports. This loss is the result of overcultivation in traditional peanutgrowing regions, drought, and the diversion of peanuts from Senegal into neighboring countries for export via the black market. The Senegalese government has taken a number of steps to restructure production and marketing systems and to increase domestic prices for farmers, but the effects of these steps have yet to be fully evaluated.
The fishing sector is Senegal's export leader. Fisheries are one of the main pillars of the economy. In 2007, fishery products contributed 22% of Senegal’s export earnings and employed about 15% of the population. Exports in 2012 amounted to 134.5 billion CFA francs, accounting for 10.7% of total exports, accounting for 1.8% of gross domestic product. National fishery employees about 115,000, accounting for 2.8% of the employed population. In recent years, the number of fishery practitioners has been reduced due to the shrinking fishery resources.
Industrial fishing operations struggle with high costs, more efficient Asian and European Union (EU) competitors, and ineffective patrolling of the country's territorial waters against poachers. Receipts from tourism, the second major foreign exchange earner, contribute between 4.6%-6.8% of GDP annually. Senegal has about 320 tourist-class hotels, and the sector employs about 100,000 people serving over 700,000 tourists annually. Agriculture employs 77% of the economically active populace, while groundnut cultivation (which in 1960 had provided 80% of Senegal’s export earnings) engages about 10% of the population and is done on 50% of sown land in rotation with millet and sorghum. Mining, especially of phosphates, employs about 33,000 people and provides about 15% of export value.
Senegal has progressively reduced government involvement in state-owned companies during the last three decades, so that only a handful of state-owned enterprises remain involved in the energy, agriculture and industrial sectors. The state-owned electricity company, SENELEC, retains control over power transmission and distribution, but relies increasingly on independent power producers to generate Senegal's power supply. The government has also retained control of the state-owned oil company Petrosen which is involved in hydrocarbon exploration in partnership with foreign oil companies and operates a small refinery dependent on government subsidies. The government of Senegal has limited and declining involvement in agriculture, including a state-owned company involved in rice production.
Senegal’s Agency for the Promotion of Investment (APIX) plays an important role in the government’s foreign investment program. Its objective is to increase the investment rate from its current level of 20.6% to 30%. Currently, there are no restrictions on the transfer or repatriation of capital and income earned, or investment financed with convertible foreign exchange. Economic assistance comes largely from France, the International Monetary Fund (IMF), the World Bank, and the United States. The European Union, the African Development Bank, China, Canada, Spain, Japan, and Germany also fund significant aid programs.
Senegal has well-developed though costly port facilities, an international airport serving 28 international airlines that serves as a regional hub, and a reasonable telecommunications infrastructure, including a fiber optics backbone. Cellular phone penetration exceeds 50% of the population, and there are 1.818 million Internet users.
Senegal's textile industry produces limited volumes of domestic cloth and finished apparel. The period 1996-1998 was a high-point for textile-related employment in Senegal with more than 7,000 workers in the sector. Despite being highlighted by senior GOS officials as a strategic sector for the country's Accelerated Growth Strategy, Senegal's apparel and textile producers are inefficient and potential growth is hampered by a range of obstacles: obsolete equipment, poor management, overstaffing, erratic and expensive electricity supply, limited and expensive credit, uncertain commercial real-estate laws and rigid labor laws. The GOS views the sector as a vital component of its accelerated growth policy. Senegal's Agency for Investment and Export Promotion (APIX) is pursuing incentives and strategies to attract foreign direct investment in the sector and to organize the apparel sub-sector.
Senegalese trade and investment officials routinely presented a vision of a vertically-integrated supply chain that includes Senegal's cotton fields, enhanced ginning capacity, fabric production, and transformation. There has been little actual movement in policy or improved business climate to encourage a private-sector-driven realization of this vision.
As of 2008, U.S. foreign direct investment stock in Senegal totaled $18 million. Total bilateral trade in 2009 was $183 million, with the United States exporting $176 million in goods and importing $7 million of goods.
The government’s economic policies continue to concentrate on large scale infrastructure projects, including the planned second international airport near Dakar (to be called the Blaise Diagne Airport). Textiles, IT and tourism are other priority sectors for the government. A major project to improve the Dakar to Bamako road is being financed by the Japanese and the EU. The country runs a successful airline (Air Senegal) in partnership with the Moroccan national airline. Telecoms is another dynamic sector, and plans are being considered to tender for a third mobile phone licence. However, despite these signs of success, several key sectors (groundnut oil, fertiliser production) are suffering from management problems and stiff competition from imports.
Senegal is pursuing an ambitious development plan, the “Plan Senegal Emergent” (Emerging Senegal Plan or "PSE"), which includes a series of economic reforms and increasing private investment in strategic sectors with the goal of increasing real GDP growth to an average of 7.1% from 2014 to 2018. The growth rate reached 6.5% in 2015, the highest in 12 years. The government is implementing reforms to the energy sector, higher education and the land tenure system, in order to improve Senegal’s attractiveness for foreign investment. Senegal also has ambitions to build on its position as a regional business hub with relatively good transportation links to become a regional center for logistics, services and industry. The Senegalese government is focusing on infrastructure projects to develop port facilities, transportation infrastructure and a Special Economic Zone. Senegal has joined the New Alliance for Food Security and committed to policy reforms to facilitate greater investment in agro-industry. As the government undertakes a range of investment-friendly reforms, capacity constraints and bureaucratic bottlenecks continue to impede the implementation of this agenda.
One of the more developed countries in West Africa, in 2013, industrial output accounted for about 22.7% of GDP. There are more than 500 enterprises nationwide, 85% of the factories and enterprises concentrated in Dakar. The food processing industry is the most important industrial sector, accounting for about 40% of the annual industrial added value. Chemical industry in the annual industrial added value accounted for 12%, mainly the production of phosphate and fertilizer. Phosphate production in 2010 was 1.015 million tons. In recent years, the rapid development of automobile assembly industry, in 2003 with the Indian Tata International Company set up a joint venture to produce cars, in 2008 with the Iran KHODRO company set up a car assembly plant.
Senegal has the best road network in West Africa. In 2012, the national highway length was 15200 kilometers, of which more than 5,000 kilometers of asphalt road. There are 374,000 motor vehicles in the country, of which 73.6% of the vehicles are concentrated in the capital Dakar area.
The tourism industry is one of the four pillars of the Serbian economy, which is included in the industry that has given priority to the rapid economic growth strategy. In order to promote the further development of the tourism industry, the government has reduced the value-added tax of tourism from 18% to 10% since March 2007, attracting more than 540,000 tourists, 5.1% over the previous year and realizing foreign exchange income of 13.87 billion Francs, an increase of 6%. In 2011, the number of inbound tourists reached 450,000, mainly from France, Italy, Belgium, Spain and other European countries, the United States and other African countries. Tours are mainly concentrated in Dakar, Jiesi, Jijin Shauer, St. Louis area. December to February the following year is the tourist season.
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