Previous Quarterly Editions
Expropriation Risk: 32 34 34 34 Political Violence Risk: 40 44 40 38 Terrorism Risk: 39 42 43 41 Exchange Transfer and Trade Sanction Risk: 40 40 40 40 Sovereign Default Risk: 45 44 42 40
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The government has adjusted smoothly to the decision by President Macky Sall, re-elected earlier this year, to abolish the post of prime minister. The last incumbent, Mahammed Boun Abdallah Dionne, a close ally of the president, has effectively become the senior minister and retains his place at the centre of Sall’s administration. Key ministers in the government appointed by Sall in April include Amadou Hott (economics, planning and development cooperation), Abdoulaye Daouda Diallo (finance) and Mouhamadou Makhtar Cissé (oil and energy). For the past four years, Cissé was head of the national power company Senelec, which he restored to health after a period of financial crisis. Hott has been vice-president of the African Development Bank for energy, climate and green growth since 2016 and will use that experience in his new role to pilot the government’s Plan Sénégal Emergeant development strategy. An early political test for Sall’s second administration came when a BBC TV documentary broadcast in June made allegations about supposed payments to the president’s brother Aliou Sall in connection with his work for the Romanian-Australian extractives entrepreneur Frank Timis. These related to the hydrocarbon resources now being developed by BP, which has rejected any suggestion that it acted improperly. Although Aliou also dismissed the allegations as false, the affair had the potential to cause serious political damage to Macky Sall. However, the government managed the situation adroitly and initiated a thorough police enquiry. Meanwhile, Aliou Sall resigned as head of the Caisse des Dépôts et Consignations (CDC) state investment bank. A further political test came in July with the decision to postpone local elections for a second time for administrative reasons, but the government has promised to consult political parties to agree a new date in 2020. The economy grew by 7.2% in 2017 and 6.2% in 2018, with 6.9% projected for this year. This is more than double the average rate of population increase and provides a platform for a gradual increase in average living standards. With consumer price inflation below 1%, the Senegalese can feel a real benefit from any rise in their incomes.
TREND ► OUTLOOK ▼
The central aspect of Senegal’s economic strategy is to sustain the flow of foreign investment into the capital-intensive hydrocarbons sector and the related area of power generation. It also hopes to develop Senegal as a regional hub for the provision of professional and technical services related to oil and gas development, and is beginning to build up the country’s technical competence in these areas. For these reasons, the Sall administration prioritises the provision of a stable and legally secure environment for foreign investors and this is holding down the risk of any expropriation for short-term political reasons. Legacy contractual issues over investments dating from the era of the previous president, Abdoulaye Wade, have now been dealt with and the current government’s attitude to foreign investment will remain strongly positive.
TREND ▼ OUTLOOK ▲
Street demonstrations are generally regarded as a democratic right and a routine part of Senegalese public life, and there were several in June and July over the Timis affair. Demonstrations are usually granted permits, as these were, but the security forces are prepared to use tear gas and other civil riot control techniques on unauthorised street protests. There is a slight residual risk of political violence between onetime separatist guerrillas and the security forces in Casamance in the south, but this is diminishing as peace talks continue. The government has adopted a consensual approach to the region, limiting military deployments and seeking to resolve grievances through a focus on local economic and social development. Sall himself remains strongly popular among the country’s extensive rural population, which has benefited from his focus on improving the agricultural sector and related infrastructure.
Dakar is one of the most important diplomatic and economic hubs in West Africa. Its close relations with France and other Western countries, and its large international community, leave it exposed to the ongoing risk of jihadist terrorist attacks. So far, however, it has escaped such violence. In 2018, 29 Senegalese were tried on charges of attempting to establish a jihadist network that could stage attacks in the south and in neighbouring countries, but only 15 were convicted for their role in what appeared to be a largely amateurish enterprise. The domestic environment does not naturally encourage extremist ideas, and indigenous Senegalese Islam has a strongly tolerant and culturally open-minded outlook.
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Senegal is a member of the West African Economic and Monetary Union (UEMOA) bloc, whose CFA franc, which is distinct from the central African CFA franc, has a fixed parity to the euro guaranteed by the French treasury. But change may be on the way and France has said it will support whatever reform plan the UEMOA states adopt. The bloc’s members are committed to the long-term goal of creating a new West African regional currency, although that remains a fairly distant prospect. A more plausible nearer-term scenario is the renaming of the West African version of the CFA franc as the “eco”. The value of the new eco would be based on a trade-weighted basket of major foreign currencies so that, in practical terms, it would be influenced by the dollar as well as the euro. Fundamental to the potential success of such a move would be maintaining the strength and political independence of UEMOA’s Dakar-based central bank, which has taken a tough monetary stance. It would need to maintain a strong monetary position, disciplined control of international borrowing, solid reserves and full convertibility.
This year’s fiscal deficit is projected to be a respectable 3% of GDP, taking account of foreign aid. Careful debt management will be required to maintain this stable position and the government will have to resist the temptation to pre-spend the proceeds from future hydrocarbons exports before the gas and oil starts flowing. However, the government is aware of this danger and has made clear that the country should not expect a spending bonanza based on expected new revenue..
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