Previous Quarterly Editions
Expropriation Risk: 34 34 34 33 Political Violence Risk: 38 36 38 39 Terrorism Risk: 41 42 40 40 Exchange Transfer and Trade Sanction Risk: 40 40 42 39 Sovereign Default Risk: 40 38 40 39
TREND ▼ OUTLOOK ►
The scale of the immediate damage to Senegal from the COVID-19 virus had become clearer by July 2020. After the first case was confirmed in early March 2020, the government became the first in Sub-Saharan Africa to close schools, restaurants and bars in any effort to contain the outbreak. The COVID-19 pandemic has drastically slowed economic activity, particularly in services, urban commerce, and the tourist sector, while also forcing a delay to one of the country’s two principal hydrocarbon projects. Both the government and the IMF expect growth to drop from 6.5% to 1% this year and President Macky Sall has warned that an actual contraction remains a possibility. The president announced the end to the country’s state of emergency at the end of June 2020, saying that the need now was to protect the economy, even as he himself began two weeks of self-isolation after coming into contact with someone who tested positive for COVID-19. The government is gradually relaxing constraints on domestic activity and this should allow local production and consumption to gradually recover, reviving both formal and informal sector urban employment. The government is responding with a stimulus plan and by paying electricity bills for close to one million households until September 2020. But the economy remains hostage to global factors beyond Dakar’s control, notably the appetite of European consumers for long-haul tourism and the pace and extent of the recovery in global oil and gas prices. The impact of the slump in world energy demand on Senegal’s emergent hydrocarbons sector remains hard to predict at this stage. BP did declare force majeure to justify delaying its order for the floating production vessel at the centre of the Grand Tortue Ahmeyim (GTA) offshore LNG project. However, so far there is nothing to suggest that this project, which is a high priority development for Senegal, will be affected as the company seeks to cut costs. President Sall has said that he expects hydrocarbons projects to be delayed by one or two years, but the government will be looking to BP to confirm a revised timetable for the completion of the GTA project. Some analysts have questioned the likely timetable for development of the Sangomar offshore oil project, amidst speculation that this will cost as much as four billion USD, substantially more than GTA. In June 2020, Australia’s FAR, which has a 15% stake in Sangomar, admitted that it had been unable to meet a cash call and was contemplating the possible sale of its holding. However, Sangomar’s operator, Woodside, says development of the project remains on schedule, with the aim of producing its first oil in 2023. Sall’s government is generally regarded as having responded with competence to the COVID-19 pandemic, despite some recent protests at the prolonged lockdown constraints. By mid-July 2020, the government had confirmed some 8,250 cases but just 150 deaths, with the major concentrations being in Dakar and Touba, an important religious centre. The country’s Health Emergency Operation Centre, set up in 2014 in response to the West African Ebola crisis, had already been working with the WHO, the US Centers for Disease Control, and other partners on simulation exercises of how to respond to epidemics, and the Institut Pasteur in Dakar has been a leader in developing African testing capacity.
With the hydrocarbons sector under pressure, the government is determined to maintain Senegal’s attraction of international investors. Senegal needs foreign expertise as well as development capital for a range of sectors, the prime example being new power generation capacity to be fuelled by gas and renewables, and tourism which, while it is a traditional arena for foreign private sector engagement, does has scope for growth. The government hopes that investors will also play a role in transport and infrastructure, the processing of natural resources and agricultural produce, development of the technology sector, and business and professional services. Expropriation is highly unlikely except in cases of clear breach of contract or performance commitments, or as a transitional rescue measure if a hitherto viable enterprise slid into crisis and had to be taken over until new partners could be found.
TREND ▲ OUTLOOK ►
Resentment against lockdown measures imposed to limit the spread of COVID-19 have provoked some limited bouts of unrest. In early June 2020, an extension of the night-time curfew prompted protests and rioting in several cities and towns including Dakar and Touba, and there were reports of more than 200 arrests. In response, the authorities moved the start of the curfew from 9pm to 11pm. However, these protests do not represent any sustained shift towards instability. The legacy of armed separatist activity in Casamance is occasionally reflected in incidents of violent criminality in this southern region.
TREND ► OUTLOOK ►
With its large expatriate community and attraction for European tourists (at least in normal times), Senegal is potentially at risk of suffering the sort of terrorist attacks on urban or leisure targets seen in a number of West African countries over recent years. Although no such incidents have occurred so far, they remain both possible and extremely difficult to guard against. Moreover, small numbers of suspected jihadists have infiltrated into the inland border regions of several coastal West African states, such as Benin, Togo and Côte d’Ivoire. Similar infiltration also remains a potential risk for Senegal.
The currency reform scheduled for 2020 by Senegal and the other seven members of the West African Economic and Monetary Union (UEMOA), could well be delayed until 2021, however this is not simply due to the complications associated with the COVID-19 pandemic. Nigeria, and some other regional states that are not members of UEMOA, fear that replacing the CFA franc with a new currency (to be known as the eco), could complicate wider (though less developed) plans for all of West Africa to eventually adopt a single common currency.
Government revenue plans do not envisage significant hydrocarbon revenue flows before 2022 or 2023, and so have not been affected by the drop in energy prices related to the pandemic. To help Senegal weather the virus impact, in April 2020 the IMF approved the release of 440 million USD from its Rapid Credit Facility and Rapid Financing Instrument windows. However, the deficit is expected to grow beyond 6% in 2020. Senegal is regarded by Europe (by France in particular), as a key partner, so in the unlikely event that debt service pressures did become intense, international partners might well provide additional assistance.
Return to contents Next Chapter