Previous Quarterly Editions
Expropriation Risk: 51 51 51 51 Political Violence Risk: 39 39 39 48 Terrorism Risk: 40 40 40 40 Exchange Transfer and Trade Sanction Risk: 35 35 45 45 Sovereign Default Risk: 75 75 75 66
TREND ►
Political tensions increased sharply in February and March 2021 as Senegal experienced mass protests and the largest riots seen in decades. The unrest was sparked after a beauty salon employee accused the opposition leader Ousmane Sonko of rape and threats of violence; he was subsequently arrested and charged and briefly detained before being granted conditional release.
Supporters of Sonko- a charismatic campaigner and adept user of social media who is hugely popular among urban youth- viewed the accusations as a politically motivated attempt to destroy his reputation and derail his electoral prospects, at a time when he has emerged as a major challenger to President Macky Sall.
The context is growing speculation that Sall may have ambitions to change the constitution, to scrap the current two-term limit so that he can stand again when his current mandate expires in 2024. The former Dakar mayor, Khalifa Sall (no relation), was prevented from standing against him in the 2019 election after a conviction for minor mismanagement of municipal funds, a case that opposition supporters also viewed as a political exploitation of the judicial system. Sall was later pardoned, but only after the election was over.
Senegal faces a major challenge to recover from COVID-19. By April 20, 2021, there had been 39,836 confirmed cases and 1,095 deaths. Despite an early start to vaccination in February 2021, with a consignment of 200,000 Sinopharm doses, Senegal will remain substantially reliant on COVID-19 Vaccine Global Access (COVAX) programme shipments to accelerate this campaign- though these are globally short in supply. Plans are now being prepared for the local manufacture of COVID-19 vaccines, substantially supported by European and French development funding.
As in most sub-Saharan economies, the informal trading, craft and services economy has been hit hard by COVID-19 lockdown curbs. Senegal is also an important destination for European tourists, meaning that pandemic-related travel curbs have cost dearly in lost jobs and informal trading and service livelihoods as well as business turnover. The government has announced a drive to tackle youth unemployment, one of the grievances that contributed to the recent unrest and that also fuels migration to Europe.
Moreover, the pandemic arrived just as the country was developing its first two major offshore energy projects. Woodside continues to press ahead with its USD4bn Sangomar oil project, as originally planned. But BP initially paused some work on the Grand Tortue Ahmeyim (GTA) offshore LNG project; it has since resumed, although the start of production is likely to be slightly delayed, perhaps to 2023. There is speculation that BP might scale back its ambitions for the second phase of the project.
The Senegalese government is highly unlikely to expropriate assets or business operations owned or operated by foreign investors, or indeed major domestic private investors, unless investors failed to honour key contractual and performance commitments, or unless a failing venture had to be rescued by the state to ensure its survival. The government aims to enhance Senegal’s attractiveness as an investment location and is determined to retain the confidence and trust of investors.
Foreign and domestic commercial investment is a key tool of the government’s strategy for diversifying the economy and strengthening infrastructure provision. Prime examples are the major new port to be developed by DP World south of Dakar and a range of projects in the power sector: the Taiba windfarm, the GTA gas project (some of whose output may be piped ashore for domestic power generation) and the 300-megawatt Cap des Biches power plant now under development, the first such project to be financed entirely by local investors (the West African Energy consortium).
TREND ▲
Although the mood has calmed since the outbreak of unrest in February and March 2021, the risk of urban protest violence remains higher than several years ago. This is partly a consequence of socio-economic pressures, which have been intensified by COVID-19. But the risk is also fuelled by a perception that President Sall has become more out of touch and has concentrated too much power in his own hands.
In a reshuffle last October (2020), Sall dismissed some of his most trusted colleagues, including those seen as potential presidential succession candidates for his Alliance for the Republic (APR) party, and brought Idrissa Seck- his leading challenger in the 2019 election- into the government camp as head of the Economic and Social Council.
This fuelled the speculation over whether Sall has third term ambitions, an issue that could spark further protest, particularly among young urban Senegalese. Sall remains popular in the rural areas, which have benefitted from his effective development programmes, but the urban political mood remains febrile.
Meanwhile, government forces have mounted fresh operations against the residual presence of armed separatist activity in Casamance, in the south. Some security concerns may persist unless an understanding is reached with any remaining militants.
As one of the most important African bases for international organisations and diplomacy, with a large expatriate community and attracting many Western tourists, there is no doubt that Senegal is at risk of terrorist jihadist attacks on urban or leisure targets of the kind seen in some other West African countries. Although there have been no such incidents, the security forces have strengthened their presence to guard against infiltration across the border from Mali. Some suspects have been detained and convicted over recent years.
Senegal and the other seven members of the West African Monetary and Economic Union (the French acronym for which is UEMOA) have finalised the first phase of their reform of the CFA franc common currency, in collaboration with France- which guarantees its fixed peg to the euro. Member countries will no longer have to deposit part of their foreign exchange reserves in the French Treasury operations account and France has withdrawn from formal representation in the UEMOA governing institutions.
The next phase of reform will be to rename the currency while maintaining the fixed peg. Some businesses report bureaucratic delays in securing foreign exchange in some UEMOA countries, but it is unclear if Senegal is among these. There are plans for a West Africa common currency, which would be free floating or based on a basket, but there is no agreement yet on how to organise this project, which remains only a longer-term regional goal.
Trade sanctions are not an issue for Senegal, a stable democracy with close ties to France, the European Union and the United States.
TREND ▼
Due to the COVID-19 pandemic dampening economic activity, default risk has inevitably increased. However, Senegal managed its finances with care. Moreover, it has not factored in its potential future oil and gas revenues into current borrowing strategy and so the weak global prices for these commodities have not affected the government’s fiscal position.
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