Previous Quarterly Editions
Expropriation Risk: 51 51 51 52 ▲ Political Violence Risk: 39 39 48 48 ► Terrorism Risk: 40 40 40 40 ► Exchange Transfer and Trade Sanction Risk: 35 45 45 35 ▼ Sovereign Default Risk: 75 75 66 75 ▲
TREND ▲
The local elections now scheduled for January 2022 will be an important test of the public mood. Pastef, the party of opposition standard-bearer Ousmane Sonko, accuses pro-government mayors of blocking the issuance of proof of address documents that would allow young people -- potential anti-Sall electors -- to register to vote. The allegations, denied by government, reflect the mistrust that will build up as the polls draw closer.
Pastef, Taxawu Dakar (headed by the deposed former Dakar mayor, Khalifa Sall), the Parti de l'Unité et du Rassemblement (PUR) and the Parti Démocratique Sénégalais (PDS) led by Karim Wade (son of a former president) have formed an alliance to challenge the governing Benno coalition. They will hope to capture Dakar or even overthrow the president’s brother, Aliou Sall, as mayor of Guédiawaye, a sprawling suburb of the capital. Local election triumph in the cities would boost their momentum before the 2023 legislative and 2024 presidential contests. But in those national elections they will still face a huge challenge to overcome President Macky Sall’s entrenched support in the rural areas and smaller towns where many Senegalese live, and which have benefitted from his development programmes.
Senegal is has struggled to curb a third wave of the COVID-19 pandemic, despite a well-organised health system and progress on vaccination, with 1 million people having received at least one jab by early August. The number of reported cases grew nine-fold between June and July; hospitals are saturated, and the authorities have reopened the network of purpose-built temporary COVID-19 treatment centres that had been set up to cope with earlier waves.
The public has overcome its initial hesitancy towards vaccines, queueing from dawn to get jabbed. This trend is fuelled both by fear at the rising death toll (1,774 by the end of August) and the need for Senegalese wishing to visit Europe to produce a vaccine passport to travel. The government aims to vaccinate 9 million of the 16 million population. European partners, the United States, the World Bank Group and the Senegal government have signed a funding agreement for the design and construction of a COVID-19 vaccine manufacturing plant at The Institut Pasteur in Dakar.
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 liquefied natural gas 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.
Senegal is keen to attract international investors for whom the country’s traditions of constitutional stable governance and organised administration are an important attraction. Moreover, it has managed to secure major international partners to develop key economic projects such as the Sangomar oil field, being developed by Woodside, or the GTA offshore gas project and the proposed new container port south of Dakar (DP World). The government is therefore unlikely to expropriate assets or business operations owned or operated by private investors, unless they fail to fulfil contractual and performance commitments.
Opposition parties would take the same view, should they come to power. Serious investors who enter Senegal on the basis of a credible business plan and go through normal regulatory approvals should be in a secure position, regardless of political changes, provided they operate within the proper rules.
TREND ►
Political pressures have eased. Recognising the social frustrations that partly fuelled the urban unrest of February and March, President Macky Sall has launched a CFA450 billion (USD806mn) package of measures for youth, including the rapid recruitment of 65,000 people for public works.
However, as the local elections of January 2022 approach, and in the run up to the 2023 and 2024 national elections, the mood could once more become confrontational. The underlying political drivers of tension remain: Sall’s rumoured third term ambitions, persistent rumours of corruption and judicial cases that embroil potential challengers, in particular. Moreover, while the president’s track record on development is strong, his reputation for tackling practical problems has not been helped by recent flooding in the Dakar suburbs, a recurrent problem.
The possibility of future mass demonstrations that could turn violent cannot be excluded. Some opposition and independent commentators argue that a new anti-terrorism law gives the authorities powers they could use both to tackle genuine terrorist plotting and to block the organising of legitimate political protest.
Alioune Badara Cissé, the Mediator of the Republic, a former close colleague of Macky Sall and subsequently a source of wise counsel, died in August. In the current brittle political climate, his widely respected voice of moderation will be much missed.
In the far south the army has carried out further operations against the residual presence of Casamance armed separatists.
Dakar is a key West African hub for diplomacy and international organisations. There is therefore a large expatriate community. Moreover, in normal times Senegal also attracts Western tourists. This places the country at risk of terrorist attack on urban or leisure targets, as has already happened in some nearby countries. The recruitment of a few individuals to extremist organisations is certainly possible and there has been at least one major trial that produced a number of convictions. The country’s security services and military have a reputation for competence and they have stepped up their efforts, but it is impossible to reduce the risk to zero.
TREND ▼
The eight-country West African Monetary and Economic Union (UEMOA), to which Senegal belongs, has agreed reforms of its CFA franc common currency, whose peg to the euro is guaranteed by France. The reform ends French representation on the boards of the UEMOA institutions and scraps the requirement for countries to deposit half their foreign exchange reserves in a French official account. However, the exchange rate peg and French guarantee are being maintained. It is possible the currency will be renamed, but that is less clear.
Meanwhile, UEMOA countries and the other members of the Economic Community of West African States have agreed a new plan for moving to their long planned common currency for the whole of the region. They have agreed on a period of convergence up to the end of 2026, under agreed criteria that are monitored for compliance, prior to launch of the currency in 2027. But many difficult institutional and strategic issues remain to be resolved.
Senegal is a stable democracy with close ties to France, the European Union and the United States and thus is highly unlikely to be the target of sanctions.
Inevitably, COVID-19 has increased the pressures on Senegal’s finances, severely slowing the hitherto fast-growing economy; real Gross Domestic Product (GDP) still rose by 0.8-1.5% in 2020, but the revenue-generating hospitality and tourism sectors were hit hard. However, having long pursued a conservative fiscal approach the country was relatively well placed to withstand the extra pressure, and the International Monetary Fund (IMF) provided USD442mn in emergency support.
A revised budget strategy through to 2023 incorporates the cost of the COVID-19 vaccination programme and new employment measures for women and youth, and aims to bring the deficit back down to 3% of GDP in 2023. In June 2021 the IMF approved an 18-month standby arrangement and the disbursement of USD187mn in further funding.
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