Previous Quarterly Editions
Expropriation Risk: 35 32 32 34 Political Violence Risk: 34 37 40 44 Terrorism Risk: 36 38 39 42 Exchange Transfer and Trade Sanction Risk: 45 42 40 40 Sovereign Default Risk: 44 44 45 44
TREND ▲ OUTLOOK ▲
Political tension rose ahead of the first round of the presidential election in February because the constitutional council prevented two of the leading challengers to President Macky Sall from standing. They are Khalifa Sall (no relation), the former mayor of the capital Dakar, and Karim Wade, the son of the president that Macky Sall replaced and who now heads the main opposition party, the PDS. This still left President Sall facing former PDS foreign minister Madické Niang; radical parliamentarian Ousmane Sonko; the academic El Hadj Issa Sall; and Idrissa Seck, a former prime minister with a strong base in Senegal’s third city. Many Dakar voters see Khalifa Sall’s March 2018 conviction for misusing municipal funds as a politically motivated case that was intended to prevent him from standing against the president. His appeal against a five-year prison sentence was rejected by the Supreme Court in early January, meaning he lost the right to stand for office. Wade’s exclusion, which follows his conviction for large-scale corruption and a subsequent departure into exile in Qatar, has been much less controversial. Amongst the remaining opposition candidates, Sonko has found a receptive audience for his message among urban youth in Dakar. By contrast, Macky Sall’s support has been drawn most strongly from the provincial areas that have benefitted from his grassroots development programmes. With broad support, Macky Sall was well-placed to win re-election in the first round and he duly did so with 58% of the vote on a turnout of 66%. Idrissa Seck came second with 21% but, despite accusing Sall of ‘conviscating the will of the Senegalese people’, has chosen not to challenge the result. Sall’s re-election will mean a new phase of infrastructure development and a concentration of investment in the renewable energy sector as well as the country’s new oil fields.
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In December 2018 BP made the final decision to go ahead with a billion dollars of investment in the Grand Tortue Ahmeyin (GTA) project that is part of the major offshore gas field that Senegal shares with Mauritania. A second positive decision, this one by Cairn and Woodside on whether to press forward with investment in the SNE offshore oilfield, is expected in the first half of 2019, although front-end engineering contracts have already been awarded. If approved, production is expected to start in 2022 with 100,000 barrels a day. Encouraged by these developments, the government will seek to maintain a stable and well-regulated environment for international investors without becoming a ‘soft touch’. As it showed with changes to the construction of Dakar’s new airport, the government is not afraid to intervene and reallocate contracts when contractors or concessionaires fail to live up to reasonable expectations. But the level of interest in the country’s new hydrocarbon projects has reassured Dakar that international companies will accept reasonable tax rates and serious social and environmental standards in exchange for good governance in the sector. It will also be encouraged that the proposed Nigeria-Morocco gas pipeline, which would connect GTA directly with Europe, is set to complete its design phase in the next few months.
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In the current climate, street demonstrations are possible over the exclusion of Khalifa Sall from the election. The security forces are fairly well trained in containing protests in a safe manner, but in a confrontational atmosphere there is a risk that unintended casualties could contribute to further outbreaks of violence. That said, there is little risk of Senegal seeing large-scale conflict or generalised political violence in most areas. In Casamance, an area in the far south where militant separatists used to be active, there is a residual risk that a few former militants might still be active.
Internet-based jihadist ideology has attracted some followers in Senegal despite the country’s deep traditions of tolerant and pluralistic Sufi Islam, and extremist ideas could find an audience among disenchanted urban youth. In July, a major trial saw some 15 Senegalese convicted of terrorism related offences. Across West Africa, jihadist terrorism remains a serious threat. Although Dakar has so far escaped attack, Senegal has close military ties with France and the US, whose troops also play a major role in the UN peacekeeping force in Mali. This may raise the risk of terrorist activity in the capital or in beach holiday resorts favoured by Europeans. It can be very difficult for government security services to detect or monitor the movements of suspected individuals, particularly as citizens of ECOWAS, the Economic Community of West African States, enjoy freedom of movement across borders that are in any case highly porous and difficult to control..
TREND ► OUTLOOK ►
Senegal is one of eight members of the West African Economic and Monetary Union (UEMOA). Its common currency, the CFA franc, has a fixed parity to the euro that is underwritten by the French treasury. Economies in the bloc have enjoyed steady growth and low inflation, and the exchange rate does not seem to have constrained their export competitiveness. Although some radical political campaigners have been pressing for an end to the monetary link with France, there are no signs that UEMOA governments are ready to bring an early end to the current system. However, in contrast to the central African CFA franc zone, the UEMOA bloc enjoys stability and fiscal strength and would probably be able to assume full monetary independence if it so chose.
TREND ▼ OUTLOOK ▼
Senegal is expected to see growth of close to 7% in 2019, while the government’s fiscal deficit is projected to be a reasonable 3% of GDP once the positive impact of grant aid from donors is factored in. Even excluding grant aid, the deficit is likely to be only 5%. Public debt service is now around 30% of government revenue, having been reduced from above 40% in recent years by a concerted effort at debt management. Provided the government takes a conservative view of future hydrocarbon revenues and is cautious about taking on new debt, Senegal’s sovereign default risk should continue to decline.
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