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Expropriation Risk: 32 32 34 34 Political Violence Risk: 37 40 44 40 Terrorism Risk: 38 39 42 43 Exchange Transfer and Trade Sanction Risk: 42 40 40 40 Sovereign Default Risk: 44 45 44 42
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The political temperature has cooled in Senegal following the presidential election in February, which independent observers concluded was fair and well organised. President Macky Sall won on the first round with 58% of the vote, followed by former prime minister Idrissa Seck on 21% and Ousmane Sonko on 16%. Some of the minor candidates claimed irregularities before the polls, while Seck subsequently accused Sall of manipulating the results to achieve a first-round victory. However, attempts to rally protests against the result gained little traction and there has been no legal challenge to the result. Although the exclusion of former Dakar mayor Khalifa Sall, no relation to the president, from standing in the election was hugely controversial, the incumbent president was always the overwhelming favourite. However, Sall surprised the country with his post-election announcement that he was abolishing the role of prime minister and concentrating executive authority in the presidency. Some were concerned that this might over-personalise the exercise of power in the future, although in Senegal the president has always been the key decision-maker and political strategist while the prime minister played a largely technocratic role in implementing policy. Other critics worry that the move will increase a creeping element of authoritarianism that some detect in his approach to government, although there has been little public reaction. A more practical concern is Sall’s ability, given the other demands on the presidency, to find the time needed to work with ministers on the technical aspects of day-to-day issues. Despite these concerns, and the fact that combining the two posts was not part of Sall’s manifesto in February, the government’s majority in the legislature ensured that the change was approved in May. The opposition resents the way in which the move has been pushed through and has pointed out that it leaves Sall more exposed to government mistakes or scandals now that he no longer has a prime minister acting as a political shield. A dialogue between political parties began in May, having been initiated by Sall in part to reverse the damage done to his image as a consensual reformer by the imprisonment of Khalifa Sall on corruption charges that were seen by many Senegalese as intended to prevent his running for president. Although some chose to boycott it, including the PDS led by former president Abdoulaye Wade whose son Karim was convicted of corruption in 2015 and is now in exile, Idrissa Seck and Ousmane Sonko, whose performance in the election underlined his support among Senegal’s urban youth, sent a joint representative to the opening session. In economic terms, Sall’s re-election will mean a continuation of the policies that produced average annual growth of around 6% during his first term, as well as 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.
TREND ► OUTLOOK ►
Expropriation risk is relatively low risk in Senegal, contributing to the government’s success in attracting investment from major international oil companies. The decision by BP in December to press forward with the Grand Tortue Ahmeyin (GTA) project vindicated this open and welcoming strategy, and Dakar hopes that a positive decision by Cairn and Woodside on the SNE oilfield will soon follow. The power sector is also a priority as Senegal seeks to develop more wind and solar generating capacity. Turbines for what will be the biggest wind farm in West Africa began arriving in May. The farm should provide 15% of the country’s electricity needs, putting it halfway towards meeting President Sall’s goal of 30% coming from renewable sources. Half of the 340 million dollars in financing is coming from a UK renewables company, with the rest split between the US Overseas Private Investment Corp. and Danish export credit company EKF.
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With the presidential election now over, the risk of short-term urban political unrest has decreased. However, despite the scale of Sall’s victory, opinion polls continue to indicate that people in Senegal, and particularly young urban Senegalese, are concerned that a booming economy does not seem to be producing more jobs. The fate of Khalifa Sall also raises strong feelings and could generate more protests. However, the security forces are well trained in containing protests in a safe manner, and there is little risk of Senegal seeing large-scale conflict or generalised political violence in most areas.
TREND ▲ OUTLOOK ►
The country’s indigenous Islamic traditions are tolerant and culturally open-minded. However, as a major diplomatic and business hub for francophone West Africa, Dakar must live with the ongoing risk of attacks by Islamist extremists A few young Senegalese have been influenced by extremist ideas, with 15 convicted of terrorism-related offences last year, and there is also some risk that radicals from elsewhere in West Africa could enter the country.
The eight-member West African Economic and Monetary Union (UEMOA), which has its central bank in Dakar, uses the West African CFA franc. This has a fixed parity to the euro that is guaranteed by the French treasury. A radical political critique of this arrangement has gained a wide audience across the region and France has confirmed that if the bloc opts for monetary independence it would support the decision. But although UEMOA members mostly enjoy steady economic growth and have the fiscal stability to support monetary independence, there appears little interest in change at present.
With growth this year expected to be around 7% and a fiscal deficit at 3% of GDP once foreign aid is factored in, Senegal enjoys a solid fiscal position. The cost of debt servicing has been reduced in recent years by a concerted effort at debt management, and the medium-term outlook is strengthened by the prospect of new gas revenues starting in 2021. The challenge now is to avoid excessive borrowing against expected hydrocarbons income, which will always be subject to fluctuations. But if, as expected, President Sall can maintain fiscal discipline during his second term, the risk of sovereign default should decline further.
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