Previous Quarterly Editions
Expropriation Risk: 35 35 32 32 Political Violence Risk: 35 34 37 40 Terrorism Risk: 36 36 38 39 Exchange Transfer and Trade Sanction Risk: 47 45 42 40 Sovereign Default Risk: 44 44 44 45
TREND ▲ OUTLOOK ▲
As expected, political tensions have risen as former Dakar mayor Khalifa Sall appeals his conviction for misusing 3.3 million dollars in municipal funds. Although he began serving a five-year sentence in March, he confirmed in July that he intends to stand in the presidential election due in February 2019. As he is potentially the strongest challenger to President Macky Sall, no relation, his imprisonment and trial has been surrounded by controversy. Opinion is deeply divided among Dakar residents but there is a sufficient degree of belief that the prosecution was politically motivated to ensure that the president’s support among voters in the capital will be reduced. In the rest of Senegal, and particularly in rural areas, the issue weighs less heavily, largely thanks to the president’s record of increasing the pace of basic development and improving key services such as health. However, his re-election is not guaranteed, particularly if the opposition does well in the heavily populated regions around Dakar. Senegal’s economic health is resilient, with real GDP growth expected to be 7% this year. Many of the institutional arrangements for development of the country’s new offshore oil and gas sector, including regulatory bodies and a process for managing the revenues that could average a billion dollars a year over thirty years, are being put in place now. The Grand Tortue Ahmeyin (GTA) offshore complex that straddles the maritime border with Mauritania has 2.7 billion barrels of oil reserves and 1.1 trillion cubic metres of proven gas reserves and should start producing both by 2022. BP is expected to give final approval for its project in the area before the end of the year. President Xi’s two-day visit to Dakar in July underscored the importance of Chinese investment in Senegal, which Beijing puts at 100 million dollars in 2017. In contrast to some other countries in the region, Senegal is able to work with a broad range of lenders but China is now the country’s second largest commercial partner after France. Chinese funding has been central to the new road linking Dakar with the country’s second city, Touba, and the new technology park at Diamniadio outside the capital. Senegal’s participation in the World Cup may have injected an extra zip into consumer spending.
TREND ► OUTLOOK ▲
The Senegalese authorities are keen to maintain an investor friendly environment that will to sustain a continuing flow of investment into hydrocarbons exploration and development. Because initial activity in the oil and gas sector under the previous president was surrounded by controversy and rumour, the Sall administration is determined to ensure a transparent framework of regulation and accountability that is fair to foreign oil companies but also reassures the Senegalese public that these firms are making their due contribution to the national economy. In other areas, notably power generation and transport, the state is likely to be firm in holding investors to their contractual commitments.
Protests by opposition supporters are likely to intensify in the run-up to the presidential contest early next year, but the security forces are likely to avoid a heavy-handed response. If Khalifa Sall’s appeal is denied, that would also increase tensions unless the president chooses to intervene with a pardon. Sporadic violent incidents may continue to occur in Casamance, in the south, but these are increasingly driven by criminal tussles over economic interests rather than the political separatist issues that were once influential in the region.
TREND ▲ OUTLOOK ►
Senegal has so far escaped serious terrorist violence, but the recent trial of 30 suspected jihadists indicated that a few young Senegalese have spent time with radical groups abroad. In July, thirteen of the accused were jailed for attempting to establish a cell modelled after Boko Haram inside Senegal. Despite the availability of extremist writings online, the country’s indigenous interpretation of Islam is notably tolerant and pluralistic. Moreover, the inter-communal tensions that contribute to violence in parts of the Sahel are generally absent from rural Senegal, which has benefitted from heavy government investment in infrastructure, public services and support for farmers. However, the major role played by Senegalese troops in the UN peacekeeping force in Mali and Senegal’s close military partnerships with France and the US could lead some extremists to view the country as a legitimate target.
TREND ▼ OUTLOOK ►
The CFA franc currency of the eight-country UEMOA bloc in West Africa has a fixed parity to the euro, guaranteed by the French treasury. Senegal and fellow UEMOA economies are mostly enjoying steady growth and the exchange rate is competitive and sustainable. Any move away from the euro and towards monetary independence would only be taken from a position of strength, founded on the authority of the bloc’s powerful independent central bank. France has stated that it will fully support whatever stance UEMOA states choose to take.
Having issued 2.2 billion dollars of bonds in March to follow 1.1 billion issued in 2017, and with the government committed to a programme of heavy capital investment in infrastructure and public services, Senegal faces an uptick in finance pressures over the short-to-medium term. Although the IMF has suggested a cautious approach to further borrowing, the underlying position is still solid. The government is tightening up debt management and aims to bolster revenue collection, improve administration and reform energy pricing as part of a gradual but sustained effort to strengthen state finances. Moreover, it is committed to setting aside a substantial slice of future oil and gas revenues in a stabilisation fund and a fund for future generations.
Return to contents Next Chapter