Macky Sall shakes up investment in Senegal

On the outskirts of a dusty village around 70km northeast of Dakar lies the largest windfarm in West Africa. Stretching across 41 hectares, the Taiba N’Diaye wind power project boasts 46 wind turbines and a total generation capacity of 158 MW. 

The facility, inaugurated in February 2020, will provide 2m people with electricity and supply nearly a sixth of Senegal’s power when operating at full capacity. The project, which attracted over $400m from multilateral lenders, is testament to a government that has set bold green energy targets and is on a major energy investment drive. It hopes that renewable energy, including large hydropower projects, will make up 30% of the power mix by 2025. 

But Taiba N’Diaye is not the only large energy project which looks set to transform Senegal’s economy. A recent spate of oil and gas finds in the Atlantic Ocean straddling the maritime border with neighbouring Mauritania have put Senegal on the map as a serious hydrocarbon player. Reserves of more than 1bn barrels of oil and 40,000bn cubic feet of gas were found in in the shared fields between 2014 and 2017. 

A major find in 2017 by British oil major BP and US operator Kosmos Energy has led to the development of the $4.8bn Greater Tortue Ahmeyim (GTA) LNG project, which boasts 15 trillion cubic feet of recoverable gas reserves. BP’s role as main stakeholder prompted the British ambassador to Senegal to claim in 2018 that the UK would soon become the largest investor in the West African nation. Ibrahima Fall, Senegal country manager for Invest in Africa, says there has been a flurry of investor interest since the oil and gas discovery. 

“Since the discoveries that were made in 2014 everybody has been talking about oil and gas. More and more companies are approaching Invest in Africa to see if we can help them enter the sector and navigate the legislation. And the knock-on effect on the economy will be huge. If you look at the projects, basically they need support from all sectors – you will need insurance, logistics and much more.”

Yet the project is not without its concerns. One worry is that a hydrocarbon resource boom will lead to a “resource curse” of the kind that has affected countries such as Nigeria and Angola, detracting from development in other sectors like agriculture and manufacturing. 

There are also legal requirements for oil companies to make use of local personnel and suppliers but some investors are concerned that Senegalese companies are too inexperienced to function properly as the local sector is still relatively new. 

Finally, the environmental impact of a major fossil fuel project is a concern as climate fears mount and investors pull back from oil and gas. Environmental groups say that GTA – the deepest subsea project BP has ever tackled – puts the local marine environment at risk. 

July brought the unexplained deaths of dozens of dolphins and turtles, whose carcasses washed up along the shore near Saint-Louis in Senegal, and a team of oceanographers in Dakar are currently researching the rise in ocean acidification. 

Positive investor environment 

Nonetheless, the diversity of investor interest as a result of the oil and gas discoveries underlines the appealing nature of the broader Senegalese market. In a relatively unstable region, with recent coups in Guinea and Mali and turbulence in Côte d’Ivoire, Senegal stands out for its political stability. 

One of the few countries that has never experienced a military takeover or harsh authoritarianism, Senegal enjoyed a period of sustained growth from 2013 until Covid-19 hit in 2020. The growth was supported by improvements in key sectors including agriculture, gold and phosphate mining, telecoms, tech and banking, and underpinned by government reforms to improve the business environment.

However, severe contractions in hospitality, tourism and transport, mitigated somewhat by a record harvest, led to subdued growth of 1.5% in 2020 as Covid-19 hit. And businesses still face significant difficulties – the World Bank’s Doing Business index ranked Senegal 123rd in the world in 2020. 

“The first and second waves of Covid-19 hit economic activity hard, ranging from a slowdown to a complete stop in business activity for less than a month to more than three months, leading to downsized growth,” says Mbaye Ndiaye, secretary general of the Dakar Chamber of Commerce for Industry and Agriculture. 

A third wave in July, with twice the number of daily cases compared to the first two waves, has since subsided and GDP growth is projected at 3.7% in 2021 by the IMF, buffeted by headwinds including future Covid-19 risks and higher commodity prices. In June, the fund approved a $650m stand-by arrangement to support the next phase of the authorities’ Covid-19 response and a job-rich recovery. 

To add to the support, the government also implemented a $1.5bn Economic and Social Resilience Programme (PRES), backed by partners like Germany and the EU, to help strengthen the health sector and mitigate losses for households and businesses.

Regional trade hub

With a relatively small domestic population of 17m, Senegal is positioning itself as a regional trade hub to increase the size of its market. The bustling port of Dakar is an important driver of economic growth, processing goods from huge landlocked countries like neighbouring Mali. Port operator DP World announced plans last year to build a massive $1.1bn deep-water port 50km outside Dakar, in the Dubai-based company’s biggest African project so far. The plan has recently been reinforced by the announcement of an investment partnership between DP World and the UK’s CDC Group. 

The port will help drive even more of West Africa’s traffic to Senegal allowing larger cargo ships coming from China or Europe to avoid goods transfer from rival ports in Togo and elsewhere. 

The development follows the 2017 opening of the Blaise Diagne International Airport, completed by Turkish construction companies at a cost of €525m ($619m). Indeed, large infrastructure and energy projects have been a mainstay of President Macky Sall’s administration. According to UNCTAD, Senegal’s stock of foreign direct investment (FDI) has increased from $3.4bn in 2015 to $6.4bn in 2019. The main countries investing in Senegal include France, China, Lebanon, Syria, Turkey, Qatar and Morocco. 

Morocco’s Attijariwafa bank recently purchased two local banks: Crédit du Senegal and the Banking Company of West Africa (CBAO). 

On top of the airport, Turkey has made huge investments in Senegal over recent years, leading to a visit by President Recep Tayyip Erdoğan in January last year. Turkish contractors are involved in more than 30 projects, mainly in construction and mining. 

Turkish contractor Summa built the Dakar Arena, the Dakar Expo Centre and the Dakar International Conference Centre, facilities designed to promote the country as a conferencing and events hub for the region. In October 2018, Turkey’s Tosyali Holding sealed a $2bn iron and steel investment pact with Senegal’s Mines and Geology Ministry during a Turkey-Africa Economy and Business Forum.

Much of the construction work is to create the futuristic city of Diamniadio, part of Sall’s Emerging Senegal Plan to boost the economy. Located 40km outside Dakar, the city will function as an urban and economic hub of hotels, conference centres and residential accommodation. French companies Engie and Thales Group have been awarded a $2bn contract to build a railway between Diamniadio and Dakar. 

The latest addition to Diamniadio is a data centre that will move all government data and digital platforms to a national platform that the government says will strengthen Senegal’s digital sovereignty. The €70m project was financed with a Chinese loan and built by Huawei, leading to concerns that Senegal’s cyber-infrastructure is too exposed to China. Critics also argue that it will grant the Senegalese government full access to the private data of thousands of companies and individuals.

Africa’s vaccine producer 

Senegal is also pursuing ambitious plans to become one of the only African countries to manufacture a Covid-19 vaccine. Dakar’s Institut Pasteur, a biomedical research centre that is part of the Institut Pasteur in Paris, is hoping to produce 300m Covid-19 vaccine doses a year from 2022. The project has secured $200m in financing from the EU, France, the US and the International Finance Corporation (IFC) to build a manufacturing plant. 

As of 12 October 2021, Senegal had recorded 73,837 confirmed cases of the virus and a death toll of 1,868, according to the WHO. A total of 1,821,218 vaccine doses had been administered in the country.

Institut Pasteur director Amadou Sall tells African Business that it will initially produce Pfizer/BioNtech vaccines but has received interest from other producers. Many of the details – including distribution, pricing and whether the vaccine will be subsidised – are yet to be finalised. However, Sall says the Institut is working with partners like the WHO, Africa CDC and the African Union to ensure that vaccines will be distributed equitably and fairly across Africa. 

Senegal is currently one of the only African countries with the technological capacity to produce vaccines on a mass scale and the partnership with global players like Pfizer/BioNtech could drive more investment into local biomedical production and technology. BioNTech has reportedly narrowed its search to Senegal and Rwanda for an African country to produce malaria and tuberculosis vaccines, setting the stage for further biomedical investment in Senegal. 

“The first thing is that we have always received very strong support from the government. Our government has been very clear to make sure that by 2035 at least half of the vaccines we are using will be produced locally, which is very ambitious,” he says. 

“It needs facilities that are expensive in terms of capital, so you need funding. You also need a very good ecosystem in terms of the regulatory environment. You need good logistics. And it is an area that is highly regulated, meaning investment is long term and you need very good partnerships.”

Senegal’s government has also implemented several new initiatives to support small to medium-sized businesses. In 2018, it created a $50m Rapid Entrepreneurship Delegation fund to help support and finance young entrepreneurs. The scheme offers a range of financing for companies in different stages of development including incubation funding, equity financing and low-interest loans. 

Ndiaye adds that the creation of a specific organisation, APIX, to help with investment promotion and business promotion, has provided a “one-stop shop” for entrepreneurs in Senegal.

Political concern

However, while President Sall’s government has made important strides in the economy, political headwinds could dampen investor confidence. Frustration has been mounting at the government over an alleged crackdown on the opposition and the introduction of laws that make it harder to protest. Analysts have voiced concern that the current administration is steering Senegal towards a more repressive form of governance. 

Widespread riots in March lasted for three days and may have led to as many as 13 deaths when the government arrested opposition leader Ousmane Sonko. The disruption was followed in June by the introduction of counter-terrorism laws which the government says are aimed at the regional Islamist threat, but civil society groups say could be used to punish political speech and peaceful protest. 

The government also introduced laws that will make it easier to tap citizens’ phones and watch opposition leaders. 

“The new capacity to intercept electronic communications and telephone conversations is very problematic because it gives the government the power to target the opposition,” says Ousmane Diallo, Francophone West Africa researcher at Amnesty International. “It constitutes a serious risk because there are not a lot of safeguards for the opposition and civil society.” 

Anger has also been building at the perceived increase in corruption and an alleged lack of accountability for figures linked to the president. In 2019, Aliou Sall, the president’s brother, resigned as the head of a state-run savings fund after a BBC investigation alleged he had been involved in improprieties relating to a natural gas deal involving BP. A judge dismissed corruption charges resulting from the allegations the following year, but opposition figures have continued to call for further investigation. 

Although religious and civil society leaders have brokered a thawing of tensions between government and opposition since the riots, an attempt by Macky Sall to run for an unconstitutional third term in 2024 could prove destabilising. The 59-year-old, who has held office since 2012, was re-elected for a second term in 2019. A referendum in 2016 reduced terms to five years.

“There is nothing to suggest that the president will not risk another gamble in the 2024 elections,” says Diallo. 

That could further dampen the outlook for political stability in a region which is currently racked by constitutional crises and coups. In neighbouring Guinea, President Alpha Condé was removed from office in September by the military after he extended term limits and was elected for a third term. Côte d’Ivoire has had an extended controversy around term limits, while Mali’s president Ibrahim Keita was removed in 2020 by the military.

From a business perspective, a further tilt by Sall could endanger the political stability which almost a decade of his rule and that of the country has come to represent.