Driving from Senegal’s Blaise Diagne International Airport to the capital city of Dakar, you see that the government has laid out an eye-catching feast for investors and visitors to marvel at. On the 50km journey, a host of large infrastructure projects stand tall and proud in the West African sun as symbols of the government’s vision for the country.
The airport itself was built for $575m by two Turkish Companies, Limak and Summa, which won a 25-year contract with the Senegalese state to manage the facility in 2016. Moving closer towards Dakar, the new city of Diamniadio shoots up on either side of the motorway with a state-of-the-art stadium, conference centre and arena – all built by the Turkish company Summa.
The motorway itself was built by Eiffage, a French construction company, which won a concession agreement with the government to build a toll road between the airport and Dakar. Next to the motorway is a rail route that also links the city with the airport, built by French companies Engie and Thales Group for $2bn.
The drive shows the great diversity of partners that have chosen to invest in Senegal, a feat which analysts attribute to diversified and sustained growth in the francophone African country over the last two decades.
“If you look at the last 15 years, maybe since the financial crisis, what is unique and maybe slightly unusual is that Senegal has had balanced growth,” says Mark Bohlund, Senior Credit Research Analyst at REDD Intelligence, an emerging market research group. “There has been a general growth dynamic. The services sector is strong. The agricultural sector has been fairly strong, which contrasts with other sub-Saharan African countries where the agricultural sector is weak and in a state of decline. And now with oil production coming on line, Senegal is expected to have the highest growth rates in Africa.”
Indeed, added to a solid economic base, two oil and gas projects are expected to turbocharge growth to 8.0% in 2023 and 10.5% in 2024, the highest growth rates in Africa, according to the World Bank.
In 2014, more than 1bn barrels of oil and 120 trillion cubic feet of natural gas were discovered in the Atlantic Ocean. The huge hydrocarbon finds led to a flurry of investment by oil and gas companies including British oil major BP and US operator Kosmos Energy, which pumped $4.8bn into the development of the Greater Tortue Ahmeyim (GTA) liquid natural gas (LNG) project – boasting 15 trillion cubic feet of recoverable gas reserves – set to come online in 2024.
Australian petroleum company Woodside Energy is also developing the Sangomar Field, 100km south of the capital city of Dakar, which has the capacity to produce 100,000 barrels of oil a day and is set to come online later this year.
On top of the huge hydrocarbonprojects, DP World made its largest-yet investment in Africa yet in 2020 by committing $1.3bn to the development of a deep-water port 50km south of Dakar. All these projects have seen foreign direct investment (FDI) increase dramatically from $409m in 2015 to $2.23bn in 2021, according to UNCTAD data.
As well as solid and diversified growth, most investors are bullish on Senegal due to its relatively stable politics, good governance, skilled but low-cost workforce and geographical position as a strategic gateway to West Africa.
“Senegal for us is a positive story,” says Martjin Proos, director of the Emerging Africa Infrastructure Fund (EAIF). “Historically it is a politically stable country. We think it is well managed. They have good public private partnership (PPP) frameworks and that allows the private sector to come in, in a variety of sectors. For us it is therefore an interesting country for infrastructure projects.”
The fund, which is backed by UK, Dutch, Swedish and Swiss governments, has invested $70m in Senegal to date across various sectors and Proos says that there is “a lot more to come in the pipeline”.
Scaling Senegalese companies
Senegal has a thriving private sector with around 300,000 small and medium enterprises (SMEs) spread across the country of 17 million people. The makeup of the economy has remained broadly the same over the last few decades with around 50% of GDP from services, 25% from industry and 15% from agriculture. Financial institutions make up a large portion of the services sector, with 26 banks based in Senegal, as well as telecommunications firms and real estate.
Government initiatives and regulatory interventions over the last decade have given rise to impressive growth in the private sector. President Macky Sall’s flagship programme, the Plan for an Emerging Senegal (PSE), was put in place to maintain Senegal’s annual growth rate above 7%. The plan includes 27 major investment projects and 17 reforms with a focus on transport infrastructure and services, energy infrastructure and service, agriculture and agro-food, water and sanitation, education and training and health nutrition.
Several organisations have also been specially created to boost the economy. These include APIX, a public body to help Senegal attract foreign investment; and the Agency for the Development and Registration of SMEs (ADEPME). During Sall’s time in office, Senegal has jumped on the World Bank’s Ease of Doing Business Scale from 178th out of 190 countries in 2013 to 123rd in 2019.
However, analysts say there are several areas ripe for improvement to unleash the full force of Senegal’s private sector. For SMEs, the main problem is finance.
Despite the presence of 26 banks, it remains hard for SMEs to access finance in the country, says Ibrahima Fall of consultancy Invest Africa, as the lenders are incredibly risk-averse and have not figured out an effective way to finance small businesses. The businesses themselves also have poor accounting and structuring methods which makes them hard to lend to.
At the other end of the scale, home-grown Senegalese companies are yet to emerge as pan-African champions like companies from other countries such as Nigeria, South Africa and Egypt. There are a host of large companies and conglomerates in Senegal, including cement producer Soccocim, food company Sedima, and drinks company Soboa, but many are yet to enter the next growth phase and become billion-dollar enterprises.
Fall says there are two main reasons: hesitancy to scale outside home markets and hesitancy to take on equity investment to turbocharge growth. He attributes this to the fact that most of Senegal’s large companies are old-school, family-owned companies that prefer to keep management and strategy closer to home.
“They don’t want to open up to private equity,” he says. “They reject it right away and say they don’t want to lose control. But if you want to go from a family business to a mega-company you have to be open to investors.” To illustrate the point, there were no Senegalese companies in the African Business 2022 list of the 250 largest companies in Africa. The firms are also hesitant to scale in the wider region, despite being part of an economic union that is home to over 100 million people.
Senegal has missed an important growth opportunity in this regard, argues Bohlund. The country should be aiming to dominate the region with Senegalese companies and as a manufacturing hub. It could follow the path of other African countries such as Kenya, which set up car assembly plants and became a leading exporter of cars to the East African region. The opportunity is there for Senegal to seize.
Read more about Senegal’s booming economy in our Senegal Dossier.
Subscribe for full access
You've reached the maximum number of free articles for this month.
£7.00 / month
Recieve full unlimited access to our articles, opinions, podcasts and more.
£56.00 / year
Recieve full unlimited access to our articles, opinions, podcasts and more.