Senegal’s stable democracy, relatively strong economic growth, and open economy offer attractive opportunities for foreign investment.  Senegal’s macroeconomic environment remains generally stable, although aggressive measures to counter the economic impact of COVID-19 and rising commodity costs are pushing public debt to nearly 70 percent of GDP, the internal debt distress threshold of the Economic Community of West African States (ECOWAS). The currency – the CFA franc used in eight West African countries – is pegged to the Euro and remains stable.

The Government of Senegal (Government of Senegal) welcomes foreign investment and has prioritized efforts to improve the business climate, and many companies choose Senegal as a base for operations in Francophone Africa. Since 2012, Senegal has pursued an ambitious development program, the Plan Senegal Emergent (Emerging Senegal Plan, or “PSE”), to improve infrastructure, achieve economic reforms, increase investment in strategic sectors, and strengthen private sector competitiveness. The Government of Senegal expanded the “single window” system to provide services to companies, opening new service centers across the country, harmonizing more than 60 Government of Senegal websites, and digitizing dozens of government services and payment mechanisms.  The national digital agency, ADIE, plans to lay 4,500 kilometers of additional fiberoptic cable to increase internet access.  Senegal has plans to transition power plants from fuel oil to domestic natural gas starting in 2023, when two recently discovered oil and gas fields come online. A new Public-Private Partnership (PPP) law entered into force in November 2021, modernizing and clarifying PPP procedures and encouraging local content.

With good air transportation links, a modern airport, expanding seaports, availability of mobile money and other financial technologies, and improving ground transportation, Senegal aims to become a regional commercial and services hub. Three Special Economic Zones offer investors tax exemptions and other benefits. Repatriation of capital and income is generally straightforward, although the regional central bank sometimes limits the number of “offshore accounts” for companies registered in Senegal and engaged in project finance. Although some companies report problems, Senegal scores favorably on corruption indicators compared to other countries in the region.

Despite Senegal’s many advantages, significant challenges remain. Investors at times cite burdensome and unpredictable tax administration, complex customs procedures, bureaucratic hurdles, opaque public procurement practices, an inefficient judicial system, inadequate access to financing, and a rigid labor market as obstacles. High real estate and energy costs, as well as high costs of inputs for manufacturing, also constrain Senegal’s competitiveness.  High levels of unemployment and underemployment, especially among the country’s large youth population, represent a long-term macroeconomic challenge.

A U.S.-Senegal Bilateral Investment Treaty went into effect since 1990. Senegal’s stock of foreign direct investment (FDI) increased from $3.4 billion in 2015 to $6.4 billion in 2019, according to UNCTAD data. U.S. investment in Senegal has expanded since 2014, including investments in power generation, renewable energy, industry, and offshore oil and gas.  The IMF reports that U.S. FDI stock in Senegal was approximately $114 million in 2019 (Table 1; up from $91 million in 2018).  Although France is historically Senegal’s largest source of FDI, China overtook France as Senegal’s largest bilateral trade partner in 2019.  Turkish economic influence is also rising, particularly in construction. Other important investment partners include Morocco, Saudi Arabia, and other Gulf States, as well as the EU.  Sectors attracting substantial investment include petroleum and natural gas, agribusiness, mining, tourism, manufacturing, and fisheries.

Investors can consult Senegal’s investment promotion agency (APIX) at www.investinsenegal.com  for information on opportunities, incentives, and procedures for foreign investment, including a copy of Senegal’s investment code.

Table 1: Key Metrics and Rankings

Source: Compiled by Dakar Post
 

To access the ICS, visit the U.S. Department of Department of State’s Investment Climate Statement website.