Senegal joins West African surge

The International Monetary Fund's recent prediction of Senegal growth of 5.9 percent next year joins other news of vibrant West African economic conditions. Inflation is low and Senegal debts are being honored. Much of this good news, of course, is attributable to lower prices for the significant imports of oil into Senegal.

But the robust projections are in line with economic health of other West African countries such as Ivory Coast.

Of note in the January IMF report, Senegal's energy reforms, initiated in 2015, are taking hold, again aided considerably by the drop in oil prices. Halved last year, halved again this year, next year SENELEC will go without direct budget subsidies. Again, let's see if that remains the case should oil prices rise.

While the IMF notes reforms also in the works in agriculture (land reforms), tourism and labor, it is the more pedestrian reforms in areas such as government regulation, banking and transparency which are showing returns already.

Cafe Touba in Cali

You don't need to go to Senegal for Café Touba now. You can get it at our e-commerce website, cassicafe.com. We are using Indian robusta with Arabica beans, giving the black, spicy delight all the kick of its native street-corner version. Djar and cloves used for spicing. Hoping to hook up with a good provider of West African robusta at some point. Meanwhile order two pounds and get free shipping. It is shipped ground and works drip or espresso machine, although I prefer the espresso machine. Cassicafe.com.

Wade returns

According to news reports, Abdoulaye Wade will be back in Senegal in a couple days. This has much more to do with politics than the economy. Indeed that was the former president's self stated purpose. Gone for a couple years after his son lost both the vote to succeed him and his freedom, Wade says he's rested up now... Will the largely moribund Senegalese economy also be shaken up by Wade, who left behind him roads, sea and air ports (still being constructed) and forged an international presence for Senegal? At least it will be interesting. And its been awhile.

IMF outlook guarded optimistic

The latest IMF report for Senegal contains positive comments on the near term and some optimism for the medium term. Here is the heart of todays release on the early September IMF mission: “Despite the gloomy international context, GDP growth is expected to increase slightly to 4.3 percent in 2013, sustained primarily by major projects coming to fruition in the electricity and road sectors, the continued recovery of the agricultural sector, implementation of the heavy metals project (zircon) in Grande Côte, gold mining projects in Golouma and Massawa, and the startup of projects financed by the Millennium Challenge Account. Inflation is expected to remain contained at about 2 percent in 2013. The current account deficit should decline, but would remain high in light of imports associated with investments in the energy and mining sectors. The overall balance of payments is expected to post a slight deficit. “In the medium term, the key challenge for Senegal is to return to strong, sustainable, shared growth. The government has an important role to play in the process, for instance, through the development of essential infrastructure, reforms to improve the business climate, and appropriate social policies. Reconciling the objectives of meeting the country's development needs and maintaining a sustainable debt position calls for greater efficiency in public spending."

IMF: tough times for new administration

The International Monetary Fund's press release today on Senegal's policy review predicted rough weather ahead for the country's new ruling administration under President Macky Sall. According to the statement of IMF deputy director Min Zhu, Senegal's economy “slowed down ahead of the elections, and economic performance was affected by exogenous shocks, including the drought in the Sahel. Growth is expected to resume in 2012, but a weak global environment and regional instability pose important challenges. “A higher deficit target in 2012 (6.4 percent of GDP) accommodates the impact of exogenous factors, but significant efforts are required to keep the program on track. The authorities’ plans to reduce the cost of running the government and postpone non-priority investment projects are crucial to meeting the deficit target. Over the medium term, the authorities are committed to reducing the fiscal deficit below 5 percent of GDP in 2013 and 4 percent by 2015 to keep public debt on a sustainable path and rebuild fiscal buffers. The authorities’ intention to replace costly general price subsidies, particularly for energy, with an alternative system better targeting the poor is an important step. “The program’s ambitious structural reform agenda is critical to raising Senegal’s long-term growth potential. Comprehensive tax reform and reform of the energy sector should remain key objectives for 2012. Other priority reform areas include public financial and debt management, tax and customs administration, the financial sector, and measures aimed at removing bottlenecks to growth and improving the business climate and governance,” Mr. Zhu added.

IMF: drought drags down GDP

According to the recent IMF mission report on Senegal's economic progress, much gain has been made. But drought conditions brought down harvests, and with that overall economic vitality of Senegal. According to the May 15 report: "Macroeconomic developments in 2011 were less positive than expected because of the drought in the Sahel region. The steep decline of agricultural production despite sound results in the other sectors of economic activity has limited GDP growth to 2.6 percent. Inflation stood at 3.4 percent in 2011, driven by the increase of food and transport prices, in a context of rising global commodity prices." Check out the Café Touba at Cassicafe.com.

Presidential election and the rule of law

This weekend's presidential elections, scented with teargas, a delicate dance between the mob and self-determination, give real meaning to the rule of law--or its lack. At this juncture in the history of Senegal, here is the latest ranking of the county by the Rule of Law Index prepared by the World Justice Project:

"Within its income group, Senegal is in the middle of the rankings in most dimensions. Government accountability is weak, with particular concerns regarding the proper functioning of checks and balances on the executive branch (ranking 51st among the 66 countries in the sample and 11th out of 16 lower-middle income countries). Another area where efforts are required is open government, where the country ranks 62nd. The country has a moderate record in protecting fundamental rights (ranking 38th overall and 3rd among the Indexed countries in Sub-Saharan Africa), although police abuses and harsh treatment of prisoners remain a source of concern."

This is not the last word on Senegal's democracy, nor will be the elections this weekend. We will see how it plays out.

IMF notes energy improvements

In its latest report on Senegal, the International Monetary Fund (IMF) notes the following:

"Senegal’s economy has remained resilient to the global economic turmoil. Growth is expected to dip slightly to 4 percent in 2011 because of power outages in the first half of 2011. In 2012, the restoration of sufficient electricity provision, together with large energy and road infrastructure spending, should boost growth to 4.4 percent and help make up for a less favorable international environment. Inflation rose in early 2011 reflecting increasing international food and petroleum prices, but this trend reversed in the second half of the year. Year-on-year inflation is now back below 3 percent, and is expected to remain so next year. The prudent approach to expenditure management has fostered macroeconomic stability and helped keep the authorities’ program on track, with all quantitative targets for end-June and end-September 2011 met. Good progress was made too with structural reforms aimed at strengthening public financial management, tax policy and administration, and debt management."

Government law would set state's telcom cut

According to Reuters Senegal's government has proposed a law that will ensure that the state has at least a 35 percent share in all telecommunications companies operating in Senegal, the president said on state television on Thursday.

Senegal's APS news agency said that the law had been passed by the cabinet at a meeting on Thursday and might be extended to other sectors, beyond telecommunications.

IMF upgrades economic prospects

An International Monetary Fund (IMF) mission, led by Mr. Hervé Joly, visited Senegal from October 5-19, 2011 to conduct the second review under the three-year Policy Support Instrument (PSI) arrangement approved in December 2010. The members of the mission met with the ministers of economy and finance, budget, international cooperation, infrastructure, and energy; representatives of the BCEAO; other senior government officials; and representatives of the private sector, civil society and development partners.

At the conclusion of the visit, the mission issued the following statement:

“After recovering in 2010, the Senegalese economy experienced a modest slowdown in early 2011 due to persistent power cuts. Assuming that recent improvements in the electricity sector continue, however, Senegal should post GDP growth of 4 percent in 2011. Inflation rose in early 2011, reflecting increasing international food and petroleum prices, but this trend reversed in the second half of the year and inflation is now expected to average 3.6 percent in 2011.

“Growth in 2012 is expected to be sustained by the significant increase in public investment in 2012, in particular with continued construction work on the toll road and implementation of the Plan Takkal. The restoration of a more reliable supply of electricity should also have a positive impact on other sectors of the economy. These domestic drivers of growth are expected to largely offset the anticipated weakening of external demand and a generally less promising external environment than expected. Overall GDP growth is expected to reach 4.4 percent in 2012 compared to 4 percent in 2011. Inflation should continue to decline, and remain well below 3 percent.

Lukens confirmed as US ambassador

Lewis Lukens was confirmed yesterday by the U.S. Senate as ambassador to Senegal. Son of a diplomat who was also ambassador to Africa, Lukens had this to say in his confirmation hearing earlier this month:

"The United States and Senegal share a strong bilateral relationship. As a critical partner in Francophone Africa, Senegal is a key ally in the fight against terrorism and narcotics, and has been an important player on regional and international issues.

"Senegal is one of a few African countries to have never experienced a coup, and prides itself as a religiously tolerant nation. However, Senegal does face economic, governance, and press freedom challenges that threaten its democratic and development future. Senegal suffers from a crippling energy crisis that causes frequent power outages and has weakened economic growth. Senegal would like to emerge as a major regional economic hub, and if confirmed, I will work with the government to encourage enactment of economic reforms necessary to attract investment and expand access to markets.

"Senegal will hold presidential and legislative elections in February 2012. These elections are important to the country’s democratic future. Concerns about democratic backsliding and corruption have tarnished Senegal’s longstanding democratic reputation. If confirmed, I will work with President Wade and the Government of Senegal in their efforts to prepare for transparent, fair, and credible elections.

"Senegal is a recipient of many foreign assistance programs, most notably a $540 million Millennium Challenge Corporation (MCC) Compact. I understand that the United States Government must be accountable to American taxpayers and, especially in this difficult economic climate, every dollar must be effectively used. If confirmed, I will work closely with our strong partners in Senegalese civil and religious society and with the government to ensure that Senegal continues to improve on all of its indicators." Check out the Café Touba at Cassicafe.com.

Power and politics threaten Senegal financing

Senegal nurtures its role as a financial hub for West Africa. A smart move, leveraging its stability. Over the past year of so Islamic financial players are also focusing on Senegal, and vice versa. Indicative of the trend was a forum convened last year SYM International Finance Corporation, in partnership with the Government of Senegal, to assist the Government of Senegal to promote the a Financial Services Center and attract more private investments.

But recent unrest--and actual violence--in Senegal over the legislative power play by President Abdoulaye Wade undermine the county's reputation of stablity, and raise investment concerns. Many have wondered whether the civil disturbances will undermine Senegal's reputation of consistent democratic traditions.

Those concerns are also reflected in the $500 million Eurobond placed this year by Senegal's government. Senegal is rated B+ by Standard & Poors and B1 by Moody’s. When the riots earlier this month were occuring, Senegal’s Eurobond yield was up 4 basis points at 8.215 percent and the price was down 1/4 point at 104.5.

The riots reveal two challenges to Senegal's newfound international finance role. The first is the energy crisis. Power outages are at the root of the civil discontent. But politics plays a companion role. The presidential elections next year are roiling right along with the power woes. Both are concerns that will not go away soon.

IMF: Energy crisis saps one percent of GDP

According to a just-released "county report" by the International Monetary Fund (IMF), Senegal's energy crisis is seriously shorting its economy. According to the report:

"Capacity constraints, frequent electricity outages, high production costs and electricity tariffs, and poor governance of the energy sector have increasingly constrained economic development. The authorities’ analysis suggests that energy supply problems have reduced real GDP growth by more than 1 percent per year during the past two years."

Senegal's government has an active plan to reform the energy sector, according to the report:

"The authorities’ reform plan (TAKKAL), includes (i) short-term emergency measures that complement medium-term investments (including recapitalization of the national electricity company SENELEC and renting of additional generating capacity (partly used to allow for the upgrading of existing power plants)); (ii) increasing the electricity supply by changing the production mix, acquiring mobile power units, and accelerating the construction of a coal power plant; (iii) demand management policies; (iv)structuring of SENELEC to achieve its financial viability; and (v) creating a communication strategy to ensure transparency and good governance of the reform process.

Financing needs: The total cost of energy sector reform for 2011–15 is estimated at some US$ 1.5 billion (more than 10 percent of 2011 GDP). Financing needs in 2011 alone amount to more than 3 percent of GDP. The analysis of a reputable private sector consultancy shows that the investment package is highly profitable."

An American company, APR Energy Ltd., is one of the key players in this program. After significant investment by former Secretary of State Madeleine Albright and capitalist George Soros, the company was purchased this week by U.K. financier Hugh Osmond's listed cash shell Horizon Acquisition Co. PLC. The company supplies "rental power."

IMF cites energy and debt, but generally good health of Senegal's economy

The International Monetary Fund's recent review of Senegal's economy has some interesting observations. Following the Executive Board’s discussion on Senegal, Ms. Nemat Shafik, Deputy Managing Director and Acting Chair, stated:

“Senegal’s economic recovery continues, and performance under its PSI-supported program is satisfactory. There are however downside risks stemming mainly from continued electricity supply problems and increasing food and fuel prices, which pose some inflationary risks.

“With the emergence of critical investment needs in the energy sector, fiscal policy faces the challenge of accommodating additional priority expenditure while maintaining debt sustainability. Although there is some space for temporarily higher fiscal deficits, a substantial contribution will need to come from additional revenue measures and reprioritizing expenditure. In the medium term, fiscal consolidation, supported by a prudent approach to borrowing, will be critical to bring down the deficit to levels consistent with preserving debt sustainability. The recent issuance of the Eurobond to finance infrastructure projects should be accompanied by strengthening investment planning and debt management.

“To sustain the growth momentum and increase Senegal’s growth potential, the pace of structural reforms should be accelerated. This includes tax policy reforms aimed at broadening the tax base and increasing the revenue effort, energy sector reforms, financial sector reforms, and other reforms geared towards removing bottlenecks to growth and promoting an improved business climate and governance,” she added.

Peanuts crop best in decades

Senegal’s peanut production is expected to top last year’s total of 1.07 million metric tons as more land is cultivated amid good weather conditions, according to the agricultural ministry. The country has reaped 246,419 tons since the start of the season in December, 18 percent more than the same period of last year. Senegal may have the biggest crop since it produced 1.2 million tons of peanuts in 1975.

Peanuts account for 60 percent of Senegal’s agricultural exports, according to the U.S. Department of Agriculture. Shipments by Suneor, the country’s biggest peanut-oil processing company, account for as much as 50 percent of the world market, according to a 2007 USDA country report. Also expected to benefit is the Café Touba at Cassicafe.com.

Energy crisis may get worse with higher oil prices

World Bank economists predict Senegal’s economic growth may be cut by as many as 1.5 percentage points this year and next because of rising crude prices as Senegal remains reliant on oil-fired power stations. The World Bank earlier forecast that Senegal’s gross domestic product would expand 4.2 percent this year and 4.4 percent in 2012.

Oil-powered plants supply 78 percent of Senegal’s generating capacity of 635 megawatts, according to World Bank statistics.

Iran emissary sent to meet on weapons discord

It's hard to be friends when your friend is selling guns to those who would hurt you. And sore feelings apparently persist between Iran and Senegal over the arms shipment on its way to Gambia, where it might logically be feared they might wind up in the hands of anti-Dakar Casamance insurgents.

Senegal and Iran enjoyed strong diplomatic ties until the 13 containers loaded with arms and munitions were found in October aboard a ship in Nigeria.

Iran's foreign minister arrived in Senegal this last week to try to smooth things over with Senegal, once close diplomatically. Acting Foreign Minister Ali Akbar Salehi was to meet Senegal President Abdoulaye Wade during the two-day trip. Salehi took over as Iran's caretaker foreign minister after President Mahmoud Ahmadinejad fired his predecessor Manouchehr Mottaki on December 13 as he was on an official visit to Senegal, after the weapons were found.

Senegal recalled its ambassador to Tehran mid-December after Iran failed to provide a "satisfactory" explanation for the weapons.

Among the Senegal-Iran co-ventures we have been following are the Theis "SenIran" Khodros auto manufacturing facility. Other economic cooperation has started or been discussed between the two countries. We will wait to see if any fallout results from the arms controversy.

This according to Al Jazeera:

Senegal has recalled its ambassador to Iran over an arms scandal in which military-grade weapons were shipped into the region allegedly bound for neighbouring Gambia.

Madicke Niang, the Senegalese foreign minister, made the announcement in a statement on Tuesday, saying the explanations Iran had given for the affair were "not satisfactory".

"True to the need for peace and security which should guide ties between states, and deeming unsatisfactory the explanations provided by the Iranian side in this affair, Senegal has decided to recall its ambassador to Iran for consultations as of today," the statement said.

Senegalese analysts have said the arms may have been bound for Senegal's restive southern Casamance region, where rebels have waged a low-level uprising against the government since 1983.

The Senegalese move comes just one day after Manouchehr Mottaki, the Iranian foreign minister, was sacked while on a two-day visit to the West African state, partly to explain the affair.

IMF gives mildly positive report

The International Monetary Fund is advising Senegal's government on a volunary basis. It had this report today:

"Economic growth in Senegal was slowed in recent years by the food and fuel price shocks and the global financial crisis. Indicators point to an ongoing economic recovery, which appears to be strengthening.

"Real GDP growth is projected to increase to 4 percent in 2010 and 4.4 percent in 2011 after averaging 2.7 percent in 2008 and 2009. Inflation turned positive in June 2010 for the first time in more than a year, and has picked up mainly because of higher food prices. The overall fiscal deficit is expected to reach 4.8 percent of GDP in 2010, broadly in line with the budget target.

"The impact of the global financial crisis on workers’ remittances and foreign direct investment (FDI) has been smaller than originally expected. The current account deficit is projected to change little in 2010 and remain at about 8 percent of GDP.

"Following progress in macroeconomic and social outcomes since the mid-1990s, going forward the main challenge for Senegal will be to achieve higher growth in order to further reduce poverty and make progress toward the Millennium Development Goals. During the past 15 years, real per capita GDP growth in Senegal was more than 2 percent lower a year than in the best-performing, non-oil exporting countries in Sub-Saharan Africa. Senegal lags these countries in a number of areas including infrastructure, non-price competitiveness, and strength of fiscal institutions, as well as factors such as governance, the quality of institutions, and financial market development."

Chinese work stalled in Touba

The planned makeover of the Holy City of Touba taken on by the Chinese development compny Henan has slowed, according to a recent report. We've followed the Chinese work there in previous posts. The on-and-off history of the five-year project hints much of the experience of the Chinese in Senegal, if not of the Chinese in broader Africa.

A recent news report of the visit of President Wade to meet the new Khalif in Touba mentions that work by the Chinese is nowhere to be seen, other than the building of some sidewalks. According to the news story the slowdown may be due to the government not paying fast enough, a tardiness that has occurred before with the Touba work. More recent IMF reports had the Dakar government catching up on its contract payments. But maybe not in Touba.

Touba is a high-profile project and the Chinese involvement is watched by us and likely by others. If the Chinese aren't being paid, one wonders about the sovereign solvency. It could be just another "negotiation" standoff, or it could indicate a broader discord between the Senegalese, or the Mourides, with the Chinese.

We'll continue to watch.