Country risks for investors operating in Senegal

07 January 2020

Country risks for investors operating in SenegalSenegal will face a number of security, investment and trading challenges in the coming months. In this article we provide a detailed forward-looking assessment of developments in the country.

Senegal has emerged as an economic bright spot in West Africa, given strong potential in its frontier hydrocarbons industry and policy stability under President Macky Sall’s government.

In 2020, the country is expected to be one of the fastest growing markets in sub-Saharan Africa.

Security Environment

In 2019, protest risks increased in Senegal following allegations of government corruption.

In June 2019, a television documentary alleged that the president’s brother, Aliou Sall, had received illegal payments in relation to oil contracts.

Following the scandal, civil society groups, such as Aar li nu Bokk and Y’en a Marre, coordinated large demonstrations demanding an inquiry and greater transparency.

Thousands of people attended a demonstration in Dakar on June 21, 2019, leading to the resignation of President Sall’s brother on June 25, 2019.

Protest numbers have decreased to around 100 people in September 2019 and have continued to fall since.

Country risks for investors operating in SenegalTransnational terrorist groups – such as Al-Qaeda in the Islamic Maghreb (AQIM) – present credible threats to businesses operating across Senegal and along its land border with Mauritania.

Senegal will remain an attractive target for AQIM due to its participation in the United Nations peacekeeping force (MINUSMA) in Mali.

Any attacks in Senegal would likely target densely populated urban areas in Dakar, such as large hotels and resorts in the Corniche neighbourhood.

Trading Environment

Senegal’s economy is expected to experience robust growth in the year ahead, with real GDP growth forecast at 6.4% in 2020.

However, performance softened in the first half of 2019, following fuel price increases which weakened private consumption. GDP growth decelerated to 5.5% year-on-year in the second quarter of 2019, as private consumption experienced a 1.1% quarter-on-quarter contraction.

In 2020, economic activity is likely to be supported by elevated levels of investment flows in relation to the second phase of the Plan Sénégal Emergent (PSE).

The development plan aims to unlock sustainable long-term economic growth through a number of structural reforms that encourage private investment.

This incorporates a program of investment in energy and transport infrastructure. In the one-year outlook, investment will support activity in the country’s construction industry, while infrastructure upgrades should also yield long-term gains to efficiency and business confidence.

Senegal offers significant offshore potential in its nascent oil and gas sector, with discoveries totaling up to 1 billion barrels of oil and 1,132.7 billion cubic meters of gas since 2014.

In November 2019, the state-oil company launched the first exploration license round for 10 offshore blocks located in the Mauritania, Senegal, Gambia, Guinea Bissau, Guinea Conakry (MSGBC) basin, with first production of oil forecast in 2022 and 2023.

The re-election of Sall in February 2019 should prove risk-positive for the oil and gas sector and ensure continued government commitment to the PSE. The government is targeting US$21 billion in foreign investment over a 10-year period.

Downside risks to Senegal’s economic outlook stem from elevated levels of government debt.

General government debt was forecast to have reached 54.9% of GDP in 2019, having risen steadily from 38.3% in 2014. However, the debt burden is likely to be sustainable in the medium term outlook, as approximately half of debt is held on concessional terms.

Continued engagement with the IMF should also moderate risks. In September 2019, Senegal reached a staff-level agreement with the IMF on a three-year program under the Policy Coordination Instrument.

The agreement includes commitments to West African Economic and Monetary Union budget targets and a targeted increase in tax revenues to above 20% of GDP.

Investment Environment

Pricing Outlook SenegalThe operating environment for foreign investors has improved since Sall took office in 2012.

However, contractual and expropriation risks exist for smaller firms operating in the oil sector. The government is keen to take advantage of a number of major offshore oil and gas discoveries.

As a result, there has been a clear preference for production-sharing agreements with major international oil companies that have the resources to meet tight development schedules, which could lead to small firms losing their concessions.

In 2018, African Petroleum (AP) requested arbitration proceedings against Senegal at the International Centre for the Settlement of Investment Disputes. AP claims that the government did not validly terminate its exploration and development contract at the Rufisque Offshore Profond block before selling its ownership stake to Total.

The government claimed that the contract was cancelled in April 2016, after AP failed to meet a work schedule.

The case is ongoing, but highlights the risks facing companies in the oil sector.

5 Key Takeaways

  • Senegal’s economy is expected to experience robust growth in the year ahead, with real GDP growth forecast at 6.4% in 2020.
  • Senegal offers significant offshore potential in its nascent oil and gas sector, with discoveries totaling up to 1 billion barrels of oil and 1,132.7 billion cubic meters of gas since 2014.
  • The government is targeting US$21 billion in foreign investment over a 10-year period through the Plan Sénégal Emergent (PSE).
  • General government debt is forecast to reach 54.9% of GDP in 2019, having risen steadily from 38.3% in 2014.
  • Contractual and expropriation risks exist for smaller firms operating in the oil sector.
  • Small hydrocarbons firms may lose their concessions in favor of multinational oil and gas majors.

The monthly Risk Outlook is supported by our proprietary country risk rating tool, World Risk Review (WRR) which provides risk ratings across nine insurable perils for 197 countries. The country risk ratings are generated by a proprietary, algorithm-based modelling system incorporating over 200 international sources of data.

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In this month's Risk Outlook, we also provide a detailed forward looking assessment of developments within the security, trading and investment environments for Vietnam, Malaysia, Colombia and Egypt and all of which have been the subject of recent enquiries from our client base.

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  • Eleanor SmithEleanor Smith

    Eleanor Smith is a Senior Political Risk Analyst within Marsh JLT Specialty’s Credit Specialties team. At Marsh JLT Specialty, Eleanor analyses developments in political risks, and advises clients on their effect in a range of sectors. Eleanor is also responsible for delivery of World Risk Review, JLT’s country risk ratings platform, to clients and prospects.


    Eleanor has a first-class degree in History with Spanish from UCL, and a Masters in International Public Policy from the same institution. With experience in a range of sectors, including diplomatic missions and not-for-profit, Eleanor can help clients understand their risk exposure.

    If you would like to talk about any of the issues raised in this article, please contact Eleanor Smith, Senior Political Risk Analyst on +44 (0)20 8108 9544.

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