In March 2018 the Turkish leader announced deals worth almost US $600 million in Senegal, the latest sign that foreign investment in Senegal is gradually shifting eastward. France, Senegal’s former colonial ruler, has long dominated foreign investment. Since 2003, however, the country has seen a surge in interest from further afield. According to the UN Conference on Trade and Development (Unctad), most new foreign investment projects have come from non-western countries, including $2.8bn from the United Arab Emirates, $1.23bn from South Korea, $695m from China and $653m from India.
Senegal has a reputation for being one of Africa’s most politically stable countries. It is experiencing one of the continent’s fastest economic growth rates and has a government that is committed to attracting FDI. FDI inflows increased from $276m in 2012 to $532m in 2017.
Senegal is already home to a number of regional headquarters for TNCs, non-governmental organisations and international bodies. The new international airport is run by Turkey’s Summa, and its new seaport will be built and managed by Dubai-based DP World, which also runs the port at Dakar. Attijariwafa Bank, one of the biggest banks in Senegal, is Moroccan. India’s Jindal Steel & Power has signed an agreement to build a $558m, 350MW coal-based power plant.
China’s presence in the country is relatively small compared with that in other African nations. Beyond financing and infrastructure, however, Senegal is trying to attract Chinese light manufacturers to industrial parks in the new city of Diamniadio outside Dakar.
However, uncertainty around Senegal’s tax system is affecting some potential investors. There are other challenges, including power and land administration. In addition, Senegal can be a difficult place to do business because, with just over 16 million people, it is a limited market and has significant infrastructural shortcomings.
Senegal’s membership of the Central Bank of West African States also makes it attractive for foreign investors. The currency’s peg to the euro is also helpful, although intra-regional trade remains difficult.
France continues to have the largest presence in Senegal, with nearly $2.4bn in accumulated foreign investment, followed by $423m from tax haven Mauritius, according to Unctad.
Dakar’s 1m citizens no longer experience the water and power cuts that plague many cities in west Africa. Rural regions, where more than 70 per cent of Senegal’s population of 16m people live, are becoming more connected both digitally and physically. However, only about 30% of them have access to electricity.
Nearly 50% of Senegal’s population who live below the poverty line, and the government has turned to infrastructure spending to spur development. In 2013 President Macky Sall endorsed the Emerging Senegal Plan (ESP), an ambitious strategy to make Senegal a middle-income economy by 2035. It is centred on 27 infrastructure projects and 17 structural reforms aimed at attracting foreign investment, reducing poverty and inequality.
As part of the ESP, Senegal is building a new city near the airport called Diamniadio, with special economic zones, a free-trade area, a tech city, research centres and a medical campus.
The energy sector capacity has grown from 540MW in 2010 to 864MW in 2017, but only 30 per cent of rural people have access. Dakar has improved its water supply, but some could face shortages if it does not build a desalination plant as part of the ESP.
Some critics argue that money spent on infrastructure can deliver results quite easily e.g. $1.5bn to build a new metro or a road, but the real challenge is to invest in social infrastructure: e.g. education and skills to reduce poverty. Nevertheless, Senegal appears to be on the way up.