Figure 1: Real GDP growth (W)

Figures for 2010 are estimates; for 2011 and later are projections.

Table 1: Macroeconomic indicators

Figures for 2010 are estimates; for 2011 and later are projections.

Following the global economic and financial crisis in 2008 and 2009, Senegal’s economy began to pick up in 2010, despite the crisis in the electricity sector, as a result of the global recovery and the economic policies implemented by the Senegalese authorities to revive economic activity. These policies included the government’s efforts to clear its domestic debt, which badly affected the private sector in 2009. The economic recovery in 2010 was mainly due to improvements in the main sectors of the economy.

The primary sector accounted for 14.9% of GDP in 2010 and this figure is forecast to fall slightly to 14.7% in 2011 and 14.4% in 2012. The growth rate for this sector registered an increase of 4.5% in 2010 compared to the 10% in 2009. This slowdown in the rate of growth is a result of the results recorded by the agriculture, livestock and fisheries sector. The primary sector’s contribution to GDP in 2009 was formed by agriculture (8% of GDP), livestock and hunting (4%), fisheries (1.7%), and forestry (1%). The sector remains vulnerable to exogenous factors, these being the weather conditions and volatile global commodity prices.

Industrial or export crops (especially groundnuts and cotton) grew by an estimated 5.4% in 2010, and growth of 4.7% and 4% is projected for 2011 and 2012. Groundnut production increased from 731 000 tonnes in 2009 to 1.032 million tonnes during the 2009/10 season and is expected to reach 1.064 million tonnes in 2010/11, representing a 3% increase.

Nevertheless, the groundnut sector is going through a difficult period because of the low prices paid to producers. On the ground, production is harvested and delivered to the oil manufacturers by the licensed private marketing agents, known as opérateurs privés stockeurs, who are responsible for obtaining financing from banks. The producer price of groundnuts is set following consultation between the oil manufacturers and a national committee for stakeholders in the groundnut industry, the Comité national interprofessionnel de l’arachide (CNIA). For the 2009/10 season, the CNIA set a price of XOF 165 (CFA Franc BCEAO) per kilo. This included a state subsidy of XOF 45.

The low producer price was underlined by a recent study undertaken by agronomists, which found that the farm-gate price for the 2009/10 season should have been XOF 192, meaning a loss of XOF 27 per kilo for producers. For the 2010/11 season, the price set by the CNIA remains at XOF 165, with the state subsidy reduced to XOF 15 per kilo. In addition to the low price, the season started late.

Dysfunctional marketing compounds the farmers’ problems, who are sometimes leading farmers to sell their harvest at much lower prices than the set price of XOF 165 (a kilo of groundnuts at local markets costs XOF 90). Cotton production fell in the 2009/10 season to 18 500 tonnes, down from 26 256 tonnes in 2008/09. The 2008/09 season also saw falls in the production of cassava (­-71%), cowpeas (-­31%) and sesame (­38%). During the 2010/11 campaign the decline in production of cassava, cowpeas and sesame has continued (respectively,  -18.1%, -17.5% and -91%). However, cotton production has recorded a turnaround, with an increase of 26% over the 2009/10 season.

Regarding horticulture, fruit production rose by 11% in 2009 and vegetable production rose by 8.3%. Through the “horte” plan, Senegal implemented a policy aimed at increasing exports from 35 000 tonnes in 2010 to 50 000 tonnes by 2012 and 75 000 tonnes by 2015.

Livestock farming’s contribution to GDP, which was 4% in 2009, has strengthened by 0.2 percentage points in 2010 and is expected to remain the same in 2011. In 2010 the sector grew by 3.7%, with milk production increasing by 5% and poultry farming growing by 4%. The good levels of milk production began in 2009, when 166.7 million litres were produced (100% of the projected production). The high production is the result of an appropriate artificial insemination policy and the development of peri-urban dairy farms. Growth of 3.5% and 3.8% is predicted for 2011 and 2012.

The fisheries sector saw growth of 10% in 2010, up from 2.6% in 2009. Projected growth for 2011 and 2012 is 2.1% and 2.3% respectively.

In the secondary sector, the marked recovery begun in 2009 has not continued in 2010 mainly because of the deteriorating business environment largely due to the difficulties in the energy sector. In 2010, the estimated growth was 2.9% (compared to 4.8% in 2009) and the projected growth for 2011 and 2012 is 5.1% and 6.0%. This upward trend is the result of growth in branches such as the manufacture of chemical products, construction, construction materials and metallurgy.

After negative growth of 18.1% in 2008, the manufacture of chemical products grew strongly in 2009 (+15.3%) and 2010 (5.0%). This strong growth was a result of the revitalisation of the sector following the recapitalisation of Industries chimiques du Sénégal (ICS) in 2008, when the Indian Farmers Fertiliser Cooperative Limited acquired 85% of ICS stock. The growth rate of phosphoric acid production, one of the main activities of ICS, thus increases by 10.3% in 2010.

Following a weak performance in 2009, with a 4.4% fall in activity, the construction sector recovered in 2010, growing by 5.8%. There are optimistic projections of 7% growth in 2011 and 7.5% growth in 2012. The benefits of the recovery in 2010 include the continuation of the construction of the Dakar-Diamniadio toll motorway and Blaise Diagne International Airport, and in particular, the implementation of the 2010­-15 five-year road infrastructure programme, with a budget of XOF 1.6 trillion

This upturn in the construction sector enabled good results in the construction materials sector. Furthermore, foreign demand for cement grew substantially in 2010, with exports increasing by 50.6% during the first six months, compared to 2009. There was a similar upward trend in the metallurgy industry, also as a result of the recovery of the construction sector, with growth of 22.7% in 2010 following a 0.4% contraction in 2009.

Mining and quarrying recorded growth of 6.8% in 2010 following the exceptional boom of 54.9% growth in 2009 as a result of the development of phosphate mining to accompany the growth in the production of chemical products. Mining and quarrying were also stimulated by the establishment of the state phosphates firm SERPM (Société d’étude et de réalisation des phosphates de Matam), which to support the success of the GOANA agricultural drive (Grande offensive agricole pour la nourriture et l’abondance) produced 20 000 tonnes of soft natural phosphates in its first year in 2008. In 2009, it increased its production to 25 000 tonnes (GOANA 2). In 2010, the SERPM produced and manufactured a high-quality compound granular fertiliser in accordance with the recommendations of the Ministry of Agriculture to meet the specific needs of Senegalese agriculture in order to complete GOANA 3.

In the energy sector, growth was 5.4%, reflecting the upward movement of water production (5.2%) and that of the electricity suppliers from SENELEC (including GTI) of 35%. SENELEC’s production in turn contracted by 4.5% due to outdated production facilities combined with cash flow problems from the company. In the period 2008/09, the state injected XOF 139 billion to recapitalise the state energy firm SENELEC and XOF 140 billion to keep prices stable. These real efforts could not avoid the usage of frequent power cuts, which are crippling the country’s economic activity. The situation reached a critical point in July 2010, when the use of adulterated fuel severely damaged several machines from the distribution grid. The numerous power outages have caused protests in the suburbs of Dakar and in several cities in the country. To permanently resolve the electricity problem in Senegal, the government has implemented an emergency plan called “ Plan Takkal” whose implementation should be spread over the period 2011-15.

The oil refining industry shrank in both 2009 and 2010, by 16.2% and 13.8% respectively. The fall in activity was caused by the problems encountered by the refinery company Société africaine de raffinage (SAR): volatile international prices, low storage capacity, problems in the logistics of receipt and offload at the port in Dakar.

The meat and fish processing and preservation sector also contracted in 2010, by 8.7%, as certain companies ceased operations because they did not comply with the sanitary and phytosanitary standards imposed by European countries.

Finally, cotton ginning and textile manufacturing activity also declined in 2010 (­-26.2%), having also declined in 2008 (­-5.7%) and 2009 (­-1.1%). The declines in 2009 and 2010 were due to the drastic fall in cotton production, as well as fraud and smuggling. In total, the secondary-sector share of GDP rose from 20.4% in 2009 to 20.8% in 2010. According to projections, the share will rise to 21.4% in 2011 and 21.9% in 2012.

A recovery was expected in the tertiary sector in 2010 (+4.9%) after the slowdown in 2009 (+0.8%) and 2008 (+3.2%). This good performance was due to the increased growth in trade, which expanded by 4.1% in 2010, up from 2.2% growth in 2009, notwithstanding the slowdown in growth of commercial activities (1.4% in 2010 compared to 2.2% in 2009) following a contraction of imports of 1.5% in real terms.

Other branches that stimulated growth in the tertiary sector in 2010 include the post and telecommunication services (9.3% against 2.3% in 2009), transport (11.4% against -6.4% in 2009), accommodation and catering (14.2% against -6.9% in 2009) and financial services (13.4% against 0.9%). Telecommunications benefited from a buoyant mobile telephony boosted by the sales of discounted phone cards, often carried out by the operators. The accommodation and catering industry benefited from the economic recovery in Europe and from the organisation of major events in Dakar, such as the inauguration of the Monument of the African Renaissance and the World Festival of Negro Arts (FESMAN).

Nevertheless, the latest statistics confirm the importance of the tertiary sector to the Senegalese economy. The sector’s share of GDP was 46.8% in 2009, and at 46.2% in 2010. It is projected to remain stable in 2011 and 2012, around 46.1%.

In 2010, there was a marked recovery in gross fixed capital formation (GFCF), which grew by 5.3%. In 2009, GFCF contracted by 7.4% due to a 12.7% fall in private investment as a result of the global economic and financial crisis. In 2010, the rise in GFCF will have concerned both the public and private sector thanks to the government’s major efforts to clear its domestic debt and to the global economic recovery. These conditions caused investment, measured as GFCF,  to rise from 23.7% in 2009 to 23.9% in 2010.

Final consumption was estimated at 92.4% of GDP in 2010, down from 92.8% in 2009. At the same time, the domestic-savings rate is estimated to have risen from 7.2% in 2009 to 7.6% in 2010. According to projections for 2011, final consumption should represent 90.7% of GDP while the domestic-savings rate equals 9.3% of GDP. For final consumption, this represents a projected rate of growth of 4.1% in 2011, compared to 3.8% in 2010. The main reason for this positive trend is private consumption, the growth rate of which is expected to rise from 4.1% in 2010 to 4.3% in 2011. In real terms, domestic demand is estimated to have risen by 4.2% in 2010, compared with growth of 0.7% in 2009, thus reflecting the recovery in economic activity.

External demand, meanwhile, has been characterised by a decrease of imports of 1.5% in real terms in 2010 compared to an increase of 0.6% in 2009.  Equally, imports as a share of GDP decreased from 43.1% in 2009 to 39.9% in 2010. The projected share for 2011 is 39.1%. On the contrary, exports as a share of GDP rose by 7% in 2010, up from 2.9% in 2009. This upward trend was thanks to sales of cement, petroleum products and phosphoric acid stimulated by the recovery in the performance of ICS. As a share of GDP, exports rose slightly from 23.2% in 2009 to 24.2% in 2010.

Figures for 2010 are estimates; for 2011 and later are projections.

Senegal is a member of the WAEMU along with seven other countries: Benin, Burkina Faso, Togo, Mali, Guinea-Bissau, Côte d’Ivoire and Niger. The authorities therefore have little room for manoeuvre, since the country’s monetary policy is the responsibility of the Central Bank of West African States (CBWAS). Because of the close monetary ties between France and the African states, there is a fixed exchange rate between the West African CFA franc (XOF) and the euro (1 EUR = 655.957).

To provide greater autonomy on monetary policy, the CBWAS created the CPM committee (Comité de politique monétaire) in 2010. Composed of 19 members – the governor, the deputy governor, one member appointed by each state, a member representing France, and four people from the WAEMU – chosen for their competence in monetary, financial and economic affairs. The first meeting of the committee took place at the headquarters of the CBWAS in Dakar on 14 September 2010. The CPM’s missions are to set the monetary policy, choose the appropriate intervention tools for the central bank and set the inflation objective. In 2010, inflation in Senegal, as measured by the Harmonised Index of Consumer Prices (HIPC), rose slightly (+1.2%), with the prices of energy products (+5.9%) and food prices (­+4.0%).

In 2010, the position of the monetary institutions led to an increase in the net external assets and in internal credit. Net external assets amounted to XOF 987.9 billion in 2010, compared to XOF 858.6 billion in 2009, covering a little more than five and a half months of imports, as opposed to five months in 2009. Internal credit grew by XOF 249.5 billion to XOF 1.853.1 trillion in 2010, from XOF 1.604 trillion in 2009. This positive evolution is the result of a 10.7% increase in credits to the economy on the one hand and on the other and a XOF 100.2 billion improvement in the government’s net position.

Analysis of credits to the economy reveals that long-term credits predominate, to the detriment of medium-and long-term credits. During the first six months of 2010, according to the economic forecasting department, short-term credits accounted for 63% of the total, medium-term credits accounted for 33% and long-term credits accounted for 4%. This configuration of credits to the economy is damaging to long-term investment, which is fundamental for sustained economic growth.

The sectoral distribution of credits to the economy shows that the catering and accommodation sectors receive almost 43% of bank financing – much more than is received by the primary sector, even though the latter employs 70% of the working population. These conditions mean that companies in the primary and secondary sectors, which are very dynamic in creating jobs and reducing poverty, are neglected. In this regard, there was a small reduction in the rate of bank financing to the economy in 2010, which stood at 24.5%, down from 24.8% in 2009. To put this into perspective, the rate is close to 100% in countries such as Tunisia, and even higher in countries such as South Africa (145%). The rate in Morocco is 77%.

Senegal’s external position was marked by an improvement of its current account due to the reduction of its trade deficit. The current account deficit was estimated at 5.9% of GDP in 2010, down from 6.7% in 2009. The trade balance deficit decreased from XOF 957.7 billion in 2009 to XOF 941.5 billion in 2010, having improved by XOF 16.2 billion. As a share of GDP, it decreased from 15.9% in 2009 to 14.8% in 2010, and is projected to reach 14.4% in 2011. The deficit diminished because Senegal’s imports (XOF 40.5 billion) increased less than its exports (56.8 billion) in 2010. On a year-on-year basis, exports grew by 5.7% in 2010, thanks mainly to increased sales of groundnut products (+40.7%), cotton (+70.5%), phosphoric acid (+64.1%), fish (+4.9%) and petroleum products (+6.5%).

The growth in exports in 2010 was thanks to the good 2009/10 agricultural season, which saw groundnut production break the million tonne mark and an upturn and recovery in ICS activities following the recapitalisation in 2008. Imports also grew, from XOF 1.948 trillion to XOF 1.988 trillion in 2010. Much of this 2.1% growth came from increased imports of petroleum products (+12.9%) and capital equipment (+6.1%). Petroleum products were the main imports in 2010, accounting for 28.1% of the total, followed by capital equipment (25.5%). Food products, which were the main imports in the early 2000s, were only the third largest type of import in 2010, accounting for 21.4% of the total.

Net current transfers increased from XOF 695.6 billion in 2009 to XOF 703.6 billion in 2010. The growth in current transfers was thus 1.1%, compared to a decrease of 7.8% in 2009, when they were affected by the international economic and financial crisis. As the ratio of GDP, current transfers decreased 4 percentage points: 11.5 % in 2009 vs 11.1 % in 2010. The capital account and financial operations had a surplus of XOF 503.7 billion in 2010, up from XOF 496.8 billion in 2009. The surplus enables to cover the deficit in current transactions for 2010.

The Highly Indebted Poor Countries (HIPC) initiative and the Multilateral Debt Relief Initiative (MDRI) have enabled Senegal to reduce its debt to a more manageable level. The MDRI provided USD 137 million in debt relief in February 2010. The stock of public debt is estimated to have increased to XOF 2.189 trillion in 2010 from XOF 1.964 trillion in 2009 (+11.5%). As a ratio of GDP, this represents an increase from 32.6% in 2009 to 34.5% in 2010, still way below the 70% ceiling specified in the WAEMU’s convergence pact. In 2010, as a percentage of GDP external debt was estimated at 27.5% and domestic debt at 6.9%. Projections for 2011 give 39.5% of GDP for public debt (29.2% for external debt and 7.5% for internal debt).

Figures for 2010 are estimates; for 2011 and later are projections.

In the World Bank’s Doing Business ranking for 2011, Senegal was placed 152nd out of 183 countries, one place lower than in 2010. The country has been asked to make efforts to reduce the high cost of transactions. Nevertheless, the 2011 report highlights progress in various areas.

Senegal was placed 25th for improvements to the business climate and for the ease of obtaining construction permits. It is also one of the few non-OECD countries to have successfully set up a one-stop shop to facilitate business start-up. Other positive points were also highlighted in the area of cross-border trade. Senegal is also praised for the various institutions that exist to create good governance. These institutions include the anti-corruption commission and the CENTIF unit responsible for processing financial information (Commission de lutte contre la non transparence, la corruption et la concussion), and the CENTIF financial-information processing centre, and Senegal is also an active member of the Inter-Governmental Action Group against Money-Laundering in West Africa

The Senegalese financial system is governed by the requirements applicable to the eight member states of the WAEMU. The organisation responsible for ensuring that these requirements are adhered to is the Conseil régional de l’épargne publique et des marchés financiers (CREPM). This regional body monitors the market’s two most important structures: the Regional Stock Exchange for Stocks and Shares (BRVM) and the Central Depository/Settlement Bank (DC/BR). The principal mission of these two structures is to promote the financial market. Senegal occupies a privileged position in the regional financial market thanks to the predominant role given to the state telecommunications firm Sonatel in the market capitalisation.

Although the Senegalese banking system is very fluid, many factors hinder it in distributing medium- and long-term credit to businesses. These factors include the informal nature of businesses and the information asymmetry for correct accounting. These two problems must be resolved to end the reluctance of banks to issue credit.

The authorities resulting from the political transition in 2000 have initiated a series of reforms covering areas such as the public sector, infrastructure, the environment and agriculture.

Public-sector reform

There has been a major step forward in the decentralisation reform that began a number of years ago. In collaboration with economic and financial partners, the PNDL local-development programme (Programme national de développement local) was created with the mission of taking grass-roots action to eradicate poverty. Furthermore, the President of the Republic announced the implementation of a green revolution in rural areas aimed at dealing with certain problems such as the diversion of subsidies by “non farmers”. As part of these plans, the government wants to set up a national farmers’ bank (Banque des agriculteurs du Sénégal) with a capital of XOF 30 to 40 billion to enable Senegalese farmers to try and deal with their problems themselves. To help with the deployment of the green revolution, the government envisages giving the farmers the state’s shares in the state agricultural credit fund, the CNCAS, (Caisse nationale de crédit agricole du Sénégal).

The latest government initiative in this area has been the creation of a commission charged with leading a reflection on the “provincialisation of the country”, with the objective of introducing a new, local, participative form of governance.

As part of its budgetary policy, the government envisages continuing its ambitious plan of reforms aimed at increasing effectiveness and transparency. It has thus undertaken a series of measures, including limiting the use of supplementary budget appropriations (décrets d’avance), appointing specific accounting officers to public bodies to reduce extra-budgetary spending, improving the functioning of the SIGFIP public-spending management system (Système intégré de gestion des finances publiques) that was set up in partnership with donors, and reforming the court of auditors so it can audit the public accounts each year.

Infrastructure

The public authorities very quickly showed their firm desire to develop the country through an ambitious infrastructure programme, hence the work carried out within the framework of the Organisation of the Islamic Conference’s national agency and completed at the end of 2009.

A whole series of measures have also been taken to improve the functioning of the energy sector: the state electricity firm’s programme to reduce non-technical losses was strengthened, anti-fraud measures were taken, and the GTI power station, which had been closed for several months, was reopened.

For the provision of fuels, the authorities have taken measures to increase storage capacities so as to have the right provisions for the market. These measures included the opening of a 164 000 m³ storage depot for petroleum products in Mbao, near Dakar, in partnership with the private company DIPROM. The company SENSTOCK was set up with a capital of XOF 12.4 billion shared between PETROSEN (46%), DIPROM (34%) and Société africaine de raffinage (SAR) (20%).

The solution to the SENELEC crisis and the power cuts is now directly related to the co­-operation agreement signed between the Minister of State Karim Wade and the French energy company EDF. According to the terms of the agreement, EDF is committed in particular to helping Senegal increase production and improve the performance of its facilities.

Management of natural resources and the environment

In the area of natural resources and environmental protection, Senegal faces difficulties such as low rainfall and inconsiderate human behaviour (a massive rise in the number of forest fires and an increase in deforestation). Together, these problems have led to a deterioration of forestry resources and of the population’s living conditions.

Despite these difficulties, Senegal is coming closer to achieving Goal 7 of the Millennium Development Goals (MDGs). In 2010, 97% of urban households and 73.6% of rural households had access to safe drinking water. The objective of 75% for rural areas set for 2009 has therefore not been achieved. The rate of access to sanitation was 63.6% of urban households and 28.9% of rural households. The objectives for 2015 are 78% and 59% respectively.

These statistics show the major improvements Senegal has made to these facilities: it has already achieved the MDG target for access to drinking water in urban areas and is very close to achieving the target for basic sanitation in urban areas. The difficulties in achieving the latter target come from opposition from the people of Cambérène to the implementation of the EU-funded project to enlarge the outfall of the town’s sewage treatment plant.

Agricultural reform

The REVA plan (Retour vers l’agriculture, or “Return to Agriculture”) and the green revolution are the latest agricultural reform innovations. They enabled cereal and groundnut production to double between 2007 and 2009. A series of land reforms have also been introduced with the aim of making transactions transparent. The state thus envisages creating an inventory of all its built and non-built assets before the middle of 2011 and intends to update it regularly.