Senegal

Executive Summary

Senegal’s stable political environment, favorable geographic position, strong and sustained growth, and generally open economy offer attractive opportunities for foreign investment. The Government of Senegal welcomes foreign investment and has prioritized efforts to improve the business climate, although significant challenges remain. Senegal’s macroeconomic environment is stable. The currency – the CFA franc used in eight West African countries – is pegged to the euro. Repatriation of capital and income is relatively straightforward, although the regional central bank has recently tightened restrictions on the use of “offshore accounts” in project finance transactions. Investors cite cumbersome and unpredictable tax administration, bureaucratic hurdles, opaque public procurement, a weak and inefficient judicial system, inadequate access to financing, and a rigid labor market as obstacles. High real estate and energy costs, as well as high factor costs driven by tariffs, undermine Senegal’s competitiveness. The government is working to address these barriers.

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 the competitiveness of the private sector. Under the PSE, Senegal has enjoyed sustained economic growth rates, averaging 6.5 percent from 2014 through 2019. With good air transportation links, a modern and functional international airport, planned port expansion projects, and improving ground transportation, Senegal also aims to become a regional center for logistics, services, and industry. Special Economic Zones offer investors tax exemptions and other benefits that have led to increased foreign investment in the manufacturing sector over the past several years.

The GOS continues to improve Senegal’s investment climate. Since 2007, Senegal has dramatically reduced the average number of days it takes to start a business. The government continues to expand its “single window” system offering one-stop government services for businesses, opening a new service centers in various locations and projecting to have at least one service center in each of the country’s 45 regional departments by 2021. Property owners can apply for construction permits online.  In 2019, the GOS made tax information and some payment options available online. Senegal’s state information agency ADIE has an ambitious SMART Senegal plan to increase access to WiFi and digitize more services onto a national hub. Senegal’s ranking in the World Bank’s Doing Business index improved from 141 in 2018 to 123 in 2019, spurred by improvements in the ease of paying taxes and access to credit information.

The government made progress in operationalizing the new Commercial Court, prioritizing the resolution of business disputes. Although companies continue to report problems with corruption and opacity, Senegal compares favorably with many countries in the region in corruption indicators. The Millennium Challenge Corporation (MCC) compact, signed in December 2018 and currently in pre-implementation prior to entry-into-force in 2021, aims to decrease energy costs by modernizing the power sector, increasing access to electricity in rural Senegal, strengthening the electrical transmission network in Dakar, and improving governance of the power sector.

Despite these improvements, business climate challenges remain. Because the informal sector dominates Senegal’s economy, legitimate companies bear a heavy tax burden, although Senegal is making progress in broadening the tax base.  Some U.S. companies complain about delays and uncertainty in the project development process.

A U.S.-Senegal Bilateral Investment Treaty has been in effect since 1990. According to UNCTAD data, Senegal’s stock of foreign direct investment (FDI) increased from $3.4 billion in 2015 to $6.4 billion in 2019. France is historically Senegal’s largest source of foreign direct investment, but the government wants more diversity in its sources of investment. U.S. investment in Senegal has expanded since 2014, including investments in power generation, industry, and the offshore oil and gas sector. Although the IMF reports (see table below) U.S. FDI stock in Senegal was approximately $91 million in 2018 (up from $25 million reported in 2017), anecdotal information suggests the amount is significantly more. China has also become a significant foreign investment partner. Other important investment partners include the United Kingdom, Mauritius, Indonesia, Morocco, Turkey, and the Gulf States. In addition to the developing petroleum industry, other sectors that have attracted substantial investment are agribusiness, mining, tourism, manufacturing, and fisheries.

Investors may consult the website of 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
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 66 of 180 http://www.transparency.org/
research/cpi/overview
World Bank’s Doing Business Report 2020 123 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2019 96 of 126 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, stock positions) 2018 $91.0 million http://data.imf.org/
?sk=40313609-F037-48C1-84B1-E1F1CE54D6D5&sId=1390030341854
World Bank GNI per capita 2018 $1,410 http://data.worldbank.org/
indicator/NY.GNP.PCAP.CD

Note on Impact of COVID-19

The 2020 COVID-19 epidemic heavily impacted Senegal’s economy. According to June 2020 government estimates, GDP growth for 2020, initially projected to reach 6.8 percent, will fall to 1.1 percent or less. Major oil and gas projects may be delayed at least a year. Although economy-wide employment figures are unreliable, it is clear the slowdown, combined with the GOS’s initial stringent outbreak containment measures, led to significant job losses, primarily in Senegal’s dominant informal sector. A May 2020 survey of 800 Senegalese businesses found that 65 percent had suffered a significant negative impact from COVID-19 and 40 percent had ceased operations. Diaspora remittances, representing 10 percent of GDP, have fallen sharply due to the pandemic’s effects on the world economy.

In the wake of the COVID-19 crisis, the GOS enacted one of the region’s most ambitious fiscal stimulus and social assistance packages. Dubbed “Force COVID-19,” the initiative sought to inject $1.7 billion – about 6 percent of GDP – into the economy. The GOS acknowledged the program will result in an increase in Senegal’s fiscal deficit, which is expected to grow from just above 3 percent (nearing the country’s target under ECOWAS convergence criteria) to more than 6 percent. According to the African Development Bank, Senegal’s public debt will rise from 65 percent to 68 percent of GDP, pushing the limits of the 70 percent threshold established by the Economic Community of West African States (ECOWAS). Nevertheless, in June 2020, the IMF assessed Senegal’s risk of debt distress as “moderate,” and the government continued to access regional credit markets at competitive rates.

Although the government won praise for its aggressive fiscal response, some have expressed concern over its intervention in labor markets, including a decree prohibiting employers from laying off or reducing salaries of workers during the COVID-19 crisis. The government’s efforts to implement the stimulus plan have drawn mixed reviews. While the government successfully increased funding to shore up its health care system, the rollout of social assistance programs was plagued by allegations of inefficiency, insider dealing, and corruption. Long delays plagued the implementation of programs to assist businesses and preserve employment, with many firms reporting they had still not received promised grants and loans months after the program launch. As of July 2020, the outbreak was still progressing in Senegal, with cases, deaths, and positivity rates still rising. Long-term effects of COVID-19 on Senegal’s economy and investment environment will depend on how long the outbreak lasts and how deeply the regional and world economies are affected.

4. Industrial Policies

Investment Incentives

Senegal’s Investment Code provides for investment incentives, including temporary exemption from customs duties and income taxes, for investment projects. Eligibility for investment incentives depends upon a firm’s size and the type of activity, amount of the potential investment, and location of the project. To qualify for significant investment incentives, firms must invest above CFA 100 million (approximately $165,000) or in activities that lead to an increase of 25 percent or more in productive capacity. Investors may also deduct up to 40 percent of retained investment over five years. However, for companies engaged strictly in “trading activities,” investment incentives may not be available.

Eligible sectors for investment incentives include agriculture and agro-processing, fishing, livestock and related industries, manufacturing, tourism, mineral exploration and mining, banking, and others. All qualifying investments benefit from the “Common Regime,” which includes two years of exoneration from duties on imports of goods not produced locally for small and medium sized firms, and three years for all others. Also included is exoneration from direct and indirect taxes for the same period.

Exoneration from the Minimum Personal Income Tax and from the Business License Tax can be granted to investors who use local resources for at least 65 percent of their total inputs within a fiscal year. Enterprises that locate in less industrialized areas of Senegal may benefit from exemption of the lump-sum payroll tax of three percent, with the exoneration running from five to 12 years, depending on the location of the investment. The investment code provides for exemption from income tax, duties, and other taxes, phased out progressively over the last three years of the exoneration period. Most incentives are automatically granted to investment projects meeting the above criteria. The new tax code was published December 31, 2012 (law # 2012-31 of December 2012 published in journal # 6706 of 31/12/2012).

An existing firm requesting an extension of such incentives must be at least 20 percent self-financed. To qualify for these benefits, firms are required to create at least 150 full-time positions for Senegalese nationals, to contribute the hard currency equivalent of at least 100 million CFA ($165,000 USD), and keep regular accounts that conform to Senegalese (European accounting system) standards. In addition, firms must provide APIX with details on company products, production, employment, and consumption of raw materials.

Foreign Trade Zones/Free Ports/Trade Facilitation

In 2017, Senegal passed legislation to create Special Economic Zones (SEZ) regime. Enterprises approved under the SEZ regime may be granted tax and customs concessions for up to 25 years. Benefits may include: exemptions from duties and taxes on imports of goods, raw materials and equipment (except for community levies); application of a reduced 15 percent corporate tax rate; and exemption from certain taxes and charges such as the business tax and property taxes. To qualify for these benefits, companies must represent a minimum investment of CFA 100 million ($165,000), create at least 150 direct jobs during their first year of operation, and generate at least 60 percent of their revenue from exports. In November 2018, President Sall inaugurated the country’s first SEZ, the Integrated Industrial Platform of Diamniadio, a suburb of Dakar. The platform is now operational with seven companies established. It is expected to create approximately 20,000 jobs by 2023. The government has launched two additional SEZ, one in Sandiara, 80 kilometers from the capital city Dakar, and the other in Ndiass, in the vicinity of Dakar’s International Airport. With growing interest in economic zones, there is a need for more clarity and coherence in the incentives offered by the government.

Performance and Data Localization Requirements

Except in the petroleum sector (discussed below), the government does not currently impose, by statute, specific requirements for including local content, input, or employment in investment activities. However, the government has announced that it favors local content, and the current administration is pursing legislation that would require some level of local content in new investment projects. The government also negotiates with potential investors on a case-by-case basis to support local employment or ensure incentives for investors to meet their contractual commitments. The U.S. Bilateral Investment Treaty with Senegal includes provisions for companies to engage freely professional, technical, and managerial assistance necessary for planning and operation of investments. Nevertheless, foreign firms often find that voluntarily including local content in their projects makes their proposals more competitive.

Senegal approved a new Petroleum Code in February 2019. The new law updated Senegal’s oil and gas legal framework, which was initially adopted two decades ago when the country sought to attract initial investments for largely untested resources.  Senegal’s recent string of major offshore petroleum discoveries, however, has attracted major international players and led the government to adjust the legislation to preserve a greater share of the profits for Senegal. The revised law guarantees more favorable terms to the national oil company Petrosen, including a minimum of 10 percent interest in projects in the exploration phase and up to 30 percent interest when projects reach the development and exploitation stages.  Although oil and gas blocks will still be awarded through open international tenders, the new law will require foreign oil companies to source a portion of labor and materials locally and contribute to a training fund for local workers.

Acquiring work permits for expatriate staff is typically straightforward. Citizens from WAEMU member countries may work freely in Senegal.

5. Protection of Property Rights

Real Property

The Senegalese Civil Code provides a framework, based on French law, for enforcing private property rights. The code provides for equality of treatment and non-discrimination against foreign-owned businesses. Senegal maintains a property title and a land registration system, but application is uneven outside of urban areas. Establishing ownership rights to real estate can be difficult. Once established, however, ownership is protected by law.

The government has undertaken several reforms to make it easier for investors to acquire and register property. It has streamlined procedures and reduced associated costs for property registration. The government has developed new land tenure models intended to facilitate land acquisition by resolving conflicts between traditional and government land ownership. If the new models are widely adopted, the government and donors expect they will facilitate land acquisition and investment in the agricultural sector while providing benefits to traditional landowners in local communities.

The government generally pays compensation when it takes private property through eminent domain actions. Senegal’s housing finance market is under-developed and few long-term mortgage-financing vehicles exist. There is no secondary market for mortgages or other bundled revenue streams. The judiciary is inconsistent when adjudicating property disputes. Senegal ranked 116 out of 190 countries in the 2020 Doing Business Index for Registering Property. According to the World Bank methodology, it requires an average of 41 days to register property against an average of 51.6 days in sub-Saharan Africa and 23.6 days in OECD high-income countries. Five separate procedures are required for property registration.

Intellectual Property Rights

Senegal maintains an adequate legal framework for protection of intellectual property rights (IPR), but the country has limited institutional capacity to implement this framework and enforce IPR protections. Senegal has been a member of the World Intellectual Property Organization (WIPO) since its inception. Senegal is also a member of the African Organization of Intellectual Property (OAPI), a grouping of 15 francophone African countries with a common system for obtaining and maintaining protection for patents, trademarks, and industrial designs. Local statutes recognize reciprocal protection for authors or artists who are nationals of countries adhering to the 1991 Paris Convention on Intellectual Property Rights. Patents may be registered with the Agence sénégalaise pour la Propriété industrielle et l’Innovation technologique (ASPIT) and are protected for 20 years. An annual charge is levied during this period. Registered trademarks are protected for a period of 20 years. Trademarks may be renewed indefinitely by subsequent registrations. Senegal is a signatory to the Berne Convention for the Protection of Literary and Artistic Works. The Senegalese Copyright Office, part of the Ministry of Culture, protects copyrights. Bootlegging of music CDs is common and concerns the local music industry. The Copyright Office has taken actions to combat media piracy, including seizure of counterfeit cassettes and CD/DVDs. In 2008, the government established a special police unit to better enforce the country’s anti-piracy and counterfeit laws. In general, however, the government has limited capacity to combat IPR violations or to seize counterfeit goods. Customs screening for counterfeit goods production is weak, and confiscated goods occasionally re-appear in the market. Nevertheless, the government has made efforts to raise awareness of the impact of counterfeit products on the Senegalese marketplace, especially regarding pharmaceuticals, and officers have participated in trainings offered by manufacturers to identify counterfeit products.

Senegal is not included in the United States Trade Representative(USTR) Special 301 Report or the Notorious Markets List.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

7. State-Owned Enterprises

Senegal has generally reduced government involvement in state-owned enterprises (SOEs) during the last three decades. However, the government still owns full or majority interests in approximately 20 such companies, including the national electricity company (Senelec), Dakar’s public bus service, the Port of Dakar, the national postal company (National Post), the national rail company, and the national water utility. The state-owned electricity company, Senelec, retains control over power transmission and distribution, but it relies increasingly on independent power producers to generate power. The government has also retained control of the national oil company, Petrosen, which is involved in hydrocarbon exploration in partnership with foreign oil companies and operates a small refinery dependent on government subsidies. The government has modest and declining ownership of agricultural enterprises, including a state-owned company involved in rice production. In 2018, the government re-launched a wholly state-owned airline, Air Senegal. The government owns a minority share in Sonatel-Orange Senegal, the country’s largest internet and mobile communications provider.

The Direction du Secteur Parapublic, an agency within the Ministry of Finance, manages the government’s ownership rights in enterprises. The government’s budget includes financial allocations to these enterprises, including subsidies to Senelec. SOE revenues are not projected in budget documents, but actual revenues are included in quarterly reports published by the Ministry of Finance. Senegal’s supreme audit institution (the Cour des Comptes) conducts audits of the public sector and SOEs. Its reports are made publicly available at www.coursdescomptes.sn and www.ige.sn, but not always in a timely fashion.

Privatization Program

The government has no program for privatizing the remaining SOEs.

11. Labor Policies and Practices

Senegal has an abundant supply of unskilled and semi-skilled labor, with a more limited supply of skilled workers in engineering and technical fields. While Senegal has one of the best higher educational systems in West Africa and produces a substantial pool of educated workers, limited job opportunities in Senegal lead many to look outside of the country for employment.

Relations between employees and employers are governed by the Labor Code, industry-wide collective bargaining agreements, company regulations, and individual employment contracts. Senegalese law provides legal protection for women and children and prohibits forced or compulsory labor. The law also establishes minimum standards for working age, working hours, and working conditions, and bars children from performing many dangerous jobs. Senegal ratified International Labor Organization Convention 182 on the worst forms of child labor in 2000. The labor code recognizes the right of workers to form and join trade unions. Any group of workers in a similar trade or profession may create a union, although formal approval by the Ministry of the Interior is required. The right to strike is recognized but sometimes restricted. The GOS has the authority to dissolve trade unions and requisition workers from private enterprises.

Two powerful industry associations represent management’s interests: the National Council of Employers (CNP) and the National Employers’ Association (CNES). The principal labor unions are the National Confederation of Senegalese Workers (CNTS) and the National Association of Senegalese Union Workers (UNSAS), a federation of independent labor unions. Collective bargaining agreements cover an estimated 44 percent of formal sector workers. Most workers, however, work in the informal sector, where labor rules are not enforced.

Child labor remains a problem, particularly in the informal sector, mining, construction, transportation, domestic work, agriculture, and fishing, where labor regulations are rarely enforced. Despite some progress, Senegal still has work to do to address the problem of forced child begging. Tens of thousands of religious students (talibés) are enrolled in Koranic schools (daaras) where some are forced to beg to enrich teachers who corrupt the daara tradition. The GOS has made some progress in combatting these practices, but more progress is needed.

The COVID-19 pandemic and the GOS’s initially stringent lockdown measures resulted in significant job losses, primarily in Senegal’s dominant informal sector. The head of Senegal’s leading employers’ association noted that the tourism sector (accounting for 7 percent of GDP) lost 45,000 jobs in April 2020 alone. A May 2020 survey of 800 Senegalese businesses by the National Agency for Small and Medium-Sized Enterprises found that 65 percent had suffered a significant negative impact from COVID-19 and 40 percent had ceased operations. At the same time, a GOS measure prohibiting layoffs raised fears of insolvency among larger formal sector firms.

12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs

The U.S. International Development Finance Corporation (DFC, formerly OPIC) offers financing and investment insurance to support U.S. investment projects in Senegal and is actively seeking to strengthen its portfolio in the country. DFC is currently supporting several investment projects in Senegal including two energy projects, one microfinance project and an agribusiness project. Additional projects in the energy and tourism sectors are under consideration. Senegal is a member of the Multilateral Investment Guarantee Agency (MIGA), an arm of the World Bank.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source USG or international statistical source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) N/A N/A 2019 $23,500 https://www.imf.org/~/media/Files/
Publications/CR/2019/cr1927-Senegal-A4.ashx
 
Foreign Direct Investment Host Country Statistical source USG or international statistical source USG or international Source of data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A N/A 2018 $91 http://data.imf.org/?sk=40313609-F037-48C1-84B1-E1F1CE54D6D5&sId=1390030341854 
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A 2019 $0 https://www.bea.gov/
international/di1fdiop
 
Total inbound stock of FDI as % host GDP N/A N/A 2019 14.4% https://unctad.org/en/Pages/DIAE/
World%20Investment%20Report/
Country-Fact-Sheets.aspx
 

“0” reflects amounts rounded to +/- USD 500,000.

Table 3: Sources and Destination of FDI
Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions) in 2018
Inward Direct Investment Outward Direct Investment
Total Inward 4,572 100% Total Outward 755 100%
France #1 1,186 26% Burkina Faso #1 273 36.1%
UK #2 363 8% Seychelles #2 164 21.7%
Mauritania #3 179 4% Cape Verde #3 112 14.8%
Indonesia #4 154 3.4% Malawi #4 67 8.9%
Morocco #5 122 2.7% Cote d’Ivoire #5 54 7.1%

Table 4: Sources of Portfolio Investment
Data not available.

Investment Climate Statements
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