Oil and gas exports from Senegal are scheduled to begin in earnest in 2023, spelling a new dawn for the economy of the West African country, popularly renowned as the ‘Gateway to Africa,’ located in the western most point of the continent. The Grand Tortue Ahmeyim (GTA) LNG gas project, will be a game changer for the country, radically transforming its economy, which is projected to register robust growth in 2023, outshining other countries in the Sub-Saharan Africa. According to the recent World Economic Outlook forecast by the International Monetary Fund (IMF); Senegal’s economy will grow by 8.1 per cent in 2023, against the projected Sub-Saharan African growth of 3.7 percent.
In reiteration, the Africa Economic Outlook (AEO) published by the Africa Development Bank (AfDB), indicates that Senegal’s economy has decelerated in 2022 to 4.6 percent, but is estimated to accelerate to 8.2 percent, due to public and private investments together with oil and gas exploitation. Currently, Senegal’s debt-to GDP ratio stands at 71.9 percent.
The Covid-19 pandemic and the Russia-Ukraine war have both punctured the country’s economy. However, Senegal’s recovery from the pandemic shocks began in 2021, in part due to the Adjusted and Accelerated Priority Action Plan, with 6.1 percent growth against 1.3 percent in 2020.The AEO highlights that this was led by the resumption of the extractive sector, construction, and commercial activity connected to strong demand, as well as transport services. Agriculture which largely contributes to the economy, slowed to 4.6 percent growth in 2021, after a soaring rise of 23.4 percent in 2020.
Furthermore, inflation settled at 2.1 percent in 2021 and the fiscal deficit similarly narrowed, owing to increased tax revenue, a higher 17.6 percent of GDP in 2021, than the 16.7 percent of 2020.Consequently, public debt increased to 73 percent of GDP in 2021 from 68.8 percent in 2020, the risk of debt distress however remains moderate. The report additionally revealed that improved global demand, helped nudge down the current account deficit; to 10.4 percent of GDP in 2021 from 10.9 percent in 2020, it remains wide because of imports related to oil investments.
Into the bargain, the report indicates that the rising prices of oil and food products, will cause inflation to increase to 3.2 percent in 2022 then to fall to 2.2 percent in 2023. Despite expected improved domestic revenue mobilization, the budgetary measures to curb the ongoing crisis would maintain fiscal deficit at the high level of 5.5 percent of GDP in 2022, before an expected decrease to 4.7 percent in 2023. Over and above, the current account deficit is forecast to widen in 2022 to 13.2 percent of GDP, then to ebb in 2023, to 10.7 percent of GDP, with the start of hydrocarbon exports and the reduction of imports linked to hydrocarbon investments.
Senegal’s economy has traditionally been driven by mining, agriculture, construction, tourism and fishing, which simultaneously bring in the bulk of the country’s foreign exchange, and additionally provide the main sources of employment. Critical sectors that could aid in rebuilding the country’s economy include:
Senegal’s Oil and Gas Sector
In the wake of the ongoing Russia-Ukraine war and the recent oil production cuts by the Organization of the Petroleum Exporting Countries and allies (OPEC+); Africa’s oil producing countries have gained more prominence in the global energy market; as countries in the EU continue to search alternative sources of oil and gas, to wean themselves off Russian gas. Senegal is set to fully join the oil league in 2023, upon making its first exports; but already countries like Germany have expressed interest, evidenced by Chancellor’s Olaf Scholtz visit in May and later by Polish President Andrzej Duda. In addition, both buyers and investors have expressed interest in Senegal, as the GTA project nears completion.
The GTA project is located in offshore waters straddling the border between Senegal and Mauritania. The oil and gas discoveries were made in 2014 and 2017, and Phase I is currently under development by BP and its partner Kosmos Energy. The country boasts oil and gas reserves worth more than 1 billion barrels of oil and in excess of 40,000 billion cubic feet. Senegal’s president H.E. President Macky Sall who is also the AU Chairperson, is steadily leading his country in this energy venture, as it forms one of the fundamental pillars for the country’s 2035 economic emergence plan.
To boot, his background as a geological engineer with hands-on experience of the hydrocarbons industry, has proved an advantage for the country’s gas development. Sall is determined to ensure that Senegal’s hydrocarbon resource boom, will not result in a ‘resource curse’ like the one that has afflicted most African oil producing nations like Nigeria, Angola, Congo and Mozambique.
According to BP, the field for the Phase I project has an estimated gas production potential of around 15 trillion cubic feet, enough for at least 30 years of production of which most of the output will be exported. Given that the figure is five times more than what gas-dependent Germany used in 2019; could Senegal replace Russian gas in Germany? A final investment decision on developing Phase 2 of the project, is due before the end of 2022.
The Yakaar-Teranga is yet another commercial find, exclusively in Senegal’s waters, estimated to hold around 20 trillion cubic feet of gas. President Sall has said around half of production from the development, would go to the domestic market as feedstock for power stations, fertilizer and ammonia plants and other industries, with the rest going for export. By the same token, a final investment decision for Yakaar-Teranga is also expected in the next few months with production possible by 2024.Into the bargain, the SNE field has both crude oil and natural gas deposits, with an estimated 862 billion cubic meters of natural gas reserves.
Besides the gas developments, Senegal is also set to become an oil producer, with Australia’s Woodside projected to commence production in 2023 from a 100,000 barrels/day FPSO on the Sangomar field. Plans to develop Phase II of the project, likely to be of a similar size with a cost $2.5bn; are underway but its development schedule is yet to be published.
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Mining In Senegal
Senegal’s mining sector has been a backbone for the country’s economy. Going forward harnessing its potential in entirety is sure to resuscitate the economy. The sector is a core component of Senegal’s export industry, and makes significant contributions to the country’s foreign exchange earnings, thereby largely boosting the country’s GDP. The West African country is endowed with diverse minerals, and is also part of the Extractive Industries Transparency Initiative (EITI).
The country boasts rich reserves of iron, precious metals like gold and platinum, copper, chromium, nickel, zircon and titanium. Furthermore, Senegal possesses significant phosphate reserves estimated at between 1 million and 500 tons, which places the country among the world´s top ten phosphate producers. These phosphates are a key ingredient for manufacturing fertilizer, an essential input for the agriculture sector, which employs the bulk of Senegal’s population.
The adequately established aspect of the sector is the sourcing of construction materials, which includesAgric stone bricks, clay, aggregates, gypsum for cement production, granite, peat, sand, gravel and rock-salt. Eastern Senegal is also richly endowed with mineral resources, which are currently under production and additionally boasts marble reserves of six varieties.
Senegal´s Investment Promotion Agency( APIX), notes that mining prospecting and geological mapping, have revealed both metallic and non-metallic minerals, including platinum, chromium, silver, manganese, industrial clays, as well as a variety of ornamental stones, that are widely used in the Senegalese handicrafts industry. Iron-ore production also largely contributes to the sector, with proven reserves of iron deposits in four locations estimated at 750 million tons. According to APIX, annual production is forecast to be well over 25 million tons.
Moreover, Senegal had set an ambition to become one of Africa’s top seven gold producers, with an annual production of 17 tons of gold by 2022.Currently, the Sabodala-Massawa project is the largest producing gold mine in Senegal. Since 2009, Sabodala has produced more than 2.6Moz of gold. In addition, Boto Gold Mine, located on the border with Mali, has the capacity to produce an average of 130,000 ounces of gold annually, over an 11-year projected mine life-span.
Deposits of heavy minerals of ilmenite and zircon, with an annual average production of 570,000 and 95,000 tons respectively; located around the capital Dakar, would rank Senegal among the leading producers. Already, the production of zircon by the mining company Grande Côte has resulted in noteworthy infrastructure investment in Senegal, as reported by EITI.This includes: the construction of a 36 MW power plant, development of a massive storage terminal at the autonomous port of Dakar, and the rehabilitation of a 110Km railway tract from Mekhé to Dakar.
Senegal aims to tap into its mineral resources, fully exploring them to attract and increase FDI into the extractive industries, generate higher commodity export revenues, to support long-term economic development objectives, as outlined in the Plan Senegal Emergent (PSE).
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Agriculture in Senegal
Agriculture is another key sector that will bolster economic growth. According to the Senegal Economic Situation Report’ published by the World Bank, agriculture was identified as a key sector that will drive Senegal’s economic rebound. In 2021, agriculture contributed around 15.32 percent to the GDP. Senegal’s main crops are peanuts, black-eyed peas, cassava, watermelons, millet, rice and corn. Agriculture occupies about two-thirds of the economically active population and provides the basis for industry as well. Livestock farming is also practiced, and whilst meat is locally consumed, hides and skins are exported.
Smallholder farmers in rural areas make up 80% of the world’s poorest people globally. In light of this, myAgro is a nonprofit organization on a mission to help move 1 million smallholder farmers out of poverty by 2026. Ninety percent of agricultural land is worked by small-scale, family-based farms engaged in subsistence agriculture.
The Syngenta Foundation for Sustainable Agriculture (SFSA) has been active in the Senegal River Valley since 2014, and has been providing access to mechanization for rice farmers through their Center for Mechanized Services (CEMA).In addition, given that the country also produces fertilizer, agriculture is bound to record massive growth, as the country looks to invest in climate-smart agriculture.
Senegal’s Fishing Industry
With perspective to its long Atlantic coastline of 530 kilometres, lined with offshore islands, the Casamance Rivers, the Sine-Saloum Delta and a vast network of waterways and tributaries, Senegal has been a fishing and aquaculture hub. The sector makes significant contributions to the country’s economy, making for a lucrative source of income for many locals. The Senegalese eat up to 35 kilograms (77 pounds) of fish each year, accounting for up to 75 percent of the nation’s animal protein intake.
Currently, fishing products take the lead in all exports in terms of value, the result of many years of building up the industry. Senegal’s coastal waters are also known for their large variety of fish, unlike most other African countries on the Atlantic coastline.
Tourism In Senegal
Senegal is a top-rated tourist destination not only in West Africa but in Africa on the whole. For a long time tourism has remained a key contributor to the country’s economy, being a primary source of foreign exchange and still there is more room for tourism development that could help rebuild the economy. Upon taking leadership in 2012, President Macky Sall launched a tourism development program titled the ‘big leap forward’ to promote tourism in Senegal.
What exactly pulls tourists to this West African nation? For starters, there are seven UNESCO World Heritage Sites in Senegal, from Island of Goree, Bassari Country, Island Of Saint-Louis, Saloum Delta, Stone Circles of Senegambia, Djoudj National Bird Sanctuary and Niokolo-Koba National Park. Other highly visited places include the Museum of Black Civilization in Dakar, the Monument of the African Renaissance and many other natural and historic sites, coupled with its pristine beaches that draw in a lot of visitors.
Senegal’s Technology Arena
Investments in technology have become a necessity not only in Senegal but other African nations, as Africa is amid the fourth industrial revolution (4IR), whose core component is technology. Senegal’s technology scene wields massive potential to catapult the economy to prosperity. The West African nation is home to francophone Africa’s first tech unicorn, mobile money provider Wave, which raised the biggest ever series A round in Africa.
Founded in 2018, the company raised $200million from four big Silicon Valley Venture Capital firms: Founders Fund, Sequoia Capital, Ribbit Capital and Stripe bringing its valuation to $1.7B.Just recently Senegal-based Kweli and KyCyber are among the startups that qualified for the MEST Africa Challenge.MEST is a pan-African software and entrepreneurship training programme, seed fund and incubator that supports the launch of African technology startups.
Senegalese Art and Fashion
Dakar is the center of Senegal’s art and fashion scene which has been increasingly gaining prominence on the world stage. The industry provides employment to thousands of young entrepreneurs, thereby making significant contributions to the economy. The country holds the biggest contemporary art exhibition in the continent, ’Dakar Biennale’ or ‘Dak’Art’. The 2022 edition in May brought together 59 artists from 30 countries. Should the sector receive more empowerment from the government and international investors, the country could reap a harvest in revenues.
Manufacturing In Senegal
Senegal’s manufacturing industry is growing in leaps and bounds, as the country seeks to reduce reliance on imports. The sector contributes to 23.2% of the GDP and employs 13% of the population. Hence it possesses the potential to further contribute to the economy, if adequately invested in. Senegalese industries produce construction materials, machinery and equipment. Into the bargain, food production and chemical industries are also growing. In light of this, the government is supporting the establishment of an integrated park for the pharmaceutical, biomedical and pharmapolis backed by the IMF. To boot, other industrial establishments, include flour mills, shoe and textile plants, sugar refinery, tobacco factory, brewery, naval shipyard, cement manufacturing plant, metalworking and an automobile assembly plant.
