Economic reforms in Senegal: the new power’s limited room for maneuver

Economic reforms in Senegal: the new power’s limited room for maneuver
Economic reforms in Senegal: the new power’s limited room for maneuver

The election of Bassirou Diomaye Faye as president of Senegal on March 24, 2024, after a turbulent electoral process, reflects the resilience of the country’s democratic institutions. The advent of a new power offers the opportunity to strengthen transparent governance and fight against inequalities in the country. It is the first time since Senegal’s independence from France in 1960 that an opposition candidate won an election in the first round.

Faye, who was released from prison ten days before the vote, won the vote with 54.28% of the vote, ahead of the fifth president of Senegal. He immediately appointed his comrade and party leader Ousmane Sonko as Prime Minister.

Western media tried to show that Faye, presented as a “left-wing Pan-Africanist”, wanted to promote authentic African culture to break with postcolonial Western influence. The political orientation of the Faye-Sonko duo corresponds above all to that of their party, the Patriots of Senegal for work, ethics and fraternity (Pastef), an organization founded by Sonko in 2014.

Although their intentions appear radical, their main objective is to strengthen the country’s national independence. This nationalist orientation will also bring Senegal’s new government closer to neighboring military juntas that govern Guinea, Mali, Burkina Faso and Niger. Paris, which has always been keen to preserve its postcolonial presence, in particular its military bases, the CFA franc and the French language, is now forced to follow events.

As a researcher, I analyzed democratic transitions in Senegal. My recent study analyzes the strengths, weaknesses, opportunities and threats associated with the policies of the new authorities. In my opinion, the Senegalese government will soon have to adapt to the harsh reality of economic inequality.

“DIPOSSESSION” CONTRACTS

Faye and Sonko promised to renegotiate the terms of the French-backed CFA currency, as well as oil and gas contracts with foreign companies, such as BP, Kosmos Energy and Woodside Energy Group in order to increase the company’s revenues. State from these energy resources.

Sonko has repeatedly described these contracts as a “dispossession” of the Senegalese, because the resources would have been sold well below their value. Enough to cause agitation within the sector, after several billion dollars of cumulative investments between majors and local subcontractors, directly or indirectly. Additionally, growth forecasts have become bleaker due to the collapse in global demand for new energy sources.

The intention to “protect” the oil and gas industry from foreign control could discourage investment in the sector.

On the demand side, private consumption growth slowed, reflecting the loss of purchasing power linked to high inflation, while investment was affected by uncertainties linked to the socio-political climate.

On the supply side, activity in the tertiary sector, affected by social unrest and political tensions, has slowed. Inflation remained high, although it is expected to moderate to 6.1% in 2023, after peaking at around 9.7% in 2022, following the fall in international commodity prices and the normalization of commodity chains. ‘supply.

Structural vulnerabilities such as low productivity, limited human capital, high levels of informal activity and youth out-migration have persisted and been exacerbated by external shocks such as the COVID-19 pandemic and the invasion of Ukraine by Russia.

FEELING OF EXCLUSION

The gap between economic potential and poverty levels fuels the population’s frustration and feelings of exclusion, making them vulnerable to recruitment by extremist groups. Let us cite the example of the gold mining region of Kédougou in the south-east of the country, one of the poorest in the country. This region represents a security risk for Senegal, according to the Institute for Security Studies (ISS) which called for accelerating the formalization of artisanal and small-scale mining to reduce illegal mining and strengthen control of the gold marketing chain.

But the International Monetary Fund (IMF) has already warned the government and adjusted its economic growth forecast for the country, reducing it from 10.6% to 8.3% due to previous delays in these key energy projects.

Other doubts have been raised about the legality of previous agreements, notably that of the transfer of the exploration concessions of Saint-Louis and Cayar (Kayar), currently held by BP. For example, in November 2023, reports emerged that BP had pulled out of the Yakaar-Teranga natural gas field offshore Senegal following disagreements with the local government.

Furthermore, the Petrosen company, the national oil company of Senegal, has confirmed a certain wait-and-see attitude. He believes that it will be difficult to renegotiate the Sangomar or GTA gas contracts, already in progress, and insists on the fact that the latter field is shared physically and commercially with Mauritania. Nothing could therefore be done without Mauritania, which has never spoken of renegotiation of contracts.

ECONOMIC INEQUALITIES

However, Dakar will soon have to adapt to the harsh reality of economic inequality. He must keep his electoral promises to fight corruption, prioritize national economic interests and create jobs for the country’s population, particularly for unemployed youth.

Young people of working age represent more than half of the unemployed. The gap between economic potential and poverty levels fuels frustration. There is a feeling of exclusion among young people, making them vulnerable to recruitment by extremist groups.

The new president also intends to renegotiate fishing agreements and develop local production, both food and industrial, in order to ensure food security while reducing costly imports. However, likely subsidies for essential goods could lead to conflicts with the IMF over program implementation.

Regarding the creation of a sovereign currency, it makes sense to implement existing plans to replace the CFA franc within the Economic Community of West African States (ECOWAS) with the currency independent, “eco”, the regional currency in the making.

However, the administration faces several challenges that could hamper the achievement of its goals. These include red tape, insufficient infrastructure and limited access to finance for small and medium-sized businesses. Furthermore, the persistence of socio-economic inequalities poses a significant threat to social cohesion and political stability.

Nevertheless, the administration must confront potential threats such as climate change, security risks and regional instability. Senegal’s vulnerability to environmental risks, including droughts and sea level rise, poses a significant risk to agricultural productivity and food security.

In addition, ongoing conflicts in neighboring countries could have repercussions on the political stability and economic development of Senegal.

PERSPECTIVES

Ultimately, the political program defined by the Faye-Sonko administration is both promising and challenging for Senegal’s long-term political and economic prospects.

While their commitment to democratic governance and inclusive development is laudable, tackling structural obstacles and external threats will be crucial to realizing their vision of a prosperous and stable Senegal.

By taking advantage of opportunities and mitigating threats, the administration can pave the way for sustainable growth and prosperity for all Senegalese citizens.

THECONVERSATION.COM

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