Senegal's pursuit of economic independence: A pathway or a familiar cycle
With the swearing-in of a new president and new political appointees, Senegal is on the edge of a new political and economic trajectory, as expected from a new government.
However, the new administration under President Bassirou Diomaye Faye promises a departure from traditional dependency on foreign powers. With bold initiatives and promises of audits and contract renegotiations of key sectors, the government aims to reclaim control over its resources and reshape its economic landscape.
President Faye's recent inauguration marked a generational shift in Senegalese leadership, with the appointment of Ousmane Sonko as prime minister and the formation of a predominantly male cabinet. With this, coupled with promises of reforms, the new administration intends to break away from historical reliance on external influences, particularly from former colonial power France.
“Senegal has the ambition to deepen its financial sector and expand the range of products available for financing businesses and projects. Senegal can become a benchmark financial hub in West Africa, we have to believe in it…It will be about making our formal or informal private sector, and each Senegalese, key player in a sovereign Senegal with the support of a strong and credible State. A credible state is one with a solid macroeconomic framework and available room for maneuver, capable of supporting the private sector and coping with shock in an uncertain world. Only in this way can we gradually free ourselves from the bonds of external dependence,” the new Minister of Economy, Planning, and Cooperation, Abdourahmane Sarr said.
Since 2019, public debt has seen a notable rise, climbing to 69.1% of GDP in 2020, 73.3% in 2021, and further to 75% of GDP in 2022, the World Bank reported.
Audit of oils and gas contracts
Central to the government's agenda is the audit of oil, gas, and mining contracts, aimed at ensuring transparency and fair resource exploitation. To kick start the initiative for freedom from external dependence, President Faye announced audit as one of his first policy initiatives. In his inaugural speech, he said, "The exploitation of our natural resources, which according to the constitution belong to the people, will receive particular attention from my government. I will proceed with the disclosure of the effective ownership of extractive companies and with an audit of the mining, oil, and gas sector."
Renegotiation of contracts
Minister of Energy and Mines, Birame Souleye Diop, emphasized the need for scrutiny and hinted at potential renegotiations to better serve the interests of the Senegalese people. This will involve "publishing the contracts, carrying out a mining audit, working in the interests of the people and, if necessary, renegotiating all existing contracts," he said. This initiative has drawn attention to key players in the sector, including multinational companies like Kosmos Energy, BP, and Woodside Energy, among others. The commencement of Senegal's inaugural offshore oil venture is slated for mid-2024. Spearheaded by Woodside Energy (WDS.AX), the Sangomar oil and gas project is anticipated to yield approximately 100,000 barrels per day.
Lessons from Ghana
Senegal's aspirations for economic sovereignty draw parallels with Ghana's "Beyond Aid" vision, declared by President Nana Akufo-Addo in 2017. “It is time to build our economies that are not dependent on charity and handouts... we are not disclaiming aid, but we do want to discard a mindset of dependency… It is unhealthy for both the giver and the receiver, said Akufo-Addo,” the president said.
The Ghanaian model aimed at mobilizing domestic resources to reduce dependency on foreign aid, reflecting a broader sentiment across Africa to achieve self-sufficiency. However, in 2023, the country made a U-turn to external aid when the International Monetary Fund (IMF) approved a three-year, $3 billion loan on May 17 to get the West African country out of its worst economic crisis in decades. The World Bank’s metrics highlight Ghana as one of the most indebted countries on the continent, with a debt of $58 billion representing 105% of its GDP. "We focus a lot on the external debt to international creditors, but it is important to bear in mind that most of Ghana's public debt is domestic debt held by the country's commercial banks," says Marc Raffinot, a senior lecturer at Paris Dauphine University and a development specialist.
