Venue: KICC, Nairobi, Kenya
Dates: 03 - 05 May, 2018 
Timing: 10.00 am to 06.00 pm
Business Visitors Only

Kenya has a well-developed building and construction industry with quality engineering, building and architectural design services being readily available. This industry is currently on an upward trend following re-habilitation and reconstruction of roads and bridges etc.

With increase in population, and growing demand for affordable housing, opportunities exist in the construction of residential, commercial and industrial buildings including prefabricated low-cost housing. Investors can also manufacture and supply construction materials and components for the sector.

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2D Seismic in Kenya’s Block 2A To Commence in May 2016

Simba Energy has said that through its subsidiary Company Simba Africa Rift Limited together with its farm in partner Essel Group ME (EGME), have agreed that the 2D Seismic Data Acquisition and Processing program will cover approximately 500 line km of survey to commence in early May 2016.

Simba says it expects that preliminary field work and mobilization will commence in mid to late April, 2016 before the full survey with the work set to take about 60-75 days to complete to be followed by interpretation of the data.

Simba adds a contract has been executed with Africa Geophysical Services LLC, (AGS) for the purpose of 2D Seismic Data Acquisition and Processing on Block 2A Wajir, Kenya.

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Seychelles

Overview

 

SeychellesIn 2010, the Seychelles economy recovered after important measures were taken to address the 2008 debt crisis. The country also weathered the recent global financial and economic crisis relatively well. Driven by the tourism industry, which accounts for 25.5% of the gross domestic product (GDP), the economy grew by over 5% from 0.7% in 2009 to an estimated 6% in 2010. There were higher numbers of visitor arrivals with a longer average stay, which increased by 13% and 5%, respectively. This was supported by a rebound in the global economy, a weaker rupee and price discounting by operators. Piracy attacks and threats in the Indian Ocean continue to affect the fishing sector adversely, however. The economy is projected to grow by 4% in 2011 and 4.5% in 2012.

The authorities have eliminated the foreign currency black market and have brought price increases under control, with inflation estimated to have been contained to negative 2.4% in 2010 and projected to reach 4.2% and 2.9% in 2011 and 2012, respectively. The Central Bank of the Seychelles (CBS) foreign exchange reserves are now in excess of two months’ worth of imports and are projected to increase to three months of imports by December 2012. Renewed domestic confidence is supporting macroeconomic stabilisation. Since October 2009, the nominal effective exchange rate has stabilised, the depreciation against the US dollar (USD) is offset by the appreciation against the euro (EUR) and the British pound (GBP).

The country now has a sustainable debt position after having re-structured the debt profile. The authorities continue to maintain fiscal discipline. The primary fiscal surplus is estimated at 11.9% of GDP in 2010. The current account deficit, which was 30.3% of GDP in 2009, widened to 33.2% of GDP in 2010 owing to the recovery of domestic demand and rising costs of insurance premiums due to piracy in the Indian Ocean. Foreign direct investment (FDI) resumed, thus financing a larger part of the deficit. The deficit is expected to gradually narrow in 2011 and 2012, as exports of tourism services will benefit from the global economic recovery and additional hotel accommodation.

A number of constraints still affect the business environment despite the measures that the government has recently put in place. The World Bank 2011 Doing Business report shows that the Seychelles slipped to a rank of 95 out of 183 countries in 2010 in the ease of doing business index, compared to a ranking of 92 in 2009.

The Seychelles is an open economy that relies heavily on tourism. As a result, growth prospects in the medium term will largely remain dependent on the global economy’s performance, especially in the euro zone, where 75% of the country’s tourists come from as well as on the levels of piracy in the Indian Ocean.

In 2009, the Seychelles received balance of payments and budget support assistance from development partners, namely the International Monetary Fund (IMF), the World Bank, the African Development Bank (AfDB) and the European Union, amounting to EUR 21.9 million to support directly the 2008 economic reform programme. The first part of the reform programme was successfully implemented, which led the IMF to approve an Extended Fund Facility (EFF) in December 2009 to replace the two-year Stand-by Arrangements (SBA). The Seychelles made a good start on its second stage of reforms under the EFF despite the global economic crisis and its external debt crisis. By the end of 2010, it had met the quantitative benchmarks under the EFF and its structural targets, and remains on track with key reforms, including an overhaul of the tax system, improving public financial management, modernising monetary operations, strengthening financial sector supervision and restructuring parastatals. It is now on a more sustainable development path.

The most established emerging partners (EPs) of the Seychelles are China, United Arab Emirates(UAE), India, Saudi Arabia and Brazil. Others include Malaysia, Indonesia, Singapore and Turkey. Most of these EPs are involved in trade, investment and aid. In the past five years (2006-10), the countries that have most intensified their relationships areChina, India and UAE.

The on-going socio-economic reforms have led to a more transparent and less partisan society. However, challenges related to building a more independent judiciary and improving press freedom remain.

The Seychelles has one of the highest GDPs per capita in Africa and is one of Africa´s six upper-middle-income countries. It leads the continent in human development according to its ranking of 57 in the 2009 Human Development Index (HDI) of the United Nations Development Programme (UNDP), a level comparable to many countries of the Organisation for Economic Co-operation and Development (OECD). It allocated about 43% of the budget in 2010 or 5% of GDP to the social sectors of health and education, reflecting the government’s concerns on poverty and social welfare programmes. The Seychelles has already met the target for five of the eight Millenium Development Goals (MDGs); only the sixth to eighth remain.

Figure 1: Real GDP growth (E)

Source:IMF and local authorities’ data; estimates and projections based on authors’ calculations.

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

Table 1: Macroeconomic indicators

  2009 2010 2011 2012
Real GDP growth 0.7 6 4 4.5
CPI inflation 31.7 -2.4 4.2 2.9
Budget balance % GDP 5.1 3.2 0.3 -0.2
Current account % GDP -30.3 -33.2 -24.8 -22.2

Source:National authorities’ data; estimates and projections based on authors’ calculations.

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

Recent Economic Developments and Prospects

Table 2: GDP by sector (in percentage)

  2005 2009
Agriculture, forestry, fishing & hunting 3.9 2.8
Agriculture, livestock, fishery, forestry and logging - -
of which agriculture - -
of which food crops - -
Mining and quarrying - -
Mining, manufacturing and utilities - -
of which oil - -
Manufacturing 10.8 9.4
of which hydrocarbon - -
Electricity, gas and water 1.8 1.6
Electricity, water and sewerage - -
Construction 7.6 6.3
Wholesale and retail trade, hotels and restaurants 7.5 11
of which hotels and restaurants - -
Transport, storage and communication 16.8 13.4
Transport and storage, information and communication - -
Finance, real estate and business services 18.9 21.7
Financial intermediation, real estate services, business and other service activities - -
General government services 10.6 6.1
Public administration & defence; social security, education, health & social work - -
Public administration, education, health - -
Public administration, education, health & other social & personal services - -
Public administration, education, health & social work, community, social & personal services - -
Public administration, education, health & social work, community, social services - -
Other community, social & personal service activities - -
Other services 22.1 27.7
Gross domestic product at basic prices / factor cost 100 100

Source:AfDB Statistics Department based on data from Statistics Seychelles.

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

In 2010, the economy recovered well from the 2008 debt crisis and the global financial and economic crisis. Driven by the tourism industry, which accounts for 25.5% of GDP, the economy grew by over 5% from 0.7% in 2009 to an estimated rate of 6% in 2010. Piracy attacks and threats in the Indian Ocean continue to affect the fishing sector adversely, however. The economy is projected to grow by 4% in 2011 and 4.5% in 2012.

The authorities brought inflation under control, with the rate estimated to have been negative during 2010. The primary sources of growth are tourism and communication as well as construction activities, with the latter partly influenced by an expansion in FDI. Key domestic production in some areas, especially beverage and food processing, has also increased.Tourism, services, fishing and, in recent years, activities of tanker operations continue to be the main drivers of the economy.

The major factors affecting the economy in 2010 include the global recession and domestic economic reform. The increasing acts of piracy in the region have had a direct effect on the country’s imports of food and other essentials. This has led to increases in insurance and shipping costs, changes in shipping routes and delays in delivery. It has affected tourism especially, with a decline of yachts and cruise ships in the Indian Ocean. Environmental conditions, particularly an exceptional drought season adversely affected the agricultural sector in 2010, while rising sea-level temperatures are affecting marine life, notably juvenile fish stock. The depreciation of the euro against the US dollar has had a direct impact on the balance of payments (BOP) given that Seychelles imports using US dollars but receives most of its revenue in euros. Recent economic crises in Greece, Ireland and Spain aggravate the BOP further, which in turn affects tourism as the vast majority of the tourists are from Europe. Since the Seychelles is not a major exporting country, it did not experience the full impact of the 2009 export slump. However, it was affected in terms of imports due to export quotas and bans by some trading partners, as well as extreme climatic events and rising international food prices, particularly of maize, flour, rice and onions.

In 2010, Seychelles recorded higher numbers of visitor arrivals and a longer average stay, which increased by 13% and 5%, respectively. This was supported by a rebound in the global economy, a weaker rupee and price discounting by operators, as well as the hold put on construction of three major hotel developments. The increase in tourism arrivals in 2010 is due to pro-active marketing by the Seychelles Tourism Board (STB) in the development of new markets; an increase in flights to Seychelles; and improvements in service through the Seychelles Tourism Academy (STA). The government considers tourism as the principal pillar of the economy and given the current difficulties in the European market, it will continue to invest in this sector by providing funds to the STB and the STA. It will also continue to work with the private sector to sustain the expansion of the industry.

In 2010, fish trans-shipment and landing that had declined by 15% in 2009 are expected to have increased, particularly in the artisanal sector. However, fish exports receipts fell by 34% in 2010. The government and its partners continued to make efforts to tackle piracy in the Indian Ocean in 2010 as one way of supporting the industry. Given the importance of the fishing industry in the economy, the government, with the support of Japan through the World Bank, invested in infrastructure development of two new facilities for the fishing community at Providence Fishing Quay Zone 6 and the ice plant at Bel-Ombre during 2010. In 2011, the government will develop facilities to allow fishers to purchase fuel.

The manufacturing sector, which accounts for about 10% of GDP improved in 2010 mainly due to increased local demand and improved access to foreign exchange. Canned tuna production rose by 2%; further increases are projected in 2011. The strong increase in the construction sector, which accounts for about 7% of GDP, during 2010, was powered partly by the construction of a massive private palace at La Misere as well as other FDI related projects. Block production rose by 18% in 2010 because of increased construction works.

Seychelles has about 350 registered farmers engaged in various agricultural activities. The agriculture and food production sector continue to face challenges. In addition, the government has yet to implement its draft food security policy, although a review workshop on the Food Strategy 2008–2011 was held in June 2010.

In 2010, about 70% of poultry farmers stopped their farming activities as the liberalisation of imports of meat led to stockpiling. The cultivation of crops was subsequently affected as fertiliser inputs in the form of manure were less available. The shortage of manure coupled with erratic weather conditions (droughts, climate change) affected both the quality and quantity of crops. In addition, there has been no major national investment in agricultural infrastructure in 2010 and nothing is planned for in the 2011 budget. The abattoir, animal feed factory and laboratories, which were given to farmers in 2009 after the liberalisation of the economy, are in poor condition and need revamping.

Oil exploration entered a new phase in 2010, with the government authorising a research company to carry out seismic studies covering 18 000 square kilometres in Seychelles’ territorial waters. There are already two oil companies in Seychelles – Houston-based Petroquest International Incorporated and Dubai-based East African Exploration (EAX) – with production agreements with the government. The two companies will use the results of this study to determine the location of oil drilling that is expected to start by the end of 2012. The government will receive technical assistance in training, regulation and management of oil industry from the United States.

Gross capital formation increased by an estimated 21.4% in 2010, which contributed to the strong GDP growth. This increase was largely due to construction sector growth. Public investment grew at a higher rate (27%) than the private sector (20%) during 2010. Private consumption increased by 6.1% as purchasing power was supported by negative inflation. Growth in exports also supported GDP growth in 2010. During 2011-12, investment and consumption will be the main drivers of growth.

Table 3: Demand composition

  Percentage of GDP (current price) Percentage changes, volume Contribution to real GDP growth
2002 2009 2010 2011 2012 2010 2011 2012
Gross capital formation 32 29.3 21.4 14.1 11.2 5.1 3.8 3.3
Public 3.4 5.7 27 30 22 1.2 1.7 1.5
Private 28.6 23.6 20 10 8 3.8 2.2 1.8
Consumption 73.2 98.3 5.8 1.5 1.6 5.8 1.5 1.6
Public 31.6 13.3 3.4 2.7 2.7 0.5 0.4 0.4
Private 41.6 85 6.1 1.3 1.4 5.3 1.1 1.2
External sector -5.2 -27.6 - - - -4.9 -1.3 -0.5
Exports 65.7 103.4 2.4 4.5 4.8 1.7 3.1 3.3
Imports -70.9 -131 6.9 4.5 3.9 -6.6 -4.4 -3.8
Real GDP growth rate - - - - - 6 4 4.5

Source:Data from IMF and local authorities’ data; estimates (e) and projections (p) based on authors’ calculations.

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

Macroeconomic Policy

The macroeconomic stabilisation policies put in place in November 2008 are yielding results. Since then, Seychelles has continued with prudent fiscal and monetary policies that have granted credibility to the currency float. Inflation has been curbed, international reserves have been rebuilt and key interest rates have been reduced. In 2010, the government created a Stabilisation Fund to dampen the effects of sudden fluctuation in oil prices by drawing from the fund and adjusting prices gradually. However, the country remains highly exposed to external shocks from piracy threats, the European economic situation and further depreciation of the euro. A further depreciation of the euro could affect the country’s still fragile external position.

Fiscal Policy

During 2010, Seychelles continued with policies in line with the public debt reduction strategy. These include consolidating the government’s fiscal position, achieving a primary surplus, re-investing in priority sectors and continuing to keep public debt at a sustainable level.

The government achieved an estimated primary surplus of 11.9% of GDP in 2010. This is projected to decline to 7.8% and 6.2% in 2011 and 2012, respectively. In the medium term, the government’s target is to reduce debt to 70% of GDP by 2012 and 50% of GDP by 2018. The authorities continued to implement tax reforms, which are progressing well. Revisions to business tax legislation were introduced in January 2010. It also expanded the sales-tax base while phasing out concessional rates. The government also introduced a withholding-based personal income tax in July 2010, which replaces the social security contributions previously levied on employers and employees. As a part of the general overhaul of the tax system, a value added tax (VAT) to replace the goods and services tax will be introduced at the end of 2012. Another prong of the economic reform programme is the modernisation of customs, which is an important step toward establishing a business-friendly environment. This will facilitate trade as well as help the Seychelles in negotiating its accession to the World Trade Organization (WTO).

A Treasury Single Account (TSA), which was introduced in late 2009, represents a major step forward in the government’s capacity to both monitor and control public expenditure and manage cash balances. The government expects revenue collection to increase by 17% above its projected targets in 2011 with the projected total to equal to 31% of GDP. Non-tax revenue will represent 4.4% of GDP in 2011. The increase in tax revenues is mainly due to economic growth. However, a few policy changes in 2010 will affect the 2011 revenues. These include an increase in GST on tourism services from 10% to 12%; harmonisation of income tax rates for all workers, which increases the rate for expatriates from 10% to 15% in line with the rate applicable to citizens; and a substantial increase in revenue from grants receipts, mainly from capital projects. The government expects dividends from investments to be 128% above 2009 estimates arising from investments in both Nouvobanq and Indian Ocean Tuna.

The 2010 estimates for government expenditure were exceeded by 7%. Total expenditures and net lending, excluding debt interests, is forecast to be equivalent to 37.3% of GDP in 2011. The government remains committed to social spending. In 2011, it will allocate approximately half of the total primary current expenditure to social spending. The education sector, employment and human resources expenditure accounts for 5.3% of GDP or 14.8% of the budget, while the health sector accounts for 4.2% of GDP or 12% of the 2011 budget.

The overall budget balance (excluding grants), as a percentage of GDP, declined from 5.1% in 2009 to 3.2% in 2010 as a result of increased capital expenditure. Expenses for wages declined slightly from 7.1% of GDP in 2009 to 7% in 2010, and are projected to remain at 6.6% and 6.3% in 2011 and 2012, respectively, which is in line with the medium-term strategy.

The total stock of debt (public and publicly guaranteed) amounted  to USD 789 million as in October 2010, accounting for 84.3% of GDP, out of which, 57% was external and 43% internal. The country’s debt stock, as a percentage of GDP, declined from 140.1% in 2009 to 84% in 2010, and is projected to decline to 75% by 2012. This decline is a result of the restructuring of the external debt under the new debt management strategy and strong fiscal performance under the reform programme.

In 2010, the government reduced its stock of T-bills due to negative domestic borrowing requirements. Under the new debt management strategy, the government is introducing new maturities in consultation with its creditors to develop a long-term yield curve and phase out illiquid instruments, such as government stocks and treasury deposits, as they mature.

Table 4: Public finances (percentage of GDP)

  2002 2007 2008 2009 2010 2011 2012
Total revenue and grants 32.2 32.2 36.6 38.8 37 37.6 36.7
Tax revenue 22.9 23.8 28.2 30.9 31.1 31 30.6
Oil revenue - - - - - - -
Grants 0.1 0.2 3.7 3.5 1.5 2.2 1.7
Other revenues 9.2 8.1 4.7 4.4 4.4 4.4 4.4
Total expenditure and net lending (a) 46.2 40.9 40 33.8 33.7 37.3 36.9
Current expenditure 37.5 36.3 28.7 31 30 28.5 26.8
Excluding interest 30.4 29.7 21.5 21.3 21.4 21 20.4
Wages and salaries 14.7 10.2 7.9 7.1 7 6.6 6.3
Goods and services 7.5 7.3 5.6 6.7 7.3 7.4 7.2
Interest 7.1 6.6 7.2 9.8 8.7 7.5 6.4
Capital expenditure 7.8 5.5 2.1 5.7 7.1 8.8 10
Primary balance -6.9 -2.1 3.9 14.8 11.9 7.8 6.2
Overall balance -14 -8.7 -3.4 5.1 3.2 0.3 -0.2

a. Only major items are reported.

Source:Data from IMF; estimates (e) and projections (p) based on authors’ calculations.

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

Monetary Policy

The objectives of the monetary policy are to control inflation, modernise the financial system and increase banking supervision. The CBS is to bring under its supervision non-commercial financial institutions such as the Development Bank of Seychelles (DBS) and the Housing Finance Company (HFC). Operations of the CBS have been modernised to ensure an independent monetary policy and strengthened supervision. The CBS will co-ordinate with the treasury on the issuance of T-bills, improving liquidity management and providing a more predictable environment for banks.

The inflation rate is estimated at negative 2.4% in 2010. However, it is projected to increase to 4.2% in 2011 before easing to 2.9% in 2012. The intense competition in the trade sector during 2010 contributed to the easing of inflationary pressures. The Seychelles rupee (SCR) value has remained stable against most major currencies at around SCR 12 per US dollar.

During 2010, interest rates fell as the economy realised a fiscal surplus. The rate for treasury bills (TB), which stood at 4% in 2009, declined to 2% in 2010; while commercial bank lending rates fell to 12.2% in 2010 from 14.9% in 2009. This decline is attributed to the measures taken by the two government-owned banks, namely Nouvobanq and the Savings Bank, to cut their prime lending rates to 7.0% in 2010.

Although deposit rates fell to 1.7% in 2010 from 1.9% in 2009, the spread between the lending and savings rates remains high at around 10%. This is higher than the spread level before November 2008.

During 2010, credit grew by 11%. The main beneficiaries included tourism projects, trade activities, mortgages as well as expenditure of private households. However, lack of competition in the banking sector, poses challenges to the financial system as it affects credit growth and the banking sector development.

External Position

The main merchandise exports are canned tuna, frozen and fresh fish, prawns and re-export of oil products. The main imports were machinery and transport goods, fuel, food, live animals and manufactured goods. Export growth is attributed to four main drivers:  privatisation, continued economic reforms, legislative reviews and the stability of the currency. The Seychelles’ main export markets during 2009/10 were the United Kingdom, France, Italy, Mauritius and Japan; while the main imports originated from Saudi Arabia, India, Spain, South Africa and France.

In 2010, the current account deficit as a percentage of GDP is estimated to have increased to 33.2% from 30.3% in 2009, mainly due to a surge in imports. This increase in imports was due to the improved economic situation and increased construction activities, which are being financed mainly by foreign investments. The deficit is projected to decline to 24.8% of GDP and 22.2% of GDP in 2011 and 2012, respectively, due to robust export growth.

Official international reserves are projected to reach the target of 3 months’ worth of official international reserves by 2012. As of mid-November 2010, gross reserves were equivalent to 2.3 months’ worth of imports, compared to 1.6 months at the end of 2009. International reserves are projected to reach 2.7 months’ worth of imports in 2011.

The Seychelles is not yet a member of the WTO; however, accession proceedings are underway. In 2009, the  Seychelles established a working group comprising government, civil society and private sector representatives mandated to update related documentation and prepare the negotiating position for accession to the WTO. In November 2010, the working group held a second meeting as part of renewed membership negotiations.

A few development partners reside in the country. The UNDP and the World Health Organization (WHO) are the only the United Nations (UN) agenciesthatmaintain liaison offices in the Seychelles; their country co-ordinators operate from Mauritius. The European Union is currently the most active among the multilateral donors and its country co-ordinator is also based in Mauritius. The 10th European Development Fund (EDF) programme for the period 2008-13 allocated EUR 5.9 million for the Seychelles, with the bulk earmarked for the environment (EUR 5 million). It also provided budget support through a grant in 2009. 

For the first time in 2008, the Seychelles received funding from the IMFin the form of a two-year Stand-By-Arrangement (SBA), which was replaced by an Extended Fund Facility (EFF) in December 2009. In 2009, the World Bank formulated, in parallel with the AfDB, an Interim Strategy Note (ISN) for the fiscal year 2010/11, providing two development policy loans (DPLs) to support the macroeconomic stabilisation programme and structural reforms required for private sector led growth. During 2010, the Seychelles received grants from a number of multilateral partners to support capacity building and the implementation of medium- to long-term structural reforms. These included: the European Union’s budget support of EUR 7.5 million and technical assistance of EUR 1 million; USD 432 973 for the formulation of a Seychelles Mariculture Master Plan from the AfDB; the World Bank’s USD 425 800 for capacity building of the Department of Public Administration; and USD 250 000 for an institutional study of the Public Utilities Corporation from the Arab Bank for Economic Development in Africa(Banque arabe pour le développement économique en Afrique [BADEA]).

Among the bilateral donors,China, Cuba, France, India, Russia and the United Kingdom have representation in the Seychelles. These donors are mostly involved in capacity building, although China is providing a combination of grants and soft loans for water supply, sewerage and energy. Japan has been active in the fisheries sector since the early 1990s, with assistance amounting to over USD 30 million. There has been an increase in Australian technical assistance in late 2010 in support of the economic reform programme. Finally, a regional co-operation agreement has been signed with Réunion Island (France), which focuses on the sharing of a wide range of technical expertise in areas such as health, training, the environment and natural-disaster management. France and the United Kingdom provided support at the Paris Club negotiation on debt restructuring and the United States is providing technical, regulatory and management expertise in oil exploration. The CBS is strengthening the Seychelles presence in regional groupings – the Common Market for Eastern and Southern Africa (COMESA), the Southern African Development Community (SADC) and the Indian Ocean Commission (IOC). The Seychelles is a member of the COMESA free trade agreement. In 2010, the Eastern and Southern African Trade and Development Bank, also known as the Preferential Trade Area (PTA) Bank expressed interest to fund well-established projects in the country.

The comprehensive, external debt-restructuring programme put in place in 2008/09 has enabled the Seychelles to overhaul its public debt stock and facilitate repayment. The external debt, which stood at USD 789 million in 2008 (of which 35% was owed to bilateral donors, 7% to multilaterals and 58% to private creditors), declined to USD 449 million.

The ratio of external debt to GDP declined from 118.8% in 2009 to 53.6% in 2010 and is projected to decline further to 52.9% in 2011 and 53.4 in 2012. The Seychelles now has a sustainable domestic and external debt portfolio, which has reduced its credit risk and supports FDI.

The total public debt (domestic and foreign) was nearly 150% of the 2009 GDP and unsustainable. In April 2009, the Seychelles restructured bilateral debts with the Paris Club, and most of the Paris Club countries signed individual agreements with the Seychelles government in 2010. The external debt levels have been reduced in the last two years by USD 388 million, which is equivalent to 43% of the GDP. The government expects to sign the last remaining restructuring agreements with four non-Paris-Club countries in early 2011. The average life of the debt portfolio has increased from 6 months to 13 years and is now sustainable.

Inflows of FDI soared to a new record of USD 364 million in 2008 – according to the 2009 World Investment Report by the United Nations Conference on Trade and Development (UNCTAD) – spurred by investment in tourism projects, especially at the luxury end of the market. However, while some tourism projects have been cancelled and delayed, others are going ahead, and the IMF estimated in July 2010 that inflows would total USD 183 million in 2009, which is about one-half of the 2008 level.

Table 5: Current account (percentage of GDP)

  2002 2007 2008 2009 2010 2011 2012
Trade balance -17.1 -41.6 -55.1 -33.8 -32.6 -31.2 -28.3
Exports of goods (f.o.b.) 28.3 38.5 54.5 44.9 52.6 55.8 56.3
Imports of goods (f.o.b.) 45.4 80.1 109.6 78.7 85.2 86.9 84.6
Services 11.8 16.4 10.3 9.8 6.6 9.4 9.2
Factor income -8.1 -6.6 -10.2 -10.6 -8.2 -4 -4
Current transfers 1.6 2.9 6.2 4.3 1 0.9 0.8
Current account balance -11.9 -28.9 -48.8 -30.3 -33.2 -24.8 -22.2

Source:Data from IMF; estimates (e) and projections (p) based on authors’ calculations.

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

Figure 2: Stock of total external debt (percentage of GDP) and debt service (percentage of exports of goods and services)


Source:IMF and local authorities’ data; estimates and projections based on authors’ calculations.

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

Structural Issues

Private Sector Development

The government is working with the International Finance Corporation (IFC) to encourage private sector development. It has prepared legislation to put in place a credit rating agency in mid-2011. In 2010, the government continued to implement measures to improve the business environment. Despite these measures, a number of constraints remain. The World Bank 2011Doing Business report shows that the Seychelles slipped to a rank of 95 out of 183 countries in 2010 in the ease of doing business index, compared to a ranking of 92 in 2009. Though the methodology has altered, the absolute ranking in the 2011 Doing Business index, using the earlier methodology, reflects the same three-point slippage in rank.

Since 2009, the government has introduced a number of measures to make it easier to do business in the Seychelles. A new legal framework re-aligned a number of procedures to encourage investors, including those associated with licensing and access to financing. Measures to improve applications for work permits and thus improve factors related to employment are being implemented. Other measures adopted in 2010 to eliminate red tape and bottlenecks are contained in the New Investment Act, the Licensing Act, the Fair Trading Commission, the Customs Management Act and tax reforms. A new bill to modify the Companies Act will be presented in 2011 for parliamentary approval.

The Seychelles Licensing Authority has been reconfigured with additional powers and is required to deal with most applications within 14 days. An appeals board was set up to arbitrate disputes. Replacing a 2005 law, the Investment Act 2010 has remodelled the Seychelles Investment Bureau (SIB) to provide a better service for foreign investors and establish an appeals panel. It will co-ordinate public and private investment projects. The government also amended the excise and business tax laws and the foreign exchange act. Hotels no longer need a licence to exchange small amounts of foreign currency for guests and businesses are no longer obliged to use the CBS exchange.

Communication between the government and the Seychelles Chamber of Commerce and Industry (SCCI) has improved. The SCCI meets every month with the Ministry of Finance, the Ministry of Employment, the Seychelles Investment Bureau and immigration authorities to discuss measures to improve the country’s business environment.

In 2010, the Concessionary Credit Agency (CCA) financed 364 small and medium enterprises (SMEs), which it will continue to fund in 2011.The maximum loan that the CCA will disburse to businesses will reduce by half to SCR 150 000 in 2011. The SMEs will also receive free training in accounting, bookkeeping, management, marketing, tax liabilities and tender procedures so that they may become more competitive.

The offshore industry, international business centres (IBCs), grew at an impressive rate during 2010, with the Seychelles International Business Authority (SIBA) revenues increasing by 35%, while the number of companies registering as IBCs increased by 12%. The SIBA introduced ‘foundations’ as a new product during 2010, with 29 foundations registering in 2010. The SIBA’s New Securities and Financial Market Division is now operational. The country is the fourth largest jurisdiction in IBC registration. The Seychelles continues to maintain its commitments to the OECD regarding the global forum on transparency and exchange of information for tax purposes. During 2010, the OECD carried out a peer review that maintained the Seychelles’ status as an international financial services centre.

Despite the global financial crisis, the banking system is well capitalised and profitable. Banks remain fully compliant with current standards. In December 2009, rules regarding minimum capital holdings for banks changed. With three years to comply, all banks will be required to double their minimum capital to SCR 20 million.

Other Recent Developments

The government continued with reforms in public financial management, public expenditure and public enterprises during 2010. In the 2011 budget, the government introduced a medium-term budgeting framework, which presents its fiscal and economic projections over a 3-year horizon. In addition, it introduced several new measures including a public bodies classification policy, a revised financial instructions and accounting manual and a public finance law.

Under its public reform programme, the government approved a detailed work plan for the public enterprise monitoring division (PEMD). This aims to reinforce the monitoring and control of public enterprises, strengthen governance, reduce dependence on public funding and minimise financial crisis to the state. The authorities are strengthening the management and oversight of publicly owned financial institutions, which are to be privatised. The government is currently assessing the timing for and modalities of the divestiture from these institutions, which include Nouvobanq, Seychelles Savings Bank and the Housing Finance Company. A privatisation strategy is to be developed by June 2011.

Public sector reforms will continue during 2011, focusing on: downsizing the number of public servants to 7 500 from 10 000; reviewing service and retention schemes of professionals and technical staff; removing existing non-core positions, which will be absorbed by private firms or co-operatives; reviewing salary structures; the reclassification of public bodies; and capacity building. A policy of outsourcing will also continue in 2011. In 2010, a number of services, such as cleaning and security, were outsourced, leading to greater efficiency in the public service. Further outsourcing may occur in areas for which the government has insufficient resources, such as architecture, installation of street lights and project supervision and management.

The Seychelles will continue investing in public infrastructure such as roads, water and energy in 2011. Other investments are being made in housing and submarine cables. In 2010, the government entered into new partnerships with two companies, Cable and Wireless and Airtel, to increase the country’s telecommunication bandwidth. The system is due to come online in mid-2012.

In 2011, the government, in partnership with the Energy Commission and the Seychelles Public Utilities Corporation, will implement the first phase of a programme geared at reducing the consumption of electricity through the usage of solar-powered water heaters. This policy is to promote greater utilisation of renewable energy sources.

The environment continues to be a central concern in development planning. The government has, to some degree, implemented its second Environment Management Plan of Seychelles (EMPS) 2000-2010, which seeks to protect the environment. The authorities are now preparing the third EMPS for the period 2010-2020. Forest covers almost 90% of the country’s land surface. The area under protection now accounts for 50% of the total land area.

Emerging Economic Partnerships

The most established emerging partners (EPs) of Seychelles are China, the United Arab Emirates (UAE), India, Saudi Arabia and Brazil. Others include Malaysia, Indonesia, Singapore and Turkey. Relationships with most of these EPs involve trade, investment and aid. Since 2006, China, India and the UAE have intensified their relationships with Seychelles the most.

India’s engagement with Seychelles started in 1976. It maintains technical and financial co-operation with Seychelles, and provides scholarships and exchanges with several Indian universities. Through the Pan African Network System with the African Union (AU), India is establishing a satellite terminal station to facilitate tele-medicine, tele-education, and video-conferencing for the 53 heads of state in Africa. Victoria hospital is connected to six specialised hospitals in India through this tele-equipment. In tele-education, the University of Seychelles is connected to three Indian universities through distance learning since September 2010. India is also to provide an information technology (IT) centre to be commissioned in March 2011 at a cost of USD 1 million, which is part of its support for the Seychelles University.

India has provided a soft loan of USD 10 million to the Development Bank of Seychelles and a line of credit of USD 5 million to the Seychelles Marketing Board/Seychelles Trading Company with a moratorium of five years at a low interest rate of 1.75%. It has also provided one surveillance aircraft and two helicopters to fight piracy in the Seychelles’ waters and is assisting with military personnel (two lieutenants and two colonels).

China is providing a combination of grants and soft loans for water supply, sewerage and energy. China has also contributed to scholarships and is helping to build the new National Assembly and two public schools. 

The UAE has recently intensified its relationships with the country and is providing support for a coast guard base, military equipment, buses and medical equipment. It is implementing an e-learning project, which is setting up networks in schools. Under this project, primary schools are being equipped with laptops. This project will cater for an IT curriculum that will bring a new dimension to teaching and learning while helping to build capacity in the education sector. This partnership and the national policy of developing information and communications technology (ICT) in schools is being managed by the University of Seychelles, under a committee from the Ministry of Education, the University of Seychelles and Abu Dhabi. The UAE has also provided a new diagnostic centre and a grant of USD 50 million for health-sector reform.

Cuba and Russia have provided the Seychelles with health professionals in various speciality areas. Turkey is in the process of signing a free trade agreement and is providing two education scholarships at the tertiary level.

The EPs’ interest in the Seychelles is similar to those of the traditional partners’. In the short term, the EPs are mainly interested in Seychelles as a destination for FDI and a source of cheap labour, while the fishing industry is also of interest. Access to natural resources, if exploration confirms commercially viable hydrocarbon deposits, is a longer-term objective.

Investments from EPs are mostly concentrated in construction (led by China, followed by the UAE); professional, scientific and technical activities (China and India); public administration and defence, compulsory social security (India and UAE); education and professional training (India and China); and health and social work (China and India).

The Seychelles’ traditional partners are focusing on economic growth, governance and increasing human capital; while the multilaterals focus on economic growth; governance; transport, water and energy infrastructure; poverty reduction; education; promoting gender equality; and environmental sustainability. On the other hand, the EPs are extending their support in both traditional and new areas, such as: economic growth; governance; increasing human capital; promoting innovation; improving the transport, water and energy infrastructure; providing special infrastructures (e.g. stadium, palaces); expanding education; improving health; reducing poverty; environmental sustainability; exports promotion; and stimulating domestic employment.

Political Context

Presidential elections are due to be held in mid-2011 and parliamentary elections in mid-2012. President James Michel will be seeking re-election for the second time, which is of critical significance, as this will be the first election since the economic crisis and subsequent sweeping economic reforms of 2008-09. The results will signal either the confidence or non-confidence of the electorate in the government’s extensive reforms. The economy has now stabilised and is expected to rebound over the next few years after two years of decline, which give the incumbents high chances of re-election.

The socio-economic reforms have resulted in a more transparent and less partisan society. However, challenges related to building a more independent judiciary and improving press freedom remain. Seychelles performs better than most of sub-Saharan Africa in political rights, civil liberty and political stability, however, and it ranks well on measures of governance and corruption.

Social Context and Human Resource Development

Seychelles has the second highest GDP per capita (after Equatorial Guinea, an oil exporter) in Africa, and is one of the six upper-middle-income countries of the continent. In addition, it leads the continent in human development. It is ranked 57th in the UNDP’s Human Development Index of 2009, a level comparable to many OECD countries. In 2010, it allocated about 43% of the country’s budget, or 5% of GDP, to health and education, reflecting that poverty and social welfare programmes rank high on the government’s priorities. The Seychelles has already met most of the eight MDGs targets. Seychelles hopes to attain MDGs 6 to 8, in which it currently falls short of the 2015 targets.

According to the government’s report on the Status of MDGs 2010, extreme poverty does not exist in the Seychelles, although there are pockets of poverty. In this regard, the government has put in place welfare programmes for those in extreme need and safety nets for the vulnerable and disadvantaged groups. Adult literacy in the Seychelles is about 96%, while universal education approaches 100%. The current national food poverty line of USD 3 per day is above the World Bank’s absolute poverty line.

In addition, the government has invested heavily in infrastructure over the past decade; as a result 93% of the population has access to treated water supply.

Seychelles maintains free access to education and health for all citizens. Primary and secondary levels of education are free and compulsory (10 years), while 80% of secondary school graduates proceed to tertiary institutions, making the country an achiever in MDGs 2 and 3. The authorities are reviewing the curriculum of secondary schools to combine vocational and academic subjects, allowing students to be connected to working institutions. The review will also identify the needs of businesses and industries and channel students accordingly.

The health sector needs to be reformed by introducing targets to measure progress, planning health services accordingly and exploring measures for effective partnerships with NGOs and churches. More research is needed on new diseases and the impact of HIV/AIDS and Hepatitis C on the economy. Incidence of Hepatitis C is increasing: in 2009, there were 37 known cases, but between January to October 2010, 50 cases were registered.

Drug and alcohol abuse are on the rise, and the government is spending a considerable sum to address illnesses such as Hepatitis B and C. Mental health problems are also on the rise, with over 300 cases treated in 2010. The government plans to build a new wellness centre for those suffering from mental illnesses and drug or alcohol addiction.

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Senegal

Overview


SenegalAfter two years marked by the effects of the global financial crisis, the Senegalese economy began to recover in 2010 thanks to the global economic recovery and the measures taken by the authorities to boost national economic activity. Gross domestic product (GDP) was estimated to have grown from 2.2% in 2009 to 4.2% in 2010, and is projected to reach 4.5% in 2011. This will be largely due to the performance of the three sectors of the economy – primary, secondary and tertiary – which respectively accounted for 14.7%, 20.4% and 64.9% (including administration) of GDP in 2010.

Analysis of the basic macroeconomic indicators in 2010 reveals the start of a recovery in the Senegalese economy. The real growth rate thus rose from 2.2% in 2009 to 4.2% in 2010 and 4.5% in 2011 (forecasts). The average annual rate of inflation (­-1.0% in 2009) was 1.2% in 2010. In 2011 inflation measured by the GDP deflator is forecast at 3% largely as a result of higher energy prices. The expected change in the investment rate measured by the Gross Fixed Capital Formation (GFCF) is positive: 23.9% of GDP in 2010 and 24.1% in 2011. The tax-burden rate of 18.9% in 2010 also complies with the requirements of the sub-regional convergence criteria (greater than or equal to 17%).

Senegal’s external position in 2009 and 2010 resulted in an improved current account deficit (6.7% of GDP in 2009 and 5.9% of GDP in 2010, compared to 14.2% in 2008). The good rate of revenue collection, up by 11% compared to 2009, and control of the increase in public expenditure (7.1%) characterised Senegal’s fiscal policy in 2010. The overall budget deficit, including grants, improved 0.4 percentage points, from 4.9% of GDP in 2009 to 4.5% in 2010. It was estimated at 5.8% in 2011.

Since 2000, Senegal has initiated new partnerships with emerging countries, particularly China, India and Iran. The main achievements are to be found in the areas of training, infrastructure and transport.

The year 2010 was marked by social movements linked to demands for better access to basic services, sometimes at the initiative of citizens’ movements unrelated to opposition political parties. New armed clashes resulted in seven deaths among the armed forces in the Casamance region in December 2010. Specific development programmes are being implemented with the objective of re-establishing peace in the region.

Figure 1: Real GDP growth (W)

Source:IMF and local authorities’ data; estimates and projections based on authors’ calculations.

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

Table 1: Macroeconomic indicators

  2009 2010 2011 2012
Real GDP growth 2.2 4.2 4.5 5
CPI inflation -1.1 1.2 3 2.3
Budget balance % GDP -4.9 -4.5 -5.8 -6.3
Current account % GDP -6.7 -5.9 -5.9 -10.3

Source:National authorities’ data; estimates and projections based on authors’ calculations.

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

Recent Economic Developments and Prospects

Table 2: GDP by sector (in percentage)

  2005 2010
Agriculture, forestry, fishing & hunting 16.8 16.6
Agriculture, livestock, fishery, forestry and logging - -
of which agriculture - -
of which food crops - -
Mining and quarrying 1.1 1.9
Mining, manufacturing and utilities - -
of which oil - -
Manufacturing 15 13.8
of which hydrocarbon - -
Electricity, gas and water 2.6 3.2
Electricity, water and sewerage - -
Construction 4.9 5.1
Wholesale and retail trade, hotels and restaurants 19.6 18.6
of which hotels and restaurants 1 0.8
Transport, storage and communication 11.3 12.5
Transport and storage, information and communication - -
Finance, real estate and business services 3.6 3.5
Financial intermediation, real estate services, business and other service activities - -
General government services 7.3 6.9
Public administration & defence; social security, education, health & social work - -
Public administration, education, health - -
Public administration, education, health & other social & personal services - -
Public administration, education, health & social work, community, social & personal services - -
Public administration, education, health & social work, community, social services - -
Other community, social & personal service activities - -
Other services 17.7 17.8
Gross domestic product at basic prices / factor cost 100 100

Source:AfDB Statistics Department; Ministry of Finance.

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.

Table 3: Demand composition

  Percentage of GDP (current price) Percentage changes, volume Contribution to real GDP growth
2002 2009 2010 2011 2012 2010 2011 2012
Gross capital formation 17.2 23.7 5.3 11.1 12.2 2.6 3.2 3.8
Public 5.7 6.7 5 7 6 0.3 0.5 0.4
Private 11.5 20.4 10.6 12.3 14 2.2 2.8 3.4
Consumption 93.2 92.8 3.8 4.1 2.6 2 2.1 2.3
Public 13.3 14.2 1.5 1.7 2.5 0.2 0.2 0.3
Private 80 78.6 4.1 4.3 2.7 1.8 1.9 2
External sector -10.4 -19.9 - - - -0.4 -0.9 -1.1
Exports 28.5 23.2 7 3.7 3.3 1.1 0.9 0.8
Imports -39 -43.1 -1.5 4.2 4.6 -1.5 -1.7 -1.9
Real GDP growth rate - - - - - 4.2 4.5 5

Source:Data from Ministry of Finance; estimates (e) and projections(p) based on authors’ calculations.

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

Macroeconomic Policy

After the food and energy crises in 2008 and the global recession in 2009 badly affected Senegal’s development, the country’s economy recorded an upturn in growth in 2010 owing to the effects of the global recovery and better targeted macroeconomic policies.

Fiscal Policy

The last few fiscal years saw significant overspending and ongoing domestic payment arrears towards the private sector. To address these flaws, the government implemented a prudent fiscal policy in 2010 aimed at stimulating overall demand, controlling public expenditure and clearing the domestic debt. In October 2010, the government publicly stated its desire to finish paying off the extra-budgetary expenditure dating from 2008. Overall for 2010, budgetary resources are estimated to have grown by 13%, compared with a 2.6% fall in 2009. Government capital expenditure, meanwhile, is estimated to have grown by 6.1%, compared with 1.9% in 2009.

The budgetary resources for 2010 amounted to XOF 1.246 trillion, up slightly from XOF 1.122 trillion in 2009. This XOF 124 billion increase was mainly due to the more favourable domestic environment. Budget receipts for 2010 rose by 10.6% to XOF 1.199 trillion from XOF 1.085 trillion in 2009.

The additional tax revenue was generated by reforms aimed at broadening the tax base and modernising the tax authorities, but also by increased direct and indirect taxes, which respectively accounted for 28.5% and 71.5% of tax revenue in 2010. Non-tax revenue rose to XOF 46.3 billion in 2010, up 24.1% from XOF 37.3 billion in 2009. This rise was mainly due to the strong upward trend in property taxes following the introduction of a new reform to the property laws. The share of tax revenue in GDP continued its upward trend, rising from 18.0% in 2009 to 18.9% in 2010. A similar share of 19.1% is projected for 2011, still well above the ECOWAS floor of 17%.

Total expenditure and net lending were estimated at XOF 1.722 trillion in 2010, up from 1.608 trillion in 2009. There are various reasons for this upward trend, including the increase in capital expenditure, staff costs and interest on external debt. Overall investment rose by 21.7% from XOF 606.9 billion in 2009 to 738.3 billion in 2010. This progress is both related to capital expenditure financed by domestic resources (up 67.2 billion compared to 2008) as to those financed with external resources (up 64.2 billion compared to 2009).

Current expenditure included a 7.7% rise in personnel costs in 2010 and interest on debt (27.7%). The interest on external debt, affected by the Eurobond loan taken out in 2009, thus rose from XOF 23.1 billion in 2009 to XOF 34.8 billion in 2010. Operating expenditure, however, is estimated to have been reduced by 8.9% in 2010, as it was in 2009.

In total, the overall budget deficit, including grants, is estimated to have improved slightly, from 4.9% of GDP in 2009 to 4.5% in 2010, and is projected to rise to 5.8% in 2011. Senegal’s fiscal position thus places the country in line with two out of three first-order convergence criteria for public finance management issued by the West African Economic and Monetary Union (WAEMU): an overall debt-to-GDP ratio of less than 70% (Senegal’s was 34.8% in 2009 and is estimated at 34.5% for 2010); the elimination of payments arrears (Senegal met the criteria for 2010).

Table 4: Public finances (percentage of GDP)

  2002 2007 2008 2009 2010 2011 2012
Total revenue and grants 19.5 22.8 21.7 22 23.1 22.2 21.4
Tax revenue 16.9 19.3 18.3 18.3 18.9 19.1 18.6
Oil revenue - - - - - - -
Grants 1.7 2.4 2.3 3 2.6 2.2 2.1
Other revenues 1 1.1 1.1 0.6 0.6 0.6 0.6
Total expenditure and net lending (a) 21 26.5 26.5 26.8 27.6 28 27.7
Current expenditure 13.7 16 16.4 16.7 17 17 16.5
Excluding interest 12.6 15.5 15.8 16 16.1 15.9 15.5
Wages and salaries 5.4 6.1 5.8 6 5.9 5.6 5.4
Goods and services 3.6 4.4 4 5.6 6 6 6
Interest 1.1 0.5 0.6 0.8 0.9 1.1 0.9
Capital expenditure 7.4 10.5 10 10.1 10.5 10.9 11.1
Primary balance -0.4 -3.2 -4.2 -4.1 -3.6 -4.7 -5.4
Overall balance -1.4 -3.8 -4.8 -4.9 -4.5 -5.8 -6.3

a. Only major items are reported.

Source:Data from Ministry of Finance; estimates (e) and projections (p) based on authors’ calculations.

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

Monetary Policy

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%.

External Position

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).

Table 5: Current account (percentage of GDP)

  2002 2007 2008 2009 2010 2011 2012
Trade balance -10.1 -22 -25.6 -15.9 -14.8 -14.4 -20.4
Exports of goods (f.o.b.) 20 14.8 16.6 15.8 16.7 16.8 16.5
Imports of goods (f.o.b.) 30.1 36.9 42.2 34.1 33.9 33.7 36.9
Services -0.3 -0.3 -0.9 -0.7 -0.7 -0.5 -0.4
Factor income -2.4 -0.7 -0.4 -0.3 -0.4 -0.4 -0.4
Current transfers 6.9 11.4 12.7 11.5 11.1 11.8 10.9
Current account balance -5.9 -11.6 -14.2 -6.7 -5.9 -5.9 -10.3

Source:Data from Ministry of Finance; estimates (e) and projections (p) based on authors’ calculations.

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

Figure 2: Stock of total external debt (percentage of GDP) and debt service (percentage of exports of goods and services)


Source:IMF and local authorities’ data; estimates and projections based on authors’ calculations.

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

Structural Issues

Private Sector Development

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.

Other Recent Developments

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.

Emerging Economic Partnerships

Much of the economy is financed through the partnership between Senegal and donors. Since the turn of the century, Senegal has signed co­-operation agreements with new donors, the most important of which have been China, India and Iran. The co-­operation with these emerging countries is both rich and diverse.

Without long discussions or political divergences, China and Senegal signed an agreement on 25 October 2005 to re-establish diplomatic relations. The Chinese offensive is justified by the strategic position of Senegal in Africa and its role in international organisations.

Located at a crossroads between Europe, the Americas and the countries of Africa, Senegal is becoming a major hub, enabling fairly easy access to these different markets. Added to this is the country’s importance in the sub-region, the continent as a whole and the wider world. Senegal’s voice is both heard and respected in organisations such as the Economic Community of West African States (ECOWAS), the African Union (AU), the New Partnership for Africa’s Development (NEPAD) and the United Nations (UN).

The focal points of this co­-operation are education (scholarships), infrastructure (construction of 11 regional stadiums and repair of the Alassane Djigo de Pikine and Ely Manel Fall de Diourbel stadiums) and transport (enlargement of the vehicle fleet used by the Senegalese authorities and construction of the toll motorway, the Patte d’Oie interchange and Colobane Bridge).

Accounting for 20% of the loan agreements signed by Senegal in 2007, the partnership with China is particularly prominent in the trade sector. In 2010 there was a massive presence of Chinese people in the new Chinatown that has developed on Allée Papa Gueye Fall, which begins at the end of Avenue Charles De Gaulle in the Senegalese capital. The main products imported from China are tea, organic and non-organic chemical products, artificial and synthetic fibres, shoes, printed cotton fabrics, ceramic stones and veins, and fruit and vegetables.

Between 2000 and 2005, these exports were estimated to amount to XOF 34.864 billion, while imports amounted to an estimated XOF 8 billion, despite the Chinese government having negotiated preferential access to 440 types of Senegalese products, particularly fish products, agricultural products, mining products, chemical products, hides and skins, wood, cotton, textiles and clothing, jewellery, and handicrafts.

Senegal is interested in co-­operating with China in the area of information and medication technologies (ICTs) as part of its battle against the digital delay. The two countries have signed a XOF 55 billion agreement to finance the e­-government project that includes extending the government intranet to the embassies, consulates, prefectures and subprefectures as well as creating and developing a telemedicine and distance-learning network in Dakar. Furthermore, the China Economic and Social Council (CESC) provided a large donation of computer equipment to its Senegalese counterpart, formerly known as the Conseil de la République pour les affaires économiques et sociales du Sénégal, or CRAES, but now known as the Economic and Social Council.

India is Senegal’s second emerging partner. As a percentage of all agreements signed, the proportion of loans from India increased from 5% in 2004 to 20% in 2009. India is also Senegal’s second commercial partner, and is involved in various projects, including the car-assembly project developed by Tata. India also contributed to ICS’s recovery. At the end of 2008, the commercial contract between Senegal and IFFCO (ICS’s main client), which runs until 2012­-13, allocates all production to IFFCO, which now holds an 85% share in ICS, the remaining 15% belonging to the state for the production of fertilisers. India is also involved in mining through the Arcelor Mittal group.

The two countries also successfully co­-operate in training civil servants in computer skills. In health care, India supports Senegal through a XOF 2.5 billion agreement with the Export-Import Bank of India to finance facilities at centres giving the Senegalese people better access to healthcare.

In education, the focus is on training and capacity building through a partnership established in 2010 between the ISM management school in Dakar (Institut supérieur de management) and the Indian Institute of Foreign Trade (IIFT). Since 2004, India has awarded more than 1 600 scholarships and internships to Senegalese students.

Finally, the Foreign Trade Directorate estimates commercial transactions between the two countries to be worth XOF 448 billion. In 2010, an estimated 26.7% of Senegalese exports went to India. India is also involved in rural electrification.

Senegal’s third emerging partner is the Islamic Republic of Iran. The Organisation of the Islamic Conference (OIC) summit in 2008 gave Senegal the opportunity to establish commercial relations with Teheran. Iran is slightly isolated in the Islamic community, but by actively co­-operating with countries of the Non-Aligned Movement like Senegal, it is able to consolidate its position on the global stage.

In the area of transport, this co­-operation resulted in the opening of an assembly factory by the motor-car manufacturer Iran Khodro at a cost of USD 80 million. The factory assembles vehicles under licence from Peugeot and Mercedes-Benz. The partnership also led to the creation of a refinery and petrochemicals factory in collaboration with the Senegalese state refinery firm SAR (Société sénégalaise de raffinerie). Furthermore, in 2008, Iran rehabilitated various roads in Dakar and the surrounding region and built the four-lane highway between Thiès and Touba.

In terms of trade, Senegalese exports to Iran amounted to XOF 20 million in 2007, while imports from Iran were estimated at XOF 12 billion. In 2010, as a continuation of the dynamic co­-operation between the two countries, they signed agreements in very specific areas, covering: the implementation of food self-sufficiency programmes for rice, the creation of industrial chicken farming units, the promotion of agricultural equipment (Sen Iran car-assembly factory and full tractor and lorry assembly lines) and support for the energy sector (the construction of the interconnection between Tambacounda and Ziguinchor, the building of a factory manufacturing low-energy light bulbs).

Despite the importance of the projects at stake, Senegal recalled its Teheran ambassador in December 2010 after a ship from Iran travelling to The Gambia was discovered carrying 13 containers full of arms of various kinds, including ammunition for heavy weapons. The ship was intercepted by Nigeria, who informed the UN Security Council of its content. The situation continued to get more tense until, in late February 2011, Senegal decided to break diplomatic relations with Teheran.

Senegal co­-operates with its three emerging partners within the framework of bilateral agreements requiring action from the directorates of the finance and foreign affairs ministries and the corresponding embassies. In addition to its fruitful partnership with these emerging countries, Senegal participated in the China-Africa, India-Africa and OIC summits in 2008.

Political Context

In Senegal, the President of the Republic is elected by universal suffrage. A two-chamber parliamentary system has been in force since 2007 with a 150-member National Assembly and a 100-member Senate. An 80-member Economic and Social Council has recently been created. In power since 2000, re-elected in 2007, Abdoulaye Wade is a candidate to succeed himself for a third term in 2012. However, the Constitution, amended by referendum in January 2001, now limits presidents to two terms of office. This divides constitutionalists on the admissibility of the candidacy of the incumbent President.

The opposition is focusing its attention and energy on the next presidential elections and on the opportunity to present a single or plural candidacy. It has thus abandoned activity on the ground in favour of citizens’ movements, which exploded in number in 2010. These movements are led by politicians, academics, celebrities and religious leaders, including the singer, Youssou Ndour, the former Foreign Affairs Minister, Cheikh Tidiane Gadio, the academic, Amsatou Sow Sidibé and the marabout Serigne Mansour Sy Djamil.

2010 was marked by social movements linked to demands for better access to basic services. Various mass protests against power cuts and floods were held in Dakar and its outskirts. Further armed clashes resulted in seven deaths among the armed forces in the Casamance region in December 2010. Specific development programmes are being implemented with the objective of re-establishing peace in the region.

Social Context and Human Resource Development

In its pursuit of the MDGs, Senegal is on the way to achieving the target of schooling for all. The gross primary school admission rate has reached 117.5%, so the target of 110.3% by 2015 has already been achieved. The gross enrolment rate (GER), which stood at 80% in 2008, is now estimated to be close to 95% if Arabic classes are included. The primary school completion rate, which was 58.4% in 2008, is now above 60%, but remains low compared to the objective of 90% by 2015. This low rate is the result of ongoing problems such as students dropping out, malnutrition, and the recurring issue of temporary shelters, although considerable efforts have been made over the past decade in the construction of new classrooms, the establishment of elementary schools, colleges, high schools and regional university centers across the country.

In lower secondary education (11­-13 year olds), the GER, for which the 2015 target is 54.5%, was 41.4% at the end of 2009. The estimated rate by sex was 38.5% for girls and 44.1% for boys. These figures show the gradual reduction in the gap between boys and girls in access to lower secondary education.

In terms of the MDGs, Senegal is somewhat behind schedule in the area of healthcare, mainly because of difficult access to care and vaccine stock-outs in certain rural areas. The infant-child mortality rate is approximately 21%, with 25% of those deaths occurring during the prenatal period. Another poor statistic is the high maternal mortality rate, with 401 deaths per 100 000 live births in 2010.

Progress has been made, however, in controlling the prevalence of AIDS, which remains at 0.7% (0.9% of women and 0.4% for men). The authorities have reduced the cost of antiretroviral treatment by 90%. Further, as part of the social measures related to healthcare taken in 2010, on 1 May 2010 the government made artemisinin combination therapies (ACTs) for malaria free. In addition to free anti-malarial drugs, the cost of treatment for haemodialysis was reduced by 80% as of 7 April 2010. In terms of budgetary policy, substantial efforts were made to try to achieve the MDGs. Nevertheless, the share of the budget allocated to healthcare in 2010 was 10%, still below the 15% threshold set by the World Health Organization (WHO).

In the area of employment and poverty reduction, several initiatives have been undertaken by President Wade since he came to power in 2000. These include the youth employment agency (ANEJ), the youth employment fund (FNPJ), the OFEJBAN office to promote the employment of young people in the suburbs, and in August 2010, the Young People on Arable Farms project (JFA), which is responsible for creating 75 farms in the country for 3 000 new people trained in farming techniques. Despite the variety of measures taken by the government, the fight against poverty, which affects a great deal of the population, continues to be one of the priorities of government action.

Subcategories

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