Tunde Capital

Market Overview

Senegal is a democratic country that’s making fast progress. It’s improving its infrastructure and has big plans to increase private investment. This makes Senegal a good place for U.S. companies to do business, especially those interested in the West African market.

Senegal has been a democracy since it became independent from France in 1960. In 2023, it celebrated over 60 years of diplomatic relations with the U.S.

The government has a plan called the “Emerging Senegal Plan” (PSE in French). The goal of this plan is to grow the economy through economic reforms and private sector investments. By doing this, Senegal hopes to transform its economy and become an emerging market by 2035.

In the past five years, Senegal has had one of the highest GDP growth rates among the 15 countries in the Economic Community of West African States (ECOWAS). However, in 2022, the GDP growth rate fell to 4.7 from 6.1 the previous year. This was mainly due to the COVID-19 pandemic, which also caused a rise in food and energy prices, trade disruptions, and uncertainty that slowed private investment.

Major oil and gas projects were delayed because of the pandemic, but they’re expected to be back on track by the end of 2023. These projects are expected to drive the GDP growth rate to 5.3 percent in 2023.

Senegal’s capital, Dakar, is a major business hub, especially for cargo and transportation. It’s also an aviation hub for West Africa, with direct flights to New York City twice a week. Senegal has a good telecommunications infrastructure, with more cell phone accounts than people.

The Port of Dakar is the first major port-of-call from Europe and is a transshipment center for landlocked nations in West Africa. The government and private sector partners are working on new port projects.

Senegal’s main exports are fish, gold, phosphates, horticulture products, cement, peanuts, and nut oil. The government has taken measures to address the increased cost of living due to rising food and energy prices.

Senegal receives a lot of money from nationals living abroad. This money is important for the economy.

If you want to start a business in Senegal, you can contact the Investment Promotion Agency (APIX). They provide services to foreign investors and have made it easier to start a business.

Senegal is looking to increase U.S. trade and investment. U.S. investment in Senegal has grown since 2014, with investments in power generation, renewable energy, industry, and offshore oil and gas.

Although France has historically been Senegal’s largest source of foreign direct investment (FDI), China overtook France as Senegal’s largest bilateral trade partner in 2019. Other important investment partners include Turkey, Morocco, Saudi Arabia, and other Gulf States, as well as the EU.

The African Growth and Opportunity Act (AGOA) provides duty-free access to the U.S. market for most Sub-Saharan African countries, including Senegal. Exports under AGOA have increased gradually over the period 2011-2020.

Market Challenges

Senegal’s government is working hard to make it easier for businesses. Since 2007, they’ve cut down the time it takes to start a business. They’re also expanding their “single window” system, which is a one-stop shop for government services for businesses. They plan to have at least one service center in each of the country’s 45 regional departments by 2023. Property owners can now apply for construction permits online, and in 2019, the government made tax information and some payment options available online.

SENUM, Senegal’s state information agency, has big plans to increase Wi-Fi access and move more government services online. The government has also made progress in setting up a new Commercial Court to help resolve business disputes. Even though companies still report problems with corruption, Senegal is doing better than many countries in the region in this area.

High energy costs are a problem for industry growth. The Millennium Challenge Corporation (MCC) compact, signed in December 2018, aims to lower energy costs by modernizing the power sector, increasing access to electricity in rural areas, strengthening the electrical transmission network in Dakar, and improving governance of the power sector. The Compact started on September 5, 2021, and will last for five years.

Despite these improvements, there are still challenges. Because a lot of Senegal’s economy is informal, legitimate companies have to pay a lot of taxes. Some U.S. companies have complained about delays and uncertainty in the project development process. High costs for real estate and energy make Senegal less competitive. The bureaucracy is slow and hard to navigate for projects that need government approval. The legal system is slow and it’s hard to resolve commercial disputes, even though a commercial court was recently created. Senegal has a procurement regulatory agency and standardized procurement practices, but these rules aren’t always applied consistently.

According to the World Bank, the per capita GDP in 2022 is $1,598.07, and $4,209 when adjusted by purchasing power parity (PPP). So, U.S. companies interested in this market might want to think about using Dakar as a hub for West Africa. Also, companies looking to provide goods and services to the Government of Senegal should keep in mind that the government is sensitive to price because of fiscal pressures and a narrow revenue base.

Market Opportunities

There are many sectors in Senegal that have potential for U.S. companies. These include oil and gas, power generation, agribusiness, automotive, aviation, construction, medical services, telecommunications, software, data management, computers, and logistics.

Senegal has made some big oil and gas discoveries offshore. This means it will keep attracting foreign investment. The Grand Tortue Anaheim (GTA) gas field, which is operated by BP and is on the border with Mauritania, is expected to start producing gas in 2024. The GTA field has about 25 trillion cubic feet of natural gas. Senegal wants to become a big hub for Liquified Natural Gas. The Sangomar oil field near Dakar, which is operated by Woodside from Australia, is also expected to start producing oil in 2024. Senegal is currently looking for more deep-water blocks to license.

Senegal is trying to replace its heavy fuel oil and diesel-run plants with plants that run on natural gas and renewable sources. Right now, Senegal can produce 1,431 megawatts of power.

There are also some big infrastructure projects happening. These include building a new city near Dakar called Diamniadio, upgrading healthcare and hospitals, developing toll roads, upgrading power lines and distribution, extending fiber optic cables, and building datacenters that are carrier-neutral. All this construction is creating a demand for construction equipment, especially re-conditioned equipment.

In the agricultural sector, there are opportunities for farming equipment, irrigation systems, postharvest handling systems, and storage and silo facilities.

Market Entry Strategy

Meeting in person is very important. In Senegal, most businesses don’t need to have a local agent or distributor to export there. But, U.S. companies that do have an experienced agent or distributor who knows how business works in Senegal are less likely to have problems. The U.S. Commercial Service can help find local partners.

If a U.S. company decides to start a business in Senegal, they will need a lawyer and a notary for all the legal steps to set up a company. The Embassy has a list of lawyers and notaries. It’s a good idea for U.S. companies to work with firms that specialize in financial and tax advice. There are representatives from major U.S. and international business consulting firms in Senegal. If a foreign business is involved in project finance and needs multiple foreign bank accounts to make payments and do transactions, they should talk to the Central Bank early on when they are setting up their operations in Senegal.