Promising market for foreign investors
Senegal is a country in West Africa located on the Atlantic coast with a population of 17.3 million. Senegal became independent from France in 1960 as part of the Federation of Mali, from which it subsequently withdrew. In 1982, Senegal formed the Confederation of Senegambia with neighboring Gambia, which was dissolved in 1989. Initially, economic development was robust, but it ended with a crash in the early 1990s. The country resumed growth through reforms supported by the International Monetary Fund and the World Bank.
Senegal ranks among low-income economies. However, it is simultaneously a hub for regional shipping and banking and transnational institutions for francophone West Africa. In 2022, Senegal’s GDP was $27.7 billion ($1598 per capita). In the GDP structure, industry accounts for 24.5%, services for 49.7%, and agriculture for 15.7%. As for the business environment, micro, small, and medium-sized enterprises (300,000) account for 90% of all companies.
The pillars of Senegal’s economy are mining, agriculture, and tourism. Authorities upgrade transportation infrastructure, both domestic and cross-border, to foster economic development. The Port of Dakar (Port Autonome de Dakar, PAD), one of the largest ports in Africa, has a pivotal position in the region. Senegal has also pledged to reduce greenhouse gas emissions by 29% by 2030, depending on foreign support to achieve this goal.
Population of Senegal
Senegal has a population of 17.3 million people. The largest ethnic groups are Wolof (39.7%), Pular (27.5%), Serer (16%), Mandinka (4.9%), Jola (4.2%) and Soninke (2.4%). The country is also home to people of European and Middle Eastern descent and 14,000 Mauritanian refugees. The largest religious groups are Muslims (97.2%), mainly Sufi, and Christians (2.7%), mostly Roman Catholic. French is the official language, while Wolof and Arabic are widely spoken.
Senegal’s population is very young. The birth rate is 2.52%. Those aged 65 or older currently account for 3.34% of the population, while those aged 15-64 account for 55.46%. The labor force numbers 5.2 million people. 36.3% of Senegalese live below the poverty line. The urbanization rate is 49.6%. The largest urban center is the capital, Dakar, with a population of 3.34 million. Most Senegalese live in the western part of the country.
Economy of Senegal
Senegal’s currency is the CFA franc, used by 14 African countries. Mining, agriculture, fisheries, and tourism are central to the economy. In recent years, oil and gas projects have been developed. Senegal has proven natural gas reserves of 910 billion cubic meters and oil reserves of 1.03 billion barrels. According to the IMF, the mining sector will boost the economy for the next few years, enabling, among other things, the upgrading of the local industrial base.
The authorities also focus on developing the chemical, textile, processing, and agri-food sectors. The main agricultural products are sugarcane, rice, corn, cotton, peanuts, sorghum, and vegetables. Although agriculture is one of the most important drivers of growth, the country’s primary source of income is services. On the other hand, there is a need to upgrade agriculture and further increase its productivity and competitiveness, also given its vulnerability to global climate change.
Senegal is the gateway to West Africa and a promising location for launching expansion in that region. A symbol of Senegal’s growing status is Dakar as a global conference and convention center. The authorities seek to position Senegal as the region’s logistics and industrial hub by 2035. The goal is being pursued through the “Plan Senegal Emergent” implemented since 2014, whose pillars are infrastructure development, strengthening human capital, and promoting good governance.
International trade
Senegal is the world’s 95th largest exporter and 94th largest importer. The value of Senegalese exports is $5.2 billion, and imports are $9.7 billion. Senegal’s main trading partners are China, France, India, Mali, Switzerland, Spain, Russia, Nigeria, Netherlands, Belgium, and Turkey.
The group of most imported goods is oil and mineral fuels (25.3%), industrial machinery (9.06%), cereals (8.93%), electrical machinery (5.82%), motor vehicles and parts (5.62%), iron and steel (4.33%), pharmaceuticals (3.5%), plastics (3.28%), iron and steel articles (3.12%), and flour and starch (2.45%). Other goods include natural minerals and stones, oils and fats, precision instruments, paper, organic chemicals, processed foods, dairy products, and sugar.
The most exported goods are precious stones and metals (18.7%), oil and mineral fuels (15.5%), seafood (10.4%), inorganic chemicals (9.35%), oilseeds (5.58%), ores (5.21%), natural minerals and stone (4.42%), processed foods (3.3%), fruits and nuts (2.9%), iron and steel (2.85%), vegetables (2.09%), and tobacco (1.61%). Other exports include cosmetics, flowers, feathers, fertilizers, electrical machinery, and cereals.
Trade agreements
Senegal, to date, has entered into 29 bilateral investment treaties (BITs). Nineteen of these are currently in force. Senegal has also concluded double taxation agreements with 15 countries in Europe, Africa, and Asia.
As a member state of the West African Economic and Monetary Union (WAEMU), Senegal is party to a Trade & Investment Framework Agreement (TIFA) with the United States. Senegal also enjoys preferential access to the US market under the African Growth and Opportunity Act (AGOA), which will expire in 2025.
Senegal is a party to the Cotonou Agreement, an economic and political agreement concluded in 2000 between the European Union and 78 African, Caribbean, and Pacific countries. In July 2023, a decision was made to replace the Cotonou Agreement with a partnership agreement.
Agreements with associations of states:
Economic Community of West African States (ECOWAS)
West African Economic and Monetary Union (WAEMU)
African Union (AU)
African Continental Free Trade Area (AfCFTA)
Senegal-European Union relations
Senegal is an important partner of the European Union in West Africa. The European Communities established relations with Senegal more than 50 years ago. They are currently based on the Cotonou Agreements and the “Joint EU-Senegal Strategy 2018-2023”. Financial assistance under the EU’s 2021-2027 budget is linked to the “Plan for an Emerging Senegal” regarding job creation and sustainable development strategies. The EU also supports programs to strengthen economic competitiveness and expand trade relations.
The European Union is Senegal’s most important trading partner. Senegal benefits from a preferential trade regime with the EU. In 2021, the total value of trade relations was 6.4 billion euros. Senegal exports gold, oil, mineral fuels, seafood, and inorganic chemicals to the EU and imports mineral fuels, cereals, industrial machinery, and electrical equipment. The economic relationship is completed by a sustainable fisheries agreement signed in 2014.
Opportunities and challenges
Import duties and customs fees are one of the primary sources of revenue for the Senegalese government. Regulations in this area stem from Senegal’s membership in ECOWAS and WAEMU. Senegal follows the ECOWAS Common External Tariff (CET) with a 5-tier tariff structure (0, 5, 10, 15, 20, 35%) with a special import tax on selected food products. Due to the Muslim majority, food products should meet the halal standard. Products banned by Shariah are not prohibited, but their sale may require additional certification.
Due to the ongoing economic transition, Senegal is a promising market. Political stability results in relatively lower corruption compared to other African countries. In 2022, Senegal was ranked 72nd by Transparency International. The main risk is related to geopolitical challenges in the region. Infrastructure shortcomings should also be taken into account. Although Senegal is the most industrialized country in West Africa, it is still not fully electrified, and the quality of the transportation network continues to pose logistical problems.
Opportunities for entrepreneurs interested in expanding arise from structural changes in the Senegalese economy. The authorities’ priorities under the “Plan for an Emerging Senegal” provide an indication. Significant opportunities are present in the modernization of the oil sector and the development of the gas and renewable energy sectors. Further prospects include the modernization of agriculture and fisheries and infrastructure development projects (roads, ports, housing). Industries for investment also include tourism, telecommunications, and education.