By Joseph Moss, International Banker
In the space of just three weeks, Bassirou Diomaye Faye went from languishing in prison to becoming president of Senegal. In an astonishing turn of events, the former tax inspector came to power following waves of political unrest in response, firstly, to Faye’s arrest last year and, secondly, to the announcement made in early February by then-President Macky Sall that he would postpone the presidential election that was due to be held on February 25. But with the courts eventually overturning Sall’s decision, Faye emerged from the March 24 election with a resounding victory. But what does the election of Senegal’s youngest-ever president mean for the economy?
Arrested and charged with contempt of court and defaming magistrates after accusing them of being unduly influenced by the state, Faye was imprisoned in April 2023, remaining in detention for 11 months. Senegal’s authorities then imprisoned Ousmane Sonko, the leader of the opposition party, the African Patriots of Senegal for Work, Ethics and Fraternity (PASTEF), to which Faye belonged, in July 2023. The arrests sparked protests across the country that only intensified in early February—even turning deadly—after President Sall announced that he had abolished by decree a November 2023 measure that had established the election date of February 25, citing disputes over the election’s approved candidate list. But with the Constitutional Council overruling the president’s decision, Sall was ordered to organise elections before the end of his second term of rule on April 2.
While Sonko’s ruling barred him from running as a candidate in any future election, Faye’s did not, allowing him to be endorsed by Sonko to run for the presidency. “My choice of Diomaye is not a choice from the heart, but from reason. I chose him because he meets the criteria that I have defined. He is competent and has attended the most prestigious school in Senegal,” Sonko confirmed. “No one can say he is not honest. I would even say that he is more honest than me. I entrust the project into his hands.”
Released from prison on March 14 before embarking on a whirlwind nationwide election campaign, Faye ultimately defeated the ruling coalition’s candidate in a landslide victory 10 days later. Indeed, with more than 54 percent of the vote, Faye is the first opposition candidate to win an election in Senegal in the first round of voting since the country gained independence in 1960, defying analysts who mostly expected Faye to win less than 50 percent of votes and thus trigger a second round of voting.
With such a strong mandate from the electorate, what does a Faye presidency mean for Senegal’s economy? For the broader economic environment, Faye’s election victory should bring calm to the country once again, which, in turn, should prove vital in delivering long-term stability. Other than two consecutive quarters of annual contractions in gross domestic product (GDP) during the COVID pandemic, Senegal’s economy has delivered strong, consistent growth for decades. Indeed, last year saw the economy grow at a solid 4.6 percent despite the political unrest following the imprisonments of Faye and Sonko.
“Seizing the Opportunity”, a June 2024 economic update report on Senegal from the World Bank, acknowledged that, thanks largely to the dynamism of the primary sector, the Senegalese economy remained resilient in 2023 despite heightened domestic, global and regional turmoil, coupled with high inflation. “Real GDP growth is estimated at 4.3 percent (1.5 percent in per capita terms) in 2023 from 3.8 percent in 2022 and above the initially projected level of 4.1 percent (1.4 percent in per capita terms) and below Senegal’s aspirational peers,” the report stated, also noting that annual inflation eased to 5.9 percent in 2023 from 9.7 percent in 2022 but remained above the country’s 3-percent target. “Political tensions coupled with higher inflation and monetary tightening, disrupted the tertiary sectors and led to reductions in growth in investment.”
Nonetheless, growth did slow in the first quarter of 2024 to 2.3 percent year-on-year from the 5.2 percent recorded during the final quarter of 2023. Following its mission to Senegal from April 26 to May 3, 2024, the International Monetary Fund (IMF) attributed this slowdown to political uncertainties linked to the presidential election. “High-frequency indicators suggest that economic activity was subdued as businesses postponed investments and consumers cut back on spending,” the IMF also noted. “Headline inflation declined to 3.3 percent year-on-year. Budget execution was marked by a revenue shortfall and an overrun in the energy subsidy.”
Many of those who supported his election campaign will also be hoping for Faye’s new administration to address the glaring anomaly among Senegal’s macroeconomic metrics—that is, an unemployment rate of more than 22 percent, including almost one-third of Senegal’s youth—another key factor underpinning the discontent among protestors. “Macky Sall’s administration prioritised infrastructure development, which, while important, overshadowed more immediate economic concerns of the people,” Abdoulaye Ndiaye, an assistant economics professor at New York University (NYU) Stern School of Business, told Reuters in late March. “There is a collective yearning for policies that will enhance job creation, improve public education quality, and revitalise the agriculture sector to be more productive and sustainable. In rural areas, more than half of the population lives below the poverty line.”
But his promise to strengthen Senegal’s economic sovereignty, particularly regarding the country’s natural resources, has been Faye’s most striking economic strategy thus far. The new president has already taken decisive actions in pursuit of this goal—for instance, he immediately ordered an audit of the country’s oil, gas and mining sectors after coming to power.
Faye also reiterated his desire to renegotiate the contracts currently in place with the foreign energy and mining companies operating in the country. “The exploitation of our natural resources, which according to the constitution belong to the people, will receive particular attention from my government,” Faye confirmed during his inaugural address to the nation in April. “I will proceed with the disclosure of the effective ownership of extractive companies (and) with an audit of the mining, oil, and gas sector.”
This issue is becoming even more pertinent since production commenced in Senegal’s first offshore oil project in the Sangomar oil field, in which Australian firm Woodside Energy maintains an 82-percent stake and the country’s state-owned energy company, Groupe Petrosen, holds the remaining 18 percent. According to a statement from Woodside, the project aims for 100,000 barrels per day of production. “First oil from the Sangomar field marks a new era not only for our country’s industry and economy, but most importantly for our people,” the general manager of Petrosen, Thierno Seydou Ly, explained in the statement.
Indeed, Petrosen has projected fossil-fuel projects to yield earnings of more than $1 billion per year over the next three decades, with a liquefied natural gas (LNG) project at Senegal’s border with Mauritania due to come online at the end of this year. And with the new administration aiming to retain more profits from foreign resource-extraction activities within its borders, Senegal’s population of 18 million people will surely hope that Faye’s stronger moves towards resource nationalism will be a key driver of economic growth in the years to come. “My belief is that we could have negotiated the contracts better…. The strategy is how to use oil and gas resources to develop other sectors,” the new president acknowledged on July 13. “There will be a renegotiation taking into account mutual benefits…. Other countries in Africa and elsewhere have negotiated better to get the maximum possible for their resources.”
Given his well-known anti-establishment credentials built on a stated ideology of “left-wing pan-Africanism”, moreover, many hope that Faye follows through with his election pledge to pull Senegal out of the West African CFA franc currency union. Increasingly viewed throughout West Africa as a legacy of French colonial rule—and a deeply undesirable one at that—plans continue to develop across the region to leave the euro-pegged CFA franc, with the newly formed Alliance of Sahel States of Mali, Burkina Faso and Niger leading the way by announcing its intentions to launch the “Sahel” as their new currency.
Could Faye’s Senegal follow suit? Sonko has certainly made noises in support of Senegal developing its own national currency. “We will try [to] implement a monetary reform at the sub-regional level first,” Sonko said. “If that fails, we will make a decision as a nation.”
However, not everyone is convinced that the government will follow through on this rhetoric with any decisive action. “The notion of Senegal unilaterally adopting a new currency seems rather far-fetched,” Nick Eisinger, a portfolio manager at Vanguard with an “overweight” position in Senegal’s bonds, told Reuters in March. “There may be some cosmetic changes…to the currency peg, but the benefits (low inflation, monetary credibility, some fiscal discipline, external transfer and convertibility mitigation) are quite numerous, and it is likely the new administration will not want to jeopardize this.”
Looking forward, the economic outlook for Senegal remains favourable, with the International Monetary Fund recently estimating 2024 economic growth at a hefty 7.1 percent. This forecast is down from its previous prediction of 8.3 percent, which the IMF stated was reflective of weaker economic activity due to the electoral context and delays in gas production until December 2024.
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