Foreign direct investment (FDI) in Senegal

FDI in Figures

Senegal hosts a large stock of FDI compared to its region. The government is leading an active policy to encourage FDI inflows. According to the UNCTAD 2021 World Investment Report, Senegal was among the few economies on the continent that received more FDI inflows in 2020, up 39% to USD 1.5 billion, compared to USD 1.1 billion in 2019, despite the global economic crisis triggered by the Covid-19 pandemic. The total stock of FDI stood at USD 8.7 billion at the end of 2020. This increase in FDI is the result of investments in energy, both in the traditional oil and gas and renewable energy sectors. According to UNCTAD’ Investment Trends Monitor, global FDI flows rebounded strongly in 2021, but FDI flows to African countries (excluding South Africa) rose only moderately. Work on offshore oil and gas fields first began in Senegal in 2020, the largest project being the SNE Oil Field, which is being developed 100km south of the capital, Dakar, by a consortium including Woodside Petroleum (Australia), Cairn Energy (UK), FAR (Australia) and Petrosen (Senegal). Since 2014, FDI inflows have been linked to the Emerging Senegal Plan for the development of infrastructure, electricity, agriculture, drinking water and health. Senegal is looking to develop new industries that are linked to hydrocarbons such as petrochemicals, pharmaceuticals, fertilizers as well as a broad utilization of gas-to-power projects linked to the automotive manufacturing and mining (Energy Capital Power). Foreign investors have secured contracts to exploit mineral resources, provide garbage services, and manage Dakar's maritime port. Port Operator DP World (a Dubai-based company) plans to build a massive USD 1.1 billion deep-water port located 50km away from Dakar. France is the largest investor in Senegal, but recently there have been important investments from China, Turkey and the United Arab Emirates. Some other key investors are Morocco, Indonesia, and the United States.

In the 2020 edition of the Doing Business report of the World Bank (latest report), Senegal was ranked 123rd worldwide for the ease of doing business. This represents a notable improvement from the 2019 edition when the country was ranked 141st. Senegal has made progress in giving access to credit information by expanding the coverage of the credit bureau and offering credit scoring as a value-added service. It has also improved its tax collection system by implementing an electronic filing and payment system; it also merged taxes which result in a decrease in tax cost. As pointed out by the IMF, the authorities are working on overhauling the labor market, facilitating access to land, improving the commercial justice system, reducing the regulatory burden through modernizing the administration, and strengthening the competition framework via the Business Environment and Competitiveness Reform Program (PREAC III). A new Public-private partnership (PPP) framework has also been designed to help accelerate and broaden the implementation of major investments. There is no legal discrimination against businesses conducted or owned by foreign investors and there are no barriers to full ownership of businesses by foreign investors in most sectors. Senegal's strengths include competitive production costs, a skilled workforce, a strategic geographical location, good international and regional political relations, and a competitive economy. Some of the barriers that might impede investment are economic vulnerability, low activity diversity, underdeveloped infrastructure, inefficient and non-transparent regulation, bureaucracy, high factor costs, and lack of security.

What to consider if you invest in Senegal

Strong Points

The main assets of the country are:

• Strategic geographical location strengthened by good-quality international and regional political relations, allowing privileged access to regional and international markets
• Membership in the West African Economic and Monetary Union (UEMOA) and the CFA franc zone, guaranteeing monetary stability and access to capital with low-interest rates
• Competitive production costs
• Low-cost and skilled workforce
• Significant offshore natural resources of oil and natural gas
• A relatively healthy and competitive economy
• Various pro-business reforms that have emerged in recent years such as the renovation of the legal and fiscal framework
• Donor support under the Plan Sénégal Émergent, easing the pressure of debt on the economy and reassures the markets
• A very advantageous business environment in which investors can: register a company in 24 hours, set up a limited liability company (LLC) without the need for share capital or obtain a building permit online in 40 days.

Weak Points

The country has many obstacles to FDI. The main weaknesses of the country are:

• Vulnerability of the economy to climatic hazards and changes in the price of commodities
• Low business productivity and low activity diversity
• Infrastructure is still largely underdeveloped, particularly in energy and transport
• Slow and corrupt administration that does not establish quickly the structural reforms expected by markets
• Despite some improvements, the business environment is still disrupted by a strong government bias towards interventionism, partial and slow justice, and generally weak regulations
• Insecurity, especially on the border with Mali
• Significant current account deficits

Government Measures to Motivate or Restrict FDI

During 2017, the Senegalese government put in place numerous incentives for investments. Some of these measures are:

• Greater protection of investments
• The definition of priority sectors for investment
• The creation of a new company is now cheaper (reduction of notary fees for the registration of a company and reduction of the mandatory initial investment) and faster. The approval documents are issued in 10 days.

A law has been adopted in Senegal to establish the regime of special economic zones (SEZ). Tax and customs benefits can be granted to companies approved under the SEZ regime for a maximum of 25 years, including: exemptions from duties and taxes on imports of goods, raw materials and equipment (except for community levies); the application of a reduced corporate tax rate of 15%; and exoneration from some taxes such as business tax and property tax. Today there are three SEZs: one in the suburbs of Dakar, one in Sandiara and another in Ndiass.