• Overview
• Recent Developments & Prospects
• Macroeconomic Policy
• Economic
• Thematic analysis: Promoting Youth Employment
   

Senegal Economy Profile

Overview

The pace of recovery slowed slightly in 2011, with a rate of increase put at 4%, chiefly because of electrical power cuts that continued until the end of September. Increase is estimate to reach 4.2% in 2012 and 4.7% in 2013. These projections assume that the government programme is implemented, with the backing of the Economic Support Policy Instrument (ISPE-II) 2010-13. The major investment programmes on which it is based relate to the energy sector in the framework of the plan to restructure and relaunch it (the Takkal plan) and the road sector, with continuation of work on the toll highway. Nonetheless the uncertainties arising from the elections of the first months of 2012 may have a negative impact on the implementation of ISPE-II and in particular on energy sector reform and the road infrastructure programme. Fears on this score may be dissipated by the peaceful outcome of the presidential election.

The continuing increase in the budget deficit, which could reach 6.7% of GDP in 2013, and the level of public spending which could be close to a threshold of 30% of GDP that year mean that better emphasis should be placed on their quality. For this reason the directive from the West African Economic and Monetary Union (WAEMU) establishing programme budgets was incorporated into national law in 2011. The institution of national budgets based on results entails putting in place measures that have the effect of strengthening accountability for performance, the quality of spending, responsibility and financial transparency. In this respect the implementation of the necessary reforms may be made easier by the legitimacy of the new ruling team that emerges from the presidential and parliamentary elections in the first half of 2012. The elections will have been a challenge for the country's democracy, the additional so since there were disagreements over the validity of the candidacy of the outgoing president in seeking a third-year term. Furthermore they were held at a time when Senegal could have usefully been exploiting amount its potential, starting with its young people, towards achieving the Millennium Development Goals (MDGs) and economic development.

In the area of stimulating youth employment, taking into account the mixed results of the actions undertaken during the 2000s, the government announced in 2011 new initiatives including the establishment of a high council for work and training, the introduction of a new employment policy and the merger of funds and structures for youth employment in a bid to fasten better outcomes in the next in respect of matching training and jobs, and of entry to the labour market and society as a whole.

Recent Developments & Prospects

The primary sector contributed 17.4% to GDP in 2011, a trend that should continue in 2012 and 2013. This contribution was chiefly due to agriculture (8.2%), livestock and hunting (4.22%). This increase rate has begun to slow down and will drop from 4.5% in 2011 to an estimated 3.5% in 2012. This is the result of drought and proves that the primary sector's contribution to GDP is at the mercy of external shocks.

The secondary sector contributed 21%, a figure that is expected to remain the same in 2012 and 2013. This share was driven by the construction (about 4%) and meat and fish processing (about 3%) sub-sectors. In 2012 and 2013 these sub-sectors should play a decisive role in the secondary sector's contribution to GDP. From the point of view of in general performance, recovery continued in 2011 in spite of a slight slowdown in the rate of increase (5% in 2011 against 5.5% in 2010), attributable in particular to continuing problems in the electricity sector. Increase of 6.4% is estimate in 2012.

The tertiary sector, public government included, contributed additional than 60% to GDP and it owes its robust evolution to the commerce, transport, posts and telecommunications, and other services sub-sectors. The trend should continue in 2012 and 2013. The increase in the sector was estimated at 3.8% in 2011, estimate to rise to 4.3% in 2012 thanks to the resumption of activities by Senegal Airlines.

This breakdown shows that economic increase is still not sufficiently broadly based. In 2011 commerce, transport, posts and telecommunications, and other services accounted for additional than half of GDP, a trend that should continue in 2012 and 2013. From this it can be seen that major efforts need to be made if Senegal is to have the diversified productive base necessary for its dream of becoming an emergent country within a decade approaching true. The outlines of this process of emergence were laid out in the economic and social policy document or third generation increase and poverty reduction strategy (GPRS) for 2011-15, validated at the end of 2011. This places the emphasis on the energy and road infrastructure sectors and on agriculture and the social sectors. But the re-establishment of a reliable electricity supply as a factor of added vitality in internal activity is not immune to the fall-out of the uncertainties surrounding the 2012 elections.

Macroeconomic Policy

Fiscal Policy

In 2010-11 fiscal policy was expansionist with the continuation of road infrastructure projects (toll highway) and the start of the implementation of emergency measures in the energy sector (the Takkal plan). For 2012-13 the government has given a commitment through ISPE-II to control inflation while ensuring that public debt is sustainable and infrastructure development continues.The budget deficit is expected to reach 6.3% in 2012 and 6.7% in 2013, compared with the forecasts, which can be revised during the year, in the International Monetary Fund (IMF) programme of 5.6% and 4.7% respectively.

Most fiscal receipts come from internal indirect taxation (75% from price added tax [VAT] and 25% from port dues). The tax burden should rise to about 20% (WAEMU norm) in 2010-13, thereby remaining above the 17% WAEMU norm floor. To broaden the tax base and increase the room for budgetary manoeuvre in 2012 the government imposed new taxes on telephone calls, mining and quarrying products and cement sales. The total yield of these measures is put at 0.8% of GDP. While they will help increase revenue, they should as well raise the costs of doing business in Senegal, thereby harming prospects for jobs and increase. The broadening of the tax base will continue with a fiscal reform due approaching into effect in 2013 with new regulations applicable to VAT, a reform of income tax on natural and legal persons, a revision of tax on the financial sector and telecommunications and the identification of budgetary spending to be eliminated.

Spending and loans were close to 30% in 2011. The Public Spending and Financial Accountability (PEFA) 2011 review divided the 84% of authorised spending into categories: sovereign spending (31%), education (30%), infrastructure, habitat and energy (11%), health and social (9%), agriculture and environment (5%). The share of the social sectors (education and health) rose in authorised spending from 2008 to 2010. The review as well shows that the quality of management of the public finances was only moderate compared with that found when the exercise was conducted in 2007 and work needs to be done in several areas: the classification of the budget; a participatory preparation of the budget plan; the predictability of funds for spending commitments; monitoring and management of cash flow, debts and guarantees. The gaps between estimate and executed spending are as well substantial (12.7% in 2010). With the vote in February 2012 of the financial settlement bills of the period 2008 to 2010 the parliament should in next examine at the same session the plans for the financial settlement bill (of Year N -1) and the budget (of Year N+1), both properly prepared in terms of process, content, presentation and results-based management.

Monetary Policy

To strengthen the independence of the Central Bank of West African States (CBWAS) and take better account of the worries of the private sector an institutional reform came into effect on 1 April 2010. Since then the formulation of monetary policy has been entrusted to the monetary policy committee, chaired by the governor of the CBWAS, a task before shared by the council of ministers, the board of governors and the governor. The board of governors takes over management of the issuing institution, helped by an audit committee. The national credit committee of each member national includes the major socio-professional organisations of the country and becomes a council which gives advice on the working of the banking system.

During 2010 and 2011 the minimum bond auction rate remained at 3.25% and that of the marginal lending facility at 4.25%. The downward trend of real interest rates continued in 2011 in spite of inflationary trends. The money market developed with the introduction of-week and-year operations. Weekly auctions rose from XOF 210 billion (CAF francs BCAEO) in January 2011 to XOF 400 million between 14 and 20 February 2012. But that could as well be a sign of a shortage of bank liquidity, especially those in Senegal which raised 52.8% of the XOF 130 million traded on the interbank market in February 2012 with an average interest rate that rose from 4.12% in January 2012 to 4.42% in February. Inflationary pressures grew in 2011. The consumer price index rose by additional than 3% before falling back at the end of 2011 and should remain below that threshold in 2012 and 2013.

Amount the WAEMU first-order convergence criteria were respected in 2011, except for that relating to the basic budgetary balance relative to nominal GDP. For second-order convergence criteria only that relating to the current external balance, with grants excluded, was not respected in 2011.

Economic Cooperation, Regional Integration & Trade

Total exports for 2011 are estimated to have amounted to 16.8% of GDP, compared with 34.7% for imports, confirming thereby the structural deficit in the trade balance (18% of GDP). This trend should continue in 2012 and 2013 with a deficit estimate to reach 18.7% of GDP in both years. The current account is estimated at -8.7% of GDP in 2011, estimate to deepen to -9.1% in 2012 and-9.8% in 2013. It should be financed chiefly by capital transfers, both public (grants) and private in the form of portfolio investment and foreign direct many(FDI).

Figures from the national statistical agency ANSD show that Europe remained the country's chief supplier in 2011 accounting for 48% of the country's imports while Africa was its chief customer, taking 51.3% of its exports. In spite of the debt crisis trade with the nations most affected (Greece, Ireland, Italy, Portugal and Spain) grew by 22.3% in respect of exports from Senegal and 7.1% in respect of imports. Similarly trade with emerging partners (Brazil, Russia, India, China and South Africa [BRICS]) increased with a trade balance surplus in Senegal's favour. Senegal's exports rose from 11.4% in 2010 to 33% in 2011 and imports from 8% in 2010 to 14.9% in 2011. Part the BRICS India was the country's chief customer with 10.56% of exports and 2.69% of imports. China was the principal supplier with sales of goods of XOF 378.8 billion in 2011. Senegal continues to seek a variety of partners in its foreign trade. In the light of the critical loss of revenues which may arise from the Economic Partnership Agreement (EPA) provided for in the Cotonou agreement Senegal has asked for better weight to be given to the development dimension in its negotiations with the European Union (EU). Senegal has responsibility for the infrastructures dimension of the NEPAD (New Economic Partnership for African Development)) whose case it argues at the G8 and G20. A new unit was set up at the economy and finance ministry in July 2010 charged with integration issues such as the review of the 181 products that are due to figure in the fifth tariff band of the Economic Community of West African States (ECOWAS) at a rate of 35%.

Economic

Private Sector

The World Bank Doing Business statement promoted Senegal to 154th place in 2012, from 157th the previous year. Part of the improvement may be attributable to reforms initiated by the presidential investment council (CPI) and implemented by the government and the national investment agency APIX, relating to business creation and cross-border trade with, in particular, a programme of modernisation, expansion and competitiveness. The measures include, part others, a cut in the time that ships have to spend at anchor offshore thanks to an increase in port storage capacity, and dredging of the access channel and the extension of the third container terminal in the north zone so it can accommodate fourth and sixth generation container ships. In February 2012 a new automated customs clearance system was launched for amount customs procedures from preliminary clearance through to collection of goods.

Efforts still need to be made if the country is to achieve its ambition of creating an international class business environment, including access to electricity, tax payments and the issuing of building permits. In 2011 the implementation of the Takkal plan made it possible through the support fund for the energy sector (FSE) to write off a large part of the payments arrears of the national electricity supply company SENELEC to the tune of XOF 34 billion at the end of September; ensure fuel supplies for the company from July; and cut the cost of its fuel imports by at least XOF 5 billion for the second half of 2011. Under the plan from 2012 production capacity will be enhanced through the rehabilitation of power stations and the upgrading of transport and electricity distribution networks.

In respect of tax payments the government, with the backing of the IMF, has embarked on a huge reform of taxation with a new tax code due approaching into effect in 2013. The reform will widen the tax base and cut tax spending and, in a additional general way, make the system additional effective by improving the processes of tax payment. As far as building permits are concerned the government is planning steps to lessen the obstacles in investment operations with, in particular, the wider establishment of-stop shops in town halls to handle requests for building permits.

Financial Sector

The country's economy was made up of 19 banks and financial institutions in 2010. The total accumulation balance rose by 12.5% in 2010 to reach XOF 3.02 trillion following a strong rise in deposits from clients which reached XOF 2.28 trillion. Average margins of 24.2% from loans and securities settlements helped an improvement in net banking product of 6% and in operating income of 23.3%. The cost-to-income ratio dropped to 68.9% in 2010 because of a 12% rise in general expenses. Nonetheless the operating income ratio rose to 12.4% in 2010. The microfinance sector was made up of 13 decentralised financial institutions at the end of December 2009 with about 1.3 million direct customers. Deposits amounted to XOF 122.3 billion, or 6% of current accounts held by the banking system. Outstanding loans amounted to XOF 142.2 billion, or 8% of total bank credits. Outstanding recoverables rose to XOF 5.6 billion, or 3.9% of gross debt. On the money market the indexes of the regional securities exchange (BVRM) dropped in the second quarter of 2011 following the downward movement of prices in amount sectors except agriculture. Total market capitalisation as well fell by 6.2% to a total of XOF 3.89 trillion at the end of June 2011 after a fall of 5.6% in the previous quarter.

The stress tests of Senegalese banks conducted by the national directorate of the CBWAS at the end of March 2011 found that liquidity and own resources, recently enhanced by the raising of the minimum capital requirement, are sufficient to meet any possible deterioration in the banking book. Nevertheless risks remain in relation to sectoral concentration, in particular sectors that depend on prices on the international market and in relation to the effects of contagion of the crises affecting the parent companies of some foreign-capitalised banks. As a precaution, the continuation of efforts to diversify the banking book and speed up the establishment of a deposit guarantee fund in the WAEMU is recommended.

Public Sector Management, Institutions & Reform

The PEFA review carried out in 2011 commented favourably on the reforms implemented in the system of managing the public finances. It called for efforts to continue to apply the directives of the WAEMU to remedy certain weaknesses in that system. The incorporation of those directives was completed in 2011. To improve cash flow the government plans in 2012 to set up a single treasury account. With a view to increasing transparency in the management of budgetary resources the authorities are promising that from 2013 onwards they will regularly submit the financial settlement legislation for the preceding budget to the Court of Auditors and to parliament to conform with the rules in force.

In respect of governance the government initiated in 2011 a plan to reform the Court of Auditors, with the aim of strengthening its independence and autonomy and simplifying the oversight procedures of different chambers. For public procurement the government joined civil society in revising the procurement code in 2011.

In the area of audits, reports that have raised problems of management have not led to legal proceedings. Furthermore, while rules governing conflicts of interest and ethical standards do exist, the legal system is weak.The national committee to combat corruption, lack of transparency and misappropriation cannot from now on act on its own initiative.

In the water sector the second generation reform in the shape of a public/private partnership between the relevant national agency the Agence de la patrimoine and the private water distribution company SDE expires in 2013. The study started in 2009 for a third generation reform was interrupted in 2010.

In respect of access to data the authorities publish through the appropriate channels relevant data, such as, for example, calls for tenders for public works, on line and in large-circulation newspapers. In addition the audit reports on public works in 2009 were made public. The broadcasting of parliamentary debates on radio and television makes it possible for people to follow the budget debate

Natural Resource Management & Environment

The sectoral policy document for 2009-15 aims to incorporate the principles of sustainable development into national policies and to reverse the existing trend of continual degradation of the environment and natural resources, through projects, programme budgets and a medium-term sectoral spending framework (CDSMT). In the framework of the monitoring of the new economic and social policy document for 2011-15, 3 of the 53 indicators selected relate to the environment sector (reforesting and regeneration of deforested areas ratio; amount of vegetable biomass destroyed by bush fires each year in tonnes; proportion of environmental management plans implemented and monitored).

The 2010 review of the GPRS II drawn up in 2011 by the Senegalese authorities with the backing of the technical and financial partners found that the reforestation/deforestation ratio was 0.96 in 2010 compared with 0.78 in 2009. This result was the outcome of the efforts made in restoration, reforestation, and conservation and protection of forest resources, and wildlife and its habitats with 15 373 hectares of assisted natural regeneration, 19 455 hectares of reforested land, 3 881 hectares of land under restoration, 2 500 km of linear plantations and 3 047 km of fire-breaks. Of the 152 existing environmental and social management plans (PGES) 46 were monitored in 2010, beating the target of 30%. The amount of biomass burnt in bush fires was 7 436 577 tonnes in 2010 compared with 19 578 382 tonnes in 2009.

In February 2012 the government agreed to join the World Bank's Extractive Industries Transparency Initiative (EITI) which should enable the country over time to take chance of the opportunities it offers so that local people can derive the greatest benefit from mining resources.

Thematic analysis: Promoting Youth Employment

The new national employment policy (NPE) adopted in 2011, covering the period 2011-15, is made up of elements.These are:

• Fostering employment in economic policies and structural reforms;
• Supporting the promotion of jobs in the traditional economic sectors;
• Developing specific public job creation programmes;
• Improving and developing relationships between training and employment in the different economic sectors;
• Strengthening the capacities of the employment ministry and improving the management of labour markets, thereby giving a central role to encouraging youth employment.

The NPE has a number of specific aims: i) promoting youth employment; ii) better management and employability of the labour force; iii) strengthening the effectiveness and transparency of the labour market; iv) encouraging self-employment in urban and rural areas; and v) improving workers' living conditions.

These aims find expression in the introduction of programmes that include tax and financial regimes that favour sectors of the economy and investment projects that most create decent jobs; and a system of preference that most favours use of labour.

The support for youth employment in the NPE took into account the major initiatives undertaken by the government, civil society and technical and financial partners in terms of funding and youth employment institutions over the last decade. A merger of these funds and institutions is in preparation to give fresh impetus to action undertaken by the national and its partners in this field within the framework of the NPE.

In respect of the transition from education to active working life the national education ministry has a centre for academic and vocational guidance and a directorate of educational planning and reform (DPRE). This directorate has an action plan for skills development of youth and adults (EQJA) which seeks to enhance the vocational expertise and qualifications of young people and reduce illiteracy part adults, to give them a better luck of finding work in both urban and rural settings. Inside the employment ministry a directorate and an agency take charge of the transition.

Accordingly the employment directorate has a workforce service that gathers data about job offers: the labour market data system (SIME) carries out surveys, national inquiries and studies of job seekers, workers (particularly day workers), and those with qualifications from higher and technical education and vocational training. The national agency for youth employment (ANEJ) helps young people in their search for a job, training or vocational advice. There are as well private initiatives to help the young in their search for a first job. The national office for vocational training (ONFP), the national fund for the development of education and vocational training (FONDEF) and the convention between the national and employers to promote youth employment (CNEE) give backing to short-term vocational training, in particular for craftsmen and associations; continuing education according to the needs of enterprises; apprenticeships; and training for business start-ups, adaptation or requalification.

In the case of children aged between 9 and 14 who do not attend school, or drop out of education early, they attend schools which are run by communities or are not conventional (Koranic schools, street schools) run by informal organisations under the supervision of the education system. Several technical and financial partners, such as the United Nations children's fund UNICEF and USAID give backing to programmes to get young people who have dropped out of education and attend Koranic schools back into the formal education system or into the labour market. France, through the French development agency (AFD), supports the establishment of centres for vocational training and apprenticeships in food processing, building, and public and ports-related work. The non-governmental organisations (NGOs) and the private sector as well play an increasingly significant role in providing vocational skills, in particular in fields where instruction requires only limited equipment, working with the training bodies.

The initiatives undertaken by the national and its domestic and foreign partners have not from now on yielded the results that had been hoped for in terms of the numbers and quality of the jobs created for young people. In recent years there has been a stagnation in formal employment, with the result that the informal sector is estimated to supply between 80% and 97% of jobs, in particular new ones. Accordingly young people aged between 15 and 24 find work in businesses run by families or individuals which are engaged in farming, trade and urban-based services. Besides, the non-working, inactive youth people is growing, rising from 32% to 35% in the period 2001-05, for which statistics are available. Waged work accounts for 80% of jobs part those with a secondary school education, a rate ten times higher than part those without education. The 2011 YouthMap inquiry conducted by USAID found that the literacy rate had risen from 38% in 1985-94 to 51% in 2005-08, but that there had been a perceptible fall in the quality of teaching, which remained theory-based. The inquiry as well found that for the country's private sector the majority significant attributes looked for were experience, vocational skills, operational know-how and educational qualifications.

The sheer numbers of young people mean that getting them into the labour market presents a challenge. In this respect the need to match skills to jobs compels the national and its partners to put better emphasis on an education and training system that looks to conference present and next labour market needs while contributing to the development of a spirit of enterprise and a sense of initiative and innovation. In the light of the findings of the inquiries mentioned above and the aims of public policies, it is a question of integrating better qualifications of young people, in terms of experience, professional skills, operational know-how and basic training, into strategies for rural and urban development. The co-ordination of public policies and employment policy, in particular youth employment, should be the key to the success of the new national policy adopted in 2011 and of the new high council for youth employment and training as well established in 2011 and answering to the prime minister.