Back to Global Rankings

SENEGAL: An Introduction

Contributors:
Houda Law Firm Logo
View firm profile

Senegal, a West African coastal country, is increasingly becoming a country favourable to investment on a regional and international scale.

In view of its privileged geographical location, thanks to its proximity to the European continent and its borders with five countries on the African continent (Mauritania, Mali, The Gambia, Guinea Bissau, Guinea), Senegal is in a favourable position to become a commercial hub. Numerous non-governmental organisations and United Nations representations have made Senegal their home country in West Africa.

Strongly committed to democratic values, the Republic of Senegal enjoys good political stability and has experienced three peaceful transitions of power. Macky Sall, the current President, is the fourth President elected since the country's independence in 1960.

Senegal's membership of several African sub-regional organisations has enabled it to integrate free trade areas for goods, persons and capital (ECOWAS and UEMOA), and to harmonise its business law with sixteen other countries on the continent with a view to attracting foreign investors and providing them with a stable and uniform legal framework (OHADA).

Senegal also benefits from a single currency, the CFA franc, which is shared by eight countries forming the UEMOA space. The CFA franc being pegged to the euro is an assurance of monetary stability, notably through the unlimited conversion guarantee granted by the French Treasury. Exchange regulations are also standardised and shared by the eight states of the WAEMU area. Furthermore, the ECO, the new currency adopted by the Economic Community of West African States (ECOWAS), which should replace the FCFA, should maintain a fixed parity rate with the euro.

Since the accession of President Macky Sall to power in 2012, Senegal has established a plan for economic development and emergence by 2035 called the "Senegal Emerging Strategic Plan" (PES). To this end, many infrastructure projects and legal reforms have been initiated.

Senegal has positioned itself as a major player in the development of the West African region through its participation in large-scale projects. Among others, we can note the implementation of a motorway network, a wind farm (Taiba Ndiaye) and a photovoltaic solar energy project (Bokhol), a TER (Regional Express Train) or the development of the mineral port of Bargny.

Recent mining and oil and gas discoveries have attracted investors, particularly large international groups. Senegal has also undertaken projects to modernise laws, notably on the management of natural resource exploitation (2019 oil and gas code, 2016 mining code, 2019 law on local content for hydrocarbon sector activities). The Senegalese vision of natural resource exploitation tends to seek a balance in the governance of natural resources between the profitability of investments and the protection and development of local communities.

To date, however, we are still waiting for one of the implementing decrees of the Local Content Act, which is the most decisive for actors in the extractive sector in Senegal. Indeed, it will make it possible to clarify the notions of Senegalese or foreign investors as well as the protection or opening regimes resulting from it.

One of the major difficulties for the practice of law and legal advice is the lack of dematerialisation of administrative and judicial procedures and the difficulty of access to legislative and regulatory texts. However, one of the axes of the PES is the "Digital Senegal 25" strategy, which aims to maintain the country's position as an innovative leader in Africa in the field of digital technology. To this end, one of the parameters of this strategy is the democratisation of digital technology and the establishment of a connected administration at the service of citizens and businesses.

Another weaker aspect of the Senegalese economy is that the country's trade balance is heavily in deficit. Senegal is based on an economy that is dependent on both energy and food. Recent oil and gas discoveries and legal reforms in the extractive sector should allow for a better redistribution of the economic benefits of the exploitation of oil and gas deposits, particularly through the implementation of the Production Sharing Contract (PSC), which allows the state to be remunerated in kind at the exploitation stage. The share of natural resources accruing to the State is intended mainly for local consumption.

Finally, Senegal is a signatory of the African Continental Free Trade Area Agreement (AfCFTA), the largest free trade area in the world by the number of participating countries, adopted on 21 March 2018 and entered into force on 1 January 2021. The objective of the agreement is to reduce tariff and non-tariff barriers between states, by reducing tariffs between member states and harmonising regulatory measures such as sanitary standards and technical barriers to trade. The Agreement signed by 52 of the 53 African Union countries aims to provide a unified regulatory framework across the continent and in most sub-regional agreements in Africa.