Back to Global Rankings

SENEGAL: An Introduction

1. Overview 

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 African countries (Mauritania, Mali, Gambia, Guinea Bissau, Guinea), Senegal is in a favourable position to become a real 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 an exemplary political stability for the continent and has experienced three peaceful political transitions. Macky Sall, the current President, is the fourth President elected since the country's independence in 1960.

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 "Plan Sénégal Emergent" (Senegal Emerging Strategic Plan in English). 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 and infrastructures. Among others, we can note the implementation of a motorway network (Dakar–Diamniadio–AIBD toll highway, Dakar–Mbour, Thies–St Louis toll highway), the largest wind farm (Taiba Ndiaye) and photovoltaic solar energy in West Africa (Bokhol), a TER (Regional Express Train) or the development of the mineral port of Bargny.

2. Issues in the process of being resolved 

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 goals of the PES is the "Digital Senegal 25" strategy, which aims to maintain Senegal'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 weakness of the Senegalese economy is that the country's trade balance is heavily in deficit. Indeed, Senegal's economy is dependent on both energy and food. Recent oil and gas discoveries and legal reforms in the extractive sector should allow 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. In fine, the share of natural resources accruing to the State should mainly be used for local consumption.

3. New legislations 

Senegal has also undertaken projects to modernise laws, notably on the management of natural resource exploitation. 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.

Local Content in Oil & Gas 

Indeed, among these recently adopted texts, Law n°2019-04 on local content in the hydrocarbon sector and its numerous application decrees formalised the Government's will to set up an ambitious local content system with the objective of reaching 50% of local content by 2030.

Among the guiding principles of the local content law is the obligation for any investor wishing to act as a subcontractor, service provider or supplier to create a company under Senegalese law (Article 8.3).

This law also establishes a classification of oil and gas activities into three regimes: exclusive, mixed and non-exclusive. The classification of an activity in each of these regimes will have consequences on the percentage of national staff and on the ownership of capital by nationals in the company according to the classification table established by Decree n°2021-249 of 22 February 2021, with the specificity that activities classified under the mixed regime must be the subject of an association with a local company. To date, questions remain which should be clarified very soon by guidelines adopted by the Comité National de Suivi du Contenu Local (“CNSCL”) on the form of association between foreign companies and national companies in the context of activities subject to the mixed regime.

Still within the framework of the implementation of local content in the hydrocarbon sector in Senegal, Decree n°2020-2047 of 21 October 2020 set the rules of operation and organisation of the CNSCL, which has a mission of coordination and supervision of the local content policy. In addition to the obligations related to the activity regime, hydrocarbon actors must submit a local content plan each year before 30 June, including a procurement plan, a succession plan and a training plan, which are subject to a priori and a posteriori control by the CNSCL, which validates them.

New Electricity Code  

Today, Senegal is counting on the active participation of national and/or international private investors to implement its recovery plan through the Priority Action Plan.

The reform of the legal and institutional frameworks of the electricity and renewable energy sector was undertaken in Senegal with the publication in the Official Gazette of the Republic of Senegal, on 5 August 2021, of the new laws n°2021-31 of 9 July 2021 on the electricity code and n°2021-32 of 9 July 2021 on the organisation and attributions of the Energy Sector Regulation Commission (CRSE).

If the new Senegalese electricity code defines the rules relating to the activities of production and self-generation, transmission, distribution, storage, sale, import and export of electrical energy, it will contribute at cost to the attractiveness of private national and foreign investment in the sector but also introduce competition in the sale and purchase of wholesale electricity, which remains the monopoly of SENELEC. It also aims to improve the financial viability and good governance of the sector, in order to provide electricity in quantity, quality and at an affordable cost. Finally, it provides a sole benchmark for achieving universal access.

New Public-Private Partnerships Law 

Faced with the objective of mobilising private sector financing, particularly through PPPs, combined with the complexity of preparing and developing PPP projects and the need to optimise financing schemes, Senegal adopted the new Law No 2021-01 of 22 February 2021 on public-private partnership contracts (the PPP Law) and its Decree n°2021-1443 of 27 October 2021 implementing the provisions of the PPP Law.

While the new PPP Law excludes certain sectors of activity such as energy, mining and electronic communications, defence, national security, etc – which are subject to specific regulations – it does apply to sectors as diverse and varied as transport, agriculture, education, health, drinking water supply, sanitation and public health.

The Senegalese legislature has retained two types of PPPs. Firstly, PPPs with payment by the users in which the remuneration of the holder, in return for the missions entrusted to them, consists either in the right to exploit the work/service which is the subject of the contract, or in this right accompanied by a price.

Secondly, there are PPPs with public payment, in which the remuneration of the holder is subject to the payment of a rent by the contracting authority according to the performance objectives assigned to the holder, linked in particular to the availability of the work, the services, the equipment or the intangible assets.

In the context of the award of a PPP contract under Senegalese law, the private investor will now be able to award its PPP either:

• according to whether the procedure is of common law (open tender procedure in one stage, preceded or not by a prequalification, or the open tender procedure in two stages, or preceded by a prequalification); or

• according to the derogatory procedure chosen by the contracting authority concerned.

These derogatory procedures include the restricted tender procedure and the competitive tender procedure, the competitive dialogue procedure which are new in Senegalese law, and direct agreement.

As part of the negotiation of the PPP contract with the public entity concerned, the private operator may contractually negotiate clauses relating to land. The land issue in the context of foreign investments is especially important, as when a PPP contract involves the occupation of the public domain, it gives the right to a title of occupation of this domain for its duration.

The private investor also has the possibility under this new law to preserve its interests, notably by negotiating other clauses relating to the legal and financial limitation of liability, the waiver of the immunity from execution from which public persons may benefit and even the legal, fiscal and customs stabilisation of the conditions for carrying out its activities in Senegal. This stabilisation clause, born of contractual practice, allows the private operator to be protected against any legislative and/or regulatory change that could have an unfavourable impact on its investment. Finally, the private operator may contractually choose the settlement of disputes arising from the execution of the contract by arbitration, which it considers to be effective in accordance with the principle of contractual freedom in force in Senegal.

The possibility for the private investor's lenders to request guarantees or securities has been reaffirmed in the new PPP law.

Private investors, in their quest for development or co-development, will also have the possibility under this new law to make a private initiative offer (private initiative offer to execute the project or private initiative offer to prepare the project) to a contracting authority for the implementation of a PPP project.

Although the PPP contract will remain subject to the laws and regulations in force in Senegal and subject to the tax and customs regime of common law in Senegal, this contract will be able to benefit from any advantages granted by the law, or any other investment incentive regime favourable to the private investor.

AUTHORS:
- Khaled ABOU EL HOUDA, Managing Partner
- Franck ALLESSIE, Senior Legal Counsel