The economy: Heavily dependent on the outside world

Trying to describe Senegal's economy in one, short article is something of a challenge. The situation has broken down to the point where structures have disintegrated and the informal sector has mushroomed. The causes are deep-rooted. 'The policy of post-l 960 Governments can be seen as a continuation of the colonial administration that went before' and, on top of that, the structural adjustment policy applied since 1980 has failed to do anything about the problems or get the economy going again on firmer foundations.

There is of course always matter for debate here. The official line is that the policies are sound and the current economic situation inauspicious. But scratch the surface and opinions as to the state of the Senegalese economy are mixed and sometimes harsh. 'No national accounting has been done since 1981. Saving is a thing of the past, although medium- and long-term bank deposits seem to be increasing at the same time,' Frans Boye, Head of the Economics Teaching and Research Unit at Senegal's Saint-Louis University, told me. Could these banking assets be a way of financing the economy?

'No', Frans Boye said. 'Paradoxically, the opposite is happening and the Prime Minister is going to the African Development Bank (ADB) to borrow something like CFAF 39 billion to finance the SMEs at the same time.'

The new industrial policy (NIP)

In theory, relatively healthy Senegalese banks should help prop up investments, especially in industry, but, in practice, they do not. Traditionally, Africa's financial establishments are chary about investing in production, for a start, and the 'complete failure of the NIP' and the 'inconsistency' of the general economic policy are holding back the development of industry, despite the Government's attempt to reshape the policy for this sector, which, as one international report made clear, has, typically, none of the major multiplying factors, fails to capitalise on local resources and has high production costs. So the major part of the manufacturing sector - with 17% of GDP in 1987, second only to Cd'Ivoire in this part of Africa - has taken a hard knock, although statistics produced by the Ministry of Economic and Financial Affairs and Planning suggest that the industrial component of GDP went up by 0.3% overall in 1991 (to 18.9%, from the 18.6% of 1990).

However, analyses do not predict any significant change in 1992 or 1993, particularly since the main products (textiles, preserved fish, oil and groundnut by-products) are selling badly because of international competition or poor competitiveness or because Africa in general and Senegal in particular have a tradition of importing the goods (other than textiles, for the most part) the consumer wants.

The phosphate sector has seen its export opportunities dwindle because of the high cadmium content of the Senegalese product, but output and income could well be looking up soon with aid of something like ECU 15 million from the European Community helping to get the 3 industry on its feet again.

Yet there will be no real take-off for any branch of the nation's industry without a thorough rationalisation of the management and economic objectives of the whole - which is the Government's aim in embarking on a strategy of rehabilitating the businesses in which the State is still a shareholder and following the World Bank's recommendations by bringing in measures to create a climate conducive to foreign investment. This means a new labour code in the very near future, the possibility of a single tax or flexible price control and many other measures to bring down management costs.

This is all very laudable, but the businessmen apparently want more than that. Their feeling is that the approved arrangements have had only a minimal effect on management cost compression so far. 'Senegal's employers wish to put the Government on its guard about the economic policy, which is worsening the financial situation of the country's businesses,' Amadou Moctar Sow, the chairman of the National Employers' Confederation, told me. The State, he maintained, should have asked the economic operators for their advice before coming up with its own measures on tax and work organisation and company competitiveness.

The futility of Senegal's ten years of structural adjustment was also to be blamed on those same errors of Government approach, he said, 'in allowing the World Bank to graft onto Senegal measures which bore no relation to local economic or political reality... and could only lead to the bad results we all know about.' This analysis of the situation comes fairly close to that of the country's main funders, who are keen to see macroeconomic factors and the structure of the market completely changed to make for a better balance of industry and services and stop the informal sector from proliferating to the increasing detriment of modern industry. But of course, with internal and external debt precluding any far-reaching tax measures (see profile), the Government is going to find any investment incentive and support policy difficult.

Agriculture - drought not the only culprit

Few countries can make a success of industrialisation without developing a strong agricultural sector first. Senegal and the other African States spent nearly three decades running policies aimed at proving this natural process of economic development wrong. They failed and now they have difficult food situations on their hands. Unsuitable measures have left domestic production in ruins and the drought which has crippled agricultural potential In Senegal and the rest of the Sahel is no longer alone in bearing most of the blame for the decline of the nation's farm sector.

The production sector has gone through nationalisation, which had more to do with introducing civil service practices, and it has undergone total and partial privatisation, but Senegalese farmers have always stuck to their traditional methods and grown what they did in the period, with just one crop or, at best, a two-crop system relying heavily on groundnuts. Attempts at diversifying into off-season vegetables (tomatoes) for export failed to make their mark because they involved a high-cost product aimed essentially at the export market and oyerlooked the psychological barriers and regulations hampering international trade. Although Senegal's agriculture accounted for 22% of GDP and provided employment for 80% of the country's workers in 1987, the national food record is largely negative. In 1990-91, an estimated 517 900 t of the available 1 289 396 t of cereal equivalent came from imports and 51 952 t were food aid - figures which, along with those for other areas, show just how export-oriented the Senegalese economy is.

Then there is the population count, expected to reach 10 million in eight years at the present rate of growth of 3.2% p.a. and implying an increase in cereal equivalent of something like 561 000 t. The Government has also adopted a new agricultural policy (the NAP), intended to bring about 80% self sufficiency in food by the year 2000 and involving being able to push the current rice output of 181000t p.a. up to 740000 t by that date. Notwithstanding an energetic drive forward, in particular with the vast European Community-supported Podor rice project in the Senegal Valley, there is little chance that the NAP target will be reached without difficulty, unless every potential resource is put to work, especially in Casamance. But, given the historico-political (and possibly economic) issue facing the people there, which loomed large for the first time in 1992 and all but upset the even tenor of Senegalese politics, Casamance's problem has to be completely solved first.

Paradise

Almost every economic parameter is negative. What can be done about it? That is the question and few are willing to hazard even the slightest guess. Senegal's economic problem is a problem of the people and a problem of the Government, in contrast with some places where politics are a bigger burden on the economy. Frans Boye, head of the economics faculty at Saint-Louis University, said that 'no enterprise will last unless the rules of the game are made clear... and thoroughgoing political reform is undertaken.'

'Politicians do not tell the truth,' the economist went on. 'With all its deficits financed from abroad, Senegal is a land of plenty'. But how much longer will it last?

L.P.