Business Investment in Senegal

A Summary of the Best Prospect Industries and Their Market Climates

Contents

Power Systems Equipment and Technology

In the energy sector, hydropower currently has limited representation with Senegal’s primary source being the Manantali dam which distributes 60 megawatts (MW) to Senegal through its 1,500 kilometer transmission grid. The greatest potential for expansion of hydropower is on the Gambia, Kayanga-Geba, and Koliba-Corubal river basins. The Gambia River Basin Development Organization (OMVG) is embarking on a major power infrastructure project to construct two hydroelectric power plants and an interconnection of the power grids which will help end the persistent problems of power shortages and the heavy dependence on imported petroleum products for the production of electricity. The cost of this integrated project, set to begin producing electricity between 2011 and 2012, is estimated at USD 1.12 billion. OMVG has favored a privately-operated scheme whereby the two plants and the 225 kilovolts transmission line will be managed by private entities. Huge opportunities in consulting work, technical assistance, and engineering works remain for U.S. companies, in addition to the supply of electricity equipment such as the turbines.

Senegal’s growing reliance on high and volatile crude oil prices as a power source make alternatives such as coal much more attractive energy resources. While coal is a less expensive option, Senegal is also exploring possibilities to become a major biofuel supplier, as well as pursuing other alternative energy schemes, including wind turbine installations and small-scale, decentralized photovoltaic panel systems. Additionally, President Wade proposed a long-term project to bring nuclear power to Senegal which recently joined the Vienna-based Global Nuclear Energy Partnership.

Investment in the transmission and distribution system has always been constrained by inadequate funding resulting in big system losses in the national grid. To redress the situation, Senelec plans to invest USD 350 million for 2008-2015 to upgrade the transportation and distribution networks. Various bilateral lenders, including Iran and China are already involved in the construction of high voltage transmission lines.

Following the 1998 institutional reforms in the energy sector, Senegal created an autonomous agency responsible for expanding access to electricity in rural areas. The agency, known as ASER, aims to increase rural access to electricity to 62% in 2022. Senegal has an innovative rural electricity expansion program favoring a Public Private Partnership whereby the government grants subsidies and private operators participate in the funding of the rural electricity project. Increasing electricity across Senegal is a priority for the World Bank energy portfolio in West Africa, in conjunction with KFW (the German Development Agency), and The African Development Bank. ASER has subdivided the territory into eighteen rural concessions, and the concessionaires will be responsible for providing power to rural communities as well as billing and revenue collection.

Automotive Spare Parts

The growing market for the import of automobiles, spare parts, and accessories has grown from $147 million in 2004 to $256 million in 2007 to $306 million in 2008. The diversified network distribution of spare parts includes major car dealers which have a well-stocked inventory for clients, as well as a large informal sector for new and used spare parts and accessories, mostly refurbished and recycled ones.

The two primary U.S. auto manufacturers represented in the Senegalese market are Ford and Chevrolet, representing 9.84% and 2.89% of the market, respectively, in 2008. Key segments of the market include 4WD vehicles, pick-ups, and light commercial vehicles weighing less than 3.5 tons. In December 2008, an Iranian automobile factory opened in Thiès, Senegal’s second largest city. The plant will assemble Peugeot/Samand sedans. The cars are to be marketed to individuals and also to be part of a program to modernize Dakar’s taxi fleet. The plant plans to assemble 10,000 cars annually. Two Sudanese firms also have plans to open an assembly line to produce heavy vehicles: trucks, vans and 4WDs under a Nissan license and heavy trucks under a Massey Ferguson license. Note that these are assembly lines only; there is no domestic production of automobiles or spare parts.

The best prospects for U.S. firms are in spare parts for the increasing number of US-origin cars/sedans, second-hand vehicles, auto-accessories, and franchise in car servicing.

Construction and Mining Equipment

Senegal’s high population growth and migration from the rural areas to Dakar has resulted in a housing development and construction boom in the nation’s capital. This, in addition to President Wade’s massive program of infrastructure development, has fueled imports of heavy construction equipment. Specifically, there is a strong demand for used heavy machinery and construction equipment such as graders, excavators, loaders, and earth-moving equipment. The total market size for heavy equipment and machinery was $135 million in 2008 and is expected to be $140 million in 2009. Imports from the U.S. are growing from $10.9 million in 2008 to an anticipated $13 million in 2009.

Agribusiness Technologies, Products, and Services

Senegal remains a food deficit country and major importer of cereal staples such as wheat and rice and intermediate products like crude vegetable oil and milk powder. Meanwhile, higher-income consumers have created a significant market for high value, consumer-ready products. The relatively high population growth (2.6 percent) and urbanization indicate that this trend will continue. Moreover, the country’s increasing openness to foreign trade and investment, its geographic location, and market forces present significant opportunities for exports. U.S. exports of food and agricultural products have grown from nearly $10 million in 2006 to $25 million in 2007 and reached nearly $35 million in the first 10 months of 2008.

Currently, however, the import market for food and agricultural products remains dominated by European, Asian and African suppliers. For example, France dominates the market for wheat and high-value processed products. Market potential exists, though, for new entrants in the market for bulk, intermediate and consumer products. In an era of rising food and commodity costs and shortages from some suppliers, the devaluation of the dollar has increased importer interest in U.S. Moreover, Senegal’s status as a major commercial hub in sub-Saharan Africa leads to the sophistication of higher-income consumers which results in a population that is generally positively inclined to purchase U.S. goods.