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Country Commercial Guides for FY 2000: Senegal Report prepared by U.S. Embassy Dakar, released July 1999    Note*

CHAPTER V. LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENT

In 1999, total Senegalese imports were estimated to be USD 1.41 billion. The United States is the fifth-largest supplier to Senegal (four percent) after France, which provided 30 percent of all imports, Nigeria (seven percent), Italy, Thailand and Germany. U.S. exports to Senegal continued a slight upward trend, reaching USD 63 million in 1999 versus USD 59.2 million in 1998. The United States runs a significant surplus in bilateral trade. The Senegalese market is small by U.S. standards, but it offers potential in the context of the West Africa Economic and Monetary Union (UEMOA).

When available, statistics below are given through 1999.

Best Prospects for Non-Agricultural Goods and Services

Rank of Sector: 1
Name of Sector: Electrical Power Systems
ITA Industry Code: ELP

Senegal's power sector has been undergoing major changes since March 1999 with the privatization of SENELEC the state-owned utility - the Canadian company Hydro-Quebec, along with French partner Elyo are the new majority owners, and the adoption of a new electricity law. The legislation has defined the legal framework for Independent Power Production projects (IPP). GE Capital's 56 MW power plant, that began operations in the fall 1999, is Senegal's first experience with independent power production To complete the energy liberalization process, the government of Senegal has created the "Conseil Supérieur de l'Electricite", the regulatory body responsible for approving concessions and investment plans for the power sector, preparing terms of reference for tenders, and monitoring prices.

Investments opportunities in the power sector remain in the replacement of SENELEC's obsolete generating capacity currently listed at around 300 MW. As an example, SENELEC has been looking actively for barge-mounted generators as a stopgap measure. Additional opportunities exist in the development of independent power production, and in rural electrification. The Senegalese government is committed to extending coverage of electricity in rural areas. The current rural coverage is only four percent, and the objective is to increase it to 15 percent in the horizon 2001-2005. The private sector will play a pivotal role in the promotion of rural electrification through the granting of concession to run small and medium-sized power generating plants. The use of solar energy has become very popular in rural areas.

Data Table: N/A

Rank of Sector: 2
Name of Sector: Telecommunications Products and Services
ITA Industry Code: TEL/TES

SONATEL, Senegal's telecommunications operator, continues to play a significant role in the market. The 1996 liberalization of the telecommunications market has led to growth in the IT sector. As a result of the successful introduction of Internet connectivity in March 1996, there has been a mini-boom of Internet-related activities and services. Teleprocessing services, a priority for the Senegalese government, have potential for growth in Senegal. As in Mauritius and several Asian countries, Senegal could take advantage of a relatively cheap labor force and its advantageous geographic position to develop data entry and teleprocessing activities for overseas companies. Telephony over Internet is making inroads into the market, which has led SONATEL to lower the rates for international calls.

Cellular service is growing apace. There are currently two cellular companies operating, "Alizé," owned by SONATEL, and "Sentel," owned by Millicom International Cellular. A third cellular license tender is planned for 2000.

Corporate communications using VSAT have potential. Numerous private companies are looking into operating their own VSATs. Costs are currently very high due to SONATEL's hefty licensing fees and its restrictions on VSAT technology to data-only networks.

The end of SONATEL's monopoly over fixed network and international calls in year 2003 could be of interest to fixed-line operators and callback companies. (Note: Callback services are currently not permitted in Senegal in order to protect SONATEL's market.)

Data Table: N/A

Rank of Sector: 3
Name of Sector: Travel and Tourism/Aviation Services/Airport/Ground Support
Equipment
ITA Industry Code: TRA/AVS/APG

Senegal earned USD 123 million from tourism in 1999. Travel and resort operators find an active market here. Known for its mild climate, attractive beaches and great sport fishing, Senegal has long been highly regarded as a European tourist destination. U.S. tourists - often African-Americans - are increasing in numbers, drawn in particular by the historic slave trading post of Goree Island.

As U.S. interest in West Africa increases, so might the opportunities for U.S. companies catering to business travelers using Senegal as the hub for the region. The strategic location of Senegal's capital city of Dakar on the westernmost point of the continent is an advantage. A U.S. carrier, providing service to this market would bring significant advantages. Consequently, the establishments of code sharing agreements between U.S. carriers and a privatized Air Senegal or other European carriers established in Senegal could bode well for the development of tourism and travel-related services in the United States. Delta's code sharing agreement with Air France on the Dakar-Paris route became effective in April 2000. Senegal's LSS International Airport is one of the few airports on the continent certified by the FAA as meeting international security standards.

Rank of Sector: 4
Name of Sector: Gold and Iron Ore, Mining/Industrial, Chemicals/Mining Equipment
ITA Industry Code: OGS/ICH/MIN

Both trade and investment opportunities exist in this sector. Senegal's phosphate mining is recognized as the dominant activity in the mining sector. Senegal has striven to rationalize and reinforce the sector by integrating upstream activities (phosphate rock mining) and downstream (fertilizer and phosphoric acid) processing operations. These efforts have led to expansion plans, partly supported by a USD 298,000 TDA grant approved in early 1998, for the Chemical Industries of Senegal (ICS).

The gold mining industry is "highly prospective." The Sabadola Mine in eastern Senegal has proven gold reserves of 13 tons. The current level of commitment to establishing mines in Senegal by foreign firms illustrates the potential for the growth of the sector, although the legal framework requires further modernization (a new mining code attractive to foreign investment has yet to be voted by the National Assembly). However, the lack of adequate road and railroad infrastructure in Senegal's mining region hinders the development of these mineral reserves.

Large reserves of iron ore exist in the eastern part of the country. Reserves are estimated at 800 million MT of high-grade iron ore and MIFERSO, Senegal's parastatal iron ore mining company, forecasts yearly production of 12 million tons. However, financing for this huge project is difficult for a country short on investment capital. An estimated USD 772.6 million is needed for mine exploration and the construction of a railway (311 kilometers) and mineral port.

Other promising unexplored mineral deposits include marble, peat, diamonds and titanium. Marble and peat reserves are respectively estimated at 800,000 MT and 52,000 MT. Dupont de Nemours discovered a potential of 10 million tons of titanium. An exploration permit for the diamond reserves has been granted to a Canadian firm. However, there is no reliable data on the diamond deposits.

Expansion of mining operations has increased the market for heavy duty-machinery and parts.

Rank of Sector: 5
Name of Sector: Used Clothing
ITA Industry Code: TXT

The country's rapidly growing population and low per capita income has fuelled the demand for used clothing in Senegal. Particularly in demand by the Senegalese are low-cost active wear products such as sports clothing and shoes, as well as casual/dress jeans and related outerwear.

Although local importers recognize the high quality of U.S.-graded used clothing, a strong dollar combined with the lack of understanding how this informal market works have hampered efforts of U.S. exporters to establish a long-standing presence in this market. Dakar's Colobane Market is the hub for clothing distributed to other markets in Senegal or reexported to Mali and Burkina Faso. The major players are the wholesalers who buy their clothing directly from abroad and sell to a myriad of local retailers. Creating a partnership with an exporter who can deliver high quality and fashionable clothing with regular and timely shipments is the greatest concern for the wholesale agent.

Data Table (USD Millions)		
			1998	1999

Total Market Size	6.2	6.4
Total Local Production	0	0
Total Exports		0	0
Total Imports		6.2	6.5
Imports from the U.S.	1.4	1.8

The above statistics are unofficial estimates.

Rank of Sector: 6
Name of Sector: Computers/Peripherals
ITA Industry Code: CPT

The Senegalese computer market is growing and very competitive. Total imports reached USD 25 million in 1999, up from USD 22.1 million in 1998. All major U.S. brand names - via their European branches - are well represented by local distributors and/or agents. Consequently, 1999 statistical figures indicate France as the largest exporter of computers, with 40 percent of the market, although a good portion of that consists of U.S. brands. Direct imports from the United States account for nine percent of the market.

The decision of the Senegalese government to reduce import duties for computer hardware to zero percent before VAT (value added tax) has contributed to an increase in the use of information technology equipment in Senegal. The country's retail market for computers is fragile and only companies offering after-sales support and financial services such as leasing will compete effectively.

Data Table (USD Millions)		
			1998	1999

Total Market Size	22.1	25.0
Total Local Production	 0	 0
Total Exports		 0	 0
Total Imports		22.1	25.0
Imports from the U.S.	 2.0	 2.5

The above statistics are unofficial estimates.

Rank of Sector: 7
Name of Sector: Cosmetics/Toiletries
ITA Industry Code: COS

U.S. cosmetics are a highly-regarded and sought-after product in West Africa, especially hair and cosmetic products developed for the African-American market. France is the largest competitor with 40 percent of the market share.

The import figures from the United States are underestimated. They do not take into account imports from U.S-affiliated companies that have established a presence in Africa by setting up their cosmetic plants. U.S. company CARSONS has thus established a plant in Ghana and sells in Senegal through an exclusive distributorship with a local importer. U.S. import figures also do not take into account the large quantities of non-declared cosmetics products carried in suitcases by Senegalese traders on board Air Afrique flights from New York. High on the list of products sought by Senegalese consumers are hair, facial and skin care products. Large quantities of counterfeit products from Nigeria are available in the country. They are commercialized under well-known U.S. brand names. The local production is dynamic and well suited to low income consumers. Local distribution could prove profitable to U.S. vendors.

Data Table (USD Millions)		
			1998	1999

Total Market Size	N/A	N/A
Total Local Production	N/A	N/A
Total Exports		N/A	N/A
Total Imports		7.1	7.5
Imports from the U.S.	0.6	0.6

The above statistics are unofficial estimates.

Rank of Sector: 8
Name of Sector: Air Conditioning/Refrigeration/Ice Making Machinery
ITA Industry Code: ACR

Refrigeration and air-conditioning equipment has good growth potential, specifically industrial refrigeration. There is also an increasing need for industrial ice making machinery. Major end-users include the fishing and export-oriented agri-business companies that are upgrading or investing in cold storage facilities.

Best Prospects for Agricultural Goods

Name of Sector: Rice
PS&D Commodity Heading: Rice, Milled (0422110)

Rice is the main staple food in Senegal and imports were 652,000 MT in 1999, compared to 535,272 MT in 1998. Imported rice is consumed even in rural areas, especially during the lean season before harvest. The preference is for 100 percent broken rice originating from Asia, mainly Thailand and India. Since the development of a highly competitive domestic rice market after the dissolution of the state rice importer in February 1996, Senegalese are unwilling to pay the higher price of U.S. medium quality rice. The GSM-102 export credit guarantee program previously provided a competitive edge to U.S. rice. Currently, with market conditions characterized by the overliquidity of local banks, the main advantage of the GSM-102 program is for U.S. exporters and not the local importers. The transaction costs linked to the GSM-102 program are expensive.

TDA has offered a USD 136,000 grant to the Dakar Port Authority to fund a feasibility study for the construction of a bulk grain terminal. If the terminal were built, the United States would be one of the few countries that could competitively supply bulk rice. The terminal might also be used for soybean and wheat imports. As for the terminal's construction estimated at USD 8.5 million, opportunities will exist for the supply of various equipment such as a vacuvator, bagging plant and storage facilities.

Data Table (in TMT) 		
			1998 	1999

Total Market Size	615	682
Total Local Production
(paddy)			180	150
Total Exports		100*	120*
Total Imports		535	652
Imports from the U.S.	  0	  2
		

*Transshipment to neighboring countries.

The above statistics are unofficial estimates.

Name of Sector: Wheat
PS&D Commodity Heading: Wheat (0410000)

Senegal has two flour mills, with entrenched French interest. They purchase 89 percent of their wheat from France. The recent opening of a third flour and feed mill by a Senegalese entrepreneur could signal increased opportunities for U.S wheat. U.S. Wheat Associates is currently studying with the third flour miller the opportunity to coordinate bulk wheat shipment with Cote d'Ivoire, Ghana and Nigeria in order to reduce freight rates and render the U.S. wheat competitive. Based on the current world market situation, USDA is not subsidizing wheat sales, while the European Union provides a special export restitution (subsidy) on sales to Senegal and a number of other countries in Sub-Saharan Africa.

Demand for wheat flour is increasing, bread being one of the rare goods to have resisted the post- devaluation inflation pressure. Some small quantities of flour have been imported. U.S. wheat is sometimes imported for blending because of its high protein content versus French soft wheat. The percentage of U.S. or other high protein wheat varies from 10 to 20 percent depending on the relative costs

Data Table (in TMT)	
	
			1998   	1999   

Total Market Size	213	213
Total Local Production	  0	  0
Total Exports		  0	  0
Total Imports		213	213
Imports from the U.S.	  4	  0

The above statistics are unofficial estimates.

Name of Sector: Corn
PS&D Commodity Heading: Corn (0440000)

Declining local production of corn mainly used for local consumption has led to increased imports. Local importers have purchased the bulk of their corn from Argentina, which has displaced U.S. corn, because of the price differential. Given the importance of the poultry industry in Senegal, it is likely that imports will continue to grow.

Data Table (in TMT)		
			1998   	1999

Total Market Size	148	N/A
Total Local Production   76	N/A
Total Exports		  0  	  0  
Total Imports		 72	 20
Imports from the U.S.	 29	  8

The above statistics are unofficial estimates.

Name of Sector: Consumer Food Products
PS&D Commodity Heading: N/A

As Senegal's economy continues to grow, so too will the urban population and the middle class. A niche market will develop and grow for American-style snack foods, breakfast cereals and other consumer products as more Senegalese travel to Europe and to the United States. The natural outlet of these grocery products is the mushrooming American-style convenience stores as well as hotels and restaurants. A Senegalese-American importer started importing full-load-containers of consumer products from the United States in 1999 and the products are selling well. The EU, Turkey, and South Africa currently dominate the import market. Imports from the United States should grow with the introduction of the USDA supplier credit guarantee in Senegal in October 1999. This guarantee covers 65 percent of the credit extended from an exporter to an importer. It is an adaptation of the GSM-102 program and is designed to assist exporters of U.S. agricultural commodities who whish to provide relatively short-term credit to importers.

Name of Sector: Frozen Poultry (Chicken Leg Quarters)
PS&D Commodity Heading: N/A

The main market for frozen chicken leg quarters is among urban consumers and to ship chandlers supplying ships calling at the Port of Dakar. Imports have jumped from 52 MT in 1997 to 422 MT in 1998. U.S-origin leg quarters have made some inroads in this market because of their price advantage over traditional European suppliers, to the great displeasure of the local poultry industry. Senegalese officials have requested on a random basis pre-shipment health inspection for salmonella and dioxin certification for U.S. poultry products as a measure to impose restrictions on imported poultry. The Senegalese government has also applied a reference price on poultry imports. USDA, jointly with the Embassy is working on this issue with the Senegalese government within the framework of WTO commitments.

Name of Sector: Tallow
PS&D Commodity Heading: N/A

There are two industrial soap factories in Dakar, one of which is operated by Colgate-Palmolive. Both companies purchase either palm oil serein or tallow to manufacture soap, depending on the relative price. Tallow is sourced from the United States with purchases reaching USD 11 million in 1998.

Significant Investment Opportunities

The Senegalese government's privatization program has been the essential component in the growth of foreign investment in Senegal. After a timid start in 1995, the government's privatization program gained momentum. To date, the water company SONEES, the telecommunications company SONATEL, the phosphate mining company SSPT, the textile company SOTEXKA, the building construction company HAMO, the national airline company Air Senegal, and the electricity company SENELEC have been successfully privatized. Other companies slated for sale include SICAP, a state company involved in residential real estate development and the Meridien President, Dakar's premier hotel. The sales of other key parastatals such as the peanut processing company SONACOS and several hotels have been delayed as the result of the lack of interested buyers and procedural errors. The various privatization methods used in Senegal range from the search for a strategic partner (telecommunications, SONACOS), the management concession approach with an operating and distribution responsibilities (water utility), the consortium approach with multiple Senegalese and/or foreign partners (the Canadian-French consortium in power utility), to the IPO -Initial Public Offering - via the BRVM, the West African Regional Stock market created in September 1998. Headquartered in Abidjan, the BRVM has branch offices in each of the member countries of the West African Economic and Monetary Union (UEMOA), except Guinea Bissau.

The newly elected government encourages foreign investment in infrastructure projects. It appears that the BOOT financing scheme has won the government's approval. Foreign investment in growth sectors such as power generation, water and wastewater management, mining, tourism are encouraged.

Power Generation

New electricity sector legislation in early 1998 paved the way for the liberalization of the electricity sector with the privatization of SENELEC, the parastatal power company in March 1999. The law calls for power production to become fully independent while SENELEC retains a monopoly on power transmission and distribution.

SENELEC's privatization is one element of a broader framework aimed at restructuring the energy sector. The World Bank has granted USD 100 million to the Senegalese government to finance a series of projects in the energy sector. The most urgent needs for SENELEC are rural electrification and reducing dependence on obsolete and inefficient plants.

Mining

Phosphate mining is recognized as the dominant activity in the mining sector and could expand with exploitation of high-grade deposit of calcium phosphates in Matam located on the Senegal River in the northeast. The lack of adequate transportation infrastructure has reportedly discouraged development of this site to date, as well as the exploration of the large reserves of iron existing in the eastern part of the country. There is room for other investors since there remain unexplored mining deposits such as peat, marble, titanium, and diamonds.

Travel, Tourism and Transport

Bright prospects exist in the hotel industry. The Meridien President hotel, Dakar's premier hotel and convention center complex is slated for privatization.

Airport Infrastructure

In seeking to reinforce and improve its airport facilities, Senegal is studying ways to build a new airport in the outskirts of Dakar, the capital city. ASECNA, the operator of the airport is also looking at the construction of a cold storage facility to service the export of perishable products (e.g., seafood and vegetables). The project would include fumigation and refrigeration rooms.

Port Infrastructure

The Port of Dakar Authority is dedicated to upgrading the port facilities. Port officials would like the port of Dakar to be the major transshipment hub for UEMOA. Their plans call for equipment modernization and extensive development which could spell major sales, consulting and investment opportunities for U.S.-firms. In absence of the extensive financial resources necessary for such an ambitious program, the Port is looking at BOOT contracts. The major infrastructure projects include the building of a distribution center which will help in eliminating current congestion at the Port, the construction of a bulk grain terminal supported by a USD 140,000 TDA grant, and the acquisition of a travelling crane.

Water Resources

Faced with rapid population growth and a massive influx of rural dwellers, the capital city Dakar has increasing problems with water distribution. The long term Water Sector Project, partly funded by the World Bank and other multilateral donors, aims at obtaining sustainable improvement in the provision of water and sanitation services in unserved and low-income areas of Dakar and secondary cities. Projects of interest to the private sector would be the construction of a wastewater treatment plant under a Design Build and Finance format. In the medium to long term, Senegal is looking at the feasibility of a water desalinization plant.

Procurement of goods and services from multilateral funds is conducted according to rules of international competitive bidding. Thus, Senegal's water sector project will open a market for supply of equipment and consulting services

Fishing

The Senegalese government has put an emphasis on fish farming and encourages the emergence of joint venture partnerships in this area.