Senegal’s President-elect Bassirou Diomaye Faye rode to victory in Sunday’s poll on a wave of protest votes against the West African country’s current leader, fuelled by discontent that infrastructure-fuelled growth has failed to benefit all.
While the young people who formed the backbone of Faye’s support base want jobs and more even wealth distribution, investors expressed hope that pledges to create a new currency and renegotiate energy contracts won’t be followed through.
During outgoing President Macky Sall’s 12 years in power, economic growth averaged almost 5%, boosted by spending on roads, railways, ports and airports, while Senegal had a reputation for being economically liberal and open to international business.
In contrast, Faye, 44, a former tax inspector who stepped up as presidential candidate in November when populist firebrand Ousmane Sonko was disqualified, has an interventionist outlook, including supporting local industrialization.
“Macky Sall’s administration prioritised infrastructure development, which, while important, overshadowed more immediate economic concerns of the people,” said Abdoulaye Ndiaye, an assistant economics professor at New York University.
Mass youth unemployment was a key factor driving the 2021 protests, he said.
“There is a collective yearning for policies that will enhance job creation, improve public education quality, and revitalise the agriculture sector to be more productive and sustainable. In rural areas, more than half of the population lives below the poverty line,” Ndiaye said.
‘A BIT MORE RADICAL’
Oil and gas production are expected to start later in 2024, which the International Monetary Fund has forecast will boost economic growth to double digits next year.
Faye’s party has pledged to renegotiate oil and gas contracts, although he also sought to reassure investors, telling Reuters before the election, “any commitments the (Senegalese) people have made with external partners will be respected.”
Faye’s popular mandate for change is likely to lead to more social spending, plus uncertainty over oil and gas revenues if contract renegotiations hold up production, said Scott Fleming, a portfolio manager at Fideuram Asset Management, which has an “overweight” position in Senegal’s international bonds, larger than its proportion in bond indices.
“Sonko is likely to have significant influence,” he said, adding that Sonko’s background as a whistleblower on offshore tax havens suggested he would be arguing in favour of getting oil and gas companies to pay more to Senegal so it could increase social spending.
Faye also rowed back a pledge to drop the CFA franc currency, which is pegged to the euro, telling Reuters that Senegal would first seek to reform the West African Monetary Union in collaboration with its seven other members.
“The notion of Senegal unilaterally adopting a new currency seems rather far fetched,” said Nick Eisinger, a portfolio manager at Vanguard with an “overweight” position in Senegal’s bonds.
“There may be some cosmetic changes … to the currency peg but the benefits (low inflation, monetary credibility, some fiscal discipline, external transfer and convertibility mitigation) are quite numerous and it is likely the new administration will not want to jeopardize this,” he said.
Faye is likely to call snap elections once the current parliament can be dissolved in July, to try get a legislative majority, credit ratings agency S&P Global Ratings said in a note.
“The new government has yet to communicate many of its key fiscal and economic policy proposals, which could affect Senegal’s creditworthiness,” it said.
Overall, the realities of governing are likely to temper any major policy upheaval, said Tochi Eni-Kalu, an analyst at risk consultancy Eurasia Group.
“The policy regime under Bassirou Faye is going to be definitely a bit more radical than the status quo,” he said, but added that Faye’s moderation on the new currency issue suggested it was not going to be a massive departure.
