Bank Group's Country Strategy Paper for Senegal, 2016-2020

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Publication Date: 
31 July 2016
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EXECUTIVE SUMMARY

1. Context

On the political front, Senegal has provided an exemplary lesson of democracy in Africa. The Presidential elections of March 2012 resulted in the accession of President Macky Sall to the country’s highest political office. The Constitutional referendum on 20 March 2016 resulted in 15 changes to the Constitution including: modernization of the role of political parties, recognition of the rights of the Opposition and its leader, restoration of the five-year Presidential term as well as promotion of local governance and territorial development. The next elections will be the legislative elections in 2017 and the Presidential elections in 2019. The threat to political stability represented by the Casamance separatist movements appears to have waned. Economic growth not only remains erratic due to its vulnerability to adverse weather conditions but is too weak to sustainably reduce poverty. The growth rate dropped to its lowest point in 2011, estimated at 1.8%, due to the negative impacts of drought and power outages. It rose to 3.5% in 2013 and 4.3% in 2014. It was estimated at 6.5% in 2015 and is projected at 6.6% in 2016, mainly driven by strong primary sector growth. Medium-term growth should be more robust with annual projections of 7% to 8%. Access to energy and transport represents the main bottleneck to inclusive and green growth in general, and to transformation of the agriculture sector, one of Senegal’s key sectors. The development of agribusiness and agricultural entrepreneurship provides opportunities for inclusive growth and a reduction in youth and women’s unemployment in Senegal. On the social front, according to national employment survey data published in November 2015, the combined rate of time-related underemployment and unemployment was estimated at 39% with 54.5% for women and 29.8% for men.

2. Country’s Strategic Options

The Emerging Senegal Plan (ESP), adopted in 2014, is Senegal’s new development strategy and economic policy reference framework. It is based on three strategic pillars: (i) structural transformation of the economy and growth; ii) human capital, social protection and sustainable development; and iii) governance, institutions, peace and security. Growth acceleration will be driven by the implementation of flagship projects (27 projects and 17 reforms) and large-scale operations with strong economic and social impacts. Under the ESP, progress has been made in the following flagship projects: ‘high valueadded agriculture with the establishment of the first four community agricultural domains and the completion of 126 Naatangue farms in 2015’, ‘the commissioning of the Tobene power plant in the 1st quarter of 2016’. The ESP will be implemented in 3 phases, the first of which (2014-2018) will constitute the economic start-up phase. Next, the ESP will begin the emergence process up to 2023 before propelling the country forwards towards economic expansion by 2035. The ESP aims to achieve a stronger and more sustainable growth rate of 7% to 8%, driven by exports and foreign direct investment (FDI) based on a structural change of the economy.

3. Bank Strategy for the 2016-2020 Period

The overall objective of this CSP (2016-2020) is to contribute to the achievement of inclusive, green and sustainable growth whose spinoff effects will benefit all segments of Senegalese society. The following factors determined the pillars of the 2016-2020 CSP: strategic alignment with the ESP, the results of the Bank’s Senegal Assistance Evaluation over the 2004-2013 period carried out by IDEV, the Bank’s Ten-Year Strategy 2013-2022, which focuses on five core institutional priorities1 , lessons 1 Light up and power Africa, Feed Africa, Industrialize Africa, Integrate Africa and improve the quality of life of the people of Africa. iv learnt from the previous strategy and the search for synergy with Senegal’s other development partners. In light of the foregoing, the following two pillars were selected: Pillar 1: Support to Agricultural Transformation; and Pillar 2: Strengthening of Production and Competitiveness Support Infrastructure (energy and transport). The main objective of Pillar 1 is to contribute to inclusive and green growth by supporting the transformation of Senegal’s agriculture sector, in particular, through the development of agricultural value chains, agribusiness and agricultural entrepreneurship. The objective of Pillar 2 is also to contribute to inclusive and green growth, by closing the energy and transport gaps in order to support the development of agribusiness and improve the population’s living conditions.

4. Resource Mobilization

Under its new assistance strategy for Senegal, in addition to financing from the ADF window (country allocations and regional operations), the Bank intends to increase funding from the ADB public and private sector windows. The 2016-2020 CSP will be financed from ADF-13, ADF-14 and ADF-15 resources for an indicative amount of UA 119 million. Senegal is eligible under the ADB public sector window for project financing on a case-by-case basis in compliance with the Bank’s Revised Credit Policy providing ADF-only countries access to the ADB sovereign window. In the case of this window, the total indicative amount for the projects concerned is about UA 895 million over the 2016-2020 period. In addition, funds secured from trust funds such as the GEF, CF, FAPA as well as Africa50 and the Africa Growing Together Fund could be mobilized. The Bank will also use co-financing with its other development partners as well as public-private partnerships in order to fulfil its strategy.

5. Country Dialogue Issues

Country dialogue issues will concern: (i) implementation of ESP reforms and projects; (ii) portfolio performance; (iii) establishment of a mechanism that will guarantee the government’s timely contribution to the Autonomous Road Maintenance Fund (FERA); (iv) monitoring and evaluation of development outcomes; and (v) mobilization of resources (including domestic resources).

6. Monitoring and Evaluation

An indicative results framework was defined in coordination with the Senegalese Authorities in order to achieve the alignment of the indicators of the Bank’s different operations over the 2016-2020 period with the ESP indicators. A Mid-Term Review Report will be prepared in 2018 and a Completion Report in 2020.

7. Risks and Mitigation Measures

The main risks relating to the implementation of the Bank’s strategy are as follows: (i) Climate. Late onset of rainfall or an acute drought could have a negative impact on agricultural production and consequently growth. This risk can be mitigated by improving the dissemination of more resistant improved seed varieties through the development of irrigation and by new innovative agricultural insurance instruments through ongoing and future agricultural projects financed by the Bank and other TFPs; ii) delays in implementing reforms and projects, including those of the CSP, due to weak capacity. This risk can be mitigated by the capacity building provided by TFPs including the Bank, especially by strengthening the Studies and Planning Units of some key sector Ministries for the implementation of strategic anchor projects; (iii) a fuel price increase where electricity is not yet v generated by the new power plants could impact negatively on the availability of energy for industries and, consequently, the creation of integrated agribusiness hubs envisaged under the CSP. This risk can be mitigated by speeding up construction work on the plants, and (iv) insecurity. The increase in insecurity and jihadist groups in West Africa could impede the implementation of projects planned under the CSP. This risk can be mitigated by pooling initiatives at the regional and international levels to combat insecurity in the sub-region.

8. Conclusion

This Strategy (2016-2020) is the Bank’s operations framework for contributing to ESP implementation in order to achieve the structural transformation of the economy, stronger inclusive and green growth and improvement of the population’s living conditions. In line with this objective, the Bank’s operations will be focused on the following two pillars: Pillar 1: Support to Agricultural Transformation; and Pillar 2: Strengthening of Production and Competitiveness Support Infrastructure (energy and transport). Recommendation. In light of the foregoing, the Boards are invited to approve the CSP for Senegal over the 2016-2020 period.