SENEGAL “Assessing the nature,

extent and impact of FDI in Senegal’s agriculture”

Harminder Singh Sangha*Sonia Heinebal * Andrea Sicuro

Pauline Fidélius * Ariana Alva Ferrari

Based on “Trends And Impacts Of Foreign Investment In Developing Country Agriculture” by the Food and Agriculture Organization of the UN

* Numerous attempts made since the early 1960s to design the right set of agricultural development policies that could successfully set Senegal on a higher paced economic growth path.

* However, results are not yet visible to the naked eye. 1. Almost 50 percent of the population remains officially unemployed,

2. more than half the country lives in poverty with GNP growth for 2009 expected to reach just 1.5 percent.

3. the country relies on imports for 70 percent of its food needs – a rate higher than most countries in sub-Saharan Africa.

* Senegal authorities faced during the 2008 global food crisis when the prices of many food items skyrocketed in international markets as a result of cutbacks on food supplies from its key Asian food exporters (Thailand, Pakistan, etc.).

* To overcome these weaknesses Senegal must swiftly reform key sectors of its economy starting with its agriculture, in order to achieve the highest economic growth rates possible – in the order of 7 percent or more per annum.

OVERVIEW

* This chapter reviews selected initiatives including various efforts made in the country recently to attract more FDI to help reduce the impacts of these weaknesses drawing as much as possible from foreign resources.

* Agricultural lending in Senegal currently accounts for less than 5 percent of the total portfolio of the financial sector. There are almost no loans for capital investment. the agriculture sector is desperately in need of credit: thus, foreign investments are vital.

* Senegal’s leaders are well aware of the country’s persistent vulnerabilities to poverty, food insecurity and lack of general economic competitiveness. In the wake of the 2008 food crisis, the government responded with the OANA programme.

* For the period of October 2008 to 2010 for example, the GOANA set goals for itself to produce 2 000 000 tonnes of maize, 3 000 000 tonnes of cassava, 500 000 tonnes of paddy rice and 2 000 000 tonnes of other cereals (millet, sorghum and fonio), 400 000 000 litres of milk and 600 000 tonnes of meat.

OANA programme

*Weakness in attracting FDI and building FDI stock

*Major providers: Arab States – Malaysia – China – Some African countries - France

Trends in levels of FDI inflows to Senegal

*High illiteracy rate

*Poor infrastructures

*Unreliable power supply

*Unfriendly tax system*No agriculture scheme

*No war no peace environment

*Land insecurity

*Inflexible labour code

*Corruption

*Ambiguous competition policies

Vulnerable areas should be improve to attract more FDI

Institutional, Regulatory And Policy Framework For Investments In Senegal

OFFICE OF THE ACCELERATED GROWTH STRATEGY (AGS)

Great Agriculture Offensive for Food and Abundance

KEY INSTITUTIONS:

Agency for the promotion of investments and major projects

SENEGAL INVESTMENT CODE*Specifies tax and customs exemptions according to the size

of investment, classification of investor and location.

*Examples:Customs exemptions (3 years)

VAT Suspension (3 years)

Tax credits: 40% eligible investment, 5 years and 50% taxable profit

Year extensions if investment is in the area outside Dakar to encourage inland investments

Unlimited recruitment of expatriate workers

Duty free importation of capital goods and more…

What has Senegal done to be more competitive?

*Steps taken in improving Senegal’s Free Zone Programme Put into action the “One Stop Shop”

Replaced its Free Trade Zone with Enterprise Zone Franche d’ Exportaition to reduce Taxes and offer duty free imports

Signed investment treaties with the United States, France, Switzerland, Denmark, Finland, Spain, Italy, Netherlands and Japan which resulted the free transfer of capital and profits thus protecting capital investments and intellectual property rights

Became a member of Agencies such as the World Trade Organization

Three tier

system:

1. Central

2. Regional

3. Local levels

Five levels of Administrative Operations:1.National2.Regional3.Departamental4.Sub-Prefactural5.Village

Land-related institutions

*National land classified as national patrimony is called Domaine National (DN) and it is the more complex area to discuss in the context of Senegal.

*AGENCIES1. Cadaster: it surveys and maps land to determine property boundaries as well

as subdivision of lands

2. Conservation Foncier: registers land, and authorizes land dividing operations before the Cadaster surveys them.

3. Bureau Des Domaines: responsible for land zoning and direct administration of state lands. Investors who want a zoning change apply here

“Everybody owns everything then no one owns anything” The government of Senegal and its system of land ownership & control is universally recognized as a constraint to agricultural modernization

• Senegal’s court system receives around 20% land disputes in Dakar and 50% in Kaolack every year.

• Courts are reported to be inconsistent & unreliable to allow access to its services, specially to the poor, who cannot afford its high fees, costs and physical distances.

• Most agencies mentioned are underfunded, understaffed and underequipped.

Land-related issues

Past 10 years : Structural deterioration of the trade balance => have

underscored the export earnings opportunities

But upward trend performance in Direct investment from 2001, with significant increase in export of non-traditional products

Current Situation :

Large number of FDI related companies actively involved with the Senegal Food Industry

FDI inflowing essentially directed toward the modern sector (agro-industry)

But limited impacts in strategic areas like technology transfer and R&D => agricultural development through innovation is vital for reducing rural poverty

Foreign Direct Investment impacts on Senegal agriculture

* The Senegalese Tomato Industry

• Stand out from the rest of the country’s agricultural landscape

• Contract farming agreement

• Social and economic improvement

• Tomato production accounted for 6% of cultivated land areas

* GDS

• Vertiacl integration of production stage

• Model more viewed as powerty-perpetuating than powerty-eradicating

FDI case study & obstacles for future FDI

* Increased risks for small farmers and future Fdi : land-scarcity

• Diminishing natural resources

• Growing land demand pressure

• Access to land = obstacle that investors face in Senegal

CONCLUSIONS

Over the last four years many analysts, development agencies, NGOs and the media have focused on one specific category of primary

agricultural investment, namely acquisition of agricultural land on a large scale.

NEGATIVE EFFECTS

• lands acquired by foreign investors tend to be among the best ones

• displacement of smallholder farmers

• loss of grazing land for pastoralists

• social fragmentation

Large-scale land acquisition

POSTIVE EFFECTS• generationof

employment• transfer of technology

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RECCOMENDATIONSFurther research on the impacts of

agricultural investment

“It is recommended that the organizations working

in this area develop a common analytical

framework that would be applied to all studies.”

The case study approach has inherent limitations and cannot fully capture the wide variety of situations

It should examine the structural changes induced by the investment project

over the short, medium and long term, at both macro and microeconomic levels

RECCOMENDATIONS

A more proactive role for civil society organisation.

Increasing the effectiveness of support

Policies for promoting investment for sustainable agricultural development

THANK YOU FOR YOUR ATTENTION