On the political front, the agreement between the government and two opposition parties to form a coalition government has brought about a minimum stability, which is a prerequisite to giving confidence to potential investors. The presidential and legislative elections due in February 1993 will provide a test and give a clear indication of the strength and durability of such coalition which remains so far, within the context of Africa, quite a political achievement.
Human rights is an important issue in a country confronted with a simmering armed conflict with separatists in the Casamance region and acute economic problems which threaten to exacerbate social discontent. But it is interesting that the appointed Chief Executives of three major human rights bodies – Mr I. Fall at the UN in Geneva, Mr A. Dieng at the International Commission of Jurists in Geneva and Mr P. Sané at Amnesty International in London – are all Senegalese citizens. And if the conditions that led the Senegalese authorities to declare a state of emergency in 1987 were to return, one could expect these three independent personalities to play a leading role in defusing the crisis.
On the economic front, Senegal started, as early as 1978, to implement a short-term economic stabilisation programme which was followed throughout the 1980s by medium and long-term adjustment programmes aimed at improving the investment climate. But Senegal is a member of the Franc zone, whose currency, the CFA franc, is pegged down to the French franc. The country has no leverage to articulate an independent monetary and exchange rate policy. Because of this constraint, the scope of various economic programmes was limited to budget deficit reduction. Imports and public investments have been reduced but the budget deficit, which was estimated as over five per cent of GDP in 1989/90, has not been brought under control. Inflation rate is low but interest rates stay high, thwarting any hope of economic recovery. The economic rate of growth was 2.9 per cent in real term in 1986-1990 instead of the annual rate of 3.5 per cent projected in the medium and long-term adjustment programme of 1985-1992. Compared to a population growth of three per cent, the level of economic growth did not improve GDP per capita.
The Government also undertook a reform of the banking system. As a result, the ailing national banks have been eliminated. The remaining banks are all foreign-owned: Crédit Lyonnais, BICIS (Banque Nationale de Paris), Société Générale, Citibank, and BIAO. They only provide short-term facilities, making handsome profits in financing lucrative petroleum products and food imports. The excessive commissions they charge dissuade many people, mostly the informal sector operators, from using their services. Consequently, the private sector is starved of medium and long-term financing and the Senegalese government’s determination to make small and medium enterprises a major vehicle of growth did not materialise.
However, the lack of medium term financing is a common feature of a world hit by recession, when the attitude of investors is to look for opportunities to make short-term profits.
Another feature of the present situation of declining economic activities is the changing view of many investors – private, corporate or institutional – about the prospect of high return in the developing countries. This turn of events have been brought about by the stringent structural adjustment programmes put in place by the developing countries under the auspices of the Bretton Woods Institutions: the IMF and the World Bank and their continental partners. These reforms have brought government budgets under control in many countries. The allocation of credits and import licences and the fixing of interest and exchange rates have been left to market forces. The privatisation programme of state assets, which is part of the economic reform programmes and the democratisation process are well underway in many countries. Tight monetary policies, which have brought down inflation rates while keeping interest rates and profit margins high, have encouraged Third world wealthy citizens, who used to look abroad for investment opportunities, to start reversing their attitudes and invest in their respective countries.
The most noticeable trend of this present situation is an estimated $40bn inflow of private capital in Latin America. And the pattern could be repeated throughout the developing countries all over the world since they have gone through the same process. If such a scenario were to materialise in Africa, what further reforms does Senegal need to put in place to attract local and foreign investors?
The various economic reform programmes undertaken by the Senegalese government are: short-term emergency stabilisation programme in 1979; a financial adjustment programme for the 1985-1992 period, followed by a medium and long-term adjustment programme 1985-1992, which resulted from 1986 to 1992 in four structural adjustment programmes. These have made it possible to reduce consumption and the rate of inflation but failed to reactivate investments and economic growth. There is a need therefore, to take further measures of liberalisation in order to mitigate the remaining distortions in the agricultural, industrial, public and financial sectors. Among these measures the most urgent ones concern:
- The liberalisation of the rice and sugar markets;
- The reconstitution of the national banking network through a government voluntarist policy with equity participation of the state, and fiscal incentives to encourage Senegalese nationals to create banks and provide the much needed medium and long term financing. Once created, these banks should, through good management, efficiency and cost reductions, be in a position to compete effectively with the foreign-owned banks and eventually force them to adhere to normal standard banking or disappear;
- The setting up of a stock market, which following years of macro-economic adjustment and liquidity squeezes, will give the private sector access to medium and long term financing through new issues and take advantage of the government divestment of the state owned-companies and the liberalisation of the rice and sugar trade. A capital market will also serve the purpose of attracting money circulating outside the banking system within the informal sector whose operators have no confidence in the present financial system. Once the stock exchange is set up, one avenue to be explored will be a triangular flotation on the Paris, New York and Dakar stock markets to tap the liquidities retained by the successful members of the Senegalese Diaspora and the African-American entrepreneurs looking to expand their US based businesses to Africa. The importance of the issue was reflected in a special issue of The World Street Journal Reports dated April 3, 1992 entitled “Black Entrepreneurship”. Other potential investors are the citizens, corporations and institutions from the rich countries, where recession has dented returns on investments. However, for such a system to work efficiently and smoothly, free movement of capital, as stipulated in the protocols of the Economic Community of West African States, is to be translated into reality and foreigners and non-resident Senegalese are to be allowed to participate in share dealings. We should contemplate of granting a “conditional financing amnesty” to facilitate the return of money acquired from corruption. It is not in the interest of Senegal that these liquidities be kept abroad instead of being brought back and invested to create jobs and revenue and contribute to the development of the country.
However, it is important to bear in mind that, no matter how hard Senegal is trying, reform can, at best, improve the economic environment, but economic recovery and prosperity will remain elusive as long as the country spends over 36 per cent of its export earnings servicing its debts. An important portion of the balance of payments, estimated at 9.1 per cent of GDP in 1989-90, is related to interests due on external public debt. Rescheduling is obviously not the cure. One of the options is in the Brady initiative, launched three years ago, to provide a framework for the easing of bank debt burdens. Senegal, with its conservative pro-western stand evinced by its decision to send troops to fight alongside the US-led coalition in the Gulf War and the military facilities it provides to France and the US should, in turn, have some claim in the reduction facilities of debt servicing burdens provided by its allies to their proteges.
The monetary union with France hampers any move towards an independent monetary and exchange rates policy, which should go hand in hand with any economic reform programmes aimed at readjusting the production system to market conditions. The 14 African members of the Franc Zone along with the other African countries, which have close trading links with such as Nigeria and Ghana should get together and initiate actions aimed at reforming or abrogating altogether the monetary union with France. Senegal could play a leading role in assembling this forum and proposing a draft agenda with the view to establishing an African Monetary Union. Understandably, France as the major player and beneficiary of the system might be reluctant to contemplate any change in the prevailing situation. However, it might be worth recalling that France would not have had the latitude to devalue its currency 14 times since 1944 to achieve one of the most balanced economies in the world today, if she had not enjoyed an independent monetary and exchange rate policy.
Regional integration leading to a Federation of West African States should be given the priority it deserves when determining policies and strategies in all sectors and endeavours. The framework of a New World is shaping up. The odds are not as bad as they had seemed for Africa, and indeed for Senegal, to carve successfully economies out of the present conditions and give some relief to the sufferings and the constant humiliation that our people have been experiencing for too long. Africa in general and Senegal in particular have the human and material resources to achieve this and ought to succeed. All we need is faith in our capacities and the right leadership.