Senegal is undergoing substantial governance reforms under newly elected President Bassirou Diomaye Faye, following the April 2024 political transition that concluded President Macky Sall’s twelve-year administration (2012–2024). While supported domestically, the abrupt and confrontational implementation has undermined investor confidence, paused engagement with the International Monetary Fund, and led to the postponement of several major foreign investment projects. Despite this, the country remains a promising long-term market, but a recovery in investor confidence is unlikely (20–35%) before 2026 unless regulatory clarity improves.
- The administration of Senegalese president Bassirou Diomaye Faye initiated audits of public finances and major national projects under his far-reaching reform agenda centered on transparency, accountability, and the renegotiation of key state contracts.
- The in-depth audits revealed significant inconsistencies in fiscal reporting under the previous administration, including a larger-than-expected public deficit. As a result, the International Monetary Fund (IMF) temporarily paused its ongoing program with Senegal, citing concerns about the reliability of economic data.
- The audits of major national projects, especially in the oil, gas, and mining sectors—which are critical to Senegal’s economic future—raised red flags within the investor community.
- So far, the audits led to the cancellation of a major desalination project by Saudi firm ACWA Power and the suspension of a project to build five regional airports by Czech firm Transcon, whose director was detained in Senegal in December and charged with undeclared imports, foreign exchange offences, and money laundering.
Stagnation of New Foreign Investment
Although investors generally support anti-corruption and transparency measures, the sudden implementation and confrontational tone of the reforms have raised concerns. The government’s approach has often been perceived as punitive rather than cooperative. This has led to increased caution among investors, who have postponed new investments and adopted a wait-and-see approach. Uncertainty is very likely (80–90%) to persist in the short term as the regulatory and policy environment in Senegal continues to evolve and does not yet offer a predictable, rules-based framework.
Policy Continuity Driven by Domestic Support
Despite external hesitation, Faye’s policies are widely popular domestically among Senegalese. His anti-corruption and resource nationalism agenda align with public sentiment, particularly among the youth. As such, it is highly likely (75–85%) that the government will maintain its reformist trajectory throughout 2025. This suggests that investors hoping for a softening in tone or a reversal of key measures are unlikely (20–35%) to see immediate change.
No Systemic Risk Yet Identified
While the cancellation of ACWA Power’s $800 million desalination project and the suspension of Transcon’s airport construction plan have drawn significant attention, these are likely (55–75%) isolated incidents rather than indicators of a broader pattern of systemic risk. The ACWA Power project, pushed through at the eleventh hour by the previous administration, had not yet moved to the implementation stage when President Faye halted it, citing concerns over its high cost. The investigation of Transcon’s director, driven by serious charges, is unprecedented — yet it remains a unique case rather than evidence of a systematic crackdown on foreign executives.
Balancing Domestic Demands with Investor Confidence
A central challenge for the Faye administration will be to balance strong domestic demands for transparency and fairness with the expectations of legal predictability and fiscal discipline from the investor community. Should the government fail to strike this balance, it is likely (55–75%) that foreign investors will become increasingly reluctant to initiate new projects in Senegal. In such a scenario, some will very likely (80–90%) redirect capital to alternative markets in the region—such as Côte d’Ivoire—which offer a more stable regulatory environment.
Medium-Term Outlook: Cautious Optimism
Despite current uncertainty, Senegal’s long-term fundamentals remain strong. A collapse in investor confidence is unlikely (15–30%), but caution is almost certain (95%+) to persist until the results of ongoing audits and policy frameworks become clearer. Assuming reforms are institutionalized in a transparent and consistent way, there is a realistic possibility (40–50%) that investor sentiment will begin recovering in 2025–2026. Continued support from the IMF and revenue prospects from oil and gas production will play key roles in this trajectory.
Recommendations:
- Joint ventures and alliances with Senegalese firms can help navigate political sensitivities and build credibility.
- Delay large-scale commitments until fiscal audits and new legal frameworks are complete and publicly communicated.
- Involve regional or international development institutions to lower political and legal risks.
