In the context of the Organization of the Islamic Conference summit in Dakar, in March 2008, billions of Arab petrodollars have poured into Senegal to help realize its ambition to become the “Gateway to Africa”. However, boosting the country’s infrastructure may not be sufficient, as long as major obstacles such as the country’s energy crisis, are not tackled simultaneously.
Situated on the western-most tip of Africa, Senegal is a predominantly Muslim country, although its Sufi-inspired conception of Islam can hardly be compared to what is practiced in most of mainstream Arabia. Still, the 11th summit of the Organization of the Islamic Conference (OIC) is set to take place on March 8-14 in the country’s capital Dakar.
Founded in 1969, the Organization of the Islamic Conference (OIC) represents 57 member states on four continents, which makes it the world’s second largest inter-governmental organization after the United Nations. Its role on the world stage is largely symbolic, yet for the hosting nation it is an ideal platform to put itself in the limelight and attract foreign investment. Senegal has done just that, and is likely to continue to do so as its president, Abdoulaye Wade, over the next three years will travel the world as temporary head of the OIC.
In sharp contrast to decades of semi-socialist rule, President Wade, nicknamed “the builder,” increasingly attempts to liberalize the economy. His dream is to make Senegal a trade and transport hub, as well as the natural gateway to Africa, primarily by boosting the country’s infrastructure. BOT-contracts and private-public partnerships (PPP) appear to be the tools of choice.
Aided by a number of Arab governments and financial institutions, Senegal’s National Agency for the Organization of the Islamic Conference (ANOCI) had a budget of some $750 million to be able to welcome the some 5,000 expected conference delegates in style. Thus, to improve circulation within the Greater Dakar area, ANOCI supervised the construction and rehabilitation of some 40 km of roads, while five luxury hotels and the King Fahd Conference Center have been either renovated, or built from scratch.
Tripling tourism figures
According to Karim Wade, ANOCI head and son of the president, the increase in hotel capacity “not only responds to the immediate needs of the Islamic Conference, but will help Senegal become one of the main tourist destinations in Africa.” In 2007, already some 500,000 tourists visited the country’s beaches, yet the government hopes to triple that figure by 2010.
However, despite all good intentions, in early 2008 it seemed hardly likely that roads and hotels will be completed before the start of the IOC summit. Consequently, with all but 2,500 hotel rooms available in Dakar, ANOCI decided to rent all available hotel rooms between the outlying town of Bakar and the tourist resort Saly, while two cruise ships were chartered to provide extra lodging off-shore.
In any case, Arab investors seem to have discovered the West African beltway, as investments related to the OIC summit are but the tip of the iceberg in terms of petrodollars traveling westward. On April 4, 2007, construction commenced of a new international airport at Diass, a city some 45 kilometer south of Dakar. Built by the Saudi BinLadin Group, the $500 million airport will have a capacity of 3 million travelers and a 3,500-meter long runway that is capable of handling the world’s largest airplanes, including the Airbus A380. Named after a political hero from the past, the Blaise Diagne International Airport (BDIA) is due to be completed by 2010.
According to Modou Khaya, BDIA managing director, there are several sound reasons for the massive investment. “The current international airport of Dakar is heavily congested, and suffers from a lack of comfort and parking space,” Khaya said. As a result of an annual increase of some 5% to 10% in passenger traffic, in 2007 Dakar airport welcomed some 1.8 million people, while it originally had been laid out for only 600,000.
Once located at the empty northern tip of the Dakar peninsula, the current Dakar International Airport today finds itself surrounded by the rapidly expanding suburbs of the Senegalese capital, causing not only problems in terms of access. According to Khaya, the existing airport could only be expanded by extending one of the runways into the sea, which proved far more costly than building a whole new airport.
“Relocating the airport south of the capital will help decongest the capital and offer better access to the tourist area of Mbour and the Diamnado special economic zone,” Khaya added. “It will also allow for the some 800 hectare of territory it currently occupies to be developed into the capital’s leading commercial district.”
The first technical studies for Dakar’s future business district have been completed, but so far it remains on the drawing board. The Diamnado Integrated Special Economic Zone (DISEZ) however, is to become reality, as the Senegalese government on December 15, 2007, signed a contract with Jafza International, a subsidiary of Dubai Holding. Situated some 20 km south of Dakar, DISEZ will occupy a total surface area of 10,000 hectares to offer an investor-friendly, low-tax zone to attract foreign investors.
With a focus on industry and logistics, DISEZ will host up to 1,000 companies and is hoped to create 130,000 direct and indirect jobs over the next two decades. It should be noted, however, that the project is to be built in four phases, the first of which will be completed by 2012. If, for whatever reason, the first or second phase does not produce the hoped for success, further construction will likely be halted.
DISEZ is not Dubai Holding’s only project in the region. Having already invested billions in Tunisia and Morocco, the Emirati giant seems to have discovered life beyond Gibraltar’s “Pillars of Hercules” and firmly set foot in West Africa. On October 8, 2007, another of its subsidiaries, global port operator DP World, signed a 25-year concession to develop and operate the container terminal at Dakar Port and construct, and develop a second terminal. DP World pledged to invest over $700 million between 2008 and 2011.
Constructing the “Port du Futur”
In a first phase of development, $163 million will be spent to modernize the infrastructure of the existing port. Construction is to start in 2008 and will be completed by 2010. The aim is to double the terminal’s capacity from some 375,000 containers in 2006 to around 550,000 by 2010. In a second phase, DP World intends to construct and manage a whole new container terminal known as the “Port du Futur”. With a price tag of some $476 million, this future port is expected to become operational in early 2011, and with a depth of 15.5 meters it will able to handle the latest generation of container carriers.
To many observers, it came quite as a surprise that newcomer DP World had managed to beat, among other rivals, CMA-CGM. The French operator had been present in Senegal for over 75 years and the country, a former French colony, still nurtures strong economic ties with France. The unexpected decision illustrates to what extent DP World, the world’s 4th largest port operator, has become a force to reckon with, as well as the fact that Senegal, in its drive to attract foreign investments, is arguably switching hats: from the French to the Muslim gateway of Africa.
However, in spite of the billions of dollars invested in a new airport, port, special economic zone, roads and hotels, it yet remains to be seen if investments will pay off. Of course, Senegal has its advantages. It is relatively safe and secure, and has enough to offer in terms of tourism. Regarding logistics, it is the most western point of Africa and in that sense could be seen as a natural gateway.
However, the world’s main trade routes are located in the northern hemisphere, between Asia, Europe and the US. Therefore, one wonders where the projected increase in trade for Dakar port is to come from. Brazil? Argentina? What’s more, with an average annual income of some $1,700, Senegal itself offers a limited market. And the same is true for the neighboring countries Mali and Burkina Faso.
Most importantly however, infrastructure consists of more than building ports, roads and hotels. For investors to flock to Senegal there will have to some sort of energy security. Yet the country has no major hydrocarbon reserves to speak of and consequently, in the wake of the international oil price hike it witnessed an energy crisis without precedent. In a way, Senegal is the archetypical example of the devastating consequences of the current oil prices for the developing world.
Between 2000 and 2006, the country’s fuel imports increased from some $400 million to $762 million, the equivalent of 40% of its export revenues. Secondly, the country’s only refinery and handful of power plants suffer from a desperate lack of investment. Due to the rise in oil prices, the national refinery was forced to close down for nine months in 2006, following an acute cash crisis. Help may be on the way, however, as Senegal has signed a memorandum of understanding with the Iranian Petroleum Company to invest in the country’s refining capacities
Meanwhile, while only 16% of the countryside has electricity, Dakar and other cities face regular power cuts, as the national electricity company, Senelec, too faces a major cash deficit “The main problem is that for decades no investments have been made,” said Ibrahim Thiam, chairman of the Electricity Sector Regulation Commission (ESRC). “As a result, Senelec faces a lack of capacity and an outdated infrastructure. In addition, the plants operate on expensive imported fuels.”
Senegal’s power plants operate on an energy efficiency rate of 30%, which means that 70% of every liter of fuel oil goes up in smoke. For years, the World Bank has called upon the Senegalese government to privatize the electricity sector, yet largely due to the outdated equipment, so far no (Islamic) investors have presented themselves.
And thus, at the start of the OIC in Dakar in March, Senegal finds itself between hope and fear. On the one hand, a glorious future lies ahead, symbolized by a state-of-the-art airport, port and free trade zone. On the other hand, the country sits on an energy bomb, which may one day blow away all dreams and ambitions. For let us not forget what a dissatisfied population can do. When President Wade, with an eye on the OIC, ordered that street sellers were no longer allowed in Dakar, the population answered with such a massive demonstration that he was forced to reverse his decision. Some things never change, they say.
