How can socio-economic divisions be bridged by TPA mechanisms in Senegal?

Think piece by Elimane Haby Kane

Elimane is a Senegalese analyst of public policy and economic governance, and founder of the pan-African think tank LEGS-Africa.

Economic and social precarity is a widespread phenomenon in Senegal. Deep divisions are observed between a minority of privileged citizens that benefit from investments and formal services provided by the state, and a wide majority of people left out that survive with their own strategies in the informal economy, and in the absence of social welfare coverage. These disparities are generated and maintained by the inefficacy of public policies and reinforced by the impact of the Covid-19 pandemic.

Senegal has more than 16 million inhabitants, with a subjective poverty rate estimated in 2015 at 56.5% (recent figures available from ANSD, Agence Nationale de Statistique et de la Démographie). The richest 20% of the population concentrates 46.8% of total income, whereas the 20% of the population with the lowest income holds only 6% of total income (Abdoul Alpha Dia, 2017). Income disparities are very marked based on the place of residence and, in particular, between the urban and rural areas. More than 90% of the workforce does not have access to any social security (paid leave, sick leave, social insurance, etc.), in particular in the urban informal sector and among rural employment. Health insurance is only available for 20% of the population, of which 60% are employed in the modern sector. The economy’s formal sector represents only less than 3% of the companies.

Given the nature of the economy that depends on exports [1], especially energy resources and consumption goods, local companies provide but a small contribution to tax revenues. More than 40% of tax revenues come from VAT. This in turn makes the tax system not very redistributive and essentially sustained by households.

This is a situation that contributes to reinforcing the selection of economic policies, namely the choices for large public works, carried out in the framework of public–private partnerships, where foreign companies are always advantaged. This explains the financial flows towards the rest of the world at the expense of mobilising domestic resources to finance local development. Other choices, such as debt in foreign currencies, the fixed parity of the local currency to the euro, the incentive regime of mining contracts, the fishing agreements, among others, are also factors that deepen non-inclusive economic growth and entail the accumulation of privileges for foreign economic partners and a minority of public officials and their domestic partners at the expense of the poorest populations.

Also on the social level and in terms of access to basic social services, social mobility is very low, so that the social position of individuals remains strongly determined by their belonging to privileged social groups constituting a political-religious aristocracy, living off non-productive intermediation between the state and economic agents. Inequality of opportunity in access to education (and more precisely to higher education) is likely to lead to a more pronounced reproduction of political elites. Children’s access to each level of education is all the weaker the poorer the household.

The coronavirus pandemic, due to its rapid and violent spread, has created an unprecedented socio-economic shock and has put the Senegalese economy into hibernation since March 2020. This unexpected health crisis has tested both the state of Senegal and its citizens, most of whom were already living in precarious socio-economic conditions. The crisis has revealed forms of precariousness of an economic and social nature. The socio-economic situation of the most precarious Senegalese is at risk of deteriorating further. In terms of food, housing and access to basic social services, we are seeing an exacerbation of social and economic inequalities. At the same time, while the incomes of those working in the public sector have remained stable, workers in the formal private sector have seen their wages fall by 30%, and the informal sector is suffering the decline in economic activity justified by measures of social distancing and lockdown. This weakens domestic production and deteriorates the living conditions of the vast majority of workers, whose livelihood depends on the immediate economy on a day-to-day basis. Unemployment persists and increases. This situation could lead a majority of Senegalese to slide into the spiral of poverty and precarity.

Growth projections for the year 2020 in Senegal, in the order of 6.8% GDP growth, have dropped to 0.7%, according to estimates by the International Monetary Fund. Despite various measures dictated by the economic situation, the economy has not yet shown convincing signs of resilience. It is households, especially the poorest ones, that are suffering from the economic slowdown, through unemployment, underemployment, falling incomes, the high cost of basic commodities, and more.

Elements of governance worsening socio-economic inequalities

Participation, inclusion and the protection of civic space are incisive factors that act on socio-economic balances. However, the results of the 2020 Ibrahim Index of African Governance show that West Africa, like the continent as a whole, has experienced a deterioration of civic space, participation and rights. This has been exacerbated by anti-Covid measures that have made the situation more alarming.

Other elements of public governance, in particular centralised governance of natural resources, are also factors that have a negative impact on inequalities.

The socio-economic life of Senegal depends largely on the fishing sub-sector, which employs more than 600,000 Senegalese (Institute for Security Studies 2016 Report). In 2016, the total export earnings of the fisheries sector were estimated at 14.64% and contributed 3.2% of GDP, with an increase of 1.96% compared to 2015. The estimated trade value in December 2016 was 204.43 billion CFA francs compared to 193.5 billion in December 2015, an increase of 5.6% (Annual fishing report, 2017).

Today, with the development of offshore hydrocarbon deposits, the sector is facing new threats to the livelihoods of players in the maritime economy, in addition to those already known related to fishing agreements entered into with foreign countries, particularly the EU and China. For example, the analysis of some fishing agreements,[2] shows that between 2011 and 2018 the production of traditional fishing went from 372,956 tons to 360,632 tons. In 2012, for instance, when the new regime decided to suspend the fishing agreements, traditional catches reached an exceptional record of 405,974 tons. In fact, on 30 April 2012, the government announced the cancellation of the fishing authorisations granted to 29 foreign trawlers.

It is thus plausible to establish a link with the fishing partnership agreement signed between the EU and Senegal between November 2014 and November 2019. This is an agreement on which the state earns only two billion per year, while the families of fishermen take to the open sea because of the drastic reduction in their income.

The asymmetry observed in the distribution of revenues from mineral resources such as gold, zircon, cement plants and hydrocarbons is due to a legal framework that is favourable to fiscal incentives and to the signing of unequal exploitation and production-sharing contracts, at the expense of maximising state revenues and redistributing them to vulnerable populations. This state of affairs is the cause of the paradox of abundance observed in certain mineral-rich regions (Kédougou, Matam), but whose terroirs are the poorest in Senegal.

Land governance is also a fundamental lever for deepening inequalities and deepening social divisions. At least for three reasons. The first concerns the phenomenon of land capture and its allocation to large agribusiness groups, and the second is related to local governance problems that are the source of several conflicts at the level of terroirs and a barrier to land development. Finally, the third reason has to do with the difficulties for women to access land in rural areas in order to benefit and empower themselves.

Indeed, the option for industrialised agriculture, not being coupled with mechanisation and the provision of substantial funding to mobilise rural farmers in industrial production, favours land hoarding by large foreign groups and speculators to whom the state grants large areas of land, not to mention the disastrous consequences on local rural communities, which find themselves dispossessed of their livelihoods in some cases.

Also, the decentralised land management since 1996 of land allocations and dis-allocations, but unchecked, whose attributions in the national arena are made at the level of local authorities, has been the subject of numerous legal disputes (more than 50% of the litigation at the Ziguinchor High Court in 2017 is related to land disputes) relating to speculative practices and overbidding, through the multiple attributions of occupancy permits . This constitutes a major threat to the viability of family farms.

Finally, women’s access to land is still a challenge, although no objective constraints are noted in terms of the law. However, certain beliefs and traditional practices continue to obstruct women’s freedom to have access to good arable land and to develop it.

The highly dispersed and inaccurate employment policies [3], combined with the weaknesses of the industrialisation policy and the professional training policy, are reflected in their ineffectiveness and the lack of clarity of their impacts, considering that the unemployment rate based on the active population (+ 15 years old) is estimated at 16.9% in the fourth quarter of 2019 (ANSD surveys). Unemployment affects women (27.6%) more than men (8.6%). Unemployment affects not only a qualified population, but also a majority of young people with no training. According to the perception of economic players and young project leaders, the hundreds of billions spent by these various institutions are not followed up by concrete effects on the ground while, more and more, the demands on the job market are increasing by about 300,000 per year.

What transparency and accountability mechanisms are needed to reduce social divide?

Senegal has a fairly extensive legal and institutional framework of governance in terms of legal texts, but it is not very effective in terms of its impact on the social wellbeing of the Senegalese people. The challenge lies primarily in practices, specifically in the application of laws, which is often hampered by corruption, political clientelism and impunity.

The Senegalese constitution defines a democratic and social republic. However, it has so far been difficult to demonstrate the social character of the republic through the effectiveness of public policies because of the extent of poverty, persistent inequalities, social divisions, and the lack of social security for the vast majority.

In order to have an effect on social divisions, governance challenges can be identified at two levels: equity mechanisms that allow for optimal mobilisation of domestic resources, and mechanisms that promote fiscal and budgetary justice for social spending that truly impacts the most vulnerable populations.

Transparency and accountability mechanisms for optimal domestic resource mobilisation

Taking into account the willingness of the Senegalese state, within the framework of the implementation of the Senegal Emerging Plan, to expedite the exploitation of natural resources in order to finance national development and to use public–private partnerships contracts to do so, it is important to revitalise the mechanisms for monitoring these contracts and the state’s commitments to ensure that these investments take into account the interests of the population in a sustainable manner. To this end, global mechanisms such as open contracting, open government and open budget are appropriate tools for transparent and inclusive governance.

Also, an existing mechanism such as the public finance transparency code (a WAEMU public finance reform directive) contains relevant provisions that, if applied, can foster a national integrity system, particularly with regard to the state’s contractual commitments with third parties and the fight against corruption.

Also, recent laws in the extractive industries sector concerning local content and decrees for the implementation of social and local development mining funds can correct, in particular, territorial inequalities, especially in mining communities that are also the least economically developed regions and also least favoured by basic public infrastructure.

Also to protect the income generated by domestic resources, and to fight against illicit financial flows, corruption and financial delinquency, bodies such as CREI, CENTIF, IGE and OFNAC, must be strengthened and brought closer to the populations. In addition, financial and tax authorities must be strengthened in order to have the appropriate means to fight against tax optimisation strategies, transfer pricing and the use of tax havens, practised by multinational companies that conclude contracts with the Senegalese state.

Transparency and accountability mechanisms for social spending for the benefit of the most vulnerable

This second lever in the fight against social divisions consists in ensuring an equitable redistribution of the income collected by the state.

The first level of action is that of fiscal equity, which consists of further strengthening fiscal policy and making it more progressive, by ensuring that those who are responsible for corporate actions pay more taxes and that households are more subsidised in order to meet their social costs. It is also necessary to strengthen the means of the state for a wider coverage of the tax base and greater efficiency in the collection of taxes.

The second level consists of encouraging citizen participation in the entire process of formulating, implementing and evaluating fiscal policy, to ensure that social priorities are effectively addressed and that the decrees on the distribution of support funds and mining social funds intended for local authorities are effectively implemented, taking into account local development plans, investments aimed at the development of the agricultural sector and basic social services and social security.

Dynamics of the agents of change

The effective implementation of these various transparent, participatory and equitable governance mechanisms also requires strengthened and committed citizen participants at the service of their communities. These participants are sought both at the level of grassroots community organisations and civil society and at the level of political leadership in local governance bodies and national representations such as parliament.

As a matter of fact, while the decisive action of the civil society organisations traditionally present through alert and advocacy actions should be noted, the leadership deficit at the level of local elected officials should also be recognised, both at the individual and institutional levels. The increasingly noticeable emergence of social movements and new forms of spontaneous collective action, encouraged by the opportunities offered by social media, is a new form of expression of active citizen participation that can considerably strengthen citizen pressure on decision-making institutions. However, to do this bridges must be established with more structured organisations to follow up on the demands raised and turn them into transformative initiatives.

[1] Overall for the year 2019, the trade deficit is -2,244.2 billion XOF (EUR -3,421 million). Senegalese exports amounted to XOF 1,985 billion (EUR 3,026 million) and cumulative imports over the year 2018 amounted to XOF 4,229 billion (EUR 6,447 million).

[2] ANSD’s report on the 2017–2018 economic and social situation of Senegal, published in July 2020.

[3] It is noted that there are several institutions with different administrative control whose mission is to promote employment in Senegal: ANPEJ, ANEJ, DER, ANIDA, PRODAC, etc.

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