June 8 (Bloomberg) -- Senegalese President Macky Sall has shut 59 state institutions and begun audits of government projects after ending the 12-year rule of Abdoulaye Wade, improving investors’ outlook for the West African nation.
Sall, 50, won a March 25 presidential election in the second-biggest economy in West Africa’s monetary union, defeating 86-year-old Wade, whose last year in office was marked with violent protests against power cuts and his bid for a third term in office.
During his campaign, Sall pledged to make government more transparent and curb spending in the $13 billion economy, which is forecast to expand 3.9 percent this year from 2.6 percent in 2011, according to the International Monetary Fund. The growth rate lags the IMF’s sub-Saharan African projection of 5.4 percent for this year.
“Macky Sall has embarked on far-reaching public-sector governance reforms which are likely to improve the predictability of Senegal’s business environment,” Alpha Diedhiou, senior Africa analyst at Bath, U.K.-based risk advisory company Maplecroft, said in an e-mailed response to questions on May 31. The changes are “likely to be well received by investors as they promote greater transparency and accountability.”
Since coming into office, Sall has kept promises to audit state institutions and programs, including a 650 billion-CFA franc ($1.2 billion) energy-crisis program started by Wade’s son Karim, who was energy minister.
Investigations into members of Wade’s administration are under way and Sall has pledged to set up a court to prosecute economic crimes and look into alleged misuse of public funds. The main port at Dakar and the office heading a $500 million airport project have new directors.
“All sectors will receive the same treatment,” Moubarak Lo, Sall’s deputy chief of staff, said by phone on June 5. “Sanctions will be implemented if necessary, under the mandate of the judiciary.”
The changes may extend to mining-contract renegotiations, “where the former regime granted a number of licenses without observing due process,” said Diedhiou. He declined to give details about what deals may be reviewed.
Audits should include all members of Wade’s administration, including Sall, who was prime minister from 2004 to 2007, said Serigne Mbacke Ndiaye, a spokesman for the former president.
“They must audit everyone who was in power from 2000 to 2012 so that the Senegalese can see the whole picture, and of course this means President Macky Sall,” Ndiaye said by phone on June 6. Sall has a “moral obligation” to allow himself to be audited, even though the country’s laws don’t permit a review of a sitting president, he said.
Senegal earns foreign currency from exports of fish, peanuts, while Mineral Deposits Ltd. of Australia mines zircon, Vancouver-based Oromin Explorations Ltd. is developing a gold project and Teranga Gold Corp. produces the metal. France Telecom SA has 42 percent stake in telecommunications company Sonatel, the largest listing on the regional stock market in Abidjan by capitalization.
The changes and audits “are a good sign for investors,” Abdou Fall, Senegal analyst at the Institute for Security Studies in Pretoria, South Africa, said in an interview on May 30. “There needs to be more transparency in contract tenders.”
The yield on Senegal’s $500 million Eurobonds due in 2021 has fallen 66 basis points in the period since Sall was elected and traded at 7.380 percent by 7:16 p.m. in London, according to data compiled by Bloomberg.
“Senegal’s yields are slightly above those of those of the other issues and I think that’s a reflection of that slow, grinding process” of enacting reforms, John Bates, head of fixed income at Silk Invest Ltd., which holds Senegalese Eurobonds in about $140 million of assets they manage, said by phone from London yesterday.
Ghana’s $750 million Eurobonds yielded 6.015 percent, while Gabon’s dollar bonds due 2017 traded at 4.638 percent and Nigeria’s yield was 5.533 percent.
“To get material progress you need a lot of different people to move in the same direction,” Bates said. “It’s notoriously very fragmented, the Senegalese government.”
Senegal needs “to give a loud signal about governance to attract investors,” Sall said in a Feb. 12 interview. He pledged to curb budget spending with “virtuous management of public resources.”
Government workers’ salaries were made public and Sall promised to cut them to less than 5 million francs a month. He stopped first-class travel for government officials and is selling one of two presidential jets, which Wade had refurbished at a cost of 17 billion francs, according to a report in Dakar-based newspaper le Soleil in March.
Sall is aiming to keep spending in check, with the budget deficit expected to reach 6.4 percent of gross domestic product this year from 6.2 percent in 2011, according to the IMF. The projection is likely to be attained “through major efforts to reduce government current spending and the postponement of some non-priority capital expenditure,” the lender said.
The moves to curb spending should show investors Sall’s cleanup will improve doing business in Senegal, said Mamadou Alhadji Ly, an analyst at Dakar-based Consortium for Economic and Social Research.
“If everything is done in the proper way, future investors or those who are already there have nothing to worry about,” he said by phone on May 31. “These reforms won’t put off investors or make those already investing leave.”
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