Economic situation Strong role of small-scale enterprises
Informal-sector micro and small enterprises account for more than 60 per cent of gross national income. The majority of the population works in agriculture or fisheries. However, agricultural productivity is low. The farming sector only accounts for about 16 per cent of gross domestic product. The main causes of this are poor soil quality and irregular rainfall along with overgrazing and deforestation, all of which are leading to increasing desertification. The coastal waters are not being managed responsibly. As a result, they are being overfished.
Climate change is exacerbating the situation
Senegal's climate limits the options for agriculture – two-thirds of the country is in the Sahel zone. Although the mean annual rainfall would be sufficient to sustain productive agriculture, it does not rain regularly enough, meaning that there are recurrent periods of drought as well as incidents of severe rainfall with devastating floods.
According to scientific forecasts, Senegal must expect an increase in such extreme weather events in the future as a result of global climate change. Senegal thus became one the first countries in Africa to take out climate risk insurance in order to better cope with the effects of natural events of this kind.
Discovery of oil and gas reserves gives rise to hope
In the past few years, economic growth in Senegal has been six to seven per cent. However, this high level of growth has to be seen in the context of the high rate of population growth (2.8 per cent in 2018). In order to boost economic development and reduce poverty, the government has so far focused on publicly funded large-scale projects in the areas of agriculture, infrastructure, transport and tourism. However, it is the declared goal of the government to encourage higher private investment.
One major impediment for development and investment is the scarcity of electricity. Several power stations are being built which should go on stream in the next few years. In 2014, large oil and gas reserves were discovered off the coast of Senegal, which could significantly improve the country's energy supply in the medium term. However, according to current plans, the extraction of gas would start in 2021 at the earliest.