Senegalese President Macky Sall said his administration will tap the international bond market this year to fund infrastructure development and accelerate growth that’s being driven by surging peanut and rice production.
The West African nation intends raising $500 million to $1 billion through the sale of a Eurobond, sukuk or Samurai bonds, Sall said in a May 13 interview in Kigali, Rwanda’s capital, where the World Economic Forum held its annual Africa summit. Senegal put on hold plans to sell at least $500 million of debt last year after costs rose.
“This year we will definitely have a bond,” Sall said. “The money will be used totally for infrastructure, roads and power. A little bit may be for health facilities and education.”
The economy is expected to expand 6.6 percent this year, the most in sub-Saharan Africa after Ivory Coast and Tanzania, the International Monetary Fund said last month. Growth has averaged 4.7 percent since Sall, a 54-year-old geological engineer, wrested the presidency from Abdoulaye Wade in 2012 elections and set about improving transport links and power supplies, and boosting farm output by increasing the use of tractors and genetically modified seed.
Peanut production reached a record 1.1 million metric tons last year and may be even higher this year if good rains materialize as expected, the president said. Rice output has doubled to 900,000 tons since 2012 and Sall is targeting 1.7 million tons by 2017, which would make the country self-sufficient as it strives to be less exposed to international market prices. Senegal also produces corn and millet.
Senegal’s dollar-denominated bonds have returned 8.2 percent this year., compared with an average of 7.6 percent for 17 sub-Saharan African securities. Yields on the $500 million of debt due in July 2024 rose 2 basis points to 7.1 percent on Monday.
The government is targeting a yield of 6 percent or less for the new bond. South Africa, the only sub-Saharan African nation to sell debt so far this year, issued a $1.25 billion Eurobond last month at a coupon of 4.875 percent. The Democratic Republic of Congo on Tuesday said it had scaled back its plans to sell $1 billion of Eurobonds and instead asked multilateral lenders for direct budgetary support, because it expected to pay an interest rate of 12 to 14 percent.
Sall’s plans to double the growth rate are set to gain impetus from 2020 when gas is expected to start flowing from two fields discovered by Kosmos Energy Ltd. earlier this year. One field, which lies offshore Senegal’s northern border with Mauritania and is shared by the two nations, contains about 17 trillion cubic feet of gas and the other about 5 trillion cubic feet, the president said.
Senegal is also set to start producing oil from 2021 or 2022 from a deep-water well that’s being developed by Cairn Energy Plc.
Energy revenues should help diversify the economy and will be transparently accounted for, said Sall, who has set up a sovereign wealth fund to ensure any windfall isn’t squandered.
Senegal’s infrastructure development plans include building a rail link servicing a new airport in the capital, Dakar. Sixteen companies from countries including China, South Africa, Canada and France have submitted bids and the winner is expected to be announced later this month, Sall said.
The government is also working with the World Bank and African Development Bank on how to finance the planned renovation of a rail link between Dakar and Bamako in neighboring Mali.
“We have some proposals from Chinese companies, from other companies,” Sall said. “We don’t yet have funding.”
Senegal is one of eight members of the West African Economic and Monetary Union and uses the CFA franc, which is pegged to the euro. A former French colony of about 14 million people, it’s the only member of the group aside from Cape Verde that’s never had a military coup.
The nation’s security forces are on alert following attacks by al-Qaeda-linked militants in Mali, Burkina Faso and Ivory Coast that have claimed more than 65 lives since November. Earlier this month, the authorities canceled an annual jazz festival in the northwestern St-Louis municipality due to security concerns — a decision Sall said was subsequently reversed.
“We of course are facing a terrorism problem,” he said. “We are very conscious of the dangers, but we are ready to face any kind of situation and our forces are really at a point where they can assure the security of the country.”