Turkish steel giant Tosyali gives a boost to Senegal’s economy
Turkish steel giant Tosyali – one of the world’s largest steel producers – has announced a major new project in Senegal: the creation of a special economic zone aiming to boost SME activity in the African country. The investment will undoubtedly encourage Dakar, which has made a concerted effort to attract overseas funders that will not only support Senegal’s economic development but will also contribute positively to the country’s broader social and cultural growth.
It was no coincidence that the investment was unveiled on the sidelines of the recent Tokyo International Conference on African Development (TICAD): Senegalese president Macky Sall was in attendance, fresh off the heels of having been invited to the G7 summit in Biarritz. The Japanese government already pledged at the TICAD meeting to pour $20 billion into the continent, but Tosyali is hoping that Japanese companies might be tempted to join in the Senegalese venture as well—particularly since Tosyali already has a joint project in Turkey with Japanese firm Toyo Kohan.
Expanding opportunities for Senegalese businesses
Tosyali’s planned economic zone is set to be the largest industrial investment in Senegal, and will help reduce Dakar’s dependence on steel imports, while offering local companies new export opportunities and supply contracts for products and raw materials.
Tosyali’s existing projects in other African countries have been quite successful, offering an encouraging indication of the long-term financial benefits the special zone may offer Dakar. The company’s involvement in Algeria, for instance, has energised economic activity in the region, prompting the emergence of a large SME cluster and attracting overseas investment. Employment among the local workforce has also received a boost; the overwhelming majority of the 4,000 Tosyali employees in Algeria were recruited locally.
Tosyali’s intent is to build a steel facility in Senegal with the target of producing a million tonnes of rebar as part of a multi-stage plan to develop capacity in line with the market. A similar approach was adopted in Algeria, where the company has already invested $3 billion out of a planned $6 billion total spend.
Senegal rising through the ranks
The new economic zone is a rich reward for the efforts Senegal has recently put into attracting foreign investment. Senegal has one of the world’s ten fastest-growing economies – six out of which are in Africa –with an economic growth rate hovering around six percent, a threefold increase since current leader Macky Sall was first elected in 2012. Intent on keeping up this rapid expansion, Dakar announced in late August that it’s kick-starting a $111 million private equity fund, the largest backed by any African government.
The fund will target medium-sized companies in a variety of industries and will provide a combination of debt and equity – so-called ‘mezzanine’ finance – to both local and foreign investors. Senegal has previously been overshadowed by neighbouring nations Nigeria, Ghana and Cote d’Ivoire, attracting less than one percent of private equity invested in West Africa over the last five years. The new initiative should help redress the balance.
Senegal’s ambition mirrors that of other forward-looking African countries. This summer, African leaders announced the creation of a free-trade area that could unite the continent in a multi-trillion-dollar economic zone. With more than a fifth of working-age Africans launching new businesses, the region boasts the highest rate of entrepreneurship in the world. And, while interest from Western backers like the United States has dwindled in recent years, others including Turkey, India, Brazil – and, of course, China – have spotted a keen commercial and strategic opportunity among Africa’s burgeoning economies.
Moving towards a stable future
Foreign investors like Tosyali are certainly drawn to Senegal thanks to its rapidly expanding economy. But they also welcome Senegal’s political stability—the country has been one of Africa’s most stable democracies since independence, with a number of peaceful transitions of power— and the progress it’s made tackling corruption in recent years.
Sub-Saharan Africa has traditionally struggled to effectively implement and enforce anti-corruption laws. But things are changing in countries like Senegal—particularly since 2012, as Sall’s administration has focused resources on tackling institutional corruption.
The strict anti-corruption platform which swept Sall into office was particularly welcome given the graft which characterised the previous administration. Sall’s predecessor, Abdoulaye Wade, sparked widespread protests after seeking an unconstitutional third term. These efforts to cling to power, which included an attempt to lower the threshold for a first-round election victory from 50 percent to 25 percent, followed twelve years of pervasive nepotism. Wade’s son Karim headed up four separate ministries at the same time, was put in charge of a budget adding up to a full third of total government expenditure, and apparently illegally amassed $1.4 billion through a web of shell companies.
Ensuing economic gains
Karim Wade was arrested, and found guilty of corruption, not long after Macky Sall took office. Sall’s administration has also bolstered existing anti-corruption institutions and created new ones, such a specialist court to address cases of illicit enrichment.
These efforts to stamp out corruption have encouraged overseas investors. Inflows of foreign direct investment into Senegal more than doubled in the five years up to 2017. It’s clear to see that advancements are moving apace. When he was first elected in 2012, President Macky Sall prioritised infrastructure investment as being key to achieving the ambitious growth strategy he envisioned. Sticking to the plan has resulted in significant improvements to Senegal’s transport network and utilities infrastructure – the water and power cuts that previously dogged the country’s capital have been consigned to the past.
Senegal’s recent offshore oil and gas discoveries have also provided the potential for significant revenues in the coming years that will benefit citizens with improved prosperity and fresh job opportunities.
Encouraging prospects for Senegal
The Tosyali announcement cements Senegal’s place as an increasingly popular African investment destination. Senegal has a modern airport and a major seaport that offers easy access to European and US markets. But it’s the country’s increasing political stability and robust anti-corruption strategy that are continuing to inspire confidence among the foreign investors that are helping to transform Senegal’s future.