In the legislative elections held in November in Senegal, President Bassirou Diomaye Faye and Prime Minister Ousmane Sonko’s PASTEF party celebrated a remarkable triumph, securing 130 out of 165 parliamentary seats. They also dominated in 40 of the 46 departments across the country, representing the most significant electoral win in Senegal since 1988.

This success has delivered a significant setback to the divided and disenchanted opposition, helmed by former President Macky Sall, whose TWS coalition managed to obtain only 16 seats, a sharp drop from the 83 seats acquired in the last election.

PASTEF’s remarkable electoral achievement is likely to have substantial repercussions for businesses. Prior to the elections, President Faye and Sonko had struggled to make a lasting impact. Although Faye claimed the presidency in March with a promise of change, there appeared to be minimal differences between his initial months in office and the prior administration under Sall.

The failure to deliver on multiple campaign promises can be attributed to the limited power that PASTEF held in the national assembly, where it did not have a majority. However, the result of the November elections has altered that scenario.

Transformations in foreign policy

With a renewed mandate, President Faye is now positioned to implement significant reforms and is anticipated to face minimal pushback in parliament. The consequences could be far-reaching.

“With this newfound political capital, PASTEF has the institutional stability and coherence necessary to execute reforms aligned with the government’s ‘Vision Senegal 2050’ national transformation initiative,” asserts Tiffany Wognaih, a senior associate at JS Held, a strategic advisory firm.

In the weeks following the legislative elections, Senegal announced that France, its former colonial power, would be mandated to withdraw its troops from the region and would no longer be permitted to maintain a military base in Senegal.

This declaration, sharply contrasting with Faye’s previously cautious demeanor towards France ahead of the elections, highlights the decisive actions he is prepared to undertake concerning his pre-election commitment to reduce French influence in Senegal.

Moreover, shortly after the election, President Faye received and accepted an invitation from President Vladimir Putin for a visit to Russia, suggesting a further departure from the close connections Senegal maintained with Western allies during President Sall’s tenure.

While Faye insists that relations with France will remain amicable and that Paris will continue to be a significant partner for Senegal, a reconfiguration of Senegalese foreign relations appears to be on the horizon.

Businesses prepare for a shift in dynamics

The extent to which the government will be open to renegotiating contracts and recalibrating its relationships with foreign businesses—one of the key promises made during Faye’s campaign—remains to be seen.

In mid-December, Faye’s administration released its budget, emphasizing deficit reduction. This budget includes an 8.8% cut in allocations to state institutions, focusing on prioritizing sectors such as agriculture and vocational training.

On one hand, a pro-market budget indicates that the government is considering the interests of businesses.

“Crucially, although both Sonko and Faye campaigned on populist platforms, the administration has not taken an overtly aggressive stance towards foreign investors, demonstrating an eagerness to collaborate with them,” explains Wognaih.

Nonetheless, the budget indicates that the government is both capable and willing to pursue its policies with renewed vigor.

In the long term, this could include revisions to the operating environment for foreign companies, in light of PASTEF’s pre-election reform commitments.

“This substantial victory has conferred upon them all the power. They can make amendments to the constitution, endorse any laws they choose. There is no genuine opposition at this point,” remarks Nicolas Soyere, a representative from the EU Chamber of Commerce in Dakar.

The government’s emphasis on anti-corruption measures, long advocated by both Sonko and Faye, may also lead to increased scrutiny of companies linked to the Sall administration, according to Wognaih.

“Given that the current administration has identified several notable instances of corruption and misrepresentation during the former government, we can anticipate intensified scrutiny on companies closely associated with Sall,” he adds.

A Senegalese entrepreneur in Dakar, speaking on the condition of anonymity, expresses unease over the situation.

“The initial nine months under PASTEF have already alarmed many businesses… A number of companies may close down in the coming months if the state does not provide support,” he cautions.

Oil and gas sector prepares for oversight

One sector that is set to receive increased government attention, due to its potential to transform Senegal’s future, is oil and gas.

Senegal’s state-owned oil company, Petrosen, anticipates that the country’s two main oil and gas deposits could generate an annual average of 700 billion CFA francs ($1.1 billion) over a 30-year period. During his campaign leading up to the general election victory, Faye pledged to retain a larger share of that expected revenue within the country. His administration has initiated a review of contracts with oil and gas companies, with outcomes expected in 2025.

Moves against companies perceived to have underpaid taxes – such as the $68.6 million tax demand against Australian oil and gas company Woodside in August – suggest that the government is not inclined to negotiate compromises.

“Tax exemptions that were generally granted by previous administrations will now be significantly curtailed and subjected to stringent conditions to ensure they genuinely benefit the national economy,” remarks Mamadou Baldé, chief of party for the USAID TRACES project at the Natural Resource Governance Institute.

However, Wognaih forecasts that the government will likely emphasize regulatory changes rather than alterations to current contracts.

“Unlike its Sahelian neighbors, Senegal is extremely unlikely to adopt an approach of resource nationalism; operators can expect proactive adjustments in policies and regulations—including new local content or procurement laws—rather than retroactive changes to contracts.”

“The government has already indicated plans to roll out a new set of policies in the hydrocarbons sector by 2025, designed to develop a local content strategy and revise the tax framework,” Wognaih explains.

Minimal retroactive changes anticipated

Baldé agrees that amending existing legislation rather than overturning current contracts is likely to take precedence.

“The strong mandate and commitment of the PASTEF-led government to address contractual disparities indicate that it may pursue indirect means. This could involve reassessing excessive tax exemptions and operational conditions within existing contracts. The government might also prioritize optimizing revenue through stricter enforcement of legal and contractual obligations to ensure a fairer distribution of benefits for Senegal.”

However, Baldé suggests that Faye understands the importance of maintaining investor goodwill. The government’s pro-market budget underscores its intent to foster a reasonably amicable relationship with businesses, he explains.

“PASTEF will maintain an open approach toward foreign investment,” Baldé asserts. “Incoming investors will be treated fairly under the PASTEF-led government, as the country urgently needs foreign investment, regardless of its origin.”