In Senegal, a survival toolkit for SMEs
Iba Fall, Senegal country manager for Invest in Africa (IIA), talks to The Energy Year about how the Covid-19 crisis has impacted Senegal’s oil and gas industry and how IIA is helping local SMEs step up. IIA is a private-sector partnership initiative focused on helping local companies connect with international ones in sectors where they have traditionally been excluded.
How has the crisis impacted Senegal’s oil and gas industry?
There was optimism, even at the beginning of 2020, as we secured the FID for the Sangomar project with Woodside, Capricorn Senegal and Petrosen. The FID for BP’s Tortue gas project happened in December 2018, so there was a great deal of optimism. It was unusual to see an FID happen in such a short time, especially for a development involving two countries. But in March 2020, everything came to a standstill with the Covid-19 pandemic. People are still trying to remain optimistic, but they want to hear from the operators about their plans and the future of the oil and gas projects in the country.
Those questions are not easy to answer, but we are getting some information from the operators. For the BP project, we are hearing about a delay of at least one year. This needs to be officially confirmed and will have an effect not just on Tier 1 companies, but Tier 2 and Tier 3 companies will also have to readjust their schedules. But the good news is that the project will go ahead; it will be just delayed.
The Sangomar project will likely be delayed as well, but it is not clear for how long at this point. For this project, Tier 1 subcontractors like Halliburton are still preparing and other subcontractors are also planning to deliver, but with some delays.
Where is Invest in Africa focusing its efforts, particularly during this global crisis?
We are focused on local content, helping local companies connect with international ones in sectors where they have traditionally been excluded. In extractive industries, local companies are usually excluded or play a very small part. We also help them access markets, skills and finance to enable them to maximise their participation in key sectors of the economy. We think those are the three pillars on which we can base an impactful local SME development programme.
The impact of the pandemic on local companies was severe. Many local SMEs saw their operations come to a standstill with no orders or customers, and as a result some went out of business. So the government of Senegal came up with a recovery plan of CFA 1 trillion (USD 1.6 billion), which was used to help SMEs survive the crisis through measures like paying the interior debt or delaying taxes.
IIA launched a virtual survival toolkit to help local SMEs better understand the changing environment to switch to survival mode but also, in some cases, identify opportunities that emerge through the crisis. For example, there was a company producing milk that then got a licence to produce hand sanitiser.
The COVID-19 SME Survival Toolkit was composed of mainly master classes – webinars by experts from organisations like Deloitte or local banks speaking to local SMEs about how they could reorganise their business to survive the situation. This has led to Invest in Africa receiving a grant from the Mastercard Foundation to pursue its support for local SMEs.
Is this crisis an opportunity for Senegal’s local sectors to step up?
Absolutely, in our daily work we organise workshops and seminars to allow oil and gas companies to meet local suppliers to help them get a better understanding of the industry and the opportunities within it. For 2020, we had initially planned a dozen workshops in Senegal, but with the restrictions on gatherings due to the pandemic, we could not have hundreds of people meeting in one place.
We had to adjust our plans and deliver those workshops online. We ran one workshop in March with Woodside and SIA (Subsea International Alliance: Subsea 7 and One Subsea of Schlumberger) and another one in June, with Woodside, Baker Hughes and Halliburton where those companies presented their local content plans to Senegal and international suppliers.
There is very little capacity locally in Senegal when it comes to the oil and gas industry. During this webinar it became clear that the current situation could be beneficial in allowing local companies to get prepared for greater participation.
The government of Senegal has an objective of reaching 50% local content in the oil and gas sector by 2020 and we are trying to contribute to the country reaching that goal. One way of maximising the participation of local companies is through partnerships and joint ventures with SMEs around the world that have the experience, expertise and certifications to meet the requirements of the industry.
How will Petrosen’s restructuring help Senegal to better seize opportunities in its oil and gas industry?
It is a good move as it will allow the NOC to be present in all segments of the oil and gas industry value chain. On the upstream side, I don’t think it will make a big difference as the new company was an already existing division of Petrosen. This might allow for more flexibility in responding to investors. On the downstream side, the value is clear as now Petrosen will be able to position itself in that segment and achieve a vertical integration.
What role will renewables play in IIA’s efforts going forward?
IIA’s work is based on a co-ordinated approach. We believe that local content is too complex and costly for any single company to try to do alone. So, we convince our MNC partners to all contribute to one common local content programme in the country. Thus, instead of BP or Woodside having their own separate local content programme, they share the burden by becoming members of Invest in Africa and achieve more than they would have if they handled local content in a silo. In this co-ordinated approach, we also include the government, the local private sector and banks, and beyond that we progressively add new sectors.
In Kenya and Ghana our offices are already at the stage of dealing with five to six different industries. In 2018 and 2019, we had a focus on oil and gas in Senegal and this year we decided to include more sectors, such as the mining sector and renewable energy.
Renewables are important in many aspects. First, they are key for the government of Senegal as by 2030 they would like to have a high percentage of renewables in the national energy mix: 30%. Second, the whole world is moving away from fossil fuels. Third, our partners, the oil and gas companies, want to explore the renewables sector. Recently, our partner Tullow Oil asked us to do a study on renewables in Ghana and Senegal and that has just been completed.
Hopefully by the end of 2020 we will have a chance to engage the renewable energy sector in Senegal and make it the second energy industry in IIA next to oil and gas.