Senegal’s economy is based on agriculture, primarily groundnuts, cotton, grain crops, livestock and fishing; industry, primarily food processing, gold, iron ore and phosphate mining, fertilizer and cement production and downstream petroleum products; and services, which are the main contributor to Senegal’s GDP.
The estimated 2011 GDP breakdown by sector is: agriculture 15.4%; industry 22.6% (minerals industry approximately 20%) and services 61.9%. The minerals industry is responsible for approximately 20% of Senegal’s export earnings. Foreign exchange is also derived from tourism. Agriculture supports over three quarters of the labor force.
The government is generally pro-mining and passed a new Mining Code in November 2003. Under the Mining Code, appropriate governmental authorization is required to undertake any form of mining activity. In this regard, the right to explore minerals is conferred only by a permit of exploitation or a mining concession.
An exploration permit for mineral exploration activities is granted for a period not exceeding three years, and is renewable. During the exploration phase, the permit holder is exempt from sales tax and duties on imported equipment and supplies necessary for exploration activities, as well as on fuel used for operation of stationary installations.
Following exploration success, the permit holder may enter into a mining contract agreement with the State, which provides the State a free carried interest of 10% of the project. Under the Senegalese Mining Code, numerous fiscal incentives are offered to mining license holders, including a minimum seven-year exemption from income tax, amongst other tax exemptions, and the opportunity to secure a lease of up to 25 years for a major project. All mining activities are subject to a royalty of 3% of the value of the mine site payable to the Government.
Foreign mining companies are allowed to expatriate profits.
Law No2003-36 of 2003, concerning the mining code, introduced several innovations, including
Fiscal incentives allowing the holder of a mining concession to benefit from exemptions for a seven- year period, with the aim of encouraging the prompt realization of investments and commencement of production.
Total exemption of all taxes for the holder of a research permit during the period of validity of the permit and any renewals.
Exoneration of all Customs duties and taxes, including VAT and the Conseil Sénégalais des Chargeurs (Senegalese Council of Shippers, COSEC) withholding tax on :
Equipment, materials, supplies, machines, equipment and utility vehicles included in the registered program, and replacement parts and functional items not produced or fabricated in Senegal, which are specifically destined to be used in mining research operations and which are vital to the realization of the research program;
Fuels and lubricants for fixed facilities, drilling instruments, machines and other equipment destined for research operations under the permit granted;
Petrol products for producing energy used during the research program;
And Spare parts and pieces for machines and equipment, specifically used in the realization of the research program.
Upon the certified presentation of a research permit, the equipment, materials, supplies, machines, equipment and utility vehicles specifically destined for mining research operations, machines and construction vehicles, which can be re-exported or sold after use, temporarily qualify with the total suspension of duties and taxes on importation and exportation. Specific benefits granted during the development phase are:
During the period of the realization of investments and the commencement of an exploration or the expansion of the production capacity of an existing mine, the exploration permit holder or the beneficiary a small mine exploration authorization and the contractors working on its behalf benefit from exemption from taxes and duties including VAT and COSEC;
On materials, equipment, supplies, machines and utility vehicles included in the registered program and equipment directly destined for mining operations;
Fuels and lubricants for fixed facilities, materials and drills, machines and other equipment destined for mining operations;
And spare parts and pieces for machines and equipment, specifically destined for mining operations. Financial benefits are granted in the development phase. Throughout the duration of the exploration, holders of exploration or concession contracts or the beneficiaries of a small mine exploration authorization are exempted from the exploration tax on products issuing from their exploration activities within the scope of the awarded title.
The holder of an exploration permit is exempted for three years, and the holder of a mining concession is exempted for seven years from company tax until recovery of all bans and exploration expenses, as well as exemptions from:
VAT on goods and services purchased from local or foreign suppliers;Entrance fees; Minimum basic tax; Property taxes except for residential property; Basic tax payable by employers; and from Duties and taxes when setting up a new company or raising capital.