VZCZCXRO8562
RR RUEHMA RUEHPA
DE RUEHDK #0424/01 1011159
ZNR UUUUU ZZH
R 101159Z APR 08
FM AMEMBASSY DAKAR
TO RUEHC/SECSTATE WASHDC 0304
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
RUEHRC/USDA WASHDC
RUEHLMC/MCC WASHDC
RUEHZK/ECOWAS COLLECTIVE

UNCLAS SECTION 01 OF 02 DAKAR 000424 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR AF/W, AF/EPS, EB/ESC/IEC 
USDOC FOR 4510/IEP/ANESA/OA/PMICHELINI 
USDA FOR FAS/OCRA/SDIABY, FAS/OCBD/PSIMMONS 
 
E.O. 12958: N/A 
TAGS: ECON ETRD EFIN PGOV SG
SUBJECT:  PRICE HIKES CHALLENGE SENEGAL'S SOCIAL STABILITY 
 
REF:  DAKAR 386 
 
DAKAR 00000424  001.2 OF 002 
 
 
¶1.  SUMMARY:  Senegalese, especially urban dwellers, are somewhat 
bewildered by the recurrence and scope of price hikes in local 
markets, supermarkets, and from specialty vendors.  Price increases 
in gasoline, cooking fuel, vegetable oil, rice, sugar, cement, and 
transportation services have created widespread personal and 
household financial concerns, intense criticism of government 
actions (or lack thereof), and at least one public demonstration 
that turned violent (Reftel).  The Government's announced measures 
to counter popular anger over rising food prices have yet to produce 
relief or allay economic fears.  We anticipate additional public 
demonstrations and unrest, with both opposition parties and unions 
threatening to keep up the pressure in the coming weeks.  END 
SUMMARY. 
 
PRICES SOARING TO RECORD LEVELS 
------------------------------ 
¶2.  Publicly, Senegalese officials blame high world oil prices and 
transportation costs for the significant increase in prices for 
"daily life" commodities since December 2007.  The inflationary 
impact of rising world food prices is complicating Senegal's efforts 
to control local price increases and several financial observers 
believe that the government's projection of 4 percent inflation in 
2008 may double to 8 percent or higher. 
 
¶3.  The government has stated it wants to keep prices for broken 
rice (a daily staple) stable, but from December 2007 to March 2008, 
the price has jumped to record levels from CFA 250/kg to CFA 350/kg 
(approximately USD 0.83).  This rice is typically sold in 50kg bags, 
which have increased in price from CFA 12,000 to CFA 15,000 in Dakar 
and up to CFA 17,000 in other locations, such as Ziguinchor and 
Tambacounda. 
 
¶4.  Because of rising global prices for rice, traders and merchants 
complain that their margin is now only one percent or less, which 
may be encouraging some hoarding of stocks.  Even though the 
government fixes prices for rice and other commodities, it does not 
have any means or power to control and end speculation on price 
hikes.  Traders hope to negotiate a higher sales price with the 
government, as the international price of rice is currently above 
the official price ceiling.  Regardless of the "official" price, it 
is likely that consumers in Senegal will face even higher rice 
prices by late May when current available stocks will be depleted. 
 
 
¶5.  During the same period, basic milk powder has increased from CFA 
1,500 per kg to CFA 3,000/kg (USD 7.15).  Millet and sorghum prices 
in some markets have doubled since January, suggesting an increase 
in demand for substitutes.  The price of cooking oil rose from CFA 
900 in January 2008 to CFA 1,050 per liter (USD 2.50) in March, an 
increase of 17 percent.  During that period, sugar, which is a 
government-controlled commodity, increased nine percent from CFA 575 
to CFA 625/kilo (USD 1.50).  Wheat flour increased from CFA 750 to 
CFA 850, an increase of 14 percent.  Household soap jumped from CFA 
250 to CFA 325.  Cooking gas, vegetable oil, meat, and fish have 
also witnessed steady price increases. 
 
¶6.  Despite the price hikes, Senegalese have yet to change their 
consumption patterns, largely due to a lack of culturally acceptable 
locally produced goods to replace imported staples such as rice and 
wheat. 
 
¶7.  Senegal's booming construction industry has been hit by rising 
cement prices.  Since December 2007 the per ton price has soared 
from CFA 55,000 CFA to CFA 75,000 (USD 180).  This increase is due 
to a strong demand and alleged hoarding and profiteering by 
suppliers.  The range of underlying price increases has created 
upward pressures on prices for a wide range of services and goods, 
including rent, water, and electricity. 
 
SOCIAL TURMOIL 
----------------------- 
¶8.  In addition to the March 30 protests organized by the Senegalese 
consumers association (ASCOSEN) (Reftel), Union leaders from the 
"General Federation of Workers" (FGTS) have announced plans to stage 
strikes and marches over the price hikes in the coming days. 
Opposition leaders from the "Front Siggil Senegal" criticized the 
government's lack of sound measures to solve the crisis and also 
threatened to organize a march against price hikes later this month. 
 
 
GOS'S MEASURES DO NOT IMPRESS 
----------------------------- 
¶9.  In a press conference held on March 26, then-Minister of 
 
DAKAR 00000424  002 OF 002 
 
 
Commerce, Abdourahim Agne blamed the price increases on world oil 
price and commodities, and noted that the government has "limited 
tools to address the price hikes since we don't have any control on 
the world oil prices."  Agne also cited government plans to open 
"reference stores" with prices fixed by the government "to protect 
consumers from greedy vendors."  The government has already 
temporarily suspended the country's 10 pct surtaxes on rice, sugar, 
oil, and wheat imports to lower tax pressures on importers and 
encourage traders to lower price on commodities. [Note:  Finance 
Ministry Officials fear the suspension of surtaxes could result in a 
serious reduction if import revenues, and are reportedly opposing 
the idea of suspending the country's 18 percent VAT on these items 
given the current budget deficit.  End note.]  GOS officials have 
also been highlighting President Wade's much-publicized goal of 
making Senegal rice self-sufficient by 2015. 
 
¶10.  On March 27, the Wade administration promised CFA 10 billion 
(USD 24 million) to help rural populations purchase food, 
specifically rice.  Opposition leaders quickly criticized the 
government's measures as insufficient, noting that they will not 
decrease the price of commodities or the suffering of rural 
populations.  They point out that the CFA 10 billion in assistance 
would offer only 3.7 kg per person for the 7.7 million people living 
in the rural areas. 
 
COMMENT 
------- 
¶11.  The GOS is finding itself squeezed from many sides with lower 
than average harvests and concerns about food scarcity exacerbating 
the problem of rising prices.  The government's ability to respond 
is limited by serious budget constraints, making the option of 
significant reductions in import duties or VAT for basic items 
problematic.  When asked about their living conditions, many 
Senegalese respond, "We're hungry, hungry and struggling for 
survival in a Senegalese way," which historically has meant with 
patience and peaceful forbearance.  However, even though they 
understand that the higher cost of living is not unique to Senegal, 
the political opposition, consumer groups, and perhaps even 
communities will likely continue to organize protests, partly in 
reaction to President Wade's recent budget commitments for 
monumental infrastructure programs and high-profile gatherings. 
 
SMITH