VZCZCXRO6477
PP RUEHBZ RUEHDU RUEHGI RUEHJO RUEHMA RUEHMR RUEHPA RUEHRN RUEHTRO
DE RUEHDK #0523/01 1271457
ZNR UUUUU ZZH
P 061457Z MAY 08
FM AMEMBASSY DAKAR
TO RUEHC/SECSTATE WASHDC PRIORITY 0431
INFO RUEHZO/AFRICAN UNION COLLECTIVE PRIORITY
RUEHNE/AMEMBASSY NEW DELHI 0073
RUEHKO/AMEMBASSY TOKYO 0116
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
RUEHRC/USDA WASHDC
RUEHLMC/MCC WASHDC

UNCLAS SECTION 01 OF 05 DAKAR 000523 
 
SIPDIS 
SENSITIVE 
 
STATE FOR AF/W, AF/EPS, AND EEB/TPP/ABT/ATP FOR JANET SPECK 
USDOC FOR 4510/IEP/ANESA/OA/PMICHELINI 
USDA FOR FAS/OCRA/SDIABY, FAS/OCBD/PSIMMONS 
 
E.O. 12958: N/A 
TAGS: EAGR EAID ECON ETRD EFIN SOCI PGOV SG
SUBJECT:  RESPONSE ON IMPACT OF RISING FOOD/COMMODITY PRICES - 
SENEGAL 
 
REF:  A. STATE 39410 
  ¶B. DAKAR 521 (NOTAL) 
  ¶C. DAKAR 497 (NOTAL) 
  ¶D. DAKAR 471 (NOTAL; FOR GUINEA-BISSAU) 
  ¶E. DAKAR 424 (NOTAL) 
  ¶F. DAKAR 386 (NOTAL) 
  ¶G. DAKAR 236 (NOTAL) 
 
DAKAR 00000523  001.2 OF 005 
 
 
¶1.  (SBU) SUMMARY:  Senegal's 2007-08 cereal deficit is estimated at 
1.4 million metric tons (MT), a significant increase from previous 
years.  The country could face a cereal shortage of 250,000-400,000 
MT in the next six months and with low global stocks and high 
commodity prices, it is not known how Senegal will close this gap. 
The Government of Senegal (GOS) maintains no emergency cereal 
stocks.  While food is more readily available in urban areas - at 
least for the time being - it comes at an extremely high price. 
President Wade denies there is any threat of famine in Senegal and 
recently announced an ambiguous new deal for India to meet almost 
all of Senegal's imported rice demand for the next six years. 
 
¶2. (U) The GOS has taken steps to lower taxes and control prices on 
key commodities, but it is not clear if this will afford enough 
price relief to consumers.  The budget impact of government measures 
is significant.  There is currently no emergency food aid targeted 
for Senegal, although the World Food Program (in cooperation with 
USAID and other donors) and at least two NGOs are considering 
contingency plans to address acute hunger.  In the short term, the 
USG should press for accurate, objective assessments of the food 
situation and the inflationary impact to consumers of high food 
costs.  In the longer term we should look for opportunities to help 
Senegal improve its agriculture productivity and unlock its 
distribution networks to lower prices.  End Summary 
 
FOOD AND AGRICULTURAL COMMODITY DEMAND 
-------------------------------------- 
¶3.  (U) Senegal is a net importer of food and other commodities.  In 
particular, Senegal is dependent on rice imports to fulfill demand 
for this daily staple.  Annual rice consumption is approximately 
800,000 metric tons, with local production accounting for only 
170,000 tons on average.  In recent years, the vast majority of 
Senegal's rice imports have been low-end scented broken from 
Thailand.  Overall, Senegal's 2007-08 cereal deficit is officially 
estimated at 1.4 million tons.  If Senegal follows average 
commercial imports (mostly rice) the country could face a cereal 
shortage of 250,000-400,000 MT in the next six months.  Senegal is 
also highly dependent on imports of sugar, vegetable oil, corn, and 
milk powder.  Of note, the cereal export ban in neighboring Mali - 
where food stocks are much more comfortable - is having a negative 
impact on prices and availability of cereal in eastern Senegal. 
 
FOOD AND AGRICULTURAL COMMODITY SUPPLY 
-------------------------------------- 
¶4.  (U) Senegal is not self-sufficient in any daily commodities 
except for peanuts.  Due to a decline in local cereal production, 
Senegal will need to import nearly 70 percent of its cereal needs 
between October 2007 and October 2008.  The greatest concern for 
consumers is the local supply and price of rice.  On April 23, 
President Wade announced he had secured an agreement with India to 
supply 600,000 MT of rice annually for the next six years, 
essentially meeting Senegal's demand for rice imports.  President 
Wade also proclaimed that this arrangement will create the bridge 
needed for Senegal to become self-sufficient in rice by 2015.  The 
announcement indicated that Indian rice supplies would be arriving 
in Dakar in the coming months, but no details of this agreement have 
been released.  [Note:  Post has heard that India does not have 
significant stocks of rice available for export, but will consider 
providing some as food aid.  The Indian embassy in Dakar cannot 
confirm if such a deal has actually been concluded and opposition 
leader Abdoulaye Bhatilly held a press conference where he 
highlighted press reports that India had already decided to stop all 
surplus rice exports in order to meet potential domestic 
emergencies.  Post would welcome input from Embassy New Delhi to 
substantiate Wade's claims.  End note.] 
 
¶5.  (U) On April 15, a small shipment (approximately 6,000 MT) of 
American and Vietnamese rice was delivered to Senegalese authorities 
as part of a 2006 food aid grant from the Japanese government.  To 
date, no emergency food aid deliveries have been made to Senegal 
this year, although some donors (including the USG) provide routine 
food aid, such as school feeding programs. 
 
DAKAR 00000523  002.2 OF 005 
 
 
 
¶6.  (U) Senegalese local production for other daily commodities 
(wheat and wheat flour, corn, vegetable oil, and powdered milk) do 
not meet the country's demand and are routinely supplied by 
commercial imports. 
 
DOMESTIC POLITICS 
----------------- 
¶7.  (U) Concerns about food shortages and raising daily commodity 
prices have been a constant public debate for the past few months. 
One of the starkest ways to describe this time of year, known as the 
"soudure," or hungry season, is that about 70 percent of the 
population is no longer eating lunch, and before the season is over, 
people will be down to one meal a day.  This is due both to a lack 
of local cereals, as well as a lack of access to imported food due 
to high prices. 
 
¶8.  (U) Social tension is high, especially in Dakar where an 
unauthorized protest rally by two consumer groups on March 30 turned 
violent (Ref F).  Mostly peaceful rallies against the high cost of 
living organized by Senegal's political opposition parties were held 
in Dakar on April 24 and 26, with many marchers holding signs and 
sporting t-shirts stating "we are hungry" (Ref B).  Similar rallies 
have also taken place outside of Dakar. 
 
¶9.  (U) Predictably, the strongest reactions so far have been from 
Senegal's opposition Socialist 
Party (PS).  They fault the government for not taking any steps to 
reduce its expenditures or the benefits received by the Presidency, 
the Ministries, the National Assembly, and the Senate.  For the PS, 
the government measures are not sufficient to counteract the price 
hikes and the suffering of the population.  The PS proposes reducing 
the number of embassies and consulates around the world (something 
it did while it was in power), eliminating redundant agencies, 
decreasing the number of Ministers (currently numbering 29) and the 
number of Ministers of State (currently, there are 12), minimizing 
government vehicle perks, and implementing a "realistic budget" to 
control public expenditures. 
 
ECONOMIC IMPACT 
--------------- 
¶10.  (U) Because it is not an exporter of commodities, high food 
prices have deteriorated consumer purchasing power.  Senegal's 
balance of payments could also be negatively impacted by high import 
costs, particularly if remittances from Senegalese living abroad 
(and facing their own economic difficulties) significantly drop.  At 
the same time, Senegal's growing income disparity is threatening the 
low-income population's ability to compete for higher-prices 
consumer items facing possible scarcity, including rice.  Due to 
restrictive distribution systems and high taxes, prices for 
commodities in Senegal are frequently higher than in neighboring 
countries.  There are credible reports of gray markets being 
established for goods along Senegal's borders with the Gambia and 
Mali. 
 
¶11.  (U) The GOS' plan to address rising food prices includes 
suspension of customs duties and VAT on imports of main commodities 
and continuing various food and energy subsidies.  The government is 
also trying to control prices with the stated goal of increasing 
consumers' purchasing power.  The government's steps, regardless of 
their efficacy, will bring tremendous pressure to Senegal's already 
difficult budget situation. 
 
¶12.  (U) Specifically, the government has reduced income taxes by 
five percent which it hopes will provide an additional CFA 6 billion 
(approximately USD 14 million) for the population's household 
spending.  [Note:  this added liquidity represents only about one 
dollar on a per capita basis, but only 18 percent of the country's 
4.5 million workforce pay income tax.  End note.]  As reported in 
Ref C, the government has pledged CFA 10 billion (USD 24 million) to 
help rural communities purchase food (although the mechanism for 
this aid is not yet known).  In addition, customs duties for 
important imported commodities have been suspended as well as the 18 
percent VAT.  The reduction of duties and VAT on main commodities 
will cost Senegal's budget an additional CFA 36 billion (USD 86 
million). 
 
¶13.  (U) The Wade administration has also touted its subsidies for 
cooking butane gas and electricity as positive actions to help 
consumers.  These subsidies reached CFA 98 billion (approximately 
 
DAKAR 00000523  003.2 OF 005 
 
 
USD 233 million) in FY08.  [Note:  The IMF and donors have raised 
their concern about the amount of government spending on energy 
subsidies, which was estimated at three percent of GDP in 2007.  End 
note.] 
 
¶14.  (U) The Government has fixed a price ceiling for the most 
popular variety of rice at CFA 280 per kilogram (USD 0.67).  Since 
April 18, the government, with the assistance of police forces, has 
seized more than 80 metric tons of rice from "greedy traders" and 
speculators in the regions of Dakar, and Fatick.  In addition, the 
government has announced other control measures, including the 
future establishment of "reference stores" with controlled prices 
and a number of "central stores" to be administered by unions. 
 
ENVIRONMENTAL IMPACT 
------------------- 
¶15.  (U) The environmental impacts of President Wade's proposals for 
increased agricultural production (as outlined in the following 
section) are difficult to predict.  While the country can expand its 
rice production, it will only do so with massive irrigation efforts 
affecting the Senegal River and other watersheds.  The same land 
that is to be used for the drive to rice self-sufficiency represents 
the country's best resource for other food and cash crops. 
 
HOST GOVERNMENT RESPONSE 
------------------------ 
¶16.  (U) With the early arrival of the "hungry season" and the 
imminent arrival of the next production season - beginning in June 
and July - GOS and donor responses are already relatively late.  The 
dual nature of the problem will challenge any successful response. 
The GOS faces an urgent need to calm the urban masses, while the 
food security and access issue is actually worse in some rural 
areas.  If mass urban migration is the result of the current 
situation, the situation may significantly deteriorate.  However, 
President Wade has stated that "there is no famine, nor will there 
be famine in Senegal."  He added that Senegal does not need and will 
not require food aid.  The country would accept, however, technical 
assistance, farm machinery, help in acquiring fertilizer and 
improved seed, and help in improving irrigation in line with GOS 
initiatives. 
 
¶17.  (U) As outlined in Ref B, President Wade recently announced his 
ambitious "Great Agricultural Offensive for Food and Abundance" 
(GOANA) plan to push for the country's food self-sufficiency.  His 
plan which aims to produce in 500,000 MT of rice in 2008, compared 
to average harvests of around 170,000 MT (but only 80,000 in 2007), 
2 million MT of maize/corn compared to 500,000 MT in 2007, 3 million 
MT of cassava/manioc compared to 280,000 MT in 2007, 2 million MT of 
cereal, 400 million of liters of milk and 43,500 MT of meat.  Any 
effort to significantly increase agricultural production will 
require immediate action, given that the planting season arrives in 
30-60 days.  President Wade also urged his Ministers, Members of 
Parliament, senior civil servants, and private sector leaders to 
cultivate at least 20 hectares of land in 2008.  How the elite will 
acquire this land is not clear.  Asked whether the crop expansion 
plan is realistic, Prime Minister Soumare stated that "it is really 
ambitious, but one has to be ambitious in Africa."  A more unlikely 
proposal is the purchase of two cloud-seeding airplanes for CFA 10 
billion (USD 23 million). 
 
POST PROGRAMS 
------------- 
¶18.  (U) The U.S. Mission to Senegal has not initiated any emergency 
response, but has been in contact with the World Food Program and 
other donors about possible emergency steps should that become 
necessary.  One possible quick response is through existing USG food 
aid programs whereby NGOs implementing Title II funded programs are 
allowed to utilize 10 percent of their commodity resources for 
emergency activities. 
 
¶19.  (U) USAID's Office for Food for Peace (FFP) has funded a 
non-emergency program in Senegal since FY 2004.  The project, known 
as the Bamtaare Fouta-Toro Project, is being implemented by 
Counterpart International (CPI) and is expected to end in 2009.  The 
program aims to reduce food insecurity in 133 vulnerable communities 
in Podor Department located in St. Louis region of northern Senegal 
through direct food distribution and monetization of food aid 
commodities.  CPI's strategy is to build local capacity, provide 
technical assistance and promote private sector development to 
facilitate program sustainability in health, education and 
 
DAKAR 00000523  004.2 OF 005 
 
 
nutrition. 
 
¶20.  (U) In FY 2008 to date, a total of 29,587 people have received 
general food distribution, including 18,784 primary school children, 
1,448 pre-school children, 1,156 people living with or affected by 
HIV/AIDS and Tuberculosis, and 8,199 maternal and child 
health/nutrition beneficiaries as well as other vulnerable people. 
In FY 2008, CPI will continue to distribute food commodities and 
serve meals to students in 151 schools and 25 pre-schools.  A total 
of 22,800 children (21,000 primary students and 1,800 pre-school 
students) are expected to eat in canteens once a day, four to five 
days a week.  Furthermore, CPI will focus on health and nutrition 
activities at 61 sites, working with approximately 20,447 direct 
monetization beneficiaries of which 9,000 will receive food rations. 
 To date, CPI received a total of 14,566 MT of commodities 
(dehydrated potatoes, vegetable oil, lentils and bulgur) for the 
Title II program.  In total, CPI expects to receive 2,260 MT of 
vegetable oil, lentils, bulgur and Corn Soy Blend for general food 
distributions in FY 2008.  Currently in stock as of end of March 
2008 for FFP/USAID:  230 MT of bulgur; 19 MT of Corn-soy blend; 149 
MT of lentils; 171 MT of vegetable oil and 61 MT of dehydrated 
potato flakes. 
 
¶21.  (U) CPI also implements a monetization program in which USG 
food commodities, principally rice and crude vegetable oil, are sold 
in the local market to generate funds in support of education, 
HIV/AIDS, and maternal child health/nutrition activities in Podor 
department and the region of Matam.  In FY 2008 to date, the 
education component of CPI's monetization program hasfor instance 
benefited 18,784 students in 152 primary schools covering 67 percent 
of all functioning primary schools in the Department of Podor. 
During FY 2008, 36 pre-schools and 1,448 pre-school students 
representing 100 percent coverage of "Case de tout petite" and 
"Ecole maternalle" in the Region of Saint Louis benefited from 
directly distributed and monetized USAID food commodities. 
 
¶22.  (U) CPI also supports a USDA Mc-Govern Dole Food for Education 
(FFE) program in the Region of Matam (Kanel, Matam and Ranerou 
Departments) using USDA food commodities and was recently awarded a 
second Food for Progress program to fund agricultural development 
activities in the Department of Podor.  To date in 2008, the CPI 
implemented USDA funded FFE program benefited 112 schools and 21 
pre-schools through the provision of hot meals and a complementary 
maternal and child health and nutrition program.  In FY 2008, CPI 
expects to receive 720 MT of commodities including textured soy 
protein, vegetable oil, bulgur and lentils for this program. 
Currently in stock at the end of March 2008 for FFE/USDA: 3.4 MT of 
Bulgur; 3.2 MT of lentils; 50 MT of TSP and 34 MT of vegetable oil, 
as well as some locally purchased food in stock (7.7 MT of dry fish; 
4.1 MT of tomato paste and 3.8 MT of rice). 
 
DONOR EFFORTS 
------------- 
¶23.  (U) The World Food Program (WFP) has been discussing possible 
responses with donors, but no food imports have been initiated 
because the government has neither declared an emergency nor 
requested emergency food assistance.  The WFP has already drafted an 
emergency response plan which would require approximately 29,000 MT 
of cereals for distribution to 660,000 beneficiaries at an estimated 
total cost of USD 28.2 million. 
 
¶24.  (U) The FAO has announced plans for a new USD 1 million seed 
distribution program.  The lack of good quality seed is one of the 
primary constraints to a positive supply response across a variety 
of crops and FAO plans to buy seeds locally and work with the GOS 
for the distribution. 
 
¶25.  (U) Some NGOs have also taken steps to help Senegal deal with 
possible food shortages.  Catholic Relief Services (CRS) staff based 
in Dakar have informed Mission staff that they are working in 
Ziguinchor, Kolda, Tamba, Diorbel, Fattick, Thies and Dakar using 
other donor funds.  CRS is closely watching the food security 
situation in these areas and is in the process of developing a 
concept paper for fertilizer and rice seed distributions using a 
food voucher system.  In addition to rice seed multiplications, CRS 
is in discussions with the FAO about holding seed fairs, although 
the GOS has indicated a preference for direct implementation of 
activities by NGOs.  World Vision (WV) also works in Kaolack, 
Kaffrine, Fattick, Kolda, Tamba in Senegal.  The NGO has indicated 
to USAID regional staff based in Dakar that they have an emergency 
 
DAKAR 00000523  005.2 OF 005 
 
 
proposal in place but are waiting for the GOS to declare a disaster 
before moving ahead.  In the meantime, the NGO is assessing the food 
security situation and sensitizing the communities.  They are 
preparing a concept paper that focuses on ways of improving soil 
fertility and regeneration of resources and that promotes support 
for Food for Work activities in hard hit areas. 
 
POLICY PROPOSALS 
---------------- 
¶26.  (SBU) President Wade believes his administration can manage 
both the impact of raising prices and the threat of food insecurity. 
 We are in no position to directly contradict the GOS in its efforts 
or rhetoric.  However, independent assessments indicate that Senegal 
could face more severe food shortages than other countries in West 
Africa, and these objective analyses must be taken into 
consideration by donors and, hopefully, by the government.  In the 
near term, we should also counsel against government measures that 
will put at risk Senegal's fiscal viability.  In the longer term, 
more emphasis on improving agricultural productivity should be a 
priority.  Assistance from the U.S., the World Bank, and other 
donors could help, but the GOS also needs to focus on its most 
pressing needs, including increased production and better 
distribution of quality seed, fertilizer, and credit to farmers.  We 
should also press for clear-thinking assessments and transparency in 
GOS schemes, including the goal of rice self-sufficiency, the GOANA 
proposals, and other recent ideas.  We are concerned that these 
could have severe budget consequences in the short term and may not 
reflect Senegal's comparative advantage in the long term, and so 
diminish opportunities for rural income growth. 
 
SMITH