GLOBAL ECONOMIC CRISIS AND CHANGE OF PARADIGMS

How can we talk about current economic events without mentioning the world situation created by the Russo-Ukrainian war, the consequences of which are the disorganization of globalization that “all went well in the best of all possible worlds”? The time seems ripe for the general “save who can” in which states remember that they are sovereign within their borders. European countries that rely heavily on Russia for agricultural and energy supplies are in crisis. This crisis is great because it has revealed that Russia and Ukraine were in fact the “key” countries in supplying strategic energy commodities (oil, gas, coal, fertilizer) to a highly interconnected global industrial economy, to essential basic foodstuffs for Europe and also the Middle and Near East (wheat, maize) not to mention Africa.

Russia, which is vital to Germany in terms of energy, has just decided to cut off gas supplies to Poland and Bulgaria because the latter do not comply with the rule of payment for their imports in rubles or gold that it has promulgated. Thus, Russia currently appears to be in a strong position in its economic relations with the European countries forming the coalition that supports Ukraine with the US. And this despite the economic sanctions imposed on her by the Western camp. To believe that this situation was poorly evaluated during the taking of these unprecedented sanctions in history. The opening of the global market that regulates economies is giving way to the temptation of states to adopt sovereign economic and monetary policies.

Russia is working to take the gold standard back out the window as the hub of international payment systems rather than the dollar. China and the other Asian countries are working together in ad hoc organizations to find their own solutions for the fluidity of energy supply chains and industrial materials and to secure their payment systems. With the energy crisis caused by this Russian-Ukrainian conflict, the temptation to challenge an international dollar-based monetary and financial system has never been greater. Frederick William Engdahl, oil and geopolitics specialist and author of the book “A Century of War: Anglo-American Oil Politics and the New World Order” foresees an impending global catastrophe following the European Commission’s decision to suspend imports of all forms of Russian energy, especially diesel. “Everything that goes in and out of a factory uses diesel”, it is said, so that the link between the evolution of the cost of diesel and that of GDP can be quickly established. In the absence of diesel, energy essential for the proper functioning of the industry, the entire supply chain is frozen. “However, Europe imports about 70% of its diesel from Russia and 76% of all its road vehicles (cars, trucks) use diesel”.

This spiraling increase in fossil energy products is taking place in a context where wind and solar energy cannot replace them in the blink of an eye. The crisis that began with a military conflict poses a serious threat to the state of a global economy already shaken by the effects of COVID on the global supply chain. The pandemic has led to an unprecedented economic and food crisis. Hit by the same crisis and without financial resources of their own, African countries rely more on their ability to take on debt. As a result, African states’ sovereign interventions in bond markets are increasing to balance their budgets or adjust the maturities of their debts.

These subsidies on the prices of food and petroleum products weigh down the state treasury!

Multilateral donors are also warning of this temptation to use debt to fund the budget deficits that will be magnified by the essential subsidies to feed the population.

In Senegal, the government has just announced the blocking of fuel sales prices in gas stations and other special places, which necessarily leads to a subsidy policy. The Minister of Finance and the Budget had already announced in the House of Representatives in April that the State had pledged 557 billion CFA francs to “shrink the shopping cart”, in order to prevent a general price increase. The question that comes to my mind is how long energy and food consumption will last and the various subsidies will cover the price increases, and the budgetary capacity to fund them over a financial year. This is all the more important because some specialists speak of a war that is not expected to end before the end of 2023.

The rise in the price of food products, largely imported, is experienced daily in Senegal, for example with brands such as Auchan, who have based their communication on the “lowest price” and where queues are becoming increasingly scarce nowadays. Authoritative voices are being raised to invite import substitution, forgetting that building another sovereign industrial policy does not happen overnight and implies the absolute need for broad consultation with the private sector, financial institutions and support institutions in both agriculture and industry. In the bakery sector, experiments were conducted in his time to make a bread that mixes wheat flour and millet flour after tests conducted by ISRA.

It was the famous “pamiblé”. Lacking political will, the state had put an end to this experiment with a view to food sovereignty, giving in to the whims of the Senegalese consumer, who had always had a preference for imported products. The slogan of “Senegalese consumers” still doesn’t work due to a lack of support from the population, who are admittedly poorly informed about the problems. The example must come “from above”; preference should be openly given to the consumption of “what we produce” rather than what the farmers of other countries produce.

Senegalese housewives will always prefer to cook with imported and lightly processed chemical tomato concentrate, rather than combining fresh tomatoes from our brave growers with imported “concentrate”. Result: our brave chefs do not know that this choice made the farmers of the valley on the throat. We should be able to tell them that! “Economic patriotism” must integrate the communication aspect essential for its implementation. It is about Ngaye Mékhé’s shoes like Richard Toll’s sugar, whose sensitivity and the interplay of the interests that surround him seem to close the door to any multi-party negotiations primarily focused on the national interest. Today, our country’s economic competitiveness in foreign markets does not exist.

The costs of factors such as energy, transport and an unfavorable monetary exchange rate have destroyed the industrial base that had been built up before the full economic opening of the early 1980s. The focus in this regard should be on restoring the internal market through protective measures to promote the emergence of agro-industrial SMEs, sources of employment and “know-how”. Importing does not require a large payroll and eventually many related services can be outsourced.

Apart from the banks that open documentary credits and the state through levies and taxes, the final consumer is the main beneficiary of the operation. The sugar sector should be inspired by the cement sector, where two additional branches were established after Sococim, namely Ciments du Sahel and Dangote. The opening of a fourth cement factory is also announced, this time with the Moroccan capital.

In any case, the dialogue between the State and the sugar players must prevail on the basis of a clear industrial orientation on the basis of which other initiatives in other sectors could emerge. The proposed sovereignty cannot, of course, be achieved without bold initiatives for the creation of local banks dedicated to investment in SMEs. The withdrawal of the major banking brands, which must be linked to the current economic sluggishness and the scarcity of foreign investment without neglecting the aggressiveness of African banks, must be compensated by the arrival of new financial institutions, which combine technically specialized personnel and experts in business management and support.

The Russian-Ukrainian crisis must trigger a review of our economic policies hitherto characterized by deindustrialization and unemployment, the structural trade deficit caused by “all imports”, even if it has the advantage of generating tax revenues for the State. The myth of a growth rate that in reality does not generate economic endogeneity is a lure. Our country’s growth rate, shown as a sign of future emergence, is generally driven by investment in infrastructure, construction or the mining sector where exports are related to raw or poorly processed materials.

In the mining sector, the low local value added generated cannot initiate and fuel a process of structural transformation that cannot take place without returning it to the generated value added circuit. The service sector, which forms the backbone, is dominated by traditional activities such as banking and insurance, while elsewhere people like to invest in new technologies and the creative industries to build new economic foundations.

The situation requires, more than in the past, new orientations, this time by mutual consent, so that all Senegalese feel really involved. The urgency is signaled in this very turbulent international period in which all countries of the world are looking for a better future in an unprecedentedly multi-faceted crisis configuration.

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