Chinese investors see opportunities in the energy sector

Earlier this week, 39 entrepreneurs and industrialists from the China-Africa Chamber of Commerce in Yiwu met with the Senegalese Agency for the Promotion of Investment and Major Works (APIX) in Dakar to explore new investment opportunities, with a focus on Senegal’s energy and power sectors.

With the recent production of the first barrel of oil from the Sangomar field development and the first gas expected from the Greater Tortue Ahmeyim (GTA) project later this year – Senegal’s energy sector is booming. The country has also become a regional renewable energy hub with facilities such as the Senergy 2 solar power plant and the Taiba N’Diaye wind farm. The IMF forecasts that Senegal’s GDP will grow by 7.1% in 2024 and 10% in 2025, positioning the country as one of Africa’s most dynamic and fastest-growing economies, as well as a leading investment destination.

China – as one of the largest foreign investors in Africa – shows growing interest in this potential. Since 2013, the volume of investment between China and Senegal has reached $1 billion, making China Senegal’s second-largest economic partner after France. While Chinese investment on the continent has traditionally focused on southern and eastern Africa, West African countries have emerged as the biggest beneficiaries of Chinese loans in the post-pandemic period. In 2021-22, $1.92 billion was committed to projects in West Africa – representing 86% of China’s loans to Africa – with Senegal, Benin and Côte d’Ivoire contributing the largest shares.

Most of these investments focused on infrastructure and fell under China’s flagship Belt and Road initiative, which aims to improve regional integration, expand trade routes and strengthen economic links with the African continent. In Senegal, China has made significant investments in communications infrastructure, such as the Safar railway extension project in Touba by China Railways Senegal, as well as the planned highway from Dakar to Saint-Louis to be built by China International Water and Electric Corp.

China is also a major investor in Senegal’s digital and ICT sector, which has been identified as a key sector and employment driver. In 2023, Chinese companies built the Senegalese government intranet, installed 4,500 km of fiber-optic cable, and built 3G and 4G networks. The Chinese government has also funded a data center at the Diamniadio Digital Technology Park – one of the largest public data storage centers in West Africa – in cooperation with Chinese multinational company Huawei. Currently, 217 Chinese companies are registered in Senegal, and 81 projects generate 9,938 jobs. With increased Chinese interest in Senegal’s fastest-growing sectors, as well as a favorable operating environment and ease of doing business in the country, these numbers are likely to increase.

During a meeting with APIX this week, Zhu Shun, CEO of the China-Africa Chamber of Commerce in Yiwu, emphasized the Chamber’s focus on Senegal’s demand for low-voltage electrical products. As a world leader in renewable energy production, China boasts over 80% of the world’s solar energy production capacity. As a result, Senegal’s goal of increasing renewable energy to 40% by 2030 creates a strategic opportunity for Chinese enterprises to participate in solar home systems, battery components, clean energy technologies and related infrastructure. In Senegal, 65% of the population has access to electricity and 50% of the energy is generated in fuel-fired power plants that are planned to be converted to gas-fired power plants. This transition offers additional opportunities for Chinese investors in the energy sector, especially in terms of technology transfer.

Similarly, the development of the oil and gas sector in Senegal requires significant investment in supporting infrastructure, including roads and ports, to facilitate the export of gas and petroleum products. Upgrading the road between Dakar and the Saint-Louis region, where the GTA project is located, could halve the current journey time of 5.5 hours. Additionally, expansion of the national railway network by a state-owned company Grands Trains du Sénégalwith the construction of the new port at Ndayane, they will reduce congestion on major roads, redirect freight to new economic hubs and stimulate broader growth.

The upcoming MSGBC Oil, Gas & Power 2024 conference and exhibition – taking place in Dakar this December – will highlight the best investment opportunities shaping Senegal’s energy sector. The event aims to unite global investors with local projects across the value chain, from oil and gas exploration to clean energy development.

Explore opportunities, develop partnerships and remain at the forefront of the oil, gas and energy sector in the MSGBC region. Visitwww.msgbcoilgasandpower.com to secure your attendance at MSGBC Oil, Gas & Power 2024. To sponsor or attend as a delegate, please contact us [email protected].