The Centre for International Private Enterprise (CIPE) has partnered with the l’Union Nationale des Commerçants et Industriels du Senegal or the National Union of Small and Medium Businesses in Senegal (the Union) since 2011 to empower small and medium-sized enterprises to engage in public-private dialogue and to better serve the needs of Union members.
The project’s mission is to improve the policy environment for small and medium sized enterprises in Senegal by reforming a complex tax code, encouraging the transformation of informal businesses to the formal sector and establishing a mechanism for regular public private dialogue with the government.
As Senegal’s largest and most representative business association, the Union is well positioned to play a significant role in the country’s policymaking process. Senegal is plagued with high rates of informality, especially among small and medium sized businesses, corruption and high percentage of unemployment, estimated to be above 40%.
In recent years, Senegal has experienced popular protests and high rates of unemployment and corruption; it also has one of the largest informal sectors in Sub-Saharan Africa. The Union has 70,000 members, the overwhelming majority of whom are small and medium businesses operating in the informal sector.
As a first step, the Union identified and prioritized the issues confronting its members along with policy recommendations to address member needs. To achieve this, the Union divided its national membership into four regions – North, South, Centre and West – and conducted regional dialogue sessions for members in each of these four regions. Complementing these regional discussions were two cross-regional business agenda forums that synthesized the regional policy concerns into a policy recommendation document.
The primary issues to emerge from the regional dialogue sessions and cross-regional forums were the need to address the complex tax code, with different tax rates for small and medium business operators in different provinces and districts of Senegal, and high tax rates, both of which were major causes of small and medium businesses choosing to operate in the informal sector.
With CIPE’s support and expertise, the Union developed an evidence-based white paper with recommendations on tax reforms for the small and medium business sector. This was the first effort by the Union to include the views and interests of all its members in one comprehensive document. The Union supported its tax code recommendations with an analysis of the prices of core goods and services of its members, an examination of the relative costs for the provision of these goods and services, and a projection of the relative profit margins of the Union members based on the prices and costs. Soliciting member input through elected leadership in the regions facilitated the flow of information between national and regional branches. The Union distributed hard copies of the white paper to all regional offices and expanded the organisation’s website to include a new section on policy advocacy that included regular updates.
Following regional consultations and the publication of the policy paper, the Union participated in high-level meetings with public officials from the Ministry of Commerce and Industry, and the Ministry of the Informal Sector. The main public-private dialogue event was a roundtable, which attracted 93 attendees from the Ministries of Finance, Employment, Taxes and Customs; members of the Parliamentary Committee on Tax and Customs, members of the Union’s national and regional leadership teams, the Senegal National Employers’ Associations and media representatives.
The objective of the roundtable was to raise understanding among government officials of the country’s small and medium businesses policy concerns and recommendations. In conjunction with the roundtable, the Union conducted three national-level meetings with the Ministry of Tax and Customs, and two with the Ministry of Finance and the Economy, to advocate for their recommended tax reforms.
This partnership between civil society, business and the government in Senegal yielded two concrete impacts. The first was the adoption of the small and medium businesses tax reform recommendations by the Ministry of Tax and Customs. The ministry submitted the Union’s recommendations to Parliament as part of the Parliament’s comprehensive review of the Senegal tax code.
On December 31, 2012, the Parliament of Senegal passed legislation to reform the Senegal tax code, which included all the Union’s recommendations. This resulted in a more streamlined tax code for small and medium business in Senegal with tax rates that are more proportional to their profit margins. Importantly, a more uniform and proportional tax code for the sector provides a strong incentive for informal businesses to take advantage of benefits of becoming a formal business, which in turn will expand the government’s tax base and promote accountability and transparency.
The program’s second major impact was establishing regular and ongoing public-private dialogue between the Union and the Government on issues related to the small and medium business sector, economic development, and food security challenges.
The quality of the tax code recommendations and the process that led to the recommendations, which demonstrated the extent of the Union’s national scope and grassroots reach, provided credibility to the Union in the eyes of senior government officials including the Minister of Tax and Customs, the Minister of Commerce and Industry, and the Prime Minister of Senegal. The Union’s potential as a valued partner was clearly demonstrated and led the Government of Senegal to engage the private sector to be part of the solution to the country’s persistent food security challenges.
The Union’s issue advocacy has contributed to a democratic culture of inclusion, accountability, and transparency in Senegal where the government has committed to soliciting the participation of the private sector in the policymaking process on economic issues. Country-led development that involves all partners as equals are central tenants of the Busan principles.