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May 17, 2008

Senegal grants tax incentives for agricultural investors

Senegal, one of the world's top food importers per capita, offered foreign entrepreneurs tax breaks on May 11 to grow food in the West African country as its poor struggle to cope with high world prices.

Senegal is one of several African countries hit by unrest in recent months over high food prices driven by unpredictable weather patterns, market speculation and demand for land and crops from the biofuels industry and Asian states.

Last month President Abdoulaye Wade launched a "Great Agricultural Offensive for Food and Abundance," known by its French acronym GOANA, to raise food production in the country at the western end of Africa's arid Sahel, south of the Sahara.

"A decree has been signed exempting every investor in the framework of GOANA from customs duties and tax. VAT (value added tax) is also exempted," Information Minister Abdul Aziz Sow said in comments broadcast on state television.

Foreign exchange controls would also be suspended for five years for investors in GOANA-related enterprises, allowing them to take their profits out of the country freely, Sow said.

The GOANA programme aims to make Senegal self-sufficient in food by 2015, notably by irrigating and cultivating unused land near the Senegal river and ramping up production of rice, the staple food for millions of Senegalese.

Senegal produces between 100,000 and 200,000 tonnes of rice a year. GOANA aims to raise that to at least 500,000 tonnes, nearer to the country's annual consumption of up to 800,000 tonnes, mostly imported from Asian producers. The plan also foresees big increases in output of maize, manioc, cereals, milk and meat.

Senegal is among the world's biggest food importers on a per capita basis and one of the leading recipients of foreign aid in Africa.

But Wade has dismissed food aid as a "swindle" and engaged in a public slanging match with the U.N. Food and Agriculture Organisation (FAO) over its operations to promote farming productivity in Africa.

The Rome-based agency is led by fellow Senegalese Jacques Diouf, who once served in a government led by the country's Socialist Party, whose 40-year rule Wade overturned when he was elected president in 2000.

Wade threatened to sue the FAO, accusing the agency of deducting 20 percent as running costs from extra funds raised specifically to help Africa cope with rising food prices. Wade's complaints about the FAO echo a critical U.S.-funded review of the agency published last year which said the FAO was badly governed and failing the people it was meant to help.

When Wade launched GOANA last month, his officials said the government had spent more than 150 billion CFA francs ($348 million) in subsidies and other costs since last year to cushion consumers from rising world fuel and food prices. The Commerce Ministry fixed a ceiling on the price of rice of 280 CFA francs ($0.67) a kg

Reuters

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