Senegal's Compact with the Millennium Challenge Corporation

On Wednesday, September 16, the Millennium Challenge Corporation (MCC) concluded a five-year, $540-million compact with Senegal. The agreement was signed at a meeting in Washington, D.C., between the U.S. secretary of state, Hillary Rodham Clinton—who chairs the MCC—and the Senegalese president, Abdoulaye Wade. The MCC program was established by President Bush in 2004 and offers targeted assistance to poor countries that have a record of good governance and are also considered solid prospects for economic growth. Those who meet the conditions are rewarded with multimillion-dollar investment packages. Recipient countries are encouraged to work with the MCC and in consultation with their own citizens in order to generate plans for spending the money. In Senegal’s case, the compact will be used to improve the country’s road network with the aim of bolstering food security. The idea is that better roads will enable agricultural goods to be distributed to domestic and international markets more efficiently. A separate tranche of money will be invested in strategic irrigation and water management projects. The MCC estimates that its investment will directly benefit 1 million Senegalese people.

Q1: Why Senegal?

A1: Senegal enjoys a close relationship with the United States. It is a moderate Muslim nation and a generous contributor to peacekeeping operations. In addition, it has willingly cooperated with the United States on counterterrorism initiatives and efforts to stamp out drug trafficking in the region. More importantly, Senegal fulfills the criteria laid out by the MCC. The MCC is an exclusive, invitation-only club. Senegal is just the 11th country in sub-Saharan Africa to sign a compact. Only those countries that clear the bar in terms of good governance and economic competence get the opportunity to join, and once they do, the process of developing an investment proposal that meets MCC approval can be arduous. Since he was elected in free and fair elections in 2000, beating an opposition party that had been in charge of Senegal since independence, President Wade has led a generally competent government and introduced modest economic reforms. In a corner of the world where the presidency has tended to be the domain of tyrants and military generals, Senegal has been an island of stability.

Q2: Why now?

A2: The signing of the MCC compact with Senegal has to be seen within the context of the Obama administration’s rapidly evolving Africa policy. The United States has been building up a head of steam in its diplomatic activity toward the African continent. Things got moving in July when President Obama extracted a $20-billion commitment from the G-8 nations to tackle global hunger, much of it in Africa. Later that month, the president made a major policy speech in Ghana, and his visit was closely followed by an exhaustive seven-state Africa trip by Secretary Clinton. The Senegalese deal, which is the first MCC compact signed since President Obama took office, is an attempt to keep the momentum going by showing Africa that the United States is prepared to put its money where its mouth is. And this is not the end of the story in terms of U.S. investments in Africa. Secretary Clinton will next roll out the U.S. portion of the G-8 food initiative, of which the United States has committed a hefty $3.5 billion this year alone. Many of the same African nations favored by the MCC are in line to benefit.

Q3: The Senegal compact has been five years in the making. Why did it take so long?

A3: Senegal was among the first African countries to sign up to the MCC in 2004, but it has taken five years of negotiations to agree on a mutually acceptable program. Previous proposals by Senegal, such as the establishment of an export zone outside Dakar, failed the MCC’s due diligence process. There was a suspicion that they stood to benefit the higher echelons of Senegal’s government rather than society as a whole. In a more general sense, there has been unease about the direction Senegal has been headed in recent years and concern that it is failing to meet the MCC’s benchmarks on governance and transparency. Corruption has been on the rise and democratic space within Senegal has been shrinking. The 2007 elections were marred by accusations of foul play, and opponents of 83-year-old President Wade suspect him of trying to line up his son as his successor when his second term expires in 2012. The annual report on political freedoms and civil liberties issued by Freedom House is used by the MCC to inform its compliance mechanism. In its most recent assessment, Senegal was downgraded from a “free” to “partly free” country. Perhaps for this reason Secretary Clinton, in her remarks at the MCC signing ceremony, was careful to point out that the compact was not to be taken for granted. She urged President Wade to “ensure good governance, fight corruption, make every aspect of government policy and operation more transparent and accountable, respect individual rights, and make Senegal the shining example of what a free market democracy can look like in the world.”

Q4: What does the Senegal deal say about the successes and shortcomings of the MCC so far?

A4: The completion of the Senegal compact helps to validate the MCC and ensures that it will continue to be a major vehicle for distributing U.S. development aid. There were big question marks over the MCC when the new administration took office; the initiative had taken a long time to get going and has been slow to disburse its funds. But its future was confirmed at a board meeting in June 2009, the first to be chaired by Secretary Clinton since she took office. In reality, the MCC has always enjoyed strong bipartisan support. People like its emphasis on conditionality—that U.S. taxpayers’ money should only be invested in nations that have proved their ability to spend it wisely. However, questions remain about how strict the membership criteria really are for candidate countries and whether those who get to join the club are truly held to account. Observers will be closely following Senegal as it becomes a fully-fledged member of the MCC to see whether the multimillion-dollar investment the United States has made in its future will incentivize the government into doing better or merely herald a further drop in performance.

Richard Downie is a fellow in the Africa Program at the Center for Strategic and International Studies in Washington, D.C.

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