Senegal ‘s government has given startups in the country the green light to excel. The country has become the second African country after Tunisia to pass a dedicated Startup Act after 90 per cent of parliamentarians voted in its favour recently.What this means is that startups in the West African country may now have access to startup funds that will help them raise the funds they need.
The Senegal Startup Act among other things, seeks to promote innovation in the country’s economy towards achieving the country’s “Digital Senegal 2025” strategy. Below are key provisions of the Startup Act, tagged Law no 2020–01 of January 6, 2020 relating to the creation and promotion of the Startup in Senegal.
Startups Covered By The Law
The Act targets startups in Senegal that use creativity, innovation, new technologies to achieve high added value for both the Senegalese and the international markets. To qualify to benefit from the Startup Act, the startup must:
a) Be an innovative and disruptive private or public company, which has been legally registered for a period of not more than 8 years, and which has strong growth potentials built on a disruptive economic model.
b) Created on the Senegalese territory and must at least, be one-third (1/3) owned by persons of Senegalese nationality or persons resident in Senegal or by legal persons having or doing business in Senegal.
b) The law also applies to any startup created by any Senegalese living abroad
who owns at least 50% of the startup.
Creation of A National Commission Dedicated To Startups
- The Act creates an Evaluation, Support and Coordination Commission, which is inclusive of all public and private stakeholders in Senegal, and which is geared towards the development of startups.
- The Commission is mandated to set up a platform dedicated to startups.
The online platform will allow any startup to complete the related formalities towards its registration and labeling. The platform will also facilitate access to information by startups. - The law also allows the Commission to get support from both the public or private sectors towards assisting the creation, promotion and development of startups.
- Consequently, the law gives the Commission the power to register and issue registration certificate to any startup which meets criteria for a startup stated above for purposes of obtaining such support and assistance from the private and public sectors.
- It also gives the Commission the power to stipulate the technical standards which a startup must meet before it is issued with a startup label. It is also tasked with the responsibilities of fixing procedures for labeling,evaluation, renewal or withdrawal of the label from startups.
Read also: Senegal Approves A-Three Year Tax Exemption For Its Startups
Incentives and Benefits for Startups Under the New Law
- The law also states that any registered or labeled startup benefits from incentives, according to conditions stated by the law.
- Consequently all the startup wishing to benefit from the reserved advantages and incentives need to do is to comply with the provisions of this law — which is to say, to embark on a simplified registration and labeling procedures implemented by the Commission described above.
Particularly, the incentives will relate to:
- The granting of customs and social advantages according to conditions to be defined taking account of the Labor Code and the General Customs Code available in Senegal.
- Tax measures according to conditions to be defined taking into account the General Tax Code — to this effect, the Senegalese government has approved a three year tax exemption for its startups and newly created companies. According to a memorandum dated February 24, 2020 issued by the country’s Ministry of Finance and Budget, the Finance law of December 20, 2019, which came fully into force throughout the country on December 28, 2019 has brought to an end the regime of taxation of the country’s startups and SMEs.
- The legally registered startup will further benefit from special tax advantages such as provided for in the General Tax Code in Senegal. It will also benefit from other measures and schemes
more favorable to them in accordance with the laws and regulations in force. - The granting of guarantees to startups with a view to obtaining credit ;
- Direct granting of public or private funding to registered startups;
- The implementation of measures favorable to investment for their benefits;
- Facilitating access to public procurement for startups under conditions to be defined in taking into account the Public Procurement Code in Senegal;
- The implementation of support, facilitation and development measures the startup;
- The implementation of capacity building measures for the startup.
- Commission is also mandated to set up training and empowerment platform reserved only for startups registered with it. The platform will, among other things, allow access to a database and a list of experts, trainers and mentors who support startups towards upgrading their knowledge on various issues such as finance, marketing, communication, and development of business plans.
Additionally, startups legally registered with the Commission, under the new Senegal ‘s Startup Act may receive support from the Senegalese government with the aim of:
- Subsidizing its registration cost;
- Reserving the .sn domain name;
- Ensuring the protection of startup innovations with national organizations
and international intellectual property protection; - Facilitating support from approved incubators for the startup;
- Supporting the startup’s research and development activities;
- Covering any other support necessary during the growth stage of the
startup.
Access To Funding For Startups Under The Act
- Under the Act, labelled startups will benefit from public and private funds in or outside of Senegal, mainly intended to directly finance eligible startups.
- The public sector support will also guarantee :
- (within the limit of a ceiling fixed by law) loans, financing and participation in the capital of startups, granted or made by investment companies, whatever their form, and any other investment organizations according to the legislation in force in Senegal;
- Loans made to startups by credit and other institutions;
- The execution of contracts.
3. Under the law, labeled startup will also benefit from a preferential regime for access to Public Procurement Order.
Consequently, throughout the label’s validity period:
- A preference margin of 5% is granted to any labeled startup that participates in a call for competition relating to public contracts, public service delegations and partnership contracts. This percentage can be combined with any other advantage granted to other candidates by
applicable regulations. However, the cumulative preference cannot exceed 25%. - The applicant for a public contract, a delegation of public service or a contract partnership which agrees to subcontract 30% of the services covered by the contract to one or more several labeled startups or that present an offer in grouping with one or several startups, can benefit from a preference margin of 5%. This margin of preference can be combined with any other margin provided for by the regulations in force.
- In the event of a collaboration with another company which is not a labeled startup, the margin of preference provided for in the preceding paragraph of this article is not applicable.
- As part of the implementation of public private partnership contracts between a contracting authority and a labeled startup, the candidate’s status is taken into account within the framework of the application of the provisions relating to the spontaneous offer.
- The procedures for applying and monitoring the benefits and incentives for promoting startups’ access to public procurement are set by the Commission.
Penalty for Non-Complying Startups
- Finally, under the Startup Act, the label given to a startup may be withdrawn from it when it no longer meets the eligibility criteria. The withdrawal of the label results in the loss of all the advantages linked to the status of labeled startup. The procedures and procedures for withdrawal are specified by the technical standards defined by the Commission.
- A legally registered or labeled startup in a situation of irregularity may however request its regularization by the Commission by complying with the standards set by the Commission.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer.
He could be contacted at udohrapulu@gmail.com