Cost of Living in Senegal

Bear with me. This is going to be a loooong post. Those of you who pay really close attention to this blog might notice something peculiar about the title of this entry. It's not a movie title. That's because this post has nothing to do with me or my story here. What it is talking about is a particular observation that I've made. That observation is that a wage of $5 per day, while entirely insufficient for one person in America, is a livable wage here. It's not enough to save much or to afford much luxury, but you can live pretty normally on that wage. The important question that is raised when one hears this is: Why is the cost of living so low here?

I've come up with 5 factors that all help to lower the cost of living in Senegal, but I'm sure there are many more. These are just the ones that are most apparent to me. They are: the real estate market (or lack thereof), social/collective charity, a focus on functionality, a lack of middlemen from farm to table, and a lack of government intervention. Allow me to spend a little more time explaining each of these five factors and how specifically they lower the cost of living in Senegal.

There isn't much of a real estate market here in Senegal especially once you move out of the big cities. Houses, farms, and compounds get passed around the family and rarely get sold on the open market. How does this effect the cost of living? Well, most people don't have to worry about rent because they can just stay at their family's place. This makes both economic and social sense for the individuals and the families, so you typically only find people living on their own in bigger cities. Even then, they are likely either students or semi-skilled workers and live with several roommates. Overall, the monthly fixed cost of lodging is much less expensive here in Senegal. This also causes the cost of living to drop indirectly because, in the absence of rent, workers don't demand as high of a wage as they would if they needed to pay for rent. Lower labor costs means lower prices for locally produced goods.

The idea of social charity might seem quite foreign to Americans. Most charity work done in America is done for the benefit of a selected group or individuals. You have charities for the homeless, for disaster victims, for cancer patients, etc. Social or collective charity is a charitable act that is done for the benefit of all members of the society. The biggest example of this comes from “sandwich ladies”. These are women who set up stands selling sandwiches for breakfast, lunch, or dinner (or sometimes all three). They are typically not formalized, have little to no fixed assets, and only operate out of a wooden stand on the side of the road. From a distance, it looks like these women are performing an income-generating activity attempting to earn a little extra cash. If you look a little closer and ask the right questions, though, you see that that's not the case. At the prices these women sell their sandwiches, you see that they make very little profit if any at all. Even the ones that do very well aren't making so much money that the women could support their families with it. They always need another stream of income. The thing is, even if you did the math for one of these women and showed her that she is making approximately no money, she likely wouldn't care. Many of these women are, in their minds, simply performing a social service, filling a perceived need within the community. It really isn't about money at all. Another example of social charity is that if you ask someone for something small, like a piece of fruit for example, you're likely to receive it. In this culture, it's customary to offer to share everything. From my perspective, when this first happened to me, I thought they were doing the “polite” thing and didn't actually want me to take what they were offering. As I've learned more about this country, I've learned that when somebody offers you something, they won't give it up begrudgingly if you accept. They will be happy to give it to you. This concept of social charity keeps the cost of living low because it's one link on the value chain that does not demand a profit. In America, the “sandwich ladies”, for example, would likely demand a markup of 20-30% to pay for their time and energy. The fact that they don't do that here in Senegal means lower prices for everyone.

The next reason is that, in terms of what people demand in a product or service, their focus is on functionality. Things don't have to be clean and pretty here. If they work, they're used. For that reason, you can get a ride across town for 25 cents from one of the old, banged-up vans and it still makes financial sense for the van owner. Other businesses minimize their fixed costs in similar ways, holding on to equipment that would be considered well past its useful life in America. This certainly does cause a lot of problems in terms of quality and safety of many products, but the pros and cons of this practice are outside the scope of this essay. Right now, I only care about how it affects the cost of living, which is undeniable. Because of this focus on functionality, businesses can minimize costs by stretching the useful life of some of their inputs. This, of course, can be extended to individuals as well. People hold off fixing their window or painting their house or they keep that pair of shoes much longer than it would be socially acceptable to do in America. The same general principles applies to the individuals as to the business. Extending the life of the goods you have reduces your expenses.

In America, produce passes through several intermediaries between production and your kitchen. Each of these “middlemen” along the way demand a markup to pay for the services they're providing and to have a bit of profit. Each step, therefore increases the price. Here in Senegal, produce typically only passes through one or two intermediaries before arriving at the market and it's certainly not unusual to see farmers bring their produce to some markets directly. In America, producer's markets (i.e. farmer's markets) are certainly becoming more popular, but the vast majority of produce is still bought through supermarkets. The lack of intermediaries in Senegal allows farmers to recoup more of the “true profit” of their produce (true profit meaning price to consumer minus cost to produce) and also allows the end consumer to pay a lower price because he/she doesn't have to pay for the profits of as many intermediaries along the way. Again, this lower price sounds great in theory, but Senegal also has a major problem with food spoilage due to a lack of infrastructure that is able to efficiently distribute the food. In America, we pay a little more, but there aren't areas of the country that simply don't have vegetables at certain parts of the year. Again, the discussion of the pros and cons is outside the scope of this essay. The undeniable fact remains: fewer middlemen equals lower prices to consumers.

The final major factor that I've noted that decreases the cost of living is a lack of government involvement and regulation. I've been talking about the food industry for most of this essay, so let's start there. There is an FDA-like entity here in Senegal called the ITA, but it's scope is much more limited than its American counterpart. It typically only steps in once a business reaches a particular size and wants to expand into more formalized sectors in the market. Most smaller farmers and businesses, food-related or otherwise, don't worry about any regulation, taxation, or impediments from the government at all. Again, this carries both good and bad consequences, but it is another cost that American farms and businesses need to account for that Senegalese ones don't. Few Senegalese businesses pay for accountants or audits or have safeguards in place to prepare for such things. Few worry about workplace safety and often cut costs on safety regulations or equipment. Many pay no taxes at all. These are all things that are “costs of doing business” in America that all need to be paid for by the price the business charges for its goods and services. When businesses aren't legally required to pay for these things, many won't and, in a competitive market, they will provide lower prices because of it.

So, there they are. Five factors that all contribute to the difference in the cost of living between Senegal and America. I'm sure I've missed some major ones, but this isn't a thesis or a treatise. I just found it interesting that, while the exchange rate is approxmately 1 dollar to 500 FCFA, a dollar bill in America is not the same as a 500 FCFA note in Senegal.