Mali sanctions: Foreign investment on the way?

By Yara Rizk
Posted on Thursday, 9 June 2022 10:24

The seat of the representative of Mali stands empty during the fifth extraordinary summit in Accra, Ghana, Friday March 25, 2022 (AP Photo/Misper Apawu)/

While the extraordinary ECOWAS summit held in Accra on 4 June failed to reach a consensus, postponing decisions on sanctions against Bamako until 3 July, we bring you this report on the efforts of Mali’s transitional authorities to replenish the state’s coffers.

Freezing central bank assets, trade sanctions by the Economic Community of West African States (ECOWAS), and the severance of international aid… While Mali seems to be running out of economic support, the country’s authorities are constantly touting its assets in the hope of attracting investors.

“You have gold mines, gas reserves, the two largest rivers in West Africa (Niger and Senegal), and more than three million hectares of potentially developable land. Malian livestock is the second largest herd in West Africa after Nigeria. Moreover, the energy deficit may also be of interest to investors,” said Prime Minister Choguel Maïga at the 2022 Doha Forum in March.

However, lacking short and medium term visibility, foreign investors remain cautious. Could the interim government’s announcement on 6 June that the “democratic transition” will end in March 2024 in addition to the prospect of the next summit of the region’s heads of state on 3 July change this?

Attracting FDI despite obstacles

Faced with these obstacles, the Malian prime minister brandished the investment code, which, in his words, “allows free movement of capital and therefore profits” in a market of “20 million inhabitants”.

If, on paper, the law places foreign and national investments on an equal footing, Mali also suffers from corruption that makes it more difficult for foreign companies to set up shop.

Although Bamako has put in place foreign direct investment (FDI) promotion policies to encourage competitiveness and private sector participation in most sectors of its economy, the data shows that it remains insufficient in the face of deficiencies in governance, competition for natural resources, demographic pressures, and security weaknesses…

In 2021, Mali was ranked 136th out of 180 countries in Transparency International’s Corruption Perceptions Index, a drop of 29 positions compared to 2020, and 148th out of 190 countries in the latest available Doing Business report, down three slots from the previous year.

Importance of gold and cotton

Gold, cotton, the livestock trade, bauxite and iron are valuable resources in Mali. Driven by exceptionally and sustainably high world prices, gold production and exports are continuing their strong growth. In the agricultural sector, the 2021-2022 cotton season resulted in a production of nearly 800,000 tonnes, which enabled Mali to regain its position as the leading African producer, ahead of Benin.

It is thanks to the revenue from exports of these products, deposited in the Banque Nationale de Développement Agricole (BNDA) and the Banque de développement du Mali (BDM), that the government is able to maintain a certain cash flow.

The junta, led by Assimi Goïta, intends to make the most of this income, notably by facilitating transport between Bamako and Conakry.

Recession looms

Despite transitional authorities’ will to diversify income sources by attracting new partners, it’s not a simple undertaking. Investor confidence in Mali has been low for the past decade. According to the World Bank, the crises that the Sahelian country has experienced have cost it the equivalent of 23% of GDP between 2012 and 2018. And the loss of earnings is estimated at $5.3bn, including $3.2bn in FDI alone.

In 2019, according to the Economic Forum’s Global Competitiveness Report, Mali ranked 129th out of 141 countries. Given the current situation, this trend is not likely to be reversed immediately. Indeed, since the beginning of the sanctions imposed by ECOWAS countries, Mali has recorded several defaults on the regional market. In March, the amount of unpaid debts to creditors amounted to more than €310 million, of which €171 million was related to the sanctions.

According to the latest Word Bank report, the perpetuation of these sanctions for two or more quarters could plunge the West African country into a recession. The IMF anticipates inflation at eight per cent, a public debt/GDP ratio of 53.4% (against 52.1% in 2021), and a total debt service equivalent to 37.6% of the state budget excluding grants (26.7% in 2021).

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