Mauritania’s Ousmane Mamadou Kane: ‘We can borrow on the international markets’

By Julien Clémençot, in Nouakchott
Posted on Wednesday, 17 August 2022 14:32

A man climbs down from a rooftop in the iron ore mining town of Zouerate June 23, 2014. Mauritania's SNIM iron ore mining company aims to produce 13 million tonnes in 2014, around the same level as last year, the majority state-owned firm said. SNIM mines black iron ore in the northern town of Zouerate, a remote desert location which nevertheless attracts people from all over the country looking for work. SNIM employees proudly call their firm the lung of their nation's economy and the train that ferries the ore to the coast stretches some two kilometres, making it one of the world's longest. Picture taken June 23, 2014. REUTERS/Joe Penney

Despite the economic uncertainties linked to the war in Ukraine, Mauritania’s former central bank governor remains confident in his country's ability to return to a sustained growth rate.

After two very difficult years, the Mauritanian economy is showing signs of improvement. But the situation remains delicate and the country is suffering, like the rest of the continent, from the rise in commodity prices and the persistent pandemic. According to the World Bank, inflation rose from 1.4% in October 2020 to 8.2% in April this year. To ease the burden of rising prices on households, the government is subsidising food and fuel. But these subsidies will soon become unsustainable for the state budget.

Minister of Economic Affairs and Promotion of Productive Sectors Ousmane Mamadou Kane, whom we interviewed in early July, remains optimistic that the country will be able to return to a sustained growth rate. To see the situation recover, he hopes, in particular, to be able to sign a support programme with the IMF and, within a few months, to set up a bond issue – a first for the country – while Nouakchott has reached agreements with several of its creditors.

Jeune Afrique: In early 2022, you were counting on the return of strong growth after two years marked by Covid. Has the war in Ukraine changed the situation?

Ousmane Mamadou Kane: The state of mind has not changed, we think that growth will be good this year. Some people expect 4%, and I expect more than 5%. However, the Ukrainian crisis is still with us, with all its uncertainties.

Your country imports much of the wheat it consumes from Ukraine and Russia. What alternative solution have you found?

There are the wheat supply problems you mentioned, but also those concerning fertilisers and oil products. For wheat, in addition to Mauritania’s private importers, the government has asked the World Food Programme (WFP) to obtain periodic purchases of 25,000 tonnes from the last quarter of 2022. In terms of fertilisers, there will be no shortage, but we are seeing an effect on the price. Part of the cost increase will be passed on to the end users. For petroleum products, prices have also risen considerably.

The consequence of this situation is the arrival of a wave of inflation. Are you able to control it?

Inflation is totally linked to imports. Our currency is doing well. We have to manage this period by giving priority to the food needs of the least well-off populations, either through free distribution using a social register, or through import subsidies at carefully located sales points.

For petroleum products, targeting is more difficult. State aid will have to be reduced. At this rate, it would represent 20% of the budget by the end of the year, and that is unsustainable. If we add the food subsidies and the general efforts made in favour of the most disadvantaged, this would represent almost 30% of the budget. Again, this is unsustainable.

To limit the impact of the Covid-19 crisis, you have extended social safety nets. Can this strategy be maintained?

President Mohamed Ould Cheikh El Ghazouani has offered medical coverage to 100,000 households. This will continue. On the other hand, we hope to emerge from the Covid pandemic or, in any case, from the way the health crisis was managed one or two years ago. Then we will no longer need to make the cash transfers that were put in place to compensate for the cessation of certain activities. The next finance laws will certainly reflect this adjustment.

Mauritania has benefited from several debt cancellations. Is this a decisive step forward?

Over the past two years, the government has managed to reach very important agreements with a number of countries, most notably Kuwait and Saudi Arabia, regarding its external debt.

We are now waiting for our partners at the IMF and the World Bank to reassess our risk level for debt distress, with the serious hope that it will change from “high” to “moderate”. The problem so far has not been the debt stock, but rather its servicing. It was a real sword of Damocles hanging over our heads. This problem has now been resolved.

Discussions are underway with the IMF for the adoption of a support programme. Do you think they will succeed?

These negotiations were initiated at our initiative, without any constraints. This shows our willingness to reform and be transparent. We think this is important in the current period when we want to consolidate control of our debt and payment balance and open up to foreign investment.

We are waiting for the IMF and the World Bank to reassess our risk level for debt distress from ‘high’ to ‘moderate’.

In two years, public spending has doubled, which is huge. In addition to the social support we have mentioned, there have been benefits for certain civil servants and pensioners. And we have continued to invest. But our budget is solid. The deficit is only about 5% of GDP, which is very acceptable in the current conditions.

Is Mauritania tempted to go to the international markets to finance itself? That would be a first.

Until now, we have not been able to do so under the right conditions, given the state of our debt. With this thorn removed, we feel able to enter the international markets. We should start with a shadow rating by the end of the year to assess how the market perceives us.

While Dakar has spoken enthusiastically about the potential of the Grand Tortue Ahmeyim gas field [GTA, shared between Senegal and Mauritania], Nouakchott has been more sober. What do you expect when the field comes on stream at the end of 2023?

From 2003-2005, the Chinguetti deposit raised a lot of expectations. A few years later, the disappointment was total. This is a lesson we must take into account. The potential is there. All the measures are being taken, with our various partners, to ensure that this GTA project is a real success. However, we are dependent on the good relationship we must continue to maintain with BP. Their priorities will not necessarily always be the same as ours.

Finally, these resources are also destined for export to countries where an unfavourable opinion of fossil fuels is developing. We are certainly fighting it, but we have to take it into account. So there is optimism. But there is also caution.

Has Mauritania received assurances that BP will invest in phases 2 and 3 of the GTA project? What about the even more promising BirAllah field?

Today, I cannot confirm anything on behalf of BP. Even less so for the BirAllah field, which could have the greatest impact on Mauritania’s economy and finances. If BP does not commit to developing these fields, the country will have to find another partner.

Is the country taking advantage of the level of iron and gold prices to maintain its macroeconomic balance?

Absolutely, and one of the reasons I am optimistic about economic activity in 2022 is that everything is back to normal at the Tasiast gold mine after the fire that stopped production for several months last year.

Isn’t the iron production of the Société Nationale Industrielle et Minière (SNIM) disappointing? The Guelb II project is producing one million tonnes of ore per year when we were expecting four million…

I understand that SNIM’s production level today (12 million tonnes per year) is roughly similar to what it was in 1974. Of course, I would like its production to be higher, especially as the company has the potential to exceed 15 million tonnes. But one should not make a primary judgement. And consider that SNIM is now exploiting ore that is not as rich and more difficult to access as it was in the past. To say that SNIM is inefficient is too simplistic.

Of course, the Guelb II project is still far from its potential, but Guelb I was also very slow to ramp up. We must remain confident: Guelb II is clearly increasing its production. The reform of SNIM is a recurrent debate in Mauritania. Without commenting on the subject, it seems to me that a company like this can always improve.

ECOWAS has just lifted sanctions against Mali, but major security challenges remain there. What impact does this have on your economy?

First of all, there is a human dimension. What affects the Malians affects us. We are delighted that sanctions have been lifted. However, security challenges can have an impact on Mauritanian livestock farmers who traditionally take their herds to Mali. There is also the issue of refugees. The Mberra camp is big. It now houses 70,000 people. Even if the international organisations are present, these are our brothers who have found themselves on our national territory: we must welcome and assist them.

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