Previous Quarterly Editions
Expropriation Risk: 78 78 57 57 Political Violence Risk: 74 74 74 74 Terrorism Risk: 75 75 75 75 Exchange Transfer and Trade Sanction Risk: 55 55 55 55 Sovereign Default Risk: 75 75 75 75
TREND ►
Mali has a transitional government in place following a military coup d’état in August 2020. The interim President, Bah N’daw, is well-respected nationally and internationally. In his inaugural briefings, he reassured mainly foreign investors and contractors that the transitional government would honour agreements and contracts undertaken by the ousted government of now-former President Ibrahim Boubacar Keita (September 2013-August 2020).
N’daw also vowed to combat corruption within the government and security services, while ensuring Malians benefit from the country’s mineral resources and the implementation of the recommendations of the 2019 National Inclusive Dialogue to ameliorate the country’s polarised socio-political situation. The transitional government has until March 2022 to achieve these promises, including organising a presidential election to return the country to democratic rule.
In April 2020, Mali’s parliament approved a new mining code that eliminates mining companies’ value-added tax exemptions during production and shortens the period during which they are protected from fiscal changes. Declaring his commitment to make the mining sector a priority, President N’daw in October 2020 outlined his administration’s readiness to reform the mining sector, starting with a review of mining contracts signed by the ousted government. The announcement came following the presentation of the auditor general’s 2019 audit report, which uncovered large-scale financial irregularities involving public entities and three mining companies.
The transitional government is also under pressure from Mali’s opposition parties, trade unions and civil groups, who feel that existing mining contracts benefit foreign mining companies disproportionately, at Malians’ expense. They claim that the mining contracts which give 80% stakes to foreign companies and 20% to Mali’s government should be changed. The interim President is left with the difficult task of how to reform the mining sector and extract more revenue without breaking contractual agreements signed with mining operators.
On the economic front, COVID-19 combined with the military coup drove the economy from 5.1% growth in 2019 to a 2% contraction in 2020. The budget deficit widened further from 1.8% of gross domestic product (GDP) in 2019 to 6.1% of GDP in 2020, mainly because of lower tax revenue. GDP is expected to grow 4% in 2021 and 5.7% in 2022, in the event that COVID–19 is brought under control.
The President’s decision to reform the mining sector, starting with reviewing mining contracts, could lead to creeping- if not outright expropriation- of some mining assets. The auditor general’s 2019 audit report, which uncovered the large financial irregularities involving public entities and the three mining companies, claimed a loss of about 301 billion West African francs (USD554mn) to the public coffers during the 2015-18 financial years- a total of USD519m of this has been accused as financial irregularities from the three firms together. Additionally, the mining companies are also accused of flouting environmental regulations.
In Mali, incoming governments are disposed to making arbitrary demands for contract review and unpaid taxes. However, most mining contracts with foreign companies are protected by stabilisation clauses that will render any enforced changes illegal, with the government liable to pay compensation. A disruption to mining operations is not in the government’s best interest. Consequently, the transitional government is more likely to engage in dialogue with mining firms for more financial support for its post-COVID-19 recovery efforts. Nevertheless, mining firms found to have broken environmental regulations are more likely to face heavy fines than expropriation of assets.
The conflict between the Malian government and the Tuaregs, seeking to carve out northern Mali for their independent state, appears interminable. Peace negotiations between the government and two largely recognised rebel coalitions, the ‘Platform’ and the ‘Coordination’, concluded with an agreement in June 2015 in Algiers. Since then, there has been a conference of national accord (2017) and an inclusive national dialogue (2019). So far, attempts at negotiated settlement have borne little progress.
The conflict is proving intractable for several reasons including deep-seated mistrust between Tuareg leaders aligned to the al-Qaida-affiliated Group for Supporting Islam and Muslims (JNIM) and the Malian government. Since July 2014, the operations of the United Nations Multidimensional Integrated Stabilization Mission in Mali (MINUSMA) have struggled to establish stability in the northern and central regions, where armed groups stage attacks against civilian and military targets.
The security situation in Mali’s northern and central regions remains dire. Attacks by jihadists and armed militias as well as intercommunal violence have intensified mainly in Ségou and Mopti in the central region, with sporadic attacks also increasing in Koulikoro in the western region and Sikasso region, the hub of the country’s cotton industry. In the northern region, Gao, Menaka and Kidal remain high-risk areas for jihadist attacks including kidnapping, while mining sites located in the south are relatively protected from regular armed attacks.
The transitional government has included national reconciliation as part of its priority to end the intercommunal violence that is acting as an avenue for recruitment by jihadists from JNIM and the Islamic State in the Greater Sahara. The transitional government is now calling for the disarmament of all militia, as opposed to the previous government’s move to support militia in the fight against jihadists and their sympathisers. This new strategy appears to have yielded modest results, with JNIM leaders on April 6 signing a ceasefire agreement with the transitional government.
The authorities of the regional bloc Economic Community of West African States (ECOWAS) placed trade and financial sanctions on Mali when the military toppled the government. These include a trade blockade, denying the country its ability to export gold, which is the main foreign exchange earner. They also blocked the junta from accessing Mali’s external foreign reserves. The sanctions were lifted after the military junta agreed to allow the appointment of a civilian interim President and prime minister to lead the transitional government.
The civilian-led transitional government is mandated to organise the municipal, legislative and presidential elections before March 2022, to return Mali to democratic rule. Achieving this mandate within the current timeframe is challenging, given Mali’s deteriorating security situation and COVID-19-related disruption. However, any extension to the 18-month transition period would need ECOWAS approval. Any unilateral decision by the transitional government to extend their stay in office will be met with renewed ECOWAS trade and financial sanctions.
TREND ▲ OUTLOOK ▲
Mali’s public debt is expected to increase to 46.2% of GDP in 2021 and 47.2% of GDP in 2022, as the transitional government moves to implement the action plan of the 2020-22 Transition Roadmap. Due to the high concentration of domestic debt maturity, a debt restructuring programme was initiated in 2019. This restructuring programme will be completed to reduce the financial pressures on the public purse.
The International Monetary Fund has recently granted an additional six-month debt repayment moratorium until 2021, following a USD200mn loan in April 2020 under the Rapid Credit Facility in addition to a USD193mn loan under the Extended Credit Facility, to enable the transition government to deal with COVID-19’s socio-economic impacts while pursuing economic recovery.
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