The Business environment in Mali

Mali’s sudden emergence into the world’s spotlight came in early 2012 when the country descended into chaos as a result of a military coup.  Prior to the still lingering period of unrest, the country had maintained a stable, democratic government for nearly two decades. The government had made great strides in reducing poverty and improving the quality of life for its citizens. Going forward, Mali undoubtedly faces many challenges, but there are still business opportunities to be had. The progress demonstrated throughout the country prior to the present period of conflict should not be overlooked.

Economic Production

Mali’s economy is highly dependent on gold mining and agricultural exports of corn, cotton, rice, sugarcane and peanuts.  As such, revenues tend to fluctuate based on gold and agricultural commodity prices. Environmental factors, mainly droughts, also play a role in the country’s economic output.  Mali’s economy also depends on foreign aid, which has become less and less over the last couple years as a result of the country’s internal conflicts. Foreign nations simply aren’t willing to invest in an unstable government.  It is expected that foreign investment will increase once a new government is established and stability has returned.

Industrial activity exists in some areas of the country, but it is mainly centered on processing agricultural commodities. Up to 80% of the workforce is tied to farming or fishing, which confines most of Mali’s economic activity to regions around the Niger River. Regions extending away from the Niger River are sparsely inhabited with up to 65% of the land being desert-like.[1]

Gold plays a large role in Mali’s economic portfolio, and has been exploited more extensively within the last 20 years. There are currently seven operating gold mines with more to potentially open in the future. The on-going unrest in Mali hasn’t seemed to slow gold production, which was up 15% in 2012. Other mining opportunities exist in Mali, but none have been exploited as much as gold. Interest in Mali’s other natural resources is growing and has a strong potential to significantly boost their GDP in the future.[2]

Demographic Factors

Many of Mali’s demographic statistics highlight the fact that the country ranks among the 25 poorest countries in the world. Over 65% of the population is below the age of 24, with 47% being age 14 or younger. Only 27% of Malians are literate with only 1 out of every 5 females being able to read. Education and healthcare are obvious areas for improvement, but such efforts will take time and money from the government and may be hindered by security challenges and a current shortage of foreign aid.

Mali’s most difficult challenge may be its rapid population growth. The country is growing at a rate that may not be sustainable. When examining birth rates, Mali is the second fastest growing country in the world with 46.06 births per 1,000 residents, and two of Mali’s neighbors, Niger and Burkina Faso, rank #1 and #4 on the list respectively. To compare, the United States averages 13.66 births per 1,000 residents. The average Malian woman has six children, and the country’s population is expected to triple in the next half century.

Such extreme population growth has numerous economic and social consequences. Food shortages are already semi-common in Mali, but they will be amplified by a growing population’s need for sustenance along with continuing environmental hardships caused by climate change. Additionally, unemployment will increase which leads some experts to imagine a generation of young men without job prospects who make easy recruits for some of the extremist factions currently residing in the country[3].

Business Climate

Mali is very open to foreign investment, and the government has put initiatives in place to give equal treatment to both foreign and domestic investors. Some state-owned enterprises have been privatized and the government has allowed calls for bids in several cases. Mali also encourages start-up businesses within the country by allowing foreign businesses to own 100% of any business they create.

Similar to other developing nations, internet access is not widely available throughout Mali.  Outside of the capital of Bamako, internet use is extremely limited. Only about 2% of the population used the internet in 2011. The country’s general infrastructure paints a similar picture. Paved roads are limited once outside of Bamako, and only six airports with paved runways exist.  Companies wishing to do business in Mali, especially outside of Bamako, need to take into consideration the inevitable internet connectivity and infrastructure challenges they are sure to face.

The prevalence of corruption within Mali can deter foreign investors.  As of 2011, Mali ranked 118 of 182 countries surveyed for perceived public sector corruption. It is not uncommon for government officials to solicit bribes to complete routine procedures.  Corruption is officially a crime punishable under the penal code, but the perception is most corruption goes unreported.  The government is aware of its corruption problem and has taken steps to curb it, but progress has been slow.

Mali’s high population makes labor in high supply, but skilled labor is often hard to come by. The labor force is mainly young and uneducated. Malian workers can unionize, and there are frequent conflicts between management and the labor force.  [4]. However, with a rapidly expanding working population, conflicts between unions and employers may decrease as a result of companies having an ever expanding pool of employees to choose from. Unions may start to lose some of their bargaining power. From a business perspective, Mali’s rapidly growing working population may allow companies to do business with minimal wage and benefits costs. If youth education reforms begin to occur and a more skilled workforce emerges, Mali’s large population of workers will offer an even bigger advantage for companies looking to do business within the country.

Economic Opportunities

Mali may offer several big opportunities for companies in the mining sector. Gold mines continue to be developed throughout the country, and exciting opportunities may exist in diamond and uranium exploration.

In the South-West portion of the country, kimberlitic pipes (type of volcanic rock notorious for containing diamonds) have been discovered which show traces of diamonds. Several mining firms currently have developed diamond mines in Mali, but it’s well believed many of the largest kimberlitic pipes have yet to be discovered. In fact, some believe the largest kimberlitic pipe in West Africa may lie in Mali.

Uranium may be the most valuable and voluminous mineral Mali has to offer. Uranium is in high demand from western nations who produce a significant amount of their electricity from nuclear power. Several companies are conducting uranium exploration missions with promising results. Some experts believe there may be over 5,000 tons of uranium throughout the country.

In addition to uranium and diamonds, Mali potentially has other natural resources that have yet to be fully explored. Since the 1970’s, Mali’s petroleum potential has been documented, but without substantial exploration up to this point. Firms have started to undergo efforts to re-examine geophysical and geological data to determine if Mali is a candidate for petroleum exploration. Experts have also identified a rather large list of natural resources contained in Mali which have yet to be fully explored. Below is a list of potentially untapped resources[5].

• Iron ore (estimated over 2 million tons)
• Bauxite
• Manganese
• Copper
• Marble
• Gypsum
• Phosphate
• Lithium (estimated over 1.3 million tons)

Many experts with knowledge of the country’s vast mining opportunities point out that France’s decision to deploy troops to Mali may not just have been to quell the violence and stabilize the region. Some feel the French are seeking a large stake in Mali’s natural resources, mainly uranium which is needed in large quantities to power their nuclear power plants. Observers also point to the Chinese, who have given millions of dollars to the Malian government and engaged in numerous development projects throughout the country. The actions of the French and Chinese government may serve as proof that Mali has a significant amount of valuable natural resources yet to be exploited[6].

Mali’s rapid population growth discussed earlier could offer opportunities for companies able to capitalize on it. Africa is the world’s fastest growing continent and doesn’t show any sign of losing that distinction anytime soon. That said, urbanization will occur throughout Mali, and the rest of Africa, at a rate not seen by the rest of the world. Opportunities for entrepreneurs will open up as a result of increased innovation and economies of scale in urban areas.

Going Forward

The world will be watching as Mali attempts to separate itself from extremist factions operating within the country. If the country is able to survive the current period of conflict and restore its previous form of democratic governance, there will be opportunities for businesses to profit. The country will no doubt face many future challenges, most notably population growth, but its potentially vast supply of undiscovered natural resources may offer economic opportunities for years to come.

References