Risk Management in Mali: A Delicate Balance Amidst Political and Economic Uncertainty
As Mali continues to grapple with political instability and economic challenges, businesses operating in the country are forced to navigate a treacherous landscape of risk and uncertainty.
High-Risk Environment
According to Coface, the corporate default probability in Mali is extremely high due to the country’s high-risk political and economic situation. The business environment is difficult, with limited access to reliable financial information and an unpredictable legal system that makes debt collection challenging.
Natural Resources and International Assistance
Despite these challenges, Mali boasts substantial natural resources, including:
- Agriculture (tobacco, cotton)
- Mining (gold, bauxite, iron)
International assistance and membership in the West African Economic and Monetary Union (WAEMU) also provide some stability.
Economic Vulnerabilities
However, the economy remains vulnerable to:
- Weather fluctuations
- Commodity price fluctuations
- Extreme poverty
The country’s geographical isolation and poor security situation only add to its woes.
2022 Outlook
In 2022, Mali is expected to experience sustained growth, driven by:
- Increased cotton exports
- Robust gold sector
- Agriculture supported by international financing
- Household consumption benefiting from low inflation rates
However, political instability could threaten this recovery, as well as deter international financing and private investment.
Fiscal Challenges
The twin deficits in the country’s budget and current account are expected to narrow but persist. The government’s debt remains high, with:
- Two-thirds of it being external
- Much of it concessional
The three-year ECF program granted by the IMF will provide some financing support, but political instability could threaten access to funds.
Political Situation
Mali’s political situation has deteriorated significantly since August 2020, when Colonel Assimi Goïta forced President Ibrahim Boubacar Keïta to resign. The country is currently under a transitional government, and elections are expected to be held by February 2022. However, this timeline has been disputed, leading to economic sanctions being imposed by ECOWAS and UEMOA.
Risk Management
As the situation remains uncertain, businesses operating in Mali must prioritize risk management to navigate these challenges successfully. By understanding the country’s complex political and economic landscape, companies can better prepare for potential disruptions and capitalize on opportunities as they arise.
Some key steps to take include:
- Conducting thorough due diligence on local partners and suppliers
- Developing contingency plans for potential disruptions
- Monitoring local events and developments closely
- Diversifying supply chains and revenue streams
- Building strong relationships with local stakeholders and government officials