Investing in Mali? An in-depth look at Malian political and security risk
Mali has in recent years flipped from being a heralded model of democracy to being mired in civil war. The history of the large, arid country in the western Sahel is replete with internal tensions and failed separatist uprisings which harm the investment outlook for most Malian sectors.
This article was co-written by GRI Analysts Jesper Bak-Christensen and Kevin Amirehsani.
The recent siege of a popular hotel in the heart of Mali’s capital, Bamako, illustrates not only the threat posed by Islamist militants in the West African state, but also the fragility of rule of law in the north and the renewed infighting between rival armed groups.
The greatest effects, however, might be felt on investor sentiment. Unless the roots of the insecurity within the country and in neighboring states are dealt with, Mali may have a hard time stemming an exodus of foreign capital.
The armed groups: recent attacks and brief background
The current bout of conflict began in 2012 when a Tuareg rebellion under the Moniker Movement for the National Liberation of the Azawad (MNLA), gained momentum and pushed the Malian army South to within striking distance of Bamako.
The Tuaregs, a semi-nomadic people native to northern Mali and parts of Algeria, Niger, and Libya, have a long history of separatism and trying to establish their own state in the north, a schism fueled by perennial droughts in northern Mali as well as racial tensions between the north and “black African” south.
This time, however, they had the advantage of heavy weapons and training acquired from Muammar Qaddafi’s defeated army in Libya.
In addition to their better arms, the MNLA were aided by several religiously motivated groups, including Ansar al-Dine, a Tuareg association motivated by extremist Salafi/Wahhabbi interpretations of Islam, and the more established Al-Qaeda in the Islamic Maghreb (AQIM), an amalgamation of different al-Qaeda factions with origins in the Algerian insurgency.
It is hard to pinpoint each group’s loyalty at any one time, which might partly explain why in 2012 the MNLA and its affiliated Tuareg groups were quickly outflanked by groups more closely-aligned with AQIM, such as Ansar Al-Dine and the Movement of Unity and Jihad in West Africa (MUJAO).
There are two groups most likely responsible for the November 20th attack on the Radisson Blu hotel in Bamako: Al-Mourabitoun and the more recently-formed Macina Liberation Front (though it is worth noting that AQIM itself has also claimed responsibility for the attack, and that reports suggest that at least two of the assailants spoke English).
The former was started by a once-leading light of AQIM, Mokthar Belmokthar, and appears to still maintain ties to al-Qaeda.
It was responsible for both a startlingly similar August assault on a hotel in the central town of Sévaré and a deadly attack on a Bamako nightclub in March. The latter is a dangerous newcomer with members from the mainly Fulani ethnic group which has also been implicated in the deaths of numerous soldiers and civilians in central and southern Mali.
The economy: potential and risk
Nestled between the harsh Sahara and the rolling savannah, Mali has long relied on mining and tourism to complement its large but inefficient agricultural sector.
It is the third-largest gold producer on the continent, with such major players as Anglogold Ashanti and IAMGOLD having operated and/or invested in several of the country’s mines for well over a decade.
Given the potential of Mali’s Southern gold belt, there is still room for growth. The recently-combined operation at Loulo and Gounkoto is one of the most mechanized in Africa and might set the stage for further investments.
Gold exports did fall 21% last year, but that was mostly down to a sharp drop in artisanal mining coupled with a government crackdown on illegal mining.
What bodes worse for the sector is the high number of expat workers typically employed in gold mining on isolated concessions, which makes them a prime target for armed groups.
None of the mines are located in zones as tense as more established conflict zones in Mali’s center and north, yet in June Ansar al-Dine fighters easily overwhelmed a police base in the southeastern village of Misseni, just 150 km from the large Morila gold mine.
Breakdown of Mali’s exports, 2013. Source: Harvard.
Other southerly leases include iron ore, bauxite, and limestone fields explored and extracted by Chinese conglomerates CGCOC and Sinosteel, British Eurasian Natural Resources Company, and Indian firms Earthstone and Sahara Mining, among others.
These concessions should be aided by a raft of MOUs signed by Chinese firms pledging to invest in railways between Bamako and ports in Conakry and Dakar, lines that are well-suited for minerals like iron ore and bauxite, which are bulkier and more expensive to transport than gold.
However, China has a history of unfulfilled infrastructure pledges, and there is every reason to suspect that regional instability coupled with low commodity prices may delay or even reduce these commitments.
The question marks arising around the security of these mines pale in comparison to manganese and phosphate concessions in the country, which tend to be located far closer to the relatively borderless north.
Ownership of the northeastern Ansongo manganese lease, near the major city of Gao, is currently being disputed, an issue which only arose after the initial operators had to flee during the Islamist advance in 2012. The area has since seen two recent attacks on UN peacekeepers as well.
In addition, large phosphate fields exist in Tilemsi, northeastern Mali. However, in 2012, Canadian Miner Great Quest Metals had to suspend its exploration program at the site for eighteen months due to nearby attacks by armed groups.
One of the geographic exceptions might be uranium exploration.
Unlike its neighbor, Niger, which is the world’s fourth largest exporter of the radioactive element, Mali’s uranium industry is in its infancy. Still, an exploration license has been granted near the Senegalese and Guinean borders to Canadian miner Denison, with potential talk of a joint venture with French giant Areva on the table.
This area has so far been untouched by any Islamist attacks.
Finally, outside of the extractive industry potential undoubtedly remains. The cotton industry represents nearly 15% of Mali’s GDP, but less than 1% is processed locally in spite of, for instance, duty-free access to the US market for textiles through the African Growth and Opportunity Act, reinstated in 2014.
And Bamako is more than open to large-scale investments in its aging electricity infrastructure, with its mining sector in particular partly dependent on a stable supply of energy. In fact, it is aiming to increase the share of renewables in its national energy mix to 25%.
Chinese investors have been among the first to accept the challenge, with the construction of hydroelectric and hybrid power plants in Dire, Timbuktu, and Kidal announced a year ago, notably all in the restive north of the country.
Yet it is unlikely that capital injections will begin in the region and potentially even in central Mali considering, for instance, that just days ago in Timbuktu and Kidal four were killed in brazen attacks on UN personnel.
Investors, beware? Systemic problems in Northern Mali
At this point, most companies with a large presence in Mali have refrained from publicly reassessing their investments.
“For Randgold Resources it is business as usual,” said Kathy du Plessis, head of investor and media relations at the profitable British miner which mainly operates in Mali.
It is true that before 2012, Mali was quickly becoming a darling of investors, thanks in no small part to reforms and privatizations which gradually took place since the early 1990s (although the pace of these changes were not commensurate with regulatory updates and capital injections into public-private enterprises).
Some examples include the establishment of special economic zones, extensive tax holidays, and guaranteed repatriation of profits. Nevertheless, the ongoing security threats suggest that foreign businesses are becoming wary of the country and that Mali may miss the investment scramble for sub-Saharan Africa.
The French and Malian counteroffensive of 2013 captured the main cities from the Tuareg and Islamist fighters, and the ongoing UN peacekeeping mission has largely brought back a measure of stability to most of the population centers of central and northern Mali.
Additionally, most Tuareg groups have joined forces and allied with Arab and Fulani factions under the Coalition of Movements for Azawad (CMA) and negotiated a peace treaty with Bamako. Yet the implementation of the peace treaty has been marred by deep mutual mistrust and intermittent fighting.
Until a lasting peace is achieved with moderate Tuareg rebels, one which grants them meaningful autonomy in their “Azawad” homeland and fosters a degree of reintegration of various Tuareg factions into the Malian security forces, it is difficult to envision any situation that is at all becoming to investors in northern, central, and even parts of southern Mali.
A key piece of the puzzle of how the myriad of Sahelian armed groups fund themselves is human trafficking, along with illicit cocaine, weapons, and cigarette smuggling (Belmokhtar even gained the nickname “Mr. Marlboro” because of this).
The Tuaregs benefit from this, but so do various non-Tuareg Islamist groups which are an even greater threat to Mali and neighboring states, and giving the former a stake in controlling the borders of their territory is essential to hampering the finances of the Islamists.
Without reconciliation with the secular Tuaregs, which Mali can ultimately live with, there is little chance that it can sustainably deal with the threats emerging from Islamist groups like al-Murabitoun and the Macina Liberation Front, which Mali cannot.
At the end of the day this will be key for ensuring stability and regaining investors’ confidence in Mali.
This article was co-written by GRI Analysts Jesper Bak-Christensen and Kevin Amirehsani.
