Mali - Economy

In economic terms, Mali is one of the contemporary world's poorest countries. Mali ranks 175th out of 187 in the United Nations Human Development Index, lower than Afghanistan or Ethiopia, and 80% of the population relies on traditional agriculture or fisheries, both highly vulnerable to climate change. With almost half of the population under 15, it is expected that the population will double within 20 years, a major challenge in terms of food security, as agricultural productivity is not following demographic trends.

Despite some political progress and promising economic opportunities for U.S. firms, Mali faces significant obstacles including electricity access, infrastructure, and corruption, as well as drug trafficking and smuggling challenges, primarily in the northern conflict-affected portion of the country. Instability in the northern regions has permitted terrorist groups to conduct attacks against Westerners and Malian government forces. This instability is progressively extending to Mali’s center where terrorist groups are taking advantage of the minimal presence of Malian authorities and security forces. Frequent deadly clashes between livestock farmers and crop farmers are exacerbating the situation. Both Malian and foreign businesses face corruption in procurement, importation and export of products, tax payment, administrative processing, and land management.

With the coming of the Europeans, trade was re-oriented away from the trans-Saharan trade routes to the coast. Commodities produced in Mali today fetch only low prices, and the land has probably become somewhat drier and less productive. Two-thirds of the present country is desert or semi-desert. The vast majority of the population (80 percent) are mostly subsistence farmers, growing just enough for their own needs, with small surpluses sold in the local markets. Fishing is also important. To this day, most of the labor is done by animal or human power. A few larger farms produce crops for sale (cash crops), mainly cotton and peanuts. About five percent of the population is nomadic. Industrial activity is concentrated on processing farm commodities grown for export, especially cotton, the main export. New gold mining operations give hope for future economic development, but at present Mali remains deeply dependent on foreign aid and vulnerable to fluctuations in the world price of cotton.

However, other countries with difficult climates and few resources have prospered. A good part of Mali's problems come from the lack of investment in the country during French colonial times and corrupt governments after independence. In an era of increasing globalization, Mali, along with most African countries, has clearly been left behind.

Mali's estimated 2010 per capita gross domestic product (GDP) of $691 placed it among the world's 10 poorest nations. Its potential wealth lies in mining and the production of agricultural commodities, livestock, and fish. Agricultural activities occupy 70% of Mali's labor force and provide about 33% of the GDP. Cotton, gold, and livestock made up 80%-90% of total export earnings in Mali in 2006. Small-scale traditional farming dominates the agricultural sector, with subsistence farming--of cereals, primarily sorghum, millet, and maize--on about 90% of the 1.4 million hectares (3.4 million acres) under cultivation.

The high cost of petroleum products, the fall in the world market price for cotton and gold, and corresponding loss of customs revenues put pressure on the economy and led the government to be very tight on cash disbursements in recent years. A landlocked country, Mali’s economy remains vulnerable to external shocks, including political crisis in neighboring countries. The recent political crisis in Cote d'Ivoire increased transportation costs and put pressure on the fragile Malian economy. Nonetheless, a focus on quality cotton production and double-digit increases in cereal and gold production boosted real GDP growth from 3.2% in 2000 to an estimated 4.5% in 2010.

The most productive agricultural area lies along the banks of the Niger River between Bamako and Mopti and extends south to the borders of Guinea, Cote d'Ivoire, and Burkina Faso. Average rainfall varies in this region from 50 centimeters per year (20 in.) around Mopti to 140 centimeters (55 in.) in the south near Sikasso. This area is most important for the production of cotton, rice, millet, corn, vegetables, tobacco, and tree crops.

Rice is grown extensively along the banks of the Niger between Segou and Mopti, with the most important rice-producing area at the Office du Niger, located north of Segou toward the Mauritanian border. Using water diverted from the Niger, the Office du Niger irrigates about 80,000 hectares of land for rice and sugarcane production. About one-third of Mali's paddy rice is produced at the Office du Niger.

The Niger River also is an important source of fish, providing food for riverside communities; the surplus--smoked, salted, and dried--is exported. Due to drought and diversion of river water for agriculture, fish production has steadily declined since the early 1980s. The government has started plans to develop fish breeding, mainly in the Niger delta, in order to boost fish production.

Sorghum is planted extensively in the drier parts of the country and along the banks of the Niger in eastern Mali, as well as in the lakebeds in the Niger delta region. Farmers near the town of Dire have cultivated wheat on irrigated fields for hundreds of years during the dry season. Peanuts are grown throughout the country but are concentrated in the area around Kita, west of Bamako.

Mali's resource in livestock consists of millions of cattle, sheep, and goats. Approximately 40% of Mali's herds were lost during the great drought in 1972-74. The level was gradually restored, but the herds were again decimated in the 1983-85 drought. The overall size of Mali's herds is not expected to reach pre-drought levels in the north of the country, where encroachment of the desert has forced many nomadic herders to abandon pastoral activities and turn instead to farming. The largest concentrations of cattle are in the areas north of Bamako and Segou extending into the Niger delta, but herding activity is gradually shifting southward, due to the effects of previous droughts.

With the technical support of U.S. Agency for International Development (USAID)-funded projects, private cooperatives developed a regional border market in the southern city of Sikasso. Livestock professionals contributed to a steady increase in cattle exports. Sheep, goats, and camels are raised to the exclusion of cattle in the dry areas north and east of Timbuktu.

Until the mid-1960s, Mali was self-sufficient in grains--millet, sorghum, rice, and corn. Diminished harvests during bad years, a growing population, changing dietary habits, and, most importantly, policy constraints on agricultural production resulted in grain deficits almost every year from 1965 to 1986. Production has rebounded since 1987, however, thanks to agricultural policy reforms undertaken by the government and supported by the Western donor nations. Liberalization of producer prices and an open cereals market have created incentives to production. These reforms, combined with adequate rainfall, successful integrated rural agriculture programs in the south, and improved management of the Office du Niger, have led to surplus cereal production over the past 5 years. In recent years, Mali has invested in its cotton industry, which employs an estimated three million Malians directly and indirectly, in an attempt to boost production.

Mining is still a growing industry in Mali, with gold accounting for some 80% of mining activity. There are considerable proven reserves of other minerals not currently exploited. In 2002, gold briefly became Mali's number one export, before cotton and livestock. There are two large private investments in gold mining: Anglo-American ($250 million) and Randgold ($140 million), both multinational South African companies located respectively in the western and southern part of the country.

During the colonial period, private capital investment was virtually nonexistent, and public investment was devoted largely to the Office du Niger irrigation scheme and to administrative expenses. Following independence, Mali built some light industries with the help of various donors. Manufacturing, consisting principally of processed agricultural products, accounted for about 24% of GDP in 2005.

Tourism is Mali’s third-largest export, comprising 2.4% of GDP. The sector, which is vulnerable to external shocks, has suffered from the security situation in northern Mali. Mali's national parks, its ancient cities and archeological sites, Niger River cruises, cultural festivals, and magnificent desert landscapes are major attractions. Mali also is home to a rare herd of elephants that continues its unique annual migration to the edges of the Sahara Desert in the northern part of the country.

Economic Reforms

With the encouragement of the major donors and international financial institutions, the Government of Mali initiated a series of adjustment and stabilization programs beginning in 1982. Measures were introduced to reduce budgetary deficits, public enterprise operating losses, and public sector arrears.

Under the economic reform program implemented in collaboration with the World Bank and the IMF in 1988, the government has taken a number of steps to liberalize the regulatory environment and attract private investment. For example, investors can now consult a one-stop shop, or guichet unique, which streamlines the process for opening a business. Price controls, import quotas, and export taxes on consumer goods have been eliminated. The Commerce Code was revised in 1991 to remove impediments to commercial activity. The investment and the mining codes also were revised in the early 1990s in order to present a good investment climate. Also in 1991, a system of commercial and administrative courts was established to handle private trade complaints and claims against the government. Together, these reforms have improved the business environment. In the 2010 Doing Business Report, Mali ranked 156 of 183 countries, an improvement of six points from the previous year.

Furthering structural reform, the government has sought to privatize a number of parastatal companies. The cotton seed oil factory (Huilerie Cotonniere du Mali, or Huicoma), was privatized 2005; the telecommunications company, Societe de Telecommunications du Mali (SOTELMA) was privatized in 2009; and the Cotton Ginning Company (CMDT) is in the process of being privatized.

Foreign Aid

Mali is a major recipient of foreign aid from many sources, including multilateral organizations (most significantly the World Bank, the African Development Bank, and Arab Funds), and bilateral programs funded by the European Union, France, United States, Canada, Netherlands, Denmark, and Germany, among others. Before 1991, the former Soviet Union had been a major source of economic and military aid, including construction of a cement plant and the Kalana gold mine. Currently, aid from Russia is restricted mainly to training and provision of spare parts.

Chinese aid remains high, and Chinese-Malian joint venture companies became more numerous during the period 1999-2002, leading to the opening of a Chinese investment center. China is a major participant in the textile and the sugar refinery industries and in large-scale construction projects, including irrigation infrastructures in the Niger Valley Authority (Office du Niger), a bridge across the Niger, a conference center, an expressway in Bamako, a new national stadium in Bamako, four regional stadiums completed for the Africa Cup competition in 2002, a hospital in Mopti, and a highway interchange and third bridge in Bamako.

In 2010, the Department of State and USAID gave $117.87 million in bilateral foreign assistance to Mali. Mali is a focus country for a number of presidential initiatives, including Feed the Future, Global Health Initiative, President’s Malaria Initiative, and Global Climate Change. Mali benefits from a $461 million Millennium Challenge Corporation compact, implemented in 2007, to develop 5,200 hectares of irrigable agricultural land and improve the international airport. Mali participates in the Trans-Sahara Counter Terrorism Partnership (TSCTP), which brings together U.S. Government resources and expertise for collaborative security initiatives. Since 1971, Peace Corps volunteers have contributed to projects in the areas of education, clean water, food security, environmental conservation, microenterprise, and preventive health care. Mali is currently host to approximately 150 volunteers, making this one of the largest programs in sub-Saharan Africa.