Mauritania Sustainable Growth

Mauritania Charting a Course to

Sustainable Growth

By Oxford Business Group

While Mauritania was hard hit by the Covid-19 pandemic, the country is now charting a course to economic recovery and resilience. Leveraging ample natural resources, Mauritania is working to add more value to traditional sectors such as mining, agriculture and fisheries, while also seeking new sources of revenue to achieve sustainable and inclusive growth and job creation, particularly for young people, reports Oxford Business Group.

“Mauritania is determined to contribute to the development and deepening of its economic and commercial partnerships with the countries of the continent by taking advantage of its geostrategic position and natural resources, as well as promoting the private sector, a favourable business climate and the numerous investment opportunities that our country offers,” says Mohamed Ould Ghazouani, President of the Islamic Republic of Mauritania.

MINING SECTOR

contributing 59% of exports by value and nearly 10% of GDP, as well as one-10th of government revenue. Iron ore and gold mining are predominantly centred in Fderik, in the Sahara Desert, while copper is primarily found around the western city of Akjoujt. Iron ore and gold are two of the country’s largest exports, with the former earning $1.7bn in 2019, though the processing of both largely takes place overseas.

The government of Mauritania is committed to diversifying the mining sector and is placing greater emphasis on non-metal commodities such as limestone, clay for construction, phosphate and industrial minerals.

Importantly, the National Industrial and Mining Company (Société Nationale Industrielle et Minière, SNIM), Africa’s second-largest iron ore producer, has attracted African Development Bank Group and European Investment Bank support to enlarge the berthing capacity at the Port of Nouadhibou, from which it ships export cargo abroad. The project plans to deepen and widen the SNIM’s berths to handle larger ships, maximising the efficiency of its transport chain while reducing costs.

OIL & GAS

The development of the country’s oil and gas sector has been less straightforward. After offshore reserves at the Chinguetti field were developed in 2006, the field quickly fell short of the expectations of the government and investors alike. However, Kosmos Energy’s 2014 discovery of 15trn cu feet of recoverable gas reserves in the waters between Mauritania and Senegal looks set to drive a new phase of investment and government revenue.

To be developed in phases, the Greater Tortue Ahmeyim liquefied natural gas (LNG) project will produce up to 10m tonnes of LNG per annum, with the potential for further expansion. The Greater Tortue Ahmeyim natural gas field has brought Mauritania’s economy to an important turning point. With first gas in the $4.8bn project backed by BP and Kosmos Energy expected in 2023, the government is set to receive a vital new injection of tax revenue that could help make the long-held goal of economic diversification a reality.

GREEN ENERGY AMBITIONS

Mauritania is seeking to capitalise on its geographical position and renewable energy resources to launch large-scale green hydrogen projects. In May 2021 the government and US renewables company CWP Global agreed to build a 30-GW wind and solar power facility in the northern part of Mauritania, where the power is intended to create green hydrogen for worldwide export.

In September of the same year Chariot, an Africa-based energy company, signed a memorandum of understanding with the government to explore a $3.5bn green hydrogen project that includes two onshore solar licences and an offshore wind element.

Under a plan to achieve universal access to electricity by 2030, the government also aimed to increase the share of renewable energy in the power generation mix to 60% by the end of 2021, leveraging Mauritania’s substantial renewable energy resources, such as solar, wind and hydropower, as well as its conventional natural gas reserves.

The African Development Bank Group’s Board of Directors recently approved a $6m grant to kick off the first phase of the Desert to Power West Africa Regional Energy Programme. The initiative seeks to reshape the Sahel by harnessing the region’s vast solar potential to connect 250m people using 10,000 MW of solar generation capacity.

DEVELOPMENT PLAN

New revenue from the natural gas field should also support sustainable and inclusive growth via the government’s current national development plan, the Strategy for Accelerated Growth and Shared Prosperity 2016-30. A key component of the plan is to drive productivity in agriculture by developing competitive livestock subsector and boosting value-added industries such as leather production. Developing the fisheries segment while preserving marine and coastal diversity is another goal. The aim is to further integrate fisheries into the national economy and lift its contribution to GDP above the current level of 6%. Mauritania’s fishing waters are attractive, with an annual total catch potential of about $1.4bn.

PRODUCTS OF INTEREST

The World Bank identifies frozen mackerel and sardines, as well as chilled and fresh fish, as some of the products in which Mauritania holds a comparative advantage in global markets and can therefore derive the greatest benefit. Other products of interest under the development plan are fish oil, sheep skin and leather, malt, Arabic gum, gypsum and quartz.

FARMING & FISHING

Much of Mauritania’s population derives its livelihood from fishing and raising crops and livestock, indicating the potential impact of the expansion of agri-business value chains on the economy. The agriculture sector accounted for 20% of GDP in 2020, but there is scope for this to increase if partners such as the International Fund for Agricultural Development (IFAD), the African Development Bank (AfDB), the World Bank, the Islamic Development Bank and the EU can galvanise improvements in agricultural practices.

In the few locations where precipitation exceeds 43 cm per year, farmers grow millet and dates, along with sorghum, beans, yams, maize and cotton. Along the riverbanks of the Sahelian zone, flooding allows rice to be cultivated, along with other grains and watermelon. The government is working to expand irrigation projects in oasis zones, primarily through the drip technique, a form of micro-irrigation that saves water by slowly feeding moisture directly into the roots of plants, thereby avoiding evaporation. Successive governments have endeavoured to increase the amount of irrigated land next to the Senegal River in the south, as well as improve well water access and palm tree coverage to allow vegetables and grains to be grown in oases. Mauritania currently relies on imports to meet the bulk of its food security requirements.

Three-quarters of the population is engaged in raising livestock; goats and sheep are the most prevalent, followed by cattle and camels, and the sale of animals is an important source of income and food for those in the industry.

Lévrier Bay opens onto some of the world’s richest fishing grounds, and fishing contributes about 5% to GDP. Since 1980 the government has required that foreign fleets form a joint venture and establish a processing terminal in Nouadhibou.

In 2015 the country adopted a new national fisheries strategy to ensure transparency and sustainable practices in the sector. In 2021 the EU sealed a new five-year agreement granting its vessels access to Mauritanian waters. They are allowed to catch some 290,000 tonnes per year, in return for €16.5m in sector support and an annual contribution of €57.5m.

TOP EXPORTS

Frozen fish is another of the country’s top exports, along with gold, molluscs and processed crustaceans. Its top imports, meanwhile, include specialpurpose ships, planes and helicopters, as well as wheat, raw sugar and refined petroleum. China is its largest overall trading partner, while Switzerland is the second-largest export market and France is its top import partner.

INVESTMENT

From 2009 to 2015 foreign investment helped drive growth in the construction, utilities, transport and communications sectors. In 2013 the government sought to capitalise on the influx and launched a free zone in Nouadhibou to improve the port’s competitiveness and attract fish-processing industries such as tuna canning. However, despite investment from mainly Spanish and Moroccan companies, the free zone failed to take off.

The government continues to court interest, with plans for a new airport, a tourist area and the continued expansion of the deepwater fishing port. President Ghazouani chairs a strategic council devoted to enhancing

Photos: OBG

its attractiveness to investors. Incentives include a cap on salary tax for expats, reductions in administration fees, and exemptions on customs duties and fees for imported goods.

NOUADHIBOU FREE ZONE

With the backing of multilateral institutions, in 2019 the country was nearing completion of a project to establish a seafood cluster in the Nouadhibou Free Zone, the port area that accounts for approximately 80% of the value of fish caught in Mauritania. The project helped lift fresh fish exports to more than 7000 tonnes per year prior to the Covid-19 pandemic, from a baseline of less than 1000 tonnes in 2015. Further gains are expected following the construction of a refrigerated warehouse for fresh fish exports at Nouadhibou International Airport. Efforts continue to attract private investment in the free zone 6 for fish processing and other industrial activities, which should yield knock-on benefits for job creation, public revenue, foreign exchange, the trade balance and food security. Other strategic objectives of the national development plan include attracting more private sector participation in the economy, including through public-private partnerships; creating a more inclusive financial sector; and facilitating the establishment of small businesses. Building more resilient infrastructure to support growth – particularly renewable energy facilities and transport networks – is also vital to improving Mauritania’s export competitiveness. Nouakchott-Oumtounsy International Airport, which opened in 2016 and lies 25 km out of town, operates routes to several major African cities, as well as to major destinations like Istanbul and Paris.

OUTLOOK

Mauritania’s public finances are relatively strong following a series of reforms in the wake of the 2015 collapse in global commodity prices, which revealed the country’s vulnerability to Mauritania

MAURITANIA OVERVIEW Mauritania sits at a historic trading crossroads between North and sub-Saharan Africa, and has a rich history The country is the world’s seventh-largest exporter of iron ore, and is also a leading producer of copper and crude oil, as well as more niche minerals such as gypsum, uranium and rare earth elements. terms of trade shocks. These reforms helped turn a fiscal deficit of 2.7% of GDP in 2014-15 to a surplus of 1% in 2016-19 – one of the most robust fiscal positions in sub-Saharan Africa at the time. Despite some continuing financial pressures in 2021, the authorities are in a good position to ramp up social and investment spending to support a resilient recovery, and the fiscal balance is expected to remain strong over the medium term.

While the economy was negatively impacted by While Mauritania’s economy was the pandemic, contracting by 1.5% in 2020, growth is negatively impacted by the pandemic, projected to recover to an contracting by 1.5% in 2020, growth is average of 4.1% in 2021-23. projected to recover to an average of 4.1% in 2021-23. An edited extract from a new report, Mauritania 2022 Economic Briefing, produced by Oxford Business Group, published with their kind permission. The full report includes interviews with key ministers including the President of Mauritania, Mohamed Ould Ghazouani, and can be obtained from OBG. ARAB-BRITISH CHAMBER OF COMMERCE | 27

being jointly developed by BP, Kosmos Energy, the Société des Pétroles du Sénégal and the Société Mauritanienne des Hydrocarbures. BP is the operator, with commercial production of gas for export and domestic consumption in Mauritania and Senegal slated for 2023 (see Energy analysis). The government is keen to nurture the domestic petrochemicals industry, and to further develop hydrocarbons resources both onshore and offshore. GREEN ENERGY AMBITIONS: Under a plan to achieve universal access to electricity by 2030, the government also aimed to increase the share of renewable energy in the power generation mix to 60% by the end of 2021, leveraging Mauritania’s substantial renewable energy resources, such as solar, wind and hydropower, as well as its conventional natural gas reserves. The African Development Bank Group’s Board of Directors recently approved a $6m grant to kick off the first phase of the Desert to Power West Africa Regional Energy Programme. The initiative seeks to reshape the Sahel by harnessing the region’s vast to discredit terrorism in the eyes of the public, as solar potential to connect 250m people using 10,000 well as encourage prominent Islamic scholars and MW of solar generation capacity. imams to assist with deradicalisation efforts. The ECONOMIC FORECAST: Prime Minister Mohamed long-term effectiveness of this multidimensional Ould Bilal Messoud, who took office in August 2020, counter-terrorism strategy remains to be seen, but is leading the implementation of the Expanded Prifor the time being Mauritania’s successes may offer ority Programme of the President of the Republic of lessons for the wider Sahel region. Mauritania, which integrates the country’s Covid-19 AGRICULTURE: Economic development is another response plan and focuses on resilience and recovimportant plank in the country’s counter-terrorism ery (see Economy overview). strategy. The government has identified agricultural While the economy was negatively impacted by reform as key to strengthening the economy and the pandemic, contracting by 1.5% in 2020, growth promoting inclusive growth. is projected to recover to an average of 4.1% in

About 75% of the poor live in rural areas, where 2021-23. However, that outlook remains subject to the prevalence of poverty is intertwined with downside risks, including the potential for the Omiweak performance in the agriculture sector, which cron variant to prolong the pandemic and delay the accounts for 20% of GDP. Shepherds raise livestock, government’s reform programme, as well as weaker primarily goats and sheep, while farmers work to commodity prices and climate change hazards. derive as much value as possible from the small proportion of land that is arable. According to the World Bank, this figure is around 0.4%.

The government is laying the foundations for more agricultural productivity, especially among family farms, women and smallholders, while also working to minimise the impact of climate change. It is partnering with the International Fund for Agricultural Development to implement climate-adaptation policies that aim to build capacity and knowledge, improve land management and promote water-saving irrigation techniques (see Agri-business analysis). EXTRACTIVE ECONOMY: The country’s mineral deposits are replete with iron ore and gold – two of Mauritania’s largest exports. The country also contains deposits of copper, gypsum, uranium and rare earth elements. Phosphate is concentrated in the Kaédi region and petroleum along the coast.

The latter includes the Greater Tortue Ahmeyim natural gas field: one of West Africa’s largest offshore discoveries, in the waters between Mauritania and Senegal. The liquefied natural gas project is www.oxfordbusinessgroup.com/country/mauritania

While the economy was negatively impacted by the pandemic, contracting by 1.5% in 2020, growth is projected to recover to an average of 4.1% in 2021-23. The government is pursuing agricultural reform to fuel inclusive growth

reform as key to strengthening the economy and the pandemic, contracting by 1.5% in 2020, growth promoting inclusive growth. is projected to recover to an average of 4.1% in

About 75% of the poor live in rural areas, where 2021-23. However, that outlook remains subject to the prevalence of poverty is intertwined with downside risks, including the potential for the Omiweak performance in the agriculture sector, which cron variant to prolong the pandemic and delay the accounts for 20% of GDP. Shepherds raise livestock, government’s reform programme, as well as weaker primarily goats and sheep, while farmers work to commodity prices and climate change hazards. derive as much value as possible from the small proportion of land that is arable. According to the World Bank, this figure is around 0.4%.

The government is laying the foundations for more agricultural productivity, especially among family farms, women and smallholders, while also working to minimise the impact of climate change. It is partnering with the International Fund for Agricultural Development to implement climate-adaptation policies that aim to build capacity and knowledge, improve land management and promote water-saving irrigation techniques (see Agri-business analysis). EXTRACTIVE ECONOMY: The country’s mineral deposits are replete with iron ore and gold – two of Mauritania’s largest exports. The country also contains deposits of copper, gypsum, uranium and rare earth elements. Phosphate is concentrated in the Kaédi region and petroleum along the coast.

The latter includes the Greater Tortue Ahmeyim natural gas field: one of West Africa’s largest offshore discoveries, in the waters between Mauritania and Senegal. The liquefied natural gas project is www.oxfordbusinessgroup.com/country/mauritania

MAURITANIA ECONOMY The government is pursuing agricultural reform to fuel inclusive growth The government is committed to diversifying the mining sector and is placing greater emphasis on non-metal commodities such as limestone, clay for construction, phosphate and industrial minerals.

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International Fund for Agricultural Development and the EU itself. For its part, the World Bank’s portfolio comprises an overall commitment of $825.75m. A newly approved Youth Employability Project complements the bank’s supporting operations in water, agriculture, urbanisation and energy. POVERTY REDUCTION: Mauritania ranks 150th out of 157 countries surveyed on the World Bank’s Human Capital Index, underscoring wide disparities in access to services and therefore economic opportunity. Recurrent droughts have undermined the country’s food production capacity and fuelled the incidence of poverty. However, the government launched a poverty reduction law and strategy in 2001 that has had a positive impact to date, and helped reduce the share of people living in monetary poverty from 10.9% in 2008 to 6% in 2014, though some other measurements put the proportion of people living in poverty at a higher level. Nonetheless, a wide disparity in living standards, food insecurity, malnutrition, gender inequality and land degradation pose considerable hurdles to inclu2021 World Economic Outlook database, inflation sive growth. In March 2021 close to 500,000 people is forecast to reach 3.8% in 2022. in the country were projected to be food insecure, The banking sector is centred in Nouakchott and encompassing both Mauritanians and refugees from includes several commercial banks of varying sizes. the volatile security situation in Mali. Insurance companies in Mauritania were state- As has been the case in many countries around owned prior to the liberalisation of the sector by the world, some measurements suggest that the the government in the 1990s; by the early 2000s the Covid-19 pandemic is fuelling an increase in poverty state-owned insurance provider was in competition levels in Mauritania, which rose from 5.4% in 2019 with a number of privately owned firms. to 6.3% in 2020 and 6.4% in 2021. EXTERNAL SUPPORT: Mauritania has long relied on EXTRACTIVE INDUSTRIES: Mining remains an foreign aid from bilateral partners and multilateral important engine of economic growth, contributagencies to help balance the national budget and ing 59% of exports by value and nearly 10% of GDP, assist in project development, as well as support as well as one-10th of government revenue. Iron food security. This vital financial lifeline has grown ore and gold mining are predominantly centred in increasingly important over time, with net official Fderik, in the Sahara Desert, while copper is primarily development assistance expanding from $236.2m found around the western city of Akjoujt. Iron ore in 1990 to $412.2m as of 2020. and gold are two of the country’s largest exports, Key development partners include France, other with the former earning $1.7bn in 2019, though the members of the EU, the African Development processing of both largely takes place overseas. Bank, the Islamic Development Bank, the IMF, the The government is committed to diversifying the mining sector and is placing greater emphasis on GDP growth, 2010-22F (%) non-metal commodities such as limestone, clay for construction, phosphate and industrial minerals. Importantly, the National Industrial and Mining 8 Company (Société Nationale Industrielle et Minière, 7 SNIM), Africa’s second-largest iron ore producer, has attracted African Development Bank Group 5 and European Investment Bank support to enlarge 4 the berthing capacity at the Port of Nouadhibou, from which it ships export cargo abroad. The project plans to deepen and widen the SNIM’s berths to 2 handle larger ships, maximising the efficiency of 1 its transport chain while reducing costs. 0 The development of the oil and gas sector, for its -1 part, has been less straightforward. After offshore Source: IMF October World Economic Outlook -2 20172016201520142013201220112010 2018 2019E 2020E 2021F 2022F reserves at the Chinguetti field were developed in 2006, the field quickly fell short of the expectations of the government and investors alike. However, Kosmos Energy’s 2014 discovery of 15trn cu feet

Foreign investment drove growth in construction and utilities in 2009-15 13

of recoverable gas reserves in the waters between Mauritania and Senegal looks set to drive a new phase of investment and government revenue. To be developed in phases, the Greater Tortue Ahmeyim liquefied natural gas (LNG) project will produce up to 10m tonnes of LNG per annum, with the potential for further expansion after commercial production is slated to begin in 2023 (see Energy analysis). AGRICULTURE & FISHING: In the few locations where precipitation exceeds 43 cm per year, farmers grow millet and dates, along with sorghum, beans, yams, maize and cotton. Along the riverbanks of the Sahelian zone, flooding allows rice to be cultivated, along with other grains and watermelon.

The government is working to expand irrigation projects in oasis zones, primarily through the drip technique, a form of micro-irrigation that saves water by slowly feeding moisture directly into the roots of plants, thereby avoiding evaporation. Successive governments have endeavoured to increase the amount of irrigated land next to the Senegal River in the south, as well as improve well water Mining is an important engine for growth, contributing 59% of exports and roughly 10% of national GDP access and palm tree coverage to allow vegetables and grains to be grown in oases.

Mauritania currently relies on imports to meet the bulk of its food security requirements. Three-quarters of the population is engaged in raising livestock; goats and sheep are the most prevalent, followed by cattle and camels, and the sale of animals is an important source of income and food for those in the industry (see Agri-business analysis).

Lévrier Bay opens onto some of the world’s richest fishing grounds, and fishing contributes about 5% to GDP. Since 1980 the government has required that foreign fleets form a joint venture and establish a processing terminal in Nouadhibou. In 2015 the country adopted a new national fisheries strategy to ensure transparency and sustainable practices in the sector. In 2021 the EU sealed a new five-year

GDP. Since 1980 the government has required that foreign fleets form a joint venture and establish a processing terminal in Nouadhibou. In 2015 the country adopted a new national fisheries strategy to ensure transparency and sustainable practices in the sector. In 2021 the EU sealed a new five-year MAURITANIA ECONOMY MAURITANIA ECONOMY

Farmers grow millet, dates, sorghum and beans, among other crops Bloomberg Terminal Research Homepage: OBGR‹GO› The current national development plan runs from 2016 to 2030

agreement granting its vessels access to Mauritanian waters. They are allowed to catch some 290,000 tonnes per year, in return for €16.5m in sector support and an annual contribution of €57.5m. TRADE & INVESTMENT: Frozen fish is another of the country’s top exports, along with gold, molluscs and processed crustaceans. Its top imports, Blueprint for growthmeanwhile, include special-purpose ships, planes and helicopters, as well as wheat, raw sugar and refined petroleum. China is its largest overall trading Changes to fiscal management and an ongoing diversification partner, while Switzerland is the second-largest export market and France is its top import partner. drive look to promote economic stabilityIn 2020 the current account deficit widened to a record 17.6% of GDP, driven by a one-third decline in The discovery and subsequent development of the iron ore exports and a pause in exports of fish prodGreater Tortue Ahmeyim natural gas field on the maructs. This saw the economy contract and pushed an estimated 48,000 people into extreme poverty. itime border with Senegal has brought Mauritania’s From 2009 to 2015 foreign investment helped economy to an important turning point. With first gas drive growth in the construction, utilities, transport and communications sectors. In 2013 the in the $4.8bn project backed by BP and Kosmos Energy government sought to capitalise on the influx and expected in 2023, the government is set to receive a launched a free zone in Nouadhibou to improve the vital new injection of tax revenue that could help make port’s competitiveness and attract fish-processing industries such as tuna canning. the long-held goal of economic diversification a reality. However, despite investment from mainly Spanish FISCAL RESPONSIBILITY: Mauritania’s economy has and Moroccan companies, the free zone failed to take off. The government continues to court interhistorically been reliant on minerals and mining, as well est, with plans for a new airport, a tourist area and 3 as petroleum to a lesser extent, reflected by the fact the continued expansion of the deepwater fishing port. President Ghazouani chairs a strategic council that GDP growth dropped from an average of 5.5% devoted to enhancing its attractiveness to investors. in 2011-14 to 2.5% in 2015-18 upon the end of the global commodities supercycle. Indeed, Mauritania became particularly vulnerable to commodity price volatility after 2014. Improving financial management Incentives include a cap on salary tax for expats, reductions in administration fees, and exemptions on Customs duties and fees for imported goods. OUTLOOK: While the pandemic saw a significant drop in foreign direct investment, from an originally forecast $937m to $594m in 2020, and put presThe Greater Tortue Ahmeyim liquefied natural gas project will produce up to 10m and formalising the economy will therefore be key to sure on socio-economic indicators, there are pros- tonnes per annum

a competitive livestock subsector and boosting value-added industries such as leather production. Developing the fisheries segment while preserving marine and coastal diversity is another goal. The aim is to further integrate fisheries into the national economy and lift its contribution to GDP above the current level of 6%. Mauritania’s fishing waters are attractive, with an annual total catch potential of about $1.4bn. The World Bank identifies frozen mackerel and sardines, as well as chilled and fresh fish, as some of the products in which Mauritania holds a comparative advantage in global markets and can therefore derive the greatest benefit. Other products of interest under the development https://oxfordbusinessgroup.com/news/report-mauritania-s-strategies-attract-foreign-investment plan are fish oil, sheep skin and leather, malt, Arabic gum, gypsum and quartz (see Agri-business analysis). NOUADHIBOU FREE ZONE: With the backing of multilateral institutions, in 2019 the country was nearing