Challenging times for Mauritania as it reinvents itself

Such is the Mauritanian government’s zeal for better economic and fiscal indicators that it sometimes loses sight of the desert for all the sand.

In an attempt to incentivise tax collection – which today runs at an impressive 19 per cent of GDP, up from 12 per cent four years ago – state tax collectors personally pocket 100 per cent of the payment every time a company incurs a tax penalty.

The overall effort may be working – authorities predict tax collection will this year reach 23 per cent of GDP – but this part of the incentive scheme also results in no extra income for the state and unhappy international policy wonks.

“It sends a negative signal to foreign investors,” says one, who is fed up with the rule. “You’re going to have a problem if the tax system is compensating its people for enforcing public policy.”

Some close to the government worry this is part of a broader challenge: it is so focused on its commitment to reform, it has forgotten what those reforms were meant to achieve: poverty reduction.

The reforms – close to 30 under a three-year $118m IMF programme that ended last year – may help macroeconomic stability indicators, but the country is falling in the World Bank’s Doing Business rankings. It is down two places to 173 (of 189) this year.

“The business environment is weak. Unfortunately, that’s one of the big challenges and bottlenecks that are impeding the private sector in Mauritania,” says the IMF’s resident representative Tijani Najeh, who says a forthcoming one-stop shop may help.

Others think the country’s ambitions have impressive reach but are, so far, too grand and incoherent to be achieved. The enthusiastic launch of a new free zone in Nouadhibou is a case in point. It widened its initial narrow scope from the fisheries sector alone to cover almost the entire peninsula and also includes plans to expand and relocate the small airport to accommodate 1m arrivals a year and develop mass tourism infrastructure in a country subject to travel advisories over terrorist concerns.

The project – first considered 20 years earlier but taken up in earnest by President Mohamed Ould Abdel Aziz – has several more immediately achievable aims: to attract fisheries and logistics companies and develop a deep-water port.

An $18m extension to the fishing port completed this month, more than three years late, will let heavier ships dock, allowing foreign fishing vessels more usually bound for Spain’s Las Palmas to disembark in Mauritania instead. Mohamed Daf, the president of the Free Zone Authority, says: “Half the economy comes through Nouadhibou – it is well situated with many natural advantages, including the most fish in the world and the export port for minerals. It’s in the midst of emerging; more and more flights are starting up.”

Plans for Nouadhibou are only one part of Mauritania’s effort for economic and administrative reform.

Sidi Ould Tah, minister of economics and planning, says: “We have improved the credibility of our financial system and public finances. We have increased our investment budget and improved procurement practices, and reduced tax evasion and corruption. Before, ministries didn’t used to pay their electricity, water, telephone bills; today, we pay our bills.”

But Mauritania’s good economic performance rides almost exclusively on the surge in the iron ore price, up 85 per cent in the past four years. The state mining company Snim contributes 25 per cent to GDP, half of exports and, with 10,500 workers, is the country’s biggest employer after the government. The risk of shocks, whether a fall in iron ore and gold prices or a drought or swarm of locusts (which destroyed agricultural output in 2004), remains substantial.

“Despite Mauritania’s good performance in terms of [the] macroeconomy it remains vulnerable to economic shocks because the economic base is still narrow,” says Mr Najeh at the IMF. “We think the Mauritanian economy is not diversified enough. There is the fisheries sector, but it has not contributed that much to growth. And livestock has an important potential that has not been used as it’s supposed to be.”

Extending the country’s economic base might also help address poverty which, Mr Najeh says, could otherwise become a source of political instability. Government officials readily acknowledge that the education and health sectors are failing the country.

“We need to train a new generation capable to run an administration effectively and with integrity,” says Sid’Ahmed Raïss, the central bank governor. “We’re putting a great deal of attention on this, but we have many things to do.”