DPMF Publications:
DPMN Bulletin

The Mauritanian Private Sector: A Pillar in Economic Recovery and Growth

(Alioune Diallo)

THE MACRO-ECONOMIC CONTEXT

Since 1985, Mauritania has been implementing, in agreement with the Bretton Woods institutions, a vast structural adjustment programme which has had beneficial effects on the macro-economic environment. F or example, the privatisation of some public enterprises has enabled the government to concentrate on its traditional role of providing an enabling environment.

Right from the beginning, a large number of enterprises were privatized in agriculture, transport, banking and insurance, in addition to the commercialization of fishery, the demonopolization of some imported essential commodities and price liberalization. Special emphasis has been placed on enhanced autonomy and efficiency for the remaining public companies while the private sector was considered as the most promising engine for growth and the creation of employment.

The structural adjustment programme also provided for support measures to cushion the adverse effects of privatization by setting up a compensatory fund for those affected by the restructuring exercise.

This shows that Mauritania has made good progress in its policy to restructure its economy which today is enjoying a steady growth. All these encouraging achievements have been possible only through the active involvement of all the national economic operators, and a meaningful cooperation between the government, the employers and the trade unions.

ROLE AND CONTRIBUTION OF THE PRIVATE SECTOR

The General Confederation of Mauritanian Employers (C.G.E.M.) which comprises 8 professional federations is the only employers' organization in the country and is an active and privileged partner in the nation's economic activities. It brings together a new breed of economic operators, of commercial origin, who invest in irrigated farming, livestock and industry and the Confederation is taking the lead in economic activities. This shows a new mentality and an entrepreneurship geared towards medium and long-term investment.

In addition to its traditional role of defending the material and moral interests of its members, the Confederation has a technical unit which manages general, institutional and regulatory information and actively promotes private investments by bringing national and foreign economic operators together.

However, the Mauritanian private sector is dominated by trading and the informal sector still plays a key role in the economy. Furthermore, much of the population still lacks the drive and especially the culture to master the rules of modern business management. To this end, steps will be taken by the government to set up technical and vocational training institutions. With the establishment of the Association for the Promotion of Private Initiatives (APIP), the private sector is trying as much as possible to popularize modern management tools by organizing regular for a and promoting contacts between economic operators.

Moreover, the joint cooperation committees which regularly invite the private sector through the CGEM is a beneficial avenue for cooperation between the national economic operators and their foreign counterparts.

THE GOVERNMENT'S ECONOMIC DEVELOPMENT PROGRAMME

Reforms undertaken by the Government are at various levels: improving the legal, judicial and institutional framework, consolidating the financial sector reform so as to improve services and companies' access to credit, and setting up a cooperation machinery with the private sector. The reforms also include reviewing the incentive packages under the two key sectors of fishery and mining which offer great opportunities to the private sector in terms of investments.

1. The liberalization process

The first series of liberalization measures were undertaken under previous adjustment programmes. Today, the economy is less regulated and more market-oriented. However, further reforms are still required in the financial sector, in the regulatory, judicial and legal aspects of the private sector, as well as the support and advisory machineries for the enterprises. Thus, a second phase of a more attractive investment policy for the domestic and foreign private sector is under way. Promoting the private sector has been the focus of a special programme called "Project for the enhanced development of the private and financial sectors," supported and funded by the World Bank (to the tune of 30 million dollars) and other Mauritania's development partners.

2. Capacity building for the private and financial sectors

Although the banking sector is currently being overhauled, it still is grappling with a relatively high volume of bad debts.

New lines of credit negotiated by the Government with donor agencies, the liberalization of exchange rates and the raised credit ceilings will hopefully improve the liquidity of local banks and enable them to provide further funding for private enterprises.

In order to successfully play its supportive role in the economy, banks require from the Government, under its overall macro-economic policy, measures specifically designed to:

encourage deposits by promoting a savings culture. By mobilizing savings, the banks will be in a position to extend long and medium-term credit to the enterprises. Such savings scheme exists in Mauritania but it is practically stifled by excessive hoarding of money and speculative sectors like real estate;

in terms of loan recovery, to ensure, under the on-going reforms, that a more strict banking law against bad debtors be promulgated in order to break away from the old habits mainly responsible for the collapse of the banking system in Mauritania;

to set up through the Mauritanian Central Bank, a Financing, Promotion and Guarantee Fund for the constant medium and long-term refinancing of the banks and sharing with them debt recovery risks.

3. Improving the institutional and regulatory framework

In spite of the various reforms initiated in the previous years, there are still some problems facing private initiatives and trade. Further improvement is required in terms of trade arrangements and investment legislation and regulations, especially trade and business laws. Among the shortcomings is the lack of appropriate law on bankruptcy and, legal arbitration regulations. Furthermore, private operators, especially in the small and medium enterprises, have very limited supportive and advisory machinery.

4. Cooperating with the private sector

A public/private sector unit was set up in May 1995 to promote consultation on issues and solutions to make the investment environment more attractive. Such consultation takes place at two levels: within the sectoral units with the relevant federations and ministerial departments and within the national unit comprising the CGEM and the Ministry of Planning.

PROSPECTS

As the gateway between two consumer markets, the Maghreb and West Africa, Mauritania definitely has some comparative advantages: a coastline and two ports providing access to the outside world, especially for landlocked countries like Mali. The telecommunication system is being developed and most cities have electricity. However, the cost of the factors of production remains high and steps should be taken to reduce it.

With all these reforms and sectoral restructuring, the Mauritanian economic operators are thus operating in a promising and conducive environment and have every reason to be optimistic about their business prospects because:

there have been changes in the socio-economic environment since the implementation in 1985 of the structural adjustment programme and its current benefits;

this policy has made it possible to restore macroeconomic balances and attain a growth rate compatible with the population growth rate. It has also made it possible to reduce inflation rate to a level acceptable to the economic operators, liberalize trade and privatize some potentially profit-making companies.

However, it is to be noted that there are some shortcomings in the policies for the promotion of private initiatives which the Government and its development partners are trying to address by putting in place appropriate instruments and consultative machinery between the Government and the representatives of the private sector.

The advent of democracy, the creation of an enabling consultative framework between the employers, workers and other partners, in addition to the recently established private sector consultative machinery, will make it possible to address the concerns of all parties and make necessary "adjustments" for the smooth implementation of economic programmes.

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