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Association of African Entrepreneurs
MADAGASCAR
By Ila Tripathi, November 2011.
Madagascar, as the fourth largest island nation, has a distinct place in the world
geographically , economically and politically. Owing to the country’s exquisite flora and
fauna, Malagasy enjoy the status of being resident in the ’Eighth Continent’. The following
is an account of how the nation scores on different aspects of entrepreneurship.
Statistical break-up per sector- Entrepreneurial activities are generally focused in areas
such as agriculture, including fishing and forestry, which contributes 32% of GDP and more
than 70% of export earnings; industry, which contributes some 13% of GDP with food
industry, energy and beverages industry as the main sub-sectors; and services, which
contributes about 55% of GDP.
Deriving Hopes- Since the last decade, Madagascar’s debt ratio has decreased considerably
from 46 % to 15.6 %. Madagascar has run sizeable balance of payment deficits since the mid
90s.Current account deficit as a percentage of GDP averaged in excess of 6% during the last
6 years and registered nearly 4% in the year 1999.Following is an enumeration of factors and
events that triggered entrepreneurial activities in the island nation Poverty Reduction and Growth Facility (PRGF):Under PRGF ,Madagascar was
granted $103 million for the year 2001-03 by the International Monetary Fund (IMF).
 Heavily Indebted Countries Campaign (HIPC): Resources freed via the HIPC are
directed towards improving access to health, education , rural roads , water and direct
support for communities.
 Export Processing Zones (EPZs): More than 200 investors , particularly garment
manufacturers , have organised themselves under this scheme. EPZs were established
in 1989 with a view to enhance entrepreneurial interests collectively.
 Lome Convention: Absence of quota limits on textiles imports to the European
markets has stimulated growth in the trade immensely.
 Eligibility for AGOA: Madagascar’s recent eligibility for AGOA is significantly
increasing Malagasy export and foreign investment.
 Poverty Reduction Strategy Paper
Pragmatic Economic Policies- a number of key policies have led to an immense boost to
existing economic conditions .Some of them are:
1. Reduction of price distortion.
2. Floated exchange rate.
3. Increased energy prices .
4. Elimination of commodity subsidies .
5. Strengthening the financial sector by bank restructuring and privatization.
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Association of African Entrepreneurs
A relatively small, though not inconsiderable, boost to the economy has been provided by the
tourism industry. Primary tourist interest areas are the capital Antananarivo, and the islands of
Nose Be in the North West and Ile Sainte-Marie to the East, owing to their beautiful beaches.
Since 2006, the average number of tourists visiting the island nation has increased by 11%
annually. A major group of tourists is comprised of research scholars and botany enthusiasts
who are highly learned and aim to explore the flora and fauna exclusive to the region. 60% of
the tourists are French; Madagascar was once a French colony and bears strong ties to the
European nation in culture and history.
Despair of mirages- With a population growth rate of about 3%, Madagascar has witnessed a
sharp decline in its per capita income over the last decade. For the past thirty years, the
growth rates have averaged only 0.4% every year. A very fragile feature of Madagascar’s
economy is its high degree of dependence on foreign aid and direct investment; net FDI
inflows into the country in 2010 were 9.87% of GDP.
Not only does the finance sector have certain loopholes that make entrepreneurial ventures
dicey, but also several social and geographical factors contribute to creating major
hindrances. Madagascar faces acute issues like chronic malnutrition, under-funded health and
education facilities, and severe loss of forest cover accompanied by erosion. Even outbreaks
of political unrest like anti-government strikes and demonstrations have held back the growth
rate and deterred entrepreneurs. The erratic commitment of the government to economic
reforms has made the business environment highly precarious.
In addition, a sudden decrease in global coffee demand in recent years has hit Madagascar
below the belt as it is one of the largest coffee exporters in the world. And mining activities in
the region, although claiming to achieve “sustainable development,“ have had adverse results
on the biodiversity of the nation – which is a home to 80% of the world’s endemic species.
With the country’s vast reserves of sapphires and other semi-precious stones, a lot of mining
firms like QIT Madagscar Minerals are concentrated in the areas primarily around the capital
region. Such ventures might be proving beneficial to the economy in the short term but are
not at all advisable in the long run.
CONCLUSION- There are no free lunches in this world; by the same token , entrepreneurial
ventures have necessitated some trade-offs in the island nation. The Malagasy population
aims at achieving sustainable development that will last for years to come, providing them
the means for self-employment. Trade, tourism, research and educational activities,
agriculture and forestry have helped a lot in giving an upper hand to Madagascar over its
contemporaries – but the nation also needs to curb “unhealthy “ means of achieving
entrepreneurial bliss.