Mauritius and Madagascar are embarking on a new path of bilateral cooperation and expanding the existing collaboration. Several Memoranda of Understanding (MoUs) were signed between the two countries to enhance cooperation in political, economic and cultural fields. Both countries complement each other in different sectors. How can Madagascar open up opportunities for Mauritius?
The celebration of our 51st Independence has given a new boost to our long lasting ties with Madagascar. With the visit of the President of the Republic of Madagascar, Mr Andry Nirina Rajoelina, several MoUs have been signed between the two countries to further strengthen our economic ties. This visit is regarded as highly symbolical. Why should Mauritius be interested in Madagascar?
It is essential to understand that like Mauritius, Madagascar also attracts foreign investors because of its strategic position between African and Asia. Despite recent conflicts within the country, Madagascar has still a vibrant economy with investments in key sectors like agri-business, tourism, mining, infrastructure, ICT and light industry. The country has a vast quantity of unexploited land suitable for agriculture, labour and a huge amount of natural resources which Mauritius lacks. What Madagascar does not have is expertise, which Mauritius has.
Vidur Ramdin, Director of Communication and Marketing African Solidarity Fund, explains that the future of both countries in terms of trade and development is to promote cooperation in sectors such as agriculture, trade, fisheries, education, research, culture, energy and health, among others. “There should be a line of permanent dialogue between the two countries so as not to slow down progress as regards possibilities of investment. To this end, key economic players should continuously exchange and come up with effective strategic tools to facilitate partnership for common potentials. Also, with the setting up of special economic zones, it will provide further opportunities to both countries to attract foreign investments in different key sectors while close collaboration will further lead to the expansion of economic and commercial exchanges.”
According to him, Madagascar has tremendous natural potential, but the poor quality and costly infrastructure (roads, electricity, telecommunications, ports and air freight), limited access to credit and financial instruments as well as the poor definition of property titles are all barriers to investment. In terms of its business climate, Madagascar ranked 162nd out of 190 economies in the 2018 Doing Business report published by the World Bank.
Madagascar is the second largest trading partner of Mauritius in Africa, with exports amounting to 135 million US dollars and Madagascar’s exports to Mauritius reach 59 million US dollars. It is believed that Madagascar can become an economic giant in the Indian Ocean region. The country has huge potential and investment opportunities in the following sectors: Agro-industry, mining sector, manufacturing and services, among others.
The tourism industry also provides a large number of job creation and growth fast while guaranteeing strong foreign currency earnings. In the world ranking of countries holders of a mega biodiversity, Madagascar is ranked number one of top 10. According to statistics, nearly 300,000 tourists visited Madagascar in 2017 and they stay in the country for an average of 10 to 20 days. With an average growth rate of 20% per year, the tourism sector is one of the growth sectors in Madagascar because it is a destination that attracts thousands or even millions of tourists.
The Malagasy government is aiming to build 10 5-star hotels in the next five years. The government is focusing on quality tourism: Infrastructure, services and products in accordance with international standards. For this, they are looking for potential investors. Furthermore, as stated by the President Mr Andry Nirina Rajoelina, incentives and a regulatory framework to facilitate investments will be established. To support this endeavor, the government is organizing a forum dedicated to tourism at the beginning of June.
Vidur Ramdin states that Madagascar benefits from an idyllic setting and diversified climatic zones favourable to the development of any tourist activity. “With a unique biodiversity of which 80% of the flora and fauna species are endemic, the sun 365 days a year, Madagascar offers you an unbeatable opportunity to succeed in tourism. Madagascar has also implemented a policy of creating protected areas and natural parks that promotes the creation of ecotourism projects through eco-lodges and luxury resorts.”
He adds that Mauritian investors can invest in the creation of eco-lodges and hotels near national parks, as well as other related reception services such as transport, catering, creation of services for tourists looking for thrills: Surfing, windsurfing and kitesurfing, sailing, house-boats, climbing, speleology, rafting, trekking, trail-biking and paragliding.
Over the coming years, several industries are going to be implanted in Madagascar. The goal of the Malagasy government is to produce locally all the needs of the country. To this end, measures will be taken to facilitate the establishment of industrial operators in Madagascar. The Malagasy President stated that actions will be deployed to promote the creation, development of industries such as agri-business, pharmaceuticals, the automotive industry, and the assembly of solar panels to meet the needs of the population.
Vidur Ramdin reveals that one of the main reasons for relocation by Mauritian companies in Madagascar is lack of manpower. “There simply aren’t enough workers in Mauritius. And, of course, the labour costs here are much lower. The minimum wage in Madagascar is around $50 per month; a low-level worker’s salary in Mauritius is five times higher.”
He avers that there are other advantages to manufacturing in Madagascar. “As compared to Bangladesh, it is close to Mauritius, and French is spoken in both countries, which makes communication easier. The two countries are also members of three regional trade blocs, which reduce import and export duties. From textiles, companies can move into many different areas, including services. So there’s trade in products, but there are also companies active in areas like publishing and tourism.”
Vimal Booluck explains that Mauritius with its limited local Market, and its more and more uncompetitive labour force, can tap into the local Madagascar market and also used the local Malagasy resources (cheap labour and raw materials) for exportation.
Agro-industry and Agriculture
Madagascar is aiming to produce 500,000 tons of rice before 2024 and to be again the granary of rice for the Indian Ocean. This time, the Malagasy government is expanding itself to other agricultural products. As pointed out by the President of Madagascar Mr Andry Nirina Rajoelina, they wish to export in the Indo Oceanic region but also in Africa, as a first step, to capitalize on their geographical proximity.
The Malagasy government is willing to supply Mauritius with onion, dry beans, potatoes and chicken. So, it is an opportunity for Mauritian import stakeholders to seize, as Madagascar is nearer to us. So, instead of importing 50,000 tons of corn from Argentina, which is so far away, why not think of Madagascar?
According to the President Mr Andry Nirina Rajoelina, the current state of the Malagasy power grid is huge. It is inconceivable today that the energy produced in Madagascar is the most expensive in Africa. It varies from 20 to 30 cents the KWh. The goal of the Malagasy government is to double energy production and halve the energy price in five years. The government is looking forward for a sustainable and rapid development in this sector. So investment in the green sector of Madagascar is highly welcomed and encouraged. Investment could be in solar, hydraulic and ethanol.
The Malagasy government is aiming to improve access to health. Hence, they are looking forward for investment to be able to equip their hospitals to international standards. Yearly, Madagascar imports 150 million medications. Since the government is willing to produce everything locally, the government is encouraging investors to set up pharmaceutical companies and laboratories. The country has the necessary space as well as raw materials both for chemical pharmaceutical but also for natural medicines.
Vimal Booluck states that Madagascar has, for a long time, been lagging behind in terms of financial intimidation. “With Mauritius, having the necessary expertise in this sector, Mauritian banks and Insurance companies need to penetrate the Malagasy Market to reap part of the growth in the Madagascar economy.”
Besides, Madagascar has one of the lowest rates of financial inclusion in Africa. “Around 41% of the population are currently unbanked, thus this can be seen as an opportunity for Mauritian banks to set up there and offer greater access to credit for local entrepreneurs there to set up businesses.”
He adds that Madagascar is also promoting a local BPO Industry with a competitive labour force. “Around 40% of the Malagasy population currently have access to a mobile phone. As the country develops, the demand for mobile phones and the potential customer base to be served by financial system also increases. Telecommunication companies like Emtel or Mauritius Telecom can take advantage of such trade agreement and set up their businesses in Madagascar.”
François Guibert : “Little overlap between Mauritius and Madagascar’s economic sectors”
François Guibert, Chief Executive Officer (CEO) of Economic Development Board speaking at the Business Forum organized by EDB, stated that there is very little overlap between Mauritius and Madagascar’s economic sectors. For him, this is a great complementarity and possible synergies to develop between our two countries. “The EDB of Mauritius and the EDB of Madagascar have the mission to work in close collaboration with the authorities of the two countries to set up the legal and operational framework that will facilitate the movement of people, capital and products. The EDB of Mauritius and the EDB of the Republic of Madagascar signed a Momeradum of Understanding to realize this ambition. Mauritius and Madagascar have a very convergent vision to build a sustainable and prosperous regional economy.”
He elaborates that the EDB of Mauritius will give all its support to the EDB of Madagascar and the Mauritian and Malagasy operators to coordinate the projects set up so that together the two nations can work for greater prosperity in the region.
Afzal Delbar : “It is a country full of opportunities”
Secretary General of the Freeport Association, Afzal Delbar explains that Mauritius and Madagascar have been sharing a very good commercial relationship since years. “Since some past years, Madagascar went through a tough time, weakening its economic and commercial ties. A turning point recently was that Madagascar has regained its stability. Now it is high time for Mauritius to take the opportunity to invest in Madagascar before any other country does so.”
Afzal Delbar argues that investors should not think twice at this point as Madagascar is growing quickly. “It is a country full of opportunities and resources. Mauritius has the competence and it should take advantage of what Madagascar is offering. From agriculture to energy, Madagascar has lots to offer.”
Frankie Tang : “Madagascar has a huge future in services”
Economist and investment consultant, Frankie Tang avers that Madagascar has a panoply of opportunities for Mauritius in field likes BPO and agriculture. “We have ignored Madagascar, which is closer to us. If Madagascar would not have faced serious internal issues, it could have become our serious competitor in various sectors. It has immense potential and, hence we must collaborate. We must start investing in emerging sectors, as this country has a promising future.”
He points out that apart from agriculture, Madagascar has a huge future in services. “The young people of Madagascar are willing to work in the BPO sector. There is no shortage of labour and there is no need for heavy investment as well. Another sector is the banking sector as well as the telecommunication sector, which needs to be exploited.”
Amédée Darga : “Both countries have a positive future”
Director of Straconsult, Amédée Darga reveals that Mauritius and Madagascar has a long history of collaboration but has faced lots of ups and down. “The President seems to have an extended vision and is very dynamic. So, now both countries have the opportunity to intensify their collaboration in the various fields. Firstly, Mauritius has an advantage in the textile industry. Companies are already relocating in Madagascar and in order to keep our competitiveness, we can adopt this strategy further. This will continue to help both countries.”
However, he argues that it is now time for action rather than just talking. “We need to be more concrete. There is a wide range of opportunities in sectors like agriculture and tourism, both of which have been proficiently developed in Mauritius. Why not jump into it now?
He firmly believes that both countries have a positive future. “If both countries are business oriented, they will find ways to succeed. They have a productive future and a positive growth. Both need to be practical.”
Several MoUs signed
During the visit of the President of Madagascar Andry Nirina Rajoelina, several MoUs have been signed in the fields of tertiary education and scientific research, mutual legal assistance as well as the harmonisation of scientific norms.
The three MoUs pertained to: Education so as to facilitate internships and provide additional scholarships as well as to enhance exchange programmes and scientific research; Judiciary in view of the exchange of information in the context of investigations and the fight against illicit trafficking and cross border crimes; and Standards to ensure the harmonisation of scientific norms as well as to facilitate commercial exchanges.
Prior to the signing ceremony, Prime Minister Pravind Jugnauth and President Andry Nirina Rajoelina had a tête-à-tête followed by a working session whereby various issues of mutual interest were discussed, namely agricultural development, fisheries, air connectivity, maritime corridor and cabotage, visa facilitation, commerce and bilateral agreements as regards employment.
In a statement to the press following the signature of MoUs, Prime Minister Jugnauth expressed satisfaction regarding the fruitful meeting with the President of Madagascar. The discussions will enable both parties to deepen cooperation in the political, economic and cultural fields, he indicated. Madagascar, he said, is considered as a critical partner for progress in the Indian Ocean region and both countries have expressed a keen interest to build a strong partnership on the basis of concrete projects.
Speaking about agricultural development, the Prime Minister highlighted that the Indian Ocean Commission (IOC) is currently financing feasibility studies to finalise a model of development for maize and soybean, in collaboration with the private sector of Mauritius. Both countries, he pointed out, are determined to provide assistance to their respective private sectors for the implementation of the project, which lies in the context of the regional programme for food security and nutrition of the IOC.
Additionally, with a view to consolidating fruitful collaboration between the Madagascar and Mauritius, the following agreements were also signed: MoU between the Economic Development Board Mauritius (EDB) and the Economic Development Board Madagascar (EDBM) and MoU between the Mauritius Africa Fund (MAF) & the Economic Development Board Madagascar (EDBM)
80 hectares for the construction of an industrial park
In addition, to support the fight against the measles outbreak in Madagascar, Prime Minister Jugnauth, on behalf of the Government of Mauritius, made a donation of USD 100,000 to the Republic of Madagascar.
President Andry Nirina Rajoelina, for his part, spoke of the historical bonds that exist between Madagascar and Mauritius and encouraged both countries to elevate the relationship to new heights. He invited Mauritian investors to tap into the Malagasy market while adding that Mauritius will be granted 80 hectares for the construction of an industrial park in Madagascar.
The Malagasy President spoke of his determination to propel the tourism industry to new heights in Madagascar through the opening of air traffic. The objective, he stated, is to double the number of tourists, which currently stands at 300,000, to 800,000 in the next five years.