Madagascar’s economy has experienced mixed fortunes since the country’s independence from France in 1960. Times of growth and modest prosperity coincided with liberal economic policies, but they were regularly interspersed with periods of stagnation and decline during socialist experiments and political instability. Currently the country is experiencing difficult times again, writes Annelie Rozeboom.
Marie Angele Rafaravavy, a 50-year-old mother of four, used to earn about $2 a day selling embroidery in one of Madagascar’s tourist markets. She also sold tablecloths and clothes decorated with colourful Malagasy dancers to an association that supplied shops and export companies, adding about another dollar a day to her meagre earnings.
Her small stream of income nearly dried up in 2009 when Madagascar plunged into political turmoil. Many countries issued travel warnings and the overseas visitors stopped coming. “Since the crisis, there have been no more orders,” she says.
Rafaravavy has survived the last few years earning pennies by fetching water, doing laundry and performing other odd jobs that are paid for by aid programmes. She is now enrolled in the Isotry Missionaries of Charity Centre in Antananarivo, the island’s capital. The nuns at this centre provide food aid as well as training in basket weaving.
The mother of four has help from her eldest, a 16-year-old son who sells Chinese plastic slippers on the street in the city centre. “Some days, he earns 2,000 Ariary (about one dollar),” she says. “On a good day, double that. It’s hard to sell things on the street, but as there are no jobs, it’s the only thing to do.”
The social centre is in the middle of Antananarivo’s poorest neighbourhood, Isotry, a dense agglomeration of narrow streets crammed with market stalls and shacks. The centre’s outside walls are lined with plastic bags filled with garbage. A dazed-looking homeless man picks through an overflowing pile while children play in the mud nearby.
“Sometimes, the women don’t have money to pay the rent, and they end up living on the street,” says social worker Josephine Rasoanirina. “I then take them back here and try to help them. But we don’t have space or enough food aid for the hundreds of people who need help.”
When Madagascar became independent from France in 1960 it was one of Africa’s success stories, known for its educated elite, strong institutions, good infrastructure and an income per capita above the developing country average. The Indian Ocean island nation was paved with good roads and joined by a railway network. People were educated and earned salaries that easily paid for house rentals, food, clothing and schooling for children.
Since then, economic mismanagement and recurrent political crises have destroyed the country’s economy. The roads are rutted and full of potholes; the health sector barely functions in the cities and is non-existent in rural areas. The government has stopped spending on teacher training, maintaining schools or building new ones. Education levels have plummeted.
The prices of basic necessities have shot up, while salaries have stagnated. The average worker still earns about a dollar a day. “My parents had 11 children and lived well. We had a house and enough food for all of us,” Rafaravavy recalls. “Our lives [now] are much harder than theirs.”
The downturn began with the socialist revolution in 1972. From the 1970s until the second half of the 1990s, Madagascar recorded the fifth-lowest rate of GDP growth in the world (0.5% per year), according to the World Bank.
The economy improved for a short period in the late 2000s, due in part to economic liberalisation and the establishment of a free zone, concentrating mainly on garment manufacture.
Some credit this economic growth to dairy tycoon Marc Ravalomanana, who came to power in 2002. He opened the country to foreign investment, built roads, reformed the educational system and set up a national anti-corruption agency. “I came back to Madagascar in 2004. It was a time of euphoria. There was finally a chance for growth,” says Harvard-educated corporate lawyer Sahondra Rabenarivo.
Seven years later in February 2009, Antananarivo’s mayor, disc jockey Andry Rajoelina, toppled Ravalomanana with military help and set off the current crisis. The economy’s growth rates declined to almost zero, according to the World Bank.
In Madagascar, the majority of the population lives off agriculture. Its main exports include seafood (mainly shrimp), coffee, cacao, litchi, pepper, cotton, tobacco, groundnuts and spices.
The economy’s main sources of growth, however, are tourism, mining and textile industries. These have been hit hard.
The two main mining projects are: Rio Tinto, which mines ilmenite, a titanium- iron oxide mineral, in Fort Dauphin; and the Ambatovy nickel mine, which is owned by a consortium led by Sherritt International. Both have suffered.
“These multinationals stay because they have already invested money and because they have a presence all over the world. But the Ambatovy project is three years behind schedule with cost overruns of several billion dollars,” Mrs Rabenarivo says. “In the mining sector, the government froze all transactions. They tried to take back mining permits and issue them again. It will take years to clean up the mess this created.”
After the coup, the United States (US) suspended Madagascar’s benefits from the African Growth and Opportunity Act (AGOA), a US plan to assist sub-Saharan African economies. The country’s textile factories, focusing mostly on the export market, collapsed.
Now, Madagascar is one of the poorest countries in the world. Income per capita is $969 and more than four-fifths of households live under the poverty threshold of $1.25 a day.
On the streets of Isotry, this means that more than 30,000 laid off textile workers try to survive by selling cheap Chinese plastic buckets, slippers and flowers. Even the traditional odd jobs of carrying water or washing clothes are scarce. “Many patrons have gone back to the countryside, so it’s harder to find jobs. And those who still employ people, pay less,” says social worker Mrs Rasoanirina.
The Malagasy middle classes are not faring much better. In Madagascar, donors have traditionally counted for almost half of the government’s budget. After the coup, the international community imposed sanctions. European donors cut back on $1 billion in promised aid.
Since the sanctions, the authorities have tried to raise income by taxing small- and medium-sized businesses. Entrepreneurs complain of tax inspectors, ministry officials and customs officers trying to squeeze every last penny out of the company, while at the same time asking for bribes. This has raised costs and profits have plunged.
Meanwhile, a lack of governance has caused a sharp increase in corruption and insecurity. The top five constraints on doing business in Madagascar are government instability, policy instability, corruption, access to finance, and crime and theft, according to the World Economic Forum’s Africa Competitiveness Report 2011.
Many small- and medium-sized companies have gone belly up. In 2011, Madagascar topped the Forbes list of the World’s Worst Economies for the same reasons. “Beyond income, [corruption] extends to economic development,” says Transparency International’s Robin Hodess, group director for research and knowledge, in the Forbes article. “All of the indices that reflect human development suffer. Where government doesn’t work, economies don’t grow.”
There is little chance of an economic recovery as long as the political crisis is not resolved. Three years of sanctions pushed Mr Rajoelina into signing a roadmap designed to restore Madagascar to democracy under a unity transitional government, which includes members of all opposition parties. Some parts of the roadmap were implemented: the government was installed; the European Union promised to lift sanctions.
However, the process ground to a halt once again last year when Mr Rajoelina refused to permit Mr Ravalomanana to return, one of the agreed upon articles of the roadmap.
Elections have been postponed many times, with another deadline set for November 2012, which the corporate lawyer is sure cannot be met. “They don’t even have acceptable voter registration lists and the CENIT [the national transition election committee] is not fully up and running,” Mrs Rabenarivo says. “Once the UN [United Nations] delegation comes, it is expected, as they have indicated before, that it will take another 11 months for the elections to be held. So then we’ll be in our fourth year of crisis.”
Mr Rajoelina has asked the UN to help him organise the vote, but is set on making sure that Mr Ravalomanana will not participate. He says he is convinced that the former president is just out to create instability. His critics counter that Mr Rajoelina is not sure he can beat his rival in an election.
