Madagascar On The Rebound With A Blue Economy

Madagascar On The Rebound With A Blue Economy

A year after he was sworn in as president of Madagascar, Hery Rajaonarimampianina is aiming to jumpstart economic development by embracing a “blue economy” using island nation’s fisheries, maritime shipping, ecotourism and sustainable energy.

In fact, experts from around the world have chosen Madagascar as the perfect place to talk about the blue economy. They are flying into the capital city Antananarivo this weekend for the U.N. Economic Commission for Africa’s 19th Intergovernmental Committee of Experts conference March 2-5.

A holistic approach is emerging to the concept known as “blue economy” that is vital to development , according to Antonio Pedro, director of the Economic Commission for Eastern Africa. This approach focuses on resources linked to oceans, rivers, lakes and other water bodies, Pedro said  in a statement.

The African Union is also committed to the blue economy and has devoted a chapter of the Agenda 2063 to the concept, as well as developing the 2050 Africa’s Integrated Maritime Strategy that places a heavy emphasis on blue economic development.

The U.N. conference will revolve around natural resource management, maritime exclusive economic zones, deep sea mineral and energy development, and maritime transport corridors.

Maritime transportation is of particular interest to Madagascar since it sits along the Indian Ocean route which links major trade from Australia, Asia, the Middle East. The Mozambique Channel separates Mozambique and Madagascar by 260 miles at its narrowest point.

In fact, Madagascar seems resolved to pursue a blue economy as an economic driver for the country.

Ahead of the Africa Union Summit in Ethiopia, the U.N. Environment Program convened a meeting to encourage cooperation on blue-economy objectives formed at the third International Conference on Small Island Developing States. The delegation from Madagascar expressed commitment by establishing maritime and climate change-focused ministries.

While Madagascar is not one of the six U.N.-designated African Small Island Developing States, or SIDS, the island nation has the same challenges concerning sustainable energy development and climate change shocks.

“It shares with other SIDS the opportunity to install more renewable energy options to reduce reliance on costly and carbon-emitting diesel fuel for electricity generation,” said Gauri Singh, a director for the International Renewable Energy Agency, in an interview with AFKInsider.Taking advantage of this opportunity will require the island nation to overcome challenges such as developing an integrated resource planning framework to identify the most cost-effective renewable options, establishing a market and regulatory framework to elicit private investment, and building the required human capacities.”

Madagascar’s New Blue Economy

After a peaceful 2013 election, foreign aid began to trickle back into Madagascar.

Last summer the African Union and European Union resumed economic support to Madagascar, while the board of the Extractive Industries Transparency Initiative also agreed to reinstate Madagascar’s status as a candidate country.

In June, the International Monetary Fund also approved a $47.1 million emergency loan to Madagascar and the U.S. reinstated African Growth and Opportunity Act trade status for the country – just in time for the White House to invite President Rajaonarimampianina to attend August’s U.S.-Africa Leaders Summit.

Meanwhile, international oil companies have slowly resumed offshore exploration.

With economic potential re-emerging in Madagascar, U.S. companies are taking another look.

“Yes, we have some members that are interested in Madagascar,” said Stephen Hayes, president and CEO of the Corporate Council on Africa, in an interview with AFKInsider.

“We see opportunities in virtually every African country where there’s rules of law being followed; there’s basic business principles; there’s structures that enable private sector investment and facilitate trade,” said Scott Eisner, vice president for African affairs at the U.S. Chamber of Commerce, in an interview with AFKInsider. “So Madagascar to Morocco is kind of where we point our members and it’s really a decision on what their need is and where they need to grow their markets.”

Eisner says he too has seen new U.S. interest in Madagascar.

“I can’t point to specific examples other than conversations I’m having with companies that are looking at what their next country that they get engaged in – folks all the way from GE down to some SMEs (small and medium-sized enterprises) that are trying to figure out where their market strategy is,” Eisner said. “I can’t say that for an SME Madagascar would be No. 1, but it’s definitely on the list of 15 or so countries that are intriguing opportunities.”

Though actively courting foreign investment, Madagascar is still struggling to sustain economic reforms. The World Bank 2015 ranking of the country’s business climate puts it in 163rd place out of 189.

Madagascar’s economy was growing annually at roughly 5.8 percent between 2005 and 2008 but financial challenges following the March 2009 coup and a locust invasion in April 2012 severely weakened the economy. The population is feeling it.

A report from the South Africa-based Institute for Security Studies notes Madagascar is among the top 10 African countries whose populations live in extreme poverty. The U.N. estimates that 77 percent of the population lives in “multi-dimensional poverty.” Other estimates put more than 90 percent of the population living on less than $2 a day.

In October 2014, USAID announced $75 million in support for food security programs which will “directly benefit over 620,000 individuals.” When Tropical Storm Chedza left 20,000 people displaced on Jan. 16, 2015, the World Bank immediately released $400,000 through its Emergency Infrastructure Preservation and Vulnerability Reduction Project.

The island nation has begun to recover, with growth rates of 2.4 percent in 2013 rising to 3 percent in 2014. And this year it is anticipated the economy will grow by 5 percent, according to the International Monetary Fund.

President Rajaonarimampianina is actively seeking investment in the nascent mining sector that includes gold, uranium and precious stones, as well as touting renewable energy and ecotourism. At a May 2014 business meeting in Johannesburg, he said, “The private sector will bring development and create jobs in Madagascar.”

“Achieving improvements in agricultural productivity would simultaneously boost the economy and improve food security,” according to the UN.

Madagascar “is a country with many advantages of unmatched biodiversity, great potential for agriculture, mineral resources and abundant labor,” according to a May 2014 World Bank study.

The industry sectors of interest in Madagascar are mining, oil, agriculture, textiles. “Those four would be the primary ones,” said Hayes at the Corporate Council on Africa.

Too soon for tourism

“Normally you would think tourism too, but I think it’s too early to talk about tourism right now with Madagascar. We have to see how the political climate and everything else evolves,” said Hayes.

Madagascar is celebrated for its unique wildlife, pristine coastline and marine reefs, but has struggled to attract tourists since the 2009 coup. And without those tourism dollars, much of what attracted tourists in the past – primarily its maritime resources – is being depleted.

The government is changing that by convincing the majority of Madagascar’s population that lives along the coast and relies on small-scale fishing, to balance fishing activities and sustainable marine resource management in areas such as Antongil Bay on the east coast, which supports a concentration of marine life.

Because past over fishing impacted the area, Antongil Bay recently became the latest of about 25 locally managed marine areas established along the coast. In fact, the Madagascar’s Ministry of Marine Resources and Fisheries is working with U.S.-based Wildlife Conservation Society to execute a management plan for the bay and create the country’s first shark sanctuary to protect some 19 different species.

The sanctuary was created by a recently enacted law to “balance fishing activities and ecological integrity to ensure rational and sustainable exploitation of fisheries resources,” according to the Ministry of Marine Resources and Fisheries.

Powering Madagascar’s Blue Economy

Whether it’s accommodating eco tourists or energizing marine port facilities, developing Madagascar’s blue economy is dependent on something the country lacks — electric power. And while Madagascar is not part of the U.S. Power Africa initiative, development opportunities in the island nation’s energy sector are huge.

“Today, very few people in Madagascar have access to modern sources of energy; and those live mostly in urban areas,” according to Madagascar Ministry of Energy.

Electric access is around 14.3 percent in Madagascar — though it’s closer to 4.8 percent in rural areas — and the country ranks last place globally for electric connectivity, according to the World Bank.

For the privileged few with electricity, hydropower provides approximately 68 percent, with the rest produced by nearly 100 diesel-fueled power plants that must import fuel. There is only a limited electric grid between the cities of Antananarivo and Antsirabé, while many of the rest of the towns and villages rely on isolated mini-grids.

Because of this lack of electric infrastructure, Madagascar has been facing power outages on a regular basis for years, undermining the country’s economy. Jirama, the national subsidized electricity distribution company, has come under fire and Energy Ministry Richard Fihenena publicly acknowledged at least 80 of the country’s towns were regularly without electricity.

After angry Madagascans demonstrated to protest rolling blackouts, the energy minister was sacked in October.

Meanwhile, those lacking modern electric power rely on wood and imported kerosene. Wood and charcoal represent about 93 percent of Madagascar’s total energy supply, according to the Ministry of Energy.

A June 2014 U.N. report, Energy Access and Security in Eastern Africa – Status and Enhancement Pathways, notes that due to limited progress in transitioning away from wood, there has been a 4-to-8 percent decline of forest cover in Madagascar since 1990.

The Prime Minister told the National Assembly in early February, “This year, we must do the work of the electric network expansion in rural and peri-urban areas; setting up solar parks; replace the groups using heavy fuel oil; set up wind farms in the North; validate the regional master plans for rural electrification.”

For renewable energy companies seeking new projects, Madagascar has myriad untapped renewable resources, including the fifth highest onshore wind power potential among sub-Saharan countries. For wind power potential, Madagascar is ahead of Kenya, and it has the best potential for offshore wind energy, according to the October Africa Energy Outlook report.

Funding for proposed renewable energy projects is apparently on its way.

At the June 2014 Climate Investment Funds meeting in Jamaica, Madagascar was one of nine African nations chosen to receive funding from the CIF’s Scaling Up Renewable Energy in Low Income Countries Program, which is overseen by the African Development Bank.

U.N. Environment Programme Executive Director Achim Steiner met the foreign minister of Madagascar and other countries on the sidelines of the January African Union Summit in Addis Ababa to discuss supporting their sustainable development. Steiner also briefed the group on the opportunities available from the proposed Africa 2020 Access to Renewables Initiative.

With new energy projects on the horizon to power Madagascar’s economy, now the trick is convincing businesses that Madagascar is potentially a great new market.

“Generally, it depends on the (business) sectors, but if you’re looking in the resource base, obviously Madagascar has that. And they also have some interesting opportunities in consumer goods,” said U.S. Chamber of Commerce’s Eisner, who notes it is incumbent on companies to figure out what it is Madagascar needs.

“We can lead them to the water, but we can’t always force them to drink,” Eisner said.