CONTENTS | ANB-BIA HOMEPAGE | WEEKLY NEWS
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Madagascar |
ECONOMY
The country’s political crisis dramatically rebounds on the national economy
Madagascar’s political crises — economic, humanitarian and social, has had dramatic consequences for the country as a whole. All the efforts and investments made in Madagascar’s future over a number of years, have been brought to nothing within a few months — and all this because of the never-ending political crisis.
Madagascar’s economy is plummeting and experts foresee that this year, there will be a 10% decline as against the 6.7% growth-rate in 2001. Since the beginning of the crisis, every sector of society has felt the effects.
Millions of people have no jobs and firms are closing down one after the other. The most optimistic forecast is, that even if the situation in Madagascar returns to «normal» within the next few weeks, it will take until 2005 for the economy to reach the level existing before the start of the current crisis.
Strikes, pickets and roadblocks have all had dramatic consequences for Madagascar’s economic situation. From the first week of the crisis, strikes took place in Tananarive firms, in the economic free trading areas, within business in general and within public services.
All these were areas which had witnessed a dynamic economic growth in recent years and which accounted for almost the totality of the country’s economic growth level. (These sectors account for 60% of the Gross National Product [GNP]). Today, the loss of work is reckoned to account for a loss of anything from 6-8 million dollars a day.
In February, the setting-up of roadblocks lead firms to stop their business activities. This was followed by several lay-offs and dismissals. The roadblocks prevented the circulation of goods between Tananarive and other provinces, bringing all sectors of the country’s economic and social life to a halt. This caused an unheard-of economic crisis.
The Free-Trade Zones
The direct contribution of the Free-Trade Industrial Zones to the GNP is minimal from a financial point of view — about 3%.
Their importance lies in their capacity to create jobs and to take the lead in other economic sectors within Madagascar (transport of goods, telecommunications, business, indirect taxation) — all this can create secondary jobs.
Let’s take a look at some statistics — in 1994, there were less than 20,000 new jobs created. In the year 2,000, 75,000 were recorded and in 2001, about 100,000. There were also 25,000 secondary jobs created over the same period. The Free-Trade Zones employ a little less than 20% of workers in Tana — this out of a workforce of 530,000.
Regarding exports — the clothing industry realised just over 293 million dollars in 1999, i.e. a little less than 40% of Madagascar’s total exports. According to International Monetary Fund (IMF) statistics, nearly 80% of foreign investment in Madagascar goes to the Free-Trade Zones, shared out in the following way: 38% coming from France; 25% from Mauritius and 9% from other European countries.
In March, companies involved in the Free-Trade Zones took stock of their situation, and found out that there was a loss of 20,000 jobs. Why? because of a decision by certain companies to move their operating centres to Mauritius and Kenya.
In May, about 70,000 ZFI workers were jobless (enforced leave, lay-offs, dismissals). For the year 2002, this meant a loss of about 125 billion Malagasy Francs (1 Euro = 6.700 Malagasy Francs) in earnings to the workers.
Also, the political crisis has had adverse effects within the Free-Trade Zones, with costs rising (anything up to 18 billion Malagasy Francs) between January and March of this year. Firms within the Free-Trade Zones have had to repair damage caused by vandalism and to dispatch by air, some goods which could not exit through the ports.
The political crisis has also created a climate of mistrust between Free-Trade businesses and their usual customers. This means a new start in Free-Trade activities will be out of the question this year.
If there should be a return to political stability, a long-term future could become possible, provided Madagascar remains competitive. And this could be thanks to a labour force, albeit unqualified but ready to work and inexpensive (a monthly salary of $50 as against $150 in Mauritius), and prepared to accept long working hours.
Rural areas
There was hope that the economic situation for the population living in rural areas would improve, but in 2002, the number of people living below the poverty line was estimated at 78% of the local population, instead of the 72.6% as calculated.
The way things are, it looks as if the rural areas will carry the repercussions of what is happening within the urban areas — in spite of the fact that things had been looking good as regards agriculture over the past two years.
The main victims will be the poorest of the poor of the rural population —estimated at being 36% of the local population as against the estimated 32.8%.
Current data shows that this year’s harvest will not be unduly affected by the present crisis. Harvesting of such money-making products as vanilla, cloves coffee; and of foodstuffs such as rice and maize took place in the early months of this year i.e. before the setting-up of the roadblocks.
However, rural households will suffer some effects, because roadblocks are preventing agricultural produce from reaching the markets.
Peasants fear they will be penalised in many areas. They will have to bear the weight of dramatically rising prices.
How heavy the price-increases will be depends on whether the politicians can control both the price rises and the amount of goods held in stock, especially basic food products.
For the average rural family, food expenses account for 80% of their total expenses. Between March and April, sugar, oil and petrol prices rose by 100% and 200%.
Rural households will experience major losses of income because of unsold produce (especially perishable crops such as tomatoes and carrots), and they will achieve only low prices from the middlemen when and if they do eventually manage to sell these goods.
(Prospective purchasers are themselves affected by the lack of petrol and the «dues» to be paid at the roadblocks).
During the five moths of Madagascar’s crisis, the GNP has dropped to the level it was in 1999.
This means the loss of a huge sum ranging from 450 million dollars to 500 million dollars i.e. more than one-and-a-half times the total amount of all development aid received in 2000 (or eight times the total aid received through the Highly Indebted poor Countries Initiative (HIPC) in 2001.
Fifteen million citizens of Madagascar are presently being held hostage by the country’s politicians, and they have no idea when the political crisis will end. All they do know is that the economic crisis will (yet again), be a long one.
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PeaceLink 2002 - Reproduction authorised, with usual acknowledgement