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Business and Economy of Madagascar

by Aakash Singha

Interesting Facts:

Household income or consumption by percentage share:

  • Lowest 10%: 2.3%
  • Highest 10%: 34.9% (1993)

Industrial production growth rate: 5% (1999 Est.)
Electricity-production: 750 GWh (1998 Est.)

Electricity-production by source:

  • Fossil fuel: 33.33%
  • Hydro: 66.67%
  • Nuclear: 0%
  • Other: 0% (1998 Est.)

Electricity-consumption: 698 GWh (1998 Est.)
Electricity-exports: 0 kWh (1998 Est.)
Electricity-imports: 0 kWh (1998 Est.)

Economy of Madagascar:

The economy of Madagascar is influenced by the business done in Madagascar. Madagascar economy is mainly dependent on the mining industry. The agricultural products also have great contribution to the economy. Coffee, cloves, sugarcane, cocoa and vanilla are the cash crops.

The principal food crops are beans, rice, bananas, cassava and peanuts. People raise goats, sheep, cattle, hogs etc. Fishing holds a major position. Forestry is equally important. Recently manufacturing are covering a large area of economy. It includes agricultural products, beverages and textiles. Oil and natural gases are gaining importance gradually.

The Economy and Business of Madagascar are centered on mineral resources. The market is ruled by diamonds. Other than diamond, the main mineral resources are coal, bauxite, graphite, salt, industrial beryl, zircon, garnets and chromate. Vanilla, coffee, sugar, textile also have a good export market.

Nearly 50% of the population of Madagascar lives below poverty line. The lowest rate of product consumption is 10%:3% and the highest rate is 10%:29%. In Madagascar the inflation rate is 7.5%. 7.3 million Labor force is at work. The budget of Madagascar shows that the expenditure of the country is $1.079 billion while the revenues it earns are $783.7 million.

Agricultural products like coffee, sugarcane, vanilla, cloves, rice, cocoa, beans, bananas, peanuts etc contribute to the Economy of Madagascar to a great extent. Economy of Madagascar earns profit from industries like meat processing, soap, breweries, tanneries, sugar, textiles, glassware, cement, paper, petroleum, automobile assembly plant and tourism. The growth rate of the industrial products of the country is 3%.

Madagascar has healthy business relations with its neighboring countries. The foreign trade is small but effective. Madagascar does business with France, Italy, Japan, and United States. International agencies as well as European Union provide assistance to Madagascar.

Currency of Madagascar:

Previously the official unit of money in Madagascar was the Malagasy franc. This has been replaced by the Malagasy ariary or the MGA which is now the official currency of Madagascar. The Madagascar currency plays a pivotal role in the country’s economy and international trade as it is the unit of money which is the decisive factor in any domestic or international transaction.

The coins and notes that are circulated in Madagascar are a part of the Madagascar currencies, the Malagasy Franc as well as the Malagasy ariary. Newer Madagascar notes represent the ariary more than the franc. The relation between ariary and franc is that one ariary equals five francs. The units of ariary of Madagascar are not based on the power of ten. But one ariary comprises five iraimbilanja. Banks and bureaux de change are the places where foreign currencies can be converted into Madagascar currencies. The ariary cannot be converted back into liquid cash.

Banks in Madagascar:

Banks in Madagascar are the principal financial institutions of the country which offer a large number of banking facilities and services to the public, to the government and to the various social organizations of the country. There are a number of important banks in Madagascar.

Major Madagascar banks include:

  • Bank of Africa-Madagascar
  • Banque Centrale de Madagascar
  • BFV-Societe Generale
  • BNI-Credit Lyonnais Madagascar
  • Bank SBM Madagascar

The principal aim of the banks of Madagascar is to serve the people of the nation. Savings, accounts, loans etc are the main functions of the banks of Madagascar. Offshore business is also carried out by these banks. The banks of Madagascar, along with their major functions, also grant agricultural credits, industrial loans, personal loans etc. Besides the names of the banks mentioned above are the National Development Bank, BTM which is a rural bank, BNI which is an industrial development bank and BFV which is a national bank for commerce. All the private banks were nationalized in 1975 by then President Ratsiraka. Private foreign investment in Madagascar banking sector was permitted in 1988. By 2001 Madagascar had six commercial banks that were under the control of various banks of other countries.

Gem Mining in Madagascar:

A reserve of different kinds of gems, Madagascar depends largely on the mining and export of its gems for earning foreign currencies. Gem mining in Madagascar, thus constitutes a principal aspect of the economy of the island. The gems found in Madagascar have given the country its worldwide fame. Abounding in gems like rubies, sapphires, emeralds, apatites, hessonites, lolites, tourmalines, aqua, quartz, beryl etc, Madagascar has gem mining as one of the major fields of mining.

Madagascar gem mining is carried out at various regions of the island where gemstones are found. The gemstone mines of Madagascar are distributed all over the country. Madagascar contains a number of colorful and good quality gems that are of high value in the gems industry of the world. The northern areas of Madagascar yield gems like ruby, aquamarine and emerald. The mountains of the central region produce a number of gems as well. The eastern coast of the country is rich in garnet, ruby etc. The mines of the south-central region contain sapphires of various colors like blue, pink etc.

Gem mining in Madagascar is an important activity in terms of occupation as well as business. Madagascar gemstone mining is a lucrative business and simultaneously opens job prospects for a large number of people living in the country. It thus helps in increasing employment besides being a major source of foreign currency earner.

The prices of gems in Madagascar have increased over the last few years. The price of Madagascar gems in 1999 in the international market was $15.18 million and by 1995 there was a 270% hike in the prices. Madagascar gem mining therefore contributes greatly to the country’s economy and the mining industry.