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Posted on Friday, 27 November 2015 11:00

Madagascar Country Profile 2015: A transition to normality

By The Africa Report

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Madagascar enters 2015 with the government looking to put the instability of the past behind it.

The country elected a new president in January 2014 to end a fraught five-year period of political transition and instability, but former president Marc Ravalomanana and transitional leader Andry Rajoelina remain divisive forces. The economy is getting back on its feet, and many threats remain, including the high level of smuggling that developed under the transitional regime.

Hery Rajaonarimampianina, finance minister under the transition and a political unknown before that, won 53.5% of the vote to become president, with the support of Rajoelina and businessman Mamy Ravatomanga.

Hery, as he is popularly known, has since shown himself to be his own man and bucked his supporters to name another political neophyte, Roger Kolo, as his prime minister in April after several months of delays in the selection process. Rajoelina, who likes the spotlight, was prohibited by international mediators from running for the presidency in 2014 and uncharacteristically took a back seat for much of 2014.

Ravalomanana trouble

Hery has tried to strike a reconciliatory middle ground with the country's political forces, but Ravalomanana's camp has been implacable. The former president still faces legal charges but he returned unannounced from his South African exile in October 2014 and was immediately taken into custody.

Lalao Ravalomanana, who is Marc's wife and sought to run against Hery, called for insurrection. A number of crucial issues are yet to be addressed by the new government: the opposition is divided and unstructured; the process of national reconciliation has barely begun; and the army remains a volatile force.

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The new government has not been able to achieve all that was set out in the transition, and the municipal elections planned for October 2014 were postponed without a date decided.

The government is desperate to get the economy back on track after it nosedived during the crisis. The challenge is stark: the International Monetary Fund (IMF) estimates that 90% of the population lives on less than $2 per day.

Smuggling of rosewood and other protected resources skyrocketed during the period of political instability and it will take time for the state to reimpose its surveillance role. Foreign aid made up about 75% of Madagascar's budget before the coup that overthrew Ravalomanana in 2009.

With the peaceful elections, most donors, including the US, EU, World Bank and IMF restarted their financial aid in 2014. The economy has mostly been driven by the extractive sector, agro-industry, banking and transport. Increased tourist arrivals and economic reforms are expected to boost the economy in 2015.

Fuel subsidies axed

In July 2014, the government decided to end fuel subsidies, which account for 1.5% of gross domestic product (GDP), and return to market-determined prices for petroleum products at the pump. The adjustment is likely to take a year.

Mitigating mechanisms such as cash transfers and subsidies for public transport will be put in place to limit the impact on the poorest households. Another item on the government's economic agenda is the floundering state electricity and water utility Jirama.

Blackouts and water shortages are a daily occurrence and a severe constraint to economic development. The company has racked up large debts because of theft, low tariffs, corruption and poor management. The World Bank committed $80m to help turn the utility around in July 2014.

National carrier Air Madagascar is equally inefficient, with flight cancellation a daily occurrence. It is banned from European airspace for safety reasons. Resuming essential public investments and social spending is another priority. Madagascar's fiscal base is one of the lowest in the world at just 10.4% of GDP. The country is therefore looking into ways to increase revenue and tax collection.

The nascent oil and gas industry also received a confidence boost in May 2014 when Madagascar Oil announced that its Tsimororo heavy oil field was commercially viable. Other companies will be watching the next steps closely. The government intends to issue more oil and gas exploration permits in addition to licences to explore for uranium, bauxite, coal and other metals.



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