Country Profile — Madagascar

Magical Madagascar

A former French colony that only achieved independence in 1960, Madagascar is a country little known to most UK firms. Its capital and largest city is Antananarivo, and, despite being about 2.5 times larger than the UK in terms of size, its population is only about half the number, at around 29 million.

Yet there is potential for so much more collaboration given the island nation’s unique ecosystem and biodiversity, and its proximity to mainland Africa, one of the world region’s tipped for strong growth in the decades ahead. The country is separated from the mainland by the Mozambique Channel, a waterway which at its narrowest point is just 250 miles wide.

Across the Channel stands Mozambique, currently one of the world’s oil and gas exploration hotspots after making a series of huge offshore discoveries in recent years. As it gears up to become a major global gas exporter in the coming years, the energy industry is closely monitoring opportunities in Madagascar as well.

Yet Madagascar is uniquely its own, quite distinct from any other African country, with two main languages spoken, French and Malagasy.

Its uniqueness is, in large part, down to its historical formation, after it split from the African continent about 160 million years ago.

Treasure island

For now, Madagascar remains something of an unknown to most UK businesses, perhaps best known currently for the DreamWorks animation movie series of the same name — now a musical theatre production too. But the country possesses its own real-world magic too that has enchanted explorers, adventurers and traders alike for many centuries.

The fourth-largest island in the world, Madagascar is a true natural paradise, with a unique and biodiverse ecosystem containing forests, savannah, rivers, lakes, wetlands, mangroves, drylands and reefs, one that has long supported agricultural production. Madagascar’s economy has traditionally been based on the cultivation of crops such as rice, coffee, vanilla and cloves.

This natural, unspoilt environment is also home to a high concentration of endemic species. In total, there are around 200,000 known species on the island, about three quarters of them endemic, with huge populations of birds, reptiles and small animals.

The island is home to all of the world’s wild lemur population — an animal that appeared in the Madagascar movie trilogy, with the lemur king, King Julien, narrated by English comedy actor Sacha Baron Cohen.

Economic troubles

Unfortunately, Madagascar’s natural scenic beauty and biodiversity has not resulted in a flourishing economy. Its people are among the poorest in Africa and only modest economic growth rates suggest that this is unlikely to change anytime soon.

The World Bank expects 2023 growth rates to reach about 4% in 2023, before climbing slightly to around 4.% in 2024‒25 — impressive by Western European standards, but not enough to make a significant dent in poverty levels in the long term. Rapid population growth is adding extra strain to the island’s economy and infrastructure, further exacerbating poverty rates — by 2045, Madagascar is expected to be third in the list of African countries hosting the greatest number of poor people.

Multilateral agencies such as the World Bank and the African Development Bank are major supporters to the economy, with multi billion dollar lending programmes covering everything from clean water and sanitation to digital connectivity. For now, the island’s economy remains rooted in traditional areas such as agriculture, alongside a small manufacturing sector, with notable exports comprising textiles, fish and shellfish, vanilla, cloves and also chocolate.

There is a growing mining and extractive industry, while tourism is another important source of hard currency revenues for the economy, providing a livelihood for many small, local businesses and entrepreneurs.

Bilateral trade

Trade and investment between the UK and Madagascar remains small, worth just £70 million (US$86 million) in the four quarters to the end of Q1 2023, according to the Department for Business and Trade. Most of this represents imports from Madagascar into the UK, notably clothing — today, the Island is believed to be the largest apparel exporter in sub-Saharan Africa to the European Union (EU) — as well as coffee, tea and cocoa, fish and shellfish, fruits and vegetables, and mineral manufactures.

In the other direction, the leading British exports include general industrial machinery and scientific instruments. The low level of trade reflects a challenging business climate, the small private sector, as well as the distance and the lack of close ties to the UK generally, compared to France. Still, the UK is viewed fondly as the first country to recognise Madagascar, back in 1817, which provides a platform for further connection and collaboration.

Firms are supported by the British Chamber of Commerce in Madagascar, originally set up in 2010, then formed as an independent non-profit association in 2022. Among other responsibilities, it assists companies investing in Madagascar to navigate the challenging regulatory framework for doing business.

But the UK is active in many other ways too, including culturally, and in the ongoing contribution of development aid and assistance. In July 2023, a UK–Madagascar development partnership summary outlined key areas of collaboration for the coming years, including support for stopping deforestation and protecting biodiversity, education, and advisory work on population growth.

UK investment

With its abundant natural resources, Madagascar has attracted UK investment in a number of strategic areas, such as the mining sector.

Guernsey-based Gemfields has a presence in the country’s precious stones and extraction industry via its interest in Oriental Mining, which owns various exploration licences in the Antananarivo, Fianarantsoa and Toliara provinces of Madagascar. The company sees the island as one of the most exciting colour gemstone provinces in the world with significant potential for emeralds, rubies, sapphires, tourmalines and garnets, among others.

Reflecting the more complex business environment, however, it was involved in a publicly-reported story recently after being asked for bribes in return for more exploration concessions by the Madagascan president’s former chief of staff. The UK’s National Crime Agency (NCA) arrested Romy Andrianarisoa in London in August 2023, and charged the official with a bribery offence — a charge that has been denied.

Gemfields swiftly informed the NCA of the allegations, triggering the investigation.

Madagascar’s London embassy is keen to showcase other potential investment opportunities to UK firms, including ICT, agribusiness, infrastructure and energy, as well as textiles and tourism.

Smaller firms

Small UK firms have also found a way to do business in Madagascar, often leveraging local links or connections to find a pathway to Europe and the rest of the world. One business with a UK presence that’s active in bringing the island’s world-class chocolate and cacao products to international markers is Chocolat Madagascar.

It has scooped countless awards for its artisan fine chocolates, with cacao sourced from the country’s central highlands region, an area with a more temperate climate, where the capital itself is also located. Madagascar produces only about 0.1% of all the world’s cacao, meaning its produce is highly sought after, especially among discerning buyers and in the health and wellness market.

Micro enterprises such as Ladina Yoga, which sources handcrafted products made in Madagascar and hosts wellness retreats there, have also successfully leveraged local connections to help put the country on the map in the eyes of UK and Western consumers. Multiple charities are also active, such as SEED Madagascar (Sustainable Environment, Education & Development in Madagascar), which operates in the south east of the island, managing sustainable development and conservation projects across the Anosy region.

Tourism paradise

Tourism is another high-potential area for collaboration with UK firms.

While getting there can be a challenge — most routes go via Paris, which takes about 11 hours to Antananarivo, Nairobi or South Africa — Madagascar’s uniqueness makes it worth the effort.

This land of lemurs and distinctive baobab trees, and rich in rainforest, also offers incredible beaches and reefs for diving and fishing, as well as a natural, unspoilt landscape that’s perfect for hiking and overland exploration. Wherever visitors go, they are surrounded by plants and wildlife that cannot be seen anywhere else on the planet.

Approximately 95% of Madagascar’s reptiles, 89% of its plant life, and 92% of its mammals exist nowhere else on earth, according to World Wide Fund for Nature (WWF). Culturally, Madagascar is similarly fascinating, not only due to its biodiversity, but also because of its cosmopolitan culture, with origins tracing back to both Asia and Africa.