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How Covid-19 is hitting Madagascar's growing economy [Business Africa]

Ruth Lago - Business Africa   -  
Copyright © africanews

Business Africa

In this episode of Business Africa, we look at Madagascar's growing economy and the effects of the coronavirus pandemic.

Next, we turn to Kenya and a project to make 5% of vehicles electric by 2025.

And finally, in Cameroon's far north we speak to some of the hundreds of families that have struck vegetable gold in onion production.

Madagascar's economic boom

Before the coronavirus pandemic, the Malagasy economy was on an upward trajectory. The pace has accelerated over the last five years, reaching an estimated growth rate of 4.8% in 2019, a record level over ten years.

In 2021, a group of private Malagasy companies expects a growth of 5%, despite the health crisis and to achieve this, the collaboration of public authorities is expected. To shed some light on this.

Africanews spoke to Thierry Rajaona, chairman of the Madagascar Business Group (Groupment des Enterprises de Madagascar).

Question: What are the economic impacts of the Covid-19 pandemic especially on Malagasy companies?

"Madagascar was on an upward trajectory and unfortunately 2020, the year of the Covid-19 pandemic has had a catastrophic impact on the Malagasy economy.

"We have officially experienced a 3.8 percent decline, which has not been seen for over a decade. From the moment that external markets closed down, whether it be in services or the industry, this has had an immediate impact on the Malagasy economy.

"To mention only two major sectors. The first one is tourism, which directly employs about 45,000 people and supports more than 300,000 in Madagascar. Overnight, we pretty much had zero tourists.

"Another sector that was also developing strongly was the mining industry. As you know, Madagascar produces nickel, cobalt and ilmenite. We have about 6% of the world's production. But not only because of the closure of the Chinese and American markets, but also because of the sharp drop in the price of nickel, which is at a historically low level, the plant closed from March 2020 and this caused a sharp drop in exports."

Question: A growth rate of 5% this year, despite the Covid crisis. But the private sector will not be able to do it alone, going by your words, how can that be achieved?

"Given the global context and the local economic policies in Madagascar, we doubt the country's ability to achieve this 5 percent growth rate.

"At the beginning of the year, the World Bank and IMF have issued more modest forecasts. The IMF projected a growth rate of 3.2 percent. The World Bank is more pessimistic, forecasting 2.1 percent.

"But we thought, we naively thought that it was quite possible to have a significant turnover of around 5 percent. If the authorities adopted a Keynesian stimulus policy with massive investments in infrastructure, which we really lack and also invested in agriculture.

"For example, Madagascar, which is one of the biggest consumers of rice in the world, the third-largest per capita, could instead of importing 10% of its rice, be self-sufficient in a very short time. And maybe, even export rice to Africa.

"We have this capacity to bounce back quite quickly, by investing in infrastructure through debt. I would like to point out that despite the fact that many African countries are over-indebted, this is not the case of Madagascar.

"The country’s debt rate is one of the lowest in Africa. It stands at nearly 40 percent, and our technical and financial partners are in full agreement: We have the capacity to significantly increase our public debt, either by increasing the number of foreign partners or by draining the national share."

Question: Tell us about this scheme for obtaining loans granted by the banking system to SMEs, will it be a favourable solution?

"Guarantees were made thanks to a World Bank loan that made it possible to ensure up to 75% of cash flow credits or investment credits that were a real lifeline for both Small businesses and Small and medium industries. This guarantee was just set up at the beginning of the year. It is true that the pandemic started a year ago. But better late than never.

"And we think that this guarantee that has just been put in place, will be able to help.

"But this help will be quite limited, as these funds amount to 24 million dollars, which is a relatively small amount, in our opinion, compared to the needs of the Malagasy economy. But it's better than nothing and we hope that in a second phase, once this guarantee has been completely exhausted and we see how effective it is, the authorities will be ready to expand and put in additional large amounts."

Electric vehicle ambitions

The Kenyan government has launched an ambitious project to make 5% of all vehicles electric by 2025.

The East African country wants to strengthen its environmental policy on the reduction of gasoline-powered cars. The new law has already succeeded in persuading some transport companies, who now use electric vehicles.

You can watch the report in the player above.

Cameroon: Godola onions cross the border

In the far north of Cameroon, young people have decided to stay in their villages and grow onions as their primary source of income. In the villages of Waza, Double and Makilingai, the most prominent activity is onion production, which amounts to 300,000 tons per year. A report by our Cameroonian correspondent Joël Koaum can be seen in the video player above.