Madagascar’s finance minister seeks partners in power

Q: In what sectors in Madagascar do you see the greatest growth potential in terms of foreign investment?

A: Today we have three principal sectors in which we solicit FDI. We have the textile sector, building and public works, and tourism. More recently we have the energy sector, which is in strong growth. We need investment for energy. Today, access to electricity is still very weak. Madagascar does not have sufficient infrastructure to produce electricity.

Q: Less than one-fifth of Madagascar’s population has access to electricity and the country suffers frequent power outages. What energy projects are under way to address this issue?

A: We have three big projects. For solar energy we have the [World Bank] Scaling Solar project. It involves several phases; the first phase will cost $120m. In this project there will be guarantees from the Multilateral Investment Guarantee Agency and the World Bank to help the external private investors. In Madagascar there is also a lot of potential for hydroelectric power, so we have two big projects: a French hydropower project with [engineering company] Eiffage for 200 megawatts that will cost $580m, and another one in partnership with China costing $200m. So there is a diversity of investors. China is trying to find opportunities in Madagascar.

Q: As an emerging economy, what guarantees and incentives do you offer investors entering the market?

A: The biggest and best incentive we offer is macroeconomic stability. In [the World Economic Forum’s most recent] Global Competitiveness Index, Madagascar improved its ranking, because we’ve had a good growth rate for four years and we have mastered our inflation. It also means that we have a stable currency, at the [current] level of exchange rates, and it is an environment that is favourable for investing. We have also simplified our taxation, and the number of taxable categories has fallen to two: taxes on corporate benefits, and value-added tax. Thus the procedures are simplified. 

Q: What policies does your government have in place to strengthen the rule of law and combat problems such as corruption and money laundering?

A: We are trying to strengthen our institutions and our laws to attract investors, because we know that the major concern of investors is corruption, and an investor does not come if there is no judicial security. We have come out with a law against corruption and have another one that is not out yet on money laundering. That one [will have been] presented to parliament in November. And Madagascar is co-operating with international authorities in the struggle against money laundering, financing terrorism and corruption.

Q: French BPO company Teleperformance is expanding in Madagascar's capital, Antananarivo. Do you see this as the start of Madagascar becoming a BPO and financial services hub?

A: I will be frank: we do not have competitive advantages to [deliver] this in Madagascar, compared with the Seychelles or Mauritius. But from our side, the island is vast and we have opportunities in agriculture, mining and the processing industries. We hope to highlight [our strengths here, as opposed to being in] financial services. Furthermore, in order to [compete in financial services] we would need special legislation for offshore and other issues. We do not yet have the legal framework, the institutional basis, and thus we are not at all competitive.

Q: Among Madagascar’s top export products is nickel, and the country also has significant graphite reserves, a mineral growing in demand due to its use in electric car technology. Do you see increasing investor interest in this area?  

A: We have lots of mineral resources, and we have two big multinationals working with us. These are Rio Tinto for ilmenite and Ambatovy for nickel. We have ilmenite and nickel [up and running], and there are further opportunities for graphite. What we are seeking is investors that are ready to work in the sector but not be involved in speculation. And we are opening our business affairs centre, inaugurated in September, so that investors know where to go when they arrive.