Madagascar - Agribusiness - Agribusiness, an important sector in job creation

This sector, which encompasses both primary processing and food processing activities, is the one that contributes most to the production of added value in exports.

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Agricultural, forestry and fisheries exports account for the largest share of value added directly generated by labor (24.1%), while food processing accounts for the largest share of value added indirectly generated by labor over all exports (21.3%). FDI in the search for natural resources is focused on the development of agribusiness in niche markets. Four subsectors with their own dynamics have been identified by the World Bank (Memorandum February 2020):

– The so-called traditional agri-food industry presents strong resilience and significant potential, but also a high degree of concentration and risks of cartelization; this is the case of the vanilla and lychee sectors;

– New high-value agri-food niches using Madagascar’s provenance as a source of differentiation in the market, presenting strong potential for territorial inclusion and development of contract farming; this is the case for cocoa, special honeys and essential oils;

– Other niche exports of high-quality products such as shellfish and tropical exotic fruits, which are based in specific regions and require specialized cold chain logistics;

– Emerging domestically oriented agribusinesses, such as poultry, beef and local rice, which are relatively easier to contest and, therefore, open to investors.

With the expanding economy and increasing urban demand for quality products, an increasing number of national and international supermarkets have opened in Madagascar, providing another example of market-seeking FDI.

Funded by the African Development Bank (AfDB), the Southwest Agro-Industrial Processing Park (Ptaso) is a 25-hectare project that will be established in the commune of Betsinjaka in southwest Madagascar. Purchasing counters for goods and raw materials to be processed will be located there. Dried grains, corn, and cassava, which are abundant in the region, will be processed in this park. Seafood processing plants will also be established there, creating a type of industry that does not yet exist on the Big Island. Numerous infrastructure projects will accompany the establishment of Ptaso. A power plant to supply the industrial zone is already located on site.

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Sugar production

Today, Madagascar imports 100,000 tons of sugar per year, out of a total consumption of 195,000 tons. The Malagasy Agricultural Sugar Company (SASM), formerly SIRAMA, has officially resumed operations. The government aims to no longer import sugar thanks to the proliferation of sugar industries in the country. The objective is to reduce sales prices to benefit the population. SASM's production is estimated at 1,600 tons/year. The resumption of this company's activities will also create some 1,600 direct and indirect jobs in the region, provide livelihoods for 800 sugarcane growers, and ensure production of 15,000 tons of organic sugar, which is in high demand on the international market. Economically speaking, it should also promote domestic trade. Furthermore, other sugar factories are expected in the coming months in three Malagasy regions, in order to increase production and eventually export Malagasy sugar to the international market.

Madagascar offers favorable ecological conditions for the development of aromatic plant cultivation and the production of high-quality essential oils. The Big Island is home to highly diverse ecosystems and an extremely rich natural environment. It boasts sites with high biodiversity potential and a preponderance of flora, with an endemism rate exceeding 80%.

In 2017, the country identified 10,000 endemic plants, 71 aromatic species are known, 30 of which are endemic. Madagascar's essential oils are highly sought-after. Exported to major international brands, these oils are generating increasing demand on the global market. The therapeutic properties of Malagasy plants place Madagascar's essential oils at the forefront of the world. 95% of the production of these oils is intended for export. Ravintsara, Mandravasarotra (saro), and Ylang-ylang essential oils, essential oils of this sector, are particularly sought after by investors.

Ylang-ylang essential oil is widely used in perfumery, cosmetics, and homeopathy. Its floral and jasmine notes attract the biggest names in the perfume industry. It also possesses anti-inflammatory properties, an opportunity for investment in the pharmaceutical industry.