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Investment opportunities in Madagascar

Tourism:

The tourism sector in Madagascar is considered to be one of the most dynamic sectors of Madagascar. There is a strong potential for growth in tourism and has shown a 21 percent increase in foreign arrivals between 2004 and 2005. Madagascar offers attractions that have the potential to appeal to both the residents and tourists alike.

The popular attractions for the tourist in Madagascar are : golf, fishing, a unique natural ecosystem, and miles of beaches. Opportunities for investment exists in building up of hotels since there are few that are  and few flagship resort hotels or ecotourism hotels on the island.

The other attractions present specifically in the African region which provide opportunities for investment in safari, beach, adventure, cultural and ecotourism holidays as well as opportunities for business travel. At the early stages of investment, anchor or magnet projects create the base for future investment.

Some of the cities in Madagascar have become major centers for tourism investment with a full complement of hotels catering to local and foreign tourists. These investments are typically made by foreign investors, but often in partnership with local people who are equally skilled at negotiating with government. These anchor – or Greenfield investments require financial engineering suited to the hotel sector. Ownership and operations are often kept separate, with one company owning the building and an the other one operating it , managing or leasing it. Ownership companies are suited to local and foreign investment with substantial equity (20-50 percent of investment) and long-term loans consistent with real estate financing. Thus in this context, investors look for the additional comfort that guarantees can offer on the equity and associated long-term lending.

Transportation :

From the year 2002, the government has committed itself in maintaining the existing network and building up new roads. In 2005, as much as 8,982 km of roads were rehabilitated. The method of road transportation remains as one of the principal mode of transport since as much as 90% of the national transportation of people and goods rely on it.

The railway network of Madagascar is 895 km long and is made up of two networks.Firstly, the 732km-long Antsirabe-Antananarivo-Toamasina North network and secondly, the 163km-long Fianarantsoa-Manakara South network. The government aims to rehabilitate the entire network, gradually by 2011.

The country has 55 airports, two of which are accessible to jumbo jets (Ivato and Nosy Be). Air traffic covers the entire Malagasy territory. There are five companies operating in Madagascar for Internationals flight: Air Madagascar, Air France,Air Mauritius, Corsair and South Africa Airlines. In 2005, the Malagasy government adopted an open sky policy to develop further this sector.

Madagascar offers a wide range of harbors both for international and national navigation. The island has 17 ports of which Toamasina is the main one for international traffic. One additional international port is expected to be operational in Toalagnaro within the coming year. An extension of the Toamasina port is under construction for the exportation of cobalt and nickel.

Concessioning principal airports for reconstruction as well as privatizing the management of the 400 km Pangalane canal along the East coast will create opportunities for investors.

Mining Sectors :

Madagascar is considered to hold 50%of the world’s sapphires, as well as other semiprecious gems such as amethyst and beryl. Madagascar also has deposits of iron, nickel, graphite, bauxite and uranium. The country has deposits of lesser-known minerals such as vanadium, a metal used in high-strength steels and titanium alloys, and ilmenite, used in pigments and whiteners from toothpaste to paint. Yet mining accounts for less than 4% of gross domestic product. The countries incredible bounty remained mostly untapped because of years of socialist governments that discouraged foreign investment and failed to improve infrastructure.

Foreign mining companies are flocking to Madagascar. Two of the biggest investments are in nickel and ilmenite.

Food & Beveraging Processing Sector :

The food and beverage processing sector refers to the manufacturing, processing and preservation of meat, fish, fruit, vegetables, oils and fats; manufacture of dairy products, manufacture of grain mill products, starches and starch products and prepared animals feeds, manufacture of other food products (e.g. bread, sugar, chocolate, pasta, coffee, nuts and spices) and the manufacture of bottled and canned soft drinks, fruit juices, beer, wines, etc.

The firms in Madagascar presently have lesser imports as compared to those in other parts of the sub-Saharan country. Even packaging materials are generally locally sourced. Many firms are positive about the potential for growth in the agribusiness sector of the country. Being the 4th largest island in the world, Madagascar has a potentially large access to available seafood. Many investment opportunities hence exist in Madagascar’s high quality and globally renowned shrimp industry and seaweed industry. Incentives from industrial free zones (EPZ) create a number of benefits for investors and many have already shifted production from Asian locations.