Madagascar: an untapped investment
Africa Opinions

Madagascar: an untapped investment

By Hasnaine Yavarhoussen – Chief Executive Officer, Groupe Filatex,

Well-known for its unique fauna and tropical climate, Madagascar is an enchanting travel destination for any visitor.

Most would agree there is nowhere else on the planet with the sheer wealth of natural resources one will find in Madagascar.

However, its potential as an investment destination stays rather unexploited. The competitive advantages that the island offers are plenty, yet they remain broadly untapped — a phenomenon that still baffles certain seasoned investors I come across.

Despite the challenges of the past, the country has come a long way to improve its economic outlook, reduce poverty and increase access to basic services.

At Groupe Filatex, we want to support Madagascar to deliver an innovation-driven and competitive economy, based on its natural merits and unique heritage.

Natural Resources

Combining arable land with multiple climatic variants that serve many agricultural activities, Madagascar could easily become a regional agro-industrial power: about half of its land is cultivable, and yet only around 5% of the total land area is currently planted.

This is despite the excellent constitution of its soil, which has made Madagascar’s produce, such as vanilla and chocolate, internationally renowned.

With its richness in oil, rare metals and gemstone reserves, the island is brimming with fertile ground for exploration.

Moreover, thanks to its 5,000 km of beaches and breath-taking landscapes, coupled with underdeveloped sites and increasing tourist demand, there are big investment opportunities in the hospitality and tourist sector, which are currently unexplored.

Not to mention the opportunities for any renewable energy company. With an annual average of 2,800 hours of sunlight, the country is gifted with tremendous solar power capacity, estimated at 2,000 kWh/m² per year.

At the same time, there is significant wind power capacity and, while the hydroelectric potential is equally big, its current exploitation reaches only 1% of that.

Seeing this, when I became Groupe Filatex’s CEO, I decided to focus our investments on renewable energy – initially solar and, this year, we will introduce Madagascar’s first 2 wind farms.

Economy and Governance

When it comes to its economy, Madagascar is an open market that has enjoyed increasing regional integration and economic growth during the last years.

It has signed longstanding trade agreements (quota and duty-free) with American, European and other advanced markets.

Its strategic location between Africa and Asia is ideal for exporting goods and services to regional markets and the new African Continental Free Trade Area (AfCFTA), which came into force this year, promises to make Madagascar and the whole region more competitive and synergic.

The island has a strong presence in major maritime routes, with ports (including Toamasina in the east, Toliara and Ehoala in the south) providing excellent facilities for trade and transportation of goods.

The existence of several high-quality free zones gives an advantage to international businesses, a service that Groupe Filatex facilitates with over 145,000m2 of free zones operating in key sites across the country.

Most foreign investors do not know that, over the past years, the Malagasy governments have performed several regulatory and structural reforms, leading to a significant improvement of the country’s business environment.

The public and private investments in infrastructure (roads, ports, airports, telecommunications, and energy) have reduced the costs of doing business and the recent rapid digitalisation of the public sector has improved the quality of its services.

Moreover, the Economic Development Board (EDBM) offers a one-stop facility for registering new companies, which can be completed in just 4 days: one of Africa’s shortest times required to set a new company, comparable to the most advanced economies.

In addition, intellectual property and property rights are protected by law thanks to guarantees against nationalisation or expropriation.

There are no restrictions on capital flows — neither for debt services nor dividend payments — and there is no requirement that nationals own shares of foreign companies, a rule often observed in the rest of the continent.

Malagasy Heritage

Last but not least, I would like to make a special reference to Madagascar’s people. The Malagasy workforce is young and skilled, while low logistic input and labour costs are attractive for international businesses that seek to invest in local talent.

Apart from its capable and efficient labour force, the country’s cultural diversity combined with its social cohesion is noteworthy too: culture forms a key part of Malagasy lifestyle and it has evolved over the years to enhance its traditional heritage in harmony with modern standards in the arts, its cuisine and architecture.

At Groupe Filatex we are extremely proud of our Malagasy heritage and we are committed to protecting it whilst giving back to our communities.

We are well-aware of the challenges and we want to keep contributing to the broader economic and social development objectives of our country, leading by example in what we do.

Hasnaine Yavarhoussen – Chief Executive Officer, Groupe Filatex

 Since taking the reins of Groupe Filatex in 2011, Hasnaine has reformed the business’s structure and strategy. Today, Groupe Filatex has become a major player in Madagascar’s real estate, free zones and energy sectors, and is now looking to export its expertise internationally.

Hasnaine has also been instrumental in delivering programmes that will leave a lasting impact on Madagascar, to support the country in reaching its economic and social development goals. Through these efforts, Groupe Filatex aims will create high-quality jobs across the country, helping to support Madagascar to deliver an innovation-driven and competitive economy.