By Ford, Neil
African Business , No. 328
The Malagasy incumbent president, Marc Ravalomanana has won a second term of office as a result of his success in December's election. The constitutional court has confirmed that the self-made millionaire secured victory in the first round of voting, overcoming a number of other candidates who divided the opposition vote.
His government has made some progress in strengthening the economy over the past five years but his chief tasks now will be to boost living standards in rural areas, maintain political stability and improve the dire power supply situation.
Ravalomanana took 54.8% of the vote, against 11.65% for the second placed candidate, Jean Lahiniriko, who is a former speaker of the National Assembly. Former president Didier Ratsiraka's nephew, Roland Ratsiraka came third with 10.14% of the vote, in an election that saw 61.45% of the 7.3m enfranchised Malagasy population exercise their right to vote.
The president will now seek to continue with his economic reforms that are derived from his own business experience. He is nicknamed 'the Milkman' because he made his original fortune in the dairy industry.
During his first term of office, Ravalomanana began to tackle the entrenched rural poverty that has helped to destabilise the country in the past. He has focused government resources on improving the island nation's road network in order to enable small scale farmers to transport their goods to local markets. Around 80% of the population relies on agriculture and forestry, although the sector generates just 27% of GDP. He has also continued the move away from Madagascar's socialist traditions that began under Ratsiraka.
Several state owned companies have been sold off and economic growth has increased, although much of this has merely served to compensate for the 12% fall that followed the 2001-02 political crises. However, some progress on diversification has been achieved. For instance, a textile sector has emerged as a result of the US African Growth and Opportunity Act (AGOA), while attempts have been made to unlock the country's huge tourist potential.
As elsewhere in Africa, access to credit for small and medium sized enterprises (SMEs) remains problematic but the increasingly stable economy enabled the Central Bank of Madagascar to massively cut base rates from 16% to 12% in August 2006. The bank's governor, Gaston Ravelojaona, commented that "in the context of relative macroeconomic stability, monetary policy, while remaining prudent, can be more oriented towards the support of investments and economic growth".
Blackouts hit industry
However, more broadly based economic growth will be difficult without increased investment in the power sector. Around 85% of the population still does not have access to electricity and even those that are supplied have been subjected to regular power cuts over the past few years.
Blackouts make life difficult for most non-agricultural businesses. The crisis has been caused by the rising oil price and the inefficient operations of state utility, Jirama. The company relies on small diesel fired power plants to provide much of its generating capacity and it has been unable to import as much feedstock as required because of high prices.
Some of the solutions will take years to implement. For instance, the government hopes to develop several major hydroelectric schemes to replace the ageing and costly diesel fired plants. New hydro plants have not been constructed in recent years because of the high initial investment required but opting for hydro would certainly be cost effective. Over reliance on any form of power generation is dangerous but Madagascar has not been affected by fluctuating rainfall patterns to the same extent as continental eastern Africa and the country has few other technically or financially viable options. …