Power cuts and candlelight in Madagascar
| Tim Cocks Antananarivo, Madagascar |
Constant power cuts and rising energy prices are a sensitive issue in Madagascar as most are having to make do with candles.
Since last year when the state's ailing energy company, Jirama, was forced to cut back its consumption of diesel for its thermic generators, or face bankruptcy owing to rising fuel costs and huge debts, severe power shortages have become standard.
And they have crippled business and sparked protests - companies have complained loudly and students fed up with doing their homework by candlelight have rioted and heckled President Marc Ravalomanana over the constant blackouts.
Lalaina, an internet cafe owner in downtown Antananarivo, has had to rely on the bar in his cafe to attract customers as often his seven computer screens are lit up by nothing more than candle light.
He explains, "When it [power cut] happens in peak time it really hurts us because 50% of our customers basically come only for the internet. So it's a bit of a drag for us. Plus its killing the atmosphere, obviously."
Rescue
Donors agreed on a rescue package in February to keep Jirama afloat for some months.
For like a year we didn't have any power. Really, they don't realise how much they are lucky 
Student from Comoros islands
But the company's future, and the energy supply for the world's fourth biggest island, are far from certain.
Even when the power is on, only 15% of Malagasy have access to it - a figure the government wants to increase but lacks the means to do so.
Power crises are hardly unique though. Many African countries suffer them, and many worse than here.
Comorian student, Olivier, says power cuts have made life tough, but that they need to be kept in perspective.
"Where I come from we used to miss power everyday, I mean for like a year we didn't have any power. Really, they don't realise how lucky they are."
Losses
Madagascar's businesses don't feel quite so lucky though.
Many, like the shrimp fishing business, the island's third biggest export, experienced heavy losses last year on the back of power shortages.
Bertrand Couteaux, the general secretary of Unima, the biggest shrimp export company says: "The impact of the Jirama crisis on the shrimp industry has been that we have to produce our own energy.
"We have no choice, we have generators because we have freezers in a cold chain and we cannot have any shortage of energy supplies. It's a high price for us.
"Our operating cost is increasing with the problem of energy. We face big problems."
Thanks to a recent influx of emergency donor money, the power cuts that hurt business so badly last year are getting rarer.
Subsidies
But what is the origin of Madagascar's power crisis? The answer is shockingly simple.
During its flirtation with Marxism that began in the 1970s, the state effectively subsidised electricity prices that it couldn't afford.(My emphasis added)
As Jirama spokesperson, Dominic Ratsimbazafy, explains: "The problem is financial. Through the years, we have always sold electricity cheaper than the cost of production. The result: the financial situation of the company is in a big deficit.
"It's a question of first redressing our financial situation for two years. And, then we can talk about developing the company."
Light or not
Measures to redress Jirama's long term financial health include hefty price increases, cracking down on electricity thieves who hook themselves up to power lines using dangerous do-it-yourself methods, and a move away from expensive petrol generators to hydroelectric power.
Unsurprisingly, price increases are the least popular. Yet more increases are due soon.
And Olivier probably speaks for most when he says, "No, no, no. People are really crying everywhere. Myself, I'm paying twice the price I used to pay. There are people who are going to make the choice between having light and not to have it - because they can't pay their bill."
Potential
Less controversial but much harder to implement are the plans for hydroelectric power, which has enormous potential but currently serves less than half of Madagascar's needs.
Christian Lempelius, a sponsored hydropower project worker, outlined the advantages, "It's a local resource. No need to import sophisticated equipment as for, for instance, wind generators. The rest is a channel in the water, from a river, and you just drop it somewhere.
"Hydropower in the long run will also be cheaper."
If this is the case though, why haven't they done this earlier?
Hydropower needs a lot of time, and a massive initial capital investment.
But if the government is to have any hope of meeting current energy demands, let alone bringing power to rural areas and move beyond the current poor 15% rate of access, then it is surely one they will have to make.
Much may also depend on whether donors are ultimately prepared to foot the bill.
Until they do, the Malagasy will have to make do with power cuts and candlelight.
Thanks to Jim for forwarding this to me. I'll post more as I find/get them.
April 18, 2005
PAGE ONE
Relief Effort New Bush Strategy
On Aid Faces Test In Madagascar
U.S. Lets African Nation Pick
Ways to Use $110 Million;
Corruption Remains Issue
Loan for a Flower-Oil Seller
By MICHAEL M. PHILLIPS
Staff Reporter of THE WALL STREET JOURNAL
April 18, 2005; Page A1
ANTANANARIVO, Madagascar -- When the Bush administration invited Madagascar a year ago to apply for aid under a new U.S. program, government officials here came up with a wish list of traditional development projects: a new hospital, more school spending, aid to rice farmers. They even put together a PowerPoint presentation they thought would wow the Americans.
U.S. officials weren't impressed. "Can you convince us that this is going to bring economic growth to reduce poverty?" asked Clay Lowery, a top official with the Millennium Challenge Corp., the overseer of the president's program.
Madagascar's leaders couldn't. So they began meeting with groups across the country, asking where the bottlenecks to economic progress lay. Officials kept hearing the same two complaints from farmers and small businesspeople: They couldn't get formal title to land because of a corrupt and decrepit bureaucracy, and they couldn't get loans because banks were growing fat investing in government bonds.
Today, Madagascar President Marc Ravalomanana will be in Washington to attend the signing of a $110 million, four-year aid package designed to fix those problems. It's the first grant ever under Mr. Bush's Millennium Challenge Account program -- and a test of whether the U.S. has found a better way of delivering assistance.
President Bush announced the program to great fanfare in 2002, vowing that he was committed "in my soul" to relieving Third World suffering. It's run separately from other aid programs by a government-funded corporation whose seven-member board includes two outside representatives. What makes this program different, according to the Bush administration, is that it will channel money only to poor countries with worthy governments -- those that encourage free markets, govern honestly and provide their people with health and education. Millennium Challenge officials want to let the locals decide how best to use the grants, demanding only a measurable impact on economic growth.
Madagascar's hunt for its share of the new money shows both the opportunities and hurdles of the Bush approach. The process has helped Madagascar identify the most critical issues for growth, but it's not clear that aid from overseas can overcome long-established obstacles, such as corrupt land officials and banks that don't want to give up a cash cow.
The World Bank already tried to fix the land-title problem by computerizing records five years ago; computers arrived, but there wasn't enough money to keep them operating for long.
In an interview, President Ravalomanana says things will be different this time. "This is a good way to kick-start our development program," he says. "It's our idea. It's our strategy."
The U.S. also badly wants a success in Madagascar. It has taken three years since the Millennium Challenge program was announced to choose the first aid recipient. Sixteen other countries have been deemed eligible to participate but haven't received money yet. The program's budget is also smaller than Mr. Bush originally promised: $2.6 billion combined in this fiscal year and last compared with the president's original proposal for $5 billion over the two years. Progress in Madagascar would help Mr. Bush make the case to Congress for fuller funding in years ahead.
An island larger than California off the southeast coast of Africa, Madagascar was run for decades by a military man, Didier Ratsiraka, who modeled his economic policies on North Korea. The nation stagnated and had to import some of its staple food, rice, from Asia. Per capita income was under $300 a year and Madagascar produced only a trickle of exports, such as gems, vanilla and spices.
In a 2001 presidential vote, President Ratsiraka faced off against the 55-year-old Mr. Ravalomanana, a millionaire businessman who started an agribusiness empire selling milk from a bicycle. Mr. Ravalomanana had won a devoted following as mayor of Antananarivo, the capital, by cleaning garbage off the streets. The incumbent won the election but was accused of vote-rigging. After massive street protests and a near civil war, he fled into exile.
Mr. Ravalomanana became president and quickly became a U.S. favorite for his businesslike style. The president grades his cabinet members, granting the best ministers bonuses far greater than their measly government pay and firing the worst. The economy, which shrank 13% during the turmoil in 2002, has begun to recover although inflation has been a worry recently.
Last May Mr. Ravalomanana received a letter from the U.S. announcing that Madagascar's government was judged sufficiently honest and market-minded to apply for a Millennium Challenge grant. The job of landing the grant eventually fell to Emma Ralijohn, a 38-year-old adviser with two business-related Ph.D.s who had been teaching at a local business school.
After the Bush administration nixed the initial suggestions for hospitals and schools, Ms. Ralijohn decided to go door-to-door polling Madagascar people, known as Malagasy, in all walks of life as well as foreign aid specialists. What she heard persuaded her to focus on rural areas where three-quarters of the 17.5 million Malagasy live. "We can't just build factories in the cities -- there would be economic growth, but not poverty reduction," says Ms. Ralijohn.
On the U.S. side the point man was Michael Grossman, a 40-year-old former Citibank executive in Africa. Over months of commuting between Washington and Antananarivo he came to realize just how much stock Malagasy put in the prospect of a grant. On one trip he found his photo in a local newspaper next to the headline: "Michael Grossman Will Reduce Poverty Through Economic Growth."
The result of the work -- including a "National Consultation" in September among 200 Malagasy -- was a plan that won U.S. support. The grants being announced today include money to install computers at land offices and develop a new system under which municipal authorities and local elders, who often know whose land is whose, can issue simple certificates of title. With this certificate, it is hoped, a landowner will be able more easily to sell his land or use it as collateral for a loan.
In the banking arena, the U.S. grant will help Madagascar ensure that offices around the country sell government bonds to individuals. The goal is to get banks to focus on what the U.S. believes should be their main business: finding creditworthy borrowers. The Millennium Challenge money will also finance an extensive study to determine the best way to move Malagasy peasants from a plow-to-mouth existence into the market economy.
This isn't the first instance of donors letting Malagasy take the lead in setting aid policies. The World Bank sponsors nationwide discussions to set antipoverty priorities and, unlike the U.S., contributes to the Malagasy government's general budget.
The U.S. is hoping for better results by focusing on a few entrenched problems. Land titles are among the worst because of a system inherited from the French colonial era (1896-1960), when the colonists tried to make their lands safe from native claims. Instead of simply registering titles, as is done in most countries, the Malagasy state guarantees that a title denotes ownership.
The formal titling process involves 24 steps and moves so slowly that just 330,000 parcels have been titled in the past century, with an estimated 500,000 applications still pending, according to the government. The title books and maps in the main land office in Antananarivo are crumbling to dust and torn scraps of records are stuffed into cardboard boxes under the stairs amid spider webs and empty water bottles.
"We can't keep up with the requests," says Henri Raharison, director of the national land office, who blames inadequate staffing.
The situation has created a rich vein for corrupt officials to tap. The wealthy and connected get titles to their land while the poor do not, says Marius Ratolojanahary, secretary general of the agriculture ministry.
On a typical day the land office is mobbed by petitioners such as Helen, a 54-year-old woman with long black braids, black pants, black shirt and tinted sunglasses. She says she has been coming to the land office every two weeks since 1998, when she paid $65 for title to 4,400 square feet of land in Antananarivo. Helen, who asked that her full name not be published for fear of reprisals, says the official who took her money promised that it would cover all the fees and taxes. So far she has gotten nothing. "Each time I come here, they say come back in two weeks," she says. "They eat our money, and they get rid of us."
Most people don't bother to apply for titles, and that stifles investment and economic growth. "People are not going to invest if they don't have clear property rights to their land," says Mr. Grossman, the U.S. official.
In Antsirabe, a farm town three hours south of the capital, Fenosoa Raheriarivony, a 52-year-old shopkeeper, has been hunting for two years for 5,400 square feet of land. He wants to build a factory to package juice from local grapes, peaches, pears and apples, a project he thinks would create five new jobs. But he finds properly titled land too expensive, untitled land too risky. "You never know if they really own it," he says.
An earlier effort by the World Bank to fix the land-title problem foundered. A few years back, the bank funded an effort to computerize the tattered paper records of the land-title office in Antsirabe and 19 other places.
Turn on the computer in Antsirabe these days and what appears on the screen are the icons for Solitaire and Minesweeper. The land-title database has disappeared into a digital netherworld. There's nobody in the office who knows how to fix it. The office director's annual operating budget, excluding staff salaries, is $200. The World Bank pulled its funding after it realized the enormousness of the land-reform task.
U.S. officials say the new grant's novelty isn't necessarily what it's funding, but who it's funding -- President Ravalomanana and his change-minded team. The agriculture minister says he plans to dismiss the head of the land office and replace him with someone younger and more energetic.
The second plank of the Millennium Challenge program in Madagascar is to jump-start the country's anemic banking system. Just 200,000 Malagasy have bank accounts, and it takes up to 20 days for a check to clear. Every day representatives of the seven commercial banks in Madagascar, including local operations of such big French banks as Société Générale SA and Crédit Lyonnais SA, gather around a table at the Central Bank of Madagascar and swap thousands of checks, figuring on calculators how much each bank owes the others.
Banks in Madagascar pay depositors low rates of interest, float checks for weeks on end, and invest much of their money in government bonds that pay about 18% interest instead of risking it on business loans that might generate economic growth. Officials estimate the banks earn about one-third of their profits by taking advantage of the long time it takes to clear checks.
Much of the economy runs on cash. The 30 teachers in the village of Miandrarivo shutter the school once a month and walk 50 miles into a slightly larger town to collect their pay. The roads are too rough for a car or motorcycle. The teachers travel in a group to fend off bandits.
In Antsirabe, Janine Rajaonarivelo, 53, buys eucalyptus, local marigolds and other plants from farmers, extracts the oils and sells the products to middlemen who export them to France, Belgium and the U.S. She says she can fill only about 10% of her orders because she doesn't have enough money to expand her backyard operation. But she has been unable to get a reasonably priced loan. When desperate she turns to loan sharks, who charge her 25% a month.
The bankers say they don't get many creditworthy loan applications. The country has only 70 certified public accountants, so few small businesses have reliable financial statements.
One of the new U.S. grants will help make government bonds available to small investors nationwide and in smaller denominations than the current minimum of $30,000. The idea is to drive down interest rates and force banks to seek profits elsewhere. The U.S. money will also aim to automate the payment system to reduce check-clearing to 48 hours.
Of course, plenty could go wrong. It could turn out that Malagasy banks don't want small rural parcels of land as collateral. The corruption at the national land office could simply migrate to municipal land offices. Or political turmoil could re-erupt. A previous donor-funded effort to modernize the check-clearing system was interrupted by the political crisis that brought Mr. Ravalomanana to power.
Another issue is whether bankers will try to block the changes in parliament. To minimize that chance, the Malagasy government doesn't plan to release the details of the U.S. aid plan until after today's signing. "They're going to absolutely hate it," says Mr. Grossman of the bankers. But "our interest is not the profitability of the banks. Our interest is in economic growth. To get economic growth you need a functioning banking system."
Write to Michael M. Phillips at michael.phillips@wsj.com1