The current price of rice on local markets in Madagascar ranges between 2,400 and 2,800 Ariary per kilogram, depending on quality. According to Rasoazananirina Feno Anja, a vendor at the Anosibe Pavilion, prices are dictated by suppliers—often Indo-Pakistani importers working in partnership with Malagasy businessmen or politicians.
“We don’t set the price; these suppliers impose their own rules. But since we invest to make a profit, we play along to avoid losses,” the wholesaler stated in an interview on October 20, 2018.
In Madagascar, the inflation rate rose to approximately 8% in both 2017 and 2018. The cost of living continues to climb. The prices of essential goods such as rice, cooking oil, and sugar have reached unaffordable levels for most households, many of which still live in poverty. In 2018, Madagascar made a slight improvement in its Human Development Index (HDI), from 0.512 to 0.519, according to the United Nations Development Programme (UNDP).
Speaking on condition of anonymity, an Indo-Pakistani employee at one of the largest import and retail outlets for essential goods in Ankorondrano confirmed that importers wield substantial influence over pricing.
“Our bosses control the prices of rice and cooking oil. They have unwavering support from Malagasy authorities. It’s important to note that a group of operators holds a monopoly over the importation and distribution of goods,” he revealed in a private interview on January 3.
This source—like several others interviewed for this investigation—named Mbola Rajoanah, former special advisor to President Rajaonarimampianina, as a key figure in this system. Rajoanah and his associates have reportedly colluded for years with the owners of two major appliance stores in Tsaralalana and Ankorondrano to import products without paying the customs duties and taxes that normally apply.
To do so, the goods—mostly rice—are falsely declared as tax-exempt. Sales are conducted informally and in cash, allowing profits to be laundered through luxury markets (precious stones, gold, rosewood) or real estate. These individuals effectively hold a near-monopoly on the importation of several staple food products.
On November 14, Lamina Boto Tsaradia, Director General of Madagascar’s Financial Intelligence Unit (Samifin), addressed this issue of monopoly during an interview. He explained that such dominance is made possible through a series of legal violations and tax fraud.
Notably, 37% of the money laundering cases handled by Samifin are linked to tax fraud, which allows the beneficiaries to reinvest domestically, particularly through the importation of essential goods, construction materials, or clothing. According to Samifin, over 160 billion Ariary in laundered money in Madagascar is directly tied to tax fraud.
A Complex System
Consumers are the primary victims of this system, as they suffer the negative consequences of rising prices driven by the absence of fair competition. Furthermore, the standard 20% value-added tax (VAT) on these products is reportedly passed directly on to consumers. However, the Malagasy government grants certain companies special tax exemptions on essential goods, such as rice, which is exempt from VAT.
According to a recent fiscal expenditure assessment published in November 2018 (see box), the estimated losses for the government—which effectively become profits for those receiving the exemptions—amounted to 18.93% of total tax revenue in 2017.
Box: What Is a Tax Expenditure?
According to the OECD, a tax expenditure is a loss of government revenue due to preferential tax treatment that deviates from the general tax system to benefit specific taxpayers or economic, social, or cultural activities. A study conducted in November 2018 and published on January 18, 2019, by the Fiscal Policy Unit (UPF) of the Ministry of Finance and Budget confirmed that such tax expenditures were used for social purposes in 2016 and 2017, with the stated goal of easing the cost of living for households in Madagascar.
The same evaluation highlights a troubling lack of transparency regarding the allocation of tax exemptions to certain companies. On page 27 of the report, it is noted that even UPF staff members have difficulty identifying the beneficiaries of some exemptions.
This lack of transparency directly affects the pricing consumers must endure. Our investigation revealed evidence suggesting that rice and oil prices should have been stable in 2017. Yet, that year, the prices of these products surged significantly.
In 2018, Madagascar imported 246,534 tons of rice—nearly 20,000 tons per month—according to the Government Program Implementation Report produced by the Ministry of Trade and Consumer Affairs. On the international market, the price per ton of rice ranged from $410 to $442 between January 2018 and January 2019, equivalent to about 1,000,000 Ariary. These prices are considerably higher than those seen in Madagascar, as they are likely subject to speculation by wholesalers and retailers.
Professionals interviewed for this investigation explained that importers often cite adverse weather conditions and poor road infrastructure to justify supply delays and substantial price hikes.
In 2018, customs authorities collected approximately 2,400 billion Ariary in budget revenue. In comparison, an overview of products granted exemptions in 2019 reveals significant potential revenue losses, particularly since these exemptions appear to have no tangible impact on product prices, which remain high.
The lack of transparency in the allocation of customs exemptions and tax breaks encourages misconduct. These practices result in substantial financial losses for the state. It is therefore urgent to reform the system and shed light on the actual cost and economic justification of these fiscal expenditures—both in terms of the sectors involved and the economic operators who benefit from them.
Cover photo source : https://midi-madagasikara.mg/
