28/06/2018. It takes just two seconds of reflection to realize that World Trade has never been so intense. At the end of May 2018, the OECD (Organization for Economic Co-operation and Development) announced that for the eighth consecutive quarter, G20 international merchandise trade has grown by +5.8% for imports and +5.3 % for exports.
This is the fastest pace of growth in the last two years. The WTO (World Trade Organization) for its part, estimates that world exports of commercial services almost doubled in 10 years ($ 2.9 trillion in 2006, $ 4.8 trillion in 2016). This is important to know because it means the market is in demand. Just bear that in mind, we will come back to that later.
For now, let’s look at this waltz of raw materials, agricultural equipment and services of all kinds, and the system without which nothing can be done, namely the global financial system. To keep up, it must be solid. Fortunately, even if it showed some signs of weakness here and there, the system is indeed strong: major international consortia as well as small actors of local scale can now make and receive payments to and from around the world. However, there are always exceptions. An irrepressible large island in the Indian Ocean seems to be withstanding the facilities brought by globalisation.
Madagascar’s place in the world
Ok, ok, no need for you to go crazy in the comments section yet. I’m not saying that Madagascar is the forgotten child of globalisation. Hard to escape Coca Cola, Facebook, and the Hyundai Starex (trendy in Madagascar at the time I’m writing this article). But the kind of globalisation that interests us here touches the nerve of the war : money. And you will see that there’s not only Facebook in life.
Here are some reminders for you. Madagascar is a member:
- of the General Agreement on Tariffs and Trade (GATT) since September 30, 1963
- of the IOC (Indian Ocean Commission) since the institutionalisation of the organization on 10 January 1984
- of WTO since 17 November 1995
- of IORA (Indian Ocean Rim Association) since the organisation’s inception in 1997
- from COMESA (Common Market for Eastern and Southern Africa) since 29 June 1998
- of an Economic Partnership Agreement (EPA) between the European Union and Eastern and Southern African Countries since 29 August 2009
- of the African Growth and Opportunity Act (AGOA), expelled in 2010 and reinstated in 2014
- of the Southern African Development Community (SADC) since April 1, 2015
With that in mind, it would be a lie to say that the large island is alone in its corner. If we want to go a little further, we can also look at its main economic partners, which are:
- For imports:
- China (21.2%)
- France (6.9%)
- India (6.5%)
- the United Arab Emirates (5.6%)
- Saudi Arabia (5%)
- and South Africa (5%)
- For exports:
- France (23.5%)
- The United States (12.8%)
- Germany (8.3%)
- China (6.3%)
- Japan (5%)
- The Netherlands (4.3%)
- and South Korea (4.2%)
Information source: CIA The World Factbook, 2016 figures.
As for the export and import volumes of goods and services from Madagascar, they were respectively $ 3.246 billion and $ 3.556 billion in 2016 (source: World Bank). In comparison and over the same period, the trade balance elements of the neighbouring islands are as follows:
- Seychelles :
- Export: US $ 1.339 billion
- Import: 1.544 billion US dollars (source: WTO)
- Export: US $ 362.8 million
- Import: 5,587 billion US dollars (source: Insee)
- The Comoros :
- Exports: 106,681 million US dollars
- Imports: US $ 292.294 million (source: World Bank)
- Exports: US $ 5.728 billion
- Imports: US $ 6.881 billion (source: World Bank)
As for the World Bank, it places us 32nd out of 48 in its Doing Business 2018 ranking in the Sub-Saharan Africa region, and 4th in the Indian Ocean after Mauritius (first in the regional ranking), Seychelles and Comoros (!).
In short, it’s to say that yes, Madagascar is doing business with the world (not just with France, no offense). But in the face of all this nebula of free trade agreements for goods and services, the question now is whether the means of payment available today make it possible to “waltz” serenely and above all, at the right cost as commercial exchanges evolve.
International payment methods to receive money in Madagascar
Voluntarily, the payment methods listed below exclude those limited to one country only and do not list other more or less informal ways of making a transfer. These are certainly practical and inexpensive, but may seem dodgy due to their lack of official billing.
Rates are also not indicated, and for good reason: they evolve. Their relevance will become debatable over time or, worse, may be misleading.
11 institutions currently hold a banking license in Madagascar and can therefore be called, without fear of misinterpretation, banks. Let’s start with the 4 that we would call historic:
- BNI Madagascar
- BFV-Société Générale
- Bank of Africa Madagascar (BOA)
- Malagasy Bank of the Indian Ocean (“Banque Malgache de l’Océan Indien” – BMOI)
Then come the “new” comers, who have been settled for the last ten years or so, and who bring a little exoticism to the sector by doing microcredit or targeting a niche market:
- The Mauritius Commercial Bank Madagascar
- BGFIBank Madagascar
- SBM Madagascar
- SIPEM Bank
- Baobab (formerly Microcred Bank Madagascar)
- AccèsBanque Madagascar
- BM Madagascar
Not all of them provide the same level of amenities and services. For example, the 4 historic banks have the most agencies in Madagascar, the BOA leading with more than 110 branches in the island, followed by the BNI which has more than 70, then the BVF-SG with sixty and, closing the march, BMOI and its twenties agencies (2018 figures).
But beware, everything changes as soon as we look at services such as the quality of the reception, the waiting time or the execution time of an order. At this game, the BMOI is the champion with impeccable service at the height of its pricing (do not forget, quality has a price …). Then come the BNI, the BFV-SG and the BOA.
It goes without saying that banking is privileged in Madagascar as soon as you touch international trade : SWIFT bank transfers, bills of exchange, promissory notes and, more rarely, bank cards. The advantage lies in the fact that we rely on a capable and experienced financial institution whilst having access to different payment techniques, some of which guarantee cashing, against payment obviously (documentary credit, stand-by letter of credit , etc.).
On the other hand, the disadvantage remains in the heaviness of the system, heaviness inherent to payments in currencies and the complexity of the exchanges in the international banking network. And it’s also due to lengthened processing times or delays, especially in cases where non-conformity is noted. Result: 2 to 5 days waiting to see the funds arrive, then there is the currency value on that date to be taken into account – it’s something those who regularly make international transactions know very well :-).
Finally, there is the cost, dissuasive enough to make the medium and small operators think, not to mention those hidden in the exchange rate applied (plus or minus 5%, it depends).
An old player, created in 1851, Western Union is the little Michael Jordan of money transfer, the Tiger Wood of the remittance, the Mike Tyson of the international payment.
Fast and efficient, this service is especially popular with individuals and is particularly developed in Africa where it holds 13% of the market share.
Its service is reliable, secure and promises an effective transfer from a few minutes to 2 days maximum. In fact, the promise is respected, the money can be withdrawn the day of the transfer, which is largely satisfactory. Thanks to its partnership with the BOA, Western Union also benefits from more than adequate radiance in Madagascar.
In return for its fast services, the American institution charges a relatively substantial transfer fee whilst taking advantage of the exchange rate. Bear that in mind, especially if you rely on those transfers to pay your bills. The money that can be sent is limited to 5,000 euros per transfer.
On the plus side, Western Union offers direct mobile transfer in partnership with Telma. It is therefore possible on one hand, to send money via internet (or even via an application), and on the other, to receive it directly on your phone with a Mvola account. No need to move and queue up in a physical branch. It’s very convenient, but again, it will be necessary to be ready to pay the price.
Last but not least, note that Western Union has launched Western Union Business Solutions, a transfer service for companies that is available for the moment only in The United States, France and Asia. A new service that already accounts for 8% of the group’s turnover. Let’s hope it will soon be accessible in Madagascar as well.
Along with Western Union, MoneyGram monopolizes the international money transfer market, sharing the lion’s share between them. A market that is growing, from $ 573 billion in 2016 to $ 613 billion in 2017. An increase of 7% for a growth estimate of 5% per year, the $ 1 trillion by 2025 .
MoneyGram has chosen to work with micro-credit players in Madagascar and has grafted its money transfer service to those of Microcred and AccèsBanque. It managed to create a consistent network of its offer throughout the island, same as its first competitor -Western Union.
In fact, MoneyGram transfer works similarly to Western Union, while still being slightly cheaper to use. The level of service in Madagascar will depend on which agency you’re choosing – between Microcred or AccèsBanque.
To share a little anecdote with you, note that MoneyGram, the second largest provider of international money transfer services in the world, was almost taken over by Alibaba, the Chinese Amazon, through its subsidiary Ant Financial Services Group. A $ 1.2 billion acquisition that could have happended in mid-2017 – if Washington had not – as much as 3 times, vetoed it. Despite the promise of creating 1 million US jobs, nothing could undo the veto – Trump and his “America first” had the last word. In the meantime, MoneyGram is still for sale.
New and hot, Paypite is a cryptocurrency dedicated to the Francophonie (yay!). In fact, we don’t even know what this really means…
Launched in early 2018, the Paypite (PIT) is based on the blockchain Ethereum (ERC20 token) launched in 2014. A job largely carried it out by its creator, Vincent Jacques, who sees in it, the possibility of great adventure. However, the experts and techies from the Cryptofr forum (the reference community on cryptocurrency) are less enthusiastic, particularly when it’s known that the Paypite association intends to artificially inflate the price of its cryptocurrency.
Indeed, it seems that it follows a timetable to refuse purchases below a certain threshold. This has the effect of increasing the value of the PIT while encouraging “hoarding”:
- Between January 15, 2018 and February 28, 2018, 1 PIT was sold 0.15 euro
- Between 1 March 2018 and 14 April 2018, 1 PIT was no longer sold below 0.30 euro
- Between April 15, 2018 and May 31, 2018, 1 PIT was no longer sold below 0.50 euro
- Between 1 June 2018 and 14 July 2018, 1 PIT will not be sold below 1 euro
- Between July 15, 2018 and September 30, 2018, 1 PIT will not be sold below 10 euros
- As of October 1, 2018, 1 PIT will not be sold below 50 euros
- As of January 1, 2019, 1 PIT will not be sold below 100 euros.
But let’s move on. What interests us here is the transfer of international money landing in Madagascar and that, Paypite has announced that it will do it well, quickly, and especially almost free of charge. The principle is simple: we buy paypites from the association, we transfer them into the wallet of the beneficiary – who can then approach a currency exchange partner to exchange his paypites for ariary. Oook.
It all starts with the creation of a portfolio on the association’s website. This creation is free, but before you can buy, sell and transfer PIT, you will need to provide identification, some personal information and a profile photo passport. The team then claims a period of 48 hours to validate the information, but in itself, 24 hours is enough.
Once his account has been validated, the sender can buy his PIT. He will then have the choice between doing so with a credit card – in which case a small fee will apply (3% at the beginning of the adventure Paypite, though it went down to 2% since June 2018), or by making a transfer – that will be free of charge. The speed of this purchase will depend on many factors: the bank card is in itself faster than the transfer, the latter being dependent on the procedures and rigour (not to say the opposite) of your banker.
It has happened that a SEPA transfer launched on a Friday takes 5 business days to be considered by the systems of the association. Or is it rather a sign of the immaturity of their processes? We will never know, since both Paypite and the bank stated that they were not to blame for the delay in this particular situation.
In any case, once the sends obtains his PITs, the next step is to simply transfer them free of charge to the beneficiary’s account. The transfer is immediate and he can immediately go to a foreign exchange agency to change them into ariary – without paying any commission. At least, that’s the official version. Because for having tested the service, a gap was found between the amount displayed on the account and what was actually received.
After discussing with the creator of cryptocurrency and a quick investigation, the reason given is that Paypite uses several different interfaces (wallet, system interface, agency interface, etc.) and that each of them currently displays a different rate. These different rates come from the PIT’s volativity. Not a surprise really – cryptocurrency being infamously known for its unstable values. At this stage of the project, a lot remains to be done.
Mr. Vincent Jacques wanted to reassure potential Paypite users in this way: a guaranteed price feature is in development and should set a fixed price on the resale of paypites purchased from Day 1 (day bought) up to Day 7. This should lead to less instability in Paypite value in the future.
It must be recognized, however, that even in the current state of affairs, the transfer of money via Paypite is cheaper than elsewhere – with not only a fair exchange rate (without commissions), but also the possibility of making a (small) added value thanks to the volatility of cryptocurrency (but forget it works both ways – the value could be less or more).
The purchase of paypites is now only available in France, Senegal, on the Ivory Coast and, most recently, in Madagascar. At the moment, a single foreign exchange agency makes it possible to transform your PIT into Ariary. It’s Noor Change, located in Tsaralalàna, Antananarivo. A second branch should open this year in the city of Majunga.
Let’s end with Payoneer, the company that offers banking services, but that’s not a bank!
To use it, you must first register either directly on their site or via a service that uses Payoneer as means of payment (AirBnB, for example). Once this free registration phase passed, you will be asked to provide documents and personal information to confirm your identity. In the process, Payoneer will also send you a MasterCard to the address you provided when registering. Yes, it’ll be a real free MasterCard, sent to you by post. You will need to activate it from your account.
It’s this card that will allow you to withdraw money in Madagascar though the sender will have sent it to your Payoneer account (a classic US bank account). This card will also allow you to shop online. However, Payoneer does not accept payments made by individuals. Only companies can make transfers.
The card is available both in dollars and euros, though the amount credited on local ATMs will be in ariary. There are also annual fees for the card and it has a lifetime of two years.
However, pay attention to the additional costs that can be charged by Payoneer on transactions such as withdrawal fees, loading fees, exchange fees and others. Similarly, even if they provide tools for Account monitoring, you must not forget that it’s a foreign company, not a bank. So be careful about the amounts you send through it.
A deterrent to development?
In addition to the oligopoly of banks and specialized institutions such as Western Union and MoneyGram, the choice is slim. It’s funny, when you think about it, to see how much Madagascar has been stagnating; while everyone was moving forward.
Ok, if we focus on the classic vanilla, clove and essential oils, we can get by – even if it’s our banks that gain the most (but that’s another debate). Still, when we consider all the observations mentioned earlier and try to match the supply with the new needs of our country, one realizes that the means of payment available are not adapted.
Badly justified bank charges (especially for companies), often uncalled-for delays (but that’s depending on the banks) and a virtual absence of openness to the world market (expensive and rare Visa International cards, or the impossibility of linking Paypal to a Malagasy bank account – or even to a Visa card issued by a Malagasy bank); all of those obstacles form a barrier that prevents Malagasy entrepreneurship from joining the rest of the world – that’s already in the digital era.
Because true, if mining products and other major export products have always carried the economy, we must remember that these are limited, exhaustible resources that only benefit a minority (well, let’s call a spade, a spade). For their part, digital skills such as computer development (web, software, artificial intelligence, video games, etc.), data science, or simply, 3D animation – have a higher potential, bringing more added value while being easier to access (proportionately, of course).
So, maybe it’s time to invest in the digital market? Perhaps it is time to find an alternative economy to the traditional one – that we have known so far and that can not be viable for future generations? We are talking here about the long term, but now is the time to make the right choices. See, Mauritius, for instance – with a population of 1.3 million – was condemned to bankruptcy since independence by a Nobel economist. Nevertheless, the country’s been successful has in developping its land and skills with cane sugar and textiles. Today, 50 years later and while its model is running out of steam, Mauritius has already planned the recovery of its economy with tourism and offshore services. As I said at the beginning, the Services market is in demand.
It’s time for Madagascar to invest in its digital future and this necessarily means easier payment methods – simpler to use and at a fair cost.