Nothing went as planned. The scenario imagined by Madagascar to protect itself from a sudden collapse of the vanilla market by imposing for three years a minimum price of 250 dollars / kg (228 euros / kg) has led to an impasse. As hundreds of tons of unsold pods accumulate in the fields of planters and the warehouses of exporters in Sava, in the northeast of the island, Andry Rajoelina admitted his failure, Thursday, April 13, by opening the way to a “liberalization” of exports. The decision, demanded by the players in the sector, is supposed to bring down the fever that has been rising in the region for several months.
However, no details have been revealed on the measures envisaged to ensure that this opening does not lead to a big sell-off and an uncontrolled drop in prices. Intense talks are underway with the main American and European importers, in a position of strength against a government whose ultimatum they have never accepted. A meeting convened by the Head of State is to take place at Ambohitsorohitra Palace on Monday, April 24, in the presence of all parties.
Less than seven months from the presidential election scheduled for November, the stakes go beyond the fate of Sava, whose votes did not go to Andry Rajoelina in 2018. The price control policy launched at the start of the The Covid-19 pandemic has not only brought down the country’s most prosperous region, it has widened the financial and monetary imbalances of the Malagasy economy, drying up one of the main sources of foreign currency.
Bloodless budget
Vanilla – of which the Big Island in the Indian Ocean remains by far the world’s leading producer with 80% of the market – provides a quarter of export earnings and substantial income for the now depleted state budget. A situation that the experts of the International Monetary Fund (IMF) worried at the end of March: “The recent reform of the vanilla sector seems to have led to a significant reduction in foreign exchange inflows and should be reconsidered. The ariary has lost 25% of its value against the dollar, increasing the prices of imported products, including rice, which the government subsidizes to cushion the social crisis.
In this context, the budget support of 100 million dollars (91.2 million euros) currently being negotiated with the World Bank appears to be an essential lifeline to enable the State to continue to honor its commitments, including the payment of its officials. The international financial institution remains the only donor to agree to provide direct support to the State budget after the diversions observed on the aid granted during the pandemic.
The equation that Andry Rajoelina must solve today is not totally a surprise. When, in 2020, the new regulations are announced – minimum export price, obligation to repatriate all foreign currency earnings, creation of a National Vanilla Council, one of whose prerogatives will be to issue approvals for export – doubts are expressed on the side of buyers as well as certain exporters.
For the former, the price demanded is “outside the realities of the market”. If, in 2019, prices reached peaks of more than 600 dollars / kg, the pandemic has since reshuffled the cards. Demand has ebbed, especially since agri-food firms have decided to source more synthetic vanillin so as to no longer suffer from prices deemed exorbitant. Other producers such as Papua New Guinea or Uganda have also taken the opportunity to strengthen their position. Finally, years of speculation have led to a rush on the lands of the Sava to plant with all your might, resulting in 2022 in record production.
On the exporters’ side, the government’s project is considered opaque and the granting of approvals – officially conditional on the total repatriation of foreign currency earnings – as a mechanism for excluding certain players in favor of those close to the regime, even if they are new to the regime. in the area.
Collapse
In reality, the system is immediately bypassed. On the one hand, “those who do not receive the approval continue to ship by slipping the vanilla pods into their containers of pepper, cloves or use deliveries by DHL”, testifies Arnaud Sion, buyer on behalf of from the Comptoir de Toamasina. On the other hand, those who have obtained the sesame practice generous retrocommissions in order to bring the price from 250 dollars to a range between 150 and 180 dollars or compensate for the difference in selling price by using the currency reserves they have at their disposal. the stranger. This allows them, in appearance, to respect the rules set by the government.
“Many did not play the game. Madagascar should have been in a position of strength, but it never was. Faced with this situation, importers who had large stocks decided to wait and buy in dribs and drabs,” recognizes Georges Geeraerts, president of the National Group of Madagascar Vanilla Exporters (GNEV).
The planters to whom Andry Rajoelina had promised a lot during his 2018 campaign are the first to bear the brunt of this collapse. The purchase price of green vanilla set at 75,000 ariary/kg (16 euros/kg) to support the income of producers was also not respected by collectors and exporters. “This year we sold almost nothing. Families are hungry. Some have been forced to sell their house or their field to repay their debt to the banks, ”says Mounirah Philibert, president of the Association of Organic Planters of Vohémar.
Is Madagascar still able to negotiate a way out of the crisis? “The Malagasy have dug their own grave, but no one has an interest in letting the market plunge. When prices are too low, planters abandon their fields and, a few years later, the fall in production is paid for by a new surge in prices. The guaranteed price must be the one received by the planter to enable him to live, ”says Laurent Bourgois, president of Eurovanille and member of the Initiative for Sustainable Vanilla, which brings together 70% of importers. Can this proposal be the basis of the compromise that will be discussed on April 24 in Antananarivo? For the Head of State and future candidate, it becomes essential to quickly put a solution on the table.
