Case Frank Davis Comes to Madagascar

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Exhibit 1. Spices of Madagascar English Name French Name Malagasy Name Latin Name Spices currently exported Cinnamon Cannelle Kanela Cinnamonum zeylanicum Turmeric Curcuma Tamotamo Cucuma longa Ginger Gingembre Sakamal Zingiber officinale Roscoe Clove Girofle Jirofo Syzygium aromaticum Hot or chili pepper Piment capsicum Sakay Capsicum frutescens Black peppercorn Poivre noir Kipoavatra mainty Piper nigrum Green peppercorn Poivre vert Dioavatra maitso Piper nigrum Vanilla Vanille Lavanila Vanilla fragrans Spices That Have Export Potential Pink peppercorn Baie rose Voatsiperifery Schirus terebenthifolius Mace Macis Myristica fragrans Nutmeg Noix de muscade Myristica fragrans SOURCE: May 1994 Study of Madagascar Exports for Horticultural Products, ATW Consultants for USAID. NOTES: Black peppercorn and green peppercorn share the same botanical name, probably because green peppercorn is a fairly new recogized plant. Mace & Nutmeg are part of the same plant, so they have the same botanical name. Apparently there are no Malagasy words for these spices. They are grown in the wild, not commercially, so perhaps they are not used in Malagasy cooking and are not known as spices there.

Martin asked Frank to find out about other types of spices grown in Madagascar and their current production levels. He felt strongly that the Malagasy government would encourage export of spices because he knew that cloves and vanilla were historically the main sources of foreign currency earnings in the country (Exhibit 2). The restaurant at the Hilton did not serve dinner for another hour and a half. Frank decided to take a walk around the neighborhood of the hotel. Although he had researched Madagascar as thoroughly as possible before he left the States, he had not found much information beyond the official reports put out by government agencies such as the State Department and the Commerce Department. He had learned that Madagascar was the world's fourth largest island with a population of 12.5 million, 1 million of whom lived in the capital, Antananarivo, where he was staying. The annual population growth rate was estimated to be 3.19%, with a fertility rate of 6.68 children per woman. In economic terms, this could mean a largely untapped consumer market if the people had disposable income to spend. But Frank was not sure how to assess that yet. The annual per capita income was about $230 but he did not know what the median income was, or what the cost of living was.

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Exhibit 2. Exports of Nontraditional Spices From Madagascar (1993) Quantity Value FOB Price/kg FOB Customs Code Spices (kg) (1,000 FMG) (1,000 FMG) 090411100 Green peppercorns in brine 371,559 1,616,136 4,350 090411900 Other peppercorns, not ground 1,470,148 2,506,289 1,705 090412000 Peppercorns, ground or crushed 4,824 37,064 7,683 090420000 Chili peppers, dried or ground 20,022 96,635 4,826 090610000 Cinnamon, whole 1,169,319 1,704,081 1,457 090620000 Cinnamon, ground or crushed 46,724 86,310 1,847 090810000 Nutmeg 143 1,725 12,063 090930000 Cumin seeds 150 99 660 090950000 Fennel seeds 245 36 147 091010000 Ginger 17,461 8,682 497 091020000 Saffron 146 194 1,329 091030000 Turmeric 2,256 15,402 6,827 091040000 Thyme 48 81 1,688 091050000 Curry 232 1,518 6,543 091099000 Other spices 476 6,619 13,905 Total 3,103,753 6,080,871 SOURCE: State Data Bank (BDE) Antananarivo. NOTE: Average rate of exchange in 1993: 1 U.S.$ = 1,900 FMG; 1 FF = 330 FMG. FOB, freight on board.

He knew Madagascar was approximately the size of Texas and rich in natural resources such as graphite, chromite, coal, bauxite, titanium, salt, quartz, and tar sands, as well as semiprecious stones. His environmentally conscious friends in the States knew that the country was home to many species and even genuses of flora and fauna that were indigenous nowhere else in the world. He also knew that there was widespread soil erosion caused by deforestation and overgrazing, and that this was contributing to desertification of the island. Several species of plant and animal life were endangered. Frank also knew a little about the Malagasy people. Their ethnic origin was a combination of Malay-Indonesian, African, Arab, French, Indian, and Creole. The religious composition of the population was 7% Muslim, 41% Christian, and 52% indigenous beliefs. A strong emphasis on ancestor veneration characterized most spiritual belief in the country. Over 90% of the Malagasy workforce was employed in the agricultural sector, including fishing and forestry, and the major exports included coffee, vanilla, cloves, shellfish, sugar, and petroleum products. The chief industries were largely agricultural product processing (such as meat canneries, soap factories, breweries, tanneries, and sugar-refining plants) and textile factories, like the company Jean-Paul represented. The first thing that struck Frank after leaving the grounds of the Hilton Hotel was the poor condition of the infrastructure—streets, sidewalks, and the storm drainage or sewer system (he was not quite sure what the purpose was of the little streams that ran alongside the streets)— and the absence of traffic signals. Come to think of it, he did not remember stopping at a single red light on the way from the airport. An extensive and well-maintained transportation network certainly would contribute to the success of any agriculturally based economy where the producers were geographically dispersed throughout the country.

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Frank also recalled that the Madagascar airport was served almost exclusively by Air Madagascar, a state-owned enterprise. The lack of competition would likely keep the cost of freight and passenger travel high, with little incentive to improve service efficiency. Despite the poor roads and lack of traffic signals, there was certainly no shortage of cars in the capital, and almost every third car seemed to be a taxi. The air was hot and hazy, thick with car exhaust. Frank noticed several buses so full of people that the backdoors remained open and two or three people clung to the outside. Exhibit 3 captures a few of the sights that caught his eye along the way.

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Exhibit 3. Buildings fill the hillsides around downtown Antananarivo

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As he continued down the street, Frank was approached by several people selling a variety of items which they pushed at him: handicrafts, Ray Ban sunglasses, brooms, tire irons, a basketball, and some fruits or vegetables he did not