On Wednesday 28 October, the African Development Bank approved the Industrialization and Financial Sector Support Project (PAISF) with a loan of approximately €14.52 million (12.08 million UA) through the African Development Fund, Bank’s concessional-rate loan arm.
Directly supporting the Madagascar Emergency Plan, the goal of PAISF is to support the industrial sector, considered essential for strengthening Madagascar’s resilience and for significantly reducing poverty, through creating decent employment and promoting investment. In this way, industrialization is a force for sustainable development and a leading strategic option.
The Covid?19 crisis, which has hit African economies hard, has shown the importance of an industrial strategy that takes account of the need to cover domestic food demand in order to ensure people’s security. The health crisis has been a sharp reminder of the urgent issue of food security in African countries. This project will particularly support the post-Covid recovery plan developed by the Madagascan government.
It also emphasizes the role of the financial sector, which small and medium-sized enterprises must be able to access for their integration into the industrial value chain. The project also underlines the importance of an education and training system suitable for the needs of the labour market.
The project aims to meet the specific needs of the Madagascan industrial sector, in line with one of the Bank’s “High 5” strategic priorities, the industrialization of Africa. Its goal is to transform the Madagascan industrial sector, turning it into the main driver of growth and decent job creation, opening up opportunities for the most vulnerable, including women and young graduates.
When implemented, PAISF will provide enabling conditions for private investment in the Madagascan manufacturing sector, especially in those industries where the country has comparative advantages, such as textiles and food. The project will help to accelerate the development of “Industrial Emergence Zones” (ZEIs) that will capitalize on these comparative advantages, develop value chains in the context of the Continental Free Trade Area and attract international investors.
In its approach, PAISF will support regional industrialization on the model of “one district, one factory”, adopted by Ghana for inclusive industrial development. The project will facilitate the creation of a long-term public-private partnership (PPP), in order to encourage private?sector involvement in infrastructure development. Lastly, the National Industrial Development Fund (FNDI) will provide SMEs with a financial boost to support their integration into the industrial value chain.
The Malagasy State will be the main beneficiary of PAISF, through the institutional capacity development of the bodies responsible for promoting industrial development and private investment, including bodies in charge of PPPs. The project will also benefit SMEs, by ensuring that there is an institutional framework more favourable to investment and by providing better access to financing. It will also benefit women and young entrepreneurs supported by the FNDI. PAISF will benefit the general population through the positive effects of industrial development and job creation, boosted by investments in the sector.
It will also facilitate regional integration by encouraging regional investments in Madagascan ZEIs, particularly from Mauritius and South Africa in the textile and food sectors.
“This project is a great fit with other Bank operations under way in Madagascar, especially the Project to Develop Corridors and Facilitate Trade, and the Agro-industrial Processing Zone Development Project in the South-West Region of Madagascar (PTASO),” explained Mr Mohamed Cherif, the Bank’s country manager for Madagascar.
PAISF is aligned with the country strategy (DSP 2017-2021), and particularly with its Pillar 2 (Support for Agricultural Transformation and Industrial Development), and is also aligned with the Bank’s priority of “Industrialize Africa” (2016-2025) and its long-term strategy (2013-2022).
