Madagascar Economy Reels as Vanilla Collapses and Ambatovy Halts Again

Economy · Madagascar

Madagascar’s 2026 story is one of weakened foundations. The two pillars that once anchored export growth have cracked, while the state’s ability to restore energy and infrastructure is tested by nature.

Vanilla Floor Reversal

For years Madagascar set a minimum export price near USD 250 per kilogram for cured vanilla. That reference price effectively set the global market floor.

In May 2023 the government liberalised export prices and removed the USD 250 floor. Export revenue then slumped 64 percent in 2024 despite shipments nearly doubling.

The domestic farmgate floor for green vanilla was once 75,000 Ariary per kilogram, roughly USD 18. By 2024 and 2025 there was no floor at all.

In late June 2026 the state reinstated a much lower farmgate floor. Long pods over 13 centimetres were set at 10,000 Ariary per kilogram and shorter pods at 5,000.

This partial reversal protects farmers only weakly. Export prices remain market-driven, with average levels near USD 38 to 40 per kilogram in early 2026.

Structural Oversupply

Biovanilla describes a third price cycle from 2023 onward as structural overproduction. The average export price in that cycle is around USD 40 per kilogram.

Flowering observed in late 2025 points to abundant production for 2026 and 2027. Biovanilla estimates the future crop at about 4,500 tonnes.

Aust and Hachmann projects a large Madagascar crop of 3,000 to 3,500 metric tonnes in 2026. Prices are at inflation-adjusted historic lows.

Official reference prices adopted by the Ministry of Commerce are USD 15 per kilogram for cuts, USD 25 for long vanilla, and USD 50 for gourmet black vanilla.

Some distressed lots traded as low as USD 10 to 16 per kilogram. The 2018 peak near USD 600 per kilogram is now a distant memory.

Ambatovy Underperformance

Ambatovy is the country’s largest nickel and cobalt mine, near Toamasina. It uses a high-pressure acid leach process to produce battery-grade nickel.

The operation is controlled by Japan’s Sumitomo Corporation. Designed capacity is about 60,000 tonnes of nickel per year.

Sumitomo produced 31,000 tonnes of nickel in the year to March 2024. Malfunctions at the processing plant kept output below the 40,000-tonne target.

By the year to March 2025 output fell to 28,000 tonnes. A slurry pipeline was damaged on 25 September 2024, forcing a suspension of operations.

Cobalt output in 2024 was about 2,500 to 2,700 tonnes. The mine remains a critical test of industrial reliability.

Cyclone Disruption

Cyclone Gezani forced another halt at Ambatovy in 2026. The stop came as the operation was trying to stabilise after the 2024 pipeline incident.

Suspensions at Ambatovy carry national significance. Nickel and cobalt revenues support foreign exchange and formal employment.

Each restart faces physical damage and supply-chain delays. The performance gap widens whenever weather events strike the east coast.

Chronic power shortages compound the problem. Damaged dams and grid infrastructure limit reliable electricity for industrial users.

The result is an operation that cannot reach even half of its designed capacity. That shortfall matters for budget projections and investor confidence.

Mining Expansion

Ilmenite and graphite mining are expanding in Madagascar. These minerals are linked to global demand for titanium feedstock and battery anodes.

The sector is attracting new operators, but controversy persists over land use and environmental compliance. Local communities have raised concerns about displacement and water access.

Graphite projects target export markets for electric vehicle supply chains. Ilmenite operations feed pigment and titanium metal producers.

Mining expansion offers diversification away from vanilla and nickel. It also exposes weak regulatory enforcement in remote areas.

Foreign investors weigh ore quality and logistics against governance risk. Power shortages raise operating costs for processing plants.

Tourism Recovery

Tourism is recovering unevenly after years of border disruption. Arrivals are rising but remain below the volumes seen before the pandemic.

High-end eco-lodges report stronger bookings from European and South African visitors. Budget and mid-range operators lag behind.

Air connectivity remains a constraint. Limited direct flights and high ticket prices deter long-haul travellers.

Cyclone damage to roads and coastal infrastructure has slowed access to key areas. Some lodges closed for repairs during the 2026 season.

The tourism sector sees opportunity in Madagascar’s unique biodiversity. Yet instability in power and transport undermines the visitor experience.

Chronic Power Shortages

Madagascar suffers from chronic electricity shortages in urban and rural areas. The national utility relies on ageing hydro and thermal plants.

Cyclone damage to dams and transmission lines has worsened outages in 2026. Businesses report rising diesel generator costs.

Industrial users such as Ambatovy compete with households for limited capacity. Load shedding remains common in Antananarivo.

Power deficits raise the cost of doing business. They also delay the expansion of processing industries beyond raw mineral exports.

Reforms to the energy sector are slow. Investors note that stable power is a precondition for manufacturing and tourism growth.

Rajoelina’s Record

President Andry Rajoelina faces a difficult narrative ahead of the 2028 vote. His government oversaw the vanilla price liberalisation and the recent partial floor reversal.

Supporters point to road projects and the reinstatement of a minimum farmgate price. Critics say the floor is too low to protect rural incomes.

The Ambatovy disruptions weaken his industrial record. Job losses and lower tax receipts contrast with earlier promises of mining-led growth.

Tourism recovery offers a modest political win, but access to reliable power remains a visible failure. Voters in cities and towns feel the outages daily.

The 2026 decisions on vanilla and mining will shape the campaign. Rajoelina must balance donor expectations with domestic anger over income losses.

The Vanilla Price Gap Hurting Farmers

The official vanilla prices do not match what farmers actually receive. In late June 2026, Madagascar’s Council of Ministers set a floor price for green vanilla at 10,000 Ariary per kilogram for pods longer than 13 centimeters. That equals about 2.34 US dollars for a kilogram of fresh pods. Pods shorter than 13 centimeters have a floor of 5,000 Ariary per kilogram.

But a 2026 price tracker called Momocalc reports that actual farmgate prices are often far lower. Recent spot prices ranged from only 1,500 to 3,000 Ariary per kilogram, depending on the region and the timing. This means many farmers sell their green vanilla for less than one third of the official floor price. The tracker also notes that export price floors have been liberalized. In other words, the government no longer controls the price for exported cured vanilla. The floor only applies to green vanilla sold inside Madagascar.

At the same time, production costs for certified vanilla producers are around 20 US dollars per kilogram for cured beans. Official export reference prices are 15 US dollars per kilogram for cuts, 25 for longs, and 50 for gourmets. A farmer who can only sell cuts may not cover the cost of production. BioVanilla says about 40 percent of the 2025/2026 crop is cuts, not high-end gourmet beans. This raises a serious problem. The government set one price, but the real market pays much less. Many small farmers carry the loss.

Investor Implications

The export price collapse has reduced vanilla’s contribution to foreign exchange. Buyers now source from Uganda and other producers more actively.

Mining investors see opportunity in ilmenite and graphite, but infrastructure gaps raise project costs. Power reliability is a key due-diligence item.

Ambatovy’s underperformance signals operational risk for process-intensive projects. Even well-capitalised operators struggle with logistics and weather.

Tourism offers niche returns for patient capital, particularly in conservation-linked lodging. The sector is too small to replace lost vanilla income.

Overall, Madagascar’s 2026 economy depends on restoring baseload energy and stabilising mining output. Without that, diversification promises will remain remote.

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