Madagascar president warns of attempt to ‘seize power’: What to know

Madagascar is experiencing severe political instability as President Andry Rajoelina warns of an attempted coup after an elite military unit, CAPSAT, joined widespread Gen Z-led protests demanding his resignation. The protests, driven by a cost of living crisis and systemic corruption, have escalated with CAPSAT claiming control of the armed forces, though broader military allegiance remains uncertain. This escalating crisis, marked by significant casualties and occurring in a nation with high poverty and a history of political upheaval, signals heightened sovereign risk and potential for significant economic disruption, impacting the investment climate and regional stability.

Analysis

Madagascar faces a severe political crisis as President Andry Rajoelina warns of an illegal power seizure, following the elite CAPSAT military unit joining Gen Z-led protests demanding his resignation. CAPSAT, instrumental in Rajoelina's 2009 rise, claims control of the armed forces and has appointed a new army head, though broader military allegiance is unconfirmed. This situation carries a strongly negative sentiment and high market impact.

The protests, now in their third week, are driven by a severe cost of living crisis, systemic corruption, and failures in basic services, resulting in at least 22 fatalities and over 100 injuries. This instability is exacerbated by Madagascar's history of political upheavals and 80% of its 31 million population living in severe poverty. The government's dialogue offers have been rejected, indicating a prolonged standoff.

This crisis significantly elevates sovereign risk, impacting themes of domestic politics, emerging markets, inflation, and governance. The potential for sustained civil unrest and economic disruption is substantial, posing considerable challenges to the nation's stability and investment climate.

Key Decisions for Investors

• Investors should immediately reassess direct and indirect exposure to Madagascar given the heightened sovereign risk and political instability.
• Closely monitor the allegiance of the broader military and the effectiveness of CAPSAT's claimed control, as this will dictate the crisis trajectory.
• Evaluate the potential for prolonged civil unrest, economic disruption, and policy paralysis, which could severely impact asset valuations and business operations in the region.