Madagascar’s Minister of Mines is confident the mineral industry will develop despite political challenges.
RDR: During my tenure we focused on adopting a long-term perspective with regard to the management of the country’s mineral wealth. Our first priority was to enforce the mining code that had been adopted during the previous administration. Next, we aimed to build sustainable relationships with all the relevant stakeholders, including the mining companies, the local communes and civil society. I hope that we will be able to maintain this level of communication between the Administration and the mining firms throughout the political transition. We focused on establishing relationships with civil society and non-governmental organizations (NGOs) such as the World Wildlife Fund (WWF). We also attended several international mining conferences in order to showcase the country’s industry to the international community. Most African governments neglected to become sufficiently involved in the activities of the mining companies, but we made this our priority in Madagascar. We focused on improving the government’s understanding of the work going on in the field, monitoring the companies’ activities, and managing any potential conflicts with local communities. We also began educating and informing local people on the potential benefits that they could reap from the mining industry. We organized national conferences, highlighting the local content of mining activities in terms of employment generation and service provision. Within the legal framework, our goal was to apply the law, and at the institutional level, our aim was to work together with all the stakeholders.
Madagascar’s partnership with the World Bank through Projet de Gouvernance des Resources Minérales (PGRM) has helped establish reliable data on the nation’s mineral wealth. Could you provide us with an overview of the country’s mineral wealth and what role the mining industry can play in the nation’s economy?
RDR: In 2012, we produced an updated geological mapping of Madagascar’s mineral wealth, a project which was financed by the World Bank and took five years to complete. We also worked with the Japanese government to update geological maps. The updated geological data showed us that Madagascar had a diversified mineral base, with deposits of almost every mineral. We have gemstones, such as sapphires and rubies, as well as industrial stones such as marble. We have also minerals including chromite and copper, such as malachite. We are now waiting for companies to come to Madagascar to explore and confirm the ore deposits. We also have interesting exploration taking place in iron ore, bauxite and gold.
Madagascar is only at the beginning of its development as a mining destination. We recently engaged with the World Bank to study both the fiscal and non-fiscal contributions of the mining sector to the nation’s GDP. We only have two large-scale mining operations at the moment, but we are confident that the number of operations will increase in the short-term. The industry contributes about 2% to the country’s GDP at the moment. Once the Ambatovy Mine begins paying royalties, and exports of nickel and cobalt take off, this percentage will certainly rise and could reach 10% of GDP in the short-term, possibly 30% once Ambatovy reaches optimal production. The development of the Toliara Sands Project will also increase the participation of mining in the national economy. It is just the beginning for Madagascar, and things will be changing significantly in the next two or three years.
Ambatovy was the largest foreign investment in the country and marks a major milestone for foreign investors. However, we have heard discussions over license moratoria as well as community disputes. What steps have been put in place by the Ministry to help control some of the political risks in the mining sector?
RDR: The key to mitigating political risks in the industry is to establish strong relationships between all the relevant stakeholders. It is an important commitment to allow foreign companies to start operating, and as a result we focused on enforcing the mining code and ensuring that all stakeholders complied with legal commitments. Our goal with the geological mapping update was to improve our understanding of the current conditions and mitigate risks for companies entering the industry. We also wanted to ensure that local communities recognized the efforts being made by the government to ensure trickle-down effects across the industry value chain, including in terms of generating employment and a local services industry. One of the challenges will be to distribute royalties among the local communes, and we have been in discussions with Ambatovy regarding the best way to do so. In terms of local content, it will be essential that the mining industry helps improve the skills and competencies of the local people, so that they can have a future in the industry either nationally, or globally.
You have been a champion of the Extractive industries Transparency Initiative (EITI) in Madagascar. What efforts have been made and at what stage is Madagascar in becoming EITI- compliant?
RDR: Madagascar submitted itself as an EITI candidate country in 2008, but our efforts were put on hold during the economic crisis. In 2010, the international secretary of EITI suspended Madagascar’s candidacy. During my tenure, my aim was to send the message that, despite the political crisis, transparency in the mining industry remained a priority for the country. We produced the required report for EITI, and in 2012 we received a letter from the international secretary of EITI that Madagascar was technically compliant with EITI standards, but officially remained suspended because of the political situation. When the political situation was stabilized, we would be welcomed back. In May, we were invited to attend the international EITI conference in Sydney, which was a great honor for us, and the international secretary also planned to come to Madagascar in July 2013. We recently signed a convention with the World Bank that will release funding for EITI activities for two years, through 2014.
Given the potential for mining operations in Madagascar, what efforts are being made to invest in the country’s infrastructure to ensure that these projects are more efficient and competitive?
RDR: Although lack of infrastructure remains a challenge in Madagascar, the development of the mining industry presents an opportunity bridge the infrastructure gap. We are working together with the relevant ministries and the mining companies to create concession agreements on the joint financing of infrastructure projects, because the government does not have sufficient funds for infrastructure projects. Although the infrastructure will be established primarily for mining activities, it will help stimulate the economic development of the country overall.
Madagascar’s mining industry is still in its infancy, but the country’s geology has been compared to that of Mozambique. What is your final message to foreign investors about Madagascar’s potential compared to its regional neighbors?
RDR: What will set Madagascar apart from its mining neighbors is not necessarily its mineral potential, but rather its management of the industry. We hope that Ambatovy and Rio Tinto QMM will be success stories that will help attract further interest to the country. I am also proud that we will export a refined, final product, such as nickel and cobalt. We are still trying to prove that we can do better in managing the first two mines, but there are many other opportunities, such as in copper, coal, iron ore and rare earth minerals. We are open to new opportunities and we are confident that investors will come to the country to explore them in the next few years.
This article was produced as part of the research conducted on African mining jurisdictions by Global Business Reports (GBR) as part of our partnership with African Mining Indaba LLC. The aim of this partnership is the production of the single most comprehensive intelligence report on the continent’s mineral sector. The Official Mining in Africa Country Investment Guide, will be launched next February 2014, as the only official publication providing country-specific information at Africa’s top mining event, the 2014 Investing in Africa Mining Indaba™ held in Cape Town, South Africa.