CONTEXT NOTE
« MINE AND RURAL DEVELOPMENT»
1. CONTEXT
Madagascar, the 4th biggest island in the World, is a country that possesses unique
natural resources with a large variety of minerals and gemstones .
It provides; on account of its geological context, an important mining potential that is
unfortunately poorly known and poorly exploited. We may distinguish mineral resources
that interest large investors, such as oil , nickel, chrome, graphite, ilmenite (FeTiO3),
bauxite, … but also gold and precious stone deposits that may be exploited at lower
levels by small and medium enterprises and associations or cooperatives.
a. Status as regards the national economy
The mining sector, though still emerging, remains fairly weak as regards the national
economy. The sector economic information is disparate and an economic database is
being put in place.
In production,
Table n°1 : Export oriented Production on the 3 provinces (2003)
Minerals
Reserve estimates
Metals and others (Thorium, Nickel, Mica, Titanium,
Cobalt, Uranium, Graphite, Chrome, Bauxite, Coal, Iron)
-
Largest reserve of Mica in the
world
10th largest reserve of chrome in
the world
Auriferous ferrous metals - 900 Mt
(estimates)
Bauxite – 300 Mt (estimates)
Nickel – 200 Mt (estimates)
Coal – 100 Mt (estimates)
Titanium – 300 Mt (estimates)
Precious metals
Precious stones
Export value
(2003) – In US $
millions
8
100
Largest sapphire reserve in the world
8
Semi precious stones
2
Industrial stones
1
Ornament stones
10
1
In investment:
Table n°2 : Status of investment (2000 – 2004)
(In Ariary millions)
Total sector
PE
PR
PRE
Amount
Growth
Amount
Growth
Amount
Growth
Amount
Growth
2000
362,825
,
19,518
-15,059
341,955
-194,069
1,352
,
2001
153,972
-208,853
4,459
1,534
147,886
-140,665
1,628
276
2002
13,988
-139,984
5,993
-2,953
7,221
-3,011
774
-854
2003
9,571
-4,417
3,040
52,099
4,210
695,273
2,023
1,249
2004
755,795
746,224
55,139
35,621
699,483
357,528
1,175
-848
TOTAL
1,296,151
,
88,149
,
1,200,755
,
6,952
In economy, in 2003 it is noted :




A 5% contribution to the Gross National Product (GNP)
Currency incomes in the order of US $ 30 millions, that is 16.17 %
Creation of more than 100, 000 full time jobs and 500, 000 seasonal jobs;
More than 2, 300 active operators in the sector.
b. Structure of sector
There are 3 sub sectors:
 The largest ore exploitations that are mainly metal bearing (Chrome, Nickel,
Ilmenite, …) : they account for more than 80% investment.
 Precious stone exploitations: they are weak but account for 60% export value.
 Gold exploitation is governed by specific texts in the Mining Code.
c. The sector stake
The mining sector accounts for weak importance at the national level and yet
Madagascar is :
 The largest mica producer in the world.
 The 10th largest chrome producer in the world.
 The largest sapphire reserve in the world.
The Government aim is to increase production, integrating the sector into the national
economy and into rural development.
d. Important reforms undertaken by authorities
The strategic approach by the Ministry of Energy and Mining is articulated around 4
specific goals:




Improving governance and transparence in the mining sector.
Support to traditional operators.
Decentralized management of mineral resources.
Promoting private investment.
The actions taken involve :
2




Enhancing the Mining Code.
Establishing and launching Madagascar Gemology Institute.
Establishing mining and geology pathways in technical high schools.
Improving the exploitation environment among small scale operators with support
from BAMEX (Tantsoroka project).
Decentralizing the management of the Office of Mining Cadastre in Madagascar
(Bureau du Cadastre Minier de Madagascar - BCMM).
Encouraging and training farmers in the mining sector.
Organizing stones and gold markets.
Establishing export one stop shows.
Supporting traditional operators (events at national and international levels).





The first outcomes allowed what follows :
 Increase in amount of square numbers granted in standard permits (PE and PR)
but also in PRE ;
 Increase in amount but also in rate for recovering mining administration fees of
which 40% go back to local governments and to the General Budget;
 Presence in Madagascar of large mining companies;
 Beginning of making traditional mining operation professional by the Association
of Sapphire and Ruby Mayors, by the Association of Exploiting Jewelers and
Lapidaries of Madagascar ;
 Increase in amount of investment in 2004 in each sub sector.
2. SWOT ANALYSIS
2.1. Opportunities
The mining sector is a growing sector and the international environment is enabling
over several factors:

-
There is currently demand on the market for several products (Steel, Chrome,
Nickel, Uranium, Titanium, Iron byproducts, …).
Such Malagasy products, especially as regards precious stones are worldly top
quality
The price of some products is rising and enables to generate considerable
foreign currency.
With the recent devaluation of « Ariary », the mining sector is a sector with high
added value.
With regard to the national environment, several factors favor the integration of the
mining sector into rural development::
-
Practically all mining sectors are located in rural areas and many of them are in
isolated areas. With the importance of the current mining potential, these mining
sectors involve practically all the provinces and most regions of Madagascar.
-
Since the end of the 90s, the State has shown a will to boost the sector through
revising the mining code and its implementation decrees. It has also improved
governance in the sector at the institutional level thanks to various measures such as
decentralizing the mining Administration, the policy of transparence in granting and
managing permits, and measures for promoting and enhancing the mining
information system are under implementation.
-
The sector is interesting to many donors who participate in its development (World
Bank, European Union, AFD, …) especially as part of the P.G.R.M. Project
3
-
With regard to the environment, the legal frameworks on protecting the
environment through the MECIE decree are in place and operational.
1. Threats
Several environmental factors stand as threats to developing the mining sector and its
integration in rural areas:
-
As regards economy, mining exploitation typically engenders inflation on basic
products in villages or in rural areas, because people have many incomes and the
supply cannot follow the demand in such areas.
-
The employment attraction towards the mining sector that is more income generating
than the other rural traditional activities leads people to abandon such activities and
even to provokes decay in agricultural land to the benefit of the mining activity which
is sometimes short-lived.
-
For developing the sector, some competitiveness factors are not favorable for
Madagascar, such as the insufficiency of deep water ports, roads, railways and the
high price of electric energy.
-
As regards the environment, mining activities generally use techniques at the level of
enrichment and first processing that may be polluting and make the environment
unproductive even if an environment protection policy is put in place.
-
In addition, many mining deposits are located in forests or inside Protected Areas and
therefore will not be allowed to be exploited.
-
Implementing the legislation in protecting workers, in typically isolated rural areas, is
very difficult and be harmful to social development.
-
Last, if mining activities are not well managed, they may provoke a degradation of the
social environment because of the rural exodus that they trigger off, a development of
prostitution and sexually transmissible diseases such as AIDS.
2. Strengths
The mining sector is characterized by strengths as regards its impact on rural
development:
-
-
Its important potential, both in quality and quantity, but which unfortunately is poorly
exploited, allows a lasting activity if it is well exploited whereas small scale operators
typically work on only alluvium areas or surface deposits.
Its high use of unskilled and low cost labor in rural areas.
Its participation in local infrastructure building (road, school, dispensary, social and
sport center,..).
The existence of several categories of mine of which part may be attributed to small
and medium enterprises or to farmer associations.
Its attraction on international investors who wish to take part in its exploitation.
The development of mining related activities (commerce, catering, accommodation,
transport, communication…)
3. Weaknesses
The mining sector is also characterized by constraints that harm rural development:
-
Several mining exploitations, and especially small exploitations, are typically short
lived and may not bring sustainable impact to participate in rural development. On the
4
-
-
-
opposite, the incomes generated among farmers are used for ostentatious and
unproductive consumptions.
Insufficiency of skilled labor at the local level, while they may improve farmers
incomes by securing products with higher added value, this is nefarious to both the
enterprise which has to import labor and the rural areas which lose a more substantial
income source.
The weak capacity of human resources in managing projects in rural areas. Therefore
farmers are victim of speculation on the part of outsiders who exploit in their stead,
and who integrate all activities by hiring only low temporary labor.
Lack of processing in mining products that does not allow to maximize the added
value.
MINING SECTOR SWOT ANALYSIS
STRENGTHS
-
WEAKNESSES
Importance of Madagascar mining potential
Participation
in
building
rural
infrastructures
Presence of 10 i important investors at
national level
Promoting governance of mineral
resources (publishing ion newspapers) -
OPPORTUNITIES
-
Market demand for several products
TOP product quality
Devaluation of ’Ariary and high added
value of mining products
Establishing good governance in
mining sector
Attractiveness ofmining sector to
donors
Decentralization of mineral resource
management at commune level
Weak information system that would allow collecting and
processing data required for developing planned
indicators.
Delay in setting up BAM en integrating mineral resource
management in Commune Development Plans (Plans
Communaux de Développement - PCD) on account of
red tape and procedures.
Low recovery rate of mining royalties due to capacity
and organization constraints.
Small scale short lived exploitations
Scarcity of skilled labor
Weak human resource capacity
Lack of mining product processing
An information system
THREATS
-
Attractiveness of employment to mining sector
Existence of unfavorable competitive factors
Presence of mining deposits in forests or close to
Protected Areas
Dégradation of rural environment
5
3. REGIONAL COMPARATIVE ADVANTAGES
To be filled in (lack of information)
4. PROSPECTS AND GROWTH STRATEGIES
4.1. Overall goals
-
Increase in production of processed stones (precious and non precious) by 50%
in 5 years and by 200% in 10 years.
Increase in incomes distributed to rural population (15% in one year ; 30% in
three years).
Increase in specialized labor in rural areas (…% in 1 year).
Extension of rural economy into industrial economy: processing mining products
for better added value.
4.2. Strategies
-
Strengthening decentralized management of mineral resources.
Setting up a transparent mining scheme.
Strengthening education – training especially in rural areas.
Encouraging farmers into mining sector.
Establishing pathways « mine and geology » in technical high schools.
Vocational training for mining sector related activities (agriculture, stone cutting,
tourism, …).
Strengthening integration of mining activities in rural areas.
Strengthening integration of mining infrastructure for rural development.
5. ADVANTAGES AND RISKS OF STRATEGIES
Strategies
1
2
3
4
5
6
7
8
Description
expected advantages
Strengthening decentralized
management of mineral resources
Strengthening education – training
especially in rural areas.
Encouraging farmers into mining sector.
Setting up a transparent mining scheme.
Establishing pathways « mine and
geology » in technical high schools.
Vocational training for mining sector
related activities (agriculture, stone
cutting, tourism, …)..
Strengthening integration of mining
activities in rural areas
Strengthening integration of mining
infrastructure for rural development.
Obstacles and risks
6