June 2024

Minerals in madagascar: opportunities and challenges of governance

Madagascar is facing a critical period in its mineral and strategic resources sector. Following 12 years of regulatory uncertainty, the sector is set to expand significantly as the country’s substantial mineral deposits are opened up to growing global demand. However persistent community grievances highlight continuing challenges in the sector and flag important risks for future growth.

In 2011, the government suspended the award of new mining permits[1], putting administrative procedures for obtaining authorisation for exploration activities on hold. Although this suspension represented an opportunity for the country to rejuvenate its mining sector governance system, it also had the effect of stifling new investment in the sector. The 2011 suspension did not affect the shift from existing exploration activities into exploitation permits[2]  but put a halt on new investment in exploration. Over the years, successive governments have tried to remedy this situation by launching revisions to the legal framework that governs the industry, in particular its Mining Code. Between 2016 and 2021, for example, a series of revisions to the Mining Code were proposed but failed to become law. It was welcome news to see the Mining Code finally promulgated into Law 2023-007 on June 7, 2023.[3]

Key gaps, however, remain in the Code—especially in relation to new global demand for the critical minerals that are key to the energy transition. In fact, the new Mining Code includes only a few broad paragraphs on critical minerals. The code grants government discretion in defining critical minerals as well as government control over the designation of a quota of production that must be allocated to the domestic market, based on existing domestic needs. The new Code, however, does not establish specific strategies for the extraction of these minerals.

The booming of graphite production to meet global demand

With the energy transition a key policy priority for governments across the globe, the race to secure the supply of minerals required for the transition is intensifying in Africa. Madagascar has substantial deposits of a number of minerals necessary for the energy transition, including cobalt, nickel, and graphite. These are currently being exploited by a small number of primarily foreign investments. The most significant of these is the Ambatovy Project, which has been in production since 2012 and produces and exports refined nickel and cobalt of 99.9% purity to customers in Asia, Europe, and the United States.[4]

Madagascar also has major deposits of graphite, with six large projects accounting for 3% of global production and 8% of global reserves.[5] With the ongoing boom in the exploitation of this ore, more substantial export forecasts are expected in the years to come.  Tirupati Graphite, a British company operating two mining sites (Vatomina and Sahamamy) on the island’s east coast, produces more than 30,000 TPA in 2024[6]. The Canadian company, NextSource Materials, publicly announced in February 2023 that the construction of a processing plant at its Molo graphite mine had been completed. The company foresees a production capacity of 17,000 TPA during the start-up phase of the project.8 Another key player in the sector is the Australian company, Black Earth Minerals, which is exploring graphite at its Maniry site and has signed a contract with the German company, Luxacarbon, to supply 25,000 tons of graphite annually. The company expects annual production of up to 500,000 tons in the first phase.9

This substantial and growing contribution of Madagascar in meeting global demand for critical minerals highlights the need for a dedicated critical minerals strategy with which to meet the challenges of upscaling mining in Madagascar. These challenges are clearly illustrated in local disputes with existing mining operations.

Transparent local consultations and respect for free and informed consent: challenges for the mining industry

International norms demand that the consent of local populations is sought before projects affecting them are approved. Consent requires that consultation with local communities is sought and that legal means are established through which participatory decision-making processes can be undertaken. Although these norms are widely accepted internationally, the lack of local consultations has proved a recurring problem in Madagascar. Local communities in the Anôsy region where a subsidiary of Rio Tinto is mining mineral sands, for example, complain of a lack of consultation. Specifically, these communities identify a lack of engagement in the process around renewing the establishment agreement that the mining company concluded with government, which has denied them an opportunity to discuss grievances with either government or the company itself relating to the project.[7]

These communities bear impacts caused by mining activities on their land to their income, their livelihoods, and their health. The mines’ disruption of local ecosystems and impacts on water quality have been particularly contentious in the context of the local community’s reliance on local rivers and lakes.[8] Given these costs to the environment, local communities do not feel that they are benefiting from fair compensation from the mining companies. This lack of community integration in mining projects is the primary source of social conflict and dissatisfaction in areas impacted by mining operations. Several communities are beginning to reject mining projects, given the impacts recorded in some mining localities[9] and the fear of losses in other parts of the country.[10]

Furthermore, an outdated legal framework prevents these communities from claiming their rights. The environmental impact framework for investments in large projects such as the mineral sands mine in Anôsy has not been updated since 2004. Known as the MECIE decree[11], the current framework does not require developers to conduct a social impact study of their mining projects[12]. Nor does the framework require a sincere and transparent consultation with local communities impacted by mining operations.

To guarantee a just energy transition in Madagascar, the government must adopt a dedicated strategy so that the exploitation of mining resources required for the global energy transition better balances the needs of local communities, the government, and mining companies. An adequate legal framework must be adopted so that exploiting these mineral resources does not exacerbate the already worrying environmental and social problems that we see in Anôsy as in other parts of the country and does not infringe on human rights.

[1] For further detail, see Razananirina, H. and Ihariantsoa, S.C, (2020) Evaluation des Riskques de Corruption dans l’Octroi des Titres Miniers a Madagascar. Available at https://bit.ly/3yw2kcd (Accessed: 24 May 2024)

[2] Some exceptions are outlined in the Mining Cadastra Office website, which shows some mining companies have been granted their Exploitation Permits within the suspension period. See https://bcmm.mg/donnees-tabulaires-3/

[3] See https://eitimadagascar.mg/wp/wp-content/uploads/2024/01/L2023-007-VF.pdf

[4] See https://ambatovy.com/en/operations/products/.

[5] Sturman, K., Loginova, J., Worden, S., Matanzima, J and Arratia-Solar, A. (2022) Mission Critical: Strengthening governance of mineral value chains for energy transition. Available at https://eiti.org/documents/mission-critical (Accessed May 24 2024)

[6] See https://tirupatigraphite.co.uk/madagascar-projects/

[7] Laetitia B. (2023) Madagascar: Nouvelles tensions autour des activités de l’entreprises minière QMM à Fort-Dauphin, RFI, available at https://bit.ly/3KkbSJD (Accessed May 24 2024)

[8] For exemple, see https://www.leighday.co.uk/news/news/2024-news/rural-villagers-living-near-mine-in-madagascar-take-legal-action-against-mining-giant-rio-tinto-after-tests-show-dangerous-levels-of-lead-in-their-bodies/

[9] For example, see https://news.mongabay.com/2023/05/fish-deaths-near-rio-tinto-mine-in-madagascar-dredge-up-community-grievances/

[10] See https://www.craadoimada.com/la-voix-et-les-droits-de-la-grande-masse-de-la-population-de-toliara-i-et-ii-directement-affectee-par-le-projet-base-toliara-comptent-non-a-toute-forme-de-discrimination-a-leur-egard/

[11] See https://edbm.mg/wp-content/uploads/2017/12/Decret_MECIE.pdf

[12] See OSCIE post ‘La revision du Décret MECIE est imminente’ , 2024, https://bit.ly/3KkkBeR