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Monday, October 12, 2009 5:54:14 PM
Country and Sector Background
The Republic of Madagascar, which is the world's fourth largest island, is about 420 kilometres east of Mozambique off the coast of Africa in the Indian Ocean. Its population is presently approximately 15 million. Madagascar is one of the poorest countries in the world, with annual per capita income of approximately US$260. 70 percent of the population in poverty and half of the children malnourished.
After decades of economic stagnation and downturn, the country has sustained several years of positive real growth and low inflation, and the public deficit is under control. After having been one of the most rapidly growing African economies in recent years, Madagascar plunged into a deep political crisis at the beginning of 2002, following contested first-round elections in December 2001. The political crisis ended in July 2002, but some residual social and economic impact remains.
Political History
Formerly an independent kingdom, Madagascar became a French colony in 1886, but regained its independence in 1960. During 1992-93, free presidential and National Assembly elections were held, ending 17 years of single-party rule. In 1997, in the second presidential race, Didier Ratsiraka, the leader during the 1970s and 1980s, was returned to the presidency. The 2001 presidential election was contested between the followers of Didier Ratsiraka and Marc Ravalomanana, and was accompanied by considerable civil unrest. In April 2002 the High Constitutional Court announced Ravalomanana the winner and political stability has resulted.
Madagascar now has a favorable climate for foreign investment following the general election establishing a democracy, led by President Mark Ravalomanana. We have met with the Minister of Mining, Director of Mines, and numerous other local officials and government administrators in order to properly evaluate the investment climate and understand the nature of requirements to do business in Madagascar.
Why consider mining in Madagascar?
There are several deciding factors that lead to the selection of Madagascar. First, Madagascar has an abundance of unexploited precious and semi precious gemstone and gold deposits, as well as large deposits of bauxite, coal, copper, lead, manganese, nickel, platinum, titanium, zinc and zirconium, and now it appears that it has a world class vanadium deposit. Secondly, Madagascar has just completed widespread government reforms, including many in the mining sector that make now make it attractive to outside investment. The political situation is thought by most to be more stable than it has ever been before, with the President focusing on economic / business development as a major thrust to growing the economy and improving the way of life for Madagascar. Lastly, many of the world's economic development programs such as USAID, International Monetary Fund and The World Bank Group have committed significant investments and resources to improve several areas of interest, including a 5-year reform program designed to attract large-scale mining projects.
The Mining Sector in Madagascar. Although governance problems have characterized Madagascar's mining sector for years, recent reform and anti-corruption measures taken by the Government have slowed illegal activities and laid the groundwork for a positive environment to exist in the mining industry for many years to come.
The Mining Sector Reform Project (led in part by the World Bank Group) assisted the Government in setting up a legal and regulatory framework conducive to private investment in the area of mineral resources, in line with its overall policy, defined in 1998 in the Document Cadre de Politique Economique (DCPE), whose key objectives are shifting the role of the State from operator to regulator and promoter of sustainable minerals development, and opening up of the sector to private investment, including foreign.
Reforms, supported by the MSRP, include (i) a new mining code and its regulations, that have established an adequate legal and regulatory framework to attract private investment into mining, including environmental regulations for mining, published jointly by the Ministry of Environment and the Ministry of Energy and Mines; (ii) a special law for large-scale mining investments, defining an attractive special investment regime for mining in Madagascar, and providing for a fair share of revenues between the Government and the private sector, an adequate cut for the Provincial Governments; and (iii) improved governance through the establishment of a non-discretionary and transparent system to grant, manage and cancel mining permits, the Mining Cadastre.
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