Thursday, January 15, 2009

Madagascar's perilous mining gamble

FORT-DAUPHIN, Madagascar (AFP)

Madagascar is throwing its all into the mining sector to vanquish poverty but the environmental and social risks are high and the guarantee of returns is doubtful.

The Indian Ocean island is one of the world's poorest countries yet its subsoil is riven with mineral riches and holds some of the world's largest deposits of sapphire, nickel, bauxite and ilmenite, among others.

Mining accounts for only four percent of Madagascar's gross domestic product and its vast unexploited reserves have become attractive to many foreign companies since the commodities markets soared.

British-Australian firm Rio Tinto and Canada's Sherritt, respectively building the world's largest ilmenite and nickel mines, are only some of the mining giants converging on the "Great Red Island".

Modern-day Klondikes are sprouting all over Madagascar, turning a very traditional society upside down and threatening to disfigure an island whose biodiversity earned it the name of the "Noah's Ark of the Indian Ocean".

In Moramanga, in the east of the island, a 20-metre-wide scar slashes right through the primary forest.

Bulldozers are busy establishing Sherritt's four-billion-dollar nickel mine -- one of the world's five largest mining projects -- and building a pipeline, ripping through the shrivelling natural habitat of the endangered indri lemur.

"This is the heart of the primary forest, very close to the future protected area decreed by the government," said Leon Rajaobelina, vice-chairman of Conservation International's Madagascar branch.

Yet in 2006, the government approved Sherritt's Ambatovy project, which will is also to exploit cobalt and ammonium sulphate from 2010 for 27 years.

According to a survey, between 1,300 and 1,700 hectares of primary forest sheltering 1,378 flower species will be sacrificed to the mine. No fewer than 47 species are found only there.

"This flora in Ambatovy was among the most endangered in Madagascar's wet forests," said Rainer Dolch, of the Madagascan environmentalist organisation Mitsinjo.

The government insists that a suitable balance has been found between the preservation of biodiversity -- also the island's main tourism asset -- and the aggressive development of the mining industry.

"Considering the extent of deforestation, conservation will be better ensured with those mining projects," director general of mining Gerard Rakototafika said.

Sherritt turned down AFP's interview requests but says on its website that it is committed to preserving biodiversity and ensuring that the mine generates a positive impact on the environment.

Amid question marks over the impact unbridled mining can have on the island's environment and increasingly crucial tourism sector, some residents are also expressing doubts over the viability of this new economy.

Until recently, Fort-Dauphin, a lobster fishing port on the island's southernmost tip, was a sleepy and picturesque town flanked by three bays of bright blue water and abutting a spectacular mountain.

The idyllic landscape was shattered in 2005 when Rio Tinto started building a massive floating mining plant to extract ilmenite -- a mineral used in pigment production -- from the sands.

The sheer size of the 850-million-dollar project has knocked the town sideways. The population has doubled in three years to reach 70,000 and flashy new hotels now cosy up to the old colonial-style buildings.

The project is managed by the QMM corporation, 80 percent of which is owned by Rio Tinto to the Madagascan government's 20 percent.

"QMM undeniably brings with it a lot of opportunities but only part of the population can benefit," said Jean-Philippe Jarry, local coordinator of the aid organisation CARE. "Fort-Dauphin was a fishing village and simply wasn't ready for all this."

Such a huge investment in one of the country's poorest regions has generated immense hope among the population.

"Before QMM arrived, this town was dormant, in a state of economic coma," said chamber of commerce chief executive Liva Randriamilamina, citing the development of transport networks, urban maintenance and the hotel industry the mine has brought to Fort-Dauphin.

But some have expressed doubts as to whether many of the small businesses will survive the upcoming completion of the initial construction phase and also argue that the mining boom has attracted many expatriate workers and inflated the cost of living.

"For the moment, the project does not generate wealth nor does it allow people to improve their living conditions," said opposition MP Josuah Randrianantenaina.

Coplan Andrianarijaona, a cook in Fort-Dauphin, said the prices of rice, meat and vegetables have shot up by 40 percent and her rent increased threefold in two years.

Leading the chorus of protests against the colossal project are the fishermen who have seen their subsistence destroyed by the floating mine.

"Life was acceptable before. Over there, we used to be able to fish all week, there were lots of fish and shells," said Christophe Mbola. "Now we only go out twice a week."

Some fishermen like Mbola were given compensation packages but they insist their income has shrunk.

"Let them keep their millions and allow us to fish in peace because at least we know the sea will always be there," said Marcel, another fisherman in the coastal village of Ambinanibe, 10 kilometres (six miles) from Fort Dauphin.

The risks are also there for the government, which granted the foreign mining companies conditions that few other nations would offer.

The contracts signed with Rio Tinto and Sherritt do not stipulate any percentage to be paid to the government and the companies' profits are tax free during the first five years of commercial activity.

"We're being criticised for being too lenient and maybe it's true, looking back from the current global context in which many countries are renegotiating their old contracts," mining chief Gerard Rakototafika said.

But he pointed out that the deal with Rio Tinto was sealed in 1998. "Madagascar had nothing to offer back then in terms of infrastructure and we could not afford to ask for too much."