Big Boost for Mining Investments in Madagascar and the region

Rapid growth for Malagasy mining sector
Rapid growth for Malagasy mining sector
Roel Slootweg | Shutterstock

With the rapid growth in new investors to the mining sector in Madagascar, the impact of the decision by the country’s president not to implement the planned changes to its mining code, paves the way for boosting economic development in the region.

Madagascar is one of Africa’s poorest nations, and the president had planned to increase royalty fees - and claim 10% stakes in mining concessions under a draft code dated back to 2015, alarming investors across the region. Increased investment in rich untapped, resources in regions such as Guinea, DRC, Ivory Coast, or Burkina Faso have also posed new challenges to the achievement of sustainable development in the Africa’s mining industry. Mining codes in Francophone Africa are at the heart of a political debate that is focused on the adoption of innovative strategies of good governance and practices to promote transparency, and allow the mutual sharing of profits between the host countries, foreign investors and local communities.

Mine tailings reservoir in Madagascar, receiving slurry through a pipeline from an ore processing plant
Mine tailings reservoir in Madagascar, receiving slurry through a pipeline from an ore processing plant
Roel Slootweg | Shutterstock

Domestic reforms in the mining code have culminated in the international processes of transparency and good governance with the Extractive Industries Transparency Initiative (EITI) – with many Francophone countries signed up as members. In Burkina Faso, which is now the fourth biggest gold producer within a decade, the mining code reform paves the way for fairness in the distribution of mining income, by providing for tax amendments.

Madagascar is ranked second place in Africa’s top destinations for oil and gas investments in 2016, and the country’s reputation for its petroleum and mineral resources potential is growing steadily.

Oil exploration is currently a booming sector as the spotlight turns to Africa as the world’s most overlooked oil and gas region.

The potential for further oil exploration in Madagascar is vast, with only one oil well for an area of 10,000 km2. The basins are very similar to those recently uncovered in East Africa, in Mozambique and Tanzania. Dry gas is also underway, and it is expected that the gas produced will provide sufficient energy for all of Madagascar. But with gold, nickel, cobalt, chrome, sapphires and rubies and new projects expected in uranium Madagascar has extensive mining potential.

Last year, the Malagasy government set out clear objectives and the revised version of the mining and hydro-carbons code aims to improve the conditions for and exploration and exploitation of hydrocarbons - to offer incentives to encourage potential investors, as foreign investment is considered key to ensuring growth of Madagascar. Experts predict that the Malagasy economy is on the verge of acceleration quickly – and this year, the share of the mining sector is expected to reach 12-15% of GDP.

1. Madagascar Back to the International Scene
2. Author Sebastien Thouvenot and Tshiamo Maseko
Source : Without Prejudice, Volume 14, Issue 2, Jan 2014, p. 12 - 13

Tags: mining madagascar mining code economic development