The World Bank has approved a US$32mn International Development Association (IDA) credit to help Madagascar manage its mineral resources more effectively, so as to accelerate development and generate funds for poverty reduction.
“This project will address Madagascar’s undiscovered geological potential, and its widely used but inefficient small-scale mining methods that unnecessarily damage the environment and enable mineral production to be smuggled out of the country with little fiscal and economic benefits,”
- Paulo De Sa, task manager for the project, says.
Known as the Mineral Resources Governance Project, to be implemented by the ministry of energy and mines over the next five years, it will support a number of measures aimed at managing mineral resources. This includes plans to reduce gemstone smuggling; adjusting the mining sector’s legal and regulatory framework; supporting the establishment of mining administration offices close to mining sites; establishing a certification programme for gemstones; creating a one-stop shop for gemstone exports and a gemstones exchange; and strengthening private sector associations.
The project will establish a small grants programme, and a database of geological and geophysical information on the country’s mineral resources. Other components will be to finance a geo-physics campaign, conduct geological and geochemical mapping, and the creation of a mineral resources governance database.
It will also be involved in an ongoing multisectoral sexually transmitted infections and HIV/Aids prevention project to undertake pilot activities for HIV/Aids prevention at community level.
According to a bank study, Madagascar is rich in minerals and gemstones, with 2,300 operators generating direct and stable employment for about 100,000 workers and about 500,000 seasonal jobs.
Official mining exports increased from US$16mn in 1996 to US$37mn in 2000. However, poor governance and corruption in the sector have led to smuggling which discouraged many formal investors.
Estimates have put the value of smuggled gemstone exports at between US$200mn and US$500mn or 10% of gross domestic product per year. Experts believe anti-corruption announcements by the government and the country’s recent political crisis have provided a window of opportunity to reduce illegal activities.
The IDA is the bank’s concessional lending window which provides “credits”. These are loans at zero interest with a 10-year grace period and maturities of 35 to 40 years. Countries qualifying face complex development challenges.