RIO TINTO QMM: Kickbacks Misappropriated!

Qit Minerals Madagascar (QMM) is a subsidiary of the mining giant Rio Tinto. The company positions itself as a major player in Madagascar’s national economy. According to a brochure available on its website, the company’s investments have exceeded one billion dollars since its establishment in Madagascar. During the operational phase, the mining activity directly employs 2,000 people, 97% of whom are Malagasy.

However, the company’s development has been marked by intense tensions. A review of the events reveals a cyclical crisis. Analyzing the recurrence of these crises allows one to outline a typical pattern of contestation events : protests, roadblocks to the factory access, intervention by defense and security forces, a few arrests, followed by dispute resolutions through “open and constructive dialogues focused on legality, sustainability, fairness, and respect for the interests of each party.”

This process results in memorandums of understanding, which are broken down into action plans and then program contracts. With minor variations, these different phases of contestation have been observed—from the earliest to the most recent, though not exhaustively—in the events of 2010, 2013, 2018, and 2022. Beyond the similarity in the sequence of events, an analysis of the reasons behind the protests highlights a common denominator: the frustration of communities affected by mining activities.

Frustrations

Ambanihampy is a locality located about twenty kilometers north of Taolagnaro, the capital of the Anosy region. The village overlooks a postcard-like landscape with calm sea, endless stretches of fine sand, coconut trees, and greenery lining the banks of the Ambavarano estuary. Perched on a small hill, about thirty wooden houses topped with ravinala leaves form the village. During our visit, dozens of children and a few women and men observed us with a mix of curiosity and apprehension. Unfazed by the commotion, Aurlette, 64, was weaving a mat inside her small house.

Sitting on the floor, a lamba wrapped around her waist, Aurlette barely looked up. She lifted a row of mahampy—marsh reeds—with her fingers, inserted another strand, and tightened the weave. She explained she had just returned from a five-hour walk to collect mahampy. In the past, she only had to go as far as Ambavarano to harvest it. “I learned to weave from my mother and made it my trade. I don’t know how to do anything else. But for the past few years, it has become increasingly difficult to find mahampy in my village. Everything has been destroyed,” she sighed.

Rasoa is a farmer. She used to supplement her income through basket weaving. This resident of Mandromondromotra does not hide her bitterness. “I grow rice and cassava. While waiting for the harvest, which can take six months to a year, weaving mahampy was my main source of income. It helped cover funeral expenses, hospital bills, or even buy clothes. Now there is no more mahampy. If a crisis were to happen, we would have to sell our rice paddies or give up our cooking pots and dishes to cover the costs.”

Indeed, the Ilmenite project of Rio Tinto/Qit Minerals Madagascar (RT/QMM) directly impacts the daily lives of people living in the immediate vicinity of the mining site, including the communes of Mandromondromotra, Ampasy Nahampoana, and Taolagnaro. A perception survey conducted in 2022 by the Publish What You Pay Madagascar network (PCQVP MG) among villagers from these communities revealed three major changes. According to the villagers, their natural environment has deteriorated, they have less access to forest products and to mahampy, and water quality has worsened, leading to health problems. Their daily livelihoods have also declined. As for the land, it has become less accessible, including pastures for zebus, and the soil has become less fertile. Moreover, a study conducted by Randrianarisoa in 2021 showed that villagers in the communes surrounding Mandena, adjacent to the mine, have lost approximately 45% of the value of their previous incomes since the start of the mining operations.

Inequalities

Yet, RT/QMM claims to inject $2.2 million annually in support of the environment and local communities. Among other initiatives, the company funds ecological compensation projects in areas outside the mining site, such as the Tsitongambarika forest—specifically the Ampasy/Ivohibe (Bemangidy) zone—or the remnant coastal forest of Agnalazaha, in the Farafangana district. In the three communes affected by the mining operations, communities benefit from various development projects.

Indeed, QMM has initiated community programs to support populations impacted by mining operations “in order to fulfill its legal obligations and to maintain its social license to operate, thereby securing its investments and ensuring production within a peaceful socio-community framework.”

In implementing these programs, communities were organized into associations based on the sectors affected, including natural resources, land use, agriculture, fisheries, and more. “In each fokontany, associations were created according to the population’s activities. There are occupants, usufructuaries, livestock breeders, fishermen…” confirms Rondro Andriamahasoro, mayor of the rural commune of Ampasy Nahampoana.

A document reporting the activities of a support organization working with QMM corroborates the existence of 23 associations across the communes of Mandromondromotra, Ampasy Nahampoana, and Taolagnaro. These include 1,092 households made up of breeders, traditional land occupants, and usufructuaries. Between April 2021 and March 2022, these associations received more than 400 million ariary. The company also cites several success stories in a brochure available on its website. One such example is the association Mpanantany mitaky ny rariny (Mpamira), which reportedly increased its members’ income by 200% through the cultivation of red chili peppers and beekeeping.

Through training sessions aimed at improving fishing techniques, some fishermen reportedly increased their income from $3 to $15 per day, per fisherman.

However, the financial flows injected by RT/QMM sometimes generate conflict and create divisions within the community due to poor governance. “From time to time, we have to arbitrate disputes within these associations. Members do not trust the president or the treasurer, as they are suspected of embezzling the association’s funds,” testifies the mayor of Ampasy Nahampoana.

In these established structures, it is the executive members who represent the associations. According to several accounts gathered on the ground, they speak on behalf of all members, and sometimes “eat” in their place. “We are not in direct contact with QMM to defend our interests—it’s the president and spokespersons who represent us… It feels like they only defend their own interests and forget they are speaking for all of us,” laments a resident of Ampasy Nahampoana. In light of such significant financial flows, poverty should be on the retreat.

RT/QMM injects tens of millions of ariary each year into associations, as well as billions of ariary in royalties and mining taxes for the three communes surrounding the mining site in Mandena.

Money Flowing Freely

According to the 2019–2020 Reconciled Report of the Extractive Industries Transparency Initiative (EITI), QMM’s fiscal contribution reached $89 million between 2006 and 2020. Projections for the period from 2021 to 2025 amount to $71 million. Under the terms of the Establishment Agreement, the company pays royalties and revenue shares equivalent to 2% of the FOB (Free on Board) value of its production.

According to the legislation in force, the distribution of revenue shares from this mining activity is as follows:

Table 1 : Mining Royalty Sharing Formula

Source : Law No. 2014-020, Decree No. 2006-910, Decree No. 2020-1000

Although Provided for in the Constitution, the Province Has Yet to Be Structured

Although it is provided for in the Constitution, the Province has not yet been formally structured. As a result, the share allocated to this level of local government is currently granted to the Anosy Region. This proportion may seem minimal compared to the profits generated by the mining activity. However, in real terms, this financial windfall amounts to several billion ariary.

From 2019 to 2021, the rural commune of Mandromondromotra received over 2.6 billion ariary in revenue shares from QMM’s operations. Some residents denounce the lack of transparency in fund management and criticize the perceived enrichment of the mayor. “(…) But how much is he being paid? Without a degree or any clear professional activity, how can he afford to acquire five or six brick houses, seven or eight vehicles, not to mention multiple plots of land… ?” questions Tsivasa Jeanson, a resident of Mandromondromotra.

These suspicions reportedly led to anonymous complaints submitted to the Territorial Office of the Anti-Corruption Bureau (Bianco) in Toliara in 2019. The allegations were substantiated, especially since investigations conducted by the anti-corruption agency uncovered irregularities in the management of 900 million ariary in the commune between 2017 and 2019. The investigation revealed that the last journal entry in Mandromondromotra’s financial records dated back to February 2019. Consequently, it was impossible to track how the funds were used from that point onward.

Furthermore, Bianco’s investigation exposed unjustified expenditures of 300 million ariary in 2017, 400 million in 2018, along with fictitious invoices and unnecessary expenses totaling another 200 million ariary.

Following the case, public frustration escalated when the justice system showed leniency toward the two officials. The mayor was acquitted “for lack of evidence,” while the secretary-treasurer received a five-year suspended prison sentence.

Transparency ?

According to Law No. 2004-020 of September 27, 2014, governing the resources of decentralized local authorities, the oversight of municipal administrative accounts operates on two levels. The State representative conducts a retrospective legality check of the administrative accounts, while the territorially competent Financial Court is responsible for the judicial review of the accountant’s accounts. These two communes reportedly submitted their administrative accounts regularly to the Tolagnaro district for legality control.

However, the two rural communes of Mandromondromotra and Ampasy Nahampoana have never sent their financial management reports to the Financial Court of Toliara.

As part of its report preparation, the Extractive Industries Transparency Initiative (EITI) Madagascar conducted field visits to regions and communes affected by major mining projects. The administrative accounts of these entities were published in its 2019-2020 Reconciled Report, finalized on June 30, 2022. The revenues of the communes of Mandromondromotra and Ampasy Nahampoana from 2019 to 2021 are distributed as follows:

Summary of Revenues for the Communes of Mandromondromotra and Ampasy Nahampoana 2019–2021 According to the EITI Reconciled Report

Source : EITI, 2019-2020 Reconciled Report, Finalized June 30, 2022

Shadows Over Transparency

According to the information provided, the funds disbursed by RT/QMM do not appear to be reflected in the coffers of the two communes, especially for the fiscal years 2020–2021. The “revenue share” account 7717 shows a zero balance. However, a significant amount is recorded under “other revenues.” To clarify this situation, the Financial Court of Toliara was consulted. Consequently, an investigation into the financial management of the two communes, Mandromondromotra and Ampasy Nahampoana, was launched. This jurisdiction requested the administrative accounts of both entities. When compared to the accounts published in the EITI report, significant discrepancies were found.

“If we consider that this reflects the transfer status made by the Treasury to these communes, then there has been a misappropriation of public funds (…) However, it is possible that the funds had not yet been deposited into the communes’ accounts at the time the administrative report was produced (…) Alternatively, it could simply be a bookkeeping error,” explains Hoby Zo Namehaniaina, magistrate advisor at the Financial Court of Toliara.

The economic benefits of mining operations in Mandena have brought positive changes to living conditions and daily well-being in the villages. To that end, six out of ten families now have access to medical care at CSB2 health centers, a 12% increase compared to 2005 figures. Nine out of ten families have access to quality education at primary schools (EPP) thanks to the construction of schools near their villages, representing an 8% rise over the past 17 years.

However, particular attention must be paid to fund management at the commune level, the governance of associations, the environmental impact of mining, and the ambiguous roles of the State and decentralized technical services.

The Establishment Agreement is set to be renewed in 2023. This presents an opportunity to establish a win-win partnership so that Rasoa, the farmer from Mandromondromotra, does not leave poverty as a legacy to her descendants, and so that Aurlette can live her old age with dignity.

Cover photo source: https://region-anosy.mg/