Increasing mining revenue to fund social infrastructure development in Madagascar

Some 80% of Malagasy regions and towns depend on state subsidies or grants to function. Any tax revenue derived from mining activities is therefore an important source of income for local government in order to provide public services and infrastructure. The Court of Accounts in Madagascar, which controls public revenue and expenditure, is tasked with ensuring that this revenue is channeled appropriately.

Australia Awards Alumna, Harinirina Rajaonah, a Senior Auditor at the Court of Accounts in Madagascar, is using her Award-gained skills and knowledge to increase revenue for municipalities, in turn creating a source of funding for much-needed social infrastructure development. She says her organisation had been trying for three years to start making inroads in tracking the payment and subsequent use of mining royalties. “Since 2012, the Court has been trying, together with the Madagascar Extractives Industries Transparency Initiative, to follow the trail of funds from mining royalties, but we did not have experience in this field”.

In 2015, shortly after returning from her Short Course in Mining Resources – Regulation and Revenue Management at the University of Sydney’s Graduate School of Government, Harinirina started working with financial courts to design a system to track and control the use of cash flows received from mining activities. This means accessing the different mining contracts to see whether the different approved social projects, such as the construction of houses, roads and hospitals, have been realised and if all the regions have received their share of mining royalties. The Court of Accounts can then take action if irregularities are found.

The Financial Court of Toamasina was the first jurisdiction in Madagascar to participate in this project, given the significant extractive industry in the region. The project involved area managers, mayors, the public, small-scale operators and existing mining companies in the region. Harinirina says the skills she gained through the short course have helped the whole region.

Another critical part of increasing mining revenue is including taxes from small-scale and artisanal miners who are often left out of the legal framework of mining revenue collection. Harinirina’s work also involves educating small-scale miners: encouraging them to pay mining royalties and explaining to them that the royalties allow municipalities to receive an inflow of funds to finance social infrastructure. Her team also assists artisanal and small-scale miners with the difficulties they may encounter, such as obtaining operating permits. “The first step for artisanal miners is to obtain operating licenses. However, these are very expensive and difficult to obtain, as most of these miners cannot read or write.” Harinirina says she has found that artisanal miners, who are not licensed, are more likely to lose their mining activity as soon as larger operators arrive on the scene, so getting them registered is important to maintain their livelihoods and their ability to contribute to revenue collection.

While more districts are being included in the project, a key challenge Harinirina faces is gaining access to all the relevant mining contracts. Some of them are confidential, yet contain critical information that would allow her team to analyse the impact of royalties on social development. “It is essential to educate both the government and the population on the benefits they can derive from the country’s mineral resources if the management is transparent. But the road is still very difficult.” However, she is motivated to continue her project, as more districts continue to come on board. “Training and exchanges with other participants and trainers with the Australia Awards program in 2015 gave me the opportunity to understand the contents of the mining contracts, the means to [engage] the operators, to assist small-scale miners to comply with existing standards and especially to mobilise municipalities to work with the mining industry in the development of their communities.”

Call to action: Educate artisanal miners on the importance of paying mining royalties, which allows local government to finance social infrastructure development.