Fledgling gold industry brings hope to ninth-poorest country, Madagascar

By Jonny Hogg
Associated Press
via Yahoo News
Monday, July 2, 2007

http://biz.yahoo.com/ap/070702/madagascar_gold_fever.html?.v=1

ANTANIMBARY, Madagascar -- For 12 years, Lauren Rakotondramara has been panning for gold on the banks of the Ikopa river in the dry western grasslands of this Indian Ocean island.

For hours each day, he digs sand, places it in a panning dish made from an old oil drum lid and swirls it gently in the water, hoping tiny flecks of heavier gold will remain when the grit is washed away.

Rakotondramara scrounges together a gram and a half (about half an ounce) of the precious metal a week. In the village market, he gets about $19 a gram, so his takings come to four times the national average weekly wage.

"Every day my body aches from my work but if luck is with me and I find a lot of gold I can make good money," the thin 57-year-old said.

Rakotondramara is part of an innovative pilot project the government hopes will help it develop the gold industry in Madagascar, the ninth poorest country in the world, as well as allow workers like Rakotondramara to earn more from their labors -- and free some from situations akin to indentured labor.

Madagascar has been known for its wildlife, not its mining. It has no formal gold industry, although there has been some large-scale mining, mostly controlled by French syndicates. More than 500,000 small-scale miners like Rakotondramara have been operating clandestinely, risking harassment from authorities and price fixing on the black market.

Under new laws that came into force in December, gold panners and collectors must register with the government and pay for permits. Funds raised from the permits go to local communities to fund infrastructure and development.

Johary Andriamanantena, director of the Gold Agency, the government agency that issues all mining permits, said the plan was being piloted among about 10,000 miners in about 15 villages. He hoped to bring about 70 percent of all small-scale miners in the country into the program by next year.

"We don't even know how much gold there is in Madagascar because before the industry was informal," Andriamanantena said.

"We know that we need a gold refinery in Madagascar to maximize profits for the country and we are hoping that a private investor from abroad will build one next year. The problem at the moment is that we have no statistics to show productivity or capacity, which is what investors want. By next year we will have these so the situation will be different," he said.

"At the moment the price of gold here is lower than the global price," Andriamanantena said. "With the new system we will publish international gold prices, so collectors (miners) will be able to get more for the gold that they sell."

Gold on international markets now is at more than $600 an ounce.

In Antanimbary, 180 miles west of the capital, Antananarivo, each miner and panner pays $1.50 a year for a permit and buyers pay $50 a year to make purchases in the area.

Miners and buyers will be taxed as well. Most miners have expressed happiness with going legal.

"Before this new law we had to hide when we worked and people caused us problems. Now, no one can cause me any problems and I can do my work openly. I can also get a better price for my gold," Rakotondramara said.

Already, 1,383 gold panners and miners as well as 55 buyers have registered. A new school and four wells have been built and electric lighting for the main street installed, all with the money raised from permits.

According to Ranaivo Nonot, from NGO Green, a local development agency assisting the project, the local mayor's budget for the area has tripled to about $7,800.

"I had to show when I started this pilot project that I was reducing rural poverty," said Nonot. "You just have to look at the things that the village can afford now to know that we are being successful."

NGO Green is funded by the World Bank which is helping with the implementation of the new law and teaching the local communities how the system will work.

Tom Cushman works as a mining consultant for the World Bank. He wears loud shirts and he drives a hard bargain. After hours of checking the quality and quantity of the gold in Antanimbary market, he buys over a kilogram (more than 2 pounds).

"I'm trying to set up a model to show that it is possible to buy gold directly from the lowest level ... and bring it all the way to the international market," he said.

"This gold directly benefits the community, they are making a profit from it. Also, the people mining it and panning it are now part of the national economy. Before they were illegal and could be exploited, now they have a vested interest in the development of their country and they are protected by law."

With the rough terrain unsuitable for agriculture and the tough stringy grass unpalatable for zebu, a type of cow that is the most common livestock in the country, 80 percent of Antanimbary relies on gold to generate an income.

Officials hope the new system will help wipe out exploitation. Now, many of those digging or panning for gold sell only to their bosses. They are often forced to borrow money from the bosses to live and in some cases entire families, including children, work on the mines to help pay off debt.

Some distance from the river, in the hills above the village, Randriananarivo, aged 62, who did not wish to give his full name, works at a shaft mine.

The site is wind-swept and hot, littered with old shafts cut into the red earth. Thirty workers, some with families, live there in simple huts made from dried grass.

"I came here with no money," Randriananarivo said. "My boss paid for my food and transport and I must sell my gold to him. He has taken my identity card so I cannot easily leave.

"If I cannot pay him back at the end of my contract he will give me more food and I must continue to work. But the food is expensive, maybe 50 percent more expensive than in the market, and we must pay someone to bring it to the mine site. Everyone here is in debt to their boss. We have to work to pay him back otherwise we'll never leave."

Randriananarivo said they received a fair price for the gold they mined but when asked about safety, he laughed and shook his head.

"We asked for oxygen so we could breathe properly in the mine but our patron said no, we owed him money so we must work," he said.

According to the miners, two people died at the site last year in mining accidents.

Jean-Jacques Rakotomavo, deputy mayor of Antanimbary, acknowledges that the exploitation and the safety of the miners are two major problems they have not yet brought under control.

Rakotomavo said wealthy gold buyers, who are part of the new plan, are continuing to loan money to workers. As part of the loan they will pay for the worker's mining permit.

"I know many people are in debt to rich people here. It's not right but that's the way it is. We try and control it but it is difficult. If we crack down on these rich people, those in debt won't be able to work here and they'll still be in debt. We must try and change people's attitudes.

"I don't think everything that is happening here is good, but we are at the very beginning and we will overcome these problems. We are a developing country and we are just taking our first steps."

* * *

Join GATA at these conferences:

The Silver Summit
Thursday-Friday, September 20-21, 2007
Coeur d'Alene, Idaho
http://thesilversummit.com

New Orleans Investment Conference
Sunday-Thursday, October 21-25, 2007
New Orleans, Louisiana
http://www.neworleansconference.com

* * *

Help Keep GATA Going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at http://www.gata.org/.

GATA is grateful for financial contributions, which are federally tax-deductible in the United States.