|1. Project Data:
ICR Review Date Posted:
|Mineral Resources Governance Project
Project Costs(US $M)
Loan/Credit (US $M)
|Energy and Mining
Cofinancing (US $M)
|USAID, French Agency for Development
Board Approval Date
|Mining and other extractive (60%), Central government administration (40%)|
|State-owned enterprise restructuring and privatization (29% - P)
Decentralization (29% - P)
Environmental policies and institutions (14% - S)
Participation and civic engagement (14% - S)
Small and Medium Enterprise support (14% - S)|
||ICR Review Coordinator:
|Joseph Makwata Wambia
||Christopher David Nelson
|2. Project Objectives and Components:|
a. Objectives:According to the Development Credit Agreement (DCA), the objective of the project was to assist the Government of Madagascar in implementing its strategy to accelerate sustainable development and reduce poverty in Madagascar through the strengthening of governance and transparency in the management of mineral resources, with special emphasis on small-scale and artisanal mining, (DCA, Schedule 2, p. 15).
The Project Appraisal Document (PAD) expands the PDO into three specific objectives: (i) to strengthen transparency and governance in mining; (ii) to promote key institutional reforms for the decentralized management of mineral resources; and (iii) to promote private investments and value added in the mining sector. (Annex 1 of the PAD, Project Design Summary, p. 28-32).
In agreement with the ICR, this review evaluates the project against the three specific objectives, since (i) sustainable development and poverty reduction can be considered as higher-level CAS objectives; (ii) the specific objectives are also listed in the financing agreement for additional financing, which also states that the original project objectives would remain unchanged; and (iii) the specific objectives correspond to the project components and key performance indicators.
b. Were the project objectives/key associated outcome targets revised during implementation?
c. Components:Component 1: Strengthen transparency and governance in mining, with particular focus on curbing gemstone smuggling in the artisanal and small-scale mining sub-sector (appraisal estimate $6.22 million; additional financing $0.42 million; actual $4.56 million): (i) reforming the mining sector’s legal and regulatory framework; (ii) supporting the establishment of decentralized mining administration offices close to exploration sites; and (iii) creating a program for the certification and quality control of gemstones, including a one-stop shop for gemstone exports and gemstones exchanges.
Component 2: Key institutional reforms for the decentralized management of mineral resources (appraisal estimate $8.63 million; additional financing $5.48 million; actual $7.26 million): (i) reorganizing and strengthening public mining agencies at the provincial and communal levels, e.g. by creating six provincial-level offices aimed to oversee the environmental management of mining titles at the provincial level; (ii) training communities to empower them to play an active role in the management of mineral resources; (iii) communication campaigns; (iv) establishing an Intranet and Internet network within the mining administration at the municipal level in order to extend access to cadastre information; (v) supporting integration of large-scale mining projects into regional development; (vi) creating capacity to manage potential conflict between environmental protection and large/small-scale mining; and (vii) improving governance and management capacity of small-scale mining activities, including decentralized tax collection in ten communes.
Component 3: Promote private investments and value-added in the mining sector (appraisal estimate $20.18 million; additional financing $1.30 million; actual $31.05 million): (i) creation of a Mining Sector Promotion Agency (APSM in French); (ii) strengthening of geo-scientific information through airborne geophysical surveys, geological and geo-chemical mapping and an associated Data Bank to attract private sector investment; and (iii) improving the Ministry of Mines' capacity to coordinate the interventions related to artisanal and small-scale mining, including certification procedures, administration of a small grants program, dissemination of information, environmental management, and extension services.
Component 4: Project Coordination and Management (appraisal estimate $2.67 million; additional financing $0.6 million; actual $4.73 million): support for the activities of the existing Project Implementation Unit (PIU) responsible for the day-to-day management of Project implementation, including procurement, financial management, reporting, monitoring and evaluation, coordination of Project activities of the Steering Committee, and other public entities.
The components were not revised. However, a Level 2 Restructuring in April 2007 provided additional financing (see below).
d. Comments on Project Cost, Financing, Borrower Contribution, and DatesProject Cost, Financing & Borrower Contribution: The project cost at completion ($48.56 million) was about 23% higher than estimated at appraisal ($38.65 million). The project was financed mainly by an IDA Credit ($41.94 million with additional financing, at closing) which was about 30% higher than the planned IDA credit of $32.0 million. The Borrower’s contribution was marginally higher at $5.42 million compared to $4.45 million planned at appraisal. Parallel financing was provided by the French Development Agency ($0.6 million), United States Agency for International Development ($, 0.1 million), and the Government of South Africa ($0.5 million).
In terms of costs by expenditure category (PAD, Annex 6, pages 44-46), the project financed procurement of civil works, publications and airborne surveys contracts (Appraisal Estimate was US$5.96 million, of which IDA would finance US$5.73 million), goods (US$3.19 million equivalent, of which IDA would finance US$2.88 million), consultancy services and training (US$24.61 million, of which IDA would finance US$19.06 million), small grants (US$0.63 million) and incremental recurrent costs (US$3.31 million). The amount of small grants and incremental recurrent costs to be financed by IDA is not indicated in the PAD.
Changes in Implementation Schedule: There was a 3.5 year delay in the implementation schedule following two extensions, the first from December 31, 2008 to December 31, 2010 in conjunction with the approval of an Additional Financing Credit in April 2007; and the second, through June 30, 20012, to allow completion of pending activities.
The ICR reports that, following the unconstitutional regime change in March 2009, the Bank suspended all disbursements to Madagascar until mid-2011, followed by a broad portfolio restructuring exercise to ensure that all operations were consistent with the new 2011 Interim Strategy Note as well as constraints imposed by the Bank’s Operational Policy (OP) 7.30 dealing with de facto governments at arms’ length, targeting social impacts, favoring partnerships with the private sector, and strengthening coordination among Bank operations.
|3. Relevance of Objectives & Design:|
a. Relevance of Objectives:High
The PDOs were relevant at the time of appraisal, and at closing in 2012. The project targeted two of the three pillars in the Interim CAS that was approved by the Board in October 2002 and the Poverty Reduction Strategy Paper (PRSP) that was then in force: (i) implementation of a governance and institutional reform strategy; and (ii) the adoption of policies to attain higher and more sustainable rates of economic growth (PAD pp. 2-3 para 1). The PDOs’ continued relevance was confirmed during the project’s Midterm Review. Mining in general, and the project in particular, also feature prominently in the Government’s 2007-2012 Madagascar Action Plan and in the September 2011 Interim Strategy Note, which was still in force at the time of closing.
b. Relevance of Design:Substantial
The causal links between the project objectives, components, and activities were clear and consistent:
- To improve transparency in the management of mineral resources, the project financed the establishment of four Mining Administration Centers, and a one-stop shop for exports of gemstones, which were expected to produce sector statistics and surveys of stakeholders groups.
- To implement key institutional reforms for the decentralized management of mineral resources, the Project financed training and certification of small-scale miners in modern gem processing techniques and six Environmental Management Units in the Provinces, which were expected to result in increased collection rate of mining royalties from 10% to 80%, and decentralization of mining administration by at least 50% at the end of the Project.
- To promote private sector investment and value added in the mining sector, and export potential, the project financed the creation of a Mining Sector Promotion Agency (Agence de Promotion du Secteur Minier) and the strengthening of geo-scientific information through airborne geophysical surveys, geological and geo-chemical mapping and associated Data Bank.
- Furthermore, the project financed the improvement of the Government's capacity to coordinate interventions related to artisanal and small-scale mining, including certification procedures etc. As a result, the annual declared exports of gold and gemstones from small-scale mining were expected to increase.
- In order to respond to the development of new large-scale mining projects in Madagascar, the sector strategy was revised in 2005, and project activities were adjusted accordingly.
However, there were some shortcomings in project design. The support to decentralized management of mineral resources (a sub-component under Component 1) could have been more clearly delineated from and linked with related activities under Component 2, which also aimed to strengthen the decentralized management of mineral resources. In addition, project design would have benefitted from a more gender-sensitive approach.
|4. Achievement of Objectives (Efficacy) :|
(i) Strengthen transparency and governance in mining: Substantial
- The legal and regulatory frameworks for industrial and artisanal mining were enhanced by the revisions of the Mining Code in 2005, the subsequent production of mining regulations (the Mining Code Decree of 2006), and the revision of the Large Scale Mining Investment Act. Further reforms to the legal and regulatory framework were to be carried out under the additional financing, but were adversely affected by the 2009 political crisis.
- New legal provisions and awareness raising campaigns make it possible for artisanal and small-scale miners to form associations, formalize their operations, and access mining titles. The size of mining squares was reduced from 2.5 km to 0.625 km, increasing the capacity to access mining resources. Artisanal mining corridors were created on a pilot basis.
- A one-stop shop for the export of rough gemstones and jewelry was established under the Project and it now sustained through an independent and self-financed association. Progress still remains to be made on aspects of the "laissez-passer" system.
- Two Mining Administration Bureaus were created (target: four), but due to the 2008-2009 ban on rough stones exports and the exhaustion of resources, the efforts could not be sustained. The centers were not operational at Project closing.
- The Gemology Institute delivered 1,750 trainings and courses in cutting, polishing, jewelry and/or gemology, as well as numerous workshops in the field.
- According to the ICR (p. 17), the Project facilitated trade and exchanges, simplified export procedures, improved quality control, developed local cutting and polishing capacity, and created a certification scheme. However, no supporting evidence is provided.
- The Project facilitated the creation of a special inter-ministerial commission in charge of monitoring large-scale mining contracts, which has been the Government's main coordination mechanism to negotiate with interested large-scale mining companies and oversee their investments.
- The ICR (p. 16) argues that improved legal and regulatory frameworks increased the confidence of mining operators to invest in Madagascar. The last official data available from the Central Bank at the time of closing (June 2012) indicated that the private sector had invested $2.9 billion in the mining sector by 2009. The ICR quoted (private) “company sources” as the source for a much higher estimate ($6.5 billion). The attribution of increased FDI to the reforms supported by the Project is unclear, but it is plausible that legal and regulatory reforms were responsible for at least some of the increase.
- The ICR (p. 17) argues that simplified export procedures and improved quality control contributed to the increase in declared exports from small scale mining from $21 million in 2003 to $40 million in 2006 (target: $50 million). These gains were partially reversed in 2008 when the Government unexpectedly declared a ban on rough stone exports, which was lifted about 18 months later. Exports in 2012 amounted to $30 million.
- The ICR (p. 17) notes that Madagascar is now recognized worldwide as a quality gem producer, an accomplishment attributable to the Project-supported creation of the Gemology Institute. The Institute was accredited by the Gemological Association of Great Britain, the world's foremost authority in gemology.
Summary: Project-supported accomplishments included the revision of the mining code, the production of mining regulations, and the revision of the large-scale mining act. The small-scale gemstone industry became more formalized. The creation of the Gemology Institute was a significant accomplishment. The main shortcoming was the shortfall in the number of mining administration centers created and operationalized.
(ii) Promote key Institutional Reforms for the decentralized management of mineral resources: Substantial
- Completion of 19 community development plans that included management of mineral resources (target: 10).
- Creation of seven cadastre "antennas" (regional delegations) in the main mining provinces/regions.
- Capacity building activities in 16 pilot mining municipalities and the formation of 54 miners' associations.
- Implementation of a comprehensive capacity building package to ensure the transparent and effective use of tax revenues generated by mines in three municipalities.
- Development of a Dynamic Mineral Resources Management System to enhance planning and development activities in the Fort-Dauphin region.
- Creation of one central and six regional environmental units in the country's main mining regions (target: six). However, the lack of resources of the National Environmental Agency has reduced the units' effectiveness, especially since the crisis.
- Development of an Environmental Management and Information System to consolidate environmental data related to both large and small-scale mining operations.
- Creation of an Inter-ministerial Committee on Mines and Forests as a mechanism for addressing overlaps between mining permits and newly protected areas.
- As a result of decentralized tax collection, the collection rate of mining royalties increased from 10% to 97% (target: 80%).
- The Project targeted a 50% increase in fiscal revenues from mining for provinces and communes. National information was not available, but evidence from some communes samples suggested a range of increases.
- The creation of cadastre offices led to an increase in the number of permits granted and improved application of the "first-come first-served" principle for license processing. Since 2009, the cadastre system has been affected by a moratorium on permit allocation and a lack of oversight.
- According to the ICR (p. 20), the improved collection of revenue contributed to the provision of basic local health, education, and transportation infrastructure. In the two municipalities affected by the Ambatovy operation, 90% of local taxes paid by Ambatovy in 2011 were invested in priority infrastructure.
Summary: The development of institutions for improved cadastre and licensing (until 2009), tax collection, management of mining revenues, and environmental management were significant. Two of the performance indictors were over-achieved, and no information is available on the third.
(iii) Promote private investments and value-added in the sector: Modest
Expected outputs were the creation of a Mining Sector Promotion Agency (APSM), and a raft of Geo-scientific surveys, both of which were achieved. High quality geo-scientific data was made available to potential investors and other users; a wealth of geological, geophysical and geo-chemical maps and data, mineral resource interpretations and assessments and other scientific information were collected and made available to the public; and a Mineral Resources Governance Promotion Data Bank was created.
Some results fell well short of expectations. The backlog of overdue applications, which was a major goal, stood at 30% at closing, fell well short of the target of 5%. Also by closing, financial mechanisms for long term sustainability of mining institutions had only been partially achieved, at 50% (studies had been completed but no institutions funded). Of the five additional financing-related indicators, four were only 50% completed (ICR pp. 38-39).
As noted above, relevant outcomes related to this objective included:
- an increase in declared exports of gold and gemstones from small-scale mining from $21 million in 2003 to $30 million in 2012. As noted above, the increase in exports fell short of target, but were influenced by the 2008 ban on rough stones exports (a factor external to the project).
- an increase in FDI. The attribution of this outcome to the Project is uncertain, but it is plausible that some of the increased FDI in the sector was due to improvements in the legal and regulatory framework, improved geological information, and the creation of a mining sector promotion agency.
The project achieved its outcomes 42 months behind schedule and with a 25.7% cost overrun.
No economic analysis was attempted in the ICR, even though the project had a substantial investment component. According to the ICR, the project exceeded the proxy economic indicators used in the original efficiency assessment in the PAD (e.g., higher FDI).
The ICR includes another proxy measure of efficiency through the concept of “value for money”. The ICR notes that Components 1 and 2 were below appraisal estimates, while Components 3 (Promoting Private Investments and Value-Added in the sector) and 4 (Operating Costs) incurred cost overruns. The main increase pertained to Component 3, which is explained by a more ambitious geological program motivated by the intensified focus on industrial mining. Two additional blocks of airborne surveys were added and financed by the Project. The ICR notes that the unit cost per linear kilometer was lower in Madagascar that in the case of similar projects implemented in other Sub-Saharan African countries, and was justified by the expansion of the coverage by about 50,000 line kilometers and by the “tremendous success of the geological program” (ICR page 25, para 54). Overruns on operating costs were attributed to the extension of the Project’s lifetime from initially five years to 8.5 years.
Although the IDA Credit was almost fully disbursed ($36.14 million) by 12/15/2008, close to the original closing date, the closing date was further extended to 6/30/2012.
a. If available, enter the Economic Rate of Return (ERR)/Financial Rate of Return at appraisal and the re-estimated value at evaluation:
* Refers to percent of total project cost for which ERR/FRR was calculated