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FIELD CASE STUDY 1: AMBATOVY, MADAGASCAR By: David Reyes and Rames Abhukara Field study completed November 30 - December 8, 2015

FIELD CASE STUDY 1 - CIRDI · FIELD CASE STUDY 1: AMBATOVY, MADAGASCAR By: David Reyes and Rames Abhukara Field study completed November 30 - December 8, 2015

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Page 1: FIELD CASE STUDY 1 - CIRDI · FIELD CASE STUDY 1: AMBATOVY, MADAGASCAR By: David Reyes and Rames Abhukara Field study completed November 30 - December 8, 2015

FIELD CASE STUDY 1:

AMBATOVY, MADAGASCAR

By:David Reyes and Rames AbhukaraField study completed November 30 - December 8, 2015

Page 2: FIELD CASE STUDY 1 - CIRDI · FIELD CASE STUDY 1: AMBATOVY, MADAGASCAR By: David Reyes and Rames Abhukara Field study completed November 30 - December 8, 2015

THE RISE IN CONFLICT ASSOCIATED WITH MINING OPERATIONS: WHAT LIES BENEATH? 2

Field Case Study 1: Ambatovy, Madagascar

SUMMARYAmbatovy is a large-scale nickel and cobalt mining complex comprising four principal elements dispersed over a wide area of eastern Madagascar. Mining operations take place in a remote area of rain forest. A 220 km long slurry pipeline carries ore from the mine to a processing plant and refinery located on the coast near the city of Toamasina. A further 15 km of slurry pipeline carry tailings from the plant to a permanent storage facility in an area of relatively low social and environmental sensitivity. Exploration of Ambatovy began in 2003 and by 2006 feasibility studies were complete together with full environmental and social impact assessments. Initial permits were granted by government in the same year and construction initiated in 2007. Mining and stockpiling of the resource began in 2010, construction ended in 2011 and full production achieved in 2014. During that time, there were multiple changes in the pattern of ownership and operator, with Sherrit ultimately becoming majority owner and operator in 2007.

Madagascar is characterized by increasing poverty (real incomes declined between 1990 and 2010) and political instability. Of note is the political crisis of 2008 which lead to a coup in 2009, the formation of a transitional government and elections in 2014. However the elections did not lead to a full recovery of political stability and tensions remain high. Development of Ambatovy took place in areas of great poverty where people were (and still are) hoping that mining will lead to an improvement in their situation. Construction of the various elements of the Ambatovy mining complex was not without problems, which included:

• Social and environmental issues that arose during construction were dealt with by the contractor. Typically, problems were resolved through compensation;

• Extensive erosion and damage to productive lands during the construction of the pipeline linking the mine and processing plant. Responsibility for receiving and processing grievances, and for valuing the harm done for the purposes of compensation, was conceded, at least initially to third parties. There are also reports of the process being affected by corruption;

• Clearing land for the tailings facility required the resettlement of a large number of people. This ran into difficulties when putative owners of the land identified for resettlement emerged with competing claims to land title. As a result, many of the resettled people have not been given title to the land they have been relocated to and are cast as squatters by those claiming to hold legal title.

At the time of the field study, relationships between the company and the communities associated with the dispersed elements of the project was found to be tenuous, with an entrenched us and them attitude prevailing throughout. In retrospect, it would appear that neither the government nor the communities was ready for mining. Government lacked capacity, stability and political will to protect the interests of the population. More particularly, there remains unwillingness on the part of the central government to empower local traditional organizational structures considered legitimate by the communities.

Among the local people, there is no sense of ownership for positive relations with the Ambatovy project. Communities are largely weak, often internally divided and lacking leadership. It is evident that they had little idea what mining involves or might mean to them before construction began. Prior experience had been with aid and development organizations where the term ‘project’, widely used by representatives of Sherritt and its contractors to describe the mine development program,

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Field Case Study 1: Ambatovy, Madagascar

implied some form of direct, collective, often material benefit to the communities. The result has been a severe disconnect with expectations.

The Ambatovy mining complex has brought change to a formerly poor and relatively remote area. From the perspective of the local population, negative aspects of this change have included: substantial in-migration to Toamasina; a loss of culturally significant traditional harvesting opportunities in the forests around the mine due to the creation of a green ‘buffer zone’; and, the appointment of disliked (and distrusted) outsiders from historically advantaged groups to the best jobs. In general, the local population is averse to controversy and is submissive to authority and as a consequence reluctant to openly challenge the status quo. In the face of the power of the company, backed by government, people feel helpless, apathetic and resigned. Any negative response to date can be characterized as passive/aggressive non-cooperation, although several informants noted that such attitude could suddenly, and without much warning, give way to more assertive expressions of discontent.

The company contributed to the conflictive nature of the situation by delegating social relationships to the prime contractor during construction of the mine, processing plant and refinery, and to a third party to resolve environmental issues arising from the pipeline construction. The transactional approach employed by both groups, which provided short term solutions, is now seen as highly problematic. The company is working to redress the problems created in construction, develop a direct relationship with the local population and move from a reactive transactional mode to a proactive posture oriented towards long term social, economic and environmental sustainability.

INTRODUCTIONThe Ambatovy enterprise was an ideal selection for a case study in several ways:

• Senior management from Ambatovy and Sherritt (the operator and majority owner) support this study’s objectives and helped ensure that key staff would be available to participate in the study.

• At a cost of roughly $8 billion US to build, Ambatovy represents a very large investment flowing into a conflicted political climate, and into an economic climate where people are desperate for resources.

• Construction ended and operations began just over three years ago, providing a timely opportunity to learn about conflict during distinct project stages and the transition between them.

• Ambatovy has a very broad geographic footprint, some of which is situated in highly populated areas. This makes for a very widespread and potentially volatile company-community interface that involves industrial-scale mining as well as complex processing, refining and transport activities. This makes it possible to draw on the experiences of diverse groups dealing with different types and severities of impacts.

Ambatovy’s broad footprint also presented a challenge. The study team had to choose between using the available time to either delve deeply in a limited geographic area or to cover as much geography as possible without going into as much detail. The team opted to cover more ground based on the assumption that features like the mine near the small city of Moramanga, the 220km slurry pipeline cutting through cultivated countryside, and the massive refinery complex on the outskirts of a highly urbanized area would provide a more useful and diverse range of insights than focusing on any one area. Nevertheless, there were important features that could not be visited such as the tailings facility and the resettlement communities. For these, the team had to rely on remote discussions that were helpful but limited. Regarding the choice of looking at Ambatovy as the subject of conflict research, it should be

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acknowledged at the outset that the enterprise is not embroiled in violence, nor is it frequently confronted with protests or other forms of overt opposition. On the other hand, quiet social tensions and frustrations are commonplace and Ambatovy operates amidst constant latent conflict. Current staff and managers are well aware of this and are working hard to achieve positive, sustainable outcomes. Meanwhile, many local stakeholders insist that the outbreak of more destructive conflict is almost inevitable. This general scenario, of a company trying to manage the risks of worsening conflict against a backdrop of tensions and frustrations, arguably reflects the status quo for a majority of mining operations in Africa, thus making Ambatovy a study subject with tremendous potential to provide lessons for other locations.

CONTEXT

Country Context

Madagascar is an island nation in the Indian Ocean, 250 miles off the eastern coast of southern Africa. It is the fourth largest island in the world, with a total area of 587,040 km2, and is rich in natural resources and ecosystems, including some of the world’s most unique biodiversity. The capital, Antananarivo, is in the Hauts Plateaux (highlands), near the centre of the island.

Madagascar has a complex social and ethnic structure due mainly to historic migration from the African continent and from other countries around the Indian Ocean, notably Indonesia and Malaysia. Although the country shares one language, the Malagasy people are officially divided into 18 ethnic groups, whose boundaries are roughly based on old kingdoms. There is an important distinction between the central highlanders and the “côtiers” (those from the coastal regions), and social relations are based on an ancient caste system, in which the Andriana are the dominant elite with significant political influence.

An important factor in politics has been the coastal people’s mistrust of the Merina ethnic group who conquered them in the 19th century. This mistrust was reinforced during the French colonial period (1896 – 1960), with the colonial rulers seeking to “divide and rule” the Malagasy elites and society, a tactic which favored highlanders and provided them with better access to educational opportunities, positions in the administration, etc. These ethnic divisions evolved into a political divide when the central highlanders, mainly the Merina ethnic group, and the côtiers formed rival political parties and competed in the 1959 elections, while on the path towards Madagascar’s independence from France. There was a tacit agreement that the President would be a côtier and the Prime Minister would be a highlander. This practice changed when President Ravalomanana, a Merina, took office in 2002; Andry Rajoelina, who seized control in 2009, is also from the Merina group. Although this highlands-coastal divide may be less significant today, politicians can still stir up hostility along ethnic lines to mobilize support or create instability.

Madagascar is the only country in the world whose real per capita income declined between 1960 and 2010 without experiencing civil wars or violent conflicts. The average Malagasy was 42% poorer in 2010 than in 1960. This can be explained by less violent but debilitating turmoil. Since Madagascar gained independence from France in 1960, the island’s politics have been marred by frequent political crises, with numerous popular protests, several disputed elections, an impeachment, two military coups and the assassination of a president. The recurrent political crises are often prolonged, with detrimental effects on the local economy, international relations and Malagasy living standards. The eight-month standoff between the former President Didier Ratsiraka and his challenger Marc Ravalomanana, following the 2001 presidential elections, for example, cost Madagascar millions of dollars in lost tourism and trade revenue as well as damage to infrastructure. Similarly, another crisis started in late 2008 with a series of protests led

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by the capital city’s mayor, Andry Rajoelina, against President Ravalomanana, and resulted in a coup in March 2009. The coup was almost universally denounced as unconstitutional by the international community. This unconstitutional change in power led to cuts in international assistance, with the United States, the European Union, Japan, the World Bank, the African Development Bank and other donors withdrawing support (except humanitarian aid), which accounted for an estimated 40% of the country’s budget and 75% of public investment. The 2009 coup also led to the termination of Madagascar’s compact with the Millennium Challenge Corporation (MCC), its removal from the African Growth and Opportunity Act (AGOA), and its suspension from the African Union and the Southern African Development Community (SADC).

After the ousting of President Ravalomanana in March 2009 and with support from segments of the army, Andry Rajoelina was installed as the leader of the High Authority of Transition (HAT) and headed the transitional government. After a long mediation process led by the SADC and the preparation of a “road map” to get out of the crisis, presidential and legislative elections were eventually held at the end of 2013 and Hery Rajaonarimampianina was elected president. The elections were recognized as fair by the international community. A government was appointed in April 2014 and was re-shuffled in January 2015. A process of national reconciliation was also initiated under the leadership of the new president with the support of the Council of Christian Churches (FFKM). A conference organized by the FFKM developed a set of recommendations, including a call for the dissolution of some of the state institutions. These proposals fueled tensions between the executive and legislative branches, leading the National Assembly to call for the impeachment of the president and the dismissal of the government in mid-2015. Both motions failed but tensions remain.

Elections aimed at selecting mayors and members of municipal councils for 1,693 communes took place in July 2015, marking the achievement of another milestone of the SADC road map. The president’s party, New Forces for Madagascar (HVM), won mayoral seats in 62% of the communes, and the other large parties (Miaraka amin’ny Prezidà Andry Rajoelina (MAPAR), chaired by former head of the transition Andry Rajoelina, and Tiako i Madagasikara (TIM), led by former President Marc Ravalomanana) won in several of the main cities. Senate elections took place in late December 2015 and the president’s party, HVM, won the majority of the seats. He was also able to appoint an additional 21 senators to the 33 member Senate.

With almost all the elections now complete, many international partners, who had not recognized the transitional government that came to power in 2009 through unconstitutional means, have slowly and cautiously started to normalize their relations with Madagascar (for example, Madagascar was re-instated to AGOA in 2014). These partners are hoping the government will deliver results and make some progress on important reforms.

According to the World Bank, more than 92% of Madagascar’s population of 22 million lives on less than $2 a day. A majority of the population lives in rural areas and relies on subsistence farming. Despite donor efforts to maintain support for critical services throughout the crisis period, the UN reports that deprivation and hardship have deepened since the coup in 2009, in a country where incomes were already among Africa’s lowest. The 2015 Human Development Report ranked Madagascar 154th out of 188 countries, and Madagascar did not achieve most of the Millennium Development Goals by 2015, particularly those relating to child mortality, school enrolment, primary education and poverty reduction.

The country is highly prone to natural disasters. In the past four decades, over 50 natural disasters have caused destruction on the island. While the south suffers from recurrent droughts, cyclones and flooding can strike several areas of the country, especially the eastern coastline. The increasing fragility of the ecosystem, caused by inadequate education, insufficient productive infrastructure and poverty is a major cause of the increased vulnerability to these shocks. It is estimated that one quarter of the population, or approximately five million people, currently live in zones at high risk of natural disasters. In February 2012, for example, Tropical Cyclone Giovanna (originally category 4 on the Saffir-

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Field Case Study 1: Ambatovy, Madagascar

Simpson scale but diminishing as it progressed), hit the east coast of Madagascar, with the Brickaville and Vatomandry District in the Atsinanana Region being the worst hit. There was widespread damage to infrastructure such as roads and footpaths, tens of thousands of houses were destroyed and an estimated 190,000 people were affected in these areas.

In recent years, mining activity and oil prospecting have developed in Madagascar and a few projects make significant contributions to the country’s export earnings. Rio Tinto’s ilmenite project in Fort Dauphin in the far southeast is already in production, as is the Ambatovy’s nickel and cobalt project east of Antananarivo. Madagascar Oil is at the early stages of producing heavy oil, near Tsimiroro, in the mid-west. Artisanal mining has also increased in recent years, especially for gold and precious stones in several different areas of the country, but much of the gold and gems have been exported illegally so the economy has not benefited.

Persistent Political Turmoil and Other Key Facts about the National Context

Madagascar has many potentially unifying qualities that certainly reduce the incidence of confrontational conflicts. These qualities are shared across the island and include a single Malagasy language (with regional dialects); common cultural beliefs and traditions including respect for ancestors, elders and for traditional authorities; traditional values such as fihavanana (fraternity, solidarity); and an aversion to overt confrontation. Moreover, despite the country’s fragility, it does not have a history of mass violence or civil war. The country is also naturally insulated from regional conflicts that could result in flows of refugees or massive inflows of arms. Nevertheless, Madagascar cannot be described as highly stable or cohesive. The national context is still marked by the consequences of the political turmoil that started in late 2008. The crisis lasted almost five years and was considered the worst since the arrival of democracy in the early 1990s. It was principally one of poor governance: a standoff between elites and their close supporters over the spoils of power. While the country was held hostage, the population watched helplessly and the country’s natural resources came under ever more pressure. Throughout the crisis, the challenge for the international community was how to help Madagascar regain democratic constitutionality without legitimizing the 2009 coup and without penalizing the poor and weak by allowing the vacuum in governance to continue indefinitely.

The background is deep and complex. As noted earlier in this report, the majority coastal people (côtiers) resented their 19th-century subjugation by the Merina plateau kingdom. This influenced the general trend after independence for a power-sharing arrangement where it was understood that a côtier would hold the office of the president while a highlander would assume the position of prime minister. The situation has changed over the years, with two Merina political leaders (Marc Ravalomanana and Andry Rajoelina) in an intense political rivalry with each other, indicating that factors such as control of resources, institutions and security may overshadow the post-independence trend in power-sharing. France’s control of Madagascar in the colonial period also laid the basis for further societal differences – between Protestants and Catholics and between the Malagasy elite and the French business class.

With the discovery of minerals and oil raising the stakes, there has been competition for control of natural resources within the Malagasy political elite. In the general population there have been differences between the urban population (with generally more access to education and employment opportunities, social services and imports) and an isolated rural population. Since 1993, the political situation has been characterized by:

• Difficult and sometimes unconstitutional political transitions, often marked by disputed

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Field Case Study 1: Ambatovy, Madagascar

election results, confrontation and some violence;

• Revisions of the constitution and use of institutions and security forces by the winner to penalize political opponents and to consolidate power;

• Leaders who have blurred public and private interests for personal gain;

• The general personalization of politics and the weakness of institutions and of democratic culture;

• Progress in political and economic reforms as well as engagement with the international community followed by periods of stagnation.

The recent crisis deeply divided Madagascar’s political class and families, frustrated ordinary citizens and left most people feeling particularly helpless, detached and resigned. The crisis saw a general decline of the middle class and of the quality of life for the average Malagasy, as well as a deterioration of law and order and security, linked partly to politics and partly to the declining governance, human rights and economic situation that prevails to this day. Different parts of the security forces (military, gendarmerie and police) are also split.

Governance emerges as a key constraint for the country’s sustained, inclusive and high economic growth. Madagascar’s fragility stems from the fact that the rule of law is not respected systematically and that the justice system is unable to enforce laws effectively. According to the World Bank’s Systematic Country Diagnostic (August 2015)1 , there are several structural and historical elements driving this fragility, including a political system that primarily serves the elite; the persistent role of the army in political dynamics; a fragmented society (geographically and socially); an incomplete decentralization process; and tensions to capture the rents from the country’s natural resources (land and extractives). This same report notes that the country’s fragility has increased in recent years due to growing criminality and insecurity, the rapid growth of a trafficking economy, the criminalization of a significant part of the country’s security forces, and a weak justice system that is absent from large areas of the territory, fostering a culture of impunity and inciting people to take justice into their own hands.

Civil Society Organizations (CSOs) are nascent in Madagascar, and they have a limited presence beyond the capital. They have struggled to play the role of an arbiter between the state and society and of a watchdog of public policies. An important barrier for the active participation of CSOs in public decision-making and in holding government accountable is the lack of capacity and unstable financing.

In addition to an increase in crime, muggings and robberies in urban areas, there has also been an upsurge in cattle-rustling (dahalo) and larger-scale violence by groups of bandits in several regions, possibly using arms obtained from the military on the black market. The dahalo phenomenon has apparently evolved in recent years from a traditional rite of passage for young men to a more organized, criminal activity.

Madagascar may not show levels of physical violence compared to crises elsewhere. However, forces and inequalities that perpetuate conflict do exist and there are many factors that contribute to tension, frustrations, dissatisfaction and chronic instability in the country. This includes institutionalized poverty, social exclusion and disempowerment; weak governance and lack of leadership; growing insecurity; jealousy amongst community members and poor stewardship of the country’s natural resources. The recent crisis and its aftermath have taken a heavy toll on the population and the economy, and has led to an increase in social tensions. As noted above, the 2009 coup precipitated sharp declines in

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Field Case Study 1: Ambatovy, Madagascar

international assistance and public investment. The sharp decline in aid and the suspension of trade agreements (including the agreement under the US African Growth and Opportunities Act, AGOA, which allowed the duty free export of goods to the United States), coupled with a drop in tourism and foreign investment as well as a global downturn in markets for Madagascar’s main food exports (vanilla, cloves, coffee and shrimp) led to significant job losses thus increasing tensions particularly in the informal sector in particular. The legacy of the crisis has been lasting damage to a natural environment of global importance and a dramatic drop in access to education and health. Life in recent years has become more difficult and more expensive for most Malagasy, and growing differences in living standards between the rich and poor have also increased social tensions.

Regional and Local Context

The country is politically divided into six faritany or provinces, 22 regions, 110 prefectures, and over 1,600 communes, which are the smallest formal administrative units. Fokontany and fokonolona are kinship-based units, composed of extended families that are traditionally governed by elder representatives of families. These latter units are not recognized by recent legislation on decentralization, but still have real value in practical terms as they represent the basic units of social organization.

The components of the Ambatovy project are located in the Alaotra Mangoro and Atsinanana regions of Toamasina Province.

The Alaotra Mangoro Region, where the mine is located, lies in the eastern highlands of Madagascar. It covers approximately 33,441 km2. The capital of the region is Ambatondrazaka and the population was estimated to be 1,027,110 in 2013. This region is globally renowned for its nature reserves and various parks rich in biodiversity. The region also has abundant mineral potential, especially in the vicinity of Andilamena and Moramanga.

The Atsinanana Region is in eastern Madagascar and covers 21,934 km2. The population was estimated to be 1,305,132 in 2014. Toamasina, also known as Tamatave, is the regional capital and it is also the location of Ambatovy’s processing plant and refinery. The country’s main port, which is used heavily by Ambatovy, is there as well.

Moramanga, classified a “secondary city” with an estimated population of about 42,000,2 is the urban centre closest to the mine site about 14 km away. The city of Moramanga has an important place in the history of Madagascar. It was in Moramanga, on March 29, 1947, that the Malagasy uprising against French colonial rule started. Moramanga is also the capital city of the Bezanozano ethnic group. Also near the mine are the communes of Morarano Gare, Ambohibary and Andasibe. The mine-area economy has both rural and urban aspects. Rural livelihoods are based largely on subsistence agriculture, predominantly rice and manioc, and livestock to a lesser extent. People depend on the markets of Moramanga to sell agricultural and artisanal products. They also exploit forest resources for additional subsistence and frequently seek temporary work in the wage economy. Moramanga’s economy was historically focused primarily on forestry, including the production of lumber and the manufacture of wood products, but this industry has been in decline in recent years.

Ambatovy’s slurry pipeline from the mine to the processing plant crosses twelve communes. There are three major land use zones along the route of the pipeline: the western section, which is within the Ankeniheny-Zahamena forest corridor; the central section, which passes around primary forest fragments through an area defined primarily by tavy (slash and burn agriculture), and the eastern section, comprising mainly agricultural lands. Crops are often lost as a result of an inability to manage water through variations in rainfall, and, due to remoteness and lack of transportation, people are often unable to access markets to sell surplus products. There are limited options for the diversification of livelihoods. Employment for cash income is generally not available and over much of the slurry

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pipeline route, there are few forest resources.

The processing plant and refinery, which represent by far the largest share of Ambatovy’s jobs, contracts and industrial activities, are located within the Toamasina II commune. Wage employment takes a larger role in livelihood strategies near Toamasina than it does at the mine site or along the pipeline, since there are more opportunities for part time or occasional work for people who live close to such a large urban area. Wage employment, artisanal production and business, together, account for the primary economic activity for over 60% of the population near the plant. However, there still remains a dependence on agriculture. The tailings facility is located approximately 15 km from the plant and refinery on the boundary between the communes of Toamasina II and Fanandrana. The tailings area and vicinity are host to a long established rural population, many of whom were displaced by the facility and had to be resettled, which Ambatovy undertook with a strong commitment to international standards and best practices subject to third party oversight. People who still live in the vicinity experience agricultural production constraints due to extreme rainfall and reduced access to both services and markets. The area is remote without easy access to the opportunities presented by Toamasina. Agriculture is an important economic activity and includes cultivation of rice, fruit trees, maize, manioc, sweet potatoes and other subsistence crops, as well as limited cultivation of cash crops, particularly ginger.

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AMBATOVY MINING PROJECT DESCRIPTION AND HISTORY

Description Ambatovy is a large-scale nickel and cobalt mining enterprise. Its main production components are the lateritic mine near Moramanga, the processing plant and refinery in Toamasina, and a 220-km-long slurry pipeline linking the two. An auxiliary office in Antananarivo provides administrative, legal, and communications support to both locations and serves as a liaison with government offices and international organizations as well as with the media and business sectors. Ambatovy’s main outputs are nickel and cobalt, produced in briquette and powdered form. The company also produces fertilizer grade ammonium-sulphate as a by-product of the refining process. When Ambatovy reaches full production capacity, it will be producing 60,000 metric tonnes of refined nickel, 5,600 tonnes of refined cobalt, and 210,000 tonnes of ammonium sulphate annually. There are currently about 9,000 direct employees and subcontractors, 89% of whom are Malagasy.

The mine sits at the southern end of the eastern rainforest about 100 km east of Antananarivo. The partially degraded forests around the mine have undergone considerable human-induced pressures that started well before the Ambatovy project and include hunting and gathering, selective logging, slash-and-burn agriculture, uncontrolled fires, and species collection for trade and consumption. The ore body at the mine consists of two lateritic nickel deposits: the Ambatovy and the Analamay deposits, with a total footprint of 2,154 ha, including the actual mine area of 1,616 ha and a buffer zone. Ore is surface-mined and turned into a slurry for transportation to the processing plant via the pipeline. The operational lifespan of the mine is approximately 29 years.

The route selected for the 220-km-long pipeline between the mine and Toamasina makes some significant deviations to avoid sensitive environmental areas, cultural sites, and local populations. It is buried for the length of its route, avoiding critical wildlife habitats and residual forest fragments. Deep rooting vegetation was planted along the length of the pipeline to stabilize steep slopes, prevent erosion, and assist in rehabilitation. However, during construction, erosion control proved to be a significant challenge.

Ambatovy’s main operations are located at its processing plant site, 11 km south of the Port of Toamasina. It is an industrial complex covering more than 320 ha. The facility was designed and built to operate in accordance with Malagasy regulations and the International Finance Corporation’s (IFC) Performance Standards. The plant’s main components include a pressure acid leaching area, a refinery, and a utilities area to support the process. Site facilities also include a medical clinic, training centre, several canteens, warehouses, workshops, a laboratory, offices, and living quarters.

The tailings (residue with no commercial value left over after mining, processing, and refining) are neutralized and pumped from the plant site through a 15-km-long pipeline to the tailings site, an area where the treated residue is discharged for permanent storage. Excess water from the tailings is discharged into the ocean through a 1.5-km-long diffuser system designed to minimize local environmental impacts. A portion of this water is available to be reused at the plant site. When the tailings site has been filled, it will be reclaimed and drainage systems will be re-established. Ambatovy’s tailings facility was built to specifications consistent with IFC requirements and the site was chosen for its relatively low environmental sensitivity.

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Dates Key Events in Madagascar’s History Key Events and Milestones for Ambatovy

1896 Madagascar is officially declared a French colony.

1911 Nickel first identified in Madagascar by the Syndicat Minier de Madagascar.

1947 Moramanga uprising takes place.

1960 • Madagascar gains independence in a peaceful transition.

• First Republic of Madagascar is established under the leadership of President Philibert Tsiranana.

Existence of a nickel deposit at Ambatovy and Analamay discovered by the Malagasy Geological Service.

1961-1962 The Syndicat Moramanga – 85% Bureau de Recherches Géologiques et Minières (BRGM) and 15% private company Ugine – determines the site has up to 80 million tonnes of 1.2% – 1.3% nickel.

1969 A new syndicate consisting of Ugine, Kuhlmann, Pechiney, SLN, ACC, COFIMER, Omnimines, and BRGM undertakes further evaluation studies.

1970 Additional studies carried out by the Groupement d’Etude de Nickel de Moramanga – GENIM, a consortium of UGINE Kuhlmann (31%), Société Le Nickel (31%), Anglo-American (21%), BRGM (9%), COFIMER (4%), and Omnimines (4%). Mine reserves estimated at this point to be 40 million tonnes.

1972 President Tsiranana steps down in the face of increasing unrest and student protests; interim government takes over.

1975 Military directorate hands power to Didier Ratsiraka; the Second Republic is established.

1979 North Korean operation mines 2,000 tonnes of ore, which is exported to North Korea.

1993 Albert Zafy defeats President Ratsiraka in presidential elections and establishes the Third Republic.

1994 Creation of Phelps Dodge Madagascar, SARL (PDM). PDM begins initial feasibility study and environmental and social impact assessment, which are finalized in 1997.

Ambatovy History

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1995 PDM acquires the rights to the Ambatovy deposits and four exploration permits. Exploratory work begins.

1996 President Zafy is impeached; Ratsiraka returns to power.

1997 Exploratory work by PDM ends. Work included:

• Seven pits dug: four at Ambatovy and three at Analamay. Pits dug by hand, some to a depth of 30 metres, with a diameter of two metres.

• 400 holes drilled, yielding 18,000 metres of core samples.

• Mine reserves estimated to be 83 million tonnes.

1998 Project put on hold by PDM.3

1999 New mining code promulgated by the Government of Madagascar, covering all aspects of mining.

2001-2002

Presidential election results are disputed; Marc Ravalomanana, Mayor of Antananarivo, is declared winner after an eight-month stand-off.

Large Mining Investment Act – Loi sur les Grands Investissements Miniers (LGIM) – comes into force in 2002 providing legal and fiscal stability and investment incentives.

2003 • Multiple Ambatovy exploration permits condensed into a single permit “Number 459” (23 blocks measuring 14,375 ha). PDM-Dynatec Corporation joint venture signed.

• Creation of Dynatec Madagascar, SARL (DMSA). DMSA conducts exploratory drilling and develops a thorough feasibility study and detailed environmental and social impact assessment. These are completed in 2006.

2004 Dynatec receives 53% interest in Ambatovy.

2005 Dynatec acquires remaining 47% interest in Ambatovy from Phelps Dodge. Sumitomo Corporation of Japan takes a 25% stake in the project leaving Dynatec as a 75% stakeholder.

2006 • Forty-year mining permit granted. Dynatec is named Project Operator and retains 45% ownership – later reduced to 40% when SNC-Lavalin Group (SLI) takes 5% interest. Kores Resources Corporation (KORES) joins the project, becoming a 27.5% shareholder along with Sumitomo Corporation, 27.5%.

• SLI awarded engineering, procurement, and construction management contract for development of Ambatovy project.

• Madagascar’s National Office for Environment (ONE) issues environmental permit six months after Ambatovy files its Environmental and Social Impact Assessment (ESIA). Following the ESIA, Ambatovy develops an Environmental Management and Social Development Plan.

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2007 • The Ambatovy Project is certified by the Government of Madagascar under LGIM.

• Construction begins at an estimated cost of around $2.5 billion….

• Sherritt International Corporation acquires Dynatec. Value of transaction is approximately $1.7 billion US. Sherritt assumes Dynatec’s ownership position in Ambatovy and is named Project Operator. Construction ground-breaking ceremony held at the plant site on November 7.

2008 Ambatovy receives construction permits for work at the port and plant site. Closing of $2.1 billion US in project financing from a group of 14 lenders.

2009 Andy Rajoelina, the young Mayor of Antanananarivo, stages a successful coup d’état and assumes leadership of the High Authority of the Transition (HAT); President Ravalomanana flees to South Africa

Mine Site construction camp is ready for occupation at the end of March. By the end of the year, construction of Ambatovy is more than 60% complete. Employment is in excess of 12,000 workers.

2010 Mining of material for stockpiling begins. Inauguration of Ambatovy Training Centre. Port expansion completed. Commissioning of plant begins.

2011 End of construction; total cost to build the project is unclear but $8 billion U.S. is the amount staff mention, or roughly three3 times more than the estimated cost at the start of construction.

2012 End of plant commissioning. Operating permit delivered. Ambatovy agrees to establish the Social Investment Fund with $25 million. First shipment of nickel to the international market.

2013 Presidential and legislative elections are held; Hery Rajaonarimampianana is elected President.

2014 • January: commercial production is achieved.• April: ISO 9001:2008 certification acquired for refining,

analysis and shipping.

2015 • Strikes take place at the mine and plant sites.• September: Financial Completion attained.

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CONFLICT ANATOMY (AN INTRODUCTORY GENERAL DESCRIPTION) This section uses input from the field study discussions to depict how people see the various shapes of conflict around Ambatovy. As noted at the outset, Ambatovy does not provide an extreme example of mine-related conflict. Instead, conflict around Ambatovy is more subtle and latent, yet local stakeholders and staff warn that this should not be interpreted as a sign that all is well.

Current Manifestations of Conflict

Madagascar’s political turmoil is the most prominent form of conflict affecting Ambatovy. A number of discussions suggested that the unpredictable political climate has inevitable negative impacts, including cost implications, on building and operating a large enterprise like Ambatovy. One example people point to came at the end of construction. The enterprise was built according to permitting conditions imposed by the pre-coup government. In the end, it cost much more and took longer to build than expected. By the time it was done in 2011 the company was under pressure from investors who were eager to see the start of production. However, the transitional government at the time unexpectedly declined to provide an operating permit. Commissioning was delayed as a result and negotiations followed. The agreement that was reached included Ambatovy committing $50 million in an environmental bond for major incident responses and $25 million for a Social Investment Fund (SIF) with strict safeguards to ensure transparency and to maximize community benefits. Such concessions are not unusual but the timing raises suspicions among some observers who are inclined to find fault in the government, the company or both. On a similar note but a larger scale, there were suggestions during discussions that total cost overruns of around $5 billion were somehow correlated with the same general cause: political instability that creates inconsistency and inefficiency in the operating environment. In essence, project sub-contractors, suppliers, politicians and other stakeholders may have tried to take advantage of Ambatovy’s need to maintain a tight construction schedule. Whether this constitutes a manifestation of conflict, per se, is subject to interpretation. Ambatovy is certainly working in an unstable, dysfunctional environment and can get caught in the turbulence. And, there is a sense within the enterprise that it gets cast as a scapegoat or target, and that it is sometimes hit by the socio-political cross-fire. There is undoubtedly a divergence of interests between three main groups:

1. Those who govern and vie to govern Madagascar. Regardless of their motives, there is little doubt that their constant maneuvering for power and the resulting political turmoil makes it difficult for the country to use its mineral wealth efficiently for development purposes.

2. Ambatovy and its need for a predictable legal and regulatory environment where agreements are upheld and enforceable, basic infrastructure is maintained and public services are provided.

3. The general population whose real standard of living has been in decline, who hoped Ambatovy would help reverse this decline, and whose ongoing daily struggles result in a hard-to-predict combination of emotions that include disappointment, frustration, anger, isolation and desperation.

Competition for returns on investment (ROI): There has been a conflict between the priorities of government officials and Ambatovy regarding social investments. Ambatovy’s inclination is to distribute benefits in proportion to where people are more impacted by its activities and where reputation is

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likely to influence operational risk. Government officials have sought to leverage Ambatovy’s social investments according to a more political calculus. An example given had to do with Ambatovy wanting to ensure that Moramanga received a reasonable share of social investment given its proximity to the mine. The government, though, saw less political advantage in this and fought to direct a much larger portion of resources toward Toamasina, the country’s second largest population centre. Some within Ambatovy feel that this type of conflict is waning thanks in part to initiatives that prioritize local hiring and procurement, as well as involving a third party development consultant to guide a mutually beneficial multi-stakeholder approach to royalties distribution.

While the study discussions did not provide a lot of detail, it is clear that the mine has been a target for well-organized, widespread crime. The example cited most was diesel theft, which apparently results in significant losses. One local leader says involvement goes “high and wide.” From the point of view of the study, this is most interesting because Ambatovy staff and local stakeholders agree that improving relations could help diminish theft and weaken the organized network behind it. Opinions vary on how much better relations could accomplish. People living on the periphery of the mine say they could help Ambatovy prevent diesel theft but, “as things are, we don’t care.” However, at least one account suggested that ‘caring’ is not enough because people are generally reluctant to denounce fellow community members. Another relevant aspect of this is that some local people associate crime like this, rightly or wrongly, with unwanted influx into the mine area by people seeking employment and other forms of opportunity. Ambatovy is aware of these types of problems and acknowledges that local communities have an important role to play in finding solutions. The sense among some key staff aware of the latest security statistics is that things are moving in the right direction with incidents of theft declining and with local stakeholders becoming more aware and involved in joint efforts to prevent crime.

Most local-level conflict around Ambatovy is characterized as latent or pending. As one person put it, “Here, conflict is not like Nigeria or Tanzania,” and another added, “It’s not direct conflict here. It’s more latent conflict that risks exploding; that threatens constantly.” Someone else compared it with working in the DRC and said, “Here, I don’t see a threat.” In general, Malagasies describe their culture, social norms and the government as inhibiting outward displays of anger and frustration, adding that the result can be an escalation that goes unnoticed until it explodes. What people describe, in essence, is a tendency for tensions to build in ways that most outsiders would fail to see and then, eventually, to erupt with surprising force. Acknowledging this as a concern, several of Ambatovy’s senior managers observed a pattern that emerged during construction of postponing rather than resolving conflict; a pattern they hope to reverse. There have been two significant labor strikes in the past year, one in March at the mine and another in May at the plant site, both of which lasted about 15 days. People say the strikes were directly attributed to “pay and benefits,” but there are also assertions that, behind the scenes, the striking workers were “politically motivated” and “politically used.” Staff at Ambatovy took it as a positive sign that local communities did not rally behind the strikers, hoping this shows “some progress toward awareness of mutual or overlapping interests.”

There are several manifestations of conflict related to resettlement. One is a series of legal battles over competing land claims. Another is the theft of and general disregard for community assets that Ambatovy has donated like solar panels and water pumps. There are also tensions within the communities, particularly between the people who were relocated and others who were already resident in the area, referred to as squatters because they did not have official title to the land. Crime, particularly theft, amongst resettlement community members is also a problem.

Environmental tensions related to biodiversity4 and industrial hazards have emerged around Ambatovy. In 2012, the processing plant experienced an SO2 leak that fueled concerns about public health and precipitated a joint fact finding (JFF) exercise that tried to build trust in the steps taken to understand and address the problem. Nevertheless, people are said to still “complain all the time

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about gas leaks.” “Disputable” is the word a civil society representative used to describe assertions that the problems have been fixed. The fact that most people in the area are not well educated surely provides fertile ground for misinformation and rumors, making the situation very challenging for Ambatovy which recognizes that simply dismissing such concerns would increase tensions. Instead, Ambatovy facilitates doctor visits for people who attribute health problems to the plant, and a project with Search for Common Ground, an international NGO, was started to improve communications and the flow of information. Near the mine, efforts to uphold Ambatovy’s stringent environmental commitments have meant more strictly enforced restrictions on land use in the area. As a result, people who use protected areas around the mine for traditional subsistence activities have had to stop. People even attributed one death to this when a man was arrested for continuing to farm watercress in a protected area. They say he lost face culturally for having been jailed and, as a result, it was inevitable that he died shortly afterward. Along the pipeline, there was significant erosion during construction resulting in the widespread loss of crops and damage to peoples’ rice fields. The physical damage was eventually repaired but tensions remain high over allegations about unfair and unscrupulous compensation.

Primary Issues Just outlined were a series of conflict manifestations, or ways in which conflict is described as presenting itself around Ambatovy. Before that was a description of the context where Ambatovy was built and has begun its operations. This brief section is more narrowly focused on highlighting specific issues within the context that can engender conflict. These are essentially the themes that emerged from discussions about why conflict around Ambatovy might be possible in the first place. In addition, and perhaps more importantly, the status of these issues over time also seems to influence whether conflict can be positively managed or not.

• Political instability: Alluded to above, this issue requires singular mention. It has been and will continue to be pivotal in whether the exploitation of Madagascar’s natural resources fuels conflict or sustainable development.

• Poverty and the slow pace of progress. Madagascar provides an example of a poor country with the resource potential to alleviate poverty and pay for progress. Malagasies are well aware of this, but also of how resource depletion can leave them worse off. And so, an enterprise the size of Ambatovy can be embraced as a source of hope, but it also risks becoming a lightning rod if people are not satisfied by the pace of change.

• A political history, education and culture that encourage deference to authority. People point to the divisive and repressive nature of French colonialism, and to educational and cultural tendencies that prioritize conformity over critical analysis in explaining a general reluctance to use protests and other forms of open conflict to address their concerns and promote their interests.

• The perception that ‘projects’ are sources of humanitarian and development assistance. Malagasy staff working for Ambatovy regret that, from the beginning, the enterprise was called a “project.” Apparently, previous “projects” supported by foreigners had the central objective of helping the local people. By referring to itself as a project, Ambatovy thus created or reinforced the impression that its raison d’etre was to help people. Local staff has continuously struggled to create a more nuanced understanding about the for-profit purposes of private industry.

• Ecological sensitivity pitted against human vulnerability. Madagascar is globally renowned for its rich but diminishing biodiversity. Meanwhile, people are engaged in their own daily struggles for survival, which can conflict with efforts to preserve fragile ecosystems and

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some of the species within them. Ambatovy, as a highly influential part of this environment, has tried to walk a fine line between protecting the natural environment without being seen by local people as making their survival more tenuous.

• Government lack of capacity and resources to provide public services. Related to the point above about political instability, but not the same, is the government’s limited ability to provide basic services. Trash collection and health care were two examples that implicated Ambatovy. Local people, including some staff, talk about corporate social responsibility (CSR) and the so-called social license to operate as though these concepts impose obligations on Ambatovy to be a direct provider of public services. There is also some concern that the company is inadvertently perpetuating this belief by providing such services on a temporary basis while expecting that the government will soon take over.

• Low trust of powerful people and institutions. Malagasies describe themselves as generally not believing that people in powerful positions would voluntarily act in honest, trustworthy ways. As one person put it, “Politicians don’t get elected to serve; they get elected to be served. There is a lack of trust – people believe politicians aren’t there to help them.” And, as this applies to Ambatovy, there is a perception, not only that the company does not pay taxes, but also that it would be naïve to do so.

Against this backdrop, one could argue that a project of Ambatovy’s geographic and financial scale was bound to face conflict, and that the actual scarcity of conflict is quite remarkable.. Why this might be the case is explored in the remainder of the report.

THE HISTORY AND DYNAMICS OF CONFLICT At first glance, the distinction between this and the last sections may not be clear. The objective above was to provide the reader with a sense of what has been happening around Ambatovy in terms of how conflict manifests and the overarching issues that seem to engender it and to influence how manageable it is at a given time. Here, the report becomes increasingly analytical, focusing more on why conflict might emerge and persist – are there specific factors and drivers that can help to explain conflict or lack thereof ? And, similarly, are there correlations between these factors.

What factors into or drives conflict around Ambatovy? General Contextual Factors As an introductory note to this subsection, it is important to highlight that Ambatovy is decidedly and admittedly not a passive actor in the general contextual factors. Since its inception, the enterprise has, with varied success, sought to diminish the likelihood of serious conflict at this level. Unfortunately, the list of factors discussed here – government, corruption, lack of preparedness, high expectations, access to remedies, money, ethnic tensions and local culture – coalesced after the field investigation. Thus, there was no opportunity to identify and explore Ambatovy’s activities in these areas. This is perhaps a shortcoming of an inductive methodology that can be remedied in Phase 2 by using a common list of contextual factors to prime discussions in this area. In the present case, the reader should simply bear in mind that Ambatovy is aware of these factors and actively engages in efforts, some more direct and effective than others, to mitigate their potential to fuel conflict.

Government

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Madagascar’s government factors into conflict around Ambatovy in two main ways: One is that it has largely failed to advance development. While this is true independent of Ambatovy, the company is caught up in perceptions about, and gets blamed for, “everything becoming more expensive and life becoming less secure.” The second way is that the government seems to lack the capacity or the will to synthesize its priorities. Instead, government is more a reflection of the myriad competing agendas of people in power at any given time. Again, Ambatovy gets caught up in this as individuals attempt to leverage the company to their own advantage, be it in terms of delivering public benefits or in terms of casting blame when people’s expectations are not met.

Corruption There is a certain sense of apathy or resignation about corruption. Certainly, some speak out about it. For example, one says, “Politicians forget it’s not their money. It’s money for them to take the country in the right direction.” Another complained that the sole objective of the transitional government under which Ambatovy was built, “was to maximize corruption… It became a culture.” But there is a general sense of powerlessness. Even the “mechanisms and institutions that would defend people’s rights are corrupt.” And, to the extent that some local people see activities like recruitment, land compensation and contracting as corrupted, they see Ambatovy more as a part of the problem than of the solution.

Inadequate Preparation for an Enterprise the Size of Ambatovy A diverse range of people say that many of the things that drive conflict around the mine could have been addressed more effectively at a much earlier point in the enterprise’s evolution. For example, one person laments that the government granted the concession apparently “without giving any thought to the social issues” and then leaving Ambatovy to deal with the fallout. Another example came from an expatriate manager who, based on his combined experiences in Madagascar and elsewhere in Africa, suggests enlisting professionals with the required skills to devise strategies for dealing with the root causes of conflict “before turning one spade of dirt.” Along these lines, there is a sense that the government could have anticipated employment needs soon enough to minimize the need to “import” skilled tradesmen like welders. Another early step that a number of people consider inadequate is consultation, which they describe as “symbolic,” as “not satisfying,” as “the source of all these problems,” and as helping to create an “inaccurate sense” of what to expect. Ambatovy points out that the ESIA and the corresponding environmental and social development management plan do address social concerns, but civil society representatives say these documents are not publically accessible and the contents are not well understood. Regarding the point about inaccurate expectations, one Ambatovy manager says it also applies to the government not making its own social expectations clear.

High Expectations about Benefits One of the issues mentioned above is that, prior to Ambatovy, local people had come to believe that the central purpose of a “project” was to provide them with assistance. As a result, hearing about a foreign investment project the size of Ambatovy created the expectation that it “would meet all of their needs.” The general expectation is described as a “welfare mentality.” In fact, some describe the pervasive attitude as being that Ambatovy has a duty to either directly meet people’s needs or to pay them throughout the life of the mine. This is matched with Ambatovy staff who say, “Each time you give something, there is a feeling you should have done more.” This perception about the obligation to give may be partly due, , as one manager put it, to people not understanding that the primary purpose of the company is to make money for investors. And, there is probably also something to the fact that local people have nothing in their experience to help them relate to an investment the

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size of Ambatovy. As one person explained, in a context where “people are used to receiving things freely… they hear Ambatovy spent $12 billion and they are still poor. It’s hard to comprehend and that leads to conflict.” Making the situation more volatile, civil society groups raise questions about whether Ambatovy does, in fact, contribute a reasonable amount toward local benefits. Meanwhile, it is said that the general public has no access to information about what the company is obligated to contribute in the social arena as part of its agreements with the government.

Access to Remedies No one seems to be under the illusion that legal remedies in Madagascar are sufficiently accessible or fair. Over the past five years or so, Ambatovy has made a significant, good faith effort to bridge this gap for people who may have been harmed in some way by the company’s activities. Ambatovy has a seemingly comprehensive, international standards-compliant grievance mechanism in place. However, comments from a range of stakeholders suggest that Ambatovy’s mechanism is, for some, hardly more accessible or trusted than the justice system. Instead, they point to particular individuals who work for Ambatovy as barriers and say, until these staff members are gone, the mechanism will not work. Part of the challenge may have started when the Catholic Diocese in Moramanga took action to help people pursue remedies, mainly for rice fields that were damaged during pipeline construction. A senior Ambatovy manager reportedly either initiated or supported the church’s initiative by asking the Bishop to, “help us live in peace with the population.” From a conflict transformation perspective, it might have been better for Ambatovy to accept direct responsibility for people’s complaints rather than leaving this gap to be filled by the church because, with the benefit of hindsight, the church stepping in created the impression that Ambatovy was not readily willing to be accountable. Instead, people saw the need for a third party process that has become adversarial.

So, while the Ambatovy grievance mechanism has undoubtedly resolved many problems and helped to improve relations, it seems that there are still significant numbers of people who see the need to pursue remedies in more adversarial ways. And, there are probably also grievances that go unreported. For example, one local leader explained that, while his community has one of the church’s complaint boxes, people are afraid to complain. In support of this, he told one story about how local people believe a man’s newly planted fruit trees were killed by Ambatovy staff because he had complained about something. And, the same leader recounted personally having been threatened with “a visit by the military” if he were to continue voicing his community’s complaints. Some at Ambatovy suspect that Taratra, a Catholic NGO managing the Diocese’s grievance process, may, in fact, perpetuate or revive complaints as a way of keeping the organization viable. This was not possible to check.

There are similar concerns alleged to be true for local businesses wanting to pursue claims against Ambatovy. Their contracts are said to require dispute resolution through arbitration, the costs of which must be paid by the claimant. And, since the nature of their claims is that they have not been paid, many reportedly lack the funds to seek remedies. The courts have reportedly declined to intervene and, here again, the Diocese has gotten involved. Money Money can drive conflict anywhere. And, it could easily be argued that it is a component in all of the factors just described. There are two distinct points about money that emerged from discussions, though. One has to do with Madagascar’s value added tax (VAT). To the extent that conflict is shaped by poverty and difficulty finding opportunities, Ambatovy acknowledges that maximizing local procurement can be extremely helpful and it has been working for a number of years on a program that supports local business initiatives, spending over $300 million dollars in the local and national supply chain in 2015. Nevertheless, the VAT is said to create a disincentive for the business community at-large because it is charged on purchases made in-country but not on outside purchases. And, while

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the VAT on some local purchases is supposed to be reimbursed, the government has not repaid Ambatovy a total of $176 million US, although an agreement for repayment has reportedly been reached. The other key point is about royalty distribution. Ambatovy is required to pay a royalty of 1% on its total sales, which, according to the original mining code, would have been split 70% - 30% with the larger portion going to the communes where the mining is done and the smaller portion going to the national government. That would mean three communes would get the entire 70%, whereas Ambatovy’s large geographic footprint impacts 20 communes. The distribution scheme was redrafted in 2014 but is not yet finalized. One proposal would not only share the revenue with all impacted communes but also reduce the 70% to 60% with the 10% difference going to other regions that lack revenue. Depending on the outcome, some say there is “huge potential for conflict.” Likewise, there is potential for conflict in how the communes manage their windfalls – one, for example, is estimated to go from $10,000 to $700,000 in annual revenues. To help, one of the SIF projects focuses on good governance; essentially a focused effort to design a mechanism and to build management capacity and accountability so that royalties will be well managed and used. Also intended to help is the process led by a third party that aims to reconcile royalty distribution and involves the potentially affected stakeholder groups. One Malagasy working for Ambatovy expressed cautious optimism: “I have some confidence that, if the communes start to receive the royalties and they see the tangible results of the mine… this can significantly reduce latent tensions.”5

Ethnic Tensions Madagascar is not plagued by violent tribal divisions, but it is ethnically divided in ways that affect mine-related conflict. For example, people from the highlands where the capital is, have historically dominated political life and they were the ones who, under the French, had greatest access to higher education and government jobs. The residual effect today is that some Malagasy from other groups are very sensitive to any signs of discrimination. From the point of view of a company like Ambatovy looking to hire staff based on merit, this poses a problem because those from the highlands often are, objectively, more often qualified. There are also perceptions of favoritism – namely that once someone from the highlands reaches a management or supervisory position, he or she will easily be suspected of using it to convey favors. Also, as noted earlier, politicians can utilize ethnic tensions, for example between coastal people and highlanders, when they calculate that it can help to rally support in their favor.

Local Culture Many of the discussions during the field study touched on local culture as a factor in conflict. One general theme suggested that Ambatovy’s business culture may be at odds with, and easily misunderstood by Malagasy culture. A traditional leader in the mine area explained, for example, that society views those who are rich and do not give as being mean. He was contrasting this with an Ambatovy manager who tried to explain why the purpose of the business is not to provide social programs. The point behind the story was not to say that Ambatovy should give more. Rather, it was to say that knowing the people and their culture can make the difference between provoking and diminishing conflict. Another highlight about culture was that Western expatriates might mistakenly assume that people in leadership positions have a social obligation to act on behalf of the “common good,” whereas, “[Malagasy] society expects a person to be in harmony with his close family. There is no real pressure for people to be good.” A second mistaken assumption for Westerners might be that employees or the beneficiaries of community projects will be inclined to help the company but this may not happen because, “Culturally, it is difficult to stand out from the majority.” And, as a result, “It is difficult to become someone who defends the company if other Malagasies are against it.”

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There was also a theme that emerged about how culturally prone Malagasies may or may not be to violent or destructive behaviors. Many Malagasy describe themselves as “laid back,” or as having a “functionary” mentality that keeps them from wanting to ‘rock the boat.’ There may also be an element of fear behind not acting out. One observation was that people are reluctant to act out against Ambatovy for fear that it might provoke a forceful reaction by the government. But then another observation turned this around, speculating that “Rajoelina’s interests are still at play,” and might manipulate local frustrations in order to take advantage of the fact that, “to destabilize Ambatovy is to destabilize the State.” At a more grassroots level, Malagasy staff described their compatriots as being characterized by “strong perseverance,” but said they fear a point when that reaches its limit, and a local civil society representative explained with pride and a touch of menace that, “we have a certain type of passivity – but one day, eventually, it erupts into something uncontrollable.”

Company Aspects People Associate with Conflict The series of factors just described are part of the general context. While Ambatovy is somehow intertwined in all of them, the company’s role is more secondary and perhaps even tertiary. Here, Ambatovy is the primary force behind these factors and whether they help to escalate or de-escalate conflict.

The Short-term Priorities and Mindset of Construction The factor internal to Ambatovy that staff point out more than any other is the shortsighted nature of decision-making and of problem solving that was applied during construction. Current senior managers tasked with fine-tuning Ambatovy’s efficiency and productivity seem frustrated. One, for example, had this to say about their construction phase counterparts: “If the people who built it knew they had to run it, they would do things differently. There is a short-term reward structure. They get bonuses the moment they turn the key. Decisions are made to keep within the budget but by god it drives up the maintenance and operating costs… They create problems but not their problems.” Someone from Human Resources lamented the precedents set by the way people were hired during construction. One manager explains the safety mentality during construction: “Sometimes it’s not explicit, but the message is to do whatever it takes to get the job done.” And, on the community side, people say, “Ambatovy did everything in terms of money,” and Ambatovy had a “business-only focus creating the sense that it was all about money.” In thinking about how to overcome this legacy, one CSR staff member seemed daunted when he said, “Now the challenge is building a sense of co-ownership. We’re in agreement that’s where we’re heading. There’s quite a lot of work to get there.”

The Shift to a Sustainable Business Model Sustainable business is about meeting current needs in ways that do not compromise long term interests. This seems to be the polar opposite of how people characterize the construction phase: “A transaction approach was how the mine got built,” said one manager. “Spend what you must to stay on schedule,” is his summary of the overarching message, “but now we recognize that it’s not a sustainable way to operate.” There seems to be a sense that the shift itself, from the old model to the new, is necessary to rein in costs and avoid white elephant projects but it is likely to escalate conflict, at least initially. For example, individual CSR staff members predict problems because the new management team is reluctant to follow through on some of the commitments for unsustainable projects that were made during construction. And, perhaps more importantly, some of the larger Social Investment Fund projects that are underway are described by staff as being “useful for the short-term,” but also as “not doing anything to prevent long-term conflict.” In fact people point to one project that may be making the prospects for conflict worse. In Moramanga, Ambatovy is financing

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trash collection and disposal. The project is designed so that Ambatovy’s funding will phase out as municipal fee collection takes over. However, the municipality seems unlikely to follow through and Ambatovy staff members are concerned that the company will be blamed when funding stops and trash starts to accumulate. For the time being, a number of people mentioned being glad that the nickel price is low because it enables them to more easily manage expectations rooted in the construction era. But another senior manager who has some responsibility over the “short-term” projects says that, after nickel prices go back up, “I don’t want to be here. I feel sorry for my successor.”

Human Resources Two main concerns were raised in discussions that covered Ambatovy’s management of Human Resources. One was about chomage technique, which means people are temporarily laid off pending improved economic conditions but if, at the end of a certain period, conditions have not improved, employment can be terminated. At the time of the field study large numbers of employees had been laid off and they were approaching permanent termination. In the end, 338 lost their jobs and, despite concerns that protests might erupt, efforts to inform people locally and nationally about the economic difficulties driving these dismissals seem to have helped alleviate tensions and avoid disruptions. Nevertheless, there were some doubts raised by Malagasy staff and others over whether economic difficulty was the whole truth about why people were being dismissed. Their suspicion is that Ambatovy is “using the price of nickel as a pretext” to terminate people who went on strike. This perception is reinforced by people believing that Ambatovy is hiring Filipino workers while laying off Malagasies, which would, in fact, cost the company more. The situation is also exacerbated by visiting international union leaders who say that firing these workers is illegal. What these accounts probably illustrate most clearly is the challenge Ambatovy faces overcoming rumors and misinformation, which suggests a persistent lack of trust.

The other main concern is about recruitment. Apparently, the approach to hiring during construction was very much about filling positions as quickly as possible without the imposition of strict controls, which makes it difficult to impose such controls now. There is also a link with corruption where numerous people talked about how easy it is to “buy a diploma;” how attempts to hire locally are undermined because “people can buy proof that they’re from here;” and how “people pay intermediaries to get jobs.” Local people are also struggling to accept that, while manual labor jobs were plentiful during construction, production jobs tend to be higher skilled and Ambatovy has had to bring in more workers from outside the area. Related to this, though, Ambatovy gets some but probably not enough positive recognition for measures that reduced tensions when large numbers of workers demobilized after construction were offered agricultural training and job placement services.

Environmental Protection Efforts Affect Local People Ecological sensitivity can be seen by local people as being pitted against human vulnerability. This was noted above in the section on the anatomy of conflict. Here the point is more specifically about how aspects of environmental management by Ambatovy affect conflict. Biodiversity is particularly sensitive in the mine area and Ambatovy has made a remarkable commitment to implementing environmental protection and conservation measures. At an international level, this alleviates potential conflicts with constituencies in the home countries of Ambatovy’s owners, with international environmental NGOs, with lenders, etc. However, at the most local level, it spurs conflict. While Ambatovy does not impose restrictions on land and resource use, Ambatovy’s presence has heightened scrutiny and increased the resources available to enforce protections. In effect, according to one knowledgeable staff member, “Community activities are curtailed to protect biodiversity and habitat. The restrictions are a source of conflict that the environmental team has to manage.” This denied access fuels tremendous local

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frustration and is, according to Ambatovy staff, the hardest thing to mitigate. “We’re not yet sure,” they say, “that the mitigations are well matched to the impacts.” The company has initiated a joint fact finding exercise in attempting to come to a shared understanding of the problem and to find an agreeable solution.

Regarding the plant site in Toamasina, the situation with environmental conflict was said to be “very different.” There, staff say, the problem is “not conflict; it’s just that people have to live with worry.” The basis for this worry was explained: “The population lives with the risk of environmental incidents; a gas release, for example.” And, there is an acknowledgement that the company still “needs to prove adequate management to increase trust.” Ambatovy did voluntarily lead the safe removal of large amounts of ammonia from decades-old abandoned storage tanks that were at risk of failing and posing a significant public safety risk. However, only “High level people were aware. Not most local people.” There is a sense among some staff that the company may have missed a good opportunity to improve trust and reduce anxiety about levels of risk exposure.

Resettlement Resettlement is contentious around Ambatovy like it is in most places. A local civil society representative tried to summarize the prevalent mentality within the resettlement communities: “Because Ambatovy resettled us, we have become Ambatovy’s responsibility.” Then, from her own perspective, she added: “From the beginning, the company and its consultants have reinforced this perception.” Ambatovy is also accused of not keeping its promises including the construction of infrastructure, the quality of the land for cultivation, of the homes that were built, and the provision of alternative livelihoods. There have also been problems with land title when, after titles were assigned to the new residents, other prior owners emerged with paperwork to demonstrate their claims. The situation is currently in court but there is a sense that it “will provoke conflict someday.”

For its part, Ambatovy has devoted considerable resources to ensuring the application of international resettlement standards and best practices. Undoubtedly, there are shortcomings but the company’s intentions seem to have been to meet, and perhaps even to exceed the norms for the industry. One stumbling block may have been unexpected difficulties in overcoming the perception noted above that the company has a perpetual duty to meet people’s needs rather than to put them in a position to meet their own needs.

The Attitudes and Behaviours of Ambatovy Staff Something that seems provocative to local people is how they are treated by Malagasies working for Ambatovy. “Egotistical” and “condescending” were two words used a number of times in referring to the attitudes and behaviors of certain staff. Some local people also say staff can be “defensive and try to excuse the company,” and that they can be, “too rigid,” not trying hard enough to see both sides and thus provoking tensions. In one discussion with a small group even more serious concerns were raised: “For us the problem isn’t Ambatovy. It’s the intermediaries sent by Ambatovy. The person who is primarily responsible is still there.” Further discussion showed that they were referring to Social Agents employed by Ambatovy and that the individual they were talking about is the one they allege as leading a pattern of skimming money from the compensation paid to people whose rice fields were damaged along the pipeline.

For their part, Malagasy staff whose jobs involve engaging with local people say they are in a very conflicted position. Being from Madagascar and sometimes even from the same vicinity, there is an expectation and pressure to act on behalf of local people. But at the same time, Ambatovy expects them to promote the company’s best interests and to carry out their duties as assigned. In short, their role as communicators and relations-builders can backfire and stir conflict more than reduce it. Much

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depends on how well their managers recognize their predicament and devise ways of helping them build trust.

Local Practices People Associate with Conflict Low Motivation / High Dependency Something about local communities that is said to factor into the conflict dynamics around Ambatovy is a seemingly low level of motivation to take steps on their own that would improve their lives. One local leader provided this critique of his own communities: “People don’t start or show any initiative. They go straight to Ambatovy with their demands. It’s made worse by politicians who come and say, “I’ll make Ambatovy give you a school.”” The Moramanga trash collection program was mentioned above in the section about Ambatovy shifting to a sustainable business model. It also provides a useful example here. The basic situation is that Ambatovy is paying for everything for now as local authorities are supposed to be introducing a fee system that will pay for it to continue in two years when the MoU calls for Ambatovy to stop. So, despite it being a highly “admired” project complimented by the UNDP and others, Ambatovy staff and others are concerned by local authorities who they say, “are not motivated to prepare.”

The Status of Civil Society The status of civil society active around Ambatovy sites is, according to some, rather weak. “There is no real civil society in Madagascar,” asserted one person, “It is politicians who want to get back into power.” Someone working for Ambatovy who has been frustrated by the role being played by the Diocese in Moramanga says, “The Catholic church is caught in a time warp – like it’s Latin America in the 1970s.” Perhaps most fundamentally, it was said that there is “no representation of the interests of society at-large.” This is probably an overstatement, but the point seems valid. Malagasies have not been able to rely on their government to represent their best interests, nor has civil society adequately filled this gap.

Organized labour is one specific area where Ambatovy recognizes the gap in local people’s interests being adequately represented and the difficulties it causes. There are unions but they are described as having “few people,” and as “making a lot of noise.” Company managers say they “can’t have real dialogue with workers and they see the importance of encouraging stronger labor representation, “but it is not seen as the role of a company.”

Catalysts / Triggers Ambatovy has not had to deal with major outbursts of violence or destructive large-scale protests. With overt conflict events like these, the triggers can be obvious. But, with conflict manifestations that are latent or political in nature like most of what the study found around Ambatovy, the triggers are more obscure. Nevertheless, people did note a number of specific things they see as sparking either an escalation or a de-escalation of conflict:

Death of a Subsistence Farmer A man living and farming near the mine site died of natural causes. However, local people and some of their leaders seem to believe Ambatovy is implicated in his death. He was reportedly arrested for defying prohibitions on farming in a protected area near the mine. And, while he was later released,

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he was described as having suffered a kind of cultural loss of face, followed shortly after by his actual death because local culture shuns criminals and does not distinguish between being arrested and being imprisoned after conviction. If we synthesize local perceptions about the chain of events it goes something like this: Ambatovy’s presence forced “agricultural people” to “abandon their ancestral land,” then this man was arrested for continuing to farm because he had “no other options,” and then he died because he lost the will to live after being arrested. The fact is that the area in question is an important wetland protected by an international treaty that predates Ambatovy, but Ambatovy’s presence has led to heightened environmental scrutiny and more resources for the enforcement of environmental protections. This, in turn, triggers local anger and Ambatovy is said to be “more to blame than the state.” Death of a Mine Employee A Malagasy mine employee suffered a heart attack while at the mine site and later died. Ambatovy was allegedly unwilling to provide him with a medical evacuation and he died before he could get to a hospital. The field study discussions were not able to gather more definitive information. One account suggested that this was a trigger behind the mine-site strike in 2015 but it is unclear whether this is true. Other discussions did show, however, that there is a perception among some of the mine’s local neighbors that Ambatovy is not concerned enough about the well-being of Malagasy employees and they link this to not feeling compelled to safeguard the company’s interests. For its part, Ambatovy has found a correlation between the health and safety of its local employees and their tendency to engage in risk-taking behaviors. In response, the company has undertaken significant efforts to instill a more safety oriented culture in the workplace.

Competing Land Title Claims Apparently, after Ambatovy resettled people away from its tailings area, individuals came forward claiming to own some of the land which Ambatovy intended to deed to the new residents. This spurred an ongoing court battle, caused frustration among those who were resettled, and is linked in the minds of some staff and civil society groups with difficulty creating a sense of ownership and a duty of care for community infrastructure.

SO2 Leak The SO2 leak from the plant site in 2012 quickly became politicized and spurred the regional health director to call for action. Ambatovy responded to by initiating a joint fact finding exercise. While doubts remain about whether the problems are truly fixed and anxieties about public safety remain, the JFF does seem to have been a useful relations-building tool and one that Ambatovy has tried to replicate in dealing with other issues. So, time will tell for sure, but it may be that the incident triggered Ambatovy being and being seen as more responsive, thus making this a positive catalyst.

Ammonia Management In Tamatave, near the Ambatovy plant site, there were large corroding ammonia storage tanks left behind from the colonial era. They were full of ammonia and appeared to be at risk of rupturing. Ambatovy recognized the significance of this as a public health threat and decided to manage the removal of the ammonia and the tanks. The company won a Green Star award from the United Nations Environment Program for the effort. The effect on conflicted relations has been positive in the limited circle of people who are aware, although it could probably have been publicized more broadly

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to help local residents understand Ambatovy’s good work in helping to manage environmental risks in the vicinity of the plant site.

Pipeline Erosion Erosion along the pipeline route during construction triggered hundreds of complaints and widespread anger. People were eventually compensated for their losses and their rice fields were restored. However, trust was also lost and has been difficult to restore, as indicated by continuing allegations that compensation was mismanaged. Another indication is that Taratra, a Catholic NGO aligned with the Bishop of Moramanga, is still able to position itself as an advocate for people with lingering claims.

The Players Involved, the Roles they Played and their Perspectives on the Conflict In discussing conflict around Ambatovy, people more often refer to key groups than they do to key individuals. However, there are a few noteworthy exceptions. Foremost is probably the Catholic Bishop of Moramanga, an Italian by origin who has lived in Madagascar for many years. He explains his role in relation to Ambatovy as wanting “to ensure that people aren’t made worse off,” and also “to ensure that the riches of the country help the people.” During an extended discussion he talked about first becoming involved with the intention of mediating but then, as time passed and, as he tells it, Ambatovy became less responsive, his role shifted to something more like advocacy. A charismatic figure, Ambatovy acknowledges the influential role he has played. The company has tried to work with him but staff say his role is declining and his methods can be counterproductive.

Some local people and civil society groups were critical of individual members of Ambatovy’s Community Relations team. Specific staff were named as acting in ways that contributed to conflict, particularly around land access negotiations, compensation payments and grievance management. To be fair, there is a good chance that these comments reflect broader frustrations and that the individuals who were identified either did nothing wrong or, if they did, that they were allowed, or even encouraged to do so by more senior staff pushing them to avoid delays. Nevertheless, it is unfortunate that Malagasy staff, some of whom are from Ambatovy’s operating areas, not only find it difficult to diminish conflict, but also in some cases are seen as making it worse.

Other individuals named include several managers during the construction phase. These would be the people seen as responsible for making decisions that focused on short-term, transactional problem-solving but wound up fueling longer-term tensions. Similar to the Community Relations staff, though, these individuals would be the figureheads of a more deep-rooted pattern of shortsighted decision-making that could implicate project owners and the most senior project leaders.

Shifting to key groups, the most pivotal is Madagascar’s political elite. For the moment, the political situation appears to be stable. Constructive efforts are underway to harness Ambatovy and use it to help prevent the country from backsliding even further. However, there were a few allusions to lingering political risks that included possible attempts to incite conflict around Ambatovy.

If there are attempts to incite conflict, this next group will be instrumental in determining whether the local population decides to defend Ambatovy or to enable its attackers. Ambatovy’s new senior management team graciously provided ample time for discussions and expressed a remarkable commitment to positively and sustainably manage conflict. This is a highly thoughtful group with relevant experience in other countries in Africa and elsewhere. There is a sense, however, that they are racing the clock to create a reasonable, shared vision of what the enterprise can help to accomplish before disappointment and frustration erupt in more destructive forms of conflict. For the moment, they say the low price of nickel gives them a buffer against unrealistic demands but pressure is likely to rise when prices eventually do.

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And finally, the local people themselves. No one seems to question that Malagasies are typically quite patient, tolerant and non-violent. But, there also does not seem to be any doubt among Malagasies that there is a limit to their “laid back” appearance. One person suggested that the likelihood of open confrontation is minimal but that Ambatovy’s infrastructure could soon be targeted by sabotage if expectations are not effectively managed and people’s concerns are not addressed. Others simply warned that frustrations continue to simmer and that the boiling point is very hard to predict.

Connectivity Between Different Key Factors Many of the things that factor into or drive conflict are intertwined. So much so, that the reader might question whether some of the subsections above should be merged together. One objective in keeping them separate until this point is to maintain as much clarity as possible about why certain factors influence conflict the way they do, and also to help in thinking about who is best positioned to positively influence the outcomes.

For example, money as a conflict driver is part of the general context and, in that sense, is related to but not the same as the government’s capacity to responsibly manage sources of revenue. This, in turn, is closely related to corruption, particularly whether it is kept in check or tolerated. The aspect of Ambatovy’s activities that is most intertwined here is the pattern of transactional problem solving that emerged during construction and continues to set the tone for local expectations and relationships several years into production. Also important is how well and how quickly the company can shift to a more sustainable approach. Taken together, these factors create a more complete picture than they do individually, but the collective view also has the potential of making it easier for one responsible party to deflect attention toward the others in terms of taking action to positively transform conflict. On the other hand, when these factors are disaggregated it is harder to see the correlations but easier to start thinking about specific things a given actor might do to help make the situation better. Ambatovy is trying to support good governance and build capacity for the provision of basic social services but one problem seems to be that local authorities lack the will to play a more active part, which is understandable since any disruptions in service provision are more likely to provoke an outcry against Ambatovy than against the government.

There are also important correlations between problems related to resettlement, high levels of dependency, and high expectations about the benefits that an enterprise like Ambatovy can and should provide. Trying to deal effectively with any one of these factors probably requires taking steps to address the others so it is important to maintain the distinctions in order to plan specific interventions, but also to look at the factors collectively to ensure a strategic approach. Ambatovy has a skilled Sustainability team that is looking at these factors but they are daunting, especially without government and civil society counterparts who can help. Progress is being made, though, in working with local authorities and with the help of Search for Common Ground, an international NGO that specializes in conflict transformation and has, since 2011, been trying to build capacity among the various parties to collaborate on problem solving and governance.

Access to remedies is a big challenge in its own right, and far bigger considering a social environment rife with corruption, a judiciary susceptible to shifting political allegiances, a local culture that expects leaders to promote their family’s interests and not to protect the interests of society at-large, and the somewhat adversarial approach of a powerful player like the Catholic Church. The Bishop has tried in his way to help people voice their concerns without fear of reprisal and criticizes Ambatovy’s grievance mechanism as an attempt by the company to be “the arbiter of its own trial.” That is one interpretation. Another is that the Ambatovy mechanism is designed to respect people’s fundamental rights while applying a relations-building, win-win approach to problem solving, whereas the Bishop and Taratra’s approach is more win-lose, aiming to get redress for individuals but in a way that is divisive. The two will probably have to be reconciled to de-escalate conflict around access to remedies. Meanwhile, little seems to be happening to eliminate corruption and improve the legal institutions as a basis for a permanent solution.

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SYNOPS ISAmbatovy’s history has been negatively but not severely affected by conflict. The types of conflict that have been a nearly constant part of the project’s evolution are probably best described using terms like “mild” or “moderate.” Given Madagascar’s struggle with political turmoil, perhaps the most noteworthy or even praiseworthy highlight is the lack of extreme downturns in the situation. Instead, the conflict pathway that has been fairly steady and only somewhat negative.

However, Ambatovy and the other stakeholders face a dilemma going forward. The way conflict has been kept from escalating, particularly throughout construction, creates significant challenges for the future of conflict prevention. The enterprise’s approach has relied largely on transactional negotiations to address people’s concerns. What this means in practical terms is that Ambatovy Community Relations staff describe their construction-era role as keeping the project on track by appeasing people, whereas a more sustainable but painstaking approach would have been to forfeit precious time to fully understand and address local people’s core concerns. This is almost certainly not unique to Ambatovy and further studies may, in fact, show it to be more the norm. In Ambatovy’s case, it effectively bought the time and access needed for contractors to build the facilities. However, some discussants implied that there was a direct correlation between this approach and significant cost overruns. Moreover, there may be a longer term price to pay in terms of local stakeholders who now have an entrenched belief that Ambatovy is willing to make costly concessions to avoid disruptive forms of conflict.

Potentially making things worse, there are widespread expectations about Ambatovy as a “project” being the singular solution to the lack of economic opportunities and development. And, at least some local officials are not committed to rectifying this unrealistic sense of what can be expected from the enterprise. The current low price of nickel helps Ambatovy defer these expectations. However, the company will either need to work with local stakeholders to redefine what they consider a reasonable level of benefits or there is likely to be some form of worsening conflict.

Fortunately, the political situation seems to have stabilized. And, Ambatovy’s new senior leadership team is remarkably well attuned to the need to achieve a more sustainable social operating environment. In terms of the current reality on the ground, this translates into highly experienced managers who are committed to operating the enterprise in ways that account for and try to address local interests. The challenge will be resetting the tone in relationships with local stakeholders before disappointed expectations fuel a damaging increase in conflict.

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SUMMARY OF KEY OBSERV AT IONS

1. As the Unraveling Mining Project proceeds, ultimately to conduct 18 field studies, it will be important to analyze the results and draw practical conclusions about how conflict around mining projects can be more systematically and sustainably prevented. The following observations about the Ambatovy study are intended to feed into that eventual analysis:

2. The extent of political turmoil, corruption, poverty and dependency in Madagascar make for a very challenging context to build and operate a large mining and refining project. These challenges include keeping costs and expectations in check. It is hard to know how much more, if anything, could have been done to better navigate the situation but the Ambatovy case at least points to the need to make these types of factors an integral, influential part of project planning and execution from the earliest stages.

3. Extreme time pressure during construction is not unique to Ambatovy. It is natural for contractors and even project managers to apply short-term thinking to social issues and to press for the quickest solutions. However, this is not in the long-term best interests of the enterprise as a whole. In fact, it ultimately puts the project and its profits at risk. At the end of the day, only the project owners and the senior management team at the time could have been expected to prevent the construction-era transactional approach to problem solving that may well haunt Ambatovy for years to come.

4. Despite some signs of inter-ethnic tensions, and grievances about land claims and resettlement, it would be easy to assume that the Malagasies are passive in nature and therefore unlikely to escalate conflict around Ambatovy. However, this probably misreads the culture and fails to account for the stifling effect of fear about the consequences for acting out. A significant number of individuals interviewed for this study warned not to mistake inaction among Malagasies for passivity. Instead, they say, Malagasies tend to let their frustrations simmer unnoticed until the moment when they boil over. The potential for outbursts, in other words, should probably not be easily dismissed.

5. The conflict status quo around Ambatovy might be described as a race against the clock. The challenge, somewhat ironically, is to reset the tone for relationships and redefine expectations between the enterprise and its local stakeholders before the price of nickel and corresponding demands for benefits start to increase.

6. Ensuring access to effective remedies is a clear part of a company’s responsibility to respect human rights. This is a duty, all-be-it one that is difficult to enforce. Ambatovy has put significant resources into developing and implementing a state of the art grievance process. By no means did the field visit provide an opportunity to assess its effectiveness but we did hear a good deal of skepticism about it, particularly in the pipeline area where the Catholic Church had initially been allowed to assume a lead role in holding the company accountable for any harm done. This turn of events seems to have forfeited an opportunity to make company-community relations more resilient to conflict, at least in that particular geographic area. In contrast, it was suggested that the mechanism has been more effective in and around Tamatave, for example, where the plant site is located and where Taratra and the church have been less active.

7. Environmental conservation efforts to help prevent conflict over Ambatovy’s impacts on sensitive biodiversity have had the unintended consequence of fueling conflict with local people whose livelihoods were already at odds with conservation objectives and priorities. This is not to downplay the importance of conservation, but instead to highlight the importance of integrated strategies that appropriately address the interests and concerns

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of those who are likely to be negatively affected. Ambatovy is conscious of this and is proactively working to find win-win strategies for the environment and local people. Until now, the company is not recognized for its efforts but its intentions are good. If there is a lesson here, it is probably to merge environmental and societal safeguards from the earliest stages of a project. And to have the local people involved in developing, implementing and owning the strategy.

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NOTES1. http://documents.worldbank.org/curated/en/2015/08/24969037/madagascar-systematic-

country-diagnostic

2. ONU-Habitat, “Madagascar: Profile urbain de Moramanga,” 2012, p.9.

3. For more information, see: http://www.ambatovy.com/docs/?p=166#sthash.iWbim9n2.dpuf

4. The links between biodiversity and conflict in Madagascar are discussed below in section 6.1.2.4 on how environmental protection efforts affect local people. The information in that section is quite limited and there is no doubt that the country’s fragile biodiversity is an extremely important and potentially contentious topic. However, relatively little was said about it during the field discussions. This may have been due partly to not having elicited input about environmental conflict per se. Instead, discussants were encouraged to highlight what they considered to be the relevant issues. The fact that biodiversity was not a very prominent theme suggests that it may be of more concern for international than for local stakeholders.

5. Ambatovy staff, along with government officials and consultant advisors have been busy working to devise a strategy for the “safe, effective and transparent management of the royalties.” It was suggested that the general content of this paragraph would need to be updated and modified. However, Ambatovy had not provided any updates by the time this field study report was drafted. Regardless of the most up-to-date details, the main point here is that royalties management is already contentious and has the potential to become much more so but efforts are underway to prevent this from happening.

Page 32: FIELD CASE STUDY 1 - CIRDI · FIELD CASE STUDY 1: AMBATOVY, MADAGASCAR By: David Reyes and Rames Abhukara Field study completed November 30 - December 8, 2015