follow the requirement
duty13
OxfordUniversity-RioTinto-CaseStudyB.pdf
QMM/Rio Tinto in MadagascarQMM/Rio Tinto in MadagascarQMM/Rio Tinto in MadagascarQMM/Rio Tinto in Madagascar
Case B: Engaging with Local CommunitiesCase B: Engaging with Local CommunitiesCase B: Engaging with Local CommunitiesCase B: Engaging with Local Communities
July 2012
Rowena Olegario
Milena Mueller
Will Harvey
This Note was prepared by Rowena Olegario, Case Study Editor; William Harvey, Research Fellow; and Milena Mueller, DPhil Candidate at Oxford University
Centre for Corporate Reputation.
© University of Oxford 2012
The University of Oxford makes no warranties or representations of any kind concerning the accuracy or suitability of the information contained herein for any
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infringement. The views expressed are those of the contributors and are not necessarily endorsed by the University of Oxford.
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QMM/Rio Tinto in Madagascar
Oxford University Centre for Corporate Reputation
2
The authors of this case study travelled to the Tolagnaro (Fort Dauphin) region of Madagascar in July
2010 to observe QMM’s sustainability programmes. In-depth interviews were conducted with company
officials and senior managers, employees, local and national government officials, Radio LAFA, local
residents, and NGOs. Follow-up interviews were conducted in London with Rio Tinto senior executives
and former and current Board members. The authors did background research in a wide variety of
publicly available sources including press articles, NGO reports, books, and unpublished academic
theses.
A detailed Teaching Note for this case study can be obtained by contacting Rowena Olegario, Case
Study Editor, at [email protected].
Related cases:
QMM/Rio Tinto in Madagascar – Case A: Protecting the Island’s Biodiversity
Eni’s Sustainability Programme in the Republic of Congo
QMM/Rio Tinto in Madagascar
Oxford University Centre for Corporate Reputation
In 2005, Rio Tinto confirmed that its subsidiary, QIT Madagascar Minera
ilmenite mine on Madagascar’s southeastern coast. QMM would also build a large new port so that it
could ship the minerals to Rio Tinto’s processing facilities in Canada. Ilmenite is used in the
production of white pigment for everyday products like paint, plastics and paper. The company’s
expectation that the mine would have a 40
over the course of three years, the largest in Madagascar for three decades.
Bringing a capital-intensive project to an impoverished country like Madagascar had significant
reputational implications for QMM and its parent, Rio Tinto. The Anosy region, the mine’s proposed
site, has a population of approximately 550,000, of which one
Dauphin. Geographical isolation had left the region with very few job opportunities and a degraded
infrastructure. In a country where two
percent earn less than $2 a day, 2 Anosy stands out for its extreme poverty. The wet climate is well
suited to growing fruit and cultivating staple crops such as rice and manioc (cassava). But the region
does not grow enough to feed itself, relying instead on imports for near
the project advanced from exploration to implementation, local communities expressed concern about
the physical and social upheaval that the mine would cause as well as excitement about the potential
development it would bring to their region.
in May 2009. The new port, which replaced a much smaller one that was five decades old, is now the
country’s second-largest. It is a wholly owned subsidiary of Rio Tinto that, afte
mine, will be owned and managed by the government of Madagascar. The new facility brought the
promise of increased economic activity and diversification. Because it can handle vessels of up to
60,000 tonnes, the port can accommodate
Port of Ehola, Fort Dauphin, © Photo Oxford University Centre
for Corporate Reputation
In 2005, Rio Tinto confirmed that its subsidiary, QIT Madagascar Minerals (QMM), would develop an
ilmenite mine on Madagascar’s southeastern coast. QMM would also build a large new port so that it
could ship the minerals to Rio Tinto’s processing facilities in Canada. Ilmenite is used in the
everyday products like paint, plastics and paper. The company’s
expectation that the mine would have a 40-year lifespan justified the huge investment: US $1 billion
over the course of three years, the largest in Madagascar for three decades. 1
intensive project to an impoverished country like Madagascar had significant
reputational implications for QMM and its parent, Rio Tinto. The Anosy region, the mine’s proposed
site, has a population of approximately 550,000, of which one-tenth reside in the largest town, Fort
Dauphin. Geographical isolation had left the region with very few job opportunities and a degraded
infrastructure. In a country where two-thirds of people earn less than $1.25 a day, and nearly 90
Anosy stands out for its extreme poverty. The wet climate is well
suited to growing fruit and cultivating staple crops such as rice and manioc (cassava). But the region
does not grow enough to feed itself, relying instead on imports for nearly all of its basic foodstuffs. As
the project advanced from exploration to implementation, local communities expressed concern about
the physical and social upheaval that the mine would cause as well as excitement about the potential
bring to their region.
When QMM first began exploration in Fort Dauphin, it
focused on protecting the area’s biodiversity (see
Case A.) Engaging with the community was an
important part of any sustainability programme
because, as Manon Vincelette, head of QMM’s
environmental team, emphasised, “Biodiversity can’t
work without community participation.” 3
Tinto Chairman, Robert Wilson, explained that the
company had anticipated the rise of sensitive
development issues such as internal mig
safety during the construction phase. 4
Over time, it increased its active engagement with
local communities through social and economic
development projects and a Community Relations
Plan. Yet almost from the beginning, tensions arose
between the company and the local population, which
QMM struggled to diffuse.
Construction of the mine began in January 2006, and
the first shipment of ilmenite passed through the newly
completed Port of Ehoala more than three years later,
in May 2009. The new port, which replaced a much smaller one that was five decades old, is now the
largest. It is a wholly owned subsidiary of Rio Tinto that, after the closure of the
mine, will be owned and managed by the government of Madagascar. The new facility brought the
promise of increased economic activity and diversification. Because it can handle vessels of up to
60,000 tonnes, the port can accommodate large cruise ships, a capacity that will help to develop the
© Photo Oxford University Centre
3
ls (QMM), would develop an
ilmenite mine on Madagascar’s southeastern coast. QMM would also build a large new port so that it
could ship the minerals to Rio Tinto’s processing facilities in Canada. Ilmenite is used in the
everyday products like paint, plastics and paper. The company’s
year lifespan justified the huge investment: US $1 billion
intensive project to an impoverished country like Madagascar had significant
reputational implications for QMM and its parent, Rio Tinto. The Anosy region, the mine’s proposed
reside in the largest town, Fort
Dauphin. Geographical isolation had left the region with very few job opportunities and a degraded
thirds of people earn less than $1.25 a day, and nearly 90
Anosy stands out for its extreme poverty. The wet climate is well
suited to growing fruit and cultivating staple crops such as rice and manioc (cassava). But the region
ly all of its basic foodstuffs. As
the project advanced from exploration to implementation, local communities expressed concern about
the physical and social upheaval that the mine would cause as well as excitement about the potential
When QMM first began exploration in Fort Dauphin, it
focused on protecting the area’s biodiversity (see
Case A.) Engaging with the community was an
important part of any sustainability programme
, head of QMM’s
environmental team, emphasised, “Biodiversity can’t 3 Former Rio
Tinto Chairman, Robert Wilson, explained that the
company had anticipated the rise of sensitive
development issues such as internal migration and
Over time, it increased its active engagement with
local communities through social and economic
development projects and a Community Relations
Plan. Yet almost from the beginning, tensions arose
and the local population, which
Construction of the mine began in January 2006, and
d through the newly
completed Port of Ehoala more than three years later,
in May 2009. The new port, which replaced a much smaller one that was five decades old, is now the
r the closure of the
mine, will be owned and managed by the government of Madagascar. The new facility brought the
promise of increased economic activity and diversification. Because it can handle vessels of up to
large cruise ships, a capacity that will help to develop the
QMM/Rio Tinto in Madagascar
Oxford University Centre for Corporate Reputation
4
region’s tourism. Export of goods such as sisal products, lobster, medicinal plants, fruit, and scrap
metal will increase; previously, most of these had to be transported 1300 kilometres by road for
shipment. Imports from other parts of the world will likely rise, which should help to contain inflation.
The port may also encourage the development of a modern fishing industry. QMM and the
government envisage that the area immediately adjacent to the facility will eventually house a
business park for the processing of foodstuffs, as well as a free-trade zone to encourage new
business and investment. 5
Additional investments included roads, a water treatment plant to provide safe drinking water, a new
power generator to supply both the mining operation and the residents of Fort Dauphin, and a landfill
site. 6 Almost all were part of a larger project put in place by the government and the World Bank
(called “growth poles”) that was designed to complement the mining investment. Recognizing that the
port would contribute to the region’s economy, the government granted the company a $35 million
non-repayable grant. In addition, the World Bank funded some road construction, capacity building,
and training (in running hotels and other businesses, for example). 7 “We knew we could not do
everything ourselves in a region where the needs are almost infinite,” explained Gary O’Brien, QMM’s
President from 2006-2009. Ny Fanja Rakotomalala, who succeeded O’Brien, added that QMM actively
participated in the regional development planning in order to avoid creating the isolated “enclaves” of
development that had characterised so many extractive industry investments in developing countries. 8
Initiatives
Programmes that were closely tied to biodiversity were among QMM’s first priorities. The company
created an Ecological Research Centre that included a plant nursery, seed treatment station,
restoration trials, and an education centre. All had the full participation of the local communities.
QMM established a conservation zone out of the largest remnant of primary coastal rainforest to
prevent local people from extracting its last remaining resources. At the same time, it engaged with
local communities to identify areas where people were allowed to cut down trees for lumber and
firewood. The negotiations were highly sensitive because the Malagasy people view forests as sacred
-- home to the spirits of their ancestors. 9
Preserving the island’s biodiversity was intertwined with the goal of helping to sustain local
communities. A reforestation programme introduced in 2002 involved planting 100 hectares of fast-
growing trees per year to provide locals with wood for their everyday needs. Additionally, much of the
wetland area that QMM planned to mine was covered in mahampy reeds, used by locals to make
essential items such as baskets, sleeping mats and burial shrouds. QMM demonstrated that the
reeds could be grown following the proper restoration of this important ecosystem, thus ensuring that
the plants would continue to be available. The company’s goal throughout was to reinforce the
capacity of local residents to achieve sustainability and, as much as possible, to transfer to them the
responsibility for monitoring and managing the forests and wetlands.
Bolstering economic opportunities for the local population was another important goal, and QMM
implemented a number of initiatives in this area. Locals were encouraged to produce their own
vegetables in tandem with a composting project begun by the company, to decrease the region’s
dependence on imported food and help bring down prices. By 2009-10, communities were producing
up to three tonnes of fruits and vegetables per month for local consumption. 10 Other projects included
a microfinance programme; a honey-producing initiative involving over 100 villagers from various
communities that turned out more than 200 litres of honey per month; and the recycling of scrap metal
from the mine construction and operation for use by households and farms. QMM contributed to
raising health and education levels by setting up literacy programmes for adults and teenagers,
improving community health services, and helping to establish a number of educational institutions.
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Oxford University Centre for Corporate Reputation
5
The latter included a secondary school, a vocational college and a handicraft training centre for
women that included a one-room primary school for their children.
The following chart lists the local and global initiatives that QMM implemented between 1998 and
2010:
Local initiatives Global initiatives
Eco-tourism in designated conservation zones Global biodiversity advisory committee
Improved agriculture (rice and other crops) Global Development Alliance (GDA) programme
with USAID matching funds
Natural resource management activities Collaborations with global NGOs
Fast-growing and native species plantations Indigenous seeds sent to Kew Gardens in London
Improved fishing practices Published biodiversity monograph with more than
70 authors (Smithsonian Institute)
Conservation zone establishment and
management
Improved education and community health
services
Adult literacy programmes
HIV/AIDS prevention and counselling
programmes
Microfinance initiatives with International de
Crédit Agricole et Rural (ICAR)
Animal breeding and husbandry initiatives
Tensions
The Panos review identified a risk that local communities (particularly men of working age),
may feel increasingly alienated by Rio Tinto’s operation, and resentful of the company’s
presence in the area. ClientEarth, 2010 11
When construction of the mine began in 2006, Fort Dauphin saw a large influx of workers from abroad
and from other parts of Madagascar. Almost immediately, a number of problems emerged.
Inflation: Inflation became an issue because of the region’s isolation, which limited the amount of
supplies that could be brought in and enhanced the power of local monopolies. 12 Even before
construction began, the average price increases in Fort Dauphin were generally higher compared to
other large cities on the island. QMM’s analyses concluded that both structural and cyclical forces
were at work: the structural ones involved the deterioration of the road network and reliance on the
old port, while cyclical factors had to do with increased migration into the area when the mine was
announced. During the first year of construction, Fort Dauphin saw a significant surge in prices,
mostly due to a shortage of accommodation that resulted in a large rise in rents. QMM realised that
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Oxford University Centre for Corporate Reputation
6
something had to be done, but monitoring inflation proved challenging because no information on
prices was available before 2006. After that date, Madagascar’s Bureau of Statistics, known as
INSTAT, began providing data, but only on a monthly basis and three months in arrears -- a problem
for a region where inflation rates could fluctuate on a weekly basis.
QMM implemented monitoring and mitigation programmes beginning in 2006. It helped to stabilize the
price of rice, a vitally important staple in the local diet, by setting up rice traders to compete with locals
who were manipulating the price. 13 By mid-2008, as the construction phase wound down, the Anosy
region had the lowest national rate of inflation, except in housing and seafood. 14 QMM continued to
monitor prices by introducing a “mystery shopper” programme to improve the quality of information. A
group of local people from the poorest areas were selected and provided with a small amount of
shopping money once a week. The company asked them to buy specific products from different
markets and to report the costs; in return the shoppers were allowed to keep the products they bought
as compensation for their time. Yet despite these efforts, the perception that inflation was a serious
problem persisted among residents. In 2010, local officials continued to voice concern over its
negative effects on their region. 15
Jobs: More difficult for QMM were the unrealistic expectations that followed the announcement of the
mine’s construction. Hopes ran high within local communities that the project would bring plentiful
investment and jobs. The construction phase lasted from 2006 to 2008. During that time more than
4,500 jobs were created, including 3,600 for Malagasy people, 70 percent of whom were from the local
region. A further 1,500 jobs were generated in the accommodation, food, banking and vehicle hire
sectors.
Although QMM anticipated that locals would expect jobs, the company was unprepared for the
eventual scale of the demand, particularly after the construction phase ended and a large portion of
the jobs disappeared. From the beginning, QMM was careful to dampen expectations by engaging
with village representatives, including traditional and formal leaders and general assemblies. With
their help, the company compiled lists of candidates for employment to prevent people from simply
turning up to apply for jobs. 16 The approach was successful – there were no disputes or
demonstrations during the hiring process. But, perhaps inevitably, many people were disappointed in
not finding work.
Resentment was further inflamed when many of the local population were employed on a short-term
contract for the initial construction of the port, mine and roads. Although they signed the employment
documents and indicated that they agreed with the provisions, in reality many did not understand the
concept of employment that expired on a given date. Instead, they interpreted the termination of their
contracts as a firing. 17 Misunderstandings were aggravated by the differences between western and
Malagasy culture. Local people tended to focus on the present and not think too far into the future,
making long-term negotiations difficult or impossible. 18
Tensions also stemmed from the allocation of jobs among locals and outsiders. The hiring process
was transparent and QMM actively recruited from nearby communities, but nothing could be done
about the lack of technical skills within Fort Dauphin. 19 Locals grew to resent the company’s
employment of large numbers of expatriates and people from other parts of Madagascar during the
construction phase. Many of the outsiders were hired by QMM’s contractors and subcontractors.
By the start of the mine’s operational phase, the number of people employed dropped to 700 (although
running the mine eventually created an additional 1,100 jobs). Local residents who had prospered by
providing services like hotel accommodation and car hire saw their market dry up when the
construction workers left. The number of expatriates employed by QMM peaked in 2008 but dropped
to only 35 by 2010, by which time 90 percent of the workforce consisted of Malagasy nationals. Of
QMM/Rio Tinto in Madagascar
Oxford University Centre for Corporate Reputation
7
these, 61 percent had been recruited locally. 20 The high proportion of Malagasy employees did not
mitigate the disappointment among some locals that the large, hoped-for increase in jobs turned out to
be temporary.
Haves and have-nots: Some rank-and-file employees did little to transform QMM’s reputation with
the local population. At times, employee conduct worsened relations with locals who didn’t work for the
company. According to a union representative:
There is envy and jealousy from people who don’t work for Rio Tinto towards those that do.
Workers are proud of QMM, but they don’t defend enough outside the company. People are
very good at showing the logo, saying that they work for the company, but not good at
projecting the values of the company. 21
According to one local NGO, the problem was exacerbated because QMM employees who hailed from
outside the area boasted in public about their generous salaries and spent their money ostentatiously
in the shops around Fort Dauphin. Their actions highlighted the growing inequality between those
who worked for QMM and the many others in the area who did not. 22 In some ways, the envy and
bad feeling brought on by perceived inequality was an unintended consequence of development.
According to Alain Tefimbola Razafindrakoto, a popular broadcaster at Fort Dauphin’s Radio LAFA:
“People used to have an easy, calm life. Now they need to work more because of the development
brought in by QMM. There is more inequality – the middle class against the poor.” 23
Delays in delivering an electricity generator caused further disappointment. QMM had agreed to
finance the generator and to charge the local utility company, Jirama, a subsidised price for the power
that would enable Jirama to make a profit on sales to local residents. Jirama at the time was
insolvent, so – as part of the growth poles co-operation programme - QMM requested a guarantee
from the World Bank for the payment of electricity sold to Jirama. The World Bank agreed and gave
QMM a guarantee, but it was not formally approved because the Bank pulled out of Madagascar in
2009. Local communities interpreted these events as a broken promise. 24
Even the taxes and royalties that QMM paid became a cause for discontent and cynicism. According
to the Chef de Region of Anosy, the 1.4 percent of total shipments that the company paid in royalties
to local governments did not amount to much. He observed that “compared with what people expect,
it doesn’t seem like enough.” Payments from the central government to the local governments were
curtailed after the 2009 coup (see Appendix 2), increasing the pressure on local authorities to make up
the shortfall. They in turn intensified the pressure on QMM to contribute more. “We know QMM is not
a philanthropic organisation,” the Chef de Région said, “but we are poor.” He added that if
Madagascar law were better enforced to ensure that taxes and royalties were fairly distributed
between the central and regional governments, “it would go a long way” to fixing the problem. 25 QMM
had recognized the inadequacies of the tax regime and had worked with the World Bank and the
national government to establish a Community Fund that would have ensured a wider distribution of
tax revenues. But this, too, was interrupted by the 2009 coup. 26 According to the company, tax and
royalty payments will increase substantially along with the growing shipments of ilmenite. 27
Resettlement and contracts. Resettlement was a significant issue for many local people because
they lived in or near areas that were designated as sites for the port and roads. Compensation
guidelines were provided by the World Bank, but many locals expressed unhappiness about the scale
and type of compensation they were given. According to one study, “Young male Permanently
Affected People (PAPs) felt particularly betrayed. They felt that since QMM had deprived them of their
livelihoods by requisitioning their farmland they bore a duty to provide them with employment.” 28 This
sentiment was echoed by Vincent Mbola, president of the conservation zone’s management
committee and a resident of one of the communes that bordered the zone. When asked what
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Oxford University Centre for Corporate Reputation
8
“sustainability” meant to him, Mbola replied: “It means understanding that QMM will mine, so it will be
more difficult for people to access resources. QMM will impact their way of life, so they [QMM] have to
prepare people for a more difficult way of life: lack of food, employment, and so on.” 29
Farmers who were restricted from accessing certain areas because of construction activity were
heavily affected. Despite a compensation scheme, disputes continued about levels of compensation
that many in the community viewed as inadequate. According to NGO Panos:
QMM says that it purchased 16 acres of land close by and gave this as compensation.
However, tests showed that the land was of poor quality and lacked the level of fertility
necessary to grow staple crops like maize and sweet potato. QMM agreed to find alternative
land and requested the local Government to come up with some alternative options. But, with
land in the Fort Dauphin area in high demand and the land department lacking capacity,
alternatives were slow to arrive. 30
Almost all of the affected residents preferred cash, rather than in-kind (land) compensation. 31
Disputes became further complicated because many subsistence farmers held land via traditional
means, administered at the community level. Establishing legal tenure was difficult and costly, and
remuneration favoured those whose land had been formally recognised before construction and
mining began. 32
Fishermen were another heavily affected group. Those who used to ply their trade near the new port
could no longer do so, according to the Chef de Région. QMM provided an alternative spot, but the
sea was sometimes too rough because there was no proper barrier. 33
According to the company, the new site was very close to the original one, and the fishermen who now
use it have experienced few problems. They were compensated based on what they reported would
have been their average catch during the relevant period, and some even continued to fish in addition
to accepting compensation. 34 Even so, some of the poorest and least educated local people found
themselves marginalised. “[QMM] took advantage of our situation, of us being too weak to oppose
them,” stated a resident of Petriky, a forested area 32 km southwest of Fort Dauphin. “In addition, we
are mostly uneducated people; therefore we had to accept - against our will - what they [proposed].” 35
Perspectives
The QMM project has an extremely high profile, and Rio Tinto has emphasised that aspects of
environmental and social management there represent their current best practice, and a
potential model for their future approach to such management. As such, Rio Tinto’s growing
reputation as a company taking progressive steps towards a more sustainable model depends
on the success of its strategy here in particular.
ClientEarth, 2010 36
The initial criticisms of QMM’s proposed activities concerned the potential damage to Madagascar’s
rich collection of indigenous species. But while biodiversity was clearly a vital issue, the effects of the
mine on the local community proved equally sensitive. QMM’s experiences reaffirmed the belief within
Rio Tinto that it made no sense to separate biodiversity and community issues because they are so
closely interrelated. 37
QMM communicated its intentions through a number of different channels to reach both its global
stakeholders - especially the mass media and NGOs - and local stakeholders, such as the Chef de
Région, the mayors and the local population generally. Both sets of stakeholders needed to
QMM/Rio Tinto in Madagascar
Oxford University Centre for Corporate Reputation
9
understand how the company had protected the Anosy region’s fragile ecosystem. As one NGO put it,
Rio Tinto expects to operate in Madagascar for 40 years, and if it is to ensure high productivity
and a stable operating environment over that period, it is essential that its social and
environmental strategy is successful, in order to maintain the company’s social licence to
operate and its reputation, amongst other things. 38
These relationships have not always been straightforward, and differences in perception often led to
misunderstandings and bruised feelings. QMM believed that social and economic programmes were
an important part of the company’s contribution, but it also stressed that there was a limit to what any
organisation could provide, leading some in the community to question the company’s motives. “QMM
don’t really understand what people want,” according to the Anosy Chef de Région, “it just wants to
show what they are doing.” 39 Azafady, a local NGO that focuses on environmental issues, echoed
the complaints that QMM confined its activities to highly visible projects like schools, infrastructure and
the conservation zone, rather than less visible initiatives, such as helping communities strengthen their
civic capacities by supporting local organisations. 40 For their part, QMM’s community engagement
team believed that schools, roads and similar projects would most benefit the entire community. 41
Veronica Bevivino of Cielo Terra, a local NGO that works closely with QMM, confirmed that “there’s a
sense that QMM can never do enough. The government itself always asks for more.” 42
Both the critics and QMM’s own managers agreed that more effective communication was the
solution. Azafady, the local NGO, said that the company was not embedded enough in the local
communities and therefore had difficulty communicating how it planned to resolve issues. Locals
sometimes did not distinguish between problems that were caused by outside bodies – for example,
the World Bank’s decision after the coup to rescind funding for roads that connected the port with the
Villagers near QMM mining site, Anosy region, Madagascar © QMM
QMM/Rio Tinto in Madagascar
Oxford University Centre for Corporate Reputation
10
mine – and problems that could be attributed to QMM’s activities. The company set up an information
centre, but local residents were not inclined to visit. 43
“There is a perception that only 600 employees and their families benefit,” observed Razafindrakoto,
the Radio LAFA broadcaster. “People don’t think of the indirect benefits.” He said that QMM was
responsible for the increased advertising revenue of his radio station, but his own employees failed to
see the connection. QMM’s statements, moreover, were difficult to translate. “They need to lower the
level of communication and be more practical.” Christian Rarivoson, head of the programme to
rehabilitate the mine, and also head of the company’s union, said that QMM needed to obtain
consensus from the entire community and not just the local authorities. He gave as an example the
owners of cattle, whose concerns were important but were seldom consulted by the company or local
officials. 44
The challenges of coupling environmental and community issues were particularly strong because the
majority of the local population depended upon forest resources for their everyday needs - for cooking
and heating fuel, as well as for natural medicines and weaving materials. Panos wrote: “Pollution
from quarrying and displacement of village populations has created new challenges and villagers are
having to come to terms with the loss of their lands and traditional ways of life, as well as their
changing landscape.” 45 The sheer proximity of residents to the mine, port area and new roads
disrupted their everyday lives and highlighted the marked contrast between those who worked for
QMM and those who did not.
QMM’s Community Relations Programme has a remit to intervene at all stages of the project to ensure
that the company’s actions aligned with local expectations. Staff conducted risk assessments for the
population affected by the construction and mining, and developed and implemented policies to
improve people’s livelihoods. In 2010, Willy Rasamoelina, QMM’s Community Relations Manager,
outlined four strategies: 46
1. More communication at the grass-roots level to ensure that the dialogue was
ongoing. Multiple channels would be used, including visits to QMM sites by
members of the community, and organized events to allow QMM employees to
spend more time with local residents.
2. Implementation of small projects to improve livelihoods. These collective projects
would include rehabilitating pathways and beaches.
3. Capacity-building and empowerment. QMM worked with some 15-20 local
community organizations, providing them with training to improve their ability to
build local civic institutions.
4. Land securitization.
Rasamoelina’s team produced a matrix that specified the amount of time spent in each geographical
area. They surveyed the mining zone and planned to do the same in other areas to assess the
effectiveness of the programme. Within the company, “champions” of community integration were
appointed, and the team worked to explain its importance to everyone throughout the company.
Nonetheless, the very visible presence of one of the world’s largest and best-funded mining
companies amid such poverty continued to elicit negative comment. As radio broadcaster
Razafindrakoto expressed it: “There are a lot of criticisms and complaints when people see all the
infrastructure and private jets . . . people ask: why doesn’t QMM just put a million ariary [the local
currency] into people’s pockets?” 47
QMM/Rio Tinto in Madagascar
Oxford University Centre for Corporate Reputation
Conclusion
There is little doubt that the financial impact of QMM’s mine will continue to be substantial. QMM
estimates that once the mine is operating at full capacity, the ‘value added’ for the country will
represent 1.5 percent of Madagascar’s GDP. QMM also pay
the value of total shipments are paid in royalties, and most of these are earmarked for local
governments. 48
QMM’s positive economic impact on the region created a great de
achievement for the ‘haves’, but also a lot of frustration and envy among the ‘have nots.’ The company
continues to set a strong example of how mining companies can cooperate with different stakeholders
in developing countries. According to Rio Tinto CEO Tom Albanese,
with local communities and commitment to improve have set high standards that other companies
within Rio Tinto strive to emulate. 49
originate from within QMM rather than the government.
Dauphin will in large part depend upon how it manages community relationships and expectations. As
Rio Tinto itself acknowledged, “Political, legal and commercial instability or community
countries and territories in which the Group operates could affect the viability of [our] operations.”
Ilmenite mine, Fort Dauphin, © Photo Oxford University Centre for Corporate Reputation
There is little doubt that the financial impact of QMM’s mine will continue to be substantial. QMM
estimates that once the mine is operating at full capacity, the ‘value added’ for the country will
represent 1.5 percent of Madagascar’s GDP. QMM also pays taxes and royalties. Two percent of
the value of total shipments are paid in royalties, and most of these are earmarked for local
QMM’s positive economic impact on the region created a great deal of satisfaction and sense of
r the ‘haves’, but also a lot of frustration and envy among the ‘have nots.’ The company
continues to set a strong example of how mining companies can cooperate with different stakeholders
in developing countries. According to Rio Tinto CEO Tom Albanese, QMM’s continuing engagement
with local communities and commitment to improve have set high standards that other companies
Even its critics in Fort Dauphin concede that solutions very often
her than the government. 50 The company’s continued success in Fort
Dauphin will in large part depend upon how it manages community relationships and expectations. As
Rio Tinto itself acknowledged, “Political, legal and commercial instability or community disputes in the
countries and territories in which the Group operates could affect the viability of [our] operations.”
© Photo Oxford University Centre for Corporate Reputation
11
There is little doubt that the financial impact of QMM’s mine will continue to be substantial. QMM
estimates that once the mine is operating at full capacity, the ‘value added’ for the country will
s taxes and royalties. Two percent of
the value of total shipments are paid in royalties, and most of these are earmarked for local
al of satisfaction and sense of
r the ‘haves’, but also a lot of frustration and envy among the ‘have nots.’ The company
continues to set a strong example of how mining companies can cooperate with different stakeholders
QMM’s continuing engagement
with local communities and commitment to improve have set high standards that other companies
Even its critics in Fort Dauphin concede that solutions very often
The company’s continued success in Fort
Dauphin will in large part depend upon how it manages community relationships and expectations. As
disputes in the
countries and territories in which the Group operates could affect the viability of [our] operations.” 51
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APPENDICES
Appendix 1: About Rio Tinto
Rio Tinto is a combination of two companies: Rio Tinto plc, based in the UK, and Rio Tinto Limited,
based in Australia. The British based Rio Tinto Company was formed by investors in 1873 to mine
ancient copper workings at Rio Tinto near Huelva in southern Spain. The Consolidated Zinc
Corporation was incorporated in 1905 to treat zinc bearing mine waste at Broken Hill, New South
Wales, Australia.
The RTZ Corporation (formerly The Rio Tinto-Zinc Corporation) was formed in 1962 by the merger of
The Rio Tinto Company and The Consolidated Zinc Corporation. CRA Limited (formerly Conzinc
Riotinto of Australia Limited) was formed at the same time by a merger of the Australian interests of
The Consolidated Zinc Corporation and The Rio Tinto Company.
RTZ and CRA were unified in December 1995. Directed by a common board of directors, the
companies operate as a single entity even though they maintain separate shareholder lists in the UK
and Australia. This places the shareholders of both companies in substantially the same position as if
they held shares in a single enterprise owning all of the assets of both companies.
In June 1997, The RTZ Corporation became Rio Tinto plc and CRA Limited became Rio Tinto Limited,
together known as the Rio Tinto Group. Rio Tinto plc is listed on the London and New York Stock
Exchanges. Rio Tinto Limited is listed on the Australian Stock Exchange. Since the 1995 merger, the
Group has continued to invest in developments and acquisitions in keeping with its strategy.
From “Who we are,” www.riotinto.com
Appendix 2: Political instability in Madagascar
Madagascar has long suffered from political instability, which worsened in the disputed 2001
presidential election that pitted the followers of Didier Ratsiraka against those of Marc Ravalomanana.
The political upheaval nearly resulted in half of the country seceding. Ravalomanana was pronounced
the winner by the country’s High Constitutional Court in April 2002. He was voted into a second term
following a landslide victory in the presidential elections of 2006, which were considered generally free
of fraud and corruption. Political tensions continued to rumble beneath the surface, however. The
problems came to a head in 2009 when the mayor of Antananarivo, Andry Rajoelina, seized power
from President Ravalomanana. Negotiations led to a power-sharing agreement in the summer of
2009. A 15-month transitional period was established, and Rajoelina announced an election calendar
culminating in presidential elections in November 2010. The process, however, was delayed. 52
The coup further destabilized the country’s political and economic climate. Because the outside world
perceived the new government as illegitimate, both aid and trade suffered, as did tourism. The World
Bank and other international donors declined to collaborate with Rajoelina’s government and cut off
funding for roads and other much-needed projects. (Direct aid to NGOs and communities continued,
but at a reduced level). 53 Clothing designers like Yves St. Laurent shifted their manufacturing orders
to other countries. 54 In reality, political demonstrations and other such disturbances were confined to
the capital, but all of Madagascar felt the effects of the reputational damage the coup inflicted. For
QMM, it led to intensified demands for assistance from residents and their political leaders.
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Appendix 3: Chronology
1986-89 BP Minerals conducts preliminary phase of exploration for ilmenite in
southern Madagascar.
1989 Rio Tinto/QMM acquires ilmenite sites from BP Minerals; continues
exploration.
1990-92 First phase of social and environmental studies and impact assessment
1996 Rio Tinto establishes full-time environmental and conservation team, led by Manon
Vincelette.
1998 Framework Agreement signed between Rio Tinto/QMM and government and ratified
by Deputy General Assembly. It provides reference point and general direction for the
company’s proposed projects.
1998 – 2001 QMM conducts Social and Environmental Impact Assessment (SEIA) Phase 2, the
first of its kind ever conducted in Africa, in compliance with Malagasy law. Paves the
way for government to issue first of three environmental permits.
2001 Presidential elections in Madagascar result in political deadlock that
divides the country, leads to unrest and negatively affects the national
economy.
Internationally renowned NGOs and biodiversity experts found
independent advisory committee to review QMM’s strategy and on-the-
ground conservation activities.
2002 QMM proposes Project Environmental Management Plan (PEMP) for Mandena site.
Plan consisted of a list of obligations that Rio Tinto put together in accordance with
the SEIA and the framework agreement of 1998.
Reforestation programme launched to plant 100 hectares of fast-growing trees per
year to provide locals with wood for their everyday needs.
Dina arranged between QMM and local community concerning the co-management of
natural resources and conservation zones around the Mandena mining district.
2003 President Marc Ravalomanana implements wide ranging economic, social,
and governance reforms. These include free market privatisation.
2005 Government launches integrated Growth Poles (PIC) project, co-funded with World
Bank, to support regions with strong potential for growth. Anosy is one of three
regions identified.
Investment decision from RioTinto to go ahead with ilmenite mine.
2006 Pre-mobilisation and start of construction of roads, port, and mine.
Ravalomanana wins a second term in office.
2007 Government launches Madagascar Action Plan (MAP), a five-year
economic program.
2009 Mining operations begin.
QMM wins prestigious Nedbank Green Mining Awards for its commitment to the
environment and biodiversity and its work towards net positive impact.
QMM introduces mystery shopper programme to monitor inflation Political coup.
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Endnotes
1 Rio Tinto, Annual Report, 2008.
2 United Nations Development Program (UNDP), “Human and income poverty: developing countries/Population living
below $1.25 a day (%)”, Human Development Report, 2009.
3 Presentation by Manon Vincelette, Head of Community Affairs, Biodiversity and Sustainable Development, QMM
Mandena offices, Madagascar, July 5, 2010. 4 Interview, Sir Robert Wilson, former Chairman of Rio Tinto, London, March 23, 2011.
5 Interview, Philipe Murcia, Port Manager, Port d’Ehoala, Madagascar, July 6, 2010.
6 Tobias Puhlmann, “The Impact of QIT Madagascar Minerals (QMM) on Local Economic Development of Fort Dauphin,
Madagascar,” MBA thesis, Graduate School of Business, University of Cape Town, December 2008, pp. 37-39. 7 Gary O’Brien, President of QMM (2006-2009), written communication to Centre for Corporate Reputation (CCR),
December 15, 2010. 8 Ny Fanja Rakatomalala, President of QMM, written correspondence, May 9, 2011.
9 Andrew Lees Trust and Panos, “Madagascar Voices of Change: Oral Testimony of the Anatosy People,” London, 2009, p. 7.
10 Vincelette, presentation, 2010.
11 ClientEarth, “Referral to the Financial Reporting Review Panel, Re: the Rio Tinto Group Annual Report 2008,” 2010, p. 61.
12 Presentation by Ny Fanja Rakatomalala, QMM Mandena offices, Madagascar, July 5, 2010.
13 O’Brien, written communication to CCR, December 15, 2010.
14 Puhlmann, “The Impact of QUI Madagascar Minerals (QMM),” pp. 57-59; Rio Tinto, “Inflation Monitoring: Mystery
Shopper Program,” slide presentation, July 2009, information shared by Rio Tinto/QMM with Centre for Corporate
Reputation. 15
Interview, Guillaume Venance Randriatefiarison, Chef de Région (Anosy), Fort Dauphin, Madagascar, July 7, 2010;
Interview, Armand Zafinandro, Mayor of Fort Dauphin, July 7, 2010. 16
RioTinto, “Sustainable development case study – employment,” 2009, information shared by Rio Tinto/QMM with the
Centre for Corporate Reputation.
17 Interview, Azafady representatives, Fort Dauphin, Madagascar, July 7, 2010.
18 Interview, Willy Rasamoelina, Community Relations Manager, QMM Mandena offices, Madagascar, July 8, 2010.
19 O’Brien, written correspondence to CCR, December 15, 2010.
20 Rakotomalala, presentation, 2010.
21 Interview, Christian Rarivoson, Superintendent of Rehabilitation of Mine and Head of Union, QMM Mandena offices,
Madagascar, July 8, 2010.
22 Interview, Azafady, 2010.
23 Interview, Alain Tefimbola Razafindrakoto, Radio LAFA, Fort Dauphin, Madagascar, July 7, 2010.
24 O’Brien, written correspondence to CCR, December 15, 2010; Rio Tinto, QIT Madagascar Minerals, Report of the
International Advisory Panel, June 28, 2010, available at http://www.riotintomadagascar.com/english/ch6Report.asp. 25
Interview, Randriatefiarison, 2010. Representatives of Azafady said that royalties were paid to the national treasury,
which they suspected did not distribute the required amounts to the regions. Interview, July 7, 2010. 26
O’Brien, written communication to CCR, December 15, 2010. 27
Vincelette, telephone communication, March 14, 2011. 28
Rod Harbinson, “Development recast? A review of the impact of Rio Tinto ilmenite mine in Southern Madagascar,” 2007.
p. 23. Harbinson, Head of Environment at Panos London, prepared the report for Friends of the Earth. QMM refer to PAP
as Person Affected by the Project.
29 Interview, Vincent Mbola, President of COGE (management committee of the Conservation Zone), QMM Mandena
offices, Madagascar, July 8, 2010. 30
Harbinson, ‘Development recast?,” p. 31. 31
“DUP [Declaration d’Utilité Publique] Process,” company document, provided to CCR by QMM. 32
Panos London, Illuminating Voices, “Background to the Region: Madagascar,” 2009, available at
http://www.panos.org.uk/?lid=29411 33
Interview, Randriatefiarison, 2010. 34
Vincelette, telephone communication, March 14, 2011; O’Brien, written communication to CCR, December 15, 2010.
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35 Zanaboatsy from Petriky, Madagascar, from Panos London, “Zanaboatsy: needing the forest,” a series of interviews with
indigenous peoples, 2007-08 [?], available online, http://www.panos.org.uk/?lid=29218
36 ClientEarth, “Referral to the Financial Reporting Review Panel,” p. 53.
37 Interview, Sir Paul Skinner, former Chairman of Rio Tinto, London, September 21, 2010.
38 ClientEarth, “Referral to the Financial Reporting Review Panel,” p. 53.
39 Interview, Randriatefiarison, 2010.
40 Interview, Azafady, 2010.
41 Interview, Rasamoelina, 2010.
42 Interview, Veronica Bevivino, Cielo Terra, Fort Dauphin, Madagascar, 2010.
43 Interview, Azafady, 2010.
44 Interview, Rarivoson, 2010.
45 Panos London, Illuminating Voices.
46 Interview, Rasamoelina, 2010.
47 Interview, Razafindrakoto, Radio LAFA, 2010.
48 Vincelette, presentation, 2010.
49 Interview, Tom Albanese, CEO of Rio Tinto, London company headquarters, October 26, 2010.
50 Interview, Razafindrakoto Radio LAFA, 2010.
51 Rio Tinto, Annual Report 2008, p. 26.
52 CIA, The World Factbook, “Madagascar,” updated 7 December 2010, available at
https://www.cia.gov/library/publications/the-world-factbook/geos/ma.html#, BBC News, “Madagascar Country Profile,”
updated 17 November 2010, available at http://news.bbc.co.uk/1/hi/country_profiles/1063208.stm 53
World Bank, “Madagascar – Economic Update: Why has the Malagasy Economy Not Yet Collapsed?,” July 26, 2010,
available at
http://blogs.worldbank.org/files/africacan/World%20Bank%20Madagascar%20Economic%20Update%20--
%20July%2015.pdf. 54
Interview, Representative of Professional Training Center CRFPTA, Fort Dauphin, Madagascar, July 6, 2010.
