Re­source ex­ploita­tion on cards

Busi­ness ve­hi­cles avail­able for in­vestors as Mada­gas­car plans devel­op­ment


IN MADA­GAS­CAR, the fifth largest is­land in the world, for­eign and do­mes­tic pri­vate en­ti­ties may freely es­tab­lish, own, and dis­pose of busi­ness en­ter­prises, as well as en­gage in all re­mu­ner­a­tive ac­tiv­ity.

Be­ing a for­mer French colony, the Mala­gasy ju­di­cial sys­tem is based on French civil law. Mala­gasy and French are the two of­fi­cial lan­guages. The na­tional cur­rency of the 22-mil­lion strong repub­lic is the ari­ary.

Com­pany law pro­vides sev­eral busi­ness ve­hi­cles, among which the most at­trac­tive for in­vestors are:

The so­ciété anonyme (SA), which is sim­i­lar to a larger lim­ited li­a­bil­ity com­pany with ei­ther a board of di­rec­tors or a gen­eral direc­tor; or

The so­ciété à re­spon­s­abil­ité lim­itée (SARL), which is sim­i­lar to an English lim­ited li­a­bil­ity com­pany and is ad­min­is­tered by one or more man­agers called “gérants”.

Joint ven­tures are of­ten formed in the min­ing and pe­tro­leum sec­tors.

The Eco­nomic and Devel­op­ment Board of Mada­gas­car is a one-stop of­fice in which all pro­ce­dures re­lat­ing to the in­cor­po­ra­tion of a com­pany are cen­tred.

Although reg­u­la­tory de­ci­sions can im­pede start-ups in par­tic­u­lar in­dus­tries, the nor­mal busi­ness regis­tra­tion process has been stream­lined by the board and gen­er­ally takes one week.

The new in­vest­ment law grants land and prop­erty to Mala­gasy com­pa­nies con­trolled by for­eign­ers, un­der cer­tain con­di­tions, to­gether with an au­tho­ri­sa­tion from the devel­op­ment board. How­ever, for­eign­ers can­not own land in Mada­gas­car and a sys­tem of longterm leases (up to 99 years) was es­tab­lished to al­low them land ac­cess.

En­dowed with a very rich sub­soil and sea, Mada­gas­car has a con­sid­er­able re­serve of nat­u­ral re­sources, which the new pres­i­dent (Hery Ra­joa­nari­mampianina, elected last year for a five-year term) and the new min­is­ter in charge of strate­gic re­sources plan to pro­mote and de­velop.

The dis­cov­ery of Be­molanga and Tsimiroro, two gi­ant oil fields, at the begin­ning of the 20th cen­tury started pe­tro­leum ex­plo­ration ac­tiv­i­ties in Mada­gas­car. These fields still pro­vide an an­nual pro­duc­tion of 2.7-bil­lion bar­rels although oil pro­duc­tion is no longer lim­ited to those sites. Other ma­jor multi­na­tional oil com­pa­nies, in­clud­ing Vanco En­ergy Co, Ster­ling En­ergy, Exxon Mo­bil, Tul­low Oil, To­tal and Mada­gas­car Oil, are present and their works are at an ad­vanced stage.

Oil and gas re­search and pro­duc­tion in Mada­gas­car is gov­erned by laws re­lat­ing to the pe­tro­leum code and the ex­plo­ration, ex­ploita­tion and trans­porta­tion ti­tles. The reg­u­la­tory en­tity for the up­stream pe­tro­leum sec­tor is the Of­fice des Mines Na­tionales et des In­dus­tries Stratégiques (Omnis).

Ex­plo­ration or ex­ploita­tion li­censes are granted to Omnis by way of a pres­i­den­tial de­cree. Omnis is en­ti­tled to trans­fer the rights and obli­ga­tions re­sult­ing from the li­cences to any pe­tro­leum com­pany or group of com­pa­nies hav­ing the nec­es­sary fi­nan­cial and tech­ni­cal ca­pac­ity and abil­ity to un­der­take ex­plo­ration and ex­ploita­tion ac­tiv­i­ties. In this re­gard, Omnis and the com­pany or group of com­pa­nies must en­ter into a pro­duc­tion-shar­ing con­tract that will gov­ern the rights and obli­ga­tions of each party in the pe­tro­leum ac­tiv­i­ties. If the Omnis con­trac­tor is a group of com­pa­nies, the com­pany with the high­est par­tic­i­pat­ing in­ter­est rate in the pro­duc­tion shar­ing con­tract is ap­pointed as the op­er­a­tor, act­ing on be­half of the rest.

A pe­tro­leum com­pany op­er­at­ing in Mada­gas­car must com­ply with the fol­low­ing re­quire­ments. It must:

Have the fi­nan­cial and tech­ni­cal ca­pac­ity and abil­ity to op­er­ate the con­cerned ac­tiv­i­ties;

En­ter into a pro­duc­tion-shar­ing con­tract with Omnis;

Ob­tain pres­i­den­tial ap­proval for the pro­duc­tion-shar­ing con­tract;

De­posit fi­nan­cial guar­an­tees through an au­tho­rised Mala­gasy-in­cor­po­rated bank cov­er­ing the spec­trum of its con­trac­tual work com­mit­ments;

Com­ply with in­ter­na­tional and lo­cal stan­dards on the pro­tec­tion of the en­vi­ron­ment;

File and im­ple­ment a train­ing and em­ploy­ment pro­gramme for na­tion­als;

Con­trib­ute to the sup­ply of oil and gas in the na­tional mar­ket; and

Have its sub­sidiary or branch in Mada­gas­car (manda­tory for op­er­a­tors only).

Min­ing is one of the key sec­tors of Mada­gas­car’s eco­nomic devel­op­ment. Its con­sid­er­able min­eral re­sources are a wealth that the state man­ages care­fully through a num­ber of laws.

Ap­pli­ca­tions for any type of min­ing per­mits can be made ei­ther by a Mala­gasy cit­i­zen or by a Mala­gasy-reg­is­tered com­pany at the min­ing reg­istry, the Bureau du Cadas­tre Minier de Mada­gas­car ( BCMM). The BCMM, at­tached to the min­istry in charge of strate­gic re­sources, man­ages min­ing per­mits. It op­er­ates on a first-come, first-served ba­sis. The BCMM is one of the largest sys­tems in Africa.

There are three ba­sic types of min­ing per­mits in Mada­gas­car: small min­ing, ex­plo­ration and ex­ploita­tion.

Mada­gas­car has ex­pe­ri­enced an eco­nomic cri­sis since the coup in 2009 and the is­suance, re­newal, trans­for­ma­tion and trans­fer of min­ing per­mits have been sus­pended since the tran­si­tional pe­riod. Ap­pli­ca­tion for a new min­ing per­mit, re­newal, trans­fer or trans­for­ma­tion can be filed at the BCMM but nei­ther a min­ing per­mit nor a de­ci­sion will be is­sued at present. How­ever, the new govern­ment pro­vides a ray of hope for in­vestors. The min­istry in charge of strate­gic re­sources with the BCMM has re­as­sured in­vestors that the pro­ce­dure will re­open soon.

In­vestor con­fi­dence could be re­stored by the sta­bil­ity of the po­lit­i­cal en­vi­ron­ment as the new govern­ment has shown its will­ing­ness to im­prove the econ­omy, trig­ger­ing a new start­ing point in its devel­op­ment.



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