Out for Summer, Episode 1: The Ambatovy mine in Madagascar – How the EIB is sweeping a development fiasco under the rug

This summer we would like to shed light on the European Investment Bank’s operations outside the EU. “Out for summer” is a series of articles focusing on different cases of troubled development stories.
First stop: Ambatovy, Madagascar.

The Ambatovy project, together with the Mopani mine in Zambia, was the last mining project directly financed by the EIB. Following the Mopani scandal, which involved a major tax evasion scandal, the EIB stopped such type of financing. But still nowadays, the impacts of those mines, supported by European public funding, are felt on the ground. And the Bank does little to address them and learn lessons from these failed investments.

Mining in the name of development: a troubled story

In 2007 the European Investment Bank (EIB) signed a loan worth EUR 215m for the Ambatovy project in Madagascar: a major nickel-cobalt mine located at 80km east of the country’s capital Antananarivo. According to the Bank, this large-scale mining project was supposed to bring economic growth and broaden Madagascar’s export base, which at the time was almost exclusively on textiles and agro-industry. In September 2007, the EIB stated on its website that „The Ambatovy mining project is already casting a positive light on economic development in Madagascar.  Intensive project preparation and implementation of appropriate safeguards have ensured that the social impact of the project will be favourable.“ The EIB also highlighted that the project will be „protecting Madagascar’s unique environment“.

But the story told by the bank looks very far from the reality on the ground. Indeed, things did not go as expected. Recently, a group of investigative journalists detailed the numerous social and environmental harmful impacts the mine had on the surrounding areas and local communities. The story is accessible here. Those impacts range from displacement of population to sulphur-dioxide leaks and pollution of water resources.

Even on the economic front, it seems that the mine, operated by the Canadian company Sherritt under a joint venture, is facing difficulties. Indeed, the fall of nickel prices has caused headaches to the Ambatovy mine which is seeking to reschedule the debt it has accumulated for years. Demonstrations of laid-off workers took place in 2016 and social tensions related to the project have not de-escalated  to date.

How to hide a publicly-backed fiasco

In 2012, local farmers contacted the EIB to complain about the project,  especially for what concerns the negative impacts the mine had on agricultural activities. Soon after, the EIB Complaints Mechanism received complaints on the disappearance of bees as well as on environmental and social impacts of the plant not being properly mitigated. Five years later, these complaints are still ongoing, and even escalated to the European Ombudsman, who picked up the case in 2017.

What happened during these five years? The case has been divisive within the EIB. The conclusions report from the Complaints Mechanism has been blocked, given that the EIB hierarchy is unsatisfied with the critical findings of the Complaints Mechanism. Hence, instead of acknowledging the harmful impacts the project had, mitigating them and learning lessons from this failed project, the EIB’s solution is to try and hide this disturbing story.

One of the complainants – Jean-Louis Berard – especially points out to the fact that the EIB has been largely outsourcing its responsibilities throughout the process – which has led to conflicts of interest. Indeed, environmental studies on the ground were mainly led by the American consultancy firm CAM, which has been remunerated directly by Ambatovy. Hence, it is not surprising that the investigation carried out by the firm fell short of demonstrating the harmful impacts denounced by the local population. Even if the EIB Complaints Mechanism is now also relying on another consultancy firm to conduct environmental expertise, the trust between the different parties seems to have been severely breached.

What way forward?

Because of the huge delay for the EIB to handle the complaints related to the project, the file has now escalated to the European Ombudsman. Indeed, under an agreement with the EIB, the Ombudsman acts as a second layer of accountability if a complainant is disappointed with how the EIB Complaints Mechanisms has handled his concerns.

In this context, it will be key that the Ombudsman services investigate the reasons why the Bank did not deal properly with the complaints on the Ambatovy project, and what internal dynamics led to the delay in publicising the conclusions of its internal investigation.

It is also worth mentioning that the EIB is currently revising the setting-up of its Complaints Mechanism via a public consultation. Hence, it is in the public interest that the bank takes the Ambatovy case seriously and makes it utmost to improve the independence and efficiency of its Complaints Mechanism for such situations not to repeat in the future. But at this stage of the revision process, this does not seem to be the case, as pointed out by the European Ombudsman in her communication with the Bank.

Finally, the EIB needs to help mitigate the harmful impacts of the Ambatovy mine that it financed in the name of development. It is the Bank’s duty to take its responsibilities towards the complainants and overall the communities affected by this major mining complex. It‘s a matter of credibility and reputation for a public institution which is the largest multilateral lender globally.

 

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