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January 13, 2014

Chinese oligarch faces scrutiny in Madagascar oil land grab

By FAIR Reporters Nadia Raonimanalina and Will Fitzgibbon, with support from the Wits China-Africa Reporting Project, originally published in The Africa Report

When a Chinese businessman first approached Malagasy farmer Jean Manantsoa, 47, in April last year with an offer to lease his family rice fields, Manantsoa had no idea of the untapped pockets of potential natural wealth beneath.

Manantsoa who now sells meat to support his wife and six children in his commune of Mahaboboka, a sandy, flat expanse in Madagascar's arid southwest says: "It was a surprise that there was gas beneath my land".

Feeling pressured by the representative of the company, Madagascar Southern Petroleum Company (MSPC), Jean signed an open-ended lease for five million Malagasy ariary a year (£1,420). He received the first year's payment but nothing this year even eight months after the 1 April deadline.

Jean now claims his paddies are ruined; a metal drilling bore and concrete slab sits on his rice field and the surrounding brown earth is churned into dry clods.

An investigation by the Forum for African Investigative Reporting (FAIR) has found a Chinese company in Madagascar, with strong links to the government, is accused of unlawfully acquiring land, blighting the environment and leaving farmers destitute.

In previously unpublished documents, Madagascar's National Environment Office, ONE (office national pour l'environnement), slams MSPC, owned by one of China and Madagascar's most powerful mining billionaires, Dr Hui Chi Ming.

Hui is currently Madagascar's consul in Hong Kong and advises the prime minister and president on economic and Asian affairs.

The Prime Minister's office did not comment.

"He's the top of the top", says one Malagasy official who dined at Hui's Hong Kong residence close to when the philanthropist and billionaire appeared on Forbes's 2009 "400 Richest Chinese List" with an estimated wealth of $815 million.

Hui's MSPC is a subsidiary of Hoifu Energy Limited, a multi-service company based in the 38-storey Shun Tak Centre on Hong Kong's waterfront. It recently announced plans to increase profits through growing "the portion of oil and gas businesses".

Neil Bush, the 58 year-old brother of former U.S. president George W. Bush, is one of eight directors.

The accusation against MSPC comes at an important political moment in Madagascar.

On 20 December, Malagasies voted in the final round of a long-awaited presidential election. Four years after a military-backed coup that installed Andry Rajoelina in power, locals hope for a reversal in the country's slide into poverty that now sees more than 20 million of the country's 22 million people live in poverty - 10 percentage points higher than when the crisis began, according to the World Bank.

It is yet to be seen if former finance minister and ally of Rajoelina, Hery Rajaonarimampianina, who was announced winner of the president election will grant the 250 potentially lucrative offshore oil and gas licenses, and place the management of Madagascar's extensive natural resources in the spotlight.

Madagascar is a resource-rich country where sapphires could once be plucked from the topsoil. But the island's oil and gas wealth has been largely unexplored and extractive industries made up just 0.53% of GDP in 2011, the last assessed year by the Extractive Industries Transparency Initiative.

At the turn of the century, officials granted 20 onshore blocks on the country's west coast to a handful of Chinese, British, Australian, American, Indian and Malagasy companies.

Among them was MSPC, which scooped up a 9,260 square kilometer plot — larger than Devon and Cornwall combined — known as Block 3112.

Eight years on, Block 3112 is promising and should start producing gas in 2017, according to Hery Zaka Razafindrakoto, the deputy head of petroleum at Madagascar's oil and gas regulator, OMNIS.

But since July 2012, the ONE has visited MSPC's Mahaboboka site and questioned the company about what the government regulator identified as "grave failures committed by MSPC with regard to environmental legislation in force."

One experienced government official says: "The worksite, from an environmental perspective, was a dump. It was in the worst condition that I had ever seen."

The local mayor believes up to 17 Mahaboboka villagers have leased or sold land to MSPC.

After months of investigating, a ONE committee delivered a rare "negative opinion" on MSPC's compliance in light of "repeated serious failings". On 19 September 2013, MSPC received a first warning, giving the company 30 days to repair environmental damage and to resolve the land disputes.

"The Chinese lied to the villagers," says Mahababoboka's Mayor Emile Rakotondravelo from his second-floor office, a concrete building where broken green lino covers the floor.

"The company said that I had already agreed to sign the contracts," something the mayor denies. Without the mayor's consent and signatures, the contracts are invalid under Malagasy law.

"I told them I wanted to legalise the contract before the Mayor," says Manantsoa. "But the company said they had already had discussions with the mayor and gotten his approval."

Accusations of land grabbing in Madagascar are not new. But ONE's response to MSPC is rare, according to insiders, reflecting the increased attention to foreign ownership of the country's natural resources.

"I will pay particular attention to [Chinese companies'] impact on the common good," Dr Jean-Louis Robinson, who was the leading candidate in the first round presidential of the election. "I will monitor their impact on national sovereignty," Robinson told FAIR in response to the MSPC affair, adding that the contract would have to be revised if the company had broken national laws.

"Land and resource grabbing in Madagascar is far from experiencing a downward trend," says Giulia Franchi, land campaigner with the Italian NGO Re:common.

"Whether this happens through lease or sale contracts, the actual results for local communities is the same: their land is being grabbed and they lose any possibility to sustain themselves," Franchi says.

ONE accuses MSPC of purchasing land in contravention of MSPC's contract with the Malagasy State and in violation of the country's Petrol Code.

Despite MSPC submitting a document confirming it owns no land in the Mahaboboka area, the committee concluded that "the questions of land acquisition are not entirely resolved because it has been explained numerous times that the manner in which the company acquired land was done indirectly, through another company."

"Of course there is a link [between MSPC and the land purchase]," says ONE's Randriamiarana, who is overseeing an investigation into the land purchase. "They cannot work there if there isn't some kind of link," he says, although he does not think the purchase was approved at senior levels.

"The Chinese bought land through a female employee," claims another official with detailed knowledge of the case.

Land registry documents show the purchaser of 74.48 acres and 2.1 hectares at Ankida is Ms Brigitte Monique Andrianifahanana, manager of Gold (Grand Investment Limited). Hui holds 21.98% of shares in a company that last year increased its stake in Gold Grand to 40%.

Andrainifahanana is an employee of Hui's company Banque Industrielle et Comerciale de Madagascar and denies any link between Hui and her purchase.

Hoifu denies that the push for greater oil and gas profits is behind MSPC's altercations with Malagasy authorities.

MSPC has promised improvements, says Heritiana Radriamiarana, the Director of Environmental Evaluation at ONE.

But MSPC's Director General, Li Yin, denies there are problems and rejects ONE's allegations.

"All our group's activities in Madagascar, whether in the field of oil and gas exploration, distribution or in others, are those regulated by laws and permitted by conventions and agreements in which the national and local governments are co-signatories and partners," Hoifu said in a statement.

"No controversial issues with the Government have ever come up," Hoifu said, adding that the director of Gold is "a very close business partner" who is "free, independent and can acquire real properties and chattels as it is allowed by the national and local laws and customs of Madagascar."

"Non obstante our group's heavy investment in Madagascar, neither our group nor its directors has drawn monetary benefits from the group's activities," says Hoifu.

But neither has Manantsoa seen the monetary benefits of his lease.

"Before we thought this was a wonderful thing," says Jean Manantsoa, remembering when he was first told of the riches beneath his rice.

"But since I gave it to the Chinese it has been a disaster."

Nadia Raonimanalina and Will Fitzgibbon write for FAIR, Forum for African Investigative Reporting - supported by WITS China-Africa Reporting Project

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