Mining chamber expresses concern over proposed 51% state ownership

STAFF WRITER

THE Chief Executive Officer of the Chamber of Mines of Namibia, Veston Malango, says the government’s plan to increase ownership of future mining ventures to 51% could scare investors off.

Speaking at a recent edition of Fireplace Conversations, Malango said the proposed new ownership structure works well in the diamond industry but may not be practical with commodities that require intensive capital investment.

“We must remember that investors always have a choice. If we do not create a favourable environment they will simply walk away, and there is very little we can do. The investors will go to other jurisdictions where the environment is favourable,” Malango said.

“Ownership is only one of the ways to benefit, but it is being sold as the only way. We are already engaged with some consultancies to assess that, and to suggest what level of state involvement is reasonable. The outcome  will be presented to the government very soon.”

Malango noted that last year the country made N$51 billion from the mining sector, with over 80% staying in the country and only about 20% leaving in dividends.

He called on the government to provide clarity on what the new policy entails.

“We need to know whether this 51% is free-carried shares or the government will buy the shares. As it is right now, it is being marketed as free carry. The mining industry is a capital intensive industry and investors can not be comfortable to invest billions of dollars that they have no control over,” he said.

“We are already a high tax regime and any other tax we will fall off the cliff.

The NamDeb agreement has worked well for the country but can only work for diamonds and not any other mine,” he added. 

 He also highlighted that investors aim to make money and are not sources of charity. 

“They are not Father Christmas. I get amused when newspapers scream that investors have taken profit. Of course they come to make money, and they will take the money,” he said.

Speaking on the same issue, Economist Robin Sherbourne described the government’s decision to aim for a greater stake in the mining industry as cheap political rhetoric.

“I am not a big fan of the nationalisation of resources. I believe there are other models that can be followed to improve local participation. Maybe we should create a fund that raises money that locals can borrow to buy a stake in the mining industry, or simply tax the industry properly to accrue better benefits. 

“The government can not be in a high risk venture like mining. What we must understand is that it may take years before dividends are declared and there will be more investment than dividends. Now tell me one Namibian who can sustain seven years before they receive a dividend,” Sherbourne said.

He added: “We need to accumulate funds that Namibians can tap into to invest in the mining industry. I suggest we use the royalties, but that is what we tried in the 1990s. Has anyone even calculated how much 51% of the current mines are? It is billions of dollars, and we do not have that kind of money. Someone has to build the mine and someone has to make an investment.”

The decision to increase the government’s stake in mining was recently announced by the Deputy Prime Minister and Minister of Industries, Mines and Energy, Natangue Ithete.

Speaking at the recent mining expo, Ithete said there is no better time than now to start the conversation on increased state ownership in the country’s extractive sector, which contributes close to 15% of the Gross Domestic Product (GDP).

“We have been independent for 35 years and the question is should we have started this conversation at independence? Should we have started it 20 years ago? Or should we start it now? The answer is that this is a conversation that we need to have to make sure that Namibians benefit from their natural resources,” he added.