Foreign investors are lured by new projects in a wide range of minerals, while China is increasingly looking to Namibia to fuel its burgeoning nuclear industry.
In its buoyant mining sector, Namibia tries to strike a balance between providing a conducive and competitive environment for foreign direct investment (FDI) and winning an appropriate revenue share for the government. This approach, combined with political stability since independence and the availability of good physical infrastructure, has served the country well and has helped overcome constraints such as the shortage of skilled labour.
Unlike most other resource-rich countries in Africa, Namibia has several products in its mix. Uranium and diamonds accounted for 33 percent of total exports in 2010, with a further 15 percent contributed by refined zinc, smelted copper, gold, zinc and lead concentrates, and fluorspar. FDI inflows, mainly to the mining sector, more than doubled from US$348 million in 2005 to $858 million in 2010, and the project pipeline is now worth over $3billion – primarily for uranium but also for diamonds, gold, manganese, marine phosphates and rare earth elements.
Foreign ownership of mining operations continues, with China and India increasingly coming to the fore. Most mines are at present majority owned by Australian, EU and South African firms, but Anglo American sold the Skorpion zinc mine and refinery to India’s Vedanta Resources at the end of 2010 and South Africa’s Exxaro also has plans to sell its 50 percent stake in the Rosh Pinah lead-zinc mine.
China is looking to Namibia’s new uranium mines to supply its expanding fleet of nuclear power plants and it is confident of acquiring UK-based Kalahari Minerals, which owns 43 percent of Australia’s Extract Resources, the developer of the largescale yellowcake (U3O8) project at Husab.
The Namibian government is expected to shortly grant mining licences for the planned uranium mines at Husab and Etango; the project developers envisage production starting at both sites by 2014. With the Trekkopje mine, which France’s Areva currently intends to bring fully on line in 2013, these would treble Namibia’s current U3O8 output to around 15,000 tonnes per year and propel it to become the second largest uranium producer in the world, behind Kazakhstan. Despite recent setbacks in confidence in nuclear power, new reactors continue to be built and more are planned in China and other Asian countries. If all goes to plan, the Husab mine alone could provide 1,100 permanent jobs and account for 20 percent of exports, with substantial contributions to government revenue as well.
In view of the strong rebound in the granting of exclusive exploration licences (EPLs) since 2009, an apparent shift in government policy towards nationalisation of the mining industry led to negative headlines in April 2011 when mines minister Isak Katali disclosed that the cabinet had declared diamonds, uranium, gold, copper, coal and rare earth elements to be “strategic minerals” for which mining and exploration rights would be “exclusively” reserved for the state-owned Epangelo Mining Co.
The policy was clarified a month later after extensive lobbying by the Chamber of Mines, whose members include all operating mines and most exploration firms. Existing rights would follow the current procedures of the Mining Act, along with conversions of current EPLs into mining licences – with no role for Epangelo. One project involving Epangelo envisages only a 10 percent stake for the company, rising to a possible 20 percent if a mine is developed.
The government has also managed to reach a consensus with the mining industry on a planned package of new and increased taxes. A formula-based surcharge is to be introduced to capture extra revenue during better economic times, and a new levy on mineral exports was indefinitely deferred. Both sides are consulting on a new mining tax structure – designed to remain competitive and to ensure a greater and more stable revenue flow into government coffers.
