Lauren Davidson
The country’s independence birthed an avalanche of political, social, economic and legislative transitions, creating the foundations for Namibia to become what she is today. Independence brought many new freedoms and liberties to the nation, with it a change in how industries were operated and governed.
Since 1990, mining has evolved to become a partner in the country’s socio-economic development, an industry that is accountable for its actions, carries out mining activities in an environmentally responsible manner and prioritises community upliftment and development.
Prior to independence, the modus operandi of mining was vastly different than that of today. It was largely an exploitative activity on most accounts, whose primary goal was to extract minerals from the ground and process it to produce a saleable product. Lower-ranking employees were poorly enumerated and subject to poor working conditions, while mining companies did little to minimise their impact on the surrounding environment and communities.One of the damaging legacies left by mining companies of the pre-independence era is over 200 unrehabilitated mining sites scattered all over the country, which were left abandoned at the whim of commodity price cycles.
Today the status quo is vastly different.
After independence, the Minerals Act of 1992 was finalised and implemented as the ultimate legislation governing the industry.
It empowers the state to take action against
unscrupulous mining operations while making it attractive for investors to develop mining assets in Namibia.
For the mining company, the ultimate goal to produce a saleable mineral remains, however, the approach is the conscience of its socio- economic contributions and environmental impact.
The balanced regulatory framework induced this change, and so the sector began to evolve in how they conducted business.
Despite its generally low grades for most minerals, except for diamonds, Namibia’s attractive legislative regime, as well as its peace and stability, made the country a prime location for the business of mining.
A number of world-class mines have, thus, been developed in Namibia by global mining majors such as DeBeers, Anglo, Rio Tinto, B2Gold and others. The country is a major producer of diamonds, uranium and the industrial mineral – salt. In smaller quantities, there are also operations producing zinc and lead concentrate, gold bullion, Special High Grade (SHG) zinc, silver, dimension stone, other industrial minerals and high-quality gemstones by small-scale miners.
A common and overlooked characteristic of mining is that companies are price- takers, meaning they do not have any influence in determining the prices of mineral commodities. Rather, prices are the outcome of market forces, a major determinant in the profitability of operations. A prolonged period of low prices may hamper the profitability of operations, and companies in such a situation may opt to place their mine on care and maintenance as a last resort. Another added element is the cost profile of operations, which tends to increase as mines mature.
This can also detract from a mine’s profitability over time. In Namibia, a combination of the above factors has resulted in a number of mines being placed on care and maintenance since independence.
Such actions by mining companies are not unique to Namibia alone, however, the manner in which operations deal with the subsequent loss of jobs is of importance. In Namibia, companies work with one another through the Chamber of Mines to mitigate the impact of retrenchments by exploring job opportunities for affected workers at other operations.
Since 2013, over N$60 billion was invested into Namibia’s mining industry and resulted in the development of three new mines which has contributed to the industry’s strong growth recorded in the last few years. At present, however, the future and direction of the industry are on a vulnerable path. A handful of Namibian operations are set toreach their life of mines in the next two years, which have seen gradual retrenchments at these mines as they prepare for closure.
The maturing context of the industry has changed the nature and face of Namibian mining in recent years. Negative commodity prices cycles and increasing cost profiles have resulted in some mines no longer being profitable for major shareholders to continue with operations and ensued major ownership changes in Namibia’s mining sector in recent years. Last year, this resulted in Rio Tinto selling its majority shareholding of the Rössing uranium mine to China National Nuclear Corporation.
Recent sales and acquisitions have attracted major scrutiny from the Namibian public, largely in response to an increasing share of Chinese interests in Namibia’s mining landscape, particularly in uranium. However, the masses forget that these mines would cease to exist under old ownership, jeopardising jobs and livelihoods. In order to grow the industry, new investment into exploration is needed to increase the likelihood of discovering new mines as well as investment into mine expansion and developing new projects.
This has materialised in some instances with the re-opening of two old mines, the Namib Lead and Zinc mine which was closed in 1991, and the old Uis Tin mine which is being developed by AfriTin.
However, more is needed to significantly boost growth in the sector. Another main challenge is the slow deterioration of Namibia’s mining tax regime, adding weight to the risks of an ageing sector and volatile mineral commodity prices.
A cumulation of marginally unfavourable decisions taken by Government and pending legislative proposals in recent years have negatively impacted Namibia’s competitiveness as a mining jurisdiction, with similar consequences on the investment required to stimulate growth. The present status quo is concerning, as opportunities to grow the sector do indeed exist. Unfortunately, this window of opportunity is being restricted by an increasingly unattractive mining regime in Namibia.
As we turn 30 years of age, we appear to be at crossroads and it becomes clear that decisive action is necessary in order to return Namibia as a favoured place to carry out the business of mining and revive a once-thriving industry.
The sector stands committed to furthering the socio-economic objectives of the country and to build on its partnership with the government that has been cultivated since independence. It believes in the power of collaboration and mutual efforts. The Chamber will continue to facilitate this, with the overall objective of growing the industry and unleashing its development potential.*Lauren Davidson is a Mining Economist with the Chamber of Mines of Namibia. ◆