WINDHOEK – It is unrealistic for investors in the mining sector to expect no change in policy or legislation during the duration of their investment, as some of these sectoral investments can be as long as 30 years.
Mines and Energy Minister, Tom Alweendo, expressed this sentiment this week when he officially opened the annual Mining Expo and Conference at the Windhoek Showgrounds.
The Ministry of Mines and Energy, with the participation of the Chamber of Mines of Namibia, is currently accelerating the review of the country’s mining legislation with the intention to finalise it before the end of this year.
“I fully understand and appreciate that change in policy and legislation can have debilitating effects on the profitability of any investment, especially those to do with taxation. We do have mining companies, the likes of Namdeb, that date back 100 years ago; or Rössing Uranium that exist for more than 40 years. It is also true that the global mining environment is an ever-changing one such that archaic policy and legislation become a hindrance rather than an enabler,” Alweendo told the gathering.
However, he emphasised that when a change in policy or legislation becomes inevitable and such change will have an impact on existing investment agreements, this must be negotiated with the existing investors.
Alweendo highlighted that an important sector such as mining cannot be sustainably managed without an effective mining legislation regulating the conduct between the state and the investors as well as between citizens and investors.
“As we all know, there are good laws and there are bad laws. We also know that at times a law is characterised as bad or good depending on whose interest is affected. A good law is that which is able to strike a balance between the varied interests of all the stakeholders; a good law is that which does not unfairly and unreasonably favour a particular stakeholder because of the perceived strength of such a stakeholder. A good law is that which is flexible enough to recognise the everchanging mining environment brought about by technology and by the international market nature of minerals,” said Alweendo.
He added that, based on feedback from investors, one of their concerns is policy uncertainty.
“They fear countries that change their policies and legislations such that the new changes threaten the financial viability of the already concluded mining investments. They thus insist on signing mining investment and operation agreements that prevent future changes in policy and legislation,” Alweendo noted.
The mines minister added that he was concerned that the mining sector relies heavily on external economies for its input. Here, he stated, the mining sector is not being sufficiently leveraged to strengthen the productive capacity of the economy.
Said Alweendo: “The desire is, therefore, for the mining companies to source their mining operation input from the local economy.”
In 2018, the mining sector procured N$13.3 billion worth of goods and services from local suppliers compared to the sector’s total procurement of N$22.95 billion.
“I am aware that currently the local economy is not in a position to produce all the required mining inputs. I am equally aware that it might not be possible to produce some of the highly specialised inputs due to the lack of economies of scale. It is, however, our view that with the necessary coordination and cooperation between the government and the mining sector, a lot can still be done. I am glad to note that we are currently working together with the Chamber (of Mines) to develop a database of all the inputs that can be produced locally. I urge all those involved to ensure that the database is completed within the next three months,” Alweendo said.