Mining production declines 4.6% in real terms

Home Business Mining production declines 4.6% in real terms


Preliminary statistics produced by the National Statistics Agency (NSA) for 2014 show that the mining industry made a direct contribution of 13 percent to Namibia’s gross domestic product (GDP), but contracted by 4.6 percent in real terms.

The decline in real value added was as a result of reduced production, especially of uranium which declined due to poor market conditions.

The commodity market created shock waves through the international and local economy, especially for uranium when the price dropped to a nine-year low of U$28/lb in June 2014. The depressed market for uranium forced major mining companies across the globe to scale back on production and some to shut down.

However, the outgoing president of the Chamber of Mines of Namibia, Werner Duvenhage, who is also the managing director of Rössing Uranium, is adamant that the mining industry is on an unprecedented growth path in the history of independent Namibia.

“The industry is creating new jobs and expanding the tax base for the fiscus with the three new mines, and re-investments in existing operations. This is in spite of the challenges on international commodity markets where Namibia has no control,” noted Duvenhage during the chamber’s annual general meeting in Windhoek on Tuesday.

Duvenhage however called on government to ensure the competitiveness of the industry by avoiding unreasonable tariff increases and the introduction of new levies.
“Mining is, and will remain, the backbone of the national economy for decades to come. The close cooperation between government and the chamber in shaping policy and legislation is indeed bearing fruits, with Namibia emerging as the most attractive investment destination in Africa in the 2014 Report by the Canadian Fraser Institute,” noted Duvenhage.

The outgoing chamber president is confident that this ranking will help Namibia attract more investments in new and current exploration projects, some of which may ultimately become new mines.

“This is the only way we can ensure sustainability of the mining industry. Through the activities of the joint Value Addition Committee and current investments in upstream economic activities by some chamber members, the industry is poised to play a catalytic role in further mineral beneficiation and industrialisation,” said Duvenhage.

In the local economy, unfavourable market conditions forced companies to cut costs in order to stay afloat, resulting in restructuring exercises in the form of retrenchments and a reduction in production in a few operations.

Overall production posted by the Namibian mining sector declined in 2014 compared to 2013, and thus growth posted also declined in 2014.
In response to depressed global commodity markets, several mines in the country underwent restructuring. For instance, Rössing Uranium retrenched 204 workers during August 2014. This restructuring was aimed at sustaining operations, avoiding the possibility of placing the mine on care and maintenance, or worse, mine closure.

Rosh Pinah Zinc Corporation retrenched 126 workers towards the second quarter of 2014 while Solvay announced the suspension of mining operations at the Okorusu fluorspar mine resulting in the retrenchment of 407 employees in October 2014.

However, about 30 employees were rehired on fixed term contracts to carry on the care and maintenance of the mine, ongoing exploration and research and development.
In terms of safety, Duvenhage says he is pleased that continuous efforts by the industry to improve safety have paid off.

“The proof exists in the safety statistics recorded for 2014. The industry recorded zero fatalities and the number of lost day injuries decreased from 88 in 2013 to 65 in 2014, representing a major stride towards achieving the goal of zero harm,” noted Duvenhage.

Meanwhile, according to chamber statistics, diamond mining surpassed non-diamond mining as the larger contributor to revenue and foreign exchange earnings.
The figure for non-diamond mining includes revenue from zinc refining and copper smelting.
Total revenue by non-diamond mining was N$10.73 billion and diamond mining earned N$10.87 billion. The total revenue from Namibia’s mining operations was N$21.62 billion in 2014.

“Although the sector may have experienced a contraction in real value added, there are many economic spin-offs and contributions which are not reflected in mining’s contribution to GDP. Fixed investments made by chamber members more than doubled during the period in review, from N$8.5 billion in 2013 to N$17.26 billion in 2014,” noted Duvenhage.

He added that indirect benefits of these investments to the local economy through upstream linkages are often understated, ranging from services provided by financial institutions to infrastructure development.

Chamber statistics show that its members paid out N$3.39 billion in taxes and royalties in 2014, representing a 22.8 percent increase from N$2.76 billion which was paid out in 2013. These figures exclude PAYE paid through wages and salaries by the sector.