Mines minister Tom Alweendo has reiterated his stance that the presence of oil in Namibia can be beneficial, and does not automatically need to lead to the dreaded oil curse.
However, the mines and energy minister warned that if the extractive industry is poorly managed, the influx of oil revenues can distort Namibia’s economic fundamentals, can create corruption, and can create conditions that trigger conflict. Alweendo was speaking on Monday during a discussion on Namibia’s petroleum activities.
“An oil curse will depend on what we decide to do. It can be a curse in two ways, namely economically and socio-politically. On the economic side, it can be a curse if we neglect all the other sectors of the economy because of too much revenue we will get. If one day oil becomes depleted, the economy cannot function without this one sector. We know very well that oil prices are so volatile,” he cautioned.
Light oil was discovered in Namibia in February 2022. Earlier this year, a joint venture consisting of Shell announced the discovery at the Orange Basin offshore Namibia. Soon afterwards, another joint venture consisting of TotalEnergies made a similar announcement, with Qatar Energy and the National Petroleum Corporation of Namibia (Namcor) being partners in both discoveries.
According to Alweendo, the other form of a resource curse is when money is stolen or corruption kicks in. Big discoveries attract external factors that cause destabilisation, which then calls for security issues. The minister said there should thus be systematic ways on how to manage this revenue methodically so that it accommodates future generations.
He furthermore said Namibia is on a good path of accommodating future generations. In an effort for government to position itself to take advantage of anticipated economic tailwinds that could potentially propel Namibia towards renewed growth and opportunity, the country launched its first sovereign wealth fund, known as the Welwitschia Fund, in May 2022.
As one of the objectives, the fund is envisaged to be a repository of the investment of a portion of defined proceeds from the present utilisation of natural resources and returns from divestiture in State assets.
Alweendo said the nation should not be
worried of the State’s 10% ownership in oil discoveries. “The country will get employment from the sector, royalties, that is currently at 5%, tax that is 35%. From this, there is a good economic impact”. Furthermore, the current model shows Namibia is going to receive up to 55% of revenue made by the discovering companies.
“And on top of the 55% revenue, you also get your reward on your 10% if there is profit made on that. We do not only get profit from ownership, but you can get economic benefits from other sources rather than just ownership,” he emphasised.
The mines minister further touched on local content as a vital component that will positively impact the domestic economy. He also questioned whether Namibian entrepreneurs are ready to absorb demands from the gas and oil industry, particularly with the recent discoveries.