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An overview of the ministry of mines… three decades of peace, democracy and prosperity

2021-07-21  Staff Reporter

An overview of the ministry of mines… three decades of peace, democracy and prosperity
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The Ministry of Mines and Energy was established with the mandate to ensure that Namibia’s geological, mineral and energy resources are sustainably exploited and contribute to the country’s socioeconomic development to benefit all Namibians.

Soon after the establishment of the ministry, the drafting of legal instruments to regulate the mining and energy industry(ies) became a primary focus which saw laws regulating petroleum products, energy, minerals, diamonds and others being promulgated. 

The mining industry has contributed immensely to the country’s GDP since independence. Mining has been and still remains the most important contributing component of the national economy, particularly in terms of mineral explorations. The sector contributes up to 15% to the national GDP. Exploration expenditure has increased over the past years, and Namibia has attracted exploration and mining companies from all over the world.

The ministry has introduced certain essential measures that are necessary to change the fabric of the energy and mining sectors. For example, in 2019, reforms were introduced in the electricity sector, where large consumers are allowed to source a portion of their electricity needs from independent power producers (IPPs). This measure will attract more private investment in the electricity sector, and at the same time will enhance competition in the sector. Similarly, in order to accelerate the discovery of minerals and in the process create the needed jobs, the ministry has improved the efficiency with which it manages the licensing process. Licensing applications are now dealt with expeditiously, and licences are granted only to those applicants who have proven the ability to do exploration. Undoubtedly, these measures will enhance our competitiveness in attracting the needed private investment, both local and foreign. 

 

Milestones during the last decade

During the last decade (2010 to 2020), the ministry saw restructuring that led to significant changes and improvements. This led to the establishment of three departments, namely the Department of Geological Survey, Department of Mines, and the Department of Diamond Affairs.  Furthermore, this led to the increase in the number of directorates within the ministry.  

As a result of the 2008 global financial crisis, activities in the Namibian mining industry slowed down significantly. Limited government revenue led to budget cuts across government, thus hampering the implementation of some of the development projects under the ministry.  

Regardless of the changes in the ministry’s structure, the budget allocation remained fairly low, rendering 50% of the positions to remain unfunded.

Despite financial constraints, the ministry has made considerable progress with the rural electrification programme. Today, the national electrification rate is approximately 50%, and rural electrification is estimated at 25%. The White Paper on Energy Policy of 1998 served as the country’s official energy policy, but was replaced with the Namibia Energy Policy in 2016 after an extensive review process.  To ensure continued security of power supply, the ministry spearheaded a number of projects.  

Regional integration, cooperation and interconnection have been boosted by the construction of the 400kV interconnector to South Africa, as well as the HVDC link to Zambia.  Through NamPower, Namibia is actively participating in the Southern African Power Pool (SAPP).  In this regard, the goals expressed in the White Paper on Energy Policy (WPEP) can be considered as having been largely achieved.

In 2018, the Ministry of Mines and Energy announced the allocation of power projects amounting to 220MW to be commissioned by 2022.  This will comprise 150MW to be installed by NamPower, and 70MW from Solar PV and Wind by Independent Power Producers (IPPs).  As at 31 October 2019, Namibia’s maximum power demand stood at 643 MW, excluding the demand by the Skorpion Zinc mine.

 

Energy Funds

Following the restructuring of the Ministry in 2016, a new Directorate “Energy Funds” was established for providing financing in the form of subsidies as provided for in the Petroleum Product and Energy Act, 1990 (No. 13 of 1990), as amended, in respect of the National Energy Fund (NEF) and the Off-Grid Energisation Master Plan for Namibia (OGEMP) for the Solar Revolving Fund.  The two funds were initially housed in the Directorate of Energy.

The NEF manages and administers the “Slate Account”. The Slate account means the account which is being kept according to an agreement between the Government of the Republic of Namibia and suppliers of petroleum products to determine, per the formula likewise agreed upon, the amount of compensation payable from time to time by the state to suppliers of petroleum products, or by such suppliers to the state, as the case may be, in respect of losses suffered or profits gained by such suppliers as a result of fluctuations in the purchase price of petroleum products vis-a-vis the selling price.  Furthermore, the fund manages and administers the Fuel Road Delivery Subsidy to the rural or far outlying areas of Namibia. The financing of national infrastructure in the energy sector is also a principal mandate of the fund.

Since 2012, the NEF was mandated to collect the electricity levy of N$0.0112 per kWh of total electricity supplied by the Namibia Power Corporation to electricity customers. The electricity levy is collected and administered to subsidise the government’s budgetary allocation for electrification, subsidising electricity tariffs to avoid temporary price shocks, and the financing of Regional Electricity Distributors (REDs) through soft loans for electricity-related projects.

 

Electricity infrastructure 

The NEF subsidised the government budget to a total amount of N$58 million towards the Baines Project Feasibility Study, Rural Electrification Projects and the establishment of the Southern Regional Electricity Distributor.  Similarly, a soft loan of N$15 million has been issued for the Cenored/Okahandja Joint Venture for the Okahandja Municipality’s electricity distribution security of supply.

It is acknowledged that the electricity levy collected by the NEF is insufficient to subsidise the capital-intensive maintenance of electricity infrastructure. 

Therefore, MME, together with key stakeholders, is working towards a sustainable maintenance plan to finance electricity infrastructure in the country.

The ministry’s Solar Revolving Fund (SRF), a credit facility established to stimulate demand for the utilisation of renewable energy technologies in the rural areas, has assisted consumers with funding.  The SRF is an element of the Off-Grid Energisation Master Plan for Namibia (OGEMP), whose objective is to provide access to appropriate energy technologies, such as solar PV and solar thermal, in rural areas.  The Fund provides loans to low-income Namibians at a subsidised rate of 5% for a period of five years to acquire Renewable Energy Technologies so as to improve the electrification rate at household level.

It is acknowledged that there is a high demand for Renewable Energy Technologies (RETs) in the country, especially from the communities living in off-grid areas. The SRF  has approved and financed 4258 solar systems across the country during the years 2011 – 2019 to the total amount of N$115.9 million.

The Petroleum Affairs Directorate, which was also established in 2013 as a new directorate of the Ministry, was previously a Division in the Directorate of Energy.  The main objectives of the new directorate are to ensure adequate supply of petroleum products to the nation, minimise the negative impact of petroleum resources’ exploitation on the environment, and contribute to the creation of value for society from petroleum activities. 

Despite the volatility of crude oil prices, the Ministry of Mines and Energy, through the directorate of Petroleum Affairs, has issued 45 exploration licences.  Moreover, Namcor has concluded four farm-outs in the licences, which they had 100% participating interest.

For the last decade, a combined total of 172,028 km (lines) of 2D Seismic and 73, 433 km2 of 3D Seismic data have been acquired, respectively.  A culmination of this exploration efforts have resulted in the drilling of eight exploration wells drilled offshore Namibia, which have enhanced our understanding of the Namibian petroleum geology.  Although the drilling activities have not yielded any economic well, the country’s petroleum sector remains positive and continues to attract major exploration companies because of the increased geological understanding of the offshore settings. To ensure the securing of supply for downstream petroleum products, the Ministry spearheaded the construction of the National Oil Storage Facility (NOSF), provides licences for new service stations, and monitors the fuel price movement.   The National Oil Storage Facility (NOSF) at Walvis Bay is a national strategic project, which is financed by the government through NEF as part of the energy infrastructure development mandate.The onstruction of the NOSF, which commenced in 2014, was completed in 2019, and cold commissioning of the NOSF was conducted.  Moreover, more than 40 new service stations have been constructed countrywide. Namcor has also entered the retail sector, and to this end have completed the construction of two service stations. Although there has been an 86.4% increase in the unleaded petrol (ULP) 95 price and a 92.8% increase in diesel since 2010, Namibia still has the lowest fuel prices in the SACU region, owing to equalisation subsidies through NEF.

Over the years, there has been an increase in revenue collection for the State Revenue Fund. This is attributed to the implementation of royalties for all mineral groups, and the monitoring, inspection and verification of minerals prices and parcels.  Furthermore, over the years, the ministry has worked tirelessly in creating awareness related to compliance with the provision of the Minerals (Prospecting and Mining) Act.  The ministry has also developed the Nuclear Fuel Cycle Policy to support sustainable, safe, secure, socially and environmentally responsible exploration, extraction and development of nuclear fuel minerals. 

 

Diamond contribution

During this last decade, much investment has been made into diamond cutting and polishing through Namibian-registered companies, in partnership with foreign companies. Namibia has so far managed to establish a viable and sustainable diamond cutting and polishing industry, with a total number of 11 active manufacturing companies and a total average employment of 1000 workers with approximately 80% Namibians.  The ministry, in collaboration with its key stakeholders, has managed to achieve on average 60% of rough diamonds cut and polished locally.

In 2011, the government and De Beers signed a newly structured agreement, which rearranged and equalised the shareholding structure of Namdeb and De Beers Marine Namibia consolidated under Namdeb Holdings (Pty) Ltd.  To date, Namdeb conducts exploration and mining activities on land, while Debmarine Namibia focuses its operations offshore. Other diamond mining companies such as SAMICOR, Diamond Fields and shallow water exploration companies also came on board. 

Namdeb Holdings has and is to date the main employer in the mining sector, with an average total employment of 1 523 people.  Similarly, the company has continued to invest in exploration, mining technology, skills development, education and community development through the Namdeb Foundation, amongst others.

In 2016, the two shareholders (GRN and De Beers) signed a new rough diamond sorting, valuing, sales and marketing agreement, which resulted in the establishment of Namib Desert Diamonds (Pty) Ltd (Namdia), a 100% GRN-owned entity. Namdia’s mandate is to discover prices of Namibian diamonds from the international market outside De Beers’s marketing channels.  In addition, the agreement resulted in the increase in supply of rough diamonds for local cutting and polishing, including special and exceptional stones.

 

*This is a brief extract from the MME’s publication titled: “Three decades of peace, democracy and prosperity”.


2021-07-21  Staff Reporter

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