The Institute for Public Policy Research has warned that if Namibia is to develop a top class international green hydrogen brand, the tax regime will need to be clear from the beginning.
“Like other countries, Namibia has displayed a tendency to chop and change tax rules in the mining sector. As soon as profits arise, government claims it is being cheated whereas when losses are sustained, government is nowhere to be seen. There are already talks of revenues accruing to a Sovereign Wealth Fund,” advised the IPPR in its Quarterly Economic Review for October to December.
Furthermore, it was stated that Namibia would have to make sure the development is clean in a political as well as environmental sense. The IPPR noted it might take many years before the cost of development is recouped and real profits start to accrue.
The US$9.4 billion green hydrogen project was announced last year, would be based in the southwestern Tsau //Khaeb National Park. Hyphen Hydrogen Energy got a 40-year contract for the project and is expected to start production in 2026.
It further pointed out the strength of this vision is that, unlike many past plans, it is based on some economic fundamentals:
“Namibia’s abundant solar and wind resources and the ample availability of land next to the ocean and some existing port infrastructure. In that sense, it is very different from Ramatex where Namibia was trying to attract internationally footloose companies which could be located almost anywhere”.
IPPR outlined some of the challenges Namibia will be faced with in getting the green hydrogen off the ground, even though possible modest improvements in the investment environment would have many smaller, more dispersed but positive effects which together could make as much of an impact on growth, employment, and incomes.
“The weakness is that much of the technology required is at a scale that is untested and needs more development. Namibia possesses little of the industry expertise required, meaning foreign expertise will have to be imported. Although expertise can be purchased, it means Namibia will find itself in a weak negotiating position until it develops this capacity itself,” added IPPR.
The project entails a wide range of considerable risks such as technical, capacity, legal, financial, economic, political, environmental and reputational.
Fortunately, Namibia seems to have accepted that it is going to be the private sector that pioneers and drives this development and bears the financial risks associated with it although it is not yet clear how the project is going to be financed.
“It is hard to see how the Namibian government is going to play a role of any significance given the current state of the public finances but it would not be a surprise to see the GIPF strong-armed into providing funding,” reads the quarterly review.