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Mining industry recorded 14.5% negative growth in 2020

2021-04-27  Edgar Brandt

Mining industry recorded 14.5% negative growth in 2020
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Initial growth projections for the local mining industry in 2020 stood at 11.1% but figures contained in the preliminary National Accounts released by the Namibia Statistics Agency indicated the industry actually recorded a negative growth rate of 14.5%. This was a further contraction from the negative growth rate of 9.5% posted in 2019. 

Despite these depressing figures, the Chamber of Mines in its Mining Industry Review for 2020 noted that mining was one of the few sectors that supported the domestic economy in 2020 in part because it was allowed to continue with normal operations during initial lock-downs and restricted economic activity when the Covid-19 pandemic first reared its ugly head in the country. 

Delivering industry overview, Chamber of Mines president Zebra Kasete noted that apart from Namib Lead and Zinc mine, there were no other retrenchments that occurred as a result of the pandemic. 

“Growth of the mining sector was negatively impacted by reduced diamond mining output, uranium and metal ore production. Uranium production was negatively impacted by the pandemic and water supply disruptions in the first quarter of 2020. Base metals output recorded a strong contraction due to a sharp drop in the production of Special High-Grade Zinc, owing to the closure of Skorpion Zinc mine,” said Kasete during the chamber’s annual general meeting on 21 April. 

The mining review showed that in total, the industry directly employed 14 435 people in 2020, which was a 12% drop in the number of permanent jobs, compared to 2019. The direct employment consisted of 8 361 permanent employees, 902 temporary employees and 5 172 contractors. Kasete noted that applying a conservative mining multiplier of seven, the mining industry created 101 045 jobs, which is a sizeable portion of Namibia’s workforce.

 Approximately 96% of the mining workforce employed in 2020 were Namibians, and the majority of the wages and salaries bill, amounting to N$6.058 billion, circulated within and benefitted the local economy. Moreover, the industry maintained its high local expenditure component, which amounted to more than N$12 billion.

Meanwhile, Kasete noted that the improved profitability of the mining industry increased its total contribution to government by 28% or just over N$4 billion in 2020. This, Kasete explained, was largely an outcome of the favourable gold price in 2020. 

Kasete continued that corporate taxes increased by 54%, totalling N$2.208 billion, owing to the boosted profitability of Namibia’s gold mines while royalties and export levies dropped by 3% and 4%, respectively, due to the lower output and commodity prices for most mineral commodities. Chamber of Mines members collectively paid N$1.672 billion in royalties and N$233 million in export levies.

Meanwhile, exploration expenditure, as captured in the Chamber’s annual survey, increased by 55% in 2020 from N$171 million in 2019 to just over N$264 million. Kasete clarified that the high gold price and rising prices for industrial minerals later in the year resulted in higher levels of exploration activity, with the actual figure likely to be much higher, as not all exploration companies are members of the Chamber. 

Moreover, after two years of declining investment by Namibian mines, Chamber members collectively posted an increase of 43% of Gross Fixed Capital Formation in 2020, totalling N$4.83 billion. Investment was driven by the construction of Debmarine’s new vessel, the AMV3, open pit development and underground mine development at the Otjikoto gold mine.

Meanwhile, Covid-19 caused some operations to scale down on production due to suppressed global demand for mineral commodities, trade restrictions of non-essential items and logistical challenges. 

Said Kasete: “Operations were negatively impacted by supply disruptions of critical inputs and equipment required for their operations. Border closures meant that mining companies were not able to source some of the specialised skills and services from external suppliers, which are often required for complex maintenance procedures. These challenging circumstances, however, presented unique opportunities for local mining personnel and businesses who were engaged to deliver the services previously provided by the external service provider. The process resulted in skills transfer to local personnel, which capacitated them to perform the specialised procedures”.

2021-04-27  Edgar Brandt

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