• August 12th, 2020

Namibia improves slightly as attractive mining destination

The just-released 2019 Fraser Institute survey of Mining Companies indicates a slight improvement in Namibia as an attractive mining jurisdiction. However, a poor survey response rate calls into question the validity of the latest rating, which may have skewed perceptions due to the low number of respondents.
A statement from the Chamber of Mines of Namibia explains that in measuring the overall attractiveness of a country, the Fraser Institute report makes use of three indicators. The first is the Investment Attractiveness Index. This index is an overall measure of a country’s competitiveness and combines the Policy Perception Index and the Brest Practices Index. The former accounts for the opinions of mining managers and CEOs on all facets of the policy environment with which they are familiar. 

This includes regulations, licencing, political stability, geological database, infrastructure, mining tax regime, among others. The Best Practices Index accounts for perceptions of a country’s mineral potential, assuming a world-class regulatory environment.  

Namibia’s score on the Investment Attractiveness Index improved from 56.6 in 2018 to 58.22 in 2019. This improvement was boosted by the Policy Perception Index that improved from 80.71 in 2018 to 87.22 in 2019, ranking as the most favourable jurisdiction in Africa on this index. The report cites an improvement in the availability of labour and skills; decreased concern with regard to socio-economic and community development conditions, regulatory duplication and inconsistencies, as well as the functioning of the legal system. The Policy Perception Index and the Best Practice Mineral Index carry a weighting of 40% and 60%, respectively. Investors generally consider a country/jurisdiction’s resource potential to be more important than the policy environment hence the higher weighting for the latter.   

Despite the perceived improvement in the above policy elements, it is worth noting the number of participants and the contextual realities of the policy environment. Firstly, survey responses received from Namibia were between 5 and 9. The poor response rate calls into question the validity of these scores as there were only a handful of companies that participated, which may have skewed perceptions. The validity is of further concern, generally noting poor policy environment in 2019. 

This was created by the highly unfavourable tax proposal to disallow the deductibility of royalties for non-diamond mining companies, the introduction of consumption levies that are increasing the costs of doing business, among a general feeling of uncertainty with regard to major policy proposals. While these issues are close to being resolved, Namibia is likely to have scored lower on the Policy Perception Index if there were a greater number of participants.  

Namibia’s Best Practice Mineral Potential Index dropped from 40.63 in 2018 to 38.89 in 2019, which has gradually been declining over the years. While this is not confirmed, it is likely that this is due to the perceived improvement in mineral potential of other jurisdictions relative to Namibia.

Staff Reporter
2020-03-03 07:30:23 | 5 months ago

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