Members of parliament have taken issue with a paltry 5% royalty rate that Namibia receives from domestic mining operations.
In the extractive industry, the relevant legislation stipulates the 5% royalty rate, and requires trust funds for decommissioning.
“The royalty rates are very low and fail to promote value addition because the commodities are exported in raw form.
“Only about N$8 billion was collected from royalties for five years.
This is very small, compared to the revenue from mines in the same period,” reads a joint report tabled in the National Assembly last week.
The report was compiled between the parliamentary committees of natural resources and economics as well as public administration.
Royalty is a set fee imposed by the State on either the amount of minerals produced at a mine or the revenue or profit generated by the minerals sold from the particular mine.
Royalties are a means of compensating the State for using its non-renewable resources.
The Minerals Act (33 of 1992) governs the administration of Namibia’s royalties, which are mandatory payments for mining claims and mineral rights holders.
Through their report, the parliamentary committees further argued royalty payments are necessary to generate revenue for the State, fulfil legal obligations and promote local value addition.
Thus, the committees recommended the mines ministry encourage and compel mining companies to establish processing plants for value chain additions and assist financially in setting up refining and value addition factories.
Another issue identified in the report is the valuation of commodities.
“The ministry has a laboratory for testing minerals, but it is not up to international standards and therefore not accredited and recognised by international investors. The establishment of an accredited lab has been in the plan of the ministry but it failed to take off due to lack of funds,” the parliamentary report reads.
Last year, Cabinet resolved to prohibit the exportation of Namibia’s critical minerals in raw form in a bid to create more local jobs and more local value.
This submission, mines minister Tom Alweendo at the time said, applies to materials such as unprocessed crushed lithium, graphite, cobalt, manganese and rare earth elements.
Alweendo noted that Cabinet nonetheless approved that smaller quantities of these minerals may be exported at the direction of the ministry.
Moreover, government is working on better ways of providing a clear roadmap for natural resources, such as minerals, to be locally beneficiated to contribute more to downstream industrialisation.
For this reason, the Mineral Beneficiation Strategy was developed as an inclusive long-term modernisation and economic transformation programme to enable the substantive and sustained raising of living standards of Namibians, intensify structural change and accelerate domestic industrialisation.
(Royalties)
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