The Nation Loses Out

Toivo Ndjebela

16 June 2011

Windhoek — Although the mining sector exported minerals worth a combined N$14 billion in 2010, the sector only paid slightly over 10 percent or N$1.6 billion to the State in taxes and royalties.

There is very little value-addition to the minerals such as copper, gold, diamonds and uranium that mining firms extract from Namibian mines and export to other countries.

Slightly over two-thirds or N$1.1 billion of the total sum came from Namdeb alone, leaving other players in the sector to share the remaining N$500 million, directly contributed to State coffers.

The N$1.6 million that government received represents a mere 11 percent of the total revenue generated by 13 mining companies that operated locally last year, the annual review released by the Chamber of Mines of Namibia reveals.

Indications are that at least four mining companies that were in operation in 2010 either did not pay corporate taxes or royalties or, in the worst-case scenario, both.

British-controlled Rossing Uranium, which raked in revenue worth N$3.6 billion during the period under review, did not pay any corporate tax in 2010.

The firm made losses of N$43 million but was able to pay N$213.6 million in royalties, the review indicates.

French-owned nuclear giant Areva Resources Namibia, which is busy developing the Trekkopje mine near Swakopmund, made profits of N$116 last year, but did not pay any corporate tax or royalty to government.

Langer Heinrich, a wholly Australian-owned company, which exported 3.7 million pounds of uranium in 2010, did not pay corporate taxes, although it paid royalties amounting to N$32 million.

The companies that paid both corporate taxes and royalties are Namdeb, which is 50 percent Namibian owned, South African-controlled Navachab gold mine and Okorusu Fluorspar, whose parent company, Solvay, is headquartered in Brussels, Belgium.

Others are Rosh Pinah Zinc Corporation whose majority shareholder is South Africa’s Exxaro, British-owned Skorpion Mining Company and The Salt Company.

President Hifikepunye Pohamba, during his recent State of the Nation address, said 2010 was primarily a year of recovery after the devastating global economic crisis, an argument that many local mining companies have also advanced.

Government’s minimal returns from the mining industry have been a source of major concern for a long time, but this could be a thing of the past if the new Cabinet policy on strategic minerals is implemented.

Cabinet has announced that key minerals such as diamond, copper, zinc, gold, uranium and coal would soon be reserved for State-owned company Epangelo Mining so that Namibians benefit meaningfully from the country’s abundant mineral riches.

Government has said this policy would only apply to new discoveries, therefore current right holders would not be affected by the new move.

The Minister of Finance, Saara Kuugongelwa-Amadhila, stated recently that she would seek taxes from mining windfalls, a move by treasury to boost state coffers.

Kuugongelwa-Amadhila has already garnered the support of her Mines and Energy counterpart Isak Katali, who said the move would benefit Namibia.

Supporting the finance minister’s move, Katali recently told New Era: “What is currently happening is that the mining companies only pay the royalties and taxes when everything is fine in the industry.”

He continued: “When there are problems, they (mining companies) approach government and say they cannot pay or cannot pay at that specific time. But when they start making profit, they keep quiet.”

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