Namibia’s Chamber of Mines recently organized the country’s first ever mining expo, a move, which was lauded as a positive step towards showcasing the industry, which contributes greatly to the Gross Domestic Product (GDP) but to some extent preferred to slouch ‘incognito’.
The mining industry contributed 12 percent to the county’s GDP in 2009.
Though it puzzles the mind why it took all these years for the Chamber of Mines to organize an expo, there were three interesting issues that came out of the fair, which should be given enough attention.
The three issues raised by the mining industry were power and water shortages, as well as (high) royalty tax legislation. These were said to have a potential to scuttle investment in the industry.
Chamber of Mines President Mike Leech said in a prepared speech that local miners where experiencing intermittent water supplies.
He singled out uranium mines as ones badly affected, adding that this remained a huge challenge in the medium term.
Though Leech could not tell us how many years or months the chamber meant by a medium term, it appears as if that this is a matter that should be looked into as a matter of exigency, if the country still wants to entertain its hopes of becoming the world’s third uranium producer by 2015, as Mining and Energy Commissioner Erasmus Shivolo recently noted.
“We at the Chamber reiterate our concern about the overall water supply at the coast and urge NamWater (the country’s water authority) to accelerate its efforts to develop further capacity urgently,” Leech said.
He said there was need for a public‐private partnership in building the country’s water capacity, which had a potential to benefit both private mining concerns and the economy at large.
It was a correct observation made by Leech that it was high time public-private partnership were promoted as this would result in some kind of a win-win situation.
Private mining concerns should not cry of water shortages, arms in akimbo, waiting for big brother (NamWater) to do everything for them.
Of course we are aware of recent comments made by the mining commissioner Erasmus Shivolo.
He said Namibia was capable of supplying water and power to uranium miners.
"There is no reason to worry for investors...it would be a concern if we issue mining licenses without being able to provide water and electricity," he was quoted as saying by Reuters.
However, one wonders if the government had the capacity to provide water on its own, and if it does, the question is when will it be in a position to do so, given bureaucracy associated with governments?
It is not a secret that the Namibian economy was caught up in a financial squeeze that wreaked havoc - like a Tsunami- almost two years ago.
The central bank reported in its financial stability report for March 2010 that the Namibian real economy contracted by 1.1 percent in 2009 as the effects of the global financial crisis took its toll.
The diamond and tourism sectors were the most affected as they experienced huge output losses and labour shedding.
However, the mining sector was expected to recover by 15.0 percent in 2010, while the tourism sector was also projected to contract by 2.0 percent compared to a reduction of 20 percent in 2009.
It is such setbacks that dogged Namibia, at a time it started experiencing its uranium boom, which unfortunately requires plenty of water supplies.
What should the government do is accept the olive branch (reads public-private partnerships) the Chamber of Mines has extended.
This is the only solution at the moment that can quickly produce results as more uranium mines are set to come on stream.
Already there had been initiatives taken by some uranium miners to provide water to their mines and the surrounding communities.
NamWater and Areva Resources are said to have discussed a joint venture regarding the seawater intake north of Wlotzkasbaken.
Last April, we read that the JSE-listed Aveng group had inaugurated a 200-million USD seawater desalination plant, located 30 km north of Swakop-mund.
This marked the beginning of potable water production at the plant and a major milestone in the mining project that Areva is developing.
Designed and constructed by Keyplan, a specialist water treatment subsidiary of Aveng, the plant turns seawater from the Atlantic Ocean into high-quality potable water for use at Areva’s Trekkopje uranium mine, which remains the largest direct foreign investment ever made in Namibia.
The plant is expected to produce 20 million cubic metres of potable water a year, which is enough to allow Areva to operate the mine without pumping any groundwater.
Areva chief executive and President Anne Lauvergeon said the partnership with the Namibia government had been a ‘win-win’ for all.
“We ensured that we have a mutually profitable partnership that can be socially and economically sustainable. It shows the country’s trust in our expertise and I have no doubt that our sound partnership will go far beyond uranium mining,” she said.
On power supplies, the Chamber of Mines said if nothing is done to generate power for the country, which relies on its neighbours for energy then the industry was doomed.
"Security of power remains critical to the prosperity of the industry. Adequate own-generation capacity is the only answer to Namibia's power woes," Leech said.
PricewaterhouseCoopers said in a report recently that although Namibia gets half of its power from South Africa this supply was not certain, putting mining companies "under severe pressure".
The chamber’s president also noted that the country’s power regulator should raise electricity prices "gradually as opposed to instantly", adding that this would enable the industry, particularly new mines, to plan effectively.
The regulator granted power utility NamPower an 18 percent hike in power tariffs for 2010/11. The utility had asked for an 35 percent increase.
Given such a scenario it becomes quite axiomatic that the Kudu field project should come on board soon, as it will have an answer to the country’s energy woes.
The mines commissioner said "serious negotiations" were underway to develop the gas field in the near future.
The future, he talked about is 2013 when the Kudu field project is expected to be commissioned.
The project would generate 800 MW and reports say nearly half of that power would be for local consumption, while the rest would be imported by South Africa.
The third point raised by the mining industry was that of high royalty tax.
Leech said the royalty tax passed at the end of 2008 would "increase rather than reduce investor risk".
"(The tax) is likely ... to make it harder for exploration companies to get projects past the credit committees of the banking institutions they will have to raise the money from," he said.
Uranium miners pay 3 percent of their gross sales in royalty taxes, on top of a 37.5 percent corporate tax, and some analysts expect royalties to rise due to higher demand for uranium.
Rio Tinto's Rossing mine currently pays 6 percent in royalties, while Areva receives some tax breaks under an economic development scheme.
It is of paramount importance for the Namibian government to consider royalty tax that allows mining firms break-even and the same time help contribute to the country’s fiscus.
Mining firms should also help contribute towards the development of communities they operate in, that way, will force the government not to introduce higher royalty tax.
Mathew Nyaungwa, Rough&Polished, from Namibia
