Namibia, which has generally proved to be one of the friendliest mining destinations in Africa, said recently that it was planning to reserve mining and exploration rights to a state-owned firm.
"Cabinet endorsed that the right to own licenses for strategic minerals will only be issued to a state company. Cabinet also endorsed that after approval of the license by the minister, the state company may enter into joint ventures with interested parties for exploration and development,” reads a statement issued by the government of the southern African country.
Initial reports claimed that Namibia’s cabinet had endorsed the declaration of uranium, gold, copper, coal and rare earth metals as strategic minerals leaving out diamonds.
However, it had since emerged that diamonds were also part of the list.
Diamonds had been a huge source of revenue for Namibia and when the sector caught up a cold in 2008 as a result of the freezing effects of the global economic recession the whole mining industry sneezed.
It was only until now that diamond prices began to improve that we saw a registered improvement regarding the industry’s contribution to the country’s Gross Domestic Product (GDP).
Last year mining contributed about 15 per cent to Namibia’s GDP while its export earnings were more than half of the country’s total export revenue.
This had dropped to as low as 12 percent during the crisis period.
It was palpable that a degree of confusion engulfed the industry when the news on the proposed changes to the country’s mining rule broke out.
There was no explanation on whether existing projects would be affected or not and this saw some analysts claiming that Namibia had “shot itself in the foot” by announcing the new rules.
“Just as you give a nation a clean bill of health, it goes on a foot-shooting spree,” Mining analyst, David Hargreaves said. “Will Africa ever learn?”
Markets turn to react negatively to bad news and such as Extract Resources, Bannerman, Auryx Gold and Forsys Metals were punished as they saw their market values shrivel.
Mining Minister Isak Katali had to douse the fire as he clarified that the rule would be applied to future mineral discoveries, not existing ones.
"We are talking strictly about any new mineral deposits that would be discovered. Not those already developed by current investors," he was quoted as saying by a local daily, New Era.
"This is definitely not a nationalisation. All we want is more benefits for Namibians from the country's minerals."
As precious minerals, such as diamonds deplete in several African countries there had been some kind of a realisation that locals had not been benefiting much from their resources, hence noise about nationalisation and indigenisation emerging from South Africa and Zimbabwe respectively.
Botswana, which is also a leading diamond mining country in the world had also been putting measures in place to assist the country derive maximum benefits from its gems, which face depletion, while the majority of the population remained generally poor.
Surely, there had been a marked increase in African governments of late seeking to secure enlarged returns as commodity prices soar.
However, analysts feel Namibia will not likely take any drastic measures regarding shareholding quotas as seen in Zimbabwe.
Mathew Nyaungwa, Rough&Polished
