Govt warns against unreasonable oil ownership demands

A senior government official has warned Namibians against demanding excessive government ownership of oil and gas projects, saying the country's benefits will extend far beyond a direct stake of between 10% and 15%.

Charles Mbeha, the deputy director for compliance, regulation and local content at the Upstream Petroleum Unit in the Office of the President, said on Monday: "I recall someone mentioning that government participation is only 10% to 15% and that Namcor's participation is peanuts and that we need more."

“Of course, even when one looks at the Swapo Party manifesto, government would want to increase that participation. But it is a process that needs to be undertaken over time,” he added while speaking at the National Upstream Petroleum Local Content Policy Validation workshop.

Mbeha cautioned against measuring Namibia's benefits from petroleum projects solely through government's direct shareholding.

“We need to understand one thing: to say that government is only receiving 15% is not correct,” he said. "Government will receive income tax, which is about 35%, as well as royalties of 5% and Namcor's participation.”

He added that broader benefits would flow through employment and local procurement.

“You must also understand that a number of Namibians will be employed, and those Namibians will also pay tax. Namibian goods and services will also be purchased,” he said.

“You will therefore find that oil companies will pay 15%, as will always be the case, but there are also other sources through which government will receive revenue.”

Mbeha said the various sources of economic benefit needed to be properly explained to the public while managing expectations about the level of ownership Namibia could demand from companies financing high-risk exploration.

“We have to explain this to the people. We also have to explain to Namibians that we should not overreach,” he said.

Investment risks

He argued that demanding a 50% interest in projects financed by private investors would raise questions about why government did not pursue full ownership and finance exploration itself.

“If you say you want 50%, one can ask: Why don't you go for 100%? Go and get your own globe, and then you get 100%. Why do you want 50% of a company that has brought in billions?”

His comments follow remarks by Industries, Mines and Energy Minister Modestus Amutse that Namibia cannot demand majority ownership of mining and petroleum projects without considering the financial risks carried by investors.

Amutse said government wanted to secure as much participation as possible, ideally through a 50-50 arrangement, but acknowledged that exploration remained risky because investors could spend billions of dollars without finding commercially viable resources.

His position differs from a proposal advanced last year under former industries and mines minister Natangwe Ithete, who called for 51% Namibian ownership of mining and petroleum projects – a proposal that drew concern from investors and the mining industry.

Mbeha similarly stressed the need to balance increased Namibian participation with the country’s continued dependence on international capital and technical expertise.

Policy targets jobs, local suppliers

Beyond ownership, Mbeha said the proposed local content policy intends to position Namibians to benefit directly from petroleum activities.

“We also informed Namibians that the closer you are to the activities, the easier it is for you to enter the market because you have an advantage over someone who has to travel a long distance,” he said.

“That advantage is also recognised in the policy as a guiding principle. We have to ensure that everyone is included.”

Skills development will be another major component of the policy, with the government placing greater emphasis on technical training instead of concentrating mainly on advanced academic qualifications.

“One of the things we picked up is that, in the past, most of the people who were trained were pursuing PhDs, master's degrees and so forth. But now we want to focus more on technical skills because that is where the greatest number of people will be needed,” Mbeha said.

He said government would work with institutions of higher learning and the education ministry to develop the technical skills required by the petroleum industry.

The proposed policy also covers employment opportunities, fair labour practices, local procurement and supplier participation. Mbeha, however, warned that Namibian businesses would still have to demonstrate that they could perform the required work.

“Namibians should therefore not simply expect to receive work. They also have to be capable and competent,” he said.

The policy is built around seven priorities: a stable regulatory and institutional framework, capacity building, employment and development of Namibians, stronger local supply chains, technology and knowledge transfer, Namibian participation and ownership, and innovation, research and development.