Oil Nnears, laws lag

Namibia is three years away from first oil. It is also, by one legal count, a decade behind on the law that would decide who will actually benefit from it.

In April this year, the Namibia International Energy Conference, under the banner The Road to First Oil & Beyond, drew more than a thousand delegates from 46 countries and more than 400 companies, a number that would have been unthinkable a decade ago, when Namibia's offshore basin was still an unproven bet. The discovery at TotalEnergies' Venus field is now edging towards a final investment decision, while Galp's Mopane find has further strengthened the basin's commercial case. First oil is targeted for 2029. The countdown has begun.

The question Namibia is supposed to answer before commercial oil production begins is one that its own numbers make uncomfortable reading. Unemployment stood at 36.9%, rising to 54.8% among young people. Namibia's Gini coefficient is about 64.2, making it the second most unequal country on Earth, behind only South Africa. The sector most likely to repeat the mining pattern, which generates 14% of GDP with just 1.4% of the workforce, is the one arriving next: capital-intensive and technically demanding, hence stingy with direct jobs.

It is quite fascinating to assume Namibia's Petroleum (Exploration and Production) Act, 1991, is the panacea for local content. It does not. The Act licenses exploration and production; it says almost less about who supplies or staffs the projects developed under it. Ownership in terms of local petroleum and mining licences is currently decided the way it has always been decided: through discretionary conditions imposed by the relevant minister or regulator, ranging anywhere from 5% to 30%, agreed on a licence-by-licence basis rather than legislated once for everyone. Two Bills intended to circumvent this, the Namibia Investment Promotion and Facilitation Bill and the National Equitable Economic Empowerment Bill, tabled in 2015, remain, a decade later, at the "pipeline stage". Investors intending to bid on Venus-scale developments are, in effect, negotiating local content in a legal vacuum, one licence at a time.

That vacuum has an opportunity cost. Once a country starts signing contracts before its regulatory framework exists, it tends to lock those terms in place, creating a "regulatory freeze" that subsequent legislation cannot reverse. It already happened in Namibia's mining sector in the 1990s. With both Venus and Mopane in the race towards development decisions, that risk is not hypothetical. It is live, with contracts being negotiated towards the end of this year. Namibia does not need to become the co-author of its own misfortune again, as it did in mining.

The region already has a working model, and Namibia needs to pick and choose from those best suited and worthy of benchmarking. Countries such as Kazakhstan run a public registry matching domestic suppliers to tenders before contracts are even awarded. Brazil compels operators to reinvest a share of gross revenue into local research and development, for instance. Meanwhile, countries such as Trinidad and Tobago have built joint ventures specifically to transfer skills, not just capital. Each of these tools addresses a different piece of the puzzle: who gets recruited, who gets trained, who gets to supply, and who gets to verify that any of it actually happened.

Namibia has leverage here that it did not have with diamonds a century ago, just as it did not have with mining a generation ago. The time to write the rulebook before the wells are drilled is now, not afterwards. That means finalising the Investment Promotion Bill and the Empowerment Bill before the next major licence is signed.

The alternative is the pattern the region is familiar with: a fiscal windfall that never quite reaches the unemployed masses it was meant to help because the law arrived after the contracts did. However, the principle, "What is good for the goose is good for the gander", should be binding on all fronts. Investors need to dance to our tune. Investors are not mineral parasites; they are driven by business motives and opportunities in a conducive and supportive environment that allows them to invest, thrive and reinvest. They also need reciprocal commitment, legal certainty and efficient regulation, working in tandem. Namibia has at most three years before first oil.

Tio Nakasole is an analyst at Monasa Advisory and Associates. His insights draw on his experience in economic and policy analysis. The views expressed do not represent those of his employer.