Phosphate mining headache continues

The Chamber of Mines has formed a committee to help the government formulate a workable strategy on marine phosphate mining.

16 May 2019 | Business

ELLANIE SMIT



The Chamber of Mines of Namibia is concerned that a way forward on marine phosphate mining has still not been found.

Chamber of Mines president Zebra Kasete revealed recently in a report tabled at the body’s annual general meeting (AGM) that a phosphate sub-committee has been established through the chamber’s mines exploration committee.

Kasete said the mandate of the sub-committee is to provide government with relevant information and to expedite the process of formulating a workable strategy to progress marine phosphate mining in Namibia.

“This should support a healthy co-existence with the environment and other sectors of the economy,” he said in the report.

Kasete said the chamber actively supports the amendments to the Environmental Management Act of 2007 and accompanying regulations on environmental impact assessments and strategic environmental assessments.

The process is driven by the chamber’s exploration and environmental committees.

“While the consultative approach has been most welcomed by the industry there were no further meetings that took place or updates provided regarding the matter.”

Kasete said the chamber remains concerned about the slow progress in expediting the amendments, particularly with regard to the establishment of a mandatory environmental trust fund or bonds, which hinge on the finalisation of amendments to the Act and its regulations.

“The chamber will continue to provide proposals and other inputs to the environment ministry via the mines minister,” said Kasete.

He said while government has provided the assurance that it will produce legislation that reflects submissions and inputs by the industry, there is still uncertainty regarding when the New Equitable Economic Empowerment Framework (NEEEF) Bill will be finalised and implemented.

Following government’s intention and announcement to finalise the bill in 2018, the outcome of this legislation is still pending, said Kasete.

“Despite this uncertainty, the chamber wishes to ally industry concerns that the contents of this legislation will be aligned to industry charters, which will include targets that are achievable for each sector.”

He said government has also reiterated its commitment and intention to continuously engage and work with industry associations to produce a policy and legislation and that is amicable and workable.

“One that will induce growth rather than stifle economic productivity.”

According to Kasete, much like NEEEF, the finalisation and implementation of Namibia Investment Promotion Act (NIPA) is also pending.

He, however, said the chamber is pleased that government has accepted amended proposals by private sector players, including the Chamber of Mines.

“The revised legislation, once promulgated by parliament, will encourage investment into Namibia rather than creating a barrier for investment.”

Kasete also referred to changes to the Income Tax Act in the Draft Income Tax Amendment Bill, which was proposed by the finance ministry in September last year.

He said the consequences of certain amendments will make most mines unprofitable, meaning they will likely scale down production and end up in care and maintenance, with inevitable job losses, while stalling any new investment into the mining sector.

“This is particularly concerning given that many major mining operations are due to reach their life of mine in the next two to ten years, and certain clauses in the bill will unquestionably reduce the value of new projects and eliminate any planned reinvestment by existing mines.”

Kasete said this would ultimately undermine broad-based growth in Namibia, bringing the mining sector to a standstill.

“As mining is one of the biggest sectors in Namibia’s economy, other sectors of the economy would shrink, particularly in the local mining supply chain, resulting in a second round of job losses and economic contractions.”

He said in his 2019/20 budget speech, finance minister Calle Schlettwein disallowed the deductibility of royalties for non-diamond companies, which also includes other sectors paying royalties on intellectual property.

“While the diamond industry is excluded from this clause the negative long-term impacts on non-diamond mining operations will far outweigh the immediate revenue gains from government.”

Kasete said that in addition to this Schlettwein also increased the export levy for dimension stone from 2% to 15%, which aims to induce local value addition to this mineral.

He said this will result in hefty revenue-based tax for dimension stone operations of 20%, with the inclusion of the current applicable royalty of 5%.

The income tax proposals will be implemented in 2020 once they have been drafted and tabled.

“The chamber will therefore continue to engage the finance ministry on the unintended negative consequences of these proposals and seek amicable resolutions.”

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