Shipping profits

Mines minister Tom Alweendo says the continued foreign ownership of local mines cannot be wished away but will be dealt with.

09 May 2019 | Business

Five of the 16 mining companies operating in Namibia are wholly foreign owned, while local ownership in the other entities does not exceed 20%, with Namdeb being the only exception.

This was confirmed by mines minister Tom Alweendo during his keynote address at the Mining Expo and Conference in Windhoek this week.

Alweendo said foreign ownership persists, despite the fact that over the years the vast majority of mineral exploration licences were granted to Namibians.

He added that by the end of 2018, more than 60% of all exclusive prospecting licences (EPLs) that were granted were issued to Namibians.

“It is also so that in most cases local ownership is not beneficial ownership, because it is financed with loans provided by the majority shareholder.





“In such instances the agreement is that the dividend, if any, which would have accrued to the local shareholder, will be utilised to service the loan and no dividend will be paid to the local owners until the loan is fully repaid. This is certainly not an economically beneficial arrangement.”

According to Alweendo, one of the most difficult issues that needs to be addressed when it comes to local ownership is that of financing.

“We know that mining is a highly capital-intensive undertaking. However, it is not impossible for serious local entrepreneurs from different professions, in collaboration with foreign investors, to put together a credible funding proposal to those with capital.”

According to him it is doable when well-aligned groups of local entrepreneurs, in collaboration with government-initiated funding programmes, approach the capital markets - both local and foreign - with well-prepared funding proposals.

“If ever we are going to find a solution to the funding dilemma, there is a need for innovative funding ideas from not only the aspiring entrepreneurs, but also from the government and the foreign investors.”

Alweendo said during his conversations with some foreign investors, the issue of local ownership is sometimes viewed as an irritant, something that can be wished away.

“This is a fallacy and a mistaken view. There is a legitimate expectation for local ownership and the sooner we address this concern, the better it is for the future sustainability of the mining sector.”

He further told local entrepreneurs who wish to venture into mining that it is not a walk in the park that everyone can do.

“The allure of success in the mining sector is at times misleading; the seeming glamour of the sector can at times be more than real. It takes real hard work and dedication.”

Alweendo also said that there is a growing call that it should be mandatory for the government to have shareholding in mining companies.

“Again, this call is from those who hold the view that the economic benefit from the mining sector is not being shared equitably. We do not currently believe that government's direct ownership in mining companies is the best solution to cure the problem of the lack of local ownership.”

Alweendo however said that they are undertaking public consultations to fully understand the origin of this view and how best it can be addressed.

An economics professor at the University of Namibia, Omu Kakujaha-Matundu, told Namibian Sun the fact that the majority of mines in Namibia are in the hands of foreigners means that the profits earned from these mines are also leaving the country.

“These profits are going to other countries and less money is left for the development of Namibia,” said Kakujaha-Matundu.

Although he said that the share owned by Namibians in local mines should be increased, he added that the country also sits with the problem that it does not have the expertise to run these mines.

Kakujaha-Matundu further pointed out that should the share of local mines be increased for Namibians it should not be for the benefit of the “small Namibian elite”, but should benefit the majority of the country.

He said there was no other way to address the current situation than to change legislation and increase the share that Namibians can own in local mining companies.

“Foreigners will always want to own 100% of the mining company and want to have 100% profit. By increasing the share through legislation to, for instance, 40% you ensure that Namibia also benefits, like what was done with the Debmarine agreement.”

He said if Epangelo could get a greater share of mining houses this could be beneficial to the country.

But he pointed out that there are risks involved, as there are always problems with inefficiently run SOEs, corruption and undervaluation of resources.

Alweendo said another concern with regard to the equitable sharing of economic benefit derived from the mining sector is that of value addition.

“Of concern here is that we are exporting most, if not all, of our minerals in raw form instead of adding value to them. This means that we are exporting local jobs while we have a problem of growing unemployment, especially youth unemployment.”

Alweendo said the Namibia University of Science and Technology (Nust) has been engaged to lead the process of developing a value-addition strategy and an implementation plan. The strategy is to be completed in August this year.

Alweendo said the mining sector relied heavily on external economies for its inputs.

According to him the issue here is that the mining sector is not being leveraged sufficiently to strengthen the productive capacity of the economy. The desire is, therefore, for the mining companies to source their mining operation inputs from the local economy.

He said that the mining sector procured goods and services from local suppliers totalling N$13.3 billion last year, compared to the total procurement of N$22.95 billion.

“While this figure of local spend seems to be sizeable, it needs to be unpacked further. For example, how much of what was procured was made in the local economy and not imported by Namibian companies. Or how much of what was procured was procured from Namibian companies owned by Namibians as opposed to Namibian-registered companies owned by non-Namibians.”

ELLANIE SMIT

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