Tax breaks needed to save Namdeb

Namdeb says it is in discussions with government to look at a possible tax break as it plans to mine beyond 2023, which is the envisaged year when its mines will stop operating.

The miner currently pays a 10% royalty on turnover and a 55% corporate tax on profits generated. The diamond industry's mining royalties to the government were recorded at N$1.15 billion during the 2017/18 fiscal year.

Shedding light on Namdeb's future in the face of its impending closure, its CEO Riaan Burger said it was having discussions with the government to forge a way forward.





The miner has in the past made a similar request to have its taxes slashed, more recently after the global financial crisis in 2008 that saw it retrench.

“The Namibian business environment, [and] the policies that are in place, are conducive for business but at the same time the specific royalties and tax regime that are applicable to diamonds are fairly high.

“While that may be conducive or viable for new diamond operators, it might not be conducive to an ageing marginal asset like Namdeb,” Burger explained.

“In light of that, we have been engaging with our stakeholders, engaging quite widely in terms of the future options for Namdeb. One option would be a relook at the tax and particularly the royalty regime for such an ageing asset,” Burger said.

Burger was optimistic when asked how the discussions were going.

“It is an ongoing conversation; I think it is a positive conversation. I think there is an understanding of the importance of Namdeb in the economy and, in particular, in terms of the jobs that are affected by the current short life of mine,” Burger said.

Burger said in the absence of a waiver being granted, Namdeb would have to start with a rehabilitation process to restore the land which it mined back to its original state.

“We have a three-year life of mine remaining; beyond that, we start rehabilitation. At current estimates, that takes about five years. That will be a very small company,” he said.

Touching on Namdeb's financial performance since 2017, while the company was generating strong revenues, Burger said any profits realised in future would only be sufficient to cover its liabilities when it eventually closes.

“We are on track with our life of mine plan. We are not making any losses at the moment; we are on budget to achieve the plan that we set.

“One must remember that the closure liabilities in terms of rehabilitation and so forth are significant and the profits we are making are only sufficient to cover these liabilities,” he said.

“We are not putting any money aside to create a future and that is the problem, we are only generating profits to cover our liabilities, we are not investing for the long term.”



Project 2050 not abandoned

Namdeb launched its ambitious Project 2050 in 2010. The project hopes to see it continue mining until the year 2050. According to Burger, despite the current challenges the project has not been abandoned.

“That is still possible, but not under these current conditions. We have a process called accretion, a methodology where we put additional sand into the beach areas which creates new mining areas.

“Under current conditions we cannot afford to do that, we can only mine what remains, what is currently available to mine.

“Should there be a review of the royalty regime, it gives us the opportunity to restart the accretion process,” he said.

Namdeb stopped the accretion process in 2017 because it found the exercise too costly, he said.

“We stopped in 2017 because we were not making money. It is a costly process to continue. It is capital intensive,” he explained.

“Diamond mining has created a wealth of expertise resulting in revenue, which has played a significant role in building the social and physical infrastructure of an independent Namibia. Namdeb is proud to have contributed to the national Gross Domestic Product over the years,” company spokesperson Shangelao Ndadi said.

The ministry of finance did not respond when asked about the discussions with Namdeb.

The Mineworkers Union of Namibia previously requested a five- to seven-year tax break to secure Namdeb's future, union representative Hashondali Kakuti told Namibian Sun.

“If this is approved it could lead to the creation of 200 to 300 jobs. We are also doing this for the sustainability of the mines. It is up to government to decide if Namdeb has a life or not,” said Kakuti.

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