MAC: Mines and Communities

Are Namibian miners and government on a collision course?

Published by MAC on 2012-06-05
Source: Southern Times (2012-06-01)

In the following article, Mark Dawe of Namibia's Chamber of Mines makes an audacious claim.

He says that "there has not been a single successful case in Africa of a majority state-owned mining company being operated successfully."

The reality is  that such companies have customarily not been allowed to "operate successfully" under constraints imposed by the World Bank.

Successive governments - despite early promises to nationalise effectively - have also been corrupted by the lure of foreign direct investments.

On coming to power in Zimbabawe, Robert Mugabe promised take over of the powerful multinationals, such a Rio Tinto and Anglo American, and quickly abandoned the plan.

And state edifices, notably Gecamines in DR Congo, were profoundly impacted by the political intrigues and sheer depredations brought on by years of horrendous conflicts, in which outside forces played a key role.

Dawe also ignores the highly successful - in its own terms - alliance between the government of Botswana and De Beers in the Debswana diamond mining company.

Mr Dawe's prejudices - and narrow perspective- are demonstrable if we look beyond sub-Saharan, Central and West Africa, north to viable state-owned mining industries in Morocco, Tunisia and Algeria.

But then, it seems Dawe may only see "black" when he looks at the continent as a whole.

[Comment by Nostromo Research, 1 June 2012]

Nam miners, govt on collision course

Southern Times Africa

28 May 2012

Windhoek - Namibia's Chamber of Mines believes that the government has no role to play in the country‘s mining sector apart from regulating the operating environment. The position is likely to put miners at loggerheads with the state, which is following the global trend of resource nationalism.

Namibia in 2011 declared all minerals - except zinc and fluorspar - strategic and handed over all exploration rights to state miner, Epangelo Mining Limited.

This means foreign investors must have partnerships with Epangelo if they want to exploit any mineral apart from zinc and fluorspar.

But on May 23, Chamber of Mines president Mark Dawe said the government had no business in the mining sector, and should be content to act as regulator and collect taxes, with - at most - a minority stake in actual mining.

Dawe said, "We are not opposed to the concept of state ownership of a minority shareholding in Namibia's mining industry as a partner with private sector companies.

"But our studies have revealed that there has not been a single successful case in Africa of a majority state-owned mining company being operated successfully.

"Governments are regulators, not operators," Dawe claimed.

He added: "Of course self-regulation is fraught with enormous challenges relating mainly to transparency and fairness, especially in the issuance of mineral licences."

Namibia's Mines Minister Isak Katali has stated that the government is shifting from being a mere "rent seeker" in the mining sector.

This has not pleased Dawe and the Chamber of Mines.

Dawe said, "The blanket issuing of ownership of most minerals and metals to Epangelo is not condoned as this will thwart investment in exploration, the life line of our industry.

"The near-term effect of this likely to be a reduction in exploration, the long-term consequences of which is a shrinking or elimination of the mining industry."

The government has instituted a two percent levy on exports of unprocessed materials, but has backtracked on raising corporate tax to 42 percent from the current rate of 37 percent.

Across Africa, Indonesia, Australia and Latin America, governments are raising equity in mining projects as they seek to secure greater benefits and value from extractive industries.

Analysts say high demand for African minerals and the influx of investors put governments in a better position to dictate how the mining sector is managed.

Analysts say the drivers of resource nationalism - such as revenue maximisation, supply chain development, and revision of historical contracts - are as clear as the motives that impel mining companies themselves, which are profit and shareholder dividends.

Observers have said foreign miners are better of negotiating with governments instead of fighting resource nationalism, because the trend is unstoppable.

"The only way to safeguard projects against the demands of more assertive governments is therefore to engage pro-actively in the resource nationalism debate.

"In this way we believe that despite investor concerns, the resource nationalism trend provides an opportunity for the mining sector to improve the long-term security of their mining projects, whilst playing a constructive and profitable role in African development," mining analysts at London based advisory firm africapractice said recently.

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