Mining Faces Some Serious Challenges


By Petronella Sibeene WINDHOEK The Chamber of Mines of Namibia has identified various challenges which if not handled carefully could negatively affect the future existence of this crucial industry. The President of the Chamber of Mines of Namibia, Mark Dawe, at the annual dinner held last Friday in Windhoek, said among the many threats currently facing the industry is the Government’s imposition of royalty on gross sales without any consultation with the Chamber. This, he said, would have dire consequences for exploration and mining operations. Gazetted in November 2004, Dawe said, royalty tax must be viewed together with the overall tax regime. As it is, the effect of the 5 per cent proposed royalty tax would translate to 50 per cent of profits for a 10 percent gross margin company. The remaining 50 percent of profits is further taxed at the country’s tax rate of 37.5 per cent viewed together with P.A.Y.E. In the end, the Government would have received 91 percent of all distributable cash if royalty was levied at five percent of gross sales. With most mines in the country facing lean times, the president of the mining chamber lamented that the future of mines that are not declaring profits given the adverse effect of the exchange rate are even bleaker. “The chamber’s view is that tax may only be levied under very specific circumstances and not as a blanket tax on the sector which is already beset by challenges,” he stated. Though the chamber might support the Government’s view that minerals and metals in the country should be beneficent as long as it is practically and economically viable, Dawe says the industry must never be pushed beyond its ambit of competencies. “Mining companies are in the business of mining. Allow us to do our jobs well. Of course, we will help the Ministry of Trade and Industry to identify possible beneficiation opportunities that others may pursue,” he urged the Government. Given a need to improve the living standards of those previously disadvantaged, sixteen years after the country’s independence, Namibia is still one of the leading countries in the world declared to have an unequal income or resource distribution. Though the chamber supports the need to accelerate development of previously disadvantaged Namibians, forced equity distribution is neither practical nor possible in Namibia. According to Dawe, the Chamber feels there are many ways through which effective empowerment can take place in a fair and equitable manner. In its efforts, the Chamber has come up with the ‘Seven Pillars of Empowerment’ approach presented to the Ministry of Mines and Energy last year. “We are now looking forward to working closely with our ministry to develop a pragmatic empowerment charter,” indicated Dawe. Further, as exploration is viewed to be crucial to the future of the industry, it has become a great concern that expenditure on exploration has shown a decline in Namibia whereas in other parts of the African continent such as Tanzania there has been new world-class mines discovered by exploration juniors. In view of that, Dawe urged the chamber and its ministry to welcome junior mining explorers, award them licences and work permits and provide a statutory and fiscal regime that would make them stay in the country. Apart from Langer Heinrich, no other mine is scheduled to come on stream this year. While global economic indicators are highly supportive of the continued upward mining trend in the near future, Africa according to Dawe is better leveraged to participate in this exploration and Namibia is considered highly prospective. “Let us not miss the boat,” he concluded.

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