Despite the cyclical nature of the minerals industry and some declining commodity prices, coupled with increasing financial market volatility, the country generated about N$25 billion through export earnings and N$1.4 billion in royalties during the 2016/17 financial year.
These funds were collected from mining companies and mineral rights holders for the benefit of the State Revenue Fund. The growth in value was mainly driven by diamonds and the base metals industry, especially gold and copper cathode exports.
These figures were revealed in parliament by Minister of Mines and Energy Obeth Kandjoze during the motivation of his ministry’s approximately N$208 million budget for the 2017/18 financial year.
Of the approximately N$208 million allocated to the Ministry of Mines and Energy for the 2017/18 financial year, about N$127 million is earmarked for the operational budget, of which 79 percent is earmarked for employee’s benefits, while about N$80 million is set aside for the development budget.
Also, just over N$28 million has been allocated to the promotion of investment in exploration and mining to ensure the safeguarding of mineral resources, the well-being of employees working in the mining industry, as well as revenue collection.
About N$1.6 million is earmarked for personnel expenditure and other employees benefits under this programme and N$1 million is made available for the secondment of a staff member to Vienna, Austria, as an attache of the ministry, while N$10 million is to be transferred to Epangelo Mining company as a government subsidy. Another N$1 million is earmarked for the finalisation of a project in Karibib and Noordoewer.
“The priorities of the Department of Mines during this financial year are, amongst others, to finalise the Minerals Bill, the review of the minerals policy, and to align them to the African Mining Vision. All approved projects implemented during the last MTEF period will also be completed.
“In order to bring services closer to the people, we shall also relocate staff members from head office to the Swakopmund office, particularly to assist the public with geo-information, as well as administration of the Minerals [Prospecting and Mining] Act, insofar as the applications and administration of mineral rights is concerned,” Kandjoze explained.
A further N$8 million is allocated for the monitoring, regulation and facilitation of the diamond industry. The ministry, in realising the speedy evolution of the diamond industry, initiated the review process of the Diamond Act of 1999 to ensure that the law governing the industry is responsive to industry dynamics. This process is anticipated to be finalised in the next financial year.
Kandjoze also noted that N$61 million is allocated to improve energy supply in the country and will include renewable energy power supply projects.
“The Kudu Gas to Power and Baynes Hydro Power projects remain strategic for the country to contribute towards achieving security of supply and the government is committed to their development.
“Recently Namcor and BW Offshore concluded a partnership for the development of the Kudu Gas Field and it is anticipated that all commercial agreements will be finalised by the end of 2017. The Namibian and Angolan governments are committed to finalise all remaining environmental studies and outstanding project activities for the development of the Baynes Hydro Power project,” he said.
Also, more than N$41 million is allocated for coordination and support services to ensure an enabling environment for employees, while about N$20 million is set aside for personnel expenditure.
Goods and other services are allocated N$5.8 million for utility services of the ministry and an additional N$6.6 million is for subscription fees and outstanding invoices of several utility services that were not honoured in the previous financial year.
“Similar to last year, this year’s budget is again being presented at a time when commodity prices remain largely depressed and in some cases have declined to levels that threaten the viability and sustainability of some prospecting and mining operations,” Kandjoze noted.
On a positive front he noted that the local uranium sector witnessed the production of the first drum of yellowcake from the Husab Uranium Mine towards the end of 2016.
“Having said that, the uranium sector still experiences profound market challenges, which have resulted in, for example, the Langer Heinrich Mine curtailing mining operations, as well as retrenching a part of its workforce.
“The recently resolved standoff between the Skorpion Zinc Mine and its employees is not only a labour relations matter, but is deeply rooted in the challenging economics of the ore-body currently being mined. We shall encourage amicable solutions in circumstances like that to be common endeavours in order to move the industry and economic prosperity forward,” Kandjoze told fellow parliamentarians.
He added that during the 2016/2017 financial year, the mines ministry witnessed a decline in exploration expenditure, but granted two mining licenses, which in all likelihood will result in the development of mines during this financial year.
“We have also implemented additional conditions on mineral licenses to reserve a minimum of five percent participation in all licenses to Namibians and 20 percent of historically disadvantaged Namibians must form part of the management structure of the license holder.
“The applicant must also submit an explicit programme on how it will contribute to poverty eradication, particularly in the context of empowering the poorest of the poor, the youth and women,” said Kandjoze.
In addition, the energy minister noted that, along with key sector stakeholders, his ministry has taken bold steps to ensure that the country and its inhabitants are safeguarded against energy shortages. This was done by reviewing and crafting new enabling policies and presenting a robust and transparent energy generation plan towards 2030.
“The Ministry of Mines and Energy acknowledges the challenges that stretch far beyond our country and regional borders and facets that will affect the development of the energy agenda on the global front. The year under review has been challenging with a re-prioritisation of resources amongst a challenging energy situation at national and regional level.
“The effects of climate change placed additional challenges on existing generation facilities and therefore call for more resilient sustainable energy infrastructures. The reliance on imports still pose a threat to the country until such a time that all the measures taken over the Medium Term Expenditure Framework period thrust the country into a favourable position to meet the ever-growing energy demand. Even against the backdrop of all challenges faced by the energy sector, I am pleased to announce that no national load shedding has occurred,” Kandjoze stated.
Further, the minister explained that the National Energy Fund (NEF) continues to subsidise petroleum and electricity prices through levies imposed on controlled petroleum products and electricity.
During the 2016/2017 financial year, the NEF paid N$340 million to petroleum product suppliers to subsidise petrol and diesel prices. Also during 2016/2017, the NEF paid N$130 million for the fuels road delivery subsidy system to the rural and far outlying areas of the country.
N$50 million was also paid from the NEF to NamPower to subsidise the cost of importing electricity and the Fund provided soft loans of N$30 million to the Electricity Supply Industry (ESI) for the distribution of electricity to the local authorities, that are not in an area with a regional electricity distributor (RED).
In addition, an amount of N$1,5 billion was collected from the NEF strategic oil storage levy since its inception in 2012 and to date N$3,1 billion has been paid towards the strategic oil storage project expenses.