23 April 2021 | Geschäft

Mining activities saves the domestic economy

Namibia dropped 33 places globally on its Policy Perception Index score, and fell from first place in 2019 to fifth position in 2020 on the African continent.

This is most concerning given that investors regard other jurisdictions as having more stable and favourable policy frameworks in comparison to Namibia. Zebra Kasete, Out going president: Chamber of Mines.

PHILLEPUS UUSIKU

Despite the mining sector being one of the few sectors that supported the Namibian economy in 2020, its investment prospects look bleak.

Apart from Namib Lead and Zinc mine, there were thus no other retrenchments that occurred as a result of the pandemic. Initial growth projections for the mining industry in 2020 stood at 11.1%.

However, the Namibia Statistics Agency (NSA) statistics show that the industry recorded a negative growth rate of 14.5%. This was a further contraction from the negative growth rate of 9.5% posted in 2019.

The Chamber of Mines of Namibia held its 42nd Annual General Meeting (AGM) on Wednesday which saw Zebra Kasete’s term as the president of the chamber coming to an end.

The new incoming president is Hilifa Mbako, while the first vice president is Irvinne Simataa. The second vice president will be the outgoing president Zebra Kasete.

According to Kasete, the industry directly employed 14 435 individuals in 2020, a 12% drop in the number of permanent jobs compared to 2019.

The direct employment consisted of 8 361 permanent employees, 902 temporary employees and 5,172 contractors. Applying a conservative mining multiplier of seven, the mining industry created 101 045 jobs, which is a sizeable portion of Namibia’s workforce, he pointed out.

Revenue

Every job created by the industry generates an important source of revenue for government through pay as you earn (PAYE) and value added tax (VAT) as a consumption tax. In 2020, employees from mining companies paid a recorded N$1.2 billion in PAYE, Kasete said.

Approximately 96% of the mining workforce employed in 2020 were Namibians, and the majority of the wages and salaries bill, amounting to N$6.058 billion, circulated within, and benefitted the local economy.

Moreover, the industry maintained its high local expenditure component which amounted to N$12.3 billion.

The improved profitability of the mining industry increased the total contribution to government by 28 %, which amounted to N$4.1 billion in 2020.

Chamber members collectively paid N$1.6 billion in royalties and N$233 million in export levies. Exploration expenditure by exploration companies, as captured in the chamber’s annual survey, increased by 55% in 2020, from N$171 million in 2019 to N$264.5 million, he pointed out.

After two years of declining investment by Namibian mines, chamber members collectively posted an increase of 43% of Gross Fixed Capital Formation (GFCF) in 2020, totalling N$4.83 billion. Investment was driven by the construction of Debmarine’s new AMV3, open pit development and underground mine development at the Otjikoto gold mine, he added.

Investment attractiveness

The Fraser Institute’s 2020 survey shows that Namibia only marginally increased its score on the overall Investment Attractiveness Index and several other jurisdictions performed far better.

This was driven by a drastic decline on the Policy Perception Index (PPI) by 12.92 points. The report cites Namibia as the only African jurisdiction that did not improve on this particular index.

“Namibia thus dropped 33 places globally on its PPI score, and fell from first place in 2019 to fifth position in 2020 on the African continent. This is most concerning given that investors regard other jurisdictions as having more stable and favourable policy frameworks in comparison to Namibia,” Kasete said.

Investors expressed concerns over the availability of skills, regulatory duplication and inconsistencies, and infrastructure. Challenges with VAT registrations and input VAT refunds for exploration companies were also cited as hurting Namibia’s competitiveness.

It is of grave concern that Namibia’s investment attractiveness in comparison to Africa, and the rest of the world, has declined in recent years. This is despite some of the major policy achievements and wins gained to encourage investment into the mining industry.

The chamber holds the view that the negative perceptions regarding Namibia’s attractiveness for investment into mining can be rectified by encouraging its members to participate and contribute to the Fraser surveys, he said.

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