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Namibia's mining industry is responsible for 14% of GDP and expanded 28% in 2018, but now it fears that government proposals to change taxes will hit exploration and deter investment. Jason Mitchell reports.

Namibia’s mining industry is fighting back against the government’s proposed tax reforms, claiming they would deter foreign investment in the sector.

The industry contributes 14% to the country’s GDP of $13.9bn, according to the Chamber of Mines. The Namibian economy has been in recession since the third quarter of 2016, and the mining sector is one of the few bright spots.  

In March, the government announced plans to stop royalties from non-diamond mining companies from being tax deductible and increase the export levy for dimension stones to 15% from 2%. 

“The government’s proposed tax changes would stop exploration in its tracks and would make marginal mining projects non-viable,” said Steve Galloway, a mining industry consultant, during the Chamber of Mines of Namibia Mining Expo, which took place in Windhoek, the Namibian capital, in early May. “The government has started to consult with the industry but often it does so too late, after changes have already been made.”

Hans Callesen, Namibia country manager at mining services provider Mincom, said: “The planned tax changes have created great uncertainty. Firms are definitely holding off investment. The mining industry requires stable and consistent government policy. With the right framework, Namibia could have a very healthy environment for mining.” 

The Namibian government believes that too high a proportion of mining profits go overseas. Five of the 16 mining companies operating in the country are wholly foreign owned. Local ownership in the other firms does not exceed more than 20% (the only exception is Namdeb, a diamond producer, which is a 50-50 partnership between the state and De Beers). 

More than 30 mining companies that earned about N$85bn ($5.87bn) paid only N$1bn in corporate tax between 2012 and 2017, according to a recent report.

In mid-May, Debmarine, a diamond mining company that is a 50-50 joint venture between De Beers and the Namibian government, said it plans to invest N$7bn in a new vessel called AMV3, which will carry out diamond mining on the ocean floor off the Namibian coast. 

It is expected to add 500,000 carats to the company’s overall diamond production and contribute N$2bn a year to the country’s economy. The ship – which is being constructed in Romania – will be the most advanced of its type in the world when it starts production in 2022. It will create 60 jobs to add to Debmarine’s current workforce of 975. 

This article is sourced from fDi Magazine
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