Ministry of Mines and Energy in Namibia is proposing that royalties for all minerals be capped at 10% to allow for flexibility to increase the current low rates, particularly during boom market conditions.
This was said by the mining commissioner and deputy executive director of mines and energy, Erasmus Shivolo, when he made a presentation on the draft minerals bill to an engagement that included members of parliament last month.
In the current Minerals (Prospecting and Mining) Act, royalty rates are capped at 5% for dimension stone, 3% for base and rare, precious metals and nuclear fuels minerals, while industrial minerals are at 2%, and precious stones at 10%.
Adjustments
“This leaves little room for adjustment in future when the need to increase arises. The Minerals Act, which was promulgated in 1992, needs reviewing to keep up with the dynamics of the industry, and to create and maintain a competitive environment for investment to the benefit of all Namibians. the proposed changes will enable allowable deductions on levies, charges, and fees to be defined. Currently, mining companies are allowed to deduct levies, charges, and fees, from royalty payments,” Shivolo said.
“At times, companies inflate these allowable deductions, which results in less payment on royalties to the state. This is because there is currently no definition of what qualifies as levies, charges, and fees in the act,” he said.
On ownership, the bill provides for Namibians to procure and maintain ownership of not less than 5% of equity in mining companies as may be prescribed by the mining charter under the national equitable economic empowerment bill.
“Currently the act does not prescribe any local ownership in either exploration and prospecting licences or mining licences. However, there is a growing public view that the country is not benefiting equitably from its mineral resources, because most mining companies are owned by foreign investors without local participation,” Shivolo said.
As a way of creating downstream jobs, Shivolo said each holder of a mining licence will be required to ensure that a percentage of annual production from the mine is made available for processing, smelting, refining or other beneficiation processes in Namibia, provided the relevant facilities are available.
“Such percentage will be agreed on following a process of consultation between the mineral rights holder, and will be reflected in the mineral agreement relating to such mining licence,” he said.
