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Chamber of Mines opposed to Namibia’s 15% EPL free-carry

By April 26, 2023 4818 0
Chamber of Mines opposed to Namibia’s 15% EPL free-carry

The Chamber of Mines is still opposed to the government's move to offer a 15% free-carry ownership to Namibians in possession of Exploration Licenses (EPL), saying this will discourage potential investors.

The mining sector representative body says once investors give up, it will defeat the purpose of the legislation, which seeks to empower locals and eventually unearth wealth resources that should develop and grow the country economically.

In 2021 the Ministry of Mines and Energy introduced a mandatory 15% shareholding ownership retention by Namibians upon transfer or sale of their existing EPLs.

"The Chamber strongly opposes this policy as it would disincentive explorations by Namibian and foreign investors. This free-carry by local entities makes it unattractive for investors to carry the burden without proportionate financial input to fund exploration activities," the Chamber's Chief Executive Officer Veston Malango said.

He made these remarks at the Chamber’s 44th Annual General Meeting today.

"Investors will shy away from such transactions resulting in unintended backlash and thereby defeating the very essence of the intended empowerment," he added.

The Chamber tried to seek an audience and make suggestions on how to refine the legislation, but Malango says such efforts fell on deaf ears as the Ministry went ahead to implement, and then subsequently accepted by the industry.

Malango addressed various policy issues such as the Electricity Control Board’s (ECB) proposed levy to be extended to stand-alone power producers, to which the Chamber is opposed as it allegedly seeks to finance ECB operations.

However, Malango argues that stand-alone power producers are not deriving any direct benefit from the levy, which results in additional costs. Attempts by the Chamber of Mines to have this levy scrapped were also declined.

Despite the hard knocks, the CEO says they are pleased to note that the Road Fund Amendment Bill, which sought to abolish the fuel levy refund system was reversed following deliberations.

"This was going to negate the user pays principle, thus leading to significant increase in the cost of fuel to mining companies," he said.

Another accomplishment is the passing of the VAT amendment bill, which now allows exploration companies to register for VAT unhindered and claim for input VAT returns.

According to Malango, this was previously done on an ad-hoc and discretionary basis by the Ministry of Finance and Public Enterprises.

"The Finance Ministry also announced that all outstanding claims made by the exploration companies including oil and gas, that were previously declined on the basis of not having produced taxable supplies, will be refunded," stated Malango, adding that this will allow companies to operate at a lower cost.

Other bills include the Health and Safety Regulation, Infrastructure and Security of water supply.

“After finally receiving the Minerals Bill we have made our inputs. However, the most contagious aspects of the draft Bills are the proposal to increase the upper royalty rate limit from 5% to 10% for base and precious metals; nuclear fuel minerals, dimension stone and industrial minerals. As well as the introduction of windfall tax and the inclusion of Mining Charter provisions as part of the legislation."

The Chamber is therefore of the view that Namibia's mining industry has the highest royalty and taxes, thus the sector cannot withstand paying more additional tax, as the mining projects will not be viable, argued Malango.

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Last modified on Wednesday, 26 April 2023 19:15
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