By Sharyn Macnamara
Namibia remains one of the more enticing mining investment jurisdictions in Africa due to solid infrastructure, openness to trade and a strong legal framework1, not withstanding having to traverse the very necessary challenge of delicately balancing indigenisation with investment attraction.
Although Namibia is the driest country in sub-Saharan Africa, which poses significant challenges, it is rich in mineral resources with unexploited diamond and uranium deposits, and battery metals mining potential drawing investor interest. Image supplied by Alan J. Hendry on Unsplash
Namibia is a geographically large country with a small population of around 2.6 million (2021).2 Although Namibia is the driest country in sub-Saharan Africa – which poses significant challenges – it is rich in mineral resources with unexploited diamond and uranium deposits and battery metals mining potential drawing investor interest.3
In addition, the country has a 1 500km-long coastline on the South Atlantic and borders South Africa, Angola and land-locked Botswana and Zambia. Its location is, on the one hand, a strength with well-developed ports making the country a strategic partner for neighbours. However, on the other hand, its location means that global and regional developments are important drivers of Namibia’s economic performance, as well as fiscal and external positions, as Namibia is highly susceptible to and reliant on commodity exports and Southern African Customs Union (SACU) transfers. The World bank highlights that recently, “The twin shocks of the pandemic and spillovers from the war in Ukraine have negatively affected socio-economic progress.”3
Economic trajectory
According to the World Bank, “Leading up to 2015, Namibia’s economy experienced strong growth, averaging nearly 5% annually, fuelled by investment and enabled by prudent economic management. However, growth stagnated from 2016 onwards, and three of the last five years have been marked by recession, with a sharp contraction in 2020 amid the COVID-19 crisis.”4 Before the pandemic, the growth slowdown was caused by severe drought, lower commodity prices, reduced public investment, weaker growth in neighbouring countries and structural rigidities.
However, since the pandemic, Namibia has seen significant improvements and in the second quarter of 2022 the economy advanced by 5.6% year-on-year, following an upwardly revised 6.5% rise in the previous period. It was the fifth consecutive quarter of expansion – mainly driven by the key mining and quarrying sector (29.4% vs 21.3% in Q1) with the biggest contribution from the diamond mining subsector (53.7%), followed by metal ores (26.4%) and uranium (3.7%) subsectors.4
The economy was projected to grow by 2.6% in 2021 and 3.3% in 2022, on the back of a steady recovery in the mining sector, financial services, tourism, retail and wholesale trade – combined with an improvement in the regional and global economic environment.5
Mining core to Namibian economy
In an interview with African Mining at the Investing in African Mining Indaba earlier this year, Honourable Tom Alweendo, minister of Mines and Energy of Namibia, pointed out that mining and quarrying are core to the Namibian economy and account for between 9 and 15% of Namibia’s GDP annually. The minister said that this number fluctuates, and notes that diamonds, uranium and zinc are the lead commodities, the total mining and quarrying contribution was pegged at 11% in February 2022, at the time of the interview.6 (See historical stats below supplied by the Ministry of Mines and Energy (MME) to give an indication of the weighting of commodities as a percentage of the total 9.1% contribution in 2021).
| Industry | 2021 |
| Mining and quarrying (total) | 9.1 |
| Diamond mining | 3.0 |
| Uranium | 1.8 |
| Metal Ores | 3.6 |
| Other mining and quarrying | 0.8 |
Per the 2022 Annual Chamber of Mines of Namibia Review, the mining industry grew by 21.6% contributing 12.2% to GDP in 2022. This growth was predominantly driven by a significant boost in the production of diamonds from Debmarine Namibia’s new state of the art Mining Vessel, the Benguela Gem. The mining sector also directly employed 16 147 people last year, increasing from 15 246 in 2021. The Chamber cited the increase in employment as a result of the new employment positions created on Debmarine Namibia’s new mining vessel and increased exploration activities, which contributed to a higher number of contractors employed – with a total of NAD964.9-million spent on exploration in the year. Over and above this, the mining sector spent approximately NAD16.823- billion on goods and services procured locally.7
Furthermore, total capital investment reported by Chamber members was NAD5-billion while “exploration continued with its upward trajectory, breaching NAD1.3-billion in real terms. This expenditure continued to be driven by progressive exploration activities at Andrada Mining’s Uis tin mine, the fast-tracking of the Osino Resources Twin Hills project, the advancement of uranium projects and the discovery rush for critical minerals in Namibia.”7
Commodity offering
Diamond mining has been the leading sub-sector historically, with NamDeb, a 50:50 joint venture between the Namibian government and De Beers being the primary land-based diamond mining company, while Debmarine Namibia, also a 50:50 joint venture between the two entities, is involved in offshore diamond mining.
In June 2022 it was reported that Namibia is now the second largest producer of uranium oxide in the world. Rossing Uranium managing director Johan Coetzee noted at the time, “Our production, together with the production of Swakop Uranium, meant that Namibia has now surpassed both Australia and Canada to become the world’s second largest primary producer of U3O8, after Kazakhstan, which continues to dominate the market from a supply side.”8
There has been a marked increase in the exploration for uranium in Namibia and it is most likely that two advanced projects will soon enter mine development – namely Bannerman’s Etango project and Reptile Uranium’s Tumas project – while Paladin’s Langer Heinrich uranium mine, which was placed on care and maintenance in 2018, is moving towards the re-start of operations. Bannerman Energy Limited reported the results from the Definitive Feasibility Study (DFS) completed on its 95%-owned Etango-8 Uranium Project in Namibia late last year stating a definitive level confirmation of strong technical and economic viability of conventional open pit mining and heap leach processing of the world-class Etango deposit at 8Mtpa throughput. Commenting on the Etango-8 DFS, Bannerman CEO, Brandon Munro, said, “We have commenced Front End Engineering and Design and are moving firmly down the path towards production at the precise moment the world wakes up to the essential role of nuclear power. Our mining licence application was submitted in August of 2022, and we are well underway with parallel offtake and project finance workstreams. All of this activity is driving towards a targeted positive Final Investment Decision on Etango-8, uranium market conditions permitting, during H2 CY2023.”9
Namibia is also a leading producer of zinc. There are two operational mines – Skorpion Zinc (operated by Vedanta Resources) and Rosh Pinah (~90% owned by Appian Capital Advisory, a UK-based private equity company).
Meanwhile, iron ore has also emerged as a Namibian secret treasure. Lodestone, a mining company with US shareholding, is extracting iron ore deposits in eastern Namibia. The Lodestone Dordabis mine, the first operational iron mine in Namibia, commenced production in 2015. The magnetite and hematite products are being sold to local niche consumers, such as Ohorongo Cement. The Chamber noted in its 2021 annual review that local sulfuric acid and iron ore production are consumed as inputs by Namibian operations, exemplifying how mining sector growth leads to the expansion of upstream and services sectors.
The country is also a source of critical minerals important for renewable energy technologies with potential to develop new mining projects for cobalt and lithium. For example, global lithium exploration and development company Lepidico Ltd is developing a lithium mine in western Namibia. Desert Lion began shipping lithium ore in 2018, with the first shipment of 30 000 tons, while Gecko Opuwo Cobalt is developing a cobalt deposit in Kunene Region.
Investment opportunity
In his discussion with African Mining, minister Alweendo explained that great potential opportunities lie in exploration of these minerals critical to the global energy transition, as well as opportunities that still lie in unexplored uranium and gold. He pointed out, “I think we need to do more to identify with some precision as to where these minerals lie.” Referring to the many recent success stories in Namibia, with regards to exploration activity in this sector, he invited investors, saying, “We just need investors ready to explore these opportunities.”
The minister added, “Although Namibia has a fully functional and transparent cadastre system, significant progress is being made in the development of a fully automated and upgraded system to make it possible for investors to do applications online and to enable online assessments, payments and submission of quarterly reports. The objective is to reduce discretional process and speed up turnaround timing on applications for investors.”
A significant find of Rare Earth Elements (REEs) on a farm in north central Namibia was announced last year; with a proven ore body of 579 million tons and a cut-off grade of 0.02 to 1.00 percent of REE-bearing materials, prospects seem highly positive.
Gold has also been mentioned by Veston Malango, CEO of the Chamber of Mines, as an exciting prospect for Namibia. In 2022 he said, “The gold mines in operation have embarked on expansion projects and there are two promising gold exploration projects. Namibia also has a number of base metals projects that have now become more attractive. This includes the old Kombat copper mine, which has been redeveloped and produced its first copper concentrate towards the end of last year.”10
Tin is yet another commodity Namibia produces – AfriTin Mining reported record levels of concentrate production at its Uis tin mine in November last year, according to its latest quarterly update (at time of writing). Recent oil discoveries by TotalEnergies and Shell could make Namibia, the southern neighbour of OPEC member Angola, the latest oil producer along the African Atlantic coast. “The companies are cautious but have talked about commercial quantities in billions of barrels,” said minister Alweendo. “The commerciality is there.” He noted that the two companies were busy with appraisal wells to decide where to start production. “This is an exciting journey, as oil is in great demand and these discoveries promise to transform the Namibian economy. We will be paying particular attention to local content in the oil and gas industry. Many services will be required to provide for this new industry growth, and we want to make sure that, as much as is possible, these services will be supplied by Namibian entrepreneurs, rather than being imported. The economy will not only benefit directly from oil revenues, but also by providing the necessary services that we would want to create within the local economy.”
Local beneficiation
As a small commodity-dependent economy, Namibia is highly susceptible to the volatility of commodity prices and the Namibian government has therefore been on a drive to diversify and promote local beneficiation under its National Development Plans (NDPs), Industrialisation Policy (IP) and its implementation of ‘Growth at Home Strategy.’
Power has proved to be a particular challenge in this drive as Namibia relies on imported power from South Africa. Recently, however, the country’s power infrastructure is rapidly developing, according to Joe Walsh, managing director of Lepidico operating the Karibib project in Namibia. “By around 2025, Namibia expects to generate some 80% of its power from renewable sources,” he confirmed.10
Regulatory challenges
Although Namibia is renowned for its political stability and sound economic management – which, according to the World Bank, has assisted in poverty reduction and allowed Namibia to become an upper-middle income country – it is noted that the legacy of apartheid systems of government in the past have led to lingering socio-economic inequalities, recently exacerbated by the COVID-19 pandemic. Namibia ranks as one of the world’s most unequal countries and the result has been a dual economy – a highly developed modern sector, co-existing with an informal subsistence-oriented one. In order to rectify this, there has been a move to indigenisation through regulation and this poses possible challenges for investors, said the World Bank.3
Malango noted in the Chamber of Mines in the 2021 Annual Review, “It remains increasingly worrisome that the current policy pronouncements and dialogue from MME favour regulatory mechanisms that will continue to deteriorate and demolish a mining framework that was once conducive for investment into mining.” He was referring to the finalisation of the Namibia Investment Promotion Act (NIPA) and the New Equitable Economic Empowerment Bill (NEEEB), pending for around 6 years now amongst others. Both pieces of legislation could significantly impact investment and ownership of mines in Namibia.
There has however been significant movement here as the Chamber and MME have been in continuous discussions on the subject and are aligned in the overall objectives to support the growth of mining and draw increased mining investment to Namibia.
Draft Minerals Bill
After many interruptions and delays during Covid-19, the Chamber received the Minerals Bill for comment and input on 24 March 2022. The Chamber compiled a comprehensive common industry position on key clauses and submitted it to MME on 24 May 2022. The Chamber commented in its 2022 review that it noted many positive inclusions and revisions, which were aligned to prior consultations and agreed-upon positions reached between the industry and MME regarding the legislation, saying, “The most contentious aspects of the draft Bill are proposals to increase the upper royalty rate limit from 5% to 10% for base and precious metals, nuclear fuel minerals, dimension stone and industrial minerals, the introduction of a windfall tax and the inclusion of Mining Charter provisions as part of the legislation. With regard to the royalty and tax proposals in the Bill, Namibia’s mining industry has one of the highest effective tax rates in the world and research has proven that the industry is not able to pay more taxes, lest the mines and projects in Namibia would become unviable. Secondly, the Mining Charter is intended to become applicable when NEEEF is finalised, to be enforced by MME as regulations under the new Minerals Act.
“The Chamber hopes that consultations on the draft Minerals Bill will be completed in 2023 and that agreeable positions can be established between all stakeholders and presented to Parliament before the close of the year. This Minerals Bill Review process has been on-going for the last twenty years, and the Chamber is relieved to see increased momentum and commitment by MME to finalise the Bill.”7
The lack of clarity and lack of conclusion in these matters have led to some uncertainty for investors – in May this year, the Namibia Investment Promotion and Development Board (NIPDB), which previously red-flagged the NEEEB, had said the length of time for the bill to be finalised has created ambiguity.11 It must, however, also be noted that there is ongoing dialogue between the private sector and the government, which is rare and appreciated by local mining companies.12
VAT registrations and input refunds for exploration companies
The passing of the Vat Amendment Act which was gazetted on 29 December 2022 and effective on 1st January 2023, was a major win for the industry. The Chamber explained, “The Act now allows for exploration companies to register for VAT unhindered and claim for input Vat refunds, which was previously being administered on an ad hoc and discretionary basis by the Ministry of Finance (MoF). In addition, MoF also announced that all outstanding claims made by exploration companies (including oil and gas) that were previously declined on the basis of not having produced taxable supplies, would now be refunded. This commendable legislative action by Parliament will elevate Namibia as a mining destination allowing exploration companies to conduct their activities at a lower cost, and the Chamber looks forward to witnessing greater inflows of investment into exploration as a result.”
Unfortunately, there were no new developments or updates on NEEEF and NIPA – two critical pieces of legislation, at the time of writing.
ESG in Namibia
The mining sector through the Chamber of Mines, and in collaboration with the Namibia Chamber of Environment, the Ministry of Environment, Forestry & Tourism (MEFT) and MME produced its own Best Practice Guide – Environmental Principles for Mining in Namibia (https://eccenvironmental.com/wpcontent/ uploads/2019/05/Best-Practice-Guide-Mining-Namibia. pdf). The guide provides key information for industry practitioners and personnel on how environmental, social and economic aspects of mining are optimally managed throughout the mining lifecycle to have the most sustainable impact on national development as well as surrounding towns and communities.
While there are indeed a host of very useful internationally recognised frameworks of best practice, reporting guidelines and benchmarks, this guide is unique in that it incorporates the local regulatory frameworks and accounts for the relevant governing and supporting institutions.
In the light of the global ESG imperatives and investment drive in energy critical minerals, Minister Alweendo welcomed investors to Namibia. He concluded his discussion with African Mining with a profound message on true investor/host country partnerships, noting that these should be recalibrated – they must be balanced and mutually beneficial relationships. To view his statement, go to : https://www.linkedin.com/posts/african-mining-publication_miningindaba2023-mi2023-energy-activity-7028720526776840193-I9IQ/?utm_source=share&utm_medium=member_desktop.
References:
- Fitch Solutions’ Namibia Mining Report. https://store.fitchsolutions.com/all-products/namibia-mining-report
- The total population in Namibia was estimated at 2.6 million people in 2021, according to the latest census figures and projections from Trading Economics. Source: Bank of Namibia
- https://tradingeconomics.com/namibia/population
- https://www.worldbank.org/enhttps://www.worldbank.org/en/country/namibia/country/namibia/overview
- https://tradingeconomics.com/namibia/gdp-growth-annual
- https://www.afdb.org/en/countries/southern-africa/namibia/namibiaeconomic-outlook
- https://www.trade.gov/country-commercial-guides/namibia-miningand-minerals
- 2022-Chamber-of-Mines-Annual-Review.pdf (chamberofmines.org.na)
- https://wordpress.thebrief.com.na/2022/06/namibia-now-worldsecond-largest-uranium-oxide-producer/
- https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02608835-6A1126858?access_token=83ff96335c2d45a094df02a206a39ff4
- https://www.gbreports.com/files/pdf/_2022/MACIG_2022_-_Web_Preview_4_B.pdf
- https://namibian.com.na/delayed-neeeb-creates-uncertaintyinvestment-board/
- https://www.reuters.com/business/energy/shell-total-namibiaoil-discoveries-likely-billions-barrels-minister-2022-09-02/#:~:text=Both%20companies%20announced%20earlier%20this,billion%20barrels%20of%20oil%20equivalent.