Is the mining industry ‘overly’ jittery over NEEEF?
The lurking birth of NEEEF is perceived by many corporations as farcical, although many believes it reveals government’s intentions to win the poverty war by eliminating inequality.
The Chamber of Mines Namibia is headed for cross roads with Government following pronouncements by its Chief Executive Officer Veston Malango that the proposed New Equitable Economic Empowerment Bill (NEEEB) is “detrimental” for the industry.
Malango in essence drew the battle lines between the mining sector and government-and by doing so pitting the two against one another as far as NEEEF concerned.
”In 2014 the Frazer Institute Survey of Mining Companies ranked Namibia as the most attractive destination for investment in mining and exploration on the African continent. In 2016 Namibia’s ranking has fallen a further five places to ninth position.
The proposed empowerment policy and legislation, the New Equitable Economic Empowerment Bill (NEEEB) and additional conditions to licenses were cited as the main drivers for the ranking degration,” Malango said in part of his assessment in the Chambers’ latest annual report.
NEEEF was mired in controversy since government announced its coming. Also in October 2015, government announced that it plans to introduce a solidarity tax in the 2016/17 budget that would compel every income-generating citizen above a certain threshold to make a contribution towards a fund earmarked for poverty eradication.
Finance Minister Calle Schlettwein said at the time that government aims to rake in an additional N$600 million a year once the so-called solidarity tax is introduced.
A close shave at Malango’s sentiments spells realistic resilience by the mining sector towards the empowerment legislation being pushed by the Government setting the two key parties (Government and Mining sector) for a bumpy engagement in the near future should the NEEEF legislation be enacted into law.
Largely perceived as a sensitive sector, the mining industry has in the past been very critical of any manoeuvres by Government aimed at increasing either taxes through various means or any policies that could alter the status quo.
The argument being that the mining industry remains one of the largest contributors to Gross Domestic Product, constituting 12.5% in 2015 and contributing about 50% to Namibia’s foreign earnings, is seemingly used as a basis to put its point across.
Ironically Government does not seem to be moved by any criticism of the NEEEF Bill which seeks to have large conglomerates cede 25 percent of their stake to the previously disadvantaged composition of the population through equity acquisition.
Reiterating this stance, President Hage Geingob emphasised this week at his address of workers during May Day celebrations in Ohangwena Region that Government is pushing forward with the proposed NEEEF policy touted as a way of sharing the country’s wealth and to unshackle the monopoly enjoyed by 10 percent of the largely white Namibian population who control the means of production.
The Government’s Chief Administrator Saara Kuugongelwa-Amadhila has also on numerous occasions made it categorically clear that the state is not backing down on the proposed legislation while the Minister of Mines Obeth Kandjoze who is the custodian of the mining industry has also added his weight to the key policy.
Malango added that the degrading of the country’s mining investor rankings in Africa coincide with a bad economic patch for the country when the Government’s debt has risen to 42% a figure above the sustainable threshold, prompting serious cuts in budgetary allocations and expenditure by the treasury in a bid to consolidate.
What does the Chamber want?
“Effective partnerships are not the only pillars of saving grace in the years to come.
What is required is an environment in which privately owned businesses, and thereby mining companies can flourish without having to comply with restrictive regulatory requirements.
The attractiveness of the Namibia mining sector along with others will continue to be eroded should uncertainty around legislation and policies continue especially during a time when the Namibian economy cannot afford to forego new investment and business opportunities,” a rather worried Malango hinted.
Namibia is ranked at position 28 on the 2016 Policy Perception Index, falling from the 29th position it occupied in the previous year. The index is an assessment of the attractiveness of mining policies.
The Policy Perception Index is a composite index that captures the opinions of managers and executives on the effects of policies in jurisdictions with which they are familiar.
The survey policy questions include uncertainty concerning the administration, interpretation, and enforcement of existing regulations; environmental regulations; regulatory duplication and inconsistencies; taxation; uncertainty concerning disputed land claims and protected areas; infrastructure; socioeconomic agreements; political stability; labor issues; geological database; and security.
The report notes that the rankings of investment attractiveness and policy perception within countries and jurisdiction should serve “as a report card to governments on how attractive their policies are from the point of view of an exploration manager”.
Botswana did well on the Policy Perception Index where she ranked at 12 while Ghana ranked at 31. Both countries improved from their positions last year, where Botswana ranked at 14 and Ghana in 52nd position.
While delivering the Mining Industry Review for 2016, Kombadayedu Kapwanga President of Chamber of Mines of Namibia New Equitable Economic Empowerment Framework (NEEEF) said the further slide of Namibia’s ranking in the 2016 Fraser Institute report is a wakeup call for government to bring to an end to investor anxiety and uncertainty on NEEEF policy as well as the Namibia Investment Promotion Act of 2016.
“We therefore wish to appeal to government to expedite this matter to ensure an amicable outcome as soon as possible.
The Chamber hopes that government will adopt the constructive alternative proposals in NEEEF which accommodate market fundamentals of the private sector and growth thereof, while implementing effective and pro-growth empowerment mechanisms.
Namibia Investment Promotion Act, 2016
The Chamber is equally concerned with the Namibia Investment Promotion Act of 2016 and is part of Business Namibia that has proposed changes to the Act before it comes into effect,” he said.
Kapwanga said the Chamber was actively involved in the private sector consultations with government on the proposed empowerment legislation, the New Equitable Economic Empowerment Bill (NEEEB).
The Chamber is one of the many institutions that made submissions to the Law Reform and Development Commission and to the Office of the Prime Minister in August 2016 on the Bill.
“The outcome of NEEEF is still uncertain, though we have it in good faith that Government is cognisant of the sector’s concerns with the current version of the Bill. As with NEEEF, the Chamber appeals to government to quickly amend this Act in consultations with the private sector under the umbrella of Business Namibia to bring an end to uncertainties and further downward sliding of Namibia’s competitive rankings on global rating agencies,” he urged.
Mining cry babies
There seem to be major similarities in the way the mining industry is responding to the proposed NEEEF compared to how it forced government onto the back foot in 2011 when the then minister of Finance Saara Kuugongelwa-Amadhila was pushing for the introduction of a raft of taxes on mining activities.
While Kuugongelwa-Amadhila was driven by the need to tap more income for treasury and diversify the country’s revenue streams, the mining industry simply saw the move as a way of pushing them out of business and making the operational environment difficult. Malango said if the draft of policy proposals made in 2011 were implemented, they would have been severely detrimental for the mining sector which would have resulted in major uncertainty and angst among existing operations, exploration companies and potential investors.
“Thankfully, the Government retracted the worst of these proposals and in productive cooperation with industry worked towards establishing a conducive regulatory framework, which drew over N$40 billion in investment to the sector. This ultimately led to the development of three new mines,” he said.
At that time both Government and the mining sector were locked in serious negotiations resulting in the state backpedalling on most of the proposed tax legislations.
In the interim, the recent pronouncements from the mining Chamber which represents the interests of the country’s biggest mining companies is seen as a direct challenge on NEEEF.
Malango argue that: “The mining sector spent 41 percent of its revenue on locally procured goods and services in 2016 which presents itself as an appealing case to manufacture some of these inputs. This is one of the many examples in which the mining sector provides mass for the advancement of other industries. For such investment to occur, however a favourable and conducive regulatory environment is of utmost importance.”
A local economist last week warned that the New Equitable Economic Empowerment Framework(NEEEF) could result in an economic catastrophe if equity is transferred without compensation from whites to previously disadvantaged Namibians.
Twilight Capital Consultancy managing director Mally Likukela said the concept of “who the correct beneficiary of this policy is” still remains unclear and also questioned whether the aim of NEEEF is to empower blacks “by taking away from whites.”
“This policy must provide hard answers to hard questions, otherwise it will be seen as a political ploy to set the black against the white business community.
There is no best way of transferring someone’ else’s wealth to another person without compensation that is grabbing, it is unconstitutional and against all business principles,” he cautioned at the time.
He warned that transferring equity without compensation will create an economic catastrophe which will be felt by all for many years to come.
“There is no hard evidence elsewhere in the world where such kinds of policies have redressed the issue of income inequality sustainably. Income inequality in Namibia is correlated to GDP growth and political administrative system. Any solution should have a fair element of these items,” Likukela said.