Wednesday 12 May 2021
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Mining sector: The missed opportunity

..Expert says small scale miners must be supported

A large state replete with natural resources, Namibia is among the most mineral-rich countries in the world. However, the unequal distribution of resources continues to exacerbate inequality in a country that is already ranked as one of the two most unequal nations in the world.

Uranium and diamonds continue to play a major role in the mining sector while significant deposits of base metals have helped Namibia rank among the top five mining countries in Africa, both in terms of production and reserves.

There have been numerous calls over the years from development experts that state involvement in mining and beneficiation should be deepened to ensure that the country derives more benefits from the exploration of its precious minerals. These calls have gone largely done unheeded as little has been done in that regard.

Diamond, uranium, copper and gold are among the largest sectors of Namibia’s mining industry in terms of employment creation, investment and revenue generation.

Between March 2014 and March 2018, government generated N$96 billion through export earnings while N$5.1 billion was generated through royalties from mineral right holders.

Legislative deficiencies

The country’s legislation has also been fingered as being too favorable to investors. In fact, potential revenue running into millions was lost over the years due to shoddy legislation.

The Chamber of Mines and Deloitte & Touché assisted the Ministry of Finance in the drafting of Guidelines to enable the smooth implementation and administration of the Export Levy Act of 2016 that became effective in June 2017.

In its 2017 annual report, the Chamber said implementation was not without a glitch as Customs and Excise incorrectly configured their system with a wrong tariff code for gold bullion, resulting in failure to capture the relevant payments for gold exports.

“The Chamber was instrumental in alerting the Ministry of Finance about the error, which was subsequently corrected with the correct tariff code and the first payment deadline was extended from 30 September to 31 October 2017. The system was correctly reconfigured and thereafter payments commenced smoothly,” said the Chamber president Johan Coetzee.

But despite Namibia’s rich mineral heritage, thousands of the country’s populace continue to wallow in abject poverty while only a few have access to the country’s natural resources.

In most cases, the same individuals who benefit from mining rights, double as fishing rights holders and mass land owners.

Another concern is that despite the mining sector being a strategic sector for the country, no update assessment of the country’s minerals has been done in the last 24 years.

The country’s mineral resource book titled “The Mineral Resources of Namibia” – compiled in 1992 – no further surveys were conducted to assess the mineral deposits across the country.

In order to boost local participation, government has implemented additional conditions on mineral licences to reserve a minimum of five percent (5%) participation in all licenses to Namibians, and twenty percent (20%) historically disadvantaged Namibians must form part of the management structure of the license holder.

The Minister Mines and Energy Tom Alweendo last week heralded the importance of the mining sector in Namibia’s growth, but warned that the desired growth can only be attained if emphasis is placed on creating and maintaining a cohesive value chain system that is efficient from the mines all the way to the consumer.

Alweendo vowed that government will at all times provide a conducive environment for mining companies to operate in.

But while most of the attention is pinned on large-scale mining activities, small scale miners “who have the potential to generate added revenue for government” continue to be ignored.

Small-scale miners

Stanley Kambonde, managing director at Esel Kay Consultancy says government is shooting itself in the foot if it does not pay attention to the needs of small scale miners and produce a conducive environment for them to operate in.

It is estimated that here are between 5 000 to 10 000 small-scale miners scattered around the Erongo, Kunene and //Kharas regions.

“However, when one looks at the minerals/stones falling within the mandate of SSM activities, it is surprising to see that such minerals/stones are still considered “uneconomical”. These include high value semi-precious stones such as tourmaline (green, blue and multi-coloured), garnet (green and orange) and aquamarine, while low semi-precious stones include rose quartz, amethyst, agate and topaz,” Kambonde said.

He added that most of these semi-precious stones are popular in international markets such as Europe and the US for jewellery-making purposes, and others including dioptase make good collector’s stones.

“The attitude given to SSM in terms of legislation and regulation within the Namibian context has made the industry vulnerable to illegal mining on a large scale. Foreign investors have seen the gap in using local small-scale miners to exploit these minerals, and take advantage of their desperation for a quick buck to make off with huge profits undetected. These companies enter into joint ventures with these miners, including in these contracts monopolistic provisions, which deprive miners of an equal payload,” Kambonde explained.

Due to the remote locations of these activities, some miners “lease” out their mining claims (albeit illegally) to companies for peanuts (for example, N$100 000 per annum), while these companies make off with huge profits for providing the technical and technological know-how (that is, excess of N$10 million per annum) for extraction purposes.

Kambonde said he is aware of small scale miners who spend months chipping and chiseling stones using basic tools only to end up trading them for maize meal and other necessities, adding that such trading practices highlights the extreme levels of desperation and exploitation they face.

“Factors contributing to the above include lack of technico-mining knowledge and lack of advisory services, which force miners to carry out ad hoc operations, largely by guesswork and trial and error.  As a result, mineral resources that could otherwise have been mined more efficiently by medium- to large-scale mining methods are sometimes rendered non-viable by small-scale activities,” he said.

Kambonde added that the lack of adequate equipment, such as drilling and pumping machines, also leads miners to abandon their deposits prematurely, once hard rock or water is encountered.

“Further, small scale miners receive no credit facilities due to risk associated with the nature of business, and lack of formal market structures results in miners selling their stones below market value. Exploitation at its best was witnessed in the Kunene Region when a Chinese company mined the rare African blue sodalite (which at one point fetched US$47/kg) from a local small-scale miner’s claim to the tune of about N$700 million, and left the miner with nothing but empty promises, empty pockets and an exploited mining claims,” said a concerned Kambonde.

However, said an optimistic Kambonde, the exploitation can become a thing of the past if the SSM industry receives a face-lift by formally recognising it as a key player within the mining industry.

“Integration of laws to mimic those used in small scale mining success stories such as Tanzania and Ghana should be considered, and there should be co-operative efforts between the public and private sectors to make SSM a success,” he said.

Kambonde said there is need for an educative symposium where small scale miners will be introduced to market related prices for their products and to entice local participation through a collective commitment to do away with illegal mining, and will consequently seek to end the leap-frogging of local laws by investors at the expense of uninformed miners.

“Small scale mining has a high potential of contributing to economic development through the empowerment of disadvantaged groups in rural areas, and can improve the livelihoods of those dependant on it. If properly funded, organised and administered, the SSM subsector can significantly reduce the prevailing high unemployment rate to acceptable levels and improve the quality of life for many in the regions,” he concluded

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