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Sunday 22 September 2019
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Mining in Namibia: A call for a Code of Conduct

The Namibian Newspaper’s Investigative Unit revealed in the lead article of that newspaper’s edition of Friday, 26 April 2019 that 30 mining companies in Namibia earned N$ 85 billion between 2012 and 2017. These mining companies were only able to pay N$1 billion in taxes during the same period.
These companies included Rio Tinto (Australia), Paladin Energy (Australia), Vedanta Resources (India), B2Gold ( Canada), Dundee Precious Metals (Canada), China Nuclear Power, Weatherly (UK) Schwenk International (Germany) and many others. The newspaper reported that there were 34 eligible tax- paying mining entities in the country. Namdeb Holding was the only exception. It paid N$ 11 billion in taxes. The global consensus is that mining companies pay 30 percent corporate tax and 3-4 percent royalty tax. It appears that some mining companies are short-changing the country either through tax avoidance or tax evasion.
Multinational companies avoid paying taxes throw many tax avoidance schemes.
In Namibia mining companies such as Dundee Precious Metals and Areva secured export processing status through dubious means. Such a status gives them the privilege of not paying tax. Some mining companies evade tax by not fully declaring the exact value of their earnings or inflating their capital cost. Since mining is a capital- intensive operation, companies inflate the cost of mining equipment for tax deduction purposes. Others engage in transfer pricing through their parent companies.
Some companies register shell companies in tax- free jurisdictions which serve as offshore holding companies of local mining companies. Namibia has been losing taxes when mining companies sell their shares through such offshore companies. When Uramin sold their uranium mine to Areva some years ago, Namibia is said to have lost N$219 million.
Other transactions such as those involving Swakop Uranium might have resulted in the country losing money through offshore selling of mining shares.
The country cannot continue to benefit shareholders in mining companies at the expense of citizens. There is an urgent need for the country to put into place a Code of Conduct for mining companies.
For example, the country should demand that all mining companies should subscribe to the Global Standard for Good Governance of Oil, Gas and Mineral Resources. The Global Standard for Good Governance of Oil, Gas and Mineral Resources is a statement of principles for transparency over payments and revenue in the extractives sector. They were agreed upon in London in 2003. When the Global Standard is adopted in a country it ensures transparency and accountability about how a country’s natural resources are governed.
This ranges from how the rights are issued to how the resources are monitored and how they benefit the citizens and the economy.
There are clear principles underpinning the Global Standard.
These include a belief that the prudent use of natural resource wealth should be an important engine for sustainable economic growth that contributes to sustainable development and poverty reduction.
The management of natural resources should benefit the country’s citizens through revenue streams. The principles further emphasise the importance of transparency by government and companies in extractive industries and the need to enhance sound public financial management and accountability.
They recognise that achievement of greater transparency must be set in the context of respect for contracts and laws. Moreover, the principles encourage high standards of transparency and accountability in public life, government operations and in business.
Though the Global Standard is a voluntary undertaking, if adopted by Government and mining companies, it will enhance trust between mining companies and the Government.
This will go a long way in mitigating against the perception that mining companies deliberately withhold tax through devious means such as under-declaration of profits or through transfer pricing.
The predominant narrative in the public is that mining companies make huge profits at the expense of the population. If such a perception is allowed to persist, Government may be forced to take a short-term approach and target the mining sector with high taxes as it happened a few years ago in neighbouring Zambia and in Australia. Such an action shall lead to declines in both mineral exploration and in opening- up of new mines.
The Global Standard for the Good Governance of Oil, Gas and Mineral Resources shall ensure a good relationship between the Government and mining companies as well as between management of mines and the workers.
The recent reports of Husab Mine Management attempts of undermining the workers’ rights should not be tolerated. The “win-lose scenario” in mining should be turned into a “win-win scenario” for the good of mining in Namibia.
For this to happen, Namibia should become a member of the Extractive Industries Transparency Initiative (EITI). About 52 countries are members EITI. In our SADC Region, Mozambique, Tanzania and Zambia are members of EITI.
When Namibia becomes a member, the country shall periodically be assessed as to how it is progressing in meeting the EITI Principles.
This will help to meaningfully determine whether mining companies are meeting their tax obligations. Both Government and mining companies will be required to disclose information along the extractive industry value chain from the point of extraction to how resources make their way through the Government and how they benefit the public.
This will strengthen public and corporate governance and promote the understanding of natural resource governance as well as create transparency and accountability in the extractive industry sector.
This will further strengthen trust and confidence in the industry, thus, ensuring a health relationship among the stakeholders. In this way mining comes a win-win undertaking.




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