Fixed investments in mining plummets
Chamber of Mines (CoM) President, Kombadayedu Kapwanga, has revealed that fixed investments in the mining sector plummeted from N$17.26 billion in 2014 to 5.48 billion in 2015, registering a massive drop of N$8.78 billion.
Kapwanga also bemoaned the lack of solid plans by the country to make sure that adequate supply of electricity and water to the extractive sector, which contributes close to 12% of the Gross Domestic Product (GDP), are secured.
“Fixed investment declined by the mining sector from N$17.26 billion in 2014 to 5.48 billion in 2015. The figure excludes the figure from Swakop Uranium, so we thus expect the amount to be higher. The relative decline was, however, largely as a result of the ramping up of fixed capital formation as the Oshikoto, Tschudi and Husab mines transitioned from development phases to production and operation,” he said.
This comes at a time when the country has been affected by the blanket power shortage which has also covers the rest of the Southern African Development Community (SADC). Most countries in the region share the same power grid with Namibia that is getting 60% of its supply from South Africa while Zimbabwe also contributes a significant portion of the country’s needs on difficult days.
“The medium and long term security of uninterrupted power and water supply remain a major concern to the chamber and the industry as a whole. Namibia imports 60% of its energy requirements from countries such as South Africa, Zambia, Zimbabwe and Mozambique through power purchase agreements. Although these power purchase agreements are still in place those countries are also facing severe energy deficits of their own, most notably Zambia and Zimbabwe thus threatening the security of Namibian power supply, “Kapwanga said in his overview of the sector’s performance presented at the mining conference recently.
He also reiterates that the rippling effects of the drought being faced by Namibia and the rest of the SADC region emanating from an el nino condition experienced for two years have also put stress on water supplies top the extractive sector.
The drought has left Namibia, an already desert exposed country, with very little option in terms of harnessing alternative water sources for power generation and supply to the heavy industry. This has also been exacerbated by the failure of earlier plans by Areva to erect a desalination plant.
Kapwanga reiterates that despite a rather subdued international economic performance, caused by the slowdown in the factory of the world (China), the mining industry in the country remained resilient. The resilience of the mining sector was well symbolised by the continued good performance by precious stones, including diamonds.
“Despite depressed commodity prices, the Namibian mining sector was well positioned to overcome the negative impact of this downturn. Many investments made by the sector in the last three years were realised in 2015, with many still to come to fruition,” Kapwanga adds.
Kapwanga also reveals that the Chamber has been impressed by the recent move by Government to reduce the rate of withholding tax from 25% to 10% through amendments made by the Ministry of Finance Calle Schlettwein through a parliamentary vote. He opines that the adjustments spell a promising future for the industry well complemented by more investments.
“A favourable legal framework which has led to Namibia achieving its status as an attractive investment destination in the mining sector is paramount to the unique and competitive position the country finds itself in, when compared to other developing nations. Namibia is still very much poised to reap such benefits of investments made, but if the country is to continue doing so, it follows that a favourable regulatory framework is necessary and imperative to weather global headwinds and to sustain such investment,” he said.
While income from diamond production, which literally provides the backbone of the whole sector, was somewhat commendable Kapwanga does not hide his worries over the drop in production in the diamond sector. Statistics released by an upbeat Kapwanga show that the diamond production industry shed 6.4% in 2015.
The drop in production is feared could also affect other economic activities that survive from this industry, including the cutting and polishing sector.
“Diamond total production for 2015 dropped by 6.4% from 1.885 million carats in 2014 to 1. 764 million carats in 2015. Namdeb produced 494 324 000 carats in 2015 and also recorded a drop in output as a result of operational challenges including a slow start up in January….
“Rossing Uranium produced 1 245 tonnes of uranium oxide in 2015 a slight reduction from 1 543 tonnes produced in 2014. This was as a result of a fire which broke out in a final product roaster in 2014,”Kapwanga says.
Kapwanga added that the future looks bright for the country bearing in mind the good performances from zinc production, lead production, gold production copper production and an increased tonnage by Ohorongo cement which is moving towards meeting its 700 000 tonnes of production annually.
Although the extractive sector remains the backbone of the Namibian economy, its contribution to the gross domestic product shrunk by 0.1% to 11.9%. Kapwanga also reveals that for the first time in a long time that the none-diamond production in the sector surpassed its contribution to the Namibian economy.