The Institute for Public Policy Research (IPPR) director Klaus Schade has warned that any production increase by Husab mine will likely not help Namibia’s chances of reaping significantly from Uranium if the current poor spot market prices prevail.
Uranium prices remained almost unchanged at US$20.15 per pound on 23 Oct. 2017 compared to US$20.25 per pound and US$20.00 per pound at the beginning of the year and end of October 2016 respectively.
Mineral ores including uranium used to exceed the value of diamond exports between 2008 and 2010, but have fallen since to second place again.
“If prices prevail at this level, even though contract prices are higher than spot market prices, increased production at Husab mine will not change this ranking,” Schade warns.
However, IPPR further observed a robust recovery in some commodity prices this year, which should bode well for commodity exporters including Namibia.
Copper and zinc prices were 47.6% and 41.0% higher on 26 October 2017 than a year ago and had increased by 24.9% and 29.3% respectively since the beginning of January 2017.
Zinc prices maintained the upward movement despite mining companies announcing the reopening of mines that were put on care and maintenance during the period of low prices.
Zinc was trading at US$3,369.50 per tonne on 4 October 2017, the highest price since 4 July 2006 (US$3,371.00 per tonne).
Copper prices peaked at US$7,073.00 per tonne so far this year, which is the highest price since 22 August 2014 (US$7,087.50 per tonne).
“However, Namibia will not benefit to the full extent from the improved price environment, because the Skorpion Zinc mine has embarked on an extensive programme to increase the lifespan of the current mine. This will limit the current output level,” says Schade.
Meanwhile, Namibia’s imports from SACU dropped from N$30,033 million in the first half of 2016 to N$27,277 million in the first half of 2017.
Imports in 2017 are expected to remain below the total value of imports in 2016 which is N$62,897 million because of the budget cuts and the contraction in the construction sector.
“Namibia’s receipts from the SACU CRP could, therefore, come under pressure from two angles, declining inflows into the CRP and Namibia’s declining imports from other SACU member states, mainly from South Africa,” says the IPPR.
Hence, Namibia cannot expect budgetary relief from SACU transfers, the institute notes, weaker than expected domestic GDP data for the second quarter of 2017 imply that government revenue from domestic sources remains constrained.
“Since capital expenditure cannot be cut further, but need to be increased again to stimulate private sector investment, the government needs to review its current structure and functions and start the debate about necessary public sector reform,” Schade advises.