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Other Articles from The Villager

Mining sector employing less and paying well

01/12/2017
by Kelvin Chiringa
Business

Namibia’s mining sector continue to be the least labour-absorbing but has been hailed for paying better relative to other sectors, associate researcher at the Institute for Public Policy Research (IPPR) Robert Mc Gregor has said. 

In the past two years it has employed 2 to 2.5 percent of the 676 885 Namibia employed persons, much less than other sectors like agriculture which take about 20 percent of the labour force.

“Although it might not be a major contributor in terms of employment, the average wage in the sector is much higher than other sectors,” he said. 

An Institute for Public Policy Research latest report also shows that the sector pays the fifth highest average wage in the country, well over 200 percent of the national average wage.

On the other hand, the report notes that, “The conditions represented in the mining sector are favourable relative to other sectors.”

“Mining is second only to public administration and defense, with regard to the percentage of employees that receive paid leave and fifth with regard to percentage of employees that receive paid sick leave,” the report says.

The mining sector contributed about $N4 billion in inflation adjusted terms, in the 1990s, to the Namibian GDP. 

Fast-forward to 2016, it contributed about N$8 billion after a couple of years of contractions. 

From the 1990s to about 2007, diamonds made up most of the value addition in the mining sector while on average the overall mining sector contributed about 10.7 percent to GDP over the last 26 years.

With the recent contractions, it went to just below 8 percent.

Most of the country’s hard cash foreign earnings are also coming from mining and in terms of goods, diamonds continue to make a significant proportion of the country’s earnings.

“Uranium is also following and over the recent years especially with the introduction of the B2Gold mine, gold has been adding more and more,” McGregor says. 

Diamonds have contributed about 40 percent of the country’s mineral export earnings representingN$12.1 billion, followed by Uranium, Gold, Zink and Copper cathodes. 

Rough diamond prices have not had a robust recovery and prices are still a bit lower in comparison to the most recent years. 

“If you are planning to get married, it’s time to buy a ring,” says McGregor. 

While Uranium prices spiked in 2007, they have been falling since the global financial crisis, and although there was some semblance of recovery in 2010, the 2011 Fukushima disaster sent prices tumbling. 

Namibia can still look to Gold. 

“Gold being a safe haven commodity has done relatively well especially round about the global financial crisis when people preferred to put their money in gold. It is still doing fairly well,” McGregor says. 

In 2015 alone, goods from the mining sector accounted for nearly half of all exports, settling at 47 percent.

“However, with weaker commodity prices seen in 2016, this figure dropped to 41 percent,” says the IPPR report. 

On the commodity prices side, Namibia stands to benefit from copper exports whose prices dipped around 2008 and went on a gradual fall between 2011 to 2015.

“Declining construction activity in China reduced demand for copper causing the price to fall to a six-year low in August 2015. Since then, however, both demand in China and the price have recovered and posted significant gains in 2016 and 2017,” says IPPR’s research associates.

Rough diamond prices performed better in the last year but they are struggling a bit in 2017, says McGregor.