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Money for nothing


by Chief Writer Tirivangani Masawi
News

 

 

Some companies listed on the Namibia Stock Exchange (NSX) are reaping massive profits every year even though they are not operational prompting Government to moot a bill that will curtail the practice.
Most of the companies especially in the mining sector make it difficult for Government to plan when they do not start operations for periods of up to 10 years after getting licences while making millions in untaxed earnings from the local stock market and benefiting from tax holidays.
Among the companies are Otjikoto Gold Mine Projects and Ramatex both which reaped huge profits that were siphoned off overseas while creating no employment or benefiting the country.
In essence there about 17 uranium companies exploring in Namibia with only two, Langer Heinrich and Rossing Uranium doing actual production while about eight of those companies are already making millions in shares from the equities market.
To put an end to the practice, Government is planning to ambush foreign direct investors in the mining sector who fail to start operations in time by a legislation that allows them to tax the companies from their stock market earnings, according to the deputy minister of Finance, Calle Schlettwein.
“We have realised that we have been losing out to companies that make promises upon receiving licences that they will start operating within a certain time-frame but fail to do so and instead, bargain for share prices on our stock market.
“We are working on a tax amendment based on our resources in order to get our share. On the other hand, we should not engage in ways that would make it difficult to have foreign direct investments (FDIs),” said Schlettwein.
If enacted, the legislation would force companies across the board to start production and create jobs as per their prior engagement arrangements with Government upon license approval.
The legislation, Schlettwein noted, will also give Government an opportunity to accrue maximum benefits from its resources.
However, he could not give a definite period as to when the country will see such a law, rather, he emphasised that prior consultations have been made.
The deputy minister said Government wants to accrue its share through introducing taxes in cases where it feels it has not been given an opportunity to accrue benefits and this will also come with a steep tax introduction on mining companies that ship out raw materials with minimum value addition.
“We have not really done much in terms of cutting down on our exportation of capital by both those companies making money on the stock market and those exporting raw materials, so we need to come up with mechanisms that would give us an opportunity to get more.
“I think when it comes to transformation; we have not managed to create value in the secondary sector. We are still heavily reliant on the primary sector. We want to get our share through taxes and export levy on raw materials. If we can’t add value, then we must get as much out of it as possible by stimulating the SME sector, for instance,” he said.
Although Schlettwein could not give a definite figure on how much Government loses through share market bargains, he noted that cumulatively, the country could be losing billions of dollars in revenue.
He also asserted that the problem of companies not operating while holding licences and instead bargain for stock markets shares makes it difficult for the country to narrow in on runaway employment now hovering at 51% of the economically active population.
The idea comes a week after the mining commissioner; Erasmus Shivolo took a swipe at the Otjikoto Gold Mine Project owners for taking long to deliver on their promise of starting a mine within 10 years while milking millions from share sales at the NSX.
With that in mind, Ramatex, which was arguably the largest textile company in the region, also fooled Government by operating for five years under a tax holiday only to dump the country after their five-year tax exclusion had lapsed, leaving hundreds of employees on the streets.  
“Government cannot wait anymore until the day it sees the initial operations of this mine. It is very frustrating for the National Planning Commission (NPC) that has to plan the economy based on a foreign company’s promises; the Ministry of Finance that expects revenue from their operations and the Ministry of Mines that would have given them the licence expecting them to operate and create employment,” said Shivolo when B2Gold listed as the 64th company on the NSX last week.
Otjikoto Gold Mine Project was sold to B2Gold almost 10 years after acquiring the licence and before going into production but was operating on the NSX, making money for its overseas shareholders while giving nothing to Government.
In most cases, companies that list on the stock market upon announcement of their bids to get into a country for investment’s sake, make a lot of money as their share prices get a boost on both the global and international markets.
NSX chief executive officer, John Mendy and listing manager, Tiaan Bazuin agree that in most cases it takes longer for companies to start operating fully and that most companies that come to Namibia have not been outright mine builders but explorers.
“The actual issue is that most companies contribute to the country in general by paying import tax for bringing their goods here and they also employ Namibians. There is nothing much that Government loses but I am not too privy to the contents of the bill being crafted so I will not be able to contextualise the issue.
“In the case of the Otjikoto Gold Project it is important to note that for the first time the owners that are there now B2Gold are mine developers not explorers meaning that the company could finally start operating,” said Bazuin.
According to him, the major setback in the uranium mine developments was caused by fluctuating prices.
“Imagine that during the time for the uranium rush, the price was at US$100 and currently it’s at around US$55 so in most cases these things also affect decision-making on whether one would start a mine or not. Imagine you go to a bank and say you are developing a mine. You expect it to be profitable if the price is; let’s say US$80 but when the current price is lower than that then you will not get the loan from a bank because it’s not profitable.”
Bazuin and his boss also emphasise that the companies that are dual listed on the NSX actually help in making the shares accessible to Namibians as compared to buying shares from a foreign country.
“It is important that these companies are dual listed here but we must also understand that for example companies that are exploring for oil here might not really find something but they would have already invested their money in the country,” said Mendy.