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Mining industry worries over high taxation

Mon, 4 July 2016 17:48
by Donald Matthys

Mining Giant, B2Gold Namibia this week informed The Villager that excessive taxation and bureaucracy is an obvious manifestation as an investor repellent in the country’s mining sector.
Challenges experienced by the mining sector also include access to capital, cost efficient access to water, cost efficient access to power and skills and expertise including industrial relations.
“If a resource cannot be extracted it is valueless. Exploration, project and capital costs of mining are extremely high, and are nearly always far more than national investors can raise alone. This is not only the case for Namibia but most countries. The global investment market is hence critically important and direct foreign investment is the key which unlocks the value of the resource and allows projects to become a reality,” Kaanduka Nghipandulwa, Public Relations Coordinator at B2Gold told The Villager.
He, however, added that it is not just the value of the commodity itself but also employment, support industries, skills development, social investment adding that with investment many things are possible but without it, the opposite is true. Namibia benefits enormously from the mining sector but Government taxes, royalties and levies are generally believed to be high by global standards and risk driving away investment. Meanwhile, gold mining has contributed about 37% on net revenue towards corporate tax, while royalty payments contributed about 3% on gross revenue, and 1% of the value of the goods exported was contributed towards the export levy.
“Most investors seek to balance risk against financial return and simply put, the better the return and the lower the risk the more likely the project will be successful in attracting development funds.  Throughout the world many projects which have been excellent in their own right, failed to become a reality because of factors such as war, political instability and corrupt administrations. Since the Global Financial Crisis of 2008/2009 investment markets have been risk averse, and the lack of (and hence raising of capital) has been challenging,” Nghipandulwa said.
Gold production in 2014 weighed 2,140 kg, while the gold exports in the same year weighed 2.205 kg valued at N$956 724 624. Gold production in 2015 accumulated about 6,009 kg, while exports weighed 7,576 kg to the export value of N$2 968 586 371. The boost to production and revenues generated rose when the Otjikoto Gold Mine came into full production in early 2015.
Touching on the environmental aspect, Nghipandulwa said responsible modern mining companies put their focus not only on their core business but also on how they conduct business. He added that B2Gold Namibia has a very strong corporate social responsibility program which injected millions of dollars into communities and projects even before mining had commenced (before the mine was cash positive).
“B2Gold Namibia does not market gold directly to the broader retail market, all gold mined is sold to Rand Refinery. This is after it has been refined as far as possible on site. Doré bars are produced by the mine and this is further refined into gold bullion by Rand Refinery. The costs of the plant and equipment needed to refine gold to the final state of 99.9% purity are extremely high, and even with 2 mines in Namibia it would not make economic sense to attempt to establish a refinery. Many mines are needed to justify a refinery, and hence gold from all around Africa and even from outside Africa is sent to Rand Refinery,” he said.
With the establishment of Namibia’s second gold mine, the Otjikoto Mine (Karibib being the first), gold mining is no longer viewed as anomalous to Namibia’s extractive industry. Even though there is a rise in gold mining in the country, miming companies are having a hard time attracting investors to make funds available for exploration and developing projects.
“Not only do they usually have a number of different industries and sectors to choose from but also different countries and different projects within those countries; and in the current global economic climate investors are somewhat spoilt with the number of choices available to them. For a project to receive the investment necessary to develop it, not only must the project itself be attractive but so must the country in which it’s hosted as well as that political regime in the country,” he said.