Government raked in a whooping N$956 million from mining taxes and royalties latest statistics from treasury shows.
However the income is a shade lower than the 2012/2013 financial year.
Out of the N$956 million, a total of N$663 million (69.3%) was corporate income tax and N$293 million (30.7%) was from royalty tax of which 98.9% (N$655.3 million) of the corporate income tax was accrued from diamond mining companies.
Uranium, zinc, gold, copper, fluorspar and manganese mining accounted for the 1.1 percent (N$7.5 million) of the total mining corporate tax revenue.
Minister of Finance, Sara Kuugongelwa-Amadhila said the key driver for better revenue from diamond mining is the high value hence better prices of diamonds relative to other mineral products, adding that other main revenue sources from the sector are Pay as You Earn (PAYE) and Value-Added Tax (VAT)
“The slowing global demand for mineral commodities, especially in the major export markets such as China, exerts further downward pressure on commodity prices which negatively impacts on sales and profitability,” said Kuugongelwa-Amadhila.
Generally, tax income from the mining sector, especially for diamond mining has been increasing, reflecting the better price effects as well as the production volume effects.
Despite the price differentials between diamonds and other mineral commodities, the combined effect of depressed commodity prices and high cost of operations lead to less taxable income for other mining companies.
Kuugongelwa-Amadhila further stated that the total royalty tax from the mining sector for 2013/14 amounted to N$293.2 million and 36.8% (N$108 million) outturn was from the diamond royalty tax; an unusually low outturn relative to the previous years due to a relatively low production this year.
“This may be due to production levels realised during the year. In previous years, diamond royalties as a share of mineral royalties amounted to more than half of total royalties. Other mineral royalties usually contribute less than half of royalty tax, mainly due to the relatively low value of other minerals. However, with more new mines expected to come on line in these subsectors, royalty payments are expected to rise,” she said.
She further noted that according to the 2013 National Accounts indicators, investment in the mining sector as a share of total investment was significantly high, as it stood at 43% in 2013 due to new projects completed.
“This is significantly higher than the stock of investment realised during the previous years, which averaged 23% of total investment,” she noted.
Currently, the value of mineral exports as a share of total exports stood at over 30% of total exports during the last seven years, making the mining sector the main export sector in the Namibian economy in terms of value.
The Chief Executive Officer of the Chamber of Mines, Veston Malango added that there was a price increase in Uranium per pound as it increased to N$448.40 per pound (US$40) in 2014, mainly as a result of a shortfall in supply from the supply cutbacks.
This presented an increase of N$44.92 from February as the price was N$403.56, despite the ideal price per pound being between N$739.86 (US$66) and N$784.7 (US$70) per pound.
However, in the second quarter of 2014, Uranium prices continued to decline, averaging at N$334 (US$29.8) per pound compared to the average price of N$393.4 (US$35.1) per pound. In the corresponding period of 2013, the price was N$456.17 (US$40.7) per pound.
Malango further noted that according to figures from the Namibia Statistics Agency (NSA), the mining sector grew by 6% during the second quarter of 2014.
“This is despite the depressed commodity prices particularly for uranium during this time. The uranium price, however, has since increased to U$40/lb as at 28 November 2014,” said Malango.
He added that the Mining Industry’s contribution to the Gross Domestic Product was 13%; however they do not have recent information as their financial year lapses in March 2015.
The mining sector accounts for an average of 12% of GDP during the 2007-2013 periods. The sector’s contribution has been increasing during the last three years, reflecting increased investment and output from the sector.
“This increase is largely attributed to a rise in revenue generated by the mines in 2013, through increased production,” he said.
The recent figures also show that despite efforts by the Government to diversify revenue sources mining still remain the country’s cash cow. The Government has been on a deliberate move to tap into other revenue sources in a bid to cut down on heavy reliance from the Southern African Customs Union and the extractive sector.
According to Kuugongelwa Amadhila in her previous fiscus policy announcements reliance on the mining sector might not be sustainable for the country in the future.