Namibia mulls minerals windfall tax

Windhoek – Namibia will consider introducing a mining windfall tax, a system under which government levies an additional tax on profits from mining companies. Mines and Energy Minister Isak Katali told mining executives attending the Mining Expo that the country is not benefitting from its mineral resources. Levying an additional tax on profitable mining companies would ensure that the country benefits more from its vast mineral resources through an expanded revenue base, he noted. The government a few weeks ago announced that all future mineral rights in copper, rare earth metals, diamonds, uranium and gold would be mined by state-owned miner, Epangelo Mining. Katali said Namibia’s Chamber of Mines should outline proposals to government on how the state can increase revenues from the sector. “It is my view that as the custodian of the mineral resources, the state should also benefit in good times beyond normal taxes and royalties. In bad times, it is the same government that the industry will look to, for measures aimed at protecting and supporting the industry to weather the storm until good times are back again,” Katali said. He pointed out that government wanted to end the situation where it has remained a rent-seeker in the mining sector. Faced with a shrinking revenue base due to shrinking income from the Southern Africa Customs Union revenue pool, Namibia is hoping to ride the commodity price circle through additional levies on the mining sector. The widely held feelings in government are that Namibia has not benefitted from the country’s natural endowment. Minerals windfall tax was introduced in Zambia, Africa’s top copper producer in February 2008, making companies pay 25 percent on the value of copper above US$6 000 per tonne. Zambia argued that it wanted to beef up state revenue to finance health services, job creation and general improvements in the livelihoods of Zambian citizens. Mining costs are fairly fixed and mining analysts say that companies only pay the extra tax when they record a profit. But under pressure from mining companies, the Zambian government scrapped the windfall tax and has since ruled out its return. In Zambia’s case, some mining companies threatened legal action against the government, which they argued had abrogated development agreements it signed with the firms to maintain low taxes. Namibia has said it is amending its minerals laws to empower Epangelo Mining. The country’s Mining Charter, which is aimed at providing a platform for broader back economic empowerment should be gazetted soon, Katali said. “I am committed to having the Mining Charter gazetted as soon as possible,” Katali said. London-listed Vedanta Resources wholly owns Skorpion Zinc Mine and Refinery, which produces 150 000 tonnes per year Special High Grade (SHG) zinc. Weatherly International Plc. mines and copper and zinc in Namibia. JSE listed Exxaro Resources owns a 50.04 percent stake in Namibia’s second largest zinc and lead mine, Rosh Pinah. Namibia accounts for nearly 10 percent of global uranium supply. The country is also renowned for its quality marine diamonds.

May 2011
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