The Minister of Mines and Energy, Tom Alweendo says that local ownership must start with the state, in whose ownership of the country’s natural resources is vested. The proposed State ownership should take the form where the state owns a minimum equity percentage in all mining companies and petroleum products for which it does not have to pay.
This comes after several Members of Parliament questioned the exploration and ownership rights of foreign investors in the country and not Namibians.
“If we agree that local ownership is so important – and we do agree – and we also argue that perhaps awarding exploration rights to those without the ability to carry out exploration is not the right way to incentivize local ownership, how then do we resolve this conundrum? What must we do to ensure that in the long run, we have local ownership in the exploitation of our minerals and petroleum resources? Alweendo argued.
Should it be desirable for the State to have ownership above the minimum ownership percentage, the State should also be allowed to acquire more equity at a cost. Alweendo says this is the most practical way to resolve the issue of local ownership.
Another important issue in relation to state ownership he said, is to establish the level of ownership that is agreeable to both the State and the investors.
“What is the appropriate percentage of the free carry State ownership? Is it ten percent; 20 percent or perhaps 50 percent? Whatever percentage is deemed appropriate, the most important thing is that we deal with this sober-mindedness. We need to be mindful of the fact that there is a level above which no investor will invest in a situation we clearly do not want to find ourselves in. It is said that a bird in hand is worth two in the bush”, said the quipped.
Additionally, another way how to incentivize local ownership, he argued, is to establish a state-funded minerals exploration Fund, which could be funded by a portion of the royalties that mining companies pay to the State. The Fund will then be used to assist eligible local entrepreneurs who wish to invest in the mining sector.
Furthermore, awarding exploration rights to someone who has no capability whatsoever to do exploration, Alweendo viewed it as tantamount to denying citizens the potential economic benefits to be derived from the country’s natural resources. “If we award exploration rights to someone who is not able to do exploration, no exploration will take place and without discovery, the minerals will remain in the ground and will have no economic value to the country”. He added.
Another point he emphasized is that awarding exploration rights to those without the necessary capability has a real potential to lead to unethical behaviour from not only the officials responsible for licensing but also from those who are being licensed. He further stated that issuing exploration licenses to anyone who applies for them, “you would create a situation where there are more applicants than there are opportunities. The dilemma you will have is how to decide whom to give the exploration rights to and using what criteria. What you would have done, albeit unintentionally so, is created a moral hazard for both licensing officials and those seeking licenses to conduct themselves unethically” the Minister argued.,
The minister is convinced that his ministry has empirical evidence that those awarded exploration rights without the requisite capability to do exploration have created a trading market for such rights, selling the rights to the highest bidder. This is tantamount to auctioning exploration rights, except that the revenue so derived does not accrue to the State, but to the few individuals who were lucky enough to acquire such rights.
However, auctioning the exploration rights is seen as the best system,. A High-Level Panel on the Namibian economy which was appointed by President Hage G. Geingob, in 2019, made a recommendation to auction minerals exploration rights.
“We are busy with the review of the Mining Act and auctioning of exploration rights will be made an option, where auctioning is deemed to be the better option”, Alweendo noted.