Justicia Shipena
Chamber of Mines of Namibia chief executive officer Veston Malango says a government-funded exploration fund would not be the right approach for the country’s mining sector because exploration is a high-risk activity that should be financed by private investors.
Speaking during a stakeholder engagement by the Namibia Revenue Agency (NamRA) and industry representatives on Thursday, Malango said exploration projects often fail and should not rely on public funds.
“Every time I hear that we are establishing an exploration fund, I get depressed. It is a bad idea because exploration is high risk,” Malango said.
He said government resources should instead go to education, infrastructure and other public services.
“Exploration is basically a gamble. You are in a casino. Why should government be in a casino with taxpayers’ money?” he said.
Malango said exploration remains critical to the future of mining in Namibia, even though it carries high uncertainty.
“Out of a thousand exploration projects, only one may become a mine,” he said.
He said this makes it difficult for exploration companies to raise funding.
According to Malango, many exploration licences in Namibia remain inactive because licence holders are still looking for investors. He said figures previously shared in Parliament showed that about 92% of exploration licences are dormant, while only about 8% are active.
He said exploration is needed to create future mines and keep the sector going.
“Exploration is the nursery of future mines. The sustainability of mining depends on exploration,” Malango said.
While praising Namibia as an attractive mining destination, Malango raised concern about the current tax treatment of the sale of shares, interests and mineral licences.
He said the current tax system is based on the full value of the transaction rather than on profit.
“The big problem is that taxation is based on the transaction value,” he said.
He said companies are taxed on the full transaction value even though they cannot deduct the costs they incurred during exploration.
“The seller cannot deduct the costs they have incurred along the way, and exploration can take more than ten years,” he said.
Malango said this discourages high-risk exploration investment.
He said the tax framework for petroleum licences, introduced in 2015, allows companies to deduct exploration costs and pay tax on profit, which he said is the better approach.
“That is the right thing that you did. We are saying change this to the mining sector as well,” he said.
Malango said the mining industry is not opposed to paying taxes.
“The mining sector is not averse to paying taxes. We are committed to supporting the fiscus,” he said.
He said the tax framework should balance the interests of both the country and investors while recognising that investors take the financial risk during exploration.
“Investors take 100% of the risk. Government takes zero risk when issuing a licence,” he said.
Malango said the sale of shares and interests in mineral licences is a normal part of the mining development process because exploration companies often sell discoveries to developers or mining companies that have the capital to build mines.
Malango said such transactions should be taxed on profit and not on the full sale value.
“Thus, the sale of shares and interests in mineral licences should be subject to taxation on profit,” he said.
“A capital gains tax would be appropriate.”
At the same engagement, NamRA commissioner Sam Shivute urged oil and mining companies to declare and pay tax on share disposals and ownership interests in the sector.
“We are calling for voluntary compliance. We want to build a NamRA that provides service and works with Namibian investors, businesses and taxpayers,” Shivute said.
He said Namibia introduced tax provisions for mining and petroleum share disposals after earlier transactions involving natural resource licences generated no revenue for the state.
“In the past we had cases where shares and interests were disposed of for millions of dollars and the government of Namibia and the people of Namibia got zero from such transactions,” he said.
Shivute said one transaction alone was worth more than N$15 billion and the state received nothing from it.
According to him, NamRA data shows that about 250 mining and petroleum licence transactions have taken place over the past decade, but only about 5% were compliant.
“The compliance rate, as we are seeing, is only about 5%,” he said.
Shivute reminded companies that Namibia operates a self-assessment tax system, meaning taxpayers must declare taxable transactions themselves.
“If there is anything that you are not clear about or how a tax treatment will be done, you can write to us and get a tax ruling which is binding,” Shivute said.
He said companies should use the opportunity to settle outstanding tax obligations before the tax amnesty programme ends on 31 October 2026.
“Remember that the amnesty is coming to an end. Voluntary compliance will help,” Shivute said.
The stakeholder engagement aimed to improve understanding of the tax rules on share disposals in the mining and petroleum sectors and to allow industry players to raise concerns and seek clarification.
