Possible bribes gives Xinfeng upperhand

Obrien Simasiku

Mines and Energy Minister Tom Alweendo has somewhat acknowledged that, Chinese owned Xinfeng Investment (pty) Ltd, which is embroiled in a bribery scandal amounting to N$50 million in order to land a lucrative lithium mining licence, duped the ministry into their mining operations by circumventing procedures seemingly with the help of the officials.

The company was not honest when it said it will only begin mining activities in 2024 after building the processing plant, but instead started immediately after being issued with a mining licence and subsequently an export permit this August but that was just supposed to be for purposes of exporting crushed ore for testing to determine what mineral were available, and the type of plant to construct. In addition, Alweendo says officials naively facilitated these processes of issuing export permits, without specifically agreeing on the amount to be exported, hence in the absence of that Xinfeng was being issued with permits as much as they desired.

Alweendo said this in the National Assembly said today, as he sought to pour water over the matter which has become a hot potato in recent months due to the controversial operations and the manner in which the Xinfeng acquired its mining licence. As it stands now, Xinfeng has exported 75 000 tonnes of ore from its mining areas situated between Omaruru and Uis, Erongo region, despite reports that the company was only supposed to export slightly above 50 000 tonnes of mineral ore for testing purposes in China. The minister in his update which comes following a public outcry, says he last Friday visited the mining site as well as the Walvis Bay harbour to verify the quantity that the company has stored and waiting to be exported.

“We appreciate the public’s concern given that the mining sector is one of the most important sectors of the economy. The sector’s contribution to the GDP ranges between 10-15%. In 2021, the total company tax paid to the Treasury was N$7.6bn of which N$2.3bn (31%) came from the mining sector. It is therefore justifiable that the public expects us to be better stewards of our minerals. It is only right that the public demands that we manage our mineral resources in the best interest of the current and future generations.”

“As part of their mining license application, the Company has also stated that before they invest in a processing plant that was to be constructed in 2024, they would need to export a certain quantity of crushed ore to their processing plant in China. This was necessary for them to make further analysis of the ore and then decide about what kind of a plant they needed to build. For this they needed an export permit, to be issued by the Mining Commissioner as per Section 127 of the Mining Act.”

“Regrettably, however, the Ministry officials responsible for the administration of export permits, neglected to agree with the Company as to the total quantity of ore that was needed to be exported for testing purposes. As a result, the Company applied for export permits as and when they needed to export, and the permits were issued. As of to-date, the company has been issued with export permits totaling 135 000 tons of crushed ore. Of the total tons, 75 000 tons have already been exported and the remainder is still to be exported,” said Alweendo, as he cleared the air over concerns that the company was still transporting ore for export to the harbor despite being ordered to stop.

After the fact finding, Alweendo says, the Ministry has agreed with the Company that what still needs to be exported based on the issued permits must be exported by 29 November 2022. “It must also be noted that the Company has paid a royalty of N$2m for the 75 000 tons so far exported.”

“It goes without saying that the 135 000 tons is an unreasonably high quantity for testing purposes. The only fair conclusion one can make is that the Company decided to export crushed ore, not only for testing purposes, but also to make an income for its operations,” he reasons.

Xinfeng was awarded an Exclusive Prospecting License, EPL7228 in October 2021. This is the controversial licence being linked to bribes to Alweendo’s former technical advisor Ralph Muyamba and former mining commissioner Erasmus Shivolo, who allegedly colluded, circumvented and convinced the minister to award the EPL to Orange river mining, a company owned by Muyamba’s cousin Peter Shifwaku. The EPL first belong to Karlowa Mining Enterprises, which was fighting tooth and nail to have the licenced returned to it. The licence was not renewed upon expiry last year on grounds that the company did do much activities hence it was incapable. Shortly after that, it was immediately issued to Orange River Mining.

Shifwaku had admitted to a local media daily a fortnight ago that he indeed sold his licence for N$50 million, but denied that there were any bribes and favouritism involved, arguing that it was a genuine and normal business transaction. After the conclusion of the transactions, in August 2022, Xinfeng applied and was awarded a mining license, ML243, over part of the area covered by the EPL7228.

“In their application for a mining license, they indicated that they have a resource estimation of 8 million tons of ore, with an estimated lithium content of about 1%. They have also indicated that they will start with the mining operations in 2024 after they have built a processing plant. Surprisingly though, the Company started its mining operations soon after they received their mining license,” reiterates a shocked Alweendo.

Weakness

“The recent allegation of the N$50m bribe paid to some officials in the Ministry to award an exploration license inappropriately has spotlighted a potential weakness in how exploration applications are evaluated and eventually awarded or declined. Over the years, a trend has emerged where exploration rights are awarded to applicants that have not proven any serious intention to do exploration. For some applicants, the main reason why they apply for exploration licenses is not so much to do exploration but rather to trade with the licenses once awarded,” he says.

Tightening

Following the discovery of loopholes and manipulation in the system, the minister says they are now strengthening the requirements for one to land an EPl through the introduction of an array of requirements to satisfy capabilities. “To address this challenge, we have strengthened our exploration applications evaluation methodology consistent with the mining legislation. Each applicant will be required to provide us with a detailed exploration program. The exploration program must also be accompanied by a commensurate exploration budget and the details of appropriately skilled personnel that will be carrying out the actual exploration activities.”

“We are well aware that this will not be appreciated by all who wish to participate in mineral exploration activities. Some will argue that demanding that applicants prove their abilities to do exploration will disadvantage previously disadvantaged Namibians resulting in a situation where only foreign companies will be awarded exploration licenses. The unfortunate truth is that it is the very Namibians that continue to sell their licenses to the foreign exploration companies,” said the unrepentant Alweendo.

He adds this on the premise that, if the current practice goes unabated, “it has a ruinous effect on the long-term mineral resources development.” “One of the unintended consequences of this practice is that you create a parallel market for trading in exploration licenses, where huge amounts of money is exchanged. This in turn has the potential to create incentives for Ministry officials to be bribed to award licenses inappropriately. Another unintended consequence of awarding exploration rights to those that are not able or not intending to do exploration, is the delay in discovering minerals. It results in a situation where applicants are hoarding land,” he stresses.

By Observer