Paul Janisch

Namibia and mining and nationalisation and Malema doesn't even get a mention (must piss him off completely)

The most recent case of resource nationalism in Africa occurred last week in Namibia, the 4th biggest uranium producer in the world. Its ‘friendliest mining regime’ image evaporated on April 21 when the Minister for Mines in a budget speech in the National Assembly, somewhat out of the blue, stated that the Government’s mining company, Epangelo Mining (Pty) Ltd., will alone have all the exploration and mining rights to ‘strategic minerals’—uranium, copper, zinc, gold, and coal. On April 28, the Cabinet endorsed that position, further elaborating that the government would take-over uranium mining to ensure Epangelo participated in the industry fully. Namibia’s stance of course pales in significance to Robert Mugabe’s planned confiscation of 50 per cent foreign mining companies.

The increase in nationalist rhetoric in Namibia is not unconnected with the rising budgetary shortfalls, growing poverty and high youth unemployment, problems that will supposedly be solved through a ‘black economic empowerment’ (BEE) in mining. Government’s Transformational Economic and Social Empowerment Framework (TESEF) has yet to be finalized, but BEE advocates are borrowing from South Africa where BEE has compelled mining companies to guarantee 15-25 per cent black equity ownership and management in the sector, resulting in denunciation that the policy has only fostered a small black elite indistinguishable from their white counterparts.

Although the Namibian mining minister later assured that the new policy will not affect current mining licences, exclusive prospecting licences (EPLs) and mineral deposit retention licences, mining companies in operating in Nambia, such as Palladin, Bannerman Uranium Co., Auryx Gold and Forsys Metals have at least 10 per cent of their value since last week. The worst hit seems to be Extract Resources, whose plan to build one of the world’s biggest uranium mines at its Husab project east of Swakopmund may be in jeopardy. Trading in the company’s stock on the Australian Stock Exchange was on Monday halted at the company’s request due to uncertainties regarding China Guondong Nuclear Power Corp’s (CGNP’s) interest in acquisition Kalahari Minerals, Extract’s biggest shareholder. Husab is the largest uranium mining project in the world that could make Namibia the world’s largest producer of uranium upon completion.

via www.businessdayonline.com

Must be a bad move.  But look at the underlined section - again this type of state control is viewed as some sort of get-out-of-poverty panacea.   Totally misguided - even our esteemed mining minister has seen the mess that this has caused here. 

the Namibian: Govt pockets all rights to mine uranium

Govt pockets all rights to mine uranium (with my comments in italics)

(the Namibian) CABINET has declared uranium, copper, gold, zinc and coal as strategic minerals to allow the State-owned Epangelo Mining Company “exclusive exploration and mining” rights, Mines and Energy Minister Isak Katali told Parliament yesterday.

Katali said Cabinet recently approved a submission in this regard “so that the Namibian citizen can fully reap the benefits arising from the rich endowment of our mineral resources”.

Oh - but isn't this what we are doing (SA that is)

Mining last year contributed about 15 per cent to the country’s gross domestic product and its export earnings were more than half Namibia’s total export revenue. Namibia recently retained its position as the fourth biggest uranium producer in the world.
Katali said his Ministry’s priority this year will be to finalise the Minerals Bill and minerals policy to allow Epangelo “to fully participate in the exploration and mineral development” in the country.

Yes - this is exactly what we are doing.  Oh well

Katali also said Government is fully aware that black economic empowerment (BEE) is abused by some to make “phenomenal amounts” of money.
He said some BEE companies are “fronting”, a practice where foreign companies use local empowerment companies to clinch deals. The Minister said he also knows of BEE licensees “selling out” exploration licences as soon as they are granted them.

This type of legislating is fundamentally anti-capitalist (which is not a good thing).  People invest for a return, get the return and then move on.  Legislating for black people to retain their ownership is counter-productive.  PLEASE don't make the same mistakes South African has made - you really don't have to!!!!!!!

The Minister also told Parliament that as soon as Government’s Transformational Economic and Social Empowerment Framework (Tesef) is finalised, BEE charters for the electricity, petroleum and mining sectors will be implemented to ensure that previously disadvantaged Namibians benefit.

We are now seeing the shape that TESEF is going to take.  Somewhat similar to ours with industry charters (they have an approved financial services charter).  

“I am happy to announce that the mining charter is at an advanced stage of completion and will be gazetted as soon as all the steps are conducted,” he said.

Let me guess, it's going to be like SA's - you know legislated and not a voluntary thing.  SA's is a mess and will not achieve the targets that it has set because it's not reasonable.  As David Crosby once said - don't do it man.

via www.namibian.com.na

TESEF - Namibian Govt BEE policy implemented this year.

SEVEN years after the Government ordered a black economic empowerment (BEE) policy for the country, Namibia is finally set to start implementing the Transformation and Empowerment Socio-economic Framework (Tesef) this year.

According to the latest Medium Term Expenditure Framework (MTEF), tabled in Parliament by Finance Minister Saara Kuugongelwa-Amadhila last week, 25 per cent of Tesef must be implemented within the private and public sectors by 2011-12. For this, the Minister has budgeted N$2,1 million until 2013-14, equally spread as N$700 000 over the next three years.
The BEE expenditure is motivated as “broader empowerment levels through Tesef especially by historically disadvantaged [men] and women”.

The various BEE components will translate into points for an eventual scorecard to be scrutinised by a Tesef Measurement Secretariat, which will be overseen by a Tesef Governing Board. Companies have to register there for Tesef compliance and to obtain their scores.

via www.namibian.com.na

It would seem that Namibia is not going to go the independent verification route.  I think this might be a bad mistake - government departments the world over are rarely as effecient as the private sector.

Caird’s letter to the Prime Minister of Namibia, HE Nahas Angula regarding TESEF

(Betcha you didn't know I could be this formal).

I am writing to you, not as a citizen of Namiba, but as a keen observer of the South African broad-based black economic empowerment system. I have been eagerly awaiting the publication of the final TESEF document and would appreciate the opportunity to discuss a few aspects of the South Africa B-BBEE system that might assist TESEF in its ultimate success.

1. Identifying the underlying reasons behind B-BBEE

If recent civil unrest over service delivery and unemployment in SA are indicators then they must be pointing to the fact that South Africa needs to address these critical areas. B-BBEE does make reference to these issues but they have got lost underneath the narrow-based notion of ownership that still persists and is a fundamental driver within the public sector. South Africa (and judging by your draft document, Namibia) needs more jobs and a more skilled population. It almost appears that for SA is too late to steer the focus towards this.

A new wave of black intellectuals are now rejecting the notion of 25% ownership of a business and advocating 100% black ownership in key areas (minerals, financial services etc). South African had great success in this field during the Apartheid years where the government insisted that the Afrikaners should own certain aspects of the economy (a policy of volkskapitalisme). South Africa desperately needs this – a new financial institution that can adequately compete with other large intuitions' would have a huge impact on job creation and competition. (I am aware of the difficulties of achieving this – but the methods to achieve this have not yet been exhausted).

1. Transformation should not be enforced via a stick method. Carrots should be offered

The need to transform is often forgotten and when targets are not achieved the South African government threatens to opt for a stick approach. People by their very nature are acquisitive and as such tend to perform better when they can derive some benefit from the process. A tax rebate system (for instance for those companies that achieve the 30% target of production spend on labour) is one of the most effective methods. There is little doubt that if a rebate is offered then the transformation process will operate more effectively. Admittedly a programme like this is open to abuse – but if such a rebate is offered then it is the responsibility of the company applying for the rebate to adequately prove that they qualify for it.

1. Building on preferential procurement

The preferential procurement element is the cornerstone of BEE's adoption in South Africa. The consistent requests for BEE scorecards over the last five years has seen a large number of companies producing some form of BEE scorecard. The preferential procurement element however falls short in understanding human spending patterns. To a large extent it is a lone voice in the drive to stimulate local production. A greater harmonisation between importing tariffs, production stimulation and other types of legislation will make this a success. South Africa is trying to achieve this with the draft industrial policy action plan (IPAP).

A solution might be a relaxation of preferential procurement requirements where jobs or skills are created.

1. Celebrating successes

Transformation is a process and each step needs to be analysed and where there is success then it should be noted. This is sorely lacking in the South African context – our politicians seem to be more at home criticising the process as opposed to recognising the successes it has achieved (and there are many).

1. Public and private sector involvement

At present the South African public sector does not appear to have the legislative support to actually implement BEE. The drafters of the legislation seem to have omitted to take this into account. As a result the transformation of South Africa's economy seems to be driven by the private sector in isolation. Any far-reaching policy must have mechanisms built into that allow for all stakeholders to participate.

 

I wish you the best of luck with this process and will be watching it keenly – Namibia is in the best position to make a truly meaningful contribution to the African transformation process.

 

Paul Janisch

TESEF fest? In other words Namibia’s BEE codes are coming

Ndaambe Haikali, a banker from Namibia, very kindly sent me a notice that is circulating on paper (not on the internet). It's called "Have your say on TESEF" and invites citizens to  submit comments before the 15^th of July this year. They have committed to launching this programme sometime next year.

The document makes for interesting reading because it tells us (those of us who don't know that much) a fair amount about the Namibian economy. For instance 75% of the national productive assets are owned by 25% of the population, foreign multinationals and absentee foreign owners. When you read through the document you'll get a sense that TESEF (Transformation of Social and Economic Empowerment Framework) is very much about trying to give Namibia back to the Namibians. It is this process of Namibianisation that underpins the whole strategy.

Namibianisation in itself is nothing new – it's been around for many years and was mostly felt in the allocation of fishing rights. It is defined as "a process to encourage the active and greater involvement, participation and benefit of Namibians - especially of Namibians previously excluded (during the Apartheid regime) from the fishery sector. Incentives are offered to companies that are at least 51 percent owned by Namibians (e.g. quota levies, long-term fishing rights)." This same concept is a constant across other charters – the Namibian Financial Sector Charter being one example.

The drafters have followed the basic guidelines of South Africa's broad based BEE but have set a longer period to achieve these targets – a total of 35 years. What isn't very clear from this document is whether the time period is 35 years or whether the cut off date is 2035. Anyway by 2035 the TESEF process should have produced 60% of the population as middle class, 20% upper middle class and 20% lower middle class. 

35 years is a long time - a regime change could negate the entire process. 

TESEF has six elements

  1)    Ownership

Target is 80% in the period 2029 – 2034. 20% must be achieved in the next 5 years.

2)    Management

Very similar to South Africa. The difference here is that I sense that Namibianisation includes ALL Namibian citizens, not specifically black ones.

3)    Employment equity

They have suggest a target of 30% of production costs to be spent on labour. Not much else is explained here but at face value this is a scary target. Hopefully they'll tie this in with skills development to try and create a skilled labour force.

4)    Entrepreneurship development

This incorporates preferential procurement. At least 30% of procurement should be allocated to businesses owned by PDIs (yes they use that term too and define it as "victims of former apartheid policies") within the next five years (probably up to 2016).

As an aside - the biggest problem with South Africa's preferential procurement is that it wants local procurement but there is no real harmony between this and import duties and the like. In other words local production should be used even if it costs more than importing the same product. In a consumer market this just won't work. If Namibia is to achieve a similar goal then it must try to encourage value-added production. I know that the Fishing Rights programme has tried to address this.

5)    Human Resource and Skills Development

A target of 2% of turnover for skills development is very high. The only SA BEE code that I think that was properly thought out is the skills development code. The emphasis on learnerships has the greatest potential for the economy. There is talk of a Training Levy in Namibia, which is probably similar to our Skills Development Levy.

6)    Community development

No transformation or social upliftment programme can exist without this. It looks like they are going to make this a tax (2% of a wealthy individual's estate should be invested in community development) for other corporates it is 2% of profit (the type of profit is not  specified). That is not a good idea – community development is a voluntary thing and should stay like that. The introduction of BEE has seen a lot more giving in South Africa than before. Corporates are really getting behind this. I had a little debate with Kevin (holding onto confidential documents) Lester yesterday.  He is in two minds about this tax – referring to the Lotto money being distributed. I am completely anti the idea of a government distributing money to charities. Especially our esteemed government.

Government officials appointed as members of the Namibia Financial Sector Charter Council

Found this on the Republikein Online website.

THE Namibian financial sector, in consultation with Government, has been engaged in sector-wide consultations for the past few years with the aim of formulating a Charter for the sector. It has been agreed that the Charter will apply to all financial institutions, except SMEs as defined in the Charter. The Charter provides the framework for transformation and economic empowerment in the sector.

The Charter’s objectives are:

• To enhance the growth and development of the Namibian economy;
• Achieving broad-based transformation of the financial sector;
• Promoting Namibianisation of enterprises in the financial sector;
•  Maintaining high standards of corporate governance in the sector. The Charter is a sector-wide consensus code of conduct for transformation of the Namibian financial industry. It sets out targets, the implementation process and mechanisms for review, monitoring and annual reporting of progress over the next ten years

The Charter is effective from 29 May 2009 and will remain valid until 31 December 2019. I can't seem to find a copy but other articles have listed other priorities as

• offering sustainable and affordable financial products and services aimed specifically at, and appropriate for, lower-income households
• addressing a number of important aspects like human resources development, affirmative procurement, access to financial services, empowerment initiatives financing, and the participation of empowerment groups in the ownership of financial institutions

If anyone has a copy of the charter I would really love to have a look at it. 

On the subject of a FSC - I have heard that certain concessions have been made over the last month or two and that our FSC might still have a little life in it yet.

Namibia's mining charter mooted

This comes from a recent Namibia mining report that you can buy for $500 US.  Or you can read the summary here.

In May 2009, there were fresh media reports that Namibia is thinking of following the lead of South Africa and introducing a mining charter, designed to increase black ownership of mineral assets. South Africa's legislation, introduced in 2004, compelled mining companies to sell a 15% stake in mining assets to local black investors by 2009, rising to 26% by 2014.

Namibia's BEE is getting closer - so they say

Namibian Mines and Energy Minister Erkki Nghimtina announced that Government was nearing completion of the long-awaited Transformational Economic and Social Empowerment Framework (TESEF) that would compel mining companies to empower communities within which they operate.
Addressing an annual general meeting of the Chamber of Mines in Windhoek a fortnight ago, Nghimtina said TESEF would compel all licence applicants to “clearly and convincingly” show their commitment to empower previously disadvantaged Namibians.

It's been mooted and discussed for a long time.  Certain mining companies in Namibia have developed their own BEE charters in anticipation of  TESEF.  Perhaps we had to wait for the elections?