The mining sector is a significant contributor to economic growth in Namibia. The country's long-term economic and social development framework and strategy study, Vision 2030, which sets the direction for Namibia’s economic and social development, supported by the government’s national development plans, confirms the government’s recognition of mining as a material sector in contributing to the achievement of its policy objectives to reduce poverty, create employment, promote empowerment, and stimulate and sustain economic growth.
Namibia's mineral resources include diamonds, copper, uranium, lead, zinc, gold, dimension stone, and semi-precious stones. According to the Chamber of Mines of Namibia’s Annual Review, 2018, mining contributed 14% to GDP and provides critical upstream, downstream and sidestream linkages for the Namibian economy.
The legal system of Namibia is a "hybrid" system, the common law of which is based on Roman-Dutch law, strongly influenced by English law in certain areas.
The Minerals (Prospecting and Mining) Act 33 of 1992 (Minerals Act) is the main source of mining legislation in Namibia, providing for the reconnaissance, prospecting and mining for, disposal of, and exercise of control over, minerals in Namibia.
Further sources of mining law include the following legislation:
Environmental Management Act 7 of 2007
The objectives of the EMA are, among others, to promote the sustainable management of the environment and the use of natural resources to provide for a process of assessment and control of activities which may have significant effects on the environment. The Minister of Environment and Tourism is authorised to list activities which may only be undertaken if an environmental clearance certificate has been issued by the environmental commissioner, which activities include those relating to exploration and mining operations.
Atomic Energy and Radiation Protection Act 5 of 2005
Except when an activity as described in this Act is authorised by a licence, no person may possess any radiation source, or dispose of, dump or abandon any radiation source, unless such person makes the prescribed notification.
Labour Act 11 of 2007
The Labour Act, 2007 provides that every employer must, among other things:
Labour Act of 1992
Regulations issued under the Labour Act, 1992 that relate to the health and safety of employees at work impose requirements with regard to, among other things, the safety of machinery, welfare and facilities in the workplace, the transportation and storage of hazardous substances, hazardous substance exposure limits, medical surveillance, first-aid and emergency arrangements.
Income Tax Act 24 of 1981
Income tax is levied on taxable income accruing to a mining company from sources within or deemed to be within Namibia and is calculated by determining the gross income, being all income accrued excluding that of a capital nature, subject to some exceptions, from which is deducted all amounts that are exempt from normal tax as well as the deductions and set-offs allowed by the Income Tax Act, 1981.
Export Levy Act 2 of 2016
The Export Levy Act, 2016 provides for the imposition of an export levy on certain goods, including certain minerals such as gold, copper, zinc and uranium, with the object of encouraging further processing or beneficiation of or value addition to such goods, and to promote the development of regional value chains.
The Minerals Act marks a departure from common law in relation to mining rights. Under Roman-Dutch law, mining rights were property rights, in the conventional sense of the word, that accrued to the owner of the land.
In terms of the Minerals Act, however, mining rights are not vested in the owners of the land. The Namibian constitution provides that natural resources belong to the state, and the Minerals Act provides that, subject to any right that is conferred under such Act, any right to prospect for, mine and sell minerals is vested in the state.
The right to prospect or mine is granted by the state under a mineral licence or a mining claim and is therefore more of a personal right than a real right. As a consequence of the fact that prospecting and mining licences are licences and not property rights, the holder of the licence continues to hold the licence only to the extent that it remains in compliance with the provisions of the Minerals Act and the licence conditions.
The granting of a licence, approval for the transfer thereof and approval for the transfer of an interest therein, requires the prior consent of the Minister of Mines and Energy (Minister). The Minister exercises administrative discretion in granting or refusing any such approvals.
An administrative act can be set aside by a court on review, at the request of an aggrieved person, where the administrative official failed to act fairly and reasonably and failed to comply with the requirements imposed upon such bodies and officials by common law and any relevant legislation.
The role of the state in Namibia is that of a grantor-regulator rather than an owner-operator although, as stated under the previous heading, the Namibian constitution provides that natural resources belong to the state, and the Minerals Act provides that, subject to any right that is conferred under such Act, any right to prospect for, mine or sell minerals is vested in the state.
The Foreign Investments Act 27 of 1990 provides that: "no foreign national engaged in a business activity or intending to commence a business activity in Namibia shall be required to provide for the participation of the Government or any Namibian as shareholder or as partner in such business … Provided that it may be a condition of any licence … for the grant of rights over natural resources that the Government shall be entitled to or may acquire an interest in any enterprise to be formed for the exploitation of such rights.”
The government established the company Epangelo Mining Company (Pty) Ltd in 2008 with the object of ensuring national participation in Namibia's mineral resources. In a few instances, Epangelo has acquired an interest in companies which hold mining licences, often on a “vendor-financed” basis where the company advances the funding for such acquisition or a transaction is notionally vendor-funded in that the purchase consideration for equity is settled through an antecedent waiver by Epangelo of the right to receive dividends.
During 2011 the Namibian cabinet declared certain minerals to be “strategic minerals” and stated that the right to licences for such minerals would be issued to state-owned companies, which may enter into joint ventures with interested parties for exploration and development, but that existing exploration and mining licences would not be affected. It was further stated that an implementation of this “cabinet decision” would require a change in legislation, but no such changes have been effected. Although not legislated, in the light of government policies, some mining projects do provide for the participation of Epangelo.
See 1.3 Ownership of Mineral Resources.
The Minerals Act provides for mineral licences, which include:
Non-exclusive prospecting licences (NEPLs) and mining claims (MCs) can also be issued.
The Minister may grant applications for the granting, renewal and transfer of mineral licences. If the Minister is prepared to grant such an application, subject to certain terms and conditions, the Minister would direct the mining commissioner to issue a notice to the applicant in which the terms and conditions are set out and on which the Minister would be prepared to grant such an application. If the applicant agrees to these terms and conditions, the Minister would direct the mining commissioner to issue the licence. Applications for mining claims are considered and granted by the mining commissioner.
A mining licence is valid for 25 years or such shorter period as, in the Minister’s opinion, corresponds with the estimated life of the mine. A licence may be renewed for further periods, not exceeding 15 years at a time.
The holder of a mining licence is required to prove to the satisfaction of the Minister that the mineral to which the licence relates still exists in such quantity that it can be mined on a profitable basis and the Minister must be satisfied with the mining operations and expenditure proposed for a renewal period. If the Minister is, on reasonable grounds, satisfied with the proposed work programme of mining operations and that the licence holder has the technical and financial resources to carry on the mining operations, and has complied with the terms and conditions of the licence, including the work programme for mining operations that had been proposed, then the Minister may not refuse to grant an application for the renewal of a mining licence.
An exclusive prospecting licence would be granted for a period not exceeding three years, as may be determined by the Minister, and renewable for further periods of no longer than two years. A third or subsequent renewal is only permissible if the Minister deems it desirable in the interests of the development of the mineral resources of Namibia that such a renewal be granted in a particular case.
In the case of a first renewal, the prospecting area would be reduced by 25%, and by 50% in respect of the second and subsequent renewals unless the Minister approves an application that the area not be reduced, which request would be granted if it is in the interest of the development of the mineral resources of Namibia and the licence holder can show good cause.
The Minister is not authorised to grant a renewal of an exclusive prospecting licence unless the Minister is, on reasonable grounds, satisfied with the manner in which the work programme of the prospecting operations has been carried out. If the Minister is, on reasonable grounds, satisfied with the proposed work programme of the prospecting operations and that the licence holder has the technical and financial resources to carry on such operations, the Minister is required to grant an application for renewal.
Mining licences and exclusive prospecting licences will not expire during the period in which the application for their renewal is being considered.
With regard to both mining licences and exclusive prospecting licences, where a licence holder has contravened or failed to comply with any provisions of the Minerals Act or any terms and conditions of the licence, the Minister may not refuse a renewal on such basis, unless the Minister has first informed the holder of his or her intention to refuse a renewal, setting out the particulars of the contravention, and has afforded the holder the chance to remedy such contravention or failure, which the holder has failed to do.
The Minister may grant mineral licences, applications for the renewal thereof and applications for the transfer of such licences or an interest therein, on such terms and conditions as may be determined by the Minister, including conditions supplementary to those contained in the Minerals Act. Standard conditions that are imposed include that the holder of a licence is required to continue mining or prospecting operations, without undue interruption or delay, in substantial conformity with the proposed work programme, schedule and budget which accompanied the original application for such licence, and that the holder of a mineral licence should observe any requirements, limitations or prohibitions on its prospecting operations as may, in the interest of environmental protection, be imposed by the Minister from time to time.
Under the Minerals Act, in addition to any term and condition contained in a mineral licence, it is deemed to be a term thereof that the holder shall give preference to Namibian citizens when taking on employees, carry out training programmes, make use of products or equipment manufactured or produced in Namibia but with due regard to the need to ensure technical and economic efficiency, and prepare an environmental impact assessment for the approval of the mining commissioner. This must indicate the extent of any pollution of the environment before any prospecting operations are carried out and an estimate of any pollution likely to be caused by such operations, and if any pollution is likely to be caused, an environmental management plan must be drawn up indicating the proposed steps to be taken in order to minimise or prevent, to the satisfaction of the mining commissioner, any pollution of the environment in consequence of any prospecting operations.
The holders of mineral licences are also obliged to keep records in respect of mining and prospecting operations; maintain plans and maps; prepare statements of income and expenditure; submit monthly returns, annual reports and bi-annual reports containing a summary of the aforesaid records; comply with exploration performance and reporting obligations; and adhere to safe work practices.
If any mineral to which a mining licence relates is not mined and the Minister is, on reasonable grounds, satisfied that such mineral is capable of being won or mined in that area on a profitable basis, then the Minister may direct the holder of such licence to take such steps as may be necessary and practicable to mine.
If the Minister is, on reasonable grounds, satisfied, having regard to good mining practices, the technical and financial resources of such holder and the prevailing marketability of any such mineral, that the mineral is not being won or mined at an optimal rate, the Minister may direct such holder to increase the rate at which such mineral is mined, not exceeding, in the case of an increase, the capacity of the mining facilities of the holder of the licence, as the Minister may specify.
In the above instances, the Minister may also direct a licence holder to abandon the mining area.
In exercising his or her discretion in any of the above-mentioned actions, the Minister must act fairly and reasonably and comply with the requirements imposed upon him or her in common law and the Minerals Act, failing which, such an administrative act can be set aside by a court on review to the High Court of Namibia.
The principal pieces of legislation concerning environmental law are the Environmental Management Act 7 of 2007 (EMA) and the Minerals Act.
The EMA and the Minerals Act
A list of activities has been issued under the EMA which may only be undertaken if an environmental clearance certificate has been issued by the environmental commissioner, which activities include, among other things, mining and extraction of natural resources, resource extraction, the construction of facilities, or activities which require a licence in terms of the Minerals Act.
It is a term and condition of any mineral licence that the holder thereof must prepare, for the approval of the mining commissioner, an environmental impact assessment indicating the possible extent of any pollution of the environment, prior to any prospecting or mining operations being carried out. If any pollution is likely to be caused by such operations, an environmental management plan indicating the proposed steps to be taken in order to minimise or prevent the pollution of the environment is required to be prepared for the approval of the mining commissioner.
In addition to the above-mentioned statutory condition, the terms and conditions imposed on the granting of mineral licences often stipulate that the holder is required to undertake an environmental impact assessment and prepare an environmental management plan for the approval of the Ministry of Environment and Tourism. A recent mining licence was issued subject to the condition that the holder adhere to the terms and conditions upon which the environmental clearance certificate was issued.
The EMA sets out the principles of environmental management, which include the principle that damage to the environment must be prevented and that activities which cause such damage must be reduced, limited or controlled, and that a person who causes damage to the environment is required to pay the costs associated with rehabilitation of damage to the environment and to human health caused by pollution. The EMA also provides for the issuing of an environmental clearance certificate.
The above-mentioned principles do not constitute an enforceable obligation. The EMA does, however, provide for compliance orders to be issued by an environmental officer where the holder of a mineral licence has contravened a provision of the EMA (ie, conducted an activity which requires an environmental clearance certificate to be issued, without such a certificate), or where the holder fails to comply with the conditions attached to an environmental clearance certificate that has been issued based on an environmental impact assessment and environmental management plan.
A person who receives a compliance order must comply with it, failing which, the environmental officer may take the measures specified therein or cause them to be taken at the cost of the mineral licence holder, whose refusal to comply would constitute an offence should such contravention have been without good reason.
The “polluter-pays” principle is reflected in the Minerals Act which obliges a licence holder to remedy pollution of the environment or other damages and losses caused by its prospecting, mining or reconnaissance operations.
Obtaining an Environmental Clearance Certificate
The process for obtaining an environmental clearance certificate entails the submission of a draft scoping report and conducting a public consultation process giving interested and affected persons an opportunity to comment on such report. A final scoping report which includes any comments received from affected persons would be considered by the environmental commissioner who would decide whether a detailed assessment is required and if not, would issue an environmental clearance certificate. Together with the final scoping report, the applicant would be required to submit a management plan, which would stipulate the measures to mitigate, control and monitor the effects on the environment, including measures to rehabilitate the environment affected by undertaking the activity which requires an environmental clearance certificate to be issued, as far as is reasonably practicable, to its natural or predetermined state or to a land use which conforms to the generally accepted principle of sustainable development.
Obtaining a Mining Licence
The Minister may not grant an application for a mining licence unless the Minister is, on reasonable grounds, satisfied that the proposed programme of mining operations to be carried out and the expenditure relating to such operations will ensure adequate protection of the environment.
If a mineral licence has been cancelled or has expired, or if any area to which such licence relates has been abandoned, the Minister may direct such person to take all necessary steps to remedy, to the satisfaction of the Minister, any damage caused by any prospecting operations and mining operations carried on by such holder to the surface of, and the environment in, such area.
Policies and Documents
The Minerals Policy, formulated by the Ministry of Mines and Energy, stipulates that, before a mining licence is granted, there should be a final mine closure plan, together with a funding mechanism that describes how the licence holder will deal with matters like groundwater pollution, soil degradation, wind pollution and dismantling infrastructure, which would be required in compliance with approved environmental management plan contracts.
A Namibian Mine Closure Framework was prepared by the Chamber of Mines of Namibia, based on international best practice, as a guidance document for its members to put mine closure plans in place, laying down minimum requirements for the members of the chamber who undertook to be bound by its code of conduct and ethics.
The Chamber of Mines, the Namibian Chamber of Environment, the Namibian government, and members of the Namibian mining industry have collaborated in producing an Environmental Best Practice Guide which was published during 2019.
The EMA has undergone a review, and proposed amendments include provisions for the use of Strategic Environmental Assessments, which could be considered at a sector level or regional level, to avoid the piecemeal approach to environmental impact assessments for mineral licences, changes to the environmental clearance certificate process and the listed activities.
Further statutes concerning the environment include the Hazardous Substance Ordinance 14 of 1974; the Atmospheric Pollution Prevention Ordinance 11 of 1976; the Nature Conservation Ordinance of 1975; the Forest Act 12 of 2001; the Atomic Energy and Radiation Protection Act 5 of 2005; the regulations issued under the Labour Act of 1992 relating to the health and safety of employees at work; and the Mines, the Works and Minerals Ordinance No 20 of 1968, the Water Act 54 of 1956 and the National Heritage Act 27 of 2004.
Land in Namibia could be categorised as state-owned land, comprising “protected areas” (approximately 17%), communal land (37%) and land for other official uses (5%), and privately owned land (approximately 41%).
“Protected areas” are established under the Nature Conservation Ordinance 4 of 1975. There is no prohibition to conducting prospecting and mining operations in these areas but conducting such operations within protected areas would impact the environmental assessment process, and more stringent conditions may be imposed and taken up in an environmental management plan. However, a substantial number of mineral licences within such protected areas have been granted.
Where prospecting and mining operations are intended to be conducted on land other than state land (ie, private land), the holder of a mineral licence is required to enter into an agreement providing for the payment of compensation to the owner of such land, which agreement must be in place prior to exercising the rights granted under the mineral licence. In the event of an owner of private land refusing to grant the licence holder access and to exercise its rights under the mineral licence, or demanding unreasonable terms and conditions, the holder may apply to the Minerals Ancillary Rights Commission to be granted any such rights.
The holder of a mineral licence is, however, not allowed to exercise its rights under such licence in a town or village, or on land comprising a proclaimed road, or on land that is reserved for any government or public purpose, without the prior permission of the Minister.
The permission of the landowner is also required for conducting mining or prospecting operations within a certain distance of water infrastructure, erven which are included in a township, and land on which accessory works have been erected.
Mining or prospecting operations may not be conducted on land which is subject to a production licence issued under the Petroleum (Exploration and Production) Act, 1991.
Should the mining or prospecting operations interfere with fishing or with marine navigation, prior permission from the Minister is also required.
The EMA defines “environment” as including the “natural environment that is the land, water and air” and the “human environment that is the natural, cultural, historical, economic and social heritage and values”.
In an application for an environmental clearance certificate the applicant would need to submit a final scoping report and management plan as described under 2.1 Environmental Protection and Licensing. The scoping report is required to include a description of the environment that may be affected by the proposed activity and the manner in which the geographical, physical, biological, social, economic and cultural aspects of the environment may be affected by the proposed listed activity (ie prospecting and mining activities).
The scoping report would address the socioeconomic impacts, including positive impacts relating to employment and skills development, and negative impacts such as inward migration.
In 2004, Namibia adopted Vision 2030, which outlines the country's development programmes and strategies to achieve its national objectives. One of the objectives of Vision 2030 is to “ensure the development of Namibia’s ‘natural capital’ and its sustainable utilisation, for the benefit of the country’s social, economic and ecological well-being”.
Under the Minerals Act, in addition to any terms and conditions contained in a mineral licence itself, it is deemed to be a term of a mineral licence that the holder shall, among other things, give preference to Namibian citizens when taking on employees, carry out training programmes, and make use of products or equipment manufactured or produced in Namibia but with due regard to the need to ensure technical and economic efficiency.
The Minerals Act authorises the Minister to grant applications for mineral licences on such terms and conditions as may be determined by the Minister. In February 2016, new standard licence conditions were issued which are intended to apply to all new mining licences, and which will be applicable when existing mining licences are renewed.
These standard conditions include that a licence holder, within 60 days from the acceptance of the conditions subject to which the mining licence is granted, is required to submit to the Minister a proposal on the structure and composition of the applicant company, which is required to provide for a minimum of 20% representation of historically disadvantaged Namibians in the management structure, and a minimum of 5% ownership by Namibian citizens or a company that is wholly owned by Namibian citizens. The said proposal is further required to: “address the Government of Namibia’s objectives of poverty eradication by (i) providing an opportunity for Namibian participation, as well as (ii) setting out a strategy to benefit the Namibian youth and women particularly from the disadvantaged groups and the poorest of the poor”.
See 2.1 Environmental Protection and Licensing.
The Communal Land Reform Act 5 of 2002 provides for communal land areas to be vested in the state in trust for the benefit of the traditional communities residing in those areas and for the purpose of promoting the economic and social development of the people of Namibia.
The regulations issued under the Communal Land Reform Act, 2002 stipulate that every person who wants to carry out any prospecting or mining operations as contemplated in the Minerals Act on communal land, must, prior to applying in terms of the Minerals Act, notify the chief or traditional authority of the traditional community and the Communal Land Board, of its intention to apply as aforementioned. The chief or traditional authority and the Communal Land Board must provide their recommendations as to whether the application should be granted, and the Minister is required to consider such recommendations prior to making a decision with regard to the particular application in terms of the Minerals Act.
The purpose of this notification requirement may be to afford the “beneficiaries” of the communal land the right to be consulted and be heard, in administrative law terms, before a decision is taken which adversely affects their rights, failing which, the decision to grant a mineral licence may be liable to be set aside on a review application to the courts.
In order to comply with the objectives of the government concerning economic empowerment and poverty eradication, and to adhere to the mining licence conditions in this regard, a number of holders of mining licences have implemented various measures.
The standard conditions imposed on the granting of mining licences include a condition with the object of addressing the government’s aim to eradicate poverty, in that the licence holder is required to submit a proposal addressing the “provision of an opportunity for Namibian participation and setting out a strategy to benefit the Namibian youth and women particularly from the disadvantaged groups and the poorest of the poor”.
This condition requires the applicant for a mining licence to submit a proposal on its structure and composition, with the management structure to consist of a minimum of 20% representation of historically disadvantaged Namibians, and Namibian citizens to have at least 5% equity in the licence-holding company.
If the Minister believes that the particular mining project is economically significant, and that the proposed structure of the applicant does not meet the government’s objectives for broad-based empowerment, then the Minister has the right to propose amendments to meet the empowerment and poverty eradication objectives. An applicant is afforded an opportunity to make representations, which the Minister is required to consider prior to notifying the applicant of the final terms and conditions on which he or she would be prepared to issue the mining licence.
The government’s objectives for broad-based empowerment and poverty eradication are, like the above-mentioned standard mining licence conditions, intended to be achieved by the implementation of the below-mentioned NEEEF Bill, should it become law.
Article 23 of the Namibian constitution prohibits discrimination, except under an act of parliament expressly providing for the advancement of persons who have been socially, economically or educationally disadvantaged by past discriminatory laws.
The NEEEF and the NEEEF Bill
The cabinet of the Republic of Namibia has adopted the New Equitable Economic Empowerment Framework (NEEEF), which was revised and approved during the year 2011. A draft National Equitable Economic Empowerment Bill, 2015 (NEEEF Bill), based on the NEEEF, has since been made available to the public, followed by a public consultation process.
The objective of the NEEEF Bill is to promote the constitutional right to equality, bring about socioeconomic transformation in order to enhance equity and empowerment of the previously disadvantaged majority Namibians, promote a higher economic growth rate, increase employment, and improve equitable income distribution, and implement a national policy of the NEEEF.
The NEEEF stipulates that to achieve its objectives, six ”empowerment pillars” need to be implemented and business enterprises will receive an NEEEF rating on having implemented these. The empowerment pillars are ownership participation, management and control participation, skills development, entrepreneurship development, community investment, and value addition, technology and innovation.
During April 2016, the president of Namibia introduced the Harambee Prosperity Plan, stating that its objectives are to reduce poverty and inequality, create employment, and stimulate and sustain economic growth as provided for in Vision 2030 and the policy recommendations contained in the National Development Plans (NDPs) of Namibia.
According to the government, the attainment of these goals demands a substantially heightened and sustained contribution from all sectors of the economy.
The Namibian president stated at the Economic Growth Summit held during July 2019 that he wanted to see the NEEEF Bill come into effect by the end of 2019. This did not occur, but it is expected that a revised bill will be published during the first half of 2020 and that it will stipulate that economic transformation must be achieved by way of, inter alia, sector charters which will also indicate the requisite equity requirements for the sector in which they apply. This aspect of the NEEEF Bill was reiterated by the Namibian president at the Economic Growth Summit, in that it was indicated that equity requirements, if contained in sector charters, may be binding.
The Mining Charter
The Chamber of Mines of Namibia has developed a draft Charter for Sustainable and Broad-Based Economic and Social Transformation in the Namibian Mining Sector, 2014 – 2020 (Mining Charter), which is designed to address the issue of sustainable and broad-based economic and social transformation, and sets specific targets for mineral licence holders active in Namibia.
The Mining Charter provides the following five pillars as measures to achieve its objectives: ownership, education and skills, affirmative action, procurement and enterprise development, and communities and infrastructure.
All mining, development and exploration companies shall make a minimum of 5% equity available for sale exclusively to historically disadvantaged Namibians within two years of this charter being adopted. This is only a minimum requirement and companies are encouraged to make more equity available to historically disadvantaged Namibians.
Mining companies will be required to invest at least 2% of their annual gross payrolls every year in developing the skills of historically disadvantaged Namibian employees and other historically disadvantaged Namibians.
The objective of the “Affirmative Action Pillar”, is to ensure that historically disadvantaged Namibians are properly represented at all levels of management so that they can acquire the skills and experience needed to successfully help run the country’s mining industry.
Mining companies will be required to ensure they direct proportions, stipulated in the charter, of discretionary expenditure to Namibian-owned businesses provided they are internationally cost and quality-competitive.
Mining companies will be expected to commit to spending 0.5% of their turnover in respect of their Namibian operations (in the case of an operating company) or 0.5% of their exploration costs (in the case of an exploration company) or 0.5% of their reduced development costs (in the case of a development company) on assisting Namibian communities or contributing towards infrastructure in excess of what is required for their own operations.
Participants will be able to “score” up to 20 points on each of the five empowerment pillars, giving a total of 100 points. Companies will receive 12 points on each pillar for complying with the minimum requirement and up to eight additional points for going beyond the minimum requirement. Companies will be expected to achieve a minimum of 60 out of 100 points overall. If a company is not able to comply with the minimum requirement on a specific pillar, an additional eight points can be achieved by going beyond the minimum requirement on other pillars so that the company can still achieve the prerequisite 60 points.
Although the Mining Charter is currently still voluntary, and still requires to be finalised, its provisions may become mandatory once the NEEEF Bill comes into force.
Many existing mines have established community trusts whose object is to develop programmes, projects and services to support the communities of the Republic of Namibia, with specific emphasis on the underprivileged, and focusing mainly on education, health, and entrepreneurial initiatives, development in the small and medium enterprise (SME) sector involved in the delivery of services and goods to the mining companies, and generally supporting social upliftment and empowerment projects.
A number of mining companies have established programmes to help their workers acquire housing.
As part of the “ownership-pillar”, forming part of the Mining Charter, recognition is given to employee ownership of mining companies by way of employee equity plans.
The Chamber of Mines of Namibia introduced the concept of investing in offsets in non-mining regions of Namibia, in order to broaden the industry’s contribution to social and economic development in regions of the country where there are no mining operations. The chamber proposed that its members should collectively contribute to projects that deliver long-term socioeconomic benefits in non-mining areas.
Two projects were identified, the first involving the electrification of two villages in a communal area in the Zambezi region, and the second giving support to the Shackdwellers Foundation for provision of affordable serviced land to the poor in the town of Oshakati. This project is administered by the Chamber of Mines and the Namibian Chamber of Environment (NCE), with the Chamber of Mines members having made contributions.
Examples of mines in Namibia meeting their environmental and community responsibilities are sometimes based on policies which are applied in the jurisdictions of the Namibian mines’ holding companies, eg, the Australian Minerals Industry Framework for Sustainable Development. A mine might apply a social performance management plan as an instrument to implement social responsibility measures. In some instances, social performance management systems are developed which are consistent with the International Standards Organisation (ISO) 14001 and 26000 requirements.
The Colorado State University established the Little Shop of Physics (LSOP) programme with its key objective being to demonstrate physics concepts using discovery and experiential learning methods. The B2Gold mine conducted pilot sessions with schools at its education centre and funded an LSOP Teacher Development Programme, which has so far provided training to 180 teachers from 54 schools, and the Ministry of Education and Culture has begun to incorporate the LSOP programme into the national school science curriculum. The LSOP’s objective is to uplift the standard of physics and chemistry education in Namibia.
NMP v the Fishing Industry
In July 2011, a mining licence was issued to Namibia Marine Phosphate (Proprietary) Limited (NMP). This project involved dredging the seabed to a depth of up to 3m and the removal of up to 5.5 million tonnes of marine sediments annually to produce three million tonnes of rock phosphates. The material would be transferred to shore where the phosphate sands would be separated from other marine sediment.
The fishing industry and other groups raised concerns that seabed mining for phosphates would cause irreversible damage to Namibia's lucrative fishing industry, which is a pillar of the country's economy, and although NMP had been issued with a mining licence and an environmental clearance certificate, it was not able to commence its mining operations.
NMP appealed to the High Court of Namibia against the Minister of Environment and Tourism’s decision to set aside its environmental clearance certificate, which appeal was upheld. The appeal to the Minister of Environment and Tourism concerning the granting of the clearance certificate was then heard afresh and the minister once again decided to refuse the clearance certificate.
Three organisations representing the Namibian fishing industry, the Confederation of Namibian Fishing Associations, the Namibian Hake Association and the Midwater Trawling Association of Namibia, brought an application to the High Court of Namibia during 2019 for an order to declare the mining licence that was issued to NMP as invalid, on the basis that NMP had failed to undertake an environmental impact assessment and apply for an environmental clearance certificate within the prescribed time limits.
During September 2019 a protest was held by mostly workers in the fishing industry at the coastal town of Walvis Bay, against marine phosphate mining, urging the government not to grant NMP an environmental clearance certificate.
A Chamber Marine Phosphate Sub-committee was established on this matter, with the object of expediting the process of developing a strategy to progress marine phosphate mining in Namibia.
No initiatives dealing with climate change have so far affected the mining industry in Namibia.
No climate change legislation related to mining currently exists in Namibia, nor is it being discussed.
There are plans to amend the EMA to provide for the establishment of a mandatory Environmental Trust Fund or bonds, but progress is slow on the finalisation of these amendments and the regulations issued in terms thereof.
The Environmental Best Practice Guide (see 2.1 Environmental Protection and Licensing) serves as a guideline for the Namibian mining sector to conduct their operations in a sustainable manner and implement environmental management systems, environmental monitoring and reporting programmes, and environmental auditing. In adhering to these objectives, a number of Namibian mines have implemented sufficient measures to be ISO 14001 certified.
The Ministry of Mines and Energy has appointed consultants to draft a Minerals Beneficiation Strategy, and two studies had been undertaken concerning local beneficiation of minerals. The Export Levy Act, 2016 which became effective on 1 June 2017 was a further initiative to encourage the beneficiation or value addition with regard to minerals. It provides for an export levy on the value of goods at the time of export of such goods, being the free on-board price of such goods, and payable at the rates specified in the Act (between 0% and 2%, ie, 0.25% on uranium oxide/yellow cake, and 1% on CU concentrate, with regard to copper).
The Namibian Mine Closure Framework (see 2.1 Environmental Protection and Licensing) from the Chamber of Mines of Namibia constitutes a measure to rehabilitate the environment to its natural or predetermined state or to a land use which conforms to the generally accepted principle of sustainable development, as far as is reasonably practicable. The intended amendments to the EMA may include a provision for a mandatory environmental trust fund or bonds for the purpose of rehabilitation of the environment. The Ministry of Mines and Energy is also working on a mine closure framework.
In terms of the standard licence conditions for mining licences, it is stipulated that an applicant for a mining licence or renewal thereof, would need to submit for approval by the Minister, its projected production profile for the first year, and for the following four years. It is further stipulated that an applicant would be obliged to: “ensure that 30% of the final product from the mine is added value locally at commercial arm’s-length-transaction terms not less favourable than the applicant’s other customers”, and further that: “Where such a value addition project does not exist locally, the applicant shall establish such a value addition facility in Namibia. Where the applicant is unable to establish such a facility in Namibia, the applicant shall show good cause of its inability to establish such facilities.” An applicant would also be required to: “keep a production inventory and an updated resource statement at all times and shall make it available to the Minister … upon request.”
The holder of a mineral licence (whether a local or a foreign licence holder) and mining claim is liable to pay to the mining commissioner a royalty of a rate calculated as a percentage, which is specified for different minerals, on the market value of such minerals. The market value of any mineral is determined, either in accordance with the terms and conditions of the relevant licence, or if no such terms exist, determined by the Minister, having regard to the value agreed between the holder and the purchaser of the minerals in an arm's-length sale and at prices which are, in the opinion of the Minister, in line with the prices paid on international markets, less any amounts deducted in respect of fees, charges or levies which are, in the opinion of the Minister, charged on international markets. The royalty on precious stones amounts to 10% of the market value on the date of the sale thereof, and 3% on the value of precious metals, base and rare metals and nuclear fuel minerals. Semi-precious stones, industrial minerals and non-nuclear fuel minerals are levied at 2%.
The Minister may levy an additional royalty with regard to any minerals other than precious stones and dimension stone, if the Minister is of the opinion that the particular minerals are of such a nature that they are capable of being increased in value, or that the prices obtained did not conform with the prices paid on international markets, or that the deductions from the sale proceeds did not conform with internationally applied rates.
Subject to prior notice, and affording the licence holder an opportunity to make representations which are to be taken into account by the Minister, the Minister may levy a windfall royalty if he or she is of the opinion that the operations of the holder have become more profitable as a result of the market prices that can be obtained for the mineral in question having increased or new technology having been deployed.
Mining companies are liable to pay 37.5% income tax, except for diamond mining companies which are required to pay 55%.
Non-resident shareholder’s tax must be deducted from dividends that are paid to a non-resident shareholder at the rate of 10% if the beneficial owner is a company which directly or indirectly holds at least 25% of the capital of the company paying the dividends, or 20% in all other cases, subject to the provisions of any double-taxation agreements that may apply.
All Namibian residents who are liable to pay a non-resident for management, consulting, technical, or entertainment services, or director’s fees must withhold 10% tax on the amount payable to such non-resident for management and consulting services, and 25% in respect of director’s fees and entertainment fees.
Withholding tax on foreign interest, equal to 10% of any amount of any interest that is paid by any person or company to or for the benefit of any non-resident, is also payable.
Amendments to the Income Tax Act, 1981 have been proposed which include a disallowance of the deductibility of royalties for non-diamond mining companies.
The Chamber of Mines of Namibia has established a Tax Committee which engages the government with regard to tax legislation and policy, including the Income Tax Amendment Bill, 2018, and the committee’s recommendations have been taken into consideration by the authorities. A matter that remains a concern is the proposed non-deductibility of royalties.
Value-Added Tax (VAT) is levied in terms of the Value-Added Tax Act, 2000 on the supply of goods and services in the furtherance of a taxable activity carried on in, or partly in, Namibia on the importation of goods, and on the supply of imported services, other than exempt imports.
An export levy is charged under the Export Levy Act, 2016 on the value of goods at the time of export of minerals as described above.
The Minister may, at the request of a person applying for a mineral licence, enter into a “mineral agreement”, containing the terms and conditions on which such a licence is issued, which agreement may include terms relating to, among others, the application of any of the fiscal laws in force in Namibia.
The Income Tax Act, 1981 provides that any amount that is received or accrued from another person, as consideration for the sale or transfer of ownership of a mineral licence, or right to mine minerals in Namibia, would be deemed to constitute gross income on which income tax is payable, and this includes the sale or transfer of any share in a company that holds a mineral licence or mineral right whether directly, or indirectly.
Transfer Duty is levied in terms of the Transfer Duty Act, 1993 on the value of any property that is acquired. “Property” includes any right to mine for minerals. Where the person acquiring the right is a person other than a natural person, the transfer duty will be levied at 12% of the said value.
Namibia is regarded as a favourable country for mineral exploration and investment with a well-developed mining industry and existing infrastructure in a jurisdiction where there is political stability and low security risk.
The Policy Perception Index of Namibia, which forms part of the overall Investment Attractiveness Index, published in the Index Fraser Institute’s annual survey of mining and exploration companies, ranks Namibia as the second-highest country in Africa. This rating is expected to improve once the draft legislation NEEEF Bill, Namibia Investment Promotion Act, 2016 (NIPA) and the Income Tax Amendment Bill are finalised and enacted during 2020.
Foreign investment in Namibia is regulated under the Foreign Investment Act No 27 of 1990.
The Foreign Investment Act, 1990 was intended to be repealed by NIPA, but the latter has not yet come into force and is expected either to be amended substantially or substituted by a new act dealing more particularly with foreign investment.
The Foreign Investment Act, 1990 expressly stipulates that a foreign national may invest and engage in any business activity in Namibia which a Namibian may undertake and that, for the purposes of any law governing the establishment and carrying on of any business activity or the taxation of the income, or any other aspect of a business activity, a foreign national will not be in a different position to any Namibian, except as may be otherwise provided by the Foreign Investment Act, 1990.
The Foreign Investment Act, 1990 also stipulates that no foreign national engaged in a business activity in Namibia is required to provide for the participation of the government or any Namibian as shareholder or as partner in such business, or for the transfer of such business to the government or any Namibian provided, however, that it may be a condition of any licence, or other authorisation, or any agreement with a foreign national for the granting of rights over natural resources that the government shall be entitled to or may acquire an interest in any enterprise to be formed for the exploitation of such rights.
The Chamber of Commerce and Industry and the Chamber of Mines made proposals with regard to a revised version of NIPA which have been accepted by the government and it is expected that a revised NIPA will be introduced by March 2020. It is said that the revised form of NIPA addresses concerns that had been raised in respect thereof and that the revised act is expected to truly promote investment in Namibia.
As stated in 2.6 Community Development Agreement, there is a local participation requirement with regard to mining licences in Namibia, and the NEEEF Bill may make the Mining Charter applicable, which provides for requirements designed to address the issue of sustainable and broad-based economic and social transformation.
The government of Namibia has entered into a number of bilateral agreements or treaties on the reciprocal promotion and protection of investments with a number of countries, but these do not specifically deal with the protection of investments in the exploration and mining industry.
Historically, the main source of finance for exploration, development and mining in Namibia was through major international mining entities who invested in Namibia, such as De Beers, Anglo American, Anglovaal, Newmont and Rio Tinto. In more recent years, there has been a surge of financing by way of public listings and private placings by foreign holding companies of their Namibian subsidiaries holding the mineral licences.
At present, there are no primary listed mining companies, but a number of dual-listed mining companies, such as B2Gold, Anglo American plc, Deep Yellow Limited, Paladin Energy Ltd, Forsys Metals Corporation, and Marencia Energy Limited, many of which are listed on the Australian Stock Exchange (ASX), and a few on the Toronto Stock Exchange (TSX), as well as being listed on the Namibian Stock Exchange (NSX).
The development of mining projects is also financed with a combination of senior debt advanced by a group of senior lenders, and equity and subordinated shareholder loans provided by a holding company and potentially one or more equity partners.
See 5.4 Sources of Finance.
Security can be granted over mineral licences by way of cession over the rights in, or to, such licences in the form of a so-called cession in securitatem debiti, where title to the licence would remain with the cedent or borrower (as with a pledge). The cessionary would have a secured claim in an insolvent estate of the licence holder. Enforcement of such a cession would, however, requireprior approval from the Minister, which he or she is unlikely to give. As to corporeal movable assets, a general notarial bond in favour of lenders could be registered. The shares in the licence-holding company could be pledged and the rights in, or to, such shares could be ceded under a security cession in favour of lenders. A cession in securitatem debiti of rights in, and to, other incorporeal rights, such as insurance policies, funds in bank accounts, and proceeds under offtake agreements can also be given as security.
The mining sector in Namibia is seeing an improvement in matters concerning environmental management. The Chamber of Mines of Namibia is actively supporting the Ministry of Environment and Tourism with regard to intended amendments to the Environmental Management Act, 2007 and regulations to be introduced on environmental impact assessments and strategic environmental assessments.
Work is being done on a Minerals Beneficiation Strategy, and the Ministry of Mines and Energy is taking initiatives encouraging the local beneficiation or value addition with regard to minerals.
Amendments to the Income Tax Act, 1981 are expected to come into force soon, with certain concerns with regard thereto having been addressed, although the non-deductibility of royalties seems to have remained.
A revised Namibia Investment Promotion Act, 2016, the NEEEF Bill and the tax amendments as per the Income Tax Amendment Bill, which are intended to be finalised and enacted during 2020, will create further certainty and enhance Namibia’s investment attractiveness.