Namibia’s mineral beneficiation strategy defines a roadmap on how the country can potentially benefit from downstream processing of the country’s mineral endowment by deriving more value from increased downstream processing and manufacturing of end products.
In their introductory remarks, mines minister Tom Alweendo and trade minister Lucia Ipumbu said Namibia does not realise much value from its mineral resources because of the inability to beneficiate mineral commodities into more valuable refined products that can serve as feedstock for a competitive manufacturing industry.
They also noted that Namibia’s options for beneficiation and manufacturing are constrained by economic, technological, market, environmental, and social factors and the lack of adequate infrastructure (transport, water, and energy), which can threaten long-term competitiveness.
The ministers said the Mineral Beneficiation Strategy for Namibia seeks to complement key national development initiatives by creating a conducive environment for investment and value-added by providing mineral-based feedstock for a competitive manufacturing sector in an environmentally sustainable way.
It also aims to address critical intervention areas to direct Namibia’s mineral endowment and outputs towards enhanced economic development and social progression.
It further provides a blueprint for Namibia to improve its competitiveness as an investment destination. It provides a platform for increased beneficiation, leading to the realisation of more economic value from the various mineral commodities in the country.
They said Namibia’s extensive and diverse mineral endowment, which has been contributing about 9% to the GDP since 1990, makes it a good candidate for further processing of minerals since the global demand for minerals has grown much broader over the years to include minerals used in a range of conventional and emerging high-technology applications.
Alweendo and Ipumbu said although there is a capacity for some mineral commodities, such as copper and zinc, to be refined in the country into pure metals before they are exported, Namibia can generally be defined as an economy that is currently operating with low levels of mineral beneficiation.
According to the ministers, the Namibian government has an unquestionable commitment to working with the role players in the minerals and manufacturing industries to create the investment in infrastructure necessary for beneficiation to reach its full potential and contribute to the country’s industrialisation.
The basis for a beneficiation strategy
The beneficiation subject is a theme under the Africa Mining Vision and the Southern Africa Development Community’s (SADC) Industrialization Strategy and Roadmap: 2015–2063. It is a concern that Namibia needs to leverage its abundant mineral resources to develop an internationally competitive industry.
Ideally, a competitive industry consists of a well-developed manufacturing sector that adds value to raw materials to produce either semi-finished products or products that are ready for market consumption in various industry sectors, including construction, battery storage, pharmaceutical, chemical, agricultural, automotive, oil, metallurgical, electronics, aerospace, plastics, and energy.
For decades, Namibia has had no overarching national or sectoral mineral beneficiation strategy to guide the Namibian mining industry towards unlocking its potential to significantly contribute to the nation’s long-term social and economic development through midstream and downstream processing.
The absence of a national Mineral strategy
Beneficiation strategy has been a major handicap for the government in implementing policies that promote value addition, particularly in the mining industry.
What hinders beneficiation?
This process revealed that the main constraints hindering beneficiation and manufacturing in the mining sector were:
• Unfavourable costs of production due to high utility costs and low productivity levels.
• International investors find the operating environment not conducive enough and the conditions unfavourable in terms of the credit rankings of the country.
• Resources required for beneficiation and manufacturing are not adequate for cost-effective and viable operations due to low economies of scale.
• Limited access to skills required for beneficiation and manufacturing;
• Local entrepreneurs find it difficult to obtain finance from financial institutions and
• Low appetite for locally beneficiated and manufactured products at national, regional, and international levels.
What the beneficiation strategy seeks to do
• Enhance the mining sector’s value-added productive capacity
• Increase the level of mineral beneficiation activities along the value chains
• Facilitate economic diversification through various linkages, i.e. forward, backward, and sideways
• Accelerate progress towards an industrialised and technologically based economy
• Create attractive opportunities for new investors in the mineral beneficiation and manufacturing industry
• Contribute to the creation of sustainable, decent jobs and poverty alleviation.
Time-frames
The strategy outlines three corresponding time-framed growth scenarios underpinning this process, as referenced:
Phase I: Years 2021–2023
This phase constitutes a period of active frontloading of the Mineral Beneficiation Strategy and laying firm foundations for long-term development. Most activities in this phase fall under the short-term period for implementation.
Phase II: Years 2024–2027
This phase will focus on the diversification and enhancement of productivity through factors of production and competitiveness. Most activities in this phase fall under the medium-term period for implementation.
Phase III: Years 2028–2030
This phase will focus on the diversification and enhancement of productivity through factors of production and competitiveness. Most activities in this phase fall under the long-term period for implementation.
The mineral beneficiation strategy is defined on three levels, namely:
• An overarching strategy that addresses broad and cross-cutting issues for a wide range of mineral commodities is considered in the study.
• Grouped mineral commodities strategies addressing issues that apply to the seven groups of mineral commodities as defined in the formulation of the strategy and
• Individual mineral commodity strategies address the mineral commodities identified in this study.
Six main intervention areas
1. Enhanced mineral sector governance.
2. Securing raw materials and intermediate resources.
3. skill development, research, and innovation.
4. Investment attraction and retention.
5. Beneficiation technology, enabling infrastructure and environment; and 6. Marketing and Trade of Beneficiated Products in the Enhanced Mineral Sector
Enhanced Governance: Strategic Objective
Indicators and Targets
• Have finalised coherent or harmonised legislation which investors can easily understand by 2023
• The number of days to set up businesses per sector should decrease by 50% by the end of 2025
• The number of women, youth, and people with disabilities actively participating in national and regional value chains will increase by at least 20% by 2025.
Securing Raw Material and Intermediate Resources Strategic Objective
Indicators and Targets
• Mine ministry regional mapping activities at the 1:100,000 scale increased by 40% annually.
• At least 15 active joint partnerships will be established between Geological Survey Namibia (GSN) and other partner geological surveys worldwide (including local industry) by 2028.
• The number and functioning of geoscientific databases and cadastral infrastructure systems will increase by 50% by 2026.
• The number of active partnerships between ASMs and large-scale mining, beneficiation, and manufacturing companies will increase by at least 30% by 2025.
Skills Development, Research and Innovation Strategic Objective
Indicators and Targets
• The local skilled workforce in mining, beneficiation, and manufacturing industries will be developed and increased by at least 20% by 2025.
• Skills transfer mechanisms implemented to increase the availability of local critical skills in mining, beneficiation, and manufacturing by at least 20% by 2025
• Local participation in research and development activities in mining, beneficiation, and manufacturing increased (by establishing research institutes and dedicated funds) by at least 20% by 2025
Attracting and Retaining Investments: Strategic Objective Indicators and
Several critical bottlenecks in the regulatory framework and overall business environment will be reduced by at least 50% between 2021 and 2030.
• At least ten mining beneficiation investment projects (over N$25 million each) will be attracted through various investment promotion activities by 2030.
• Establish at most minuscule MOUs annually among representative stakeholders across the beneficiation sector and ensure a regular and structured collaboration framework by 2030.
Technology and Enabling Infrastructure: Strategic Indicators and Targets
• Access to advanced mineral beneficiation technology will increase by at least 20% (through assisting local companies to procure and develop modern equipment and implementing regional integration of technological facilities) by 2025.
• Productivity will improve by at least 20% by 2023 through upgrading and developing new infrastructure and integrating it for use by the mineral industry.
• Waste generation during production operations will be reduced by at least 20% by 2023 (through recycling, reusing, and implementing cleaner production principles for greater environmental sustainability).
Marketing and Trade of Beneficiated Products Strategic Objective
Indicators and Targets
• The trade of mineral-beneficiated products will increase by at least 50% per year by 2025 and by at least 85% by 2030.
• The number of accredited laboratories for product certification will increase to at least one in each region in 2025.
• At least one comprehensive market study for beneficiated products will be conducted annually from 2021 to 2030 (to expand the marketability of mineral-beneficiated products).
The status of mineral beneficiation in Namibia varies, with some mineral commodities being exported as raw ores or mineral concentrates while others are exported as refined metal. Further beneficiation of semi-processed mineral products is necessary for local industrialisation and economic development.
Namibia has the capacity for varying levels of mineral beneficiation, ranging from first-stage concentration, as in the case of zinc concentrates from Rosh Pinah, to final refining capacity, as in the case of zinc (99.99% pure) ingots from Skorpion Zinc and 99.99% pure copper cathode at Tschudi Mine.
The country is among the world’s top 10 gem-quality diamond producers, mined on land and onshore, and the Namibia Diamond Trading Company allocates a portion of the rough diamonds produced in the country to local cutting and polishing factories.
Gold is partially refined in Namibia and exported for further refining outside the country.
Both Navachab gold mine (owned by QKR Corporation) and B2Gold Otjikoto mine currently export their gold to South Africa for further processing at Rand Refinery.
Uranium oxide produced in the country is exported as “yellow cake” to power utilities in countries that sign the Nuclear Non-Proliferation Treaty.
Namibia also produces various industrial minerals, including graphite, dimension stone, limestone, wollastonite, bentonite, and salt. Apart from limestone, graphite, and salt, these minerals are mined on a small scale, and the country is also known for its wide variety of high-quality semi-precious stones.
Battery minerals, notably lithium, graphite, cobalt, and rare earth, have been found in Namibia, but they are currently not being mined at full scale.
These minerals present opportunities for mining and beneficiation, thus significantly contributing to the manufacture of various components used in electric vehicles and the storage of relatively large amounts of energy for more extended periods, especially from renewable sources such as solar, for which Namibia has a comparative advantage due to long hours of sunshine.
Constraints for Beneficiation in Namibia
• The national economy is not growing as it should, and a decrease in processing and manufacturing activities resulting in income and employment losses.
• Loss of government revenue,
• The job creation potential of the mining and mineral beneficiation sector is not being fully realised, and
• Beneficiation and manufacturing sectors are not performing optimally.
The main constraints hindering the mineral beneficiation and manufacturing sectors were identified as
• Limited access to skills required for beneficiation and manufacturing
• Local entrepreneurs find it difficult to obtain finance from financial institutions.
• Investors find conditions that could be more favourable in terms of the investment rankings of the country.
• Low appetite for locally beneficiated and manufactured products at national, regional, and international levels.
• The operating environment is not conducive enough for beneficiation and manufacturing.
• Unfavourable cost of production.
• The resources required for beneficiation and manufacturing are not adequate.
After identifying the main (higher-level) causes, a 5-whys analysis was conducted for each cause with the help of stakeholders to explore the root cause of the problem.
Investment incentives The Namibian government aims to stimulate economic growth and employment through industrialisation and promoting exports.
To this end, the government has introduced numerous incentives, primarily concentrated on stimulating manufacturing in Namibia and promoting exports into the region and to the rest of the world.
General tax regulations that are indicative of the government’s commitment are:
• Non-resident Shareholders’ Tax is only 10%;
• Dividends accruing to Namibian companies or resident shareholders are tax-exempt;
• Plant, machinery and equipment can be entirely written off for three years;
• Buildings of non-manufacturing operations can be written off at 20% in the first year and the balance at 4% over the ensuing 20 years;
• Import or purchase of manufacturing machinery and equipment is exempt from value-added tax (VAT); and
• Preferential market access to the EU, USA, and other markets for manufacturers is provided. Export Processing Zones (EPZs) Namibia currently has an Export Processing Zone (EPZ) regime that offers favourable conditions for companies wishing to manufacture and export products.
The EPZ scheme is due to be phased out, possibly in 2021, and replaced by Special Economic Zones (SEZ), outlined in the Income Tax Amendment Bill, which the Minister of Finance tabled in Parliament on February 19, 2020. There is a moratorium on new applications under the existing EPZ regime.
In 2019, there were 19 EPZ companies in operation, most of which were closely linked to mineral beneficiation, including Namzinc (which produces Special High-Grade zinc at the Skorpion zinc mine), Namibia Custom Smelters (which has blister copper from imported copper concentrates), and a variety of diamond cutting and polishing operations (which cut and polish locally and internationally sourced rough diamonds).
Under the EPZ regime, the government offered a package of tax and non-tax special incentives applicable to existing and new manufacturing enterprises, exporters, and EPZ enterprises.
Companies operating under the EPZ regime need help locating their operations in Namibia. Through the Off-shore Development Company (ODC), EPZ enterprises also have access to factory facilities rented at economical rates.
Current EPZ incentives are:
• Corporate tax holiday;
• Exemption from import duties on imported intermediate and capital goods;
• Exemption from sales tax, stamp and transfer duties on goods and services required for EPZ activities;
• Reduction in foreign exchange controls;
• Guarantee of free repatriation of capital and profits;
• Permission for EPZ investors to hold foreign currency accounts locally; Access to streamlined regulatory service (‘one-stop shop’);
• Refund of up to 75% of costs of pre-approved training of Namibian citizens;
• No strikes or lockouts allowed in EPZs;
• Provision of factory facilities for rent at economical rates. Capital allowances
For buildings used for trade, 20% of the cost of erection may be written off in the first year of use, and 4% may be written off annually over 20 years (the 4% allowance is increased to 8% for certain manufacturing buildings, and the write-off period is reduced to 10 years).
A general three-year write-off period applies for fixed assets other than buildings (e.g., plants, machinery, equipment, aircraft, and ships), with an accelerated write-off period for some expenditures regarding mining and farming operations.
Taxation system Namibia operates a modern system of taxation that is reasonably competitive by international standards and is modified and updated regularly, usually but only sometimes, following announcements in the national budget speech. The basic system has remained relatively simple.
Tax administration is carried out primarily by the Directorates of Inland Revenue and Customs and Excise within the Ministry of Finance, which administer the Income Tax Act, Value Added Tax Act, Stamp Duty Act, Transfer Duty Act, as well as parts of the Petroleum Taxation Act.
Some mining taxes, however, are the responsibility of the Ministry of Mines and Energy under the Diamond Act and Minerals (Prospecting and Mining) Act.
Taxation for mining and quarrying and oil and gas companies is different from that of other companies. Diamond mining companies pay a 50% corporate profit tax plus a 10% surcharge, resulting in an effective 55% corporate tax rate.
They also pay a 10% duty on the export of unpolished diamonds, according to the Diamond Act of 1999, administered by the Department of Diamond Affairs within the Ministry of Mines and Energy.
The land tax is provided under Agricultural (Commercial) Land Reform, Act 6 of 1995, which is currently administered by the Ministry of Agriculture, Water, and Land Reform.
There are tax offices in Windhoek, Walvis Bay, Rundu, Otjiwarongo, Oshakati, and Keetmanshoop. The government has established a “semi-autonomous revenue agency” to improve the efficiency of tax collection.
Implementing the action plan would require significant financial, technical, and logistical resources within a long-term macroeconomic equilibrium path for greater economic and social prosperity.
The relative importance of these sources of demand for finance will naturally vary according to the stage of Namibia’s development, its resource endowments, macroeconomic challenges and the sophistication of the private sector.
Given the funding constraints, the Action Plan prioritises those activities most crucial to successfully implementing the Industrialization Strategy.
- Income tax – Companies Tax (%)
- Standard corporate rate 32
- Manufacturing Companies 18 – 32
- Diamond mining companies 55
- Non-Diamond Minerals 37.5
- Mining service companies 37.5 – 55
- Petroleum mining companies 37.5 – 55
- Insurance Companies 32
- Retirement Funds Exempt
