NAMIBIA - MINING REGULATIONS
Namibia, officially the Republic of Namibia, sits on the south west coast of the African continent, bordered by Zambia and Angola to the north, Botswana and South Africa to the east and south and the Atlantic Ocean to the west. The country gained independence in 1990, following 75 years of South African control, and the SWAPO became the governing political party in the region, remaining in power ever since.
Namibia is the 15th largest country in Africa by area but only the 27th largest economy by nominal GDP (IMF 2014). Whilst agriculture, manufacturing and tourism are all significant contributors to the country’s economy, the extractive industry and the subsequent processing and exportation of minerals is by far the largest overall contributor, responsible for around 15% of GDP. Namibia is now the sixth largest uranium producer in the world, falling from fifth place in 2015, which is reflective of a downturn in production in recent years. That said the country’s two large-scale uranium mines are capable of producing around 10% of world uranium output. Namibia also has considerable diamond reserves and whilst the country only accounts for less than 2% of world rough diamond production by weight (USGS, 2013) it is recognised as one of the leading producers in terms of value of dollars per carat. Other minerals resources in the country include copper, lead, manganese, zinc, silver, gold and numerous industrial minerals such as cement fluorspar, cement and marble (USGS, 2013).
Following a meeting in 2011, the Namibian Cabinet issued a statement declaring certain minerals as controlled and high value minerals or strategic minerals. The list of strategic minerals includes uranium, gold, copper, coal, diamonds and rare earth metals. Licences for such minerals may only be issued to a State owned company, which has the capacity to enter into joint ventures with interested parties in order to carry out exploration and development. Thus, foreign companies looking to exploit strategic minerals will need to enter into agreements or joint ventures with the state-owned Epangelo Mining Company, in order to carry out operations.. Notable operators in Namibia include De Beers, which formed the Namdeb Company, a 50:50 joint venture with the Namibian government, and Rio Tinto who own majority shares in the Rössing uranium mine, with the Namibian government having just 3% of shareholding but a 51% majority when it comes to voting rights.
The Fraser Institute’s Policy Perceptions Index for 2015 rated Namibia in 29th place out of the 109 jurisdictions surveyed.
PRINCIPAL LEGISLATION AND REGULATOR
The primary legislation relevant to the mining industry is the Minerals (Prospecting and Mining) Act 1992 (Minerals Act) and the 2008 Minerals (Prospecting and Mining) Amendment Act. The former regulates mining activities in the country and governs the permitting of prospecting, exploration and mining, whilst the latter amendment focused on changing the royalties scheme.. Other notable legislation includes the Environmental Management Act 2007 and the EIA Regulations. The Diamond Act of 1999, accompanying regulations and subsequent amendments regulate the processing, import and export of diamonds as well as their possession, purchase and sale. Separate regulations govern petroleum. Those looking to invest or mine in the country should also be aware of the National Equitable Economic Empowerment Bill, which was published for comment earlier this year and the Mining Charter (see ‘Future Amendments’ below).
The sector itself is regulated by the Ministry of Mines and Energy (Ministry), which is headed by a Minister of the same title (Minister). The Minerals Act also created the role of Mining Commissioner (Commissioner), who is appointed by the Minister and is head of the Mines Directorate within the Ministry. Together the Minister and the Commissioner are responsible for the management of mineral licence applications and subsequent issuance of licences, as well as the oversight and management of the industry more generally.
According to the Namibian Constitution land, water and natural resources below and above the surface of the land belong to the State unless otherwise lawfully owned (see Article 100, Namibian Constitution). Any right in relation to reconnaissance, prospecting, or mining or the sale or disposal of minerals is vested in the State, who can confer such rights on others under the Minerals Act (s. 2, MA).
GRANTS AND FORMS OF MINERAL TITLE
Pursuant to section 46 of the Minerals Act a mineral licence shall not be granted to any person other than a company (registered and incorporated in Namibia) or a Namibian citizen, over the age of 18, who is considered by the Minister to be a ‘fit and proper’ person. However, Ministerial guidance identifies only Mining Claims (MC) as rights that are exclusively for Namibian citizens and section 121 requires only that persons be resident in Namibia, suggesting that any person may apply for the titles listed below, except of course MC.
The following are provided for within the Minerals Act:
- Reconnaissance Licence (RL): Grants the holder the right to carry out reconnaissance activities, which are defined as: “…any operations carried on in a general search for minerals by means of aerial sensing techniques, including geophysical surveys, photo-geological mapping or imagery carried on from the air…”. Applications can be made to obtain an exclusive RL for areas where no other mining claim or mineral licence applies (s. 59, MA). Applications must contain: a detailed plan of the land area, a geological description of the land, proof of financial and technical resources, a programme of operations and, for exclusive RL only, details of the mineral or mineral groups for which the application is made and why an exclusive licence is sought (s. 60, MA). Before granting the licence the Minister must be satisfied with the programme of operations and the technical and financial capacity of the applicant (s. 61(c), MA). RL will be valid for a duration determined by the Minister, not exceeding 6 months and are generally non-renewable, unless the Minister chooses to grant an extension of no more than 6 months (s. 63, MA). RL are non-transferable and do not confer any preferential right to any other licence under the MA (s. 58(3)(a), MA and s. 64, MA).
- Non- Exclusive Prospecting Licence (NEPL): Available to any person over the age of 18 (s. 17, MA); grants the holder the right to carry out prospecting operations for a mineral or group of minerals and remove such minerals according to the terms of section 16. Applications must contain details of the applicant and any other documentation the Commissioner requests (s. 18, MA). Granted subject to terms and conditions determined by the Commissioner. Valid for a period of 12 months (s. 22, MA) with no possibility of renewal. NEPL are non-transferable (s. 23, MA).
- Exclusive Prospecting Licences (EPL): Grants the holder the right to carry out prospecting operations in the area for the mineral or group of minerals specified within the licence and remove such minerals for the purposes laid out in section 67. The exclusivity applies only as regards the mineral or group of minerals identified in the licence; several EPL may be granted over the same area of land for separate minerals. Applications for EPL must contain: details of the applicant; the period for which the EPL is required and the mineral(s) for which the application is made; a detailed plan of the area; a geological description; details of any other licences held by the applicant in the last 10 years; the condition of the environment and the estimated environmental impact of the proposed activities, alongside mitigation and prevention measures; proof (as required by the Commissioner) of the technical and financial resources available; a programme of operations with estimated expenditure; and any other documentation requested by the Minister (s. 68, MA). Before granting the licence the Minister must be satisfied with the proposed programme of operations and that the person has the technical and financial resources to carry out the work (see s. 69, MA). EPL will be granted for a duration determined by the Minister, not exceeding 3 years, renewable for one or two further periods of a duration determined by the Minister, not exceeding 2 years.
- Mineral Deposit Retention Licences (MDRL): Available to holders of EPL and Mining Claims (Namibian citizens only) (s. 78, MA). Grants the holder the right to retain the area for future mining operations, subject to the terms of the MA, including the right to remove minerals and carry out prospecting operations, as outlined in section 77. Applies only in relation to the mineral(s) specified within the licence. Applications must contain the same information as listed above in relation to an EPL as well as the reasons why a deposit cannot be mined on a profitable basis at the time; an indication of when the mineral(s) may be mined; and the reasons why no further prospecting operations can usefully be carried on in the area (see s. 79, MA). Granted for a duration determined by the Minister, not exceeding 5 years, renewable for a further period as determined by the Minister, not exceeding 2 years.
- Mining Licence (ML): Available to exclusive RL holders; EPL holders; MDRL holders and Mining Claim holders (s. 92, MA). Grants the holder the right to carry out mining operations in the area for the mineral(s) specified within the licence, including the right to remove minerals as provided for in section 90 of the MA. Also allows the holder to carry out prospecting operations in the area for any mineral(s). Applications must contain details of the applicant; the period of duration requested; a detailed location plan; a geological description, including information on the mineral reserves; details of any other mineral licences held by the applicant and / or information on previous operations outside Namibia; details on environmental issues, including prevention measures; a technical report on the development, mining and ore treatment activities; proof of technical and financial resources (as required by the Commissioner); a programme of mining operations, with expenditure figures; a detailed forecast of capital investment and means of financing and other documentation requested (see s. 91, MA). Before granting the licence the Minister must be satisfied that: the area of land contains a deposit which may be mined on a profitable basis; that the proposed programme of operations ensures the efficient, beneficial and timely use of the mineral(s) and adequate protection of the environment; and that the person has the required technical and financial resources to carry out operations. ML are issued for a period of 25 years or a duration which, in the opinion of the Minister, reflects the estimated life of the mine; renewals for a duration which in the opinion of the Minister, represents the remaining life of the mine (not exceeding 15 years) are possible (s. 94, MA).
- Mineral Agreements: Pursuant to section 49 of the MA applicants for mineral licences may, before the licence is issued, enter into an agreement with the government containing the terms and conditions on which the mineral licence will be issued. The potential content of a Mineral Agreement is broad and may include terms and conditions in relation to: reconnaissance, prospecting or mining operations and a time table of activities; minimum expenditure; formation of joint ventures or joint arrangements; participation, including the acquisition of equity share capital by the State or any other person in a joint venture or agreement; the manner in which operations will be carried out; processing information on Namibian based activities; the basis on which market value of the mineral(s) may be determined; guarantees to ensure the due and proper performance of the liabilities and obligations under the licence; financial and insurance arrangements; arbitration arrangements; and the application of fiscal laws in Namibia (see s. 49, MA).
The MA also provides for Mining Claims, which are exclusively available to Namibian citizens following the successful pegging of a claim, as provided for in Part VI of the MA.
It should also be noted that, as discussed above, the Ministry has declared certain minerals including uranium, gold, copper, coal, diamonds and rare earth metals, as strategic. Only state-owned mining companies i.e. Epangelo Mining Company will be granted licences for such minerals, thus foreign companies will need to enter into joint ventures in order to obtain exploration and mining rights for such minerals.
In relation to private land, pursuant to section 50 of the MA, mineral licence holders are required to exercise any right granted under the Act reasonably and in such a manner that the rights and interests of the owner of the land are not adversely affected, except to the extent that such owner is compensated. Licence holders will need to enter into an agreement with the landowner in relation to compensation or have the owner waive the rights to the land before any rights on or under private land may be exercised (s. 52, MA). Compensation must also be paid to the landowner for damages caused by prospecting or mining activities and the licence holder may, in certain predefined circumstances, be required to purchase the land following a request from the Minister. In cases where a land purchase is ordered the price will be determined by agreement or arbitration. Where it is considered ‘reasonably necessary’ for a licence holder to obtain a right to enter upon land in order to carry out operations, yet the landowner refuses to grant such right, an application can be made to the Commissioner. If the Commissioner is then satisfied that there are ‘reasonable grounds’ for granting the right, he / she will do so for a duration and subject to such terms and conditions as the Commissioner deems necessary. The Commissioner may also grant interim rights, whilst applications are being considered, subject to the payment of a security. In cases where an agreement on compensation cannot be reached between the landowner and the licence holder, the Commissioner will determine the amount which, in his / her opinion, represents ‘just compensation’. Appeals against compensation are possible and must be made to the High Court of Namibia.
In terms of environmental assessments, mining and quarrying activities (as defined in the EIA Regulations) require an Environmental Clearance Certificate (ECC) before they can commence. A clear process, with accompanying timelines, is provided for within the Environmental Management Act and the EIA Regulations. The Environmental Commissioner is responsible for granting the ECC, although applications are made via the competent authority i.e. the Ministry of Mines and Energy (see Environmental Overview Commentary).
Applications for mining licences must contain information on the manner in which the applicant intends to reclaim and rehabilitate the land. Under section 128 of the MA, the Minister can require the holder of a licence to remove or demolish structures or carry out steps to remedy damages caused to the land or environment in areas that have been abandoned or operations ceased or in areas where licences have been cancelled or expired.
Finally, operators should bear in mind the fact that the Minerals Act contains a number of general terms and conditions to which each mineral licence is subject, these include requirements to: give preference in employment to Namibian citizens with the appropriate qualifications; carry out training programmes in order to encourage and promote the development of Namibian citizens; make use of services, products or equipment available, manufactured or produced in Namibia; and co-operate with others in the industry to ensure citizens develop skills and technology to service the industry in Namibia (s. 50, MA).
NATIONAL EQUITABLE ECONOMIC EMPOWERMENT
It is worth noting that the National Equitable Economic Empowerment Bill (NEEEF Bill) was published for comment earlier this year, with the Ministry indicating that the intention is for the new laws to enter into force by April of 2017. The Bill itself is based on the Equitable Economic Framework (Framework), which aims to bring about socio-economic transformation in order to enhance equity, social justice and empowerment of the previously disadvantaged majority. Under the Framework “previously disadvantaged persons” means those persons defined in Article 23(2) of the Constitution which includes racially disadvantaged persons, women, and persons with any disability as defined in legislation.
The Framework includes six “Pillars of Empowerment” which are aimed at addressing the needs of previously disadvantaged persons. Whilst each of the six pillars will require changes those of particular relevance here are the Ownership Pillar and the Management Control and Employment Equity Pillar.
The “Ownership Pillar” has two aspects – one for new enterprises and another for existing enterprises. The Framework suggests that new enterprises will need to allocate 25% of shares to previously disadvantaged persons before commencing business, whilst existing enterprises will be required to meet minimum scoring requirements. The following scoring will apply:
- A minimum 10 points will be awarded to a company which is 25% owned by previously disadvantaged persons.
- 1 additional point will be awarded for each additional 7.5% of ownership by previously disadvantaged persons.
- A maximum of 20 points is available for a company 100% owned by previously disadvantaged persons.
A business must score a minimum of 10 points i.e. be 25% owned by previously disadvantaged persons in order to enter into a contract for procurement purposes or obtain a right to exploit natural resources or to continue to conduct a licenced trade.
The “Management Control and Employment Equity Pillar” also has separate requirements for new enterprises and existing enterprises. New enterprises will be required to have combined board and top management structures of which 50% are filled by previously disadvantaged persons before they can commence business, whilst existing companies will again need to meet minimum scoring requirements. The following scoring will apply:
- 10 points will be awarded to companies whose combined board and top management structures are 50% filled by previously disadvantaged persons.
- 2 additional points will be awarded for each additional 10% of roles filled.
- A maximum of 20 points is available for a company whose combined board and top management structures are 100% filled by previously disadvantaged persons.
A business must score a minimum of 10 points i.e. have a combined board and top management structure which is at least 50% filled by previously disadvantaged persons, in order to enter into a public contract for procurement purposes or to be able to obtain work permits, access rights to natural resources, business licences, trading, telecommunications and financial services.
The NEEEF Bill itself aims at implementing a national policy on the Framework and sets out to establish a Commission and Council to focus on economic empowerment measures. The Bill aims to implement the six pillars of the Framework but also directly incorporates ownership requirements into the legislation; thus, should the Bill enter into force, the ownership requirements below will become a legal obligation for new and existing mining companies operating within Namibia.
The following aspects of the Bill are particularly noteworthy:
- Ownership Restrictions: Any private sector enterprise established after the legislation enters into force will need to be 25% owned by a racially disadvantaged person or persons before it can commence business. Further, the Minister has the power to require a higher percentage of ownership by giving notice in the Gazette. The legislation prohibits private sector enterprises which are owned and controlled by a previously disadvantaged person from allotting, issuing or transferring any portion of its ownership to a person that is not previously disadvantaged or to a domestic or foreign entity that is not previously disadvantaged. Any person who has received ownership in a private sector enterprise under the legislation may only allot, issue or transfer ownership to another person who is previously disadvantaged.
- Sector-specific Transformation Charters: The Economic Empowerment Council (EEC), created under the NEEEF Bill, is tasked with promoting a transformation charter for particular sectors of the economy. Such charters must be developed by major stakeholders in the sector; contain the development and implementation of a communication plan on economic transformation and empowerment and advance the objectives of the legislation. Charters cannot set lower benchmarks or weightings than those identified in the national programme or economic empowerment standards.
The general response to the Framework and the Bill from numerous industries and organisations has been critical. It is likely that the Bill itself will need considerable redrafting before it can enter into force, meaning the April 2017 goal is perhaps unrealistic. In truth the major faults of the draft legislation can be traced back to the Framework which critics have suggested is: impossible to implement over the short or medium term; ill thought out; poorly researched; and, according to one politician, pathetic from A to Z.
Readers should also be aware of the Mining Charter – which was published in 2014 and has been trialled over the last two years. At the time of writing (May 2016) the Charter was yet to be adopted, although it appears that it will only be a matter of time until this occurs. The Charter contains policies in relation to sustainable and broad-based economic and social transformation in the Namibian mining sector, which broadly reflect the pillars under the Framework discussed above; however the requirements of the Charter are lower than those set by the NEEEF Bill and so are likely to be adjusted if the legislation enters into force. Whilst the Charter is not legal binding, companies are encouraged to comply with its terms and one can easily foresee, based on the MineHutte Score above, the potential for the government to hinder the activities of those who fail to do so.
Notable points of the Charter include:
- That all mining, development and exploration companies make a minimum of 5% of equity available for sale exclusively to HDNs within two years of the Charter being adopted. Notably the government of Namibia and other government owned entities or state-owned enterprises or organisations, including state owned mining companies qualify as HDN. Equity stakes must be made available at fair market value but the price can be negotiated. HDN equity requirements will only be met in cases where HDN equity is subsequently sold to a non-HDN shareholder, if the equity was previously held for a continuous period of 5 years. Making the equity shares available will be sufficient in cases where a HDN shareholder cannot be found.
- Mining companies must invest at least 2% of annual gross payrolls into developing the skills of HDN employees and other HDN.
- Existing operating companies must ensure that HDN are properly represented at managerial level with 40% of managerial level staff formed of HDN by 2016, 50% by 2018, and 60% by 2020.
- Exploration and development companies must achieve a minimum 20% HDN representation.
- New operating companies must ensure HDN representation at managerial level of 20% during the development phase; 30% within 2 years of the first sale of product; 40% within 4 years; 50% within 6 years; and 60% within 8 years. Alternative requirements apply to smaller mining companies.
- Mining companies must ensure they direct 40% of discretionary expenditure (as defined in the Charter) from 2016-2020 to Namibian-owned businesses, providing they are internationally cost and quality-competitive.
- Companies must commit to spending 0.5% of turnover in respect of Namibian mining operations, or 0.5% of exploration costs or 0.5% of reduced development costs, in assisting Namibian communities or contributing towards infrastructure in excess of what is required for their own operations.
See Namibia- Environmental Overview Commentary.