Oil and mining boom: Where do Namibians fit in?

26 September 2014 Author   Nyasha Francis Nyaungwa and Christine-Rita Abankwah

front Oil  minin 26 sepEQUITY participation by Namibians in Exclusive Prospecting Licences (EPLs) has largely been opportunistic, speculative and short term due to the absence of venture capital, respected geologist turned investment banker Steve Galloway says.In an interview this week, Galloway, who is also the Managing Director of Rand Merchant Bank (RMB) Namibia, gave his views on the state of mining, and oil and gas sectors in the country.

He said there had been a marked increase in participation by previously disadvantaged Namibians in mining and exploration activities over the last ten years.

However, the absence of capital had hampered meaningful participation by locals in the lucrative sector.

“As a bank we do try to support broad- based groups to take equity positions in advanced projects or mine acquisitions, based on the fundamentals of the project or mine. Evi Mining into Otjikoto Gold and Epangelo into Swakop Uranium are good examples.

“While we also provide advice at EPL level, we cannot finance exploration activity as it is by definition very high risk,” he said.

Galloway, who previously served as Chief Mineral Economist at the Ministry of Mines and Energy, contributed to the implementation of Namibia’s first mineral policy, incentives and tax regime.

In his view, Government had generally adopted policies that were conducive to investment in the mining sector.

“Government policy has been generally conducive to investment in the mining sector. The capital- intensive nature of mining, however, necessitates access to foreign capital and skills and makes preferential treatment for Namibians only advisable or feasible in small-scale mining and beneficiation.

“The mineral rights regime also provides preferential access to Namibians on mining claims. Lately, Government has also given Epangelo and previously disadvantaged Namibians preferential rights to EPLs, with mixed results to date.

“The funding and expertise gaps make the success of these policy initiatives a challenge, unless credible capital and technology partners can be engaged in joint ventures,” he said.

“My perception is that previously disadvantaged Namibians have had no trouble in acquiring EPLs. It is the work commitments, access to funding, skills and technology and therefore inability to progress the EPLs to development that has hampered greater traction and progress by most of these parties,” he said.

Galloway, who started his career as a geologist, has extensive experience in Namibia’s exploration and mining industry.

He has been involved in advisory and/or financing roles for Debmarine Namibia, Otjikoto Gold, Langer Heinrich, Rössing, Bannerman Resources and Deep Yellow. He is also the former chairman of Extract Resources.

He added that while Epangelo and Namcor (both state owned) are in a slightly better position to play a more constructive role, similar funding, skills and technology gaps have hampered their progress.

 

Galloway further said that participation in the oil and gas sector represented an even higher risk environment than mining did, and required much higher capital commitments.

“Even Namcor is not in a position to fund the massive costs associated with oil and gas exploration, but must secure some form of participation on behalf of the Namibian nation,” he said.

The Petroleum Commissioner Immanuel Mulunga said Namcor enjoys a stake of between 5 to 15 percent out of the 46 Petroleum Exploration Licenses (PELs) in Namibia, while local Namibian participation in the sector stood at approximately 5 percent.

He said that previously disadvantaged Namibians participated in about 90 percent of these licenses.

Like Galloway, Mulunga is of the opinion that the capital intensity nature of the petroleum exploration industry forces Namibians to go into joint ventures with foreign companies, because they do not have the required funds to spend on exploration activities on their license“Financial commitments run into millions of US dollars and you need a foreign partner who can risk such amounts on exploration.

“That’s why we see these types of partnerships where Namcor and locals are not expected to contribute funds during the exploration phase and are thus carried by the foreign partner with deeper pockets,” Mulunga said.

The petroleum commissioner dismissed suggestions that the majority of EPLs lie in the hands of a few politically connected black Namibians.

He stated that it was not true that only so-called ‘politically connected’ people obtain the licenses.

“What some sections of the media do [is] they look at a small sample of names of people that they regard as politically connected and make a case that it’s only those people that are participating.

“However, when you look at the list of people that participate in the industry you will realise that there are many other ordinary Namibians participating in these licenses,” he said.

Mulunga said it was important for people to understand that the Ministry of Mines and Energy did not seek out people for empowerment, but those who were interested either approached the ministry or applied directly with their foreign partners.

“We are duty-bound to process any application for an exploration license whether it comes from a so-called politically connected person or not,” Mulunga emphasised.

In the absence of a formal Black Economic Empowerment (BEE) policy in place, Mulunga said he was happy to see that Namibians had found innovative ways to participate and benefit from the oil and gas industry.
“We couldn’t have waited to have a BEE policy in place before we let Namibians participate and financially benefit from the exploration of their own resources. We had to be proactive even in the face of this unfair criticism from some sections of the media,” he said.

WINDHOEK OBSERVER

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