CORPORATE taxes paid by the mining industry o government fell from N$2.2027 billion in 2020 to N$1.553 billion in 2021 due to the lower profits recorded, Hilifa Mbako, President, Chamber of Mines of Namibia has said.
Mbako who was speaking at the mining industry review for yesteryear also revealed that the Chamber members collectively paid N$1.611 billion in royalties and N$231.7 million in export levies, which fell by 3.65% and 0.57% in 2021 respectively.
“The drop in royalties was a result of the royalty remission from 10% to 5% to Namdeb land-based diamond mining operations,” Mbako said.
Total revenue to government paid by Chamber members decreased by 17.43% in 2021 as a result of lower sales revenues and profits realized compared to 2020.
‘Although the mining sector reaped the fruits of higher commodity prices, the sector collectively registered a reduction in total revenue of -4.6% primarily due to the winding down of Weatherly’s Tschudi mine in 2021. Potential gross profit gains from higher commodity prices and a weak.er local currency were offset by increasing input costs that became more expensive due to the appreciating US dollar, in combination with the rapidly increasing price of fuel which raised the cost of transporting inputs and production.
“Collectively, the mining sector recorded a profit of N$928.4million for its second consecutive year as supported by higher mineral commodity prices. However, the profitability of the sector fell by 16.8% in 2021 due to increasing input costs,” Mbako said.
On the employment front, total direct employment increased by 4.5% in 2021 and the sector collectively employed 15,246 people.
“The increase in employment was a result of the various expansion activities carried out by mining companies including Rosh Pinah Zinc, Namdeb, Navachab, B2Gold and Debmarine Namibia, and increased exploration activity,” Mbako said.
The direct employment consisted of 8,640 permanent employees, 1,103 temporary employees and 5,503 contractors. Applying a conservative mining multiplier of 7, the mining industry created 106,722 jobs, which is a sizeable portion of Namibia’s workforce.
Every job created by the industry also generates an important source of revenue for Government through PAYE and VAT as a consumption tax. In 2021, employees from mining companies paid N$1.086 billion in PAYE.
“The majority of individuals employed by the mining sector are Namibians, which consisted of approximately 96% of the mining workforce in 2021. This means that the wage bill of N$5.945 billion circulated within Namibia’s borders and creates local spin-offs that support and benefit other sectors of the economy. Moreover, according to the annual renumeration survey carried out by PWC RemChannel, local Namibians benefitted from much higher salaries and more attractive benefits paid by the mining sector compared to other sectors,” Mbako explained.
The mining sector continued to uphold its commitment in supporting local suppliers, and spent approximately N$15.297 billion on goods and services from Namibian registered businesses. This is equivalent to 47 % of total industry revenue from mining in 2021. As a proportion of total procurement spend by the sector, the local spend amounts to 59%.
Exploration expenditure by exploration companies, as captured in the Chamber’s annual survey, increased by 57.5% in 2021, from N$264.5 million in 2020 to N$416.7million in 2021. The favourable commodity price environment supported increased capital flows into exploration around the globe, which was also reflected in the higher levels of exploration expenditure in Namibia. The actual figure is likely to be much higher as not all exploration companies are members of the Chamber and covered in the survey. This trend was also observed for exploration expenditure by mining companies which increased by 37.4%.
Total exploration expenditure by operating companies and exploration companies increased by 47.09%, from N$548.2 million in 2021 to N$806.4 million in 2022.
“Total capital investment reported by Chamber members again posted an increase of 15.3% of Gross Fixed Capital Formation in 2021, totalling N$5.592 billion. Investment was driven by the construction of Debmarine’s new mining vessel, the Benguela Gem, along with expansion projects at the Otjikoto gold mine, Rosh Pinah mine and Navachab. Figures from the Bank of Namibia show that the mining sector has collectively invested N$14. 1 billion over the last three years, a sure indication that the industry is also a major source and contributor of direct investment into Namibia, whereas other sectors have registered declining levels in recent years,” Mbako also said.