Sub-Sahara Mining & Industrial Journal

Govt eyes stake in future mineral, oil ventures

Minister of mines and energy Tom Alweendo has confirmed that while existing mining and exploration contracts will remain unaffected, the government is contemplating the possibility of requiring a minimum equity stake through a public enterprise in future mineral and petroleum licences.

This comes as Alweendo’s comments on Tuesday about the possible nationalisation of specific natural resources created concerns among players in the oil and gas industry, resulting in a notable effect on the shares of mining companies primarily listed in Australia.

In a statement issued yesterday, Alweendo emphasised that Namibians face disadvantages in exercising their rights to natural resources due to financial and other constraints.

He said as the supreme owner of Namibia’s natural resources, the government may require a minimum stake in future mineral or petroleum licences through public enterprises like Epangelo Mining or the National Petroleum Corporation of Namibia (Namcor).

“Cognisant of the fact that many Namibians might not have individual capacity or the requisite resources to realise these rights or expectations in their individual capacities, it would be just that the government acquire these rights on their behalf,” Alweendo said.

Alweendo said the government would exercise these rights in a balanced way, considering the interests of both investors and the Namibian nation.

“The ministry would like to reiterate this is normal practice in Namibia – especially in the petroleum and mining sectors – and we should maintain such practice in the interest of all our stakeholders,” Alweendo said.

Quoting article 100 of Namibia’s Constitution, Alweendo on Tuesday said local ownership must start with the state, in which the ownership of natural resources is vested.

“The proposed state ownership should take the form where the state owns a minimum equity percentage in all mining companies and petroleum production for which it does not have to pay.

“We believe this is the most practical way to resolve the issue of local ownership,” Alweendo said.


Prominent investment expert Steve Galloway says there is nothing wrong with the government’s acquisition of minority stakes at fair value, and the government becoming a risk taker in resource ventures.

According to Galloway, the “government stake” on behalf of the people of Namibia, who are the ultimate owners, should range between 50% and 70%, depending on the resource’s quality.

If the government chooses to pursue equity acquisition, Galloway advises that the resource rents be closer to the lower end of this range.

He says the less risky alternative is capturing resource rents through royalties, taxes and duties.

Galloway warns against nationalisation, asserting that taking free or carried equity would adversely affect investor sentiments.

“If it is instead of traditional resource rents, it needs to be carefully structured and legislated. Forced sale without payment is unconstitutional and in contravention of current legislation,” he says.

The mining expert cautions that acquiring free equity, or shares without payment, would complicate investment cases and make them less financially viable.

“Unless this is balanced against total government stake and is in line with other similar resources and jurisdictions, it would be mostly negative for the country,” Galloway says.

Further, Alweendo made a case for incentivising local ownership through the establishment of a state-funded minerals exploration fund, which could be funded by a portion of the royalties mining and petroleum companies pay to the state.

“The fund will then be used to assist eligible local entrepreneurs who wish to invest in the mining sector,” Alweendo said.


During his Tuesday briefing, Alweendo reiterated that the culture of entitlement has become a major obstacle in the country and makes it difficult to develop a thriving and sustainable local content industry.

“We have people in our society with a ‘you owe me’ attitude; people who are not willing to acknowledge that as a nation we will achieve better outcomes when all of us accept individual responsibilities,” Alweendo said.

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