COMMENTARY — Namibia attracting Canadians

As more and more Canadian mining companies move offshore, one country sure to gain prominence in the next few years is Namibia. Hidden in the shadow of South Africa for 75 years, Namibia is now being touted as “a model for the rest of Africa.”

Having recently returned from a visit to this, the newest nation in Africa, The Northern Miner was impressed with what Namibia had to offer. The trip, co-sponsored by Yorkton Securities and Namibian Minerals (also known as Namco), provided us with a glimpse at the investment climate, government, mining industry and the country as a whole.

Namibia comprises 824,269 sq. km, making it slightly larger than Texas, or roughly four times the size of the United Kingdom.

The country can be roughly divided into three areas: the coastal region, the central plateau, and the northern region.

The coastal area is home to the Namib Desert, the oldest desert in the world, which stretches 2,000 km along the Atlantic coast.

To the east is the central plateau, which rises 900-1,200 metres above sea level and is home to the capital city of Windhoek.

The northern region, bordered to the north by Angola and Zambia and to the east by Botswana, is the most fertile and populous part of the country. The population totals 1.5 million people and consists of a dozen different cultural groupings. About 75,000 Namibians are of European origin. The country came into being in 1884 when Britain, Germany and Portugal negotiated territorial boundaries and established the colony of German South-West Africa.

Just after the start of the First World War, the country was occupied by South African forces and subsequently annexed. In 1946, South Africa opted against handing over the area to the United Nations and decided, instead, that South-West Africa should be regarded as the Union’s fifth province. A non-violent pressure group, the South-West African People’s Organization, was formed in 1960 to bring about independence. In 1966, however, the struggle turned violent and fighting continued until a negotiated settlement was reached in 1989. Namibia, the youngest member of the Commonwealth, was born on March 21, 1990.

Namibia is a multiparty, unitary republic with a Western-style, democratic form of government. The head of state is the executive president who is directly elected by the people (he requires at least half of the votes) for a 5-year term, with possible re-election for a second term. The country is governed by an elected legislature.

The government sees its main priorities as follows: to attract foreign investment, to stimulate growth, to reduce poverty, to create jobs, and to raise the standard of living.

Even though mining is Namibia’s largest industry (accounting for about one-third of the gross domestic product and some 80% of the value of export sales), the country is largely underexplored and underexploited. This is due mainly to the reluctance of foreign investors to risk spending capital during the troubled years before independence.

The Namibian government emphasizes creating a fair and flexible fiscal regime that will provide revenues to the state from successful mines and yet allow attractive returns on foreign investment.

There is no differentiation between local and foreign-owned companies with regard to payment of income tax, since once a foreign-controlled company has been locally registered, it has the status of an incorporated company. Under a recently enacted mining fiscal regime, direct taxes are profit-based. A progressive tax formula, with a minimum rate of 25%, is applied to mining profits, with the exception of diamond mining profits which are taxed at 55%. Tax laws also allow for the redemption of capital, exploration and development expenditures against taxable income.

Corporate tax, at a rate of 38%, is payable by mining companies on taxable profit arising from non-mining activities.

The mineral industry is largely based on diamonds, mined along the barren southwestern coast by CDM, a unit of De Beers, and to a lesser degree on uranium oxide (5,000 tons a year) and copper (35,000 tons).

About one million carats of gem-quality diamonds are produced annually.