September 7, 2007

Minerals licences abused / Dali Diamond Co. eyes local diamond sector

The Government might be forced to amend the Minerals Act of 1992 because of a common practice among mining licence holders interested in making a quick buck to sell the acquired mineral licences to foreign investors. The Minister of Mines and Energy, Erkki Nghimtina, said that it was common for local people to apply for licences only to sell them to foreign investors for one-off payments. "They come to us and say they have partners, they sell for example the licence for N$2 million and the buyer explores the resources and gets more out of the deal. "Namibians are losing out on developing their own resources, and growing the economy in terms of employment creation," he said. According to the Minister, this showed how Namibians have failed to embrace opportunities availed for self-development.
The Minerals (Prospecting and Mining) Act of 1992 regulates the mining industry in the country. The Act is designed to facilitate and encourage the private sector to evaluate and develop mineral resources. While Black Economic Empowerment (BEE) policy forces foreign investors to collaborate with local BEE firms or trusts, Nghimtina pointed out that there was nothing wrong with local people having interest in the mining industry but that they should be part of ownership. He added that there was need to inculcate long-term investment visions in the local people. According to him, the law on minerals was tricky because it made provisions that licences could be transferred.
Mining licences according to the law can be awarded to Namibian citizens and companies registered in Namibia. They are valid for the life of the mine or an initial 25 years, renewable up to 15 years at a time. Applicants must have the financial and technical resources to mine effectively and safely. In as much as the Government would like to give first preference to Namibians, Nghimtina said outsiders are using local people to acquire licences. The Minister revealed that the practice is common in the diamond industry where already all the licences awarded to locals have been transferred to so-called partners. "Nearly all licences for diamond cutting and polishing have been transferred," Nghimtina said. That has also delayed the Government in supplying 16 percent of the stones to local cutters and polishers as it was found that foreign operators mainly dominate the industry. There are about 20 licences registered for cutting and polishing Namibian diamonds. Mining products in Namibia account for about 50 percent of the country's annual export earnings. Although the mining industry plays a vital role in Namibia's economy, the mining sector has experienced a decline in growth over the past few years. Namibia's main mining products include diamonds, uranium, gold, zinc, copper and lead.
Dali Diamond Co., the Antwerp based diamond supplier, has in the meantime announced the opening of a diamond polishing plant in Namibia later this year. The US$2.7 million investment includes modern electronic and mechanical manufacturing equipment, as well as specialized training programs for the local work force. Dali said it would also invest in branding the origin of its Namibian diamonds. The Dali factory will be fully operational by the end of 2007 and expects to employ about 150 workers by the end of the 2008. Growth plans envisage the opportunity to create a workforce of 300, it said. Dali, a supplier of watch and jewellery houses and high-profile retailers, is a De Beers sightholder since 1969, and is a core client of Russian mining company Alrosa. (Namibia Economist, Windhoek / New Era, Windhoek)

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