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close this bookThe Courier N 127 May - June 1991- Dossier 'New' ACP Export Products - Country Reports Cape Verde - Namibia (EC Courier, 1991, 104 p.)
close this folderCountry reports
close this folderNamibia: Meeting challenge of nationhood
View the document(introduction...)
View the documentConsolidating democracy
View the documentAn interview with Prime Minister Geingob: partnership with business to create wealth
View the documentAn interview with Vice-President Marin: the political and constitutional success of Namibia is now a model for change in Africa
View the documentAn interview with Dr Ben Amathila, Minister for Trade and Industry: added value equals greater prosperity
View the documentAgriculture and fisheries - managing the transition
View the documentMining - the economic foundation
View the documentWealth in the desert
View the documentEducation in Namibia - bridging the divide by Dr Ian G. MACFARLANE
View the documentProfile
View the documentNamibia and the European Community
View the documentPlanning for development - a man with a mission

Mining - the economic foundation

In common with most developing states, Namibia’s economy is based mainly on the production and exploitation of primary products. In financial terms, mining is by far the most important sector, generating no less than 29% of the country’s total GDP. From the point of view of employment, it has less of an impact (5-6% of the total), but it nevertheless provides a significant number of jobs in areas where few alternatives exist.

On the face of it, Namibia is fortunate in having such a wealth of mineral resources. The picture, however, is not universally favourable and predictions about the future of the sector - which is vitally important for the future of Namibia as a whole - tend to be conflicting.

Although many different minerals have been discovered in Namibia, the strength of mining rests on three products - uranium, diamonds and copper. Since 1989, the Navachab Gold Mine has also made a useful contribution to overall earnings but the commercial exploitation of other minerals is currently on a much smaller scale.

The three main mining companies - each of which is dominant in a single product - are part of large multinational groups with mining interests worldwide. Prior to independence, their exploitation of Namibia’s mineral resources on behalf of foreign interests was a source of great resentment. Indeed, SWAPO was initially committed to bringing the mining industry under public ownership with a view to spreading the benefit of Namibia’s mineral wealth more equitably among its people. However, the threat of nationalisation has receded with the Namibian Government’s acceptance of the prevailing economic philosophy in favour of free enterprise. It is moving instead towards a regulatory framework which it hopes will lead to expansion in the sector, increasing its own tax revenues in the process. There now appears to be a general consensus that this is the best way of maximising the economic benefit to the country.

Problems

The main mining enterprises are currently facing both common problems and difficulties which are specific to their particular product. The former include depressed world commodity prices, which have been a feature of the past decade, and the effects of the economic sanctions which were imposed on the former colonial regime. In addition, investment and operating costs are inflated by the need to build and run large scale mining operations in a largely hostile natural environment. Transport is also expensive given the size of the country and its distance from the principal markets in the northern hemisphere.

It is a truism that non-renewable resources do not last forever but where a country is heavily dependent on extractive industries, this creates particular development problems. Mining towns, often created from scratch, have experienced boom conditions only to discover when the resource is exhausted that their communities have lost their raison d’e. With far-sighted planning, it may be possible to invest today’s wealth in diversifying for tomorrow and this is clearly one of the current objectives of the Namibian administration.

The largest shadow appears to loom over the copper industry. Extraction is carried out by the Tsumeb Corporation at a town of the same name in the north of Namibia but it is generally accepted that this is a business which is well past maturity. Given the mine’s location in an already depressed area of the country, the urgency of broadening economic activity in the region is recognised.

For diamonds and uranium, the longer term prospects are more promising although some difficulties are expected over the next few years. Diamonds have been exploited in Namibia for a very long time and many traditional onshore mining areas have been exhausted. However, the giant Consolidated Diamond Mines (CDM) which dominates the industry in the country does have two new mines at Auchas and Elizabeth Bay as well as a major stake in the gold mine at Navachab. For diamonds, the future focus is likely to be offshore rather than land-based with encouraging indications coming from test mining in Namibian waters.

It is worth mentioning that one of the consequences of diamond mining in the Namib desert was the establishment of the Sperrgebiet (the forbidden zone). This is a huge area in the south west of Namibia which can only be entered with a permit.

Uranium extraction is carried out by the Rossing company at its huge open-cast mine in the Namib desert. Production is currently being cut back due to a depressed world price, the prospect of cheap ore floodong the world market from Eastern Europe and a continuing public mistrust of nuclear power in the aftermath of the Chernobyl disaster, which has influenced energy policymaking in the developed world. Rossing, however, is convinced that future energy demand, combined with a growing environmental backlash against the burning of fossil fuels, mean that the future of the industry is likely to be secure.

Diversification the key

Namibia is also pinning its hopes on diversification in the mining sector. Recent prospecting has revealed that the country has significant untapped reserves of lead, zinc and silver. More copper and gold deposits have also been discovered while there may be potential for mining other rare metals. Rossing, who are acutely aware that all their eggs are currently in one basket (uranium) recently embarked on a pilot project for mining graphite at Otjiwarongo. Beyond the traditional minerals, there may be scope for producing high quality marble and granite while significant reserves of gas have been discovered offshore. The prospect of finding offshore oil is also thought to be ‘reasonably good’.

The discovery of a range of hitherto unexploited mineral resources in Namibia has prompted the Government to predict a buoyant future for the sector. This is not a view which is shared by all, however, and there are those who believe that mining in Namibia has ‘seen its peak years’ (Financial Times, March 22 1990). Time will tell whether the latest finds are suitable for commercial exploitation on a large scale and which view is, therefore, correct. One thing which remains certain is that the fortunes of the Namibian economy will, for the foreseeable future continue to be closely linked to those of its major mining industries.

S.H.