| Mining companies refuse to pay royalties |
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| Written by Chamwe Kaira | |
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Some mining companies have refused to pay the new mining royalties introduced last year, it has emerged. This development has left the Minister of Mines
and Energy disappointed, as he says the government and the industry had
an agreement when the royalties were introduced last year. “It is disheartening to note that after the Chamber of Mines and the
ministry reached an agreement on the applicability of the Government
Notice of 2006 imposing payment of royalties by mining companies, there
are still a few companies that continue to defy the directive. In this
respect, I would urge them to start paying not later than today,” said
Minister of Mines and Energy Erkki Nghimtina last Friday during the
Annual Dinner of the Chamber of Mines of Namibia.
But Otto Shikongo, president of the Chamber, told the Economist that the refusal to pay was purely from a governance point of view and not a defiance of policy. “This is purely from a governance point of view and its not like they don’t want to pay. There is some clause in the Government Notice, which needs to be clarified. Once this condition is met, they (miners) will pay the royalties,” Shikongo said. “We, as the mining industry, met and agreed to pay the royalties, however of our members went back to the ministry to seek clarification on the clause. “We are trying to sort this issue out.” Early last year, the chamber said royalties would hurt the profitability of the industry. The tax was gazetted in November 2004, but the Ministry of Mines and Energy agreed to postpone its implementation to last year until the industry had been consulted on it’s affordability and the effect it would have on the future of the industry, both in terms of existing operations and Namibia’s attractiveness as an exploration destination. Last year, the chamber said the effect of the 5% royalty translates to 50% of profits for a 10% gross margin company. The remaining 50% of profits is taxed at Namibia’s mining rate of 37.5%. Together with PAYE, the government would receive 91% of all distributable cash if the royalties were levied at 5% of gross sales, the chamber said. Mining contributes around 10% to the country’s GDP. AngloGold Ashanti, De Beers, Anglo American and Rio Tinto have operations in Namibia. The mining industry increased its turnover last year by 13% to N$13.8 billion from N$12.2 billion in 2006, the chamber said in its 2006/7 Annual Report released last week. |
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