MINES and energy minister Tom Alweendo has warned that Namibians holding onto dormant exclusive prospecting licences (EPLs) at the expense of capable foreign investors risk lowering Namibia's maximum earnings from the extractive sector.
Alweendo said in the National Assembly yesterday that awarding exploration licences to locals without the capacity to do exploration is tantamount to denying citizens the potential economic benefits.
He said the move could be equated to limiting the country from accruing benefits of natural resources.
Alweendo insisted that giving mineral and petroleum exploration rights to local business people merely because they are Namibians is risky.
Some locals do not have the money and technology for exploration, Alweendo said.
His sentiments come at a time when the ministry has asked locals holding onto EPLs to prove their ability to mine or explore for the minerals ahead of foreign investors.
He was addressing growing public criticism over foreign companies dominating the petroleum and mineral resources exploration.
"If we award exploration rights to someone who is not able to do exploration, no exploration will take place and without a discovery, the minerals will remain in the ground and will have no economic value to the country. This is surely not what we desire," Alweendo said.
He said awarding exploration rights to those without the necessary capability has real potential to lead to unethical behaviour from not only the officials responsible for licensing, but also from those who are being licensed.
"We have empirical evidence where those awarded exploration rights without the requisite capability to do exploration have created a trading market for such rights, selling the rights to the highest bidder," Alweendo said.
He added that this is tantamount to auctioning exploration rights, except that the revenue so derived does not accrue to the state, but to the few individuals who were lucky enough to acquire such rights.
Dicoveries of an estimated 11 billion barrels in oil reserves off Namibia's coast have been reported, with the first production anticipated within four years. This find could put Namibia on par with Angola, whose oil reserves are estimated to be around 13 billion barrels and whose production rivals Nigeria's.
MINING LAW REVIEW
On recommendation by the high-level panel on the Namibian economy, the mines and energy ministry is reviewing the Mining Act to make the auctioning of prospecting rights an option.
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"However, if we believe that auctioning the exploration rights will be the best system, then we might as well change the law to that effect," Alweendo said.
Alweendo added that local ownership should start with the state. Currently, the government, through the National Petroleum Corporation of Namibia (Namcor), owns 10% in oil exploration activities.
According to Alweendo, for the country to really benefit from its natural resources, it is important to establish a level of ownership that is agreeable to both the government and the investors.
"What is the appropriate percentage of the free carry state ownership? Is it 10%, 20%, or perhaps 50%? Whatever percentage is deemed appropriate, the most important thing is that we deal with this issue with sober-mindedness," Alweendo said.
He said there is a level above which no investor will invest.
However, all international oil exploration companies will be required to ensure that all services that can immediately be provided by local entrepreneurs are acquired from local entrepreneurs.
"In cases where local entrepreneurs are not able to provide certain services, we will need to have a clear programme on how to capacitate local entrepreneurs. This can be done, for example, through joint ventures with experienced international service providers," Alweendo said.
The ministry is drafting a local content policy that is available for public comments on its website.
The ministry intends to hold a workshop during the first half of this year, to which all relevant stakeholders will be invited for a discussion with a view to finalise the policy.
