A ground-breaking report on Namibia's mining industry released this week indicates that the management of the country's oil, gas, and mineral resources is at best opaque and at worst highly secretive.
The study revealed that there are a number of politically-connected individuals who are gaining top-level access to exploration and mining licenses, in ways which are not open to the general public. The authors of the report also note that “there is a growing perception that the playing field is not completely level.”
The extensive report, entitled Namibia's New Frontiers, Transparency and Accountability in Extractive Indust..., produced by the Institute of Public Policy Research (IPPR), named a number of prominent business and political personalities, who have scored big when it comes to securing a stake in oil and gas exploration licenses.
The researchers found that “transparency is lacking in many respects in the local mining industry, while key decisions are left in the hands of one or two individuals. This type of discretionary power has little place in modern, accountable mining licensing systems,” the IPPR said.
Among those named as stakeholders in the oil and gas industry are President Pohamba's son-in-law, Heinrich Ndume (Chariot Oil & Gas), the son of the Speaker of Parliament, Dantago Gurirab (Alphapetro), former minister Helmut Angula (Eco Oil & Gas) and his daughter, Phillipine Angula (Eco Namibia); Swapo MP Juliet Kavetuna, Elvis Nashilongo, Isaiah Kavendjii, Mac Hengari, Tobie Aupindi, Timotheus Angula and Chris Kaura (African International Energy), Andimba Toivo ya Toivo (Energulf), as well as former State House security chief, Jeremy Hangula (HRT Africa) and Knowledge Katti (HRT & Cowan Petroleo).
The IPPR said that “Namibia lacks clear policies and laws in certain areas. The absence of a Black Economic Empowerment policy or framework (and law) means that the 'positive discrimination' associated with BEE can be applied in an ad hoc and arbitrary manner”.
“There is a “need for laws, regulations and guidelines that address conflicts of interest, the need for codes of ethical conduct for both public and private officials,” the IPPR said.
By early 2013 the Ministry of Mines and Energy had issued 57 Petroleum Exploration Licences (EPL's), mostly to Namibian empowerment companies and or start-up oil companies, which have sought to bring in (farm-in) the world's major oil companies to drive and fund drilling programmes.
The researchers however found that “the identities of various companies involved in exploration are hard to pin down. They may be known to the Ministry, but they are not clear to the public... During the process of verifying contact details of companies with pending and granted licences … different companies often had the same contact number, and confirming the contact details led to the same person.”
The IPPR reported that the Minister of Mines and Energy, Isak Katali, had noted already in 2011 that Namibia has become an “Eldorado of speculators and other quick-fix, would-be mineral explorers and mining developers”.
Minister Katali said at the time that the extractive industry is “dominated by foreign multinational corporations and that a disturbing phenomenon has developed whereby ownership of the Namibian resources is sold through licences internationally … without government deriving any benefits through sales taxes, value-added taxes, or stamp duties.”
In April 2010 Katali had said that he wants to curb the sale of exploration licences, especially to individuals whose aim was not actually to explore, but to make quick money by selling off licences to mainly foreign-owned mining, oil and gas exploration companies.
“EPLs are being abused”, Katali said, “People buy them from the Ministry and then sell their rights on stock exchanges and we want to put a stop to such practices, because this does not serve the purpose for which EPLs are sold to Namibians.”
Katali had earlier also suggested that Namibian entrants into the extractive sector should be required to keep their ownership stakes in licences at least for a certain time period, rather than sell these to foreign buyers.
A recent report published by Global Witness shows that, “Too often private 'shell' companies with opaque ownership structures are awarded lucrative concessions, with little information available as to who the beneficial owners of the company are, how much (if anything) the company has paid for the licence, and what the country has gained in return.
If these companies do not have the technical capacity or financial resources to develop the asset themselves, they may end up being carried by international and national operators.
“Alternatively, the rights holders may squat on lucrative concessions by acquiring them from government before 'flipping' them quickly to other investors, who have the capacity to develop the licence. It is our view that joint ventures with such shell companies, while not necessarily breaching anti-corruption laws … could be indirectly sustaining a system in which resource revenues are being siphoned off by corrupt elites. Whilst foreign investors may be fully compliant with the local and international laws, in effect, they are paying huge fees to elites in order to access the local market.”
The IPPR noted that “disturbing occurrences within the exploration and mining / production licensing sphere have raised concerns that corruption could be-come a substantial threat to the future prospects for the extractive sector itself and broader socio-economic benefits.
“Unsurprisingly, oil and gas reconnaissance and exploration activities are dominated by well-established foreign companies partnering with locals who in most cases if not all the time lack the necessary expertise and capital but are seen to have political connections or influence.
The relationship between these private companies and government (including state-owned companies) should be clearly defined, particularly in terms of the processes to be followed for applying and reporting the way in which key decisions will be taken and the time-frames that are applicable for various decisions.
“In particular any financial transactions between companies and the state should be clearly delineated in the manner in which they are to take place, the purpose of such payments…”
The IPPR also found that the “role of the state-owned mining company, Epangelo, has not been legislated for” and that “Namcor's role still remains unclear”. As a means of tackling corruption, sunshine is the best disinfectant, the IPPR advised, and said that if the country is “to avoid the seemingly pervasive African phenomenon of resource curse, Namibia must tighten the screws well ahead of time before oil is discovered.”