Namibia's New Frontiers

Institute for Public Policy Research (IPPR) Anti-Corruption Research Programme Namibia’s New Frontiers Transparency and Accountability in Extractive Industry Exploration The compilation and publication of this report have been supported by the Commercial Diplomacy Fund of the British Foreign & Commonwealth Office © Institute for Public Policy Research Design and layout: Regine Gillmann Photos: Simon Wilkie Printed by John Meinert Printing, Windhoek Published by the: Institute for Public Policy Research (IPPR) PO Box 6566 14 Nachtigal Street Windhoek Namibia Tel: +264 61 240514 Fax: +264 61 240516 [email protected] http://www.ippr.org.na Namibia’s New Frontiers Transparency and Accountability in Extractive Industry Exploration Anti-Corruption Research Programme June 2013 Edited by Graham Hopwood Contributors to the Report Graham Hopwood Leon Kufa Tracey Naughton Ellison Tjirera Abbreviations and acronyms ACC Anti-Corruption Commission LRDC Law Reform and Development Commission ADB African Development Bank MARC Minerals Ancillary Rights Commission AGA AngloGold Ashanti MIASA Mining Industry Associations of Southern Africa AMV Africa Mining Vision MDGs Millennium Development Goals ASM Artisanal and small-scale mining MDTF Multi Donor Trust Fund ATI Access to information MIGA Multilateral Investment Guarantee Agency BEE Black Economic Empowerment MME Ministry of Mines and Energy CAFOD Catholic Agency for Overseas Development NEEEF New Equitable Economic Empowerment CASM Communities and Small Scale Mining Framework COP Communication of Progress NGO Non-Governmental Organisation CSR Corporate Social Responsibility OECD Organisation for Economic Cooperation and DFAIT Department of Foreign Affairs and International Development Trade OPEC Organisation of the Petroleum Exporting DFID Department for International Development Countries DRC Democratic Republic of Congo PDAC Canadian Prospectors & Developers Association EBRD European Bank for Reconstruction and of Canada Development PEL Petroleum Exploration Licence EHS Environmental Health and Safety PIAC Public Interest and Accounting Committee EISA Environmental and Social Impact Assessment PWYP Publish What You Pay EITI Extractive Industries Transparency Initiative RMI Responsible Mining Initiative for Sustainable EPL Exclusive Prospecting Licence Development EPRC Economic Policy Reform and Competitiveness TESEF Transformational Economic and Social EU European Union Empowerment Framework FPIC Free, Prior and Informed Consent TI Transparency International GDP Gross Domestic Product UK United Kingdom GIZ Deutsche Gesellschaft für Internationale UNICEF United Nations Children’s Fund Zusammenarbeit UNGC United Nations Global Compact GRI Global Reporting Initiative UN-REDD United Nations (UN) Collaborative Programme IADB Inter-American Development Bank on Reducing Emissions from Deforestation and ICMM International Council on Mining and Minerals Forest Degradation in Developing Countries IFC International Finance Corporation VP Voluntary Principles ILO International Labour Organisation WWF World Wildlife Fund IWGIA International Working Group for Indigenous Affairs 2 Table of Contents Summary and Recommendations 5 Chapter 1: Exploration Licensing in Namibia 13 Interview: Mining Commissioner Erasmus Shivolo 29 Chapter 2: International Standards 35 A to Z of Key Companies Involved in Namibia’s Search for Oil 66 Chapter 3: Perceptions of Extractive Industry Governance 74 Interview: Petroleum Commissioner Immanuel Mulunga 79 Further Reading 83 3 4 EXPLORATION LICENSING IN NAMIBIA SUmmarY anD RecommenDations By Graham Hopwood Namibia is not usually associated with the term ‘resource curse’ resources so that natural resource wealth translates into national (otherwise known as the ‘paradox of plenty’) which is used in development. connection with countries with an abundance of natural In the 2013 Resource Governance Index released by Reve- resources, particularly minerals and hydrocarbons, but extreme nue Watch, Namibia does not feature among the 17 countries poverty due, at least in part, to the diversion of extractive indus- assessed for their extractive sector governance records. How- try revenues to a politically-connected elite. ever, the four areas of transparency and accountability that the Corruption is not rampant in Namibia’s extractive indus- Index examines are highly relevant to Namibia: tries. In fact, confirmed cases of corruption are few and far • Institutional and legal setting – the degree to which laws, between. regulations and institutional arrangements facilitate Namibia’s reputation for mostly sound custodianship of its transparency, accountability and open, fair competition. extractive sector was evidenced in the 2012/13 Fraser Institute • Reporting practices – the extent to which government index which ranks the world’s best mining jurisdictions for discloses information. mining companies1. Namibia came 30th on the index – the sec- • Safeguards and quality controls – the presence of checks ond best score for sub-Saharan Africa (Botswana came 17th). and oversight mechanisms that encourage integrity and Namibia’s position was a 15 place improvement on its 2011/12 guard against conflicts of interest. performance. The country received particular praise for provid- • Enabling environment – the broader governance ing high-quality data on mineral resources at a reasonable price. environment, based on external measures of accountability, The Fraser Institute did reserve some critical remarks for government effectiveness, rule of law, corruption and Namibia’s unclear Black Economic Empowerment (BEE) democracy. policy. Namibia’s absence from these ‘halls of shame’ should not Namibia has not featured in the campaigns of international be a reason for complacency. Indeed there are aspects of NGOs like Global Witness, Publish What You Pay, and the Namibia’s management of its oil, gas, and mineral resources Revenue Watch Institute – which seek greater accountability that are at best opaque and at worst highly secretive. In terms of and transparency in the management of oil, gas and mineral exploration licensing, the focus of this study, transparency is more of an optional add-on than a core feature of the system. In addition there is a growing perception that the playing field is 1 The index is based on a survey of mining and exploration companies. It not completely level and that potential and existing players in can be downloaded from http://www.fraserinstitute.org 5 EXPLORATION LICENSING IN NAMIBIA the extractive industry are not always treated in a consistent and need legal underpinning through a number of legal reforms fair manner. Some of these concerns arise because Namibia including ATI legislation. lacks clear policies and laws in certain areas. For the example, It is fair to say that so far calls for more transparency and the absence of a Black Economic Empowerment policy or accountability in the extractive sector have been muted in framework (and law) means that the ‘positive discrimination’ Namibia. The current issues of concern are: associated with BEE can be applied in an ad hoc and arbitrary • Demands from government that companies pay their fair manner. On top of this the role of the state-owned mining com- share in terms of taxes, royalties and levies and promote pany, Epangelo, has not been legislated for. value addition (beneficiation) within the country During 2011 and 2012, the IPPR published a series of 14 • Calls for caution from extractive industry companies and papers on anti-corruption themes – several of which inform this bodies over the arbitrary imposition of taxes, levies and publication. In particular, these are the need for laws, regula- royalties that could drive down investment, lead to mine tions and guidelines that address conflicts of interest, the need closures and scare off would-be investors for codes of ethical conduct for both public and private officials, • Government’s plans for an increased state role in the and the need for greater transparency and access to extractive sector through state-owned companies like information. Namcor and Epangelo An IPPR paper published in 2012 noted that “disturbing However, if government is serious about ensuring that occurrences over the years within the exploration and mining/ Namibia’s natural resources produce development gains for the production licensing sphere have raised concerns that corrup- mass of the population, then more accountability will be a pre- tion could become a substantial threat to the future prospects requisite. Only by ensuring information about extractive indus- for the extractive sector itself and broader socio-economic try revenues is released will all stakeholders – including benefits.” government, private sector, and civil society – be able to moni- tor and ensure that the Namibian people are getting their dues in terms of the development benefits that should flow from natu- Accessing information ral resource wealth. The focus on transparency and accountability in exploration licensing in this report feeds into a broader debate about the Government concern need for access to information (ATI) legislation in Namibia. When government and leading figures in Namibia sat down in In May 2011 Minister of Mines and Energy Isak Katali said the late 1990s to discuss an effective anti-corruption regime for Namibia had become an “Eldorado of speculators and other Namibia, they came to two conclusions: Namibia needed both a quick-fix, would-be mineral explorers and mining developers”3. dedicated

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