Industry urges balanced tax framework for mining and petroleum sector 

By: Hertha Ekandjo

Industry players have called for a balanced taxation framework that recognises the high risks associated with exploration in the mining and petroleum sectors. 

The call was made on Thursday during a stakeholder engagement on the taxation of the sale of shares, interests and the transfer of mineral and petroleum licences in Windhoek. 

Speaking at the event, Chamber of Mines of Namibia`s chief executive officer, Veston Malango, said exploration remains a high-risk activity in which only a small number of projects ultimately develop into operating mines. 

He explained that discoveries are often made by smaller exploration firms, commonly known in the industry as “junior” companies, which later sell their interests to larger investors who develop the mines. 

Malango recommended that taxation on the sale of shares or interests in mineral licences should be based on realised profits rather than the gross transaction value.

He also suggested that authorities consider introducing a capital gains tax framework that supports government revenue while still encouraging investment in exploration.

According to Malango, tax policies should recognise the significant capital invested during exploration, where companies face uncertainty and no guarantee of success.
Meanwhile, Shell Namibia’s country chair, Eduardo Rodriguez, highlighted the long investment timelines in the oil and gas industry. 

Rodriguez said large offshore projects can take more than a decade before generating revenue, as companies must first invest heavily in exploration, drilling and development.
“In the exploration phase you do not make money because those are investment phases,” he said.

He estimated that about US$3 billion has already been invested in Namibia’s offshore oil and gas exploration over the past four years, including the drilling of 26 wells, each costing roughly US$100 million.

Rodriguez cautioned that imposing taxes during early investment phases could make projects more expensive and potentially reduce the country’s attractiveness to global investors. 

However, Namibia Revenue Agency Commissioner Sam Shivute, clarified that under the current tax laws companies only pay tax on profits. 

He said companies engaged in exploration do not pay tax during the exploration phase because no profits are generated at that stage.