Interview with Tom Alweendo, Minister of Mines and Energy, Namibia

Sep 2022 Interview with Tom Alweendo, Minister of Mines and Energy, Namibia

Prisma Reports (PR): Could you offer our readers a brief overview of Namibia’s mining sector and describe how it stands out globally?

Tom Alweendo (TA): Mining is still one of the country’s largest economic sectors. It currently contributes 10% of our gross domestic product, although pre-COVID — in 2019 — mining represented 15% of GDP. Mining as an industry comes and goes: you can’t mine forever, because the things you mine are finite — once you take them out of the ground, they’re gone. As much as it is a key sector, we need to make sure that we diversify and don’t only concentrate on the mining industry.

Right now, however, it’s one of the most important sectors of the economy. For example, the export revenue from our diamond industry represents more than 50% of the country’s total export revenues. It’s a huge sector. Our uranium sector is equally vast — in fact, as of last year, Namibia is now the second-largest uranium producer globally. Some uranium mining activities in other countries had to close down, either because of the pandemic or because of changes in the uranium industry. We continued to mine uranium throughout the crisis, which propelled Namibia into becoming the second-largest producer worldwide.

That has placed us in a position where potential investors want to know more about Namibian mining, which is a good thing. However, in most of Africa’s mineral-producing countries, minerals are being exported without any value being added to those exports and there’s strong concern that this is not going to be sustainable. Therefore, we want to encourage those who invest in our mineral sector to not only export the raw materials, but to really add value within the country in order to make the industry more meaningful to the local economy and not just to create jobs somewhere else. That’s the message we need to put across: mining is a growing sector; we’ve got diamonds, uranium, gold and some rare minerals, but we need to start adding value to these minerals in Namibia rather than exporting them in their raw form.

If the mining companies producing the raw materials are making the argument that they don’t invest in value addition, then we need to start identifying investors that can invest in value addition and we need to incentivize those investors. This is where we’re focusing when we go around the globe looking for investment.

PR: To what extent has Namibia’s mining industry been affected by the pandemic or by the ongoing global geopolitical instability?

TA: In some countries, mining basically closed down during the pandemic, but it didn’t here, because the sector was classified as one of the essential industries that we needed to keep open. Even with that, there have obviously been some disruptions. For example, international supply routes for importing equipment weren’t always as efficient as the sector required, which delayed some works that mining companies wanted to carry out. But there was no total shutdown and we continued to operate. In that respect, employment loss in the mining sector was not as large as in some other sectors, like tourism, which shut down almost completely.

What also might have helped the sector is that commodity prices suddenly shot up for minerals such as gold — the price just went through the roof. Diamond prices, which we also thought might be affected, weren’t. On average, commodity prices were not really affected negatively and that helped our mining companies to be able to continue to produce.

The Russia-Ukraine situation is probably impacting us more negatively. It created scarcity in the energy sector and prices almost tripled for users, which impacts everything else. There aren’t any positive spin-offs to that issue and the sooner it’s resolved, the better for everybody.

PR: What would you identify as the biggest challenges and opportunities for Namibia’s mining industry right now?

TA: Traditionally, the opportunities for mining companies have been in the three minerals that we’ve been producing the most: diamonds, gold and uranium. But, going forward, there’s a new interest in minerals that are used for the sustainable future of energy. For example, commodities such as lithium and all the rare earth minerals are the in-thing now; and Namibia has those minerals. We encourage and invite people to invest in and explore those rare earth minerals of the future with us.

PR: Namibia is pursuing a dual approach to energy development. As the man charged with formulating the country’s energy strategy, you’ve said Namibia will exploit its hydrocarbon resources in parallel to embarking on green hydrogen projects, adding that the contribution oil and gas can be “transformative”. Can you elaborate on your vision and explain how it’s shaping the government’s plans and policies?

TA: On the one hand, we’ve embraced renewable energy. Green hydrogen is the energy of the future and we’re able to embrace it thanks to the great natural wind and solar resources that we have. On the other hand, we’re also embracing fossil fuels. Some have said that seems like a contradiction — because, with the energy transition, people are no longer investing in fossil fuels and everybody wants to invest in renewables, which is true, but we’re doing both. Why are we doing both and why it is not a contradiction? Because it’s an energy transition. Some countries are in a better position to transition faster due to their level of development, while others will have to move at a slower pace. That’s why, across the globe, you find countries saying they are going to reach net zero by 2030, some by 2050, some even by 2060. That’s based on their current situation.

The global energy transition has to be a fair transition: countries with good hydrocarbon resources should be allowed to leverage those resources to manage their transitions. That will enable them to embrace renewables much faster or in a more resilient manner. Africa contributes less than 3% to global emissions — although, we probably pay the highest price in terms of the adverse effects of climate change. If we have resources that we can leverage to manage our transition, we should be allowed to do that. In Namibia specifically, we’re in a good position because our resources for renewable energies like green hydrogen are so vast that we can help the globe to decarbonize. There’s no contradiction whatsoever.

PR: Earlier this year, exciting new offshore Namibian oil discoveries were made by TotalEnergies and Shell. Can you tell us about these discoveries and their potential impact?

TA: Obviously, we’re quite excited by the discoveries. We’ve been exploring for oil for the last 30 years and nothing had been found. Then, last year, not only one, but two discoveries were made by TotalEnergies and Shell. It’s great economic news for us and, together with the investors, we want to work as fast as possible to make sure that production starts quickly, so that really it contributes to the economy.

The impact could be huge. We’re still doing analysis to firm up the amount of barrels that will be produced, so all we can confirm is that these are really massive discoveries that are going to change the economic landscape of the country, not only in terms of direct employment, but probably more so in terms of the associated sectors that will need to develop to service the oil and gas industry. In the next couple of years, we believe it’s going to change the economy.

Oil can be a blessing or a curse. It can become a curse if you only focus on that industry and forget about all other economic sectors. Eventually, the oil is going to run out and you will have suffocated the economy if you’ve neglected other sectors. It can also become a curse if the revenue derived from it isn’t used properly: it might be used in activities that don’t promote economic or human development, or the money could be stolen from the public.

In Namibia’s case, I’ve got no reason to believe that’s what’s going to happen. We’ve got good processes and systems, our laws are solid and our institutions are robust. Therefore, I’ve got no reason to think that oil will be anything other than an economic game-changer and we’re simply just looking forward to making sure that happens.

PR: What level of investment is Namibia securing for the development of its energy projects?

TA: In the oil and gas sector, the investment is mainly being made by Shell and TotalEnergies, and it’s in the billions of US dollars. To develop an oil field doesn’t cost a small sum; it’s always a heavy investment to make. The other major investment that we’re receiving is in green hydrogen. In total, we’re expecting up to $20 billion could be invested in that area. Overall, we envisage investments in the region of $50 billion into our energy sector — particularly into oil, gas and green hydrogen — within the next couple of years, which is huge for Namibia.

We haven’t seen many US investors coming on board yet, which is certainly because they aren’t aware of what’s possible in Namibia. We want to make them aware that there’s substantial potential for investment in Namibia, not only in our energy sector, but equally in other sectors like agriculture and tourism. We’ve met a few US companies that want to come and see what we’re doing in energy, but we probably need to step this up and let others know what the possibilities are.

PR: Climate change is a reality, no country is exempt from it and certainly not in Africa. You’ve previously said that: “Namibia’s contribution to climate change lies in the use of our abundant solar and wind energy sources — hence our green hydrogen program. In this respect, we will need global partnerships in various aspects such as market access, setting of standards, research and development, the funding of de-risking and so on.” Could you be a bit more specific on the type of investments that Namibia has secured to date in green hydrogen?

TA: Namibia has renewable energy resources: we’ve got plenty of sun and wind, hence our drive to become a green-hydrogen producing country. Green hydrogen is still an energy of the future. The market and technologies are still developing, but it’s reached a level where it can be commercialized. We’ve already secured investment in green hydrogen and are working with those investors to produce the gas. The plan is moving so rapidly that, by 2027, we will have started producing hydrogen for the market.

We have to follow the market as it develops, so that we know who the off-takers will be. Right now, we have international collaborations with countries like Germany, the Netherlands and Belgium, where we have signed memorandums of understanding for those countries’ heavy industries to be off-takers for our green hydrogen — which is good, because when you have the market, it’s much easier for you to produce.

You mentioned standards, which is also vital because green hydrogen will become an internationally traded commodity and there are many countries that will be producing it. So we need to have international standards to say it can only be certified as green hydrogen if it meets certain requirements. Those are very important issues to be developed. The idea is to make sure that those standards are discussed and agreed by not only the producing and consuming countries, but globally.

PR: What would be your final takeaway message for our readers?

TA: Namibia is a well-kept secret in terms of its investment potential, especially among global investors. African countries tend to be known for their bad characteristics — when you’re a country that doesn’t have them, nobody talks about you. Many excellent things are happening in Namibia, especially with regard to the energy transition, in which the country can play a very important role. Namibia is a great investment destination: investors want to go where they can make money but, equally, they’re concerned about stability and Namibia is a peaceful country. We’ve also got the necessary transport and communication infrastructure, in fact our roads are probably the second best on the African continent and when international investors invest in Namibia, they have access to all the amenities they require. People should come and see what Namibia is all about for themselves — they will certainly find some investment opportunities that they won’t regret.