DEA RESEARCH DISCUSSION PAPER Number 54 February 2003

The contribution of minerals to sustainable economic development: Mineral resource accounts in Namibia
Glenn-Marie Lange

Directorate of Environmental Affairs, Ministry of Environment and Tourism, Private Bag 13306, Windhoek, Namibia Tel: + 264 (0)61 249 015 Fax: + 264 (0)61 240 339 email: contact@dea.met.gov.na http://www.dea.met.gov.na

This series of Research Discussion Papers is intended to present preliminary, new or topical information and ideas for discussion and debate. The contents are not necessarily the final views or firm positions of the Ministry of Environment and Tourism. Comments and feedback will be welcomed.

Contact details: Glenn-Marie Lange, Institute for Economic Analysis, New York University, 269 Mercer Street, Room 835, New York, New York, 10003, USA. GML1@nyu.edu Edited by Helen Suich Cover illustration by Helga Hoveka I would like to thank many people who assisted in providing data and valuable suggestions, in particular Ndamona Kali, Jonathan I. Barnes, and Matthew Wright. The author is responsible for all opinions expressed in this report. This work was supported in part through funding from the Swedish International Development Cooperation Agency and the United States Agency for International Development.

Table of Contents Acronyms 2 Abstract 3 1. Introduction: Minerals in the Namibian economy....................................................................... 4 1.1 Namibia’s mineral economy................................................................................................ 4 1.2 Minerals and sustainable development: An environmental accounting approach .............. 5 2. Methodology and data sources .................................................................................................... 6 2.1 Structure of environmental accounts ................................................................................... 6 2.2 Physical accounts: Methodology and data sources.............................................................. 8 2.2.1 Namibian data sources................................................................................................. 9 2.3 Monetary accounts: Methodology and data sources.......................................................... 10 2.3.1 Measuring resource rent ............................................................................................ 10 2.3.2 Projecting future resource rent .................................................................................. 11 2.3.3 Data sources............................................................................................................... 11 2.3.4 Constant value asset accounts.................................................................................... 12 3. Mineral accounts for diamonds, uranium and gold ................................................................... 12 3.1 Physical accounts for minerals .......................................................................................... 12 3.2 Resource rent and the monetary accounts for minerals ..................................................... 14 3.2.1 Resource rent ............................................................................................................. 14 3.2.2 Sensitivity analysis .................................................................................................... 14 3.2.3 Monetary accounts..................................................................................................... 15 4. Policy implications for resource management........................................................................... 16 4.1 Recovery of resource rent.................................................................................................. 17 4.2 4.2 Reinvestment of resource rent to maintain national wealth ........................................ 18 5. Conclusions ............................................................................................................................... 20 6. References ................................................................................................................................. 22 Appendix 1 ........................................................................................................................................ 24 A.1 Calculation of resource rent for mining.................................................................................. 24 A.2 Monetary accounts for minerals ............................................................................................. 26 A.3 Taxes on resource rent ............................................................................................................ 28 List of Tables, Figures and Boxes Table 1 Resource endowments and economic growth in developing countries................................. 4 Table 2 Countries that construct mineral accounts............................................................................. 7 Table 3 Extraction of minerals in Namibia, 1980 to 2001 ............................................................... 13 Table 4 Physical accounts for diamonds, 1999 to 2001 ................................................................... 13 Table 5 Resource rent from mining in Namibia and, 1980 to 2001 ($N millions) .......................... 15 Table A1 Calculating resource rent for mining, 1980 to 2001.......................................................... 25 Table A2 Monetary asset accounts for minerals in Namibia, 1980 to 2001 ($N millions)............... 26 Table A3 Taxes on resource rent in Namibia, 1980 to 2001 ($N millions) ..................................... 29 Figure 1 Figure 2 Figure 3 Figure 3 Figure 4 Figure 5 Figure 6 Figure 7 Contribution of mining to GDP and exports in Namibia, 1980 to 2000 (percent)............. 5 Structure of mineral asset accounts...................................................................................... 8 Example of a McKelvey Box to classify mineral reserves .................................................. 8 Mineral assets in current and constant prices, 1980 to 2001.............................................. 16 Rent recovery from mining in Namibia, 1980 to 2001 ...................................................... 17 Rent recovery as a share of rents from diamond mining, 1980 to 2001 ............................ 18 The Sustainable Budget Index of Botswana, 1980 to 2001 ............................................... 19 Per capita GDP growth in Botswana and Namibia, 1980 to 2000 ..................................... 20

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................................. 11 Box 3 Sustainable Budget Index (SBI).................................................................... 10 Box 2 Calculating mineral asset value ...............Box 1 Calculating resource rent ...................... 18 Acronyms GDP SAMREC SBI SEEA SNA gross domestic product South African Mineral Resources Committee Sustainable Budget Index System of Integrated Economic and Environmental Accounting 1993 System of National Accounts 2 ..........................................................................................................................................................

providing accounts for the value of mineral reserves and the cost of depletion. resource-rich developing countries have performed worse. While Namibia has carefully considered how mining may contribute to current employment and the economy of specific regions of the country. human capital and foreign financial assets. about 42 per cent of diamond rents over the past 20 years. Botswana has an explicit policy of reinvestment by government of all mineral revenues in public infrastructure. Only through building national wealth can minerals contribute to long-term sustainable development. economically. uranium and gold – based on the United Nation’s System for Integrated Environmental and Economic Accounts. Mineral wealth can provide countries with a tremendous opportunity for economic development by providing the funding for investment and growth. Sustainable development requires recovery of resource rent generated by mining. resource abundance does not necessarily lead to economic prosperity for a variety of reasons. policy-makers can anticipate and plan for the eventual exhaustion of mineral assets. it has yet to develop a policy for reinvestment of mineral revenues. Physical and monetary accounts are constructed for Namibia’s three major minerals – diamonds. This is reasonable. Mining is a critical sector of the Namibian economy and mineral assets form a major source of national wealth. a non-renewable resource. capable of generating income and employment once minerals are depleted. where the two countries differ most is in management of mineral revenues. than resource-poor developing countries over the past 30 years. a phenomenon known as the ‘resource curse’. But the national accounts give a distorted picture of economic health because they record the contribution of mining to gross domestic product but not the simultaneous depletion of mineral wealth. Namibia has recovered. The accounts are used to assess the extent to which minerals are being used to build a sustainable economy. and investment of this rent in other forms of wealth. 3 . However. though much lower than rent recovery in Botswana (76 per cent). Environmental and natural resource accounts overcome this limitation. In this way. However. on average.Abstract This report addresses the issue of sustainable development in an economy dependent on mineral resources. As a group.

resource abundance does not necessarily lead to economic prosperity for a variety of reasons.5 2. the dependence of these economies on non-renewable resources is often much lower than in the developing countries under consideration. the management of this wealth is less critical. including many in southern Africa. lead) were exploited in the post-World War II period. The main copper mines shut down in 1998.1 0.6 1. INTRODUCTION: MINERALS IN THE NAMIBIAN ECONOMY Minerals are a principle source of income for many developing countries. 7 13 85 3. mineral-rich economies have an advantage over those less well endowed because minerals provide funds for rapid development and poverty reduction. most of the on-shore diamond reserves have been exhausted and mining has moved 1 While this may also be true in industrialised countries. Namibia’s mining industry developed relatively early. 1995).8 1. based mostly on diamonds discovered at the turn of the century (Hartmann. 1998. However. As a group.7 1. resource-rich developing countries have performed worse economically than resourcepoor developing countries over the past 30 years1 (Table 1). 4 . In the late 1980’s Navachab gold mine opened up. mineral wealth can detract from.1 1. where many basic needs remain unmet and rent-seeking behaviour by individuals and interest groups may be especially difficult to resist. The initial reserves were high quality gem diamonds extracted from relatively inexpensive on-shore mining sites. It is hoped that this report will shed some light on policies that can be implemented to avoid the resource curse in Namibia. 1998. At first glance. Table 1 Resource endowments and economic growth in developing countries Annual per capita GDP growth Number of countries 1960–1990 (%) Resource-rich Large economies Small economies. Sachs and Warner. Governments are frequently under considerable pressure to spend mineral revenues on current consumption rather than to invest revenues.1 Namibia’s mineral economy Mining has played a vital role in the economic development of many southern African countries. including Namibia and Botswana. zinc.1. rather than enhance. Other metals (mainly copper. a phenomenon known as the ‘resource curse’ (Auty and Mikesell. and uranium mining began in the early 1970s. 1986). exports dominated by: Non-mineral resources Mineral ores Petroleum and natural gas Resource-poor Large economies Small economies All countries Source: Based on Auty and Mikesell. As a result. This is particularly the case in developing countries. By the 1990’s.6 10 55 31 16 8 1. hence. economic performance.5 1. Namibia’s mining industry appeared largely depleted.

Figure 1 Contribution of mining to GDP and exports in Namibia. it appeared that off-shore natural gas fields would be developed. but the fields will not be developed in the foreseeable future (USGS. In earlier years. the statistical offices compile asset accounts only for manufactured capital.0 20. even though the economic life of mineral resources can be extended by new discoveries or new extraction technologies. the value of natural capital is omitted. 2000). however. for 1997. which includes buildings. mining is still a critical sector of the Namibian economy and mineral assets form a major source of national wealth. mining was the single largest component of the Namibian economy.0 40. 2001) In 2000. Continued exploration for diamonds. The copper mine and smelter at Tsumeb reopened in 2000. The national economic accounts. however. so that although the reserves have not yet been exhausted.0 GDP 50. there is not a strong market for uranium. thus.0 30. indicates that mining employs roughly two per cent of the formal labour force (Ministry of Labour. but at the same time depletes national wealth by using up the limited supply of mineral assets. accounting for nearly 40 per cent of GDP and 50 per cent of exports in 1980 (Figure 1). The global outlook for uranium has not been good for some time. mining still accounted for 13 per cent of GDP and 26 per cent of exports in 2000 (CBS. 5 . both off-shore and in the northeastern part of the country that borders Botswana have yielded positive results. which would have helped Namibia meet its energy requirements. For a few years. Although its importance has since declined. The most recent Labour Force Survey. 1980 to 2000 (percent) 60. along with the copper mines at Kombat and Otjihase.0 10.2 Minerals and sustainable development: An environmental accounting approach Clearly. This omission is problematic because minerals are nonrenewable resources that are gradually being depleted. construction works. 2001. Although off-shore reserves appear to be abundant. 1. machinery and equipment. At this time. 1996. give a distorted picture of economic health because they report the contribution of mining to GDP but not the simultaneous depletion of mineral wealth.0 19 80 19 81 19 82 19 83 19 84 19 85 19 86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 Exports Source: CBS. they are much more expensive to mine.much of its operations to off-shore reserves. Skorpion zinc mine is under development with production expected for 2003. Mining generates income (which is included in the national accounts and economic indicators like gross domestic product (GDP)). Namibia’s mining industry outlook was substantially better.0 0. 2001).

which has been revised in 2002 (UN. the World Bank. taxing resource rent and reinvesting part of the rent in other economic activities is necessary to provide alternative sources of income and employment once the minerals are exhausted. the 1993 System of National Accounts (SNA) (United Nations. in excess of the costs of extraction (including a ‘normal’ return to capital). over the period 1980 to 2001. even though the resource itself is not sustainable. In this way. The mineral accounts for Namibia and Botswana are based on the SEEA. 1993b. country statistical offices. a major purpose of the environmental accounts is not simply to monitor total assets of the country. the environmental accounts estimate the economic value of mineral wealth. Section 4 discusses the policy implications of the accounts in terms of two criteria for sustainable development: recovery of resource rent through taxes and reinvestment of resource rent in other assets. policy-makers can anticipate and plan for the eventual exhaustion of mineral assets. Hence. the economic rent. Concluding remarks are provided in the final section. 2002). the OECD. Rent is attributable to the scarcity of the resource and is a measure of the value of the resource. but to monitor whether the objectives of sustainable development are being achieved and to shed light on how alternative management of resources might enhance sustainable development. with regard to minerals. 2002) as a set of satellite accounts to the SNA in order to provide a more accurate picture of the extent to which the economy relies on natural capital and. uranium and gold but confidentiality constraints prevent disclosure of the complete accounts for each mineral. such as minerals.To correct this omission. and the extent to which mineral wealth is being used to promote sustainable economic development. by substituting other economic activities for mining. With respect to minerals. For non-renewable resources like minerals. the cost of depletion. The present value of mineral assets is the discounted value of resource rent that a mineral will earn over its lifespan. or resource rent.1 Structure of environmental accounts Environmental and resource accounts have evolved since the 1970s through the efforts of individual countries and practitioners. Accounts are constructed for diamonds. physical and monetary. the European Union. METHODOLOGY AND DATA SOURCES 2. Briefly. each developing their own frameworks and methodologies to represent their environmental priorities. This report addresses the issue of sustainable development in an economy dependent on mineral resources. Since the late 1980s. proposed including minerals in the asset accounts. concerted efforts have been underway through the United Nations Statistics Division. 2.) The recovery of resource rent by the government is essential for sustainable economic development. 1993a). The United Nations published an interim handbook on environmental accounting called the System of Integrated Economic and Environmental Accounting (SEEA) in 1993 (UN. 1993b). is an income earned from resources. the economic implications of the rate at which this capital is being depleted (or increased when new discoveries are made). 6 . the most recent revision of the national accounts. and other organizations to standardize the framework and methodologies. environmental accounts were proposed by the United Nations (UN. Section 2 describes the mineral accounts. Strengthening and expanding the inclusion of natural capital. The mineral accounts of Botswana are presented to provide an example of an alternative approach to resource management. explains the methodology used to measure rent and the economic value of mineral assets. Section 3 presents the mineral accounts. The goal is to sustain income over time. (Rent is discussed in greater detail in sections 2 and 3. a non-renewable resource.

7 . with data for opening stocks. Accounts for petroleum and natural gas predominate. sulfur. calcium carbonate petroleum. Presently. diamonds. natural gas. expected to begin production in 2003 and the newly reopened copper mine at Tsumeb will be included in future mineral accounts. uranium and gold account for more than 95 per cent of Namibia’s mining GDP and mineral accounts have been compiled only for these minerals. Both industrialised and developing countries compile mineral accounts and. gypsum. copper. copper lead. for example. coal. petroleum. platinum petroleum. manganese coal. natural gas. copper-nickel. gold. nickel. natural gas petroleum. natural gas petroleum. Table 2 Countries that construct mineral accounts Country Australia Botswana Canada Chile Denmark France Indonesia Mexico Netherlands Norway Philippines South Africa UK US Minerals included in the sub-soil asset accounts bauxite. gold.Many countries are now compiling mineral accounts. potash) Source: Based on Lange. zinc. molybdenum. lead. natural gas gold. boron. coal metals (iron ore. Relative to other resources. coal petroleum. silver. a few minerals account for virtually all the economic contribution. molybdenum) other minerals (phosphate rock. nickel. natural gas petroleum. iron. There have been one-time consultancy reports and academic studies as well. silver. Table 2 shows the countries with official environmental accounting programmes and the most important minerals in their asset accounts. uranium). iron. Natural resource asset accounts follow the general structure of the accounts for fixed assets in the SNA. diatomite. natural gas petroleum. gold. lead. zinc. mineral accounts are compiled in countries where minerals play an important economic role. natural gas petroleum petroleum. The monetary accounts for resources have an additional component. natural gas. diamonds. cobalt. metals (copper. zinc. like manufactured capital. new discoveries and other volume changes. closing stocks. for revaluation. zinc. gold. not surprisingly. The zinc mine. coal. silver. but these are too numerous to include here. uranium diamonds. molybdenum. Although Namibia mines a wide range of minerals. lead. which includes redefinition of reserves due to changes in price or extraction technology. minerals are probably the most commonly constructed set of accounts. 2002a. and changes during the year (Figure 2). coal.potash copper. chromite. which are included in the national accounts under the asset accounts as non-produced assets. Changes include extraction.

The mining industry has developed a system. referred to as the McKelvey Box. Reserves that are both proven plus economic are referred to as economically proven reserves.. 50 thousand tons of ore are shown to be proven reserves (90%+ probability) that are profitable to mine at the current market price and the cost of extraction. Reserves include proven and probable reserves. Resources include indicated and inferred mineral deposits which correspond roughly to possible and speculative reserves.g. 8 . This system is used by all the diamond mining companies in Namibia.Extraction + New discoveries + Other volume changes Revaluation (monetary accounts only) Closing Stocks X X X X X X Monetary Accounts X X X X X X X 2. Another 50 thousand tons may be probable (e. corresponding roughly to the classification of the McKelvey Box. 5090% probability) and 60 thousand tons possible (less than 50% probability). In the example of Figure 3. The SAMREC code identifies two categories: reserves and resources. Marginally economic reserves are estimated at 100–250 thousand tons and sub-economic reserves – not profitable to mine with the present price and technology – may be estimated at 200–600 thousand tons. to classify mineral reserves according to combined criteria of geological certainty (proven/probable/possible/undiscovered reserves) and economic feasibility of extraction (economic/ marginally economic/sub-economic reserves) (Figure 3).2 Physical accounts: Methodology and data sources Measurement of the physical stocks can present problems both in terms of what to measure as well as how to measure. Figure 3 Example of a McKelvey Box to classify mineral reserves Discovered Reserves Proven Increasing degree of economic and technical feasibility Economic Marginally economic Sub-economic 50 Probable 50 100-250 200-600 Increasing degree of geological certainty Possible 60 Undiscovered Reserves Speculative Reserves 200-1000 A modified version of the McKelvey Box system of classification was established by the South African Mineral Resources Committee (SAMREC) as part of a code for public company reporting in South Africa.Figure 2 Structure of mineral asset accounts Physical Accounts Opening Stocks Changes in Stocks .

most countries included only proven reserves because of the difficulties in valuing probable reserves. Several new companies.2. Uranium has been mined by one company at a single location since the mine was first opened in the early 1970s. However. the proven petroleum reserves of UK have shown no depletion for the last 20 years. In the past. the category of reserves included depends on the information available for each mineral. or whether both proven and probable reserves should be valued. For example. probable. information about reserves for individual minerals cannot be published. 2000). Increasingly. formerly Ocean Diamond Mining) accounted for almost all remaining production (14 per cent). despite massive extraction (Harris. the per-unit rent for probable reserves may differ significantly from extraction costs for proven reserves.There has been some controversy over whether mineral accounts should include only economically proven reserves. no depletion was seen. countries are including other categories of reserves. Namdeb expects a lifespan of its operations at current production levels (in 2000) for roughly 20 years. With the expansion of reserves in 2000. Even when probable reserves were added to proven reserves. including those in Namibia. accounted for 86 per cent of production in 2000. No figures on reserves are collected or published so a survey was undertaken that requested data for economically proven reserves. and Namibian Minerals Corporation (NAMCO. 2001). ‘Proving’ reserves – undertaking the exploration and development necessary to move reserves from probable or possible into proven – is expensive and companies do not undertake this expense until it is profitable for them to do so. 2. such as Trans-Hex. The survey was sent out to the four companies that mine Namibia’s three major minerals. Only when all three categories of reserves – possible. there is a new spirit of openness and transparency in the mining industry. when the current level of proven reserves has declined sufficiently to require a decision about the future of the mine. i. The costs of extraction and. In practice. the partnership between the government of Namibia and DeBeers mining company. annual figures for extraction are published by the Ministry of Mines and Energy. Gold mining is also limited to one company in a single location. It is hoped that in the future. new discoveries.1 Namibian data sources In Namibia. hence. Since 1999. with other companies accounting for less than one per cent of production (USGS. particularly diamond mining. weighted by their probability of economic extraction. DeBeers’ Annual Report has published figures for reserves and production at all its mines. changes in reserves. possible and even probable. This is because depletion of proven reserves was constantly being offset by further development of probable and possible reserves which added to proven reserves. Because of confidentiality requirements.e. are quite active in diamond exploration and will be included in future industry surveys. 9 . because omission of these reserves gives a misleading picture of the mineral assets. Two companies mine virtually all diamonds: Namdeb. as well as information about annual investment since the opening of the mine in order to compile the monetary accounts. it will be possible to publish complete mineral accounts including information about reserves. and proven – were included could the depletion of reserves due to extraction be seen. The SEEA recommends that mineral accounts include economically proven.

The stream of income that is attributable solely to the resource is called the resource rent. The omission of government investment reduces the private costs of mining and increases the 10 .2. The second source of divergence between the private and social value of rent results from government investment in fixed capital. adjusted for risk.) There are several qualifications to this method of estimating rent that should be noted.1 Measuring resource rent Resource rent is an income earned from resources. A 10% rate of return was used. especially for unskilled labour. average cost is used rather than marginal cost because data about marginal costs are not generally available. under the right circumstances. such as auction markets for fish quotas. Where such markets are lacking. Where markets for resources exist. is difficult to measure and is. thus. (Appendix 1 provides all the data used to calculate resource rent and goes through the calculation for one year to demonstrate how the equations are implemented. including infrastructure. where i = 1. This estimate of rent is based on the private costs of extraction. in excess of the costs of extraction (including a ‘normal’ return to capital). Constructing monetary accounts. In actual implementation. this effect is probably quite small and can be ignored.2. In practice. Rent is attributable to the scarcity of the resource and is a measure of the value of the resource. The value of mineral reserves is the net present value of the stream of income they are expected to generate in the future.3 for diamonds. above the shadow wage rate. First. necessary for mining. often defined as either the average return on capital in an economy or the average cost of borrowing capital.3 Monetary accounts: Methodology and data sources Monetary accounts are constructed by estimating the value of the physical asset. reflect the rent. the trading prices can. and gold. (2) where All data used in the calculations are obtained from the national accounts except for π. therefore. hence. and hence the social value of rent may diverge from the private value for several reasons. This would have the effect of increasing private costs above social costs and reducing the private value of rent relative to the social value of rent. 2. wages may be artificially high in the mining sector. has two components: measuring resource rent and making projections about the factors that will affect the future stream of rent. the opportunity cost of capital. i. The social costs of extraction. the SEEA recommends calculating rent as the value of output minus the costs of production.3. In the national accounts. these capital costs are not associated with the mining industry. uranium. the capital costs (return to fixed capital and depreciation) of mining may be underestimated to some extent. Since labour costs are rather small in the highly capital-intensive mining operations. This practice introduces an upward bias into the measure of rent when average cost is lower than marginal cost. based on government guidelines for project evaluation. respectively. or ‘normal profit’ as it is also known. such as minerals. the opportunity cost. Box 1 Calculating resource rent Rent is calculated each year for each mineral using the following formula: (1) Ri = TRi – (ICi + CEi + CFCi + NPi) NPi = π x Ki R is Resource rent TR is Total revenue IC is Intermediate consumption CE is Compensation of employees CFC is Consumption of fixed capital NP is Normal profit π is rate of return on fixed capital K is the value of fixed capital stock invested in the industry for each mineral. as shown in Box 1.

for other minerals.3. which is the medium rate used by these governments for project evaluation. r. However. and gold. but there are no estimates of these costs at present. such as air and water pollution and the disruption of natural habitat. i. in most instances this information is lacking. Ideally. it is usually assumed that both the volume of extraction and the per unit rent remain constant over time. uranium. where i = 1. the costs of capital cannot be easily calculated for each mineral because there is no time 11 . Including such costs would reduce the value of rent and of the asset. but would be useful in future work on the mineral accounts. information about planned future extraction. expected production costs and market prices for the mineral would be obtained from mining companies and used for the calculation. so. In calculating the asset value another assumption must be made about the social discount rate to apply to future rent. However.private value of rent relative to the social value.2 Projecting future resource rent The value of each mineral reserve is the net present value of all the rent it will generate in the future. at the recommendation of the SEEA. as well as from the infrastructure – roads. and c) the discount rate. Part of the information necessary to calculate rent can be obtained from unpublished national accounts data: production and extraction costs for each mineral since 1990. Finally. for each mineral. However. A number of assumptions are required for implementing this formula: a) future levels of extraction. and other variables are defined as in Box 1. the inclusion of government investment would probably not make much difference. While pollution seems to be a minor issue in Namibia. there is great potential for damage to fragile and unique natural habitats both from mining operations themselves.3 for diamonds. Box 2 Calculating mineral asset value The NPV formula for calculating the value of mineral assets V at period τ is: (3) pti Qti V =∑ t t =τ (1 + r ) T i τ (4) p = i t Rti Qti S ti Qti (5) where Tt i = T is the remaining lifespan of the resource Q is the quantity extracted p is the unit rent r is the discount rate S is the remaining physical stock.3. 2. mining may cause substantial environmental damage. p. Q. 2.3 Data sources Namibia only developed its own national accounts after Independence in 1990. respectively. For diamond mining. a rate of 10 per cent was used. because rent is large relative to extraction costs. which is described in Box 2. so there is no time series of mining surveys. It is not possible at this time to estimate how large an impact this would have on the private rent estimates calculated here. b) expected future per unit rent.2. railways – necessary for the exploitation of their minerals. the inclusion of capital costs incurred by government could push the extraction costs high enough to result in near zero or negative rents for most years.

Gold production increased somewhat after the initial development of the mine. deflates current-price unit rent using the GDP deflator to represent the changing purchasing power of rent over time. Constant price mineral accounts are then obtained by applying the prices for the benchmark year to physical accounts throughout the times series (Johnson. since DeBeers made public its estimates of reserves since 1999. An alternative. One approach. Informal discussions with other economists and national accountants indicate more support for the income-oriented approach. 1986) but this did not adequately distinguish different minerals. including Australia and Canada. The growth of reserves between 1999 and 2000 indicates further exploration and development of off-shore diamond mining. URANIUM AND GOLD 3. a 5-year lagged moving average of the unit rent is used for the mineral accounts. use a multiple-year moving average per unit rent in calculating asset values. 2001) and prospects are not good for an increase in production in future years. due to the poor state of world demand. values must be converted to constant value measures. a number of countries. However.) 3. used by the Australian Bureau of Statistics for minerals treats the annual unit rent as the price of the asset in situ. income-based approach. (See Lange.4 Constant value asset accounts As with many economic variables. MINERAL ACCOUNTS FOR DIAMONDS. In order to reduce volatility and better represent the longer-term value of mineral assets. pers. There are two approaches to estimating the constant value of mineral assets. so the value of mineral assets is not always best represented by the per unit rent in any single year. the full accounts for those years are reported (Table 4). in order to assess trends over time. Annual uranium production has declined continuously since 1980. 2.). ABS. so that is the method applied here.3.series of fixed capital by mining company. 2002b for further discussion of this issue and its implications for estimates of constant value natural capital. Diamond extraction fell from 1980 to 1997 and began to recover since 1998 with the development of offshore diamond mines. under consideration by Statistics Canada (Gravel. (There is a times series of fixed capital for all mining in (Hartmann. To better reflect the longer-term value of mineral assets. which is now updated with information about annual investment obtained from surveys by Namibia’s Central Bureau of Statistics. Mineral prices can fluctuate a great deal from one year to the next. comm. pers. ) A company survey was carried out to develop the time series. only extraction can be reported for each mineral (Table 3). comm. similar to deflating financial assets or wages.1 Physical accounts for minerals For Namibia. 12 . Rössing Uranium is currently operating at roughly 75 per cent of capacity (USGS.).

3 5. 1999–2001 1999 Opening stock Extraction New discoveries and Other volume changes Closing stock 4.8 0.9 4.2 2001 16.3 2.6 1.6 0. Source: Author’s calculations based on DeBeers.2 1.9 0.1 3.9 3.0 0.6 0.9 4.6 4.0 2.8 0.5 5. 2001.1 5.6 1.6 2.2 2. 2001.3 3.7 0.6 0.8 0.4 Na Na Na: Not available.5 1. 1999. World Diamond Council. 2001. 1980–2001 Diamonds (million carats) 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 1.0 2000 7.2 4.8 4.4 4.2 4. USGS.3 2.4 2.8 1.1 2.3 1.0 1. 13 .3 2.3 2. 2002.8 0.6 Source: Ministry of Mines and Energy.Table 3 Extraction of minerals in Namibia.3 3.5 1.2 3.6 2.5 7.3 10.8 0.9 Gold Uranium (tons) (thousands of tons) 5.3 3.0 0.0 2. Table 4 Physical accounts for diamonds.7 0.0 2. 2000.8 1.9 2.5 4.5 1.5 16.9 0. World Nuclear Association.7 0.

2 Because more than one company is engaged in diamond mining. To provide a sensitivity analysis of the assumption about a 10 per cent return to fixed capital.2 Sensitivity analysis Calculation of rent requires an assumption about the rate of return used to calculate normal profit. mining companies do not earn enough to cover their full capital costs including a normal profit. This occurs in years when rents for other minerals (not reported here) are negative. an increase in the return to capital to 20 per cent reduces rent by an average of 26 per cent over the period – less in the 1980’s and more in recent years. In some years diamond rent even surpasses total rent. total mining rents are negative (earning less than the cost of capital.2 Resource rent and the monetary accounts for minerals 3. rent for the entire industry was negative. rent was also calculated assuming a 20 per cent return. Indeed. each mined by a single company. reflecting different characteristics for different mining activities.2. a higher return to capital pushes most mining operations over the edge into unprofitability. Over the period. the rent can be reported.3. rent is 43 per cent lower for a 20 per cent rate of return to capital than for a 10 per cent return. in 1993 and 1995. See Appendix 1 for calculations). which reflects the increasing capital intensity of diamond mining. these losses were large enough to swamp the positive diamond rents and. cannot be reported separately. 3. diamond rent is positive and a large component of total mining rent. and in 10 out of the last 12 years since Independence.1 Resource rent The mining sector has generated substantial amounts of resource rent. At the higher cost of capital. the picture is more complex. For all mining together.e. less than normal profits) in 13 out of the past 22 years. Perhaps more importantly. Rent for uranium and gold. For diamond mining. i.2. mostly from diamonds (Table 5. 14 .2 In all years. as a result.

not just the three (diamonds. Source: Author’s calculations based on methods and data sources described in Section 2.) At first glance. was not very sensitive: an increase of the return to capital to 20 per cent reduced rent by roughly 10 per cent. The complete accounts are given in Appendix 1. but the sensitivity varied a great deal among the three minerals that account for 99 per cent of Botswana’s diamond mining (Lange. 1980–2001 ($N millions) Rent for a return on fixed capital of 10% All Mining 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 339 124 105 74 108 382 376 206 441 548 121 74 48 -246 135 -153 248 323 314 338 844 1483 Diamonds 281 93 57 86 66 159 199 201 414 466 241 370 343 150 400 237 595 590 655 935 1093 1941 Rent for a return on fixed investment of 20% All Mining 250 25 -7 -47 -15 250 218 35 249 324 -134 -190 -229 -545 -181 -495 -138 -98 -138 -158 288 852 Diamonds 258 67 31 59 39 132 168 165 371 412 167 293 257 51 291 115 446 424 486 741 860 1677 NB: All mining includes all mining activities. of mineral asset value) is quite sensitive to assumptions about the return on fixed capital. Clearly. it appears that Namibia’s mineral wealth has increased enormously from N$2. 3.3 Monetary accounts Figure 3 shows the asset value of minerals in current and constant 1995 prices. A 20 per cent return to capital could reduce the already-low rent by a third or more. Diamond mining. (The separate accounts for each mineral cannot be reported. as a consequence. accounting for roughly 95 per cent of mining GDP.2.Table 5 Resource rent from mining in Namibia and.4 billion 15 . but copper–nickel and coal were highly sensitive. Lange and Hassan. Analysis of rents from Botswana’s mining industry also showed sensitivity to the rate of return to fixed capital. Figures for 2001 are provisional. uranium. the estimate of rent (and. 2003). gold) for which asset accounts are constructed. 2001.

In Namibia.3 billion to N$4. the real value of mineral wealth has instead declined by 57 per cent. which can replace the employment and income from the mineral-based industries once they are exhausted. Wealth can also increase when cheaper production costs or increases in market prices for minerals result in an increase in rent. non-renewable resources will be depleted. Figure 3 Mineral assets in current and constant prices.000 Current prices 10. are being depleted through extraction. 1977. eventually.000 19 80 19 81 19 82 19 83 19 84 19 85 19 86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 Source: Appendix Table A1.000 6. not biologically sustainable. A decline in wealth can be reversed when new discoveries or other volume changes are sufficient to offset depletion. This issue is taken up in the following section. the government is entitled to a portion of the resource rent. Solow. much like a landowner may rent grazing land. There is no guarantee that mining companies will reinvest the rent in the host country. Rent that is not recovered by government accrues as ‘windfall’ profits to mining companies. even when private operators exploit the resource. and the employment and incomes generated by this activity will come to an end. by definition.000 4. 4. mineral assets are the property of the state. of reinvesting rent from non-renewable resources in other assets. 1974. from N$11.000 2. The inevitability of this outcome suggests that countries depending on mineral wealth must manage their resources differently from countries that are not heavily dependent on non-renewable resources. exploitation of minerals can be economically sustainable – because it creates a permanent source of income – even though non-renewable resources are. 1980– 2001 12. which appears to account for the increase in real wealth in the late 1990s. This principle for sustainable development. It is especially important that resource rents from minerals be invested in other kinds of economic activity. adjusted for inflation. As the owner of the resource. especially if the mining operators 16 .000 Constant 1995 price million Namibia $ 8. Although the exhaustion of mineral wealth can be delayed.in 1980 to N$8. POLICY IMPLICATIONS FOR RESOURCE MANAGEMENT Non-renewable resources like minerals will eventually be depleted.9 billion in constant 1995 prices. is known as the Solow–Hartwick Rule (Hartwick. as in most other countries. 1986). which in effect constitute an inventory of wealth. A decline in mineral wealth over time is not unusual because the physical reserves of nonrenewable resources.6 billion in 2001. However. In this way.

1 Recovery of resource rent Like many countries. manufactured capital (e. the government of Botswana has recovered a greater share of resource rent – averaging 76 per cent over the period 1980 to 1997 (Lange and Wright. and government must be careful not to set taxes so high as to discourage investment. (Description of the different taxes and determination of which constitute taxes on rent are discussed in Appendix 1. education and health). the government bears the responsibility for reinvestment of the rent. Whether this degree of rent recovery is sufficient is difficult to determine. This requires: • recovery of a significant portion of the resource rent. it is not feasible to attempt full rent recovery. taxes from Table A3. but others are designed specifically to capture the ‘excess profits. but rent recovery has varied enormously from year to year (Figure 4). 1980–2001 1500 1400 1300 1200 1100 1000 900 800 700 600 500 400 300 200 100 0 -100 -200 -300 Resource rent Taxes on rent millions of N$ Source: Rent from Table 5. Some of these are ordinary corporate profit taxes.are foreigners and there are relatively few investment opportunities in the host country. which makes it much easier to establish appropriate tax regimes. natural capital. 19 80 19 81 19 82 19 83 19 84 19 85 19 86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 17 . taxes paid by other mining operations fall within the range of normal corporate taxes on income (see Appendix 1). As the owner of the resource.’ that is. As a share of diamond rent. Namibia levies a number taxes and fees on its mineral industry. government has levied taxes designed to recover rent only on diamond mining. government has recovered an average of 52 per cent of the rent generated by all mining. By comparison.g. averaging 42 per cent over the past two decades. forthcoming). Figure 4 Rent recovery from mining in Namibia. Since Independence. and • a policy of reinvestment of the rent in other assets: human capital (e. Perhaps because of the volatility.) Over the past two decades. public infrastructure). taxes have been considerably lower. When rent is so volatile. generated by mining.g. the rents. 4. However. and diamond rent has been much more stable in Botswana over the past two decades. or foreign financial assets (which represent claims on the capital of other countries). diamonds generate more than 95 per cent of the rent. rent recovery has increased slightly to 45 per cent.

Botswana developed an indicator. whether mineral wealth is being transformed into other assets (Box 3). even after independence. if rents are used for public consumption rather than reinvestment. the SBI was well below 1. there are few specific rules for determining the amount of rent that must be reinvested. It is useful to consider one country that has developed an explicit policy regarding management of resource rent. Prior to Independence. 4. Until the mid-1990’s. Namibia has not explicitly reversed this policy. Indications are that it will continue to surpass 1. which yield an annual income. However. like many other resource-rich countries. Botswana. Since then. implicitly requiring that all mineral revenues be used only for investment.0 in 2001. surpassing 1.Figure 5 Rent recovery as a share of rents from diamond mining. to monitor whether the mineral revenues it collects are being used in a manner that promotes sustainable development.0 by a small amount in the next few years at least. the SBI has increased.0 and all mineral revenues were reinvested (Figure 6).0) public consumption should not use any mineral revenues. taxes from Table A3. 1980–2001 130% 120% 110% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 19 80 19 81 19 82 19 83 19 84 19 85 19 86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 Average Annual rent recovered from diamonds Sources: Rent from Table 5. According to its rule (SBI < 1. human capital (education and health care). Government can reinvest rents in public sector capital (infrastructure). the lack of a reinvestment policy could be attributed to disinterest in providing for the future of the majority of Namibia’s population. Recognising that the revenues from diamonds represented mainly asset sales rather than value added in production. Namibia.2 4. that is. The SBI monitors reinvestment of rents by showing the share of public consumption that is paid for out of non-mineral revenues.2 Reinvestment of resource rent to maintain national wealth While the Hartwick–Solow Rule provides general theoretical guidelines for reinvesting mineral rents. Of course. does not have an explicit policy for reinvestment of resource rent. the Sustainable Budget Index (SBI). the government of Botswana saw the need for reinvestment of these revenues in order to maintain economic growth. 18 . or in foreign financial assets. then national wealth declines over time.

0 means that all mineral revenues are reinvested rather than used for public consumption. 19 .4 0. which is fiscally unsustainable in the long run. SBI = Govt. SBI is the ratio of public consumption (non-investment expenditures) to recurrent (non-mineral) revenues. per capita GDP is roughly the same in 2000 as it was twenty years ago in 1980. forthcoming. Real. Given the decline of GDP by 17 per cent in the 1980’s. The SBI is an indicator that monitors whether government is reinvesting mineral rents or using them for public consumption. However. per capita income has increased substantially over time. While there are a number of shortcomings to the SBI. See Lange and Wright (forthcoming) for further discussion of the SBI and its use in Botswana.2 1 0. although growth rates are not nearly as high as in Botswana.2 0 19 80 19 /81 81 19 /82 82 19 /83 83 19 /84 84 19 /85 85 19 /86 86 19 /87 87 19 /88 88 19 /89 89 19 /90 90 19 /91 91 19 /92 92 19 /93 93 19 /94 94 19 /95 95 19 /96 96 19 /97 97 19 /98 98 19 /99 99 20 /00 00 20 /01 01 /0 2 NB: SBI < 1.Spending (non-investment) Govt. per capita income in Botswana’s has grown steadily.0 means that public consumption is funded by mineral revenues. non-investment expenditures on education and health are excluded from the numerator. Its real. there is no doubt that it has served Botswana very well in the process of economic development. SBI > 1. SBI > 1. recovery to the 1980 level of per capita income represents a considerable achievement. this observation masks considerable economic growth after Independence. 1980–2001 1. and growing an additional 60 per cent in the 1990s. in contrast to that of Namibia’s (Figure 7). Source: Lange and Wright.6 0.8 0. doubling in the decade from 1980 to 1991. To account for investment in human capital. Figure 6 The Sustainable Budget Index of Botswana.0 means that mineral wealth is being liquidated to pay for current consumption.Box 3 Sustainable Budget Index (SBI) Sustainable development in economies dependent on non-renewable resources requires reinvestment of resource rents in other assets to offset depletion of mineral assets. Namibia’s real.Re venue (recurrent) SBI < 1.0 means that all resource rent is used for investment in public sector and human capital.

reinvestment of the rent. United States. but by no means the only one3. Namibia has been moderately successful. With respect to the second criteria. 2001. Much of Namibia’s mineral wealth was extracted prior to 1990 and was not used for the betterment of all its citizens.00 19 80 19 81 19 82 19 83 19 84 19 85 19 86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 Source: Botswana: Bank of Botswana. The critical factor for sustainable economic development is the third criteria. CONCLUSIONS Mineral wealth can provide countries with a tremendous opportunity for economic development by providing the funding for investment and growth. see Lange and Wright (forthcoming). however. This is less than the rate of recovery achieved in Botswana. For further discussion of this. Canada and Alaska. public infrastructure and manufactured capital Maximisation of resource rent is most often achieved through exploitation of minerals by largescale commercial operators.00 Botswana Namibia 2. the rent is then used for current consumption rather than to build the wealth that guarantees the livelihoods of future generations as well. Using minerals to build a sustainable economy requires: • policies that maximise resource rent generated by mining. have squandered this gift from nature and end up no better off than countries without an abundance of natural capital. 2001.50 2. such as human capital. 1980–2000 3. Countries that have been successful in reinvesting rent usually have explicit policies to guide them. • recovery of resource rent by an agency able and willing to reinvest rent. unpublished data. Since Independence.g. but not unreasonable given the greater volatility of mineral rents in Namibia. Most resource-rich countries recover a substantial portion of the rent through taxes. e. Botswana’s Sustainable Budget Index is one example. recovery of resource rent.Figure 7 Per capita GDP growth in Botswana and Namibia.00 1. Namibia has carefully considered how mining may 3 Other examples.00 0. 20 . 1996.50 1.50 0. Alberta. Namibia: CBS. a policy followed in Namibia. Many countries. are mostly in industrialised countries. • reinvestment of rent in other assets that are capable of generating income and employment once resources are exhausted. However. however. 5. recovering an average of about 40 per cent of diamond rents over the past 20 years.

how it can be used to build national wealth. i. This has. But Namibia has yet to develop a policy that addresses how mineral wealth can contribute to long-term sustainable development.e. The tremendous demands being placed on the economy by the HIV/AIDS epidemic make this an even more urgent.contribute to current employment and the economy of specific regions of the country. 21 . in part. resulted in the recovery of economic growth since 1990.

R. forthcoming. State Revenue and Expenditure Report. The contribution of minerals to sustainable economic development in Botswana. Paper accepted for publication in Environment and Development Economics. and A. World Bank. Development Discussion Paper No. Sustainable Development in Mineral Economies. Unpublished M.mme. 18-22 September. DeBeers Corporation. Review of Economic Studies. Available from website www. Lange. Windhoek. 1998. Stanford University. Wright. 2001. 2000. 73pp. _______.C. University of Stellenbosch. Hartwick. Thesis. (1977). Cheltenham. _______. 2002. Mid-Term Review of NDP7. National Accounts 1995. State Revenue and Expenditure Report. National Accounts 2001. Windhoek. Department of Economics. 87. Namibia.. Gaborone. Lange.Sc. _______. 2001. 1990. Gaborone. The Namibia Labour Force Survey 1997. Windhoek. _______. 132pp + statistical appendices not consecutively numbered. R. Annual Review. See also. Oxford: Clarendon Press. 2001. Lange. 2526 May 2002. Sub-soil asset accounts for the United Kingdom. Ministry of Finance. _______. REFERENCES Auty. 2000. Botswana. Alternative measures of the value of natural capital in constant prices. 2001. 67 (5): 972-974. 1999. Botswana: MFDP. 1997. M. Annual Report. Solow. Harvard Institute for International Development. Namibia. 2000. G. Namibia: MME. American Economic Review. _______. Paper presented at the workshop. Intergenerational equity and the investing of rents from exhaustible resources. 1990. 2003. Windhoek. website www. In press. Windhoek. Botswana: Bank of Botswana. G. 33pp.com _______. 1999. 2000. Hassan.debeersgroup.com Harris. 41:29-45. 1989. 2002b. G. Washington D. Ministry of Finance and Development Planning. Natural resource abundance and economic growth. 1995. _______. Ministry of Mines and Energy. Namibia. 1998. Bank of Botswana. Hartmann. Statistical and Economic Review. and R. Namibia: National Planning Commission. Statistical and Economic Review. 1995. 517a. 1986.. Gaborone. (1974). 33 pp. UK: Edward Elgar Publishers. and K. R. Hamilton Environmental Accounting in Action: Case Studies from Southern Africa. Annual Economic Report. Mikesell. 1996.6. Windhoek. Final report to the Botswana Natural Resource Accounting Programme. Statistical and Economic Review.1989. Mineral accounts: managing an exhaustible resource. Gaborone. State Revenue and Expenditure Report. and M. Ministry of Labour. The contribution of minerals to sustainable economic development: the example of Botswana. 1997. 22 .debeersgroup. Windhoek. 2001. Hassan. _______. Namibia. P.gov. Available from website www. Environment Department Paper No. Manila. 7pp. Botswana: MFDP. Windhoek. 1995. Namibia.na Sachs.M. Central Bureau of Statistics. 39pp. Windhoek. In Lange. Namibia. The role of diamond mining in the economy of South West Africa 1950-1985. and R. 2001. R. Annual Report. the Philippines. Namibia: National Planning Commission. Environmental Accounts: Uses and Policy Applications. _______. J. 2002a. Intergenerational equity and exhaustible resources. Namibia. Cambridge. J. Warner. Annual Report. Paper presented at the International Workshop on Environmental and Economic Accounting. G. Ministry of Labour: Windhoek. 1996. Putting Theory to Work: The Measurement of Genuine Wealth. Various years.

World Diamond Council.org/info/inf23. June. In press. (1986).’ Scandinavian Journal of Economics. 1993b. New York: UN. Integrated Environmental and Economic Accounting. Series F. Minerals Information: Commodity Statistics and Information. New York: UN. 2001. United Nations. 703pp. 2001. 1993a._______. On the intergenerational allocation of natural resources.com/etimate.htm 23 .gov/minerals/pubs/commodity. Integrated Environmental and Economic Accounting. 88:141-149. Diamond production estimates 1999.shtml World Nuclear Association. United Nations: New York. United States Geological Survey. Studies in Methods. 61. World uranium mining. 2001. System of National Accounts.worlddiamondcouncil. 2002. Information and Issue Briefs. _______. 182pp _______.usgs. website: www. Website: www. No. Website: www/world-nuclear. Handbook of National Accounting.

89 =339 24 .1* 891) = RENT -141 .0 6. The first section provides the data used to calculate resource rent and goes through the calculation for one year to demonstrate how the formulas are applied.0 3. Using the formula in Box 1 and the data from the national accounts reported in Table A1.2 4. A.1 Output minus Intermediate consumption Net taxes Compensation of employees Consumption of Fixed Capital (CFC) 10% return to Capital Stock (0. the rent in 1980 for a 10 per cent return to fixed capital stock can be calculated as: Value (millions of N$) 913 -280 1 Item number and description 1.0 2.APPENDIX 1 This appendix has three sections. The second section presents the monetary accounts.1 3.1 Calculation of resource rent for mining This section demonstrates how resource rent is calculated and presents the monetary assets for minerals.64 . The final section discusses all the taxes levied on the mining industry and describes what portion can be considered tax on resource rent.

0 Output Intermediate 2.1 10% return 7.3 Net taxes 2005 2167 1728 2327 2298 2977 3311 3458 3808 4546 5721 901 1056 909 1077 1240 1438 1582 1623 1859 1935 2232 1250 1058 1539 1729 1835 1949 2610 3489 5 484 761 7 524 528 7 535 997 8 577 10 622 10 618 11 651 12 731 1104 1112 819 5 5 494 613 4 469 346 Compensation 482 of Employees GOS 617 1144 1204 1321 1949 2746 Capital Costs 4. Source: Unpublished data from the national accounts compiled by the Central Bureau of Statistics.0 Output 2. Figures for 2001 are provisional.0 CFC 5. 25 .2 of employees 141 3.Table A1 Calculating resource rent for mining.1 6.2 10% return 20% return 64 891 89 178 72 987 99 197 85 96 101 117 153 177 206 247 274 1122 1209 1224 1324 1582 1709 1919 2237 2547 112 224 121 242 122 245 132 265 158 316 171 342 192 384 224 447 255 509 Resource rent 7.2 10% return 20% return 284 292 297 316 345 371 408 447 497 560 645 2632 2773 2990 3153 3418 3855 4210 4525 4960 5562 6307 263 526 277 555 299 598 315 631 342 684 386 771 421 842 452 905 496 992 556 631 1112 1261 Resource rent 7.1 3.2 20% return 339 250 124 25 105 -7 74 -47 108 -15 382 250 376 218 206 35 441 249 548 324 121 -134 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 1.0 CFC 5.1 Net taxes 913 280 633 1 706 248 458 1 163 293 742 s272 470 1 167 301 773 292 481 1 190 290 862 342 520 1 189 330 1228 1500 1418 1797 2236 2350 382 847 1 215 630 574 927 2 239 686 611 807 2 253 552 653 853 1266 1144 1382 1084 3 305 836 3 364 4 435 Compensation 3.2 20% return 74 -190 48 -229 -246 -545 135 -181 -153 -495 248 -138 323 -98 314 -138 338 -158 844 288 1483 852 NB: Figures for individual minerals cannot be published. 1980 to 2001 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1.0 Value added 3.2 3.0 Capital Stock 6.0 Value added 3.3 GOS 491 1015 646 Capital Costs 4.0 consumption 3.0 Intermediate consumption 3.1 10% return 7.1 6.0 Capital Stock 6.

1980 to 2001 ($N millions) A.695 3.352 1.060 4.034 4.451 1.624 1.778 1.570 1.695 3.929 Closing stocks 2.061 4.095 6.036 3.212 2.923 2.212 2.136 1.888 1.883 3.567 3.475 3.567 3.037 1.534 1.883 3.A.778 1.2 Monetary accounts for minerals Table A2 Monetary asset accounts for minerals in Namibia.224 10 66 -39 11 -13 231 -13 142 32 -234 -75 58 94 30 46 337 351 504 883 2.878 2.709 2.668 26 .575 7.575 7.923 2.625 2.624 1.534 1.397 3.984 11 0 -483 -11 3 14 322 936 359 738 826 -84 34 -32 -504 14 -248 711 603 974 -605 -2.136 1.952 New discoveries + Other volume changes Revaluation Extraction 283 158 103 105 83 81 151 159 239 276 248 354 396 268 307 268 373 444 884 949 1.034 4.352 1.475 3.878 2. Current Prices Opening Stocks 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2.952 8.397 3.451 1.036 3.709 2.888 1.

286 804 1.B.040 5.358 1.372 6.181 6.806 6.956 2.709 2.289 4.223 7.135 5.996 1.496 3.685 5.508 New discoveries + Other volume Extraction changes Revaluation 1.039 4.492 1.670 3.304 -45 13 46 868 2.262 3.188 3.628 1.888 1. Source: Author’s calculations based on methodology and data described in Section 2. 27 .909 4.316 -128 49 -43 -617 15 -248 621 491 732 -427 -1.793 4.477 4. Constant 1995 Prices Opening Stocks 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 12.565 6.426 6 0 -2.365 752 428 396 281 219 370 356 440 440 378 515 526 328 325 268 326 362 664 669 657 694 50 314 -162 41 -45 622 -32 318 59 -372 -114 84 125 37 48 337 306 411 664 1.519 2.299 2.914 NB: Figures for individual minerals cannot be published.094 Closing stocks 11.845 2.644 11.330 8. Figures for 2001 are provisional.052 4.031 3.583 6.908 5.481 6.899 4.611 1.094 2.910 5.820 2.588 5.698 6.737 5.226 5.258 1.188 5.

Diamond export duties (column 4). is shown in column 3. in effect. 28 . 55%. is taxed at a higher rate. The non-diamond mining companies pay the normal corporate income tax rate. There are various forms of taxes and not all taxes can be considered taxes on rent.3 Taxes on resource rent Table A3 shows the total taxes paid by the mining industry from 1980 to 2001. 3. however. The normal corporate tax rate is presently 35%. such as licensing and registration. Diamond mining. All companies in all industries pay some tax on their income and the normal rate of taxation should not be considered a tax on rent. so they are. later replaced by the diamond export levy4 (column 5). Only tax rates in excess of the normal rate are considered a tax on rent. diamond royalties and the portion of diamond income tax that is a tax on rent. 6). Taxes on income and profits (columns 2. So the portion of income tax paid by diamond mining above the 35% normal tax rate is considered a tax on rent. This portion. Taxes on resource rent (column 8) is the sum of diamond export duties. which amounts to 36% of diamond income tax. are considered taxes on rent.A. due to the excess profits – that is. Taxes on production (column 1) include fees levied for government services related to mining activity. They are not designed to capture rent. This section describes how the portion of mining taxes that can be considered taxes on rent has been calculated. the rents – earned by these companies. 4 The export levy is 10% of the value of diamond exports. paying no tax on rent.

7 8.6 239.8 452.5 405.1 181.6 947.0 41.4 121.9 216.5 28.7 397.7 189.7 10.4 145.9 66.1 2.3 37.8 37.3 287.1 44.7 65.9 258.6 66.6 4.8 8.5 180.0 149.8 28.3 26.1 21.7 208.3 17.7 243.6 62.7 51.1 125.2 211.5 32.6 5.2 55.9 324.5 90.0 191.2 41.4 35.5 41.3 1.8 83.9 505.2 83.6 5.6 44.7 6.9 94.1 24.3 7.8 9.7 183. PROFIT.9 60.8 178.1 38. Source: Ministry of Finance (various years).2 146 158. RENT DIAMONDS Income and profit tax Taxes on Tax on Production Full tax resource rent (1) (2) (3) 36% of col 2 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 0.9 67.7 305.3 75.8 0.5 30.4 NB: Diamond export duties were replaced by diamond royalties after 1994.7 185.2 3.4 3.7 29.0 37.0 475. 1980–2001 ($N millions) OTHER MINING ALL TAXES ON INCOME.8 38.3 1.4 373.5 7.1 296.4 142.4 153.1 134.9 114.3 552.7 2 2.8 64.3 23.2 99.8 89.3 206.5 88.1 65.6 114.1 2.2 1.9 22.8 9.5 32.1 77.2 47.9 102.9 180.8 50. 29 .0 265. Taxes on income and profit for 2000–2001 are estimated.0 3.2 174.3 143.1 318.7 21.6 19.4 135.8 22.9 93.6 3.8 120.5 18.4 11.8 26.0 55.7 23.Table A3 Taxes on resource rent in Namibia.5 126 61.6 46.4 121.8 578.7 730.3 92.2 73.0 45.8 202.2 56.6 4.1 18.1 157.1 11.7 17.7 Export Diamond Income Taxes on duties royalties and profit Total taxes resource rent (4) (5) (6) (7) (8) Cols Cols 3+4+5 1+2+4+5+6 16.5 365.2 12.8 2.3 115.3 1.6 58.7 49.0 161.6 131.9 188.5 30.2 144.3 172.9 49.9 1.9 316.

1995. 43 pp. DEA Research Discussion Paper 14. 1994. capacity and sustainability: lessons learned from a community-based conservation project. 33 pp. DEA Research Discussion Paper 8. growth and sustainability: The potential role of wildlife enterprises in Caprivi and other communal areas of Namibia. Jones. 8. Ashley. 10. Wildlife resources in Caprivi.. H and Harris. 39 pp. 4. C. 2. An approach to sustainable water management using natural resource accounts: The use of water. DEA Research Discussion Paper 16. DEA Research Discussion Paper 6. Müller. Population growth and renewable resource management: The challenge of sustaining people and the environment. DJ. 24 pp. JI and de Jager. J and Healy. Tagg. 150 pp. 13. Barnes. T. 1915 to 1995. AM and Robertson. C. Tourism. Rodwell. Namibia. 21 pp. DEA Research Discussion Paper 7. 35 pp. Ashley. CJ and Jones. productivity and land degradation in the commercial farming sector of Namibia. 17. 1995. DEA Research Discussion Paper 15. Ashley. Barnes. 1995. 1997. DEA Research Discussion Paper 2. A preliminary assessment of the economic impact of desertification in Namibia. utilisation and tourism in communal areas: Benefits to communities and improved resource management. BTB. 29 pp. 1995. Tourists’ willingness to pay for wildlife viewing and wildlife conservation in Namibia. JI. 1997. 1991–96. Promoting community-based tourism development: Why. DEA Research Discussion Paper 17. 1997. Barnes. Ashley. Jarvis. C and Garland. DEA Research Discussion Paper 13. 1996. M. C. the economic value of water and implications for policy. C. DEA Research Discussion Paper 11. Economic and financial incentives for wildlife use on private land in Namibia and the implications for policy.. 6. 21 pp. Ashley. JI and Motinga. Barton.. C ed). C (Ashley. 28 pp. GM. A. 1994. 42 pp. the environment and demand for water and energy in Namibia. 7.. The value of non-agricultural land use in some Namibian communal areas: A data base for planning. Lange. 1996. DEA Research Discussion Paper 10. TC. 5. 11. Incentives affecting biodiversity conservation and sustainable use: The case of land use options in Namibia. . 3. 40 pp. C. DEA Research Discussion Paper 18. 12. DEA Research Discussion Paper 5. 37 pp. Ashley. 15. Cattle numbers. 51 pp. BTB. Communal and commercial areas of southern Namibia. Institutional relationships. Endemic birds of Namibia: Evaluating their status and mapping biodiversity hotspots. BTB. 9. 1994. JI. 23 pp. Schier. G. J. 1997. 18. JLV. Lange. E. 103 pp. 1994. biomass. Jones. Wildlife management. Ashley. and van Rooy. 14. continued overleaf. C. 1997. C and Barnes. Wildlife use for economic gain: The potential for wildlife to contribute to development in Namibia. Barnes. 1995. eastern Tsumkwe District. DEA Research Discussion Paper 12.. 25 pp.. 1995. GM. Barnes. what and how? DEA Research Discussion Paper 4. 1996. JI. M. DEA Research Discussion Paper 1. Profits.. J and Grobler. JI. Ashley. Northern commercial areas: Okahandja. Otjiwarongo and Grootfontein. 23 pp. DEA Research Discussion Paper 3. DEA Research Discussion Paper 9. Brown. Barnes. Using resource economics for natural resource management: Namibia’s experience. communities and the potential impacts on local incomes and conservation. 37 pp. 16. equity. Quan. Namibia: The results of an aerial census in 1994 and comparisons with past surveys.DIRECTORATE OF ENVIRONMENTAL AFFAIRS Research Discussion Papers available in this series 1. C. 21 pp. Population dynamics. 37 pp. Northern communal areas: Uukwaluudhi. D and Conroy.

JA. ed.. ed). Government policies on sustainable development in Namibia.. P. DEA Research Discussion Paper 22.. BTB. JG. DEA Research Discussion Paper 19. DJ. 57 pp. C and LaFranchi. 32 pp. A preliminary environmental assessment of Namibia’s resettlement programme. DEA Research Discussion Paper 27. 1998. GM and Motinga. Lange. JI. 22. DEA Research Discussion Paper 32. 66 pp. 122 pp. Blackie.. . The Environmental Investment Fund: An initiative for the conservation and protection of the environmental and natural resource base of Namibia. DEA Research Discussion Paper 36. 65 pp. Environmental and Geographical Science Masters Students. Auer. 27. 1999. 34. Tarr. 27 pp. 1997. Day. P and Figueira. 31. DEA Research Discussion Paper 33. 36. P. Ashley. CR (Barnard. 1997. 26. P. 1998. Parks and resident peoples. DEA Research Discussion Paper 30. 25. DEA Research Discussion Paper 31. JA (Barnard. Environmental threats and opportunities in Namibia: A comprehensive assessment. Margules. DEA Research Discussion Paper 21. M. 96 pp. 35.. Communities and natural resources: Trends in equitable and efficient use. 33. The status of freshwater resources in Namibia. 20. 1999. Water availability and chemical water quality as important factors for sustainable wildlife management in the Etosha National Park and for domestic stock in farming areas of Namibia. 1999. Biodiversity planning and monitoring in Namibia.. 19. opinions and attitudes regarding Environmental Assessment in Namibia: Results of a national survey conducted in 1997. 1997. Simmons. DEA Research Discussion Paper 29. Tarr. 20 pp. Barnes. DEA Research Discussion Paper 38. Important bird areas in Namibia. 21 pp. C. P. 20 pp. DEA Research Discussion Paper 34. 48 pp. AM. Bird data in Namibia: A model for biodiversity information system development. 23. Knowledge. 29 pp. 30 pp. AM and Robertson. 29. 1999. R. DEA Research Discussion Paper 37.) 1997. McGann. 1998. 1998. P.) 1998. KN. C. ed). R and Tarr. 38. V. BA (Roberts. ed).. Linking Namibian protected areas with local communities. University of Cape Town (Tarr. Namibia’s Environmental Assessment framework: The evolution of policy and practice. 21. The state of Namibia’s socio-economic environment. Byers. 1999. 1999. The state of Namibia’s freshwater environment. Wildlife conservation and utilisation as complements to agriculture in southern African development. CS. DEA Research Discussion Paper 26. 46 pp. University of Cape Town (Blackie.. DEA Research Discussion Paper 35. DEA Research Discussion Paper 23. Summary report of a retrospective study of the environmental impacts of emergency borehole supply in the Gam and Khorixas areas of Namibia. Jarvis. 39 pp.. DEA Research Discussion Paper 20. DEA Research Discussion Paper 24... DEA Research Discussion Paper 25. 28. MJ (Barnard. 32. Marine environmental threats in Namibia.Other Research Discussion Papers in this series (continued). continued overleaf. 1997. RE. Barnes. Avifaunal database user manual. 1999.. Livelihood strategies of rural households in Caprivi: Implications for conservancies and natural resource management. in press. 1999. 27 pp. Nghileendele. 1997. Robertson. NP and Uisso. NP and Uisso. 37. R. ed). O’Toole. V. ed. Jones.. A. 24. DEA Research Discussion Paper 28. A and Jarvis. Nghileendele. 18 pp Blackie. Environmental Evaluation Unit. The contribution of resource rents from minerals and fisheries to sustainable economic development in Namibia. 1999. 30.

and Weaver. Suich H and Haimbodi. Development of preliminary tourism satellite accounts for Namibia. J. MacGregor. DEA Research Discussion Paper 45.. M. 42. 49. 23pp. 50pp. Postharvest fisheries on the eastern floodplains. 41. Economics without markets: Policy inferences from nature-based tourism studies in Namibia. Caprivi. 2002. 31pp. and lessons learned. natural resource management and managing revenue from tourism. . and Sakko. L. D. 29pp. DEA Research Discussion Paper 51. DEA Research Discussion Paper 54. 1999.N. 2002. DEA Research Discussion Paper 46. The legal aspects of governance in CBNRM in Namibia. constraints.Other Research Discussion Papers in this series (continued). Long. 32 pp. JA.I. 2001. 39.N.. 40.H. 23pp. Caprivi. Kirchner. 46. Barnes. DEA Research Discussion Paper 48. 2001. The contribution of minerals to sustainable economic development: Mineral resource accounts in Namibia. DEA Research Discussion Paper 47. 48. DEA Research Discussion Paper 49. Namibia. Corbett. A. Crafty women: The livelihood impact of craft income in Caprivi. 52.L.I. 2002. DEA Research Discussion Paper 41. Zeybrandt. DEA Research Discussion Paper 42. A and Jones. Purvis. 54. F. A.. Suich. 47. Disentangling benefits: Livelihoods. An econometric analysis of fixed investment in Namibia. 22pp. 51. 21pp. The experience of the Torra Conservancy. 2003. H. Fish and livelihoods: Fisheries on the eastern floodplains. 53. 20pp. J.. 20pp Poonyth. Suich. Purvis. 43. G-M. 29pp.. McGann. Lange.I. Empowering communities to manage natural resources: where does the new power lie? Case studies from Namibia. 2002. Krug W. J. Towards the establishment of the Environmental Investment Fund: Opportunities. 2002. M. H and Murphy. 50. J. The economic value of Namibia’s recreational shore fishery: A review..C.. M. Krugman. J. Suich. Humavindu. BTB. 2000. Fundamental issues and the threats to sustainable development in Namibia. Barnes. DEA Research Discussion Paper 43. 45. 2002. DEA Research Discussion Paper 40. 25 pp. 21pp. Economic analysis of community wildlife use initiatives in Namibia. H. DEA Research Discussion Paper 50. N. Satellite and resource accounting as tools for tourism planning in southern Africa. 44. S. DEA Research Discussion Paper 53. Barnes. BTB and Mosimane. Humavindu. 22pp.. DEA Research Discussion Paper 44. 2002. 2000.A... H. C. 44pp.. DEA Research Discussion Paper 52. J. Park pricing and economic efficiency in Namibia. 2002. Jones. 2002. 2001. 47 pp. C. and Monamati. DEA Research Discussion Paper 39.

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