By Malcolm Sylvester Tsuseb
Namibians are awaiting positive feedback on the current underway exploration and appraisals activities. Once appropriate Final Investment Decisions (FIDs) are obtained, the country will soon be able to access the new oil and gas supply and its potential economic advantages.
The extend to which all citizen will benefits rests on the tongue weight of the state.The government’s capacity to engage in prudent negotiations is what the country depends on.
Investors are often clear on what they want and how they want to proceed with the production, distribution, and consumption of their products while firmly pursuing their profit-maximizing objective.
Investors are likely to seek operational freedom to conduct their business, including the ability to sell petroleum products without restrictions, set prices with minimal interference, choose partners and suppliers, access financing freely, and hire skilled talent as needed beyond borders. Achieving this freedom will likely involve requests for revised taxes and regulatory frameworks and agreements to share investment risks and costs with the government.
This will shaken the lesgisaltion however, offers us a new opportunity to review our laws and introduce some beneficial changes.
As the regulator the state should assess the potential freedom request which may arise from investors while maintaing a friendly investment environment. For Namibia to reap from the promise land; will require the state to talk now.
Due to possible differences in goals and objectives the call for communication is now. The time to talk, align, and agree on objectives is not when the oil starts flowing or when the FID’s are reach. The time is now, while appraisal activities are still in progress.
‘’The talking stage is not tomorrow. It is now. And both government and investors must seizeit.’’
Just as in any relationship or business partnership, the foundation must be set early. Expectations must be clearly communicated, roles defined, and mutual benefits agreed upon. During this negoatiations the interest of the citizen must be presented.
Government should resolve and address structural challenges Namibia is facing in terms of high unemployment rate. Policies should be amendented to drive local participation and employment within the new emerging sector.
Local employment ratio should be introduce along the entire hierarchy of each development to ensure local job creation. Support for local tertiary institutions should be provided in order to guarantee the sustainability of a labour market with the necessary skills and to guarantee that pertinent programs are offered through Namibia’s major teriary institutions. Government objectives should not only prevail around taxes and royalties collections.
Government should secure sufficient local supply of petroleum products. Sorting the local market will be determine by affordability reflected through pricing.
The state should first carry out a comprehensive analysis to ascertain which option is most effective before putting it on the negotiation agenda, even though it may have to choose between allowing market forces to set prices and using tax revenues to fund subsidies for affordability or controlling prices for domestic consumers while possibly losing out on optimal tax revenue.
There are several countries where oil discoveries did not fully translate into national benefits. Ghana, despite its significant 2007 discoveries, has struggled to manage revenues in a way that delivers broad economic gains to its citizens.
São Tomé and Príncipe discovered oil in the 1990s, yet extraction has been delayed by disputes over production-sharing agreements and other obstacles. Kenya, too, has made notable discoveries but continues to face security challenges and infrastructure gaps that slow development. Some issues can be ironed out before the end of appraisal season.
Before the greenlight pops the government should have all its plans in place. Positive FID may serves as an exponential tool to achieve governmental objectives however, if these objectives are unknown to the investors they may be excluded from their strategies and goals.
Hence talking now is the deal; Namibia’s oil and gas resources represent a once in a lifetime opportunity. Opportunity alone, however, does not guarantee success. If the government and investors don’t align their objectives now, everyone will end up with less in the bag.
* I am a candidate for the MSc in Energy Economics and Finance at the University of Aberdeen and currently serve as an Economist at the Bank of Namibia. My research and professional interests lie in macroeconomic analysis, statistics, and the energy sector, with a particular focus on oil and gas. This work is written in my personal capacity.
