Of State Shareholding in Oil

So, the government has once again decided to put taxpayer funds on the line with a N$1,2 billion bailout for the scandal-ridden state oil company Namcor, neh?

“I must make it clear this [bailout] did not involve any direct cash injections to Namcor,” said company spokesperson Utaara Hoveka, apparently to ease concerns that the money could be squandered.

Namcor reached a point last year of owing its suppliers nearly N$2 billion, mainly due to careless management and directors who were sleeping on duty, if not outright complicit in the mismanagement of the state-owned entity. Namcor has the mandate to look after the country’s oil needs.

In 2010, Namcor received about N$260 million to get out of another mess with PetroNeft, a Russian subsidiary of corruption-tainted Glencore. At that time, Namcor had the sole mandate to import 50% of Namibia’s petroleum needs.

The latest bailout risking taxpayer funds by guaranteeing the N$1,2 billion should serve as a reminder that the chorus about shareholding in oil production being endlessly sung by business and politically connected people, as well as other clever-sounding Namibians, is not only poorly thought through, but sheer insanity – doing the same thing and expecting marvellous results every time.

Namcor currently has the mandate to demand at least 10% shareholding in companies lining up to produce oil and gas from Namibia’s seabed. Several Namibians have complained that the 10% is too little and that the share amount should be much higher.

Some have referred to the joint ownership with De Beers as the perfect example of how benefits can accrue to the country and taxpayers.

Indeed, the government’s joint venture with De Beers has been a great success: Diamonds made Namdeb our country’s single biggest taxpayer; the company and its subsidiaries are completely managed by Namibians; its employees are among the best skilled and highly paid in the country.

One swallow does not a summer make.

No case study is publicly available to provide insightful information on what made the De Beers joint venture successful. That De Beers has been mining diamonds in Namibia for decades before the joint venture was set might explain its instant success.

Few Namibians seem willing to critique why the government’s 100% ownership in the likes of Namibia Wildlife Resorts, which has exclusive control of most tourism resorts, is a dismal failure such that NWR perennially depends on bailouts while its competitors are highly profitable.

Bailouts may be good for parastatal employees who are often extravagantly paid, but they are a huge cost to the majority of Namibians who end up having no healthcare, water, education/training and simple basic essentials.

Namcor, shamefully, has been dishing out exploration licences to individuals who have been friends of their management, employees and government officials. Such individuals have gone on to make hundreds or billions of dollars bringing in international oil companies for exploration.

By contrast, Namcor would have been bankrupt were it not for the bailouts, mandates to control resources and cash injections from every litre of fuel sold in the country.

In short, Namibians must disabuse themselves of the notion that “direct shareholding” by the state guarantees a flow of benefits to the masses.

At the very least, first ensure prudent use of tax money and other state resources like fishing or mining licences and land that are given to a few individuals for self-enrichment at the expense of the majority who live in poverty.