Vincent Shimutwikeni
Africa-Press – Namibia. The mining sector has been a cornerstone of Namibia’s socio-economic development, driving job creation and contributing to the growth of both new and existing towns.
With key industries in diamonds, uranium, zinc, copper, and other metal ores, mining has long provided stability and opportunities across the country.
Historically, both before and after independence, mining towns have offered miners and residents a relatively low-cost lifestyle, with mining companies covering many essential expenses and providing numerous fringe benefits.
While not as glamorous as in the past, miners in these towns still enjoy financial advantages, avoiding many of the everyday costs faced by city dwellers.
Oranjemund, established in 1936 by Consolidated Diamond Mines (CDM) and later managed by Namdeb, was originally a privately-owned mining town.
For decades, Namdeb provided essential services such as free housing, water, and electricity to its employees and the community. Even after the town’s official proclamation, Namdeb continued to offer various financial benefits, including subsidized property sales for employees and financial assistance for those purchasing homes outside the town.
Living in Oranjemund remains relatively affordable, offering a level of financial comfort rarely found elsewhere.
In recent years, large-scale retrenchments have been observed in the mining sector.
The Impact of the Mining Sector on the Namibian Economy: Assessing Socio-Economic and Environmental Effects (2021) underscores both the industry’s contributions and the challenges it faces. At that time, Rosh Pinah had not yet been proclaimed a town and was managed by Roshcor, a joint venture between Skorpion Zinc and Rosh Pinah Zinc Corporation. Employees of both mines received water and electricity as part of their employment benefits.
Similar trends exist in other mining towns, with Rössing Uranium shaping Arandis and Dundee Precious Metals influencing Tsumeb. This pattern is evident in multiple cases across the industry.
So, what’s the problem?
While there are indeed many positives derived from the mining sector, such as its contribution to GDP, job creation, and the socio-economic development of towns, the issue lies in the development of a “dependency syndrome” among miners.
Workers have grown accustomed to the benefits provided by mining companies, including but not limited to subsidised housing, utilities, transport, and other financial support.
This has led to a lack of incentive or opportunity for miners to learn how to manage their finances or plan for the future. This dependency on the industry creates a cycle where financial literacy, including understanding and managing pensions, is often overlooked.
As a result, despite the immediate financial advantages, many miners are left unprepared to fend for themselves once they retire or if the mines face retrenchments.
The lack of pension literacy, combined with broader financial dependence on the industry, undermines long-term socio-economic stability and personal financial growth, leaving many vulnerable once they leave the workforce or face retrenchment. While some may have accumulated savings, the critical question remains: do they possess the necessary financial literacy to effectively invest, preserve, and sustainably utilise their pensions?
Upon retirement, many individuals return to their hometowns or villages. Fringe benefits provided during employment may change once an employee retires or leaves the company, often leaving them responsible for securing housing, paying municipal bills, and covering higher school fees.
Additionally, while employed, a mining company may subsidise a significant portion of an employee’s medical aid contributions, but this support may be reduced or discontinued after retirement due to financial constraints or policy changes. As a result, the former employee may need to cover the full cost of their medical aid premiums or a substantial portion of it themselves.
This additional, unplanned expense can create significant financial challenges, especially given the high cost of medical aid premiums.
After retirement, access to medical coverage becomes even more critical as healthcare needs typically increase with age. In many cases, retirees have little choice but to rely on private medical aid due to the unfortunate state of public healthcare facilities.
Miners who are members of a pension fund receive a lump sum and monthly pension upon retirement, but effectively managing the lump sum for long-term financial security remains a significant challenge.
In a provident fund arrangement, where members can withdraw their full accrued benefit in cash at retirement, one-third of the amount is tax-free while the remaining two-thirds is subject to taxation either as a lump sum or as a monthly annuity.
However, most members opt to take the full amount in cash rather than converting the two-thirds portion into a monthly annuity.
Under the provisions of the Income Tax Act, this lump sum withdrawal is taxed at marginal rates, often resulting in retirees being assessed by NamRA at a significantly higher tax rate.
Instead of spreading the tax liability over their lifetime through monthly annuity payments, retirees face immediate taxation on the full amount at a much higher rate.
This financial shift underscores the need for better pension and financial literacy to ensure miners’ long-term stability in retirement or new employment.
Miners must understand that!
Given increasing life expectancy, economic instability, and inflation, early retirement planning is essential. Compound interest significantly boosts long-term savings, ensuring financial independence. Retirement planning secures not just their future but also their family’s well-being, reducing dependence on others in later years.
Mining companies and pension funds
By fostering financial and pension literacy, mining companies, pension, and provident funds should empower miners to manage their finances effectively, both during and after their careers. This will enable miners to transition smoothly into retirement or new roles, reducing financial stress and promoting long-term economic stability. Moreover, it will help them move beyond the dependency syndrome, fostering a culture of financial independence. In turn, this contributes to the broader economy by creating a more financially empowered and educated workforce capable of making informed decisions that support personal and national economic growth.
Source: neweralive
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