The one big thing that I haven’t been able to reconcile or tie-off is CLA’s sovereign risk.
I’ve read and seen on here that Namibia is a good place for mining (good infrastructure, established mines, friendly government etc.) but haven’t deep dived yet. It is the last and only big thing that makes me uncomfortable. A mate triggered this on Friday when I was talking about CLA – his words on Namibia and Africa generally were “I went there for the 2010 FIFA World Cup and the whole place is a sh*thole” …reminded me of old mate Trump’s words. Anyway, thought I’d better do some research, so I started digging before I pull the trigger and go all-in!
Disclaimer: this is NOT a down ramp (almost half my portfolio is CLA and I will be taking up the $15k max. offered up in the CR offer)...I just know jack sh*t about Namibia (other than they play rugby and soccer, and Julius Indongo is the world light welterweight champion) so this is me trying to cover my bases and share what I found.
Government/Economy
Namibia has a population of 2.6 million people and a stable multi-party stable democracy. It also has a strong military, consistently spending 4-5% of GDP on its military, more than all its neighbours, except Angola. Namibia has no enemies in Africa.
Namibia is one of the most unequal countries in the world with Gini coefficient of 60, the 6th highest in the world – this means there is a huge gap between the rich and the poor. For comparison, South Africa is 62 (2nd highest), US is 45 (41st highest), Australia is 30 (132nd highest) and Finland is 21.5 (156th and the lowest) – see CIA factbook https://www.cia.gov/library/publications/the-world-factbook/rankorder/2172rank.html
Agriculture, herding, tourism and mining form the basis of the economy. Mining makes up 10-25% of the economy (depending on your measure) with diamonds and uranium making up the large chunk of mining activity. The sector is well established and accepted by the government – see BDO Namibia https://www.bdo.com.na/en-gb/industries/natural-resources/mining-in-namibia
World Bank
The World Bank has a 2017 report on fiscal policy in Namibia – lots of technical eco analysis, but exec summary states:
“Political stability, sound economic management, moderate economic growth, and a sustained fiscal commitment to social programs have helped Namibia confront developmental challenges since independence in 1990. More than half of government spending routinely goes to education, health, social security, housing, and other social programs. This has been complemented by a highly progressive income tax schedule and exemptions in the value-added tax for goods consumed by the poor.
This has helped achieve notable progress in reducing poverty, although variations persist across the country’s 14 regions. The incidence of extreme poverty fell from 58.9 percent of individuals in 1993/94 to 15.3 percent in 2009/10. In addition, the country has made strides in upgrading its human development record by improving citizens’ access to basic public services.”
Namibia ranks towards the about middle of the pack for global mining risks on average: high hard and investment risk but low perceived risk compared to the world. For sub-Saharan Africa, it seems middle of the pack too. See the Mining Journal’s 2017 World Risk Report: http://acrm.dk/wp-content/uploads/2017/12/World-Risk-Report-2017-Executive-Summary.pdf
The mining sector is well established and the Chamber of Mines of Namibia is established and stable, with 48 years of existence and 111 members including CLA via Gecko (BB, PVW and PF) - see http://www.chamberofmines.org.na/index.php/home-menu/
The 2017 annual report has this beauty of a quote: "Cobalt, mostly as a by-product of copper and nickel is generally in short supply in the global market and thus an extremely valuable mineral. Maiden exploration results from Namibia’s first cobalt discovery, the Opuwo Cobalt project, albeit yielding very low grades, indicate that it could become Africa’s next producer of cobalt. Aside from the exceptionally high price of cobalt, the project holds significant value as cobalt predominantly comes from the Democratic Republic of Congo, a country with enormous political and security challenges and reliable supply is under continuous threat. Should this project become a mine, Namibia stands to benefit significantly from high revenues received through sales of a valuable commodity, and a preferred source of supply due to the country’s inherent peace and stability".
Geography
Namibia has lots of open land – it’s the world’s 2nd least population dense sovereign country after Mongolia (3rd is Australia btw). Although Namibia is the driest country in sub-Saharan Africa, there is annual seasonal flooding (called Efundja) in the northern parts of the country, originating in Angola and flowing into Namibia's Cuvelai Basin. The worst floods so far occurred in March 2011 and displaced 21,000 people. Opuwo might be okay given it’s elevation is about 1200 metres – maybe someone can add to this one.
Namibia is bordered by Angola, Zambia, Botswana and South Africa (Zimbabwe too but across the Zambazi River). DRC is next country up from Angola and Zambia but a lot of the DRC trouble is in the north east apparently, not near these borders so much. Map marks out Opuwo town - see https://www.google.com.au/maps/plac...c3ecb4!8m2!3d-18.0580139!4d13.8361177!5m1!1e4
Angola is stable now after years of civil war and was one of the world’s fastest growing economies pre-GFC. It ‘s main exports are diamonds and oil. This seems a stable country now, both politically and economically. Zambia has been reasonably stable but has mass poverty and has been granted international debt relief previously. Biggest export is copper and the World Bank has recognised its recent economic reforms – again, seems okay for now.
Other facts
The Christian community makes up 80%–90% of the population of Namibia.
Life expectancy at birth is estimated to be 64 years in 2017 – among the lowest in the world.
The most common language is Oshiwambo (the most spoken language for 49% of households) but the most widely understood and spoken language is English. Also, most of the white population speaks either German or Afrikaans.
Namibia is the only country in Sub-Saharan Africa to provide water through municipal departments (which is good!). However, compared to the efforts made to improve access to safe water, Namibia is lagging in the provision of adequate sanitation. Over 50% of child deaths are related to lack of water, sanitation, or hygiene; 23% are due to diarrhea alone. The UN has identified a "sanitation crisis" in the country.
Tourism is a major contributor (14.5%) to Namibia's GDP, creating tens of thousands of jobs (18.2% of all employment) directly or indirectly and servicing over a million tourists per year. The country is a prime destination in Africa and is known for ecotourism which features Namibia's extensive wildlife.
The only thing that stands out is that Opuwo is right up in the north of Namibia, so anything affecting Angola or Zambia might spill over i.e. annual flood season or conflict. Floods discussed above but for a conflict, from Opuwo there is an infantry battalion in Oshakati (225km east), an artillery bridge in Otjiwarongo (450km south) and another infantry batallion in Rundu (650km east). Also, the two airforce bases are Karibib (600km south) and Grootfontein (650km east) – they have 30-odd fighter jets (12 are newish from China) and 2 attack helicopters amongst the other transport planes and choppers.
I’m comfortable with all of this as everything seems stable in this part of Africa atm. If anything breaks out here, it’ll be some kind of black swan event that probably can't be foreseen or predicted. I haven’t included anything on DRC as there is a country in between, and its 1000kms to Opuwo from DRC, so spillover conflict or war refugees are unforeseeable if things light up.
A big thank you to all (PG, sailorlion, ans25, binwood, Ramsess1 and everyone else) who has been contributing quality stuff to this forum and got me riding the CLA wave from September last year. And for BB and PG - may the gods shine upon you!
CLA Price at posting:
19.5¢ Sentiment: Buy Disclosure: Held
(20min delay)