N$11 diesel surge threatens mining jobs, tax revenue

Namibia's diesel price has increased by N$11.23 per litre since February, raising mining operating costs and putting company profits, investment, employment and government tax revenue under pressure.

Diesel 50ppm, which cost N$19.63 per litre at Walvis Bay in February 2026, reached N$30.86 this week following the latest N$3 increase announced by industries, mines and energy minister Modestus Amutse. The cumulative increase over nine months amounts to 57.2%.

The increase comes as Namibia's mining industry faces weaker production forecasts and rising financing costs. The Chamber of Mines' September 2026 update identified fuel prices, inflation and interest rates among the challenges facing operations, warning that rising costs could delay expansion projects and exploration.

The Bank of Namibia has revised its 2026 mining growth forecast from a contraction of 2.2% to 6.2%. Although fuel prices are not solely responsible for the deteriorating outlook, they are adding pressure to an industry already grappling with production and market challenges.

Diesel is a major expense at open-pit mines, where haul trucks, excavators and other heavy machinery move ore and waste rock. Mining companies also rely on road transport for equipment, explosives, spare parts and supplies.

Companies unable to recover higher fuel costs through mineral prices or productivity improvements risk shrinking profit margins. Rising costs could also prompt investors to reassess project budgets and expected returns, potentially delaying recruitment, expansion and new developments.

The Bank of Namibia's October decision to raise its repo rate to 7% adds to financing costs for machinery, vehicles and mine development.

Mining tax revenue at risk

Higher diesel expenditure could affect government revenue, particularly company income tax and pay-as-you-earn (PAYE) collections.

Non-diamond mining companies are subject to a corporate income tax rate of 37.5%. Under a simplified calculation, every N$1 million reduction in taxable mining profits could result in N$375,000 less in company income tax.

Mineral royalties, however, are generally calculated on mineral value rather than profits. Higher fuel expenditure would therefore not automatically reduce royalty revenue unless production or sales were affected.

The government has already revised its mining tax and royalty revenue forecast downwards in the 2026/27 Mid-Year Budget Review, reducing expected collections by N$900 million, from N$6.1 billion to N$5.2 billion. The revision largely reflects existing weaknesses in mining revenue, particularly from diamonds, rather than losses directly attributable to higher fuel prices.

The Chamber of Mines' 2025 annual review shows that taxes paid by its members increased from N$5.62 billion in 2024 to N$7.81 billion in 2025, supported largely by stronger corporate income tax contributions from gold producers.

The chamber also projected non-diamond mining income tax revenue of N$4.44 billion for 2025/26, compared with N$2.89 billion in 2024/25. Higher fuel costs could erode future taxable profits, although stronger mineral prices and production may offset some of the pressure.

Husab's giant trucks illustrate the burden

The scale of the increase can be illustrated by haul trucks operating at the Husab uranium mine near Swakopmund.

A 2019 report indicated that a Komatsu 960E haul truck consumed approximately 5,500 litres of diesel over three shifts in 24 hours. Husab's historically documented fleet included 23 Komatsu 960E-2KT trucks, according to a 2023 industry report.

At February's diesel price, 5,500 litres would have cost N$107,965 a day. At November's price, the same quantity would cost N$169,730, an increase of N$61,765 per truck daily.

Applied to all 23 Komatsu trucks, assuming identical consumption, the increase would amount to N$1.42 million a day, N$42.62 million over 30 days or N$518.52 million annually.

The latest N$3 increase alone would add N$11.39 million to the combined fuel bill of the 23 trucks over 30 days.

These are illustrative calculations based on historical consumption and Walvis Bay diesel prices, not verified figures for Husab's actual expenditure. The mine has since introduced electric trolley-assist infrastructure to reduce diesel consumption, while actual fleet utilisation and fuel purchasing arrangements may differ.

If the calculated annual increase of N$518.52 million were fully deductible and reduced otherwise taxable profits by the same amount, the corresponding reduction in company income tax at 37.5% would be approximately N$194.45 million. This is a hypothetical calculation, not a confirmed loss of government revenue.

The government is also absorbing part of the fuel price shock through the National Energy Fund.

Amutse said the fund was expected to pay approximately N$384 million to cover October's fuel under-recoveries, while its equalisation reserve had fallen to N$416 million against an intended buffer of N$800 million.

Even after November's increases, the fund will absorb approximately 81 cents per litre of petrol and between 52 and 53 cents per litre of diesel.

The minister attributed the adjustments partly to higher shipping costs and a weaker Namibia dollar. Higher pump prices do not automatically translate into increased government tax revenue, as much of the additional expenditure reflects higher import and distribution costs.