- Junior miners have hailed the recent discussion document released by the ANC titled Reconstruction, Growth and Transformation: Building A New, Inclusive Economy.
- The document proposes retail investors should be incentivised to back mining exploration.
- Junior and emerging miners make up nearly 40% of the total membership of the Minerals Council.
- But they have been hardest hit by the Covid-19 pandemic, and say investment is critical.
Junior miners have hailed the recent discussion document by
the African National Congress – which calls for increased investment in
medium-scale mining companies – as a “glimmer of hope” for the
struggling industry.
The economic reform discussion document, released last week,
outlines the ruling party’s proposed response to the economic challenges
wrought by Covid-19. The multi-sectoral response included an emphasis by the
ANC’s Economic Transformation Committee on the potential of the mining sector
in driving growth after the pandemic, including investment in exploration and
mining activities by junior miners.
Junior and emerging companies are considered as entities
with an annual turnovers of not more than R500 million, and players in the
segment are spread across the mining spectrum. Junior and emerging member
companies make up nearly 40% of the total membership of the Minerals Council
and contribute between 3% and 5% of total taxes by the sector.
Errol Smart, chairperson of the Minerals Council Junior and
Emerging Miners, described the plan as “encouraging” and aligned with
the growth ambitions of the sector.
“I see a glimmer of hope there… for them to recognise
the role of junior miners in economic development through participation in
exploration and clean technology,” Smart said on Monday.
South Africa’s mining production, overall, has been hammered
by the coronavirus outbreak. In April 2020, seasonally adjusted mining
production fell 34% due to the lockdown, while the Minerals Council has
estimated that production would be impacted up to 10% this year.
But while the entire mining industry has been hard hit by
lockdown regulations, junior miners were already coming off a low base when the
pandemic struck. The mining sector ramped up production as regulations were
eased, but emerging miners have been dealt hard blows as they battle low
production and heavily impacted cash flows.
Investment ‘critical’
“Investment is critical for the growth of the sector,
and right now we have seen a decline due to various factors such as policy
uncertainty, especially around the Mining Charter,” said Smart.
“Although the Mining Charter has now been passed, it is
important that we get through some of the sections that are still under
litigation,” he added.
The Minerals Council is engaged in a legal bid with the department of mineral resources and
energy to have the certain provision of the regulations around the
transfer of mining rights, black economic empowerment shareholding among other
empowerment reviewed.
The recent ANC document, titled Reconstruction, Growth
and Transformation: Building A New, Inclusive Economy, proposes South
African retail investors who are ploughing resources into mining and oil and
gas exploration should be incentivised, as is the case in other economies that
are heavily reliant on mining.
The party acknowledges the declining position of the country
as a leading mining economy, saying there is a need to strengthen innovation,
introduce robust junior mineral exploration and clean technology, ensure
mineral processing, and build support for the sector and its supply chain.
The Minerals Council has shown interest in the flow-through
share (FTS) system implemented by Canada, which allows tax deductions for
investors in mining activities and exploration.
“The key factor was the recognition for a need for
finance….for the them to say investors wanting to invest in the sector should
be incentivised is a step in the right direction and speaks and is aligned with
our growth prospects,” said Smart.
