ANC’s post-pandemic plan ‘a glimmer of hope’ for battered junior miners

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.

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