Nina Yose is the Acting Divisional Executive for Mining, Metals and Energy at the Industrial Development Corporation.
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By Nina Yose
Mining is critical to South Africa’s economy. In the first three quarters of 2024, the sector contributed an added value of about R448.4 billion (6.8%) to the country's gross domestic product (GDP) - underscoring its importance to the economy. That is in nominal terms.
Its historic significance as the main cog to SA’s industrialisation trajectory cannot be overstated – the more reason that the government has placed this industry at the core of its efforts to transform the local economy. Over the years, the sector has undergone significant changes, moving away from being an isolated sector to becoming integrated into the wider economy; making it more imperative to transform the sector.
And try as some might to disagree, it is irrefutable that South Africa’s mining sector has vastly transformed 30 years into a new democratic dispensation. The growing number of black-owned and managed mining companies, some of which are listed on the JSE resources counters including other foreign-based stock markets, is a mirror reflection of efforts to transform this sector. While considerable progress has been achieved in this regard, how can SA ensure that previously marginalised individuals and mining communities gain a foothold in this sector?
While SA is endowed with a vast array of minerals including gold, zinc, platinum, copper, manganese among others and including rare earth elements, there are many other minerals that could potentially be found and extracted if the industry could enhance exploration activity. Eliminating barriers to entry, such as the prohibitive exploration costs largely impacting junior miners, is a key but critical step to achieving inclusive transformation.
Junior miners in particular, including aspiring ones, have consistently struggled to raise capital for exploration activity. This challenge is telling of the country’s low uptake in mining exploration activity in general. According to the Minerals Council of South Africa, local exploration has fallen from 5% of global exploration expenditure to less than 1%, with the greatest decline recorded between 2020 and 2022.
Junior mining exploration fund launched
Enter the Junior Mining Exploration Fund (JMEF) - a joint mining exploration fund established by the Industrial Development Corporation (IDC), the Department of Mineral Resources and Energy (DMRE) and The Council for Geoscience (CGS) – which has thrown eligible junior mining companies a financial lifeline.
Launched in 2024, the objective of the R400-million fund is to enable eligible South African junior mining businesses to access funding so they can conduct prospecting work, increase junior miners' access to mine ore bodies and promote economic inclusion that will support equitable economic growth. The fund is administered and managed by the IDC. As part of the terms for funding, successful applicants receive non-repayable and convertible grants.
Funds disbursed to recipients are convertible to equity or profit share upon successful discovery of an ore body. Other qualifying criteria require applicants to comply with the South African mining regulatory requirements, including but not limited to the provisions of the Mineral and Petroleum Resources Development Act (MPRDA), the National Environmental Management Act (NEMA) and the National Water Act.
Critical among other requirements, and as prescribed by the provisions and requirements of the Mining Charter, interested companies must have at least a 51% black shareholding in the business and this equity should meet the equity merit as defined in the B-BBEE Act.
Impact of fund on junior miners
The IDC has and continues to play a critical role in transforming the local mining sector. Although not a panacea to the funding challenges facing junior miners, the overwhelming response in applications received thus far underscores the importance of the exploration fund.
While we aren’t anywhere close to proclaiming that funding constraints facing junior miners have been eliminated, we are confident that this intervention will galvanise the private sector including other stakeholders to come on board and support this initiative.
Without a doubt, a vibrant mining sector will go a long way towards bolstering the development of SA’s economy which is critical to creation of employment opportunities. Against the backdrop of teething challenges, the uptake in applications is remarkable. Of significance to the IDC is that there is a very good regional spread and target of minerals.
During its first application window, the JMEF received a total of 114 applications. Due to the small size, eight applications, accounting for 41.2% of the value of the fund, have since been approved.
Copper, nickel, graphite, lithium and rare-earth elements – from the review of the first call, it was clear that some applications could not make it through the assessment process due to:
As we prepare to open the next application window, our caution to applicants is that they should strongly factor the chances of finding the minerals in the prospective areas a key consideration. Although still in infancy, our view is that the JMEF will in the long-term contribute to the transformation of local mining.
• Yose is the Acting Divisional Executive for Mining, Metals and Energy at the Industrial Development Corporation.