Red tape stands in way of flourishing junior mining sector in SA

The growth of the mining and energy sector in SA is measured at 0.4%. While growth is to be applauded in the current economic circumstances, it could increase exponentially if the potential of the junior mining sector was unlocked and developed. 

Investors are less enthusiastic about junior mining in SA due to these companies having less experience, the legislative and permitting challenges, the geopolitical climate of SA, and the lack of adequate infrastructure.

Mining and environmental law has stringent permit procedures and about 28 acts which apply to junior miners, making it legally difficult for junior miners to conduct exploration activities. Continuous reporting in terms of legislative requirements are also administrative burdens for junior miners just starting out. 

Permits and appeals can be time-consuming and it may take years for a licence to be granted or for an appeal decision to be made, delaying operations. Typically, junior miners need to wait for authorisation to be granted before funding can be secured.

Is the 0.4% growth enough?

When considering SA’s rich mineral landscape, the extensive skills in the sector and its potential, 0.4% growth appears to be minimal. 

According to the Minerals Council SA, junior mining contributed R54bn to the sector in 2018, which increased by 63% to R88bn in 2022. This demonstrates the potential of junior mining and its valuable contribution to economic growth and creating a robust mining sector in the country.

Junior mining also employs about 10% of the mining workforce, contributing to the country's employment. The junior mining sector has grown considerably over time and has the potential to develop further, should the barriers to the sector be relaxed. 

The junior mining sector should be promoted, not only to investors, but also to other prominent players in the mining sector to enable equal access to opportunities in line with the objectives of the Mineral and Petroleum Resources Development Act. 

What can be done to lower the barriers??

1. Shine a little light

The importance of junior miners in the industry should be emphasised. Clearly, the longevity of mining is critical to the economy and continued growth of the sector and investment is required for it to survive. 

2. Apply successful models that work elsewhere

Canada has adopted a tax incentive model where investment through a share system is offered, something SA is attempting to adopt to attract investments for junior miners.  

This would create a knock-on effect, encouraging funding and investments through incentives. The government is amenable to this as it has facilitated junior miners’ access to such financial resources through a fund. The JSE has also developed a fundraising product for junior miners.

3. Work with regulators to relax legislation

Legislative reform catering to junior miners and their exploration operations is much needed, in particular through the proposal of fewer regulatory hurdles — or the relaxation of such requirements. There needs to be a legislated commitment to the reduce time periods for junior miners to obtain licences (assuming all boxes have been ticked). 

NSDV, which specialises in mining, construction, energy and environmental law, has considered the various amendments which could be made to the existing legislation and has proactively marked up these amendments in their acts. 

Experts that lambaste the government are a dime a dozen but they don’t build relationships that facilitate the changes we need — based on operational experience — with junior mining clients. NSDV is more than willing to discuss these with the Junior Mining Council and the regulator if it would move such proposed amendments along.

A starting point would be amending the regulations promulgated in terms of the Mineral and Petroleum Resources Development Act to include and recognise junior mining and their specific requirements.

Changes like these to the administrative and legal requirements should result in easier access to funding and the ability for juniors to “put a spade in the ground” and start mining.

4. Map it out 

A mineral cadastral system should be implemented as SA is the only Southern African Development Community country without a functioning cadastral system. This will enable junior miners to enter the sector, aid in clearing the backlog of mineral rights applications, and hopefully clear the appeals.

In addition, there are many opportunities for the future of junior mining, including those created by the energy transition and the need to search for “green minerals” to facilitate and construct renewable energy mechanisms. 

A functional and transparent mineral cadastral map and system will assist junior miners in identifying the locations of various minerals and the availability of prospecting and mining rights, and mining permits for those minerals to be easily exploited. 

Mining starts with exploration. Junior miners explore potentially mineral-rich areas and develop these on a small scale. This is often overlooked but is a necessary function and essential to the health of the mining industry. 

NSDV can make a significant impact through its practical approach to the sector, but within the legal realms.

Watch Lili Nupen, director of the mining and environmental team and co-founder of NSDV, as she discusses the state of the junior mining sector below. 

This article was sponsored by NSDV.