JSE flags fresh hope National Treasury will reconsider junior mining tax incentives

SOUTH Africa’s National Treasury may look favourably on new proposals to introduce tax incentives in return for investment in the country’s minerals exploration sector.

“I would not want to pre-empt what the Treasury decides but when we look at the proposals we believe there [is] room for incentives,” said department of minerals and energy director-general Jacob Mbele.

Responding to a question at the Junior Indaba mining conference earlier this month, Mbele added that “the conversation will likely result in a positive outcome”.

The Minerals Council is thought to be behind a fresh motivation, backed by the JSE, to have  flow-back shares supported by the National Treasury in which investors are allowed tax breaks in return for investing in mining junior and minerals exploration companies in South Africa. The treasury previously kicked back such a proposal.

“I am hopeful that at least we will have an opportunity to put another proposal on the table and get some serious consideration,” said Patrycja Kula-Verster who is in charge of business development for the Johannesburg Stock Exchange.

“I do feel the flow-through shares are a mechanism that can unlock investment,” says Kula-Verster. “We have done everything we can in terms of getting junior miners listed. But we need some form of an incentive.”

Paul Miller, a former resources banker, is sceptical however. He said the National Treasury has moved away from “picking and choosing sectors for tax incentives” in favour of trying to reduce the overall corporate tax rate.

The JSE has about 12 junior miners listed compared to 47 new listings of junior miners last year on the Toronto Venture Exchange.

“You can’t give us zero for effort,” said the Minerals Council’s outgoing CEO, Roger Baxter who has previously attempted to have the flow through share concepted accepted in South Africa. “If we don’t get a tax incentive system, we won’t have a junior sector,” he said.