A trove of mineral discoveries remains untapped in South Africa thanks to unsupportive policy and a chronic lack of venture capital strangling junior miners, said Economic Research Southern Africa (Ersa).
A recent policy paper by the group paints a scathing picture of South Africa’s failure to get exploration projects off the ground and calls for a major policy overhaul to halt the mining sector’s decades-long stagnation.
Ersa’s research suggests that financing costs are the primary constraint on the junior mining sector, “reflecting a chronic lack of venture capital and high-risk funding” in the sector.
The heart of the problem, says Ersa, is a “one-size-fits-all” regulatory burden, applied equally across junior and major miners.
“The sheer accumulation of regulation acts as a prohibitive fixed cost,” reads the paper, which estimates that regulatory compliance consumes 30%-40% of companies’ operational budgets.
“While majors can partially absorb these costs through scale, juniors lack the balance sheets to navigate extensive red tape, resulting in a failure-to-launch crisis for new exploration projects.”
Junior miners are generally small companies that focus on the early stages of mineral exploration and development. They are responsible for most new mine discoveries globally. Compared with majors, their business model is characterised by a high level of risk, making them vulnerable to the policy frameworks of their jurisdiction and the associated costs.
“The long-term health of the industry depends on a functional relationship where juniors discover new deposits and majors bring them into production,” reads the paper.
“Historically, the South African regulatory framework has faltered by treating junior miners as smaller versions of majors, failing to account for the formers’ unique, high-risk business model.”
The result of junior miners’ “failure-to-launch crisis” is a sector whose full potential remains largely latent. Only 9%-14% of the country is geo-mapped at a sufficiently detailed (1:50,000) scale, meaning “significant discoveries likely remain untapped”.
The first step in the paper’s proposed policy overhaul is to withdraw and review the Mineral Resources Development Bill, a long-awaited overhaul of mining’s flagship legislation that was published in draft form last year.
Ersa said the bill, which fails to distinguish sufficiently between juniors and majors, should recognise juniors as a distinct category requiring its own regulatory and compliance approach.
The group estimated that if the draft bill is enacted in its current form, the cost of regulatory compliance will rise by another 40%-60%, further stifling exploration.
This sentiment was echoed in legal experts’ reaction to the bill’s publication last May. Representatives of Cliffe Dekker Hofmeyr and Herbert Smith Freehills Kramer warned at the time that the draft bill would impose significantly more onerous requirements on the application for prospecting rights, probably dampening investment in exploration.
The message has long been voiced by South Africa’s mining majors. In an unusually candid speech at the Joburg Mining Indaba last year, Anglo American CEO Duncan Wanblad attributed the group’s dwindling local exploration spending to two decades of exploration-unfriendly policy that caused South Africa to miss out on a generation of new mines.
Minerals Council South Africa’s latest facts and figures report for 2025 noted that South Africa still attracts less than 1% of global exploration spending, “in stark contrast to countries such as Canada and Australia”.
“It is imperative that we ensure a supportive policy environment, which is critical to converting demand for critical minerals into actual exploration projects,” it said.
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