A remodelled exploration tax code, which makes buying junior mining stocks on the JSE more affordable, could add billions of rand to the fiscus by levelling the playing field with South Africa’s peers.
Research by the Minerals Council of South Africa published this week found that a tax incentive model used in Canada could help to end the country’s exploration crisis by attracting billions in foreign investment.
The model, a so-called flow-through share incentive, allows junior mining companies to pass on income tax deductions, which would usually be applied to their exploration expenses, to the investors who buy their shares on the stock market.
Investors can deduct these expenses from their own taxable income, effectively lowering the risk associated with investing in junior miners ― often small, early-stage firms that focus on the riskier business of exploring and discovering new mineral deposits ― and incentivising those companies to raise capital on the JSE.
Using a PwC model, the council estimated that an effective flow-through share tax incentive could create R15.8bn in tax revenue per successful mine. Importantly, it would put South Africa’s junior mining sector back on par with global peers in the eyes of foreign investors.
In recent years, the country has attracted less than 1% of global exploration expenditure, down from 8% in 2001, as a result of a perceived uncertainty.
“In doing roadshows to investors in North America in 2025, junior miners report that Americans and Canadians respond positively to the technical viability of what is presented to them, but with an uncertain response: ‘We like the resource and the project, but we don’t know how to think about South Africa considering the political disconnect with the West,” the report said.
A flourishing junior sector could create thousands of jobs, contribute significantly to the tax base and help create a new generation of mining capitalists.
— Minerals Council report
The council believes that a difference between South Africa and junior mining hubs such as Canada is the extent to which junior miners use the stock exchange to raise capital.
Canada’s Toronto Stock Exchange has 880 junior listings and 180 more are listed on the London Stock Exchange. The JSE ― home to most of Africa’s mining giants ― has only 12 junior miners, according to reporting by Mining Weekly.
Junior miners generated 11% of the mining industry’s total revenue in 2024, employing more than 50,000 people. According to the Minerals Council, there is a potential to double that figure over the next decade.
“A flourishing junior sector could create thousands of jobs, contribute significantly to the tax base and help create a new generation of mining capitalists,” it said.
A paper by Economic Research Southern Africa (Ersa) earlier this year found financing costs were the primary constraint on the local junior mining sector, “reflecting a chronic lack of venture capital and high-risk funding” in the sector.
Ersa found that regulatory compliance alone consumes 30%-40% of companies’ operational budgets, a bill which junior miners simply cannot afford.
As a result of this pressure, the group found that only 9%-14% of the country is geo-mapped at a sufficiently detailed scale, meaning “significant discoveries likely remain untapped”.
The government has moved to combat the decline in exploration spending by rolling out the R400m Junior Mining Exploration Fund, which helps finance junior miners with valid prospecting or mining rights.
The Mineral Resource Development Bill, a rewrite of the mining sector’s main laws, is also meant to bring more foreign money into the mining sector by making policies around prospecting rights clearer and speeding up turnaround times.
But Ersa warned that the draft bill fails to distinguish between juniors and majors and, if enacted in its present form, would increase the cost of regulatory compliance by another 40%-60%, further stifling exploration.
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