South Africa may introduce ”flow-through shares” to bolster flagging mining exploration, the chief economist at the Chamber of Mines told Parliament on Wednesday.
The possible new rules would allow junior companies to issue shares that enable investors to get a tax deduction for the expenses of an exploration company.
Mining contributes about 6,2% to South Africa’s gross domestic product, with export earnings generating about R145-billion to Africa’s biggest economy.
But the sector is recovering from a rocky patch that saw investment in local mining decline despite a commodity boom and an increase in global exploration expenditure.
Roger Baxter, chief economist at the Chamber of Mines, which represents the majority of mining houses in South Africa, said the government should follow the example of Canada and introduce flow-through shares to provide incentives for venture capital funding in the exploration sector.
Baxter said a lot of work has been done on the issue and the Treasury is interested.
”The future effects would be very significant for the country as a whole because you have a pipeline of new projects that may come on stream, and that will really benefit on the transformation side … [and] on the production side,” he said.
He said that in Canada, for every dollar invested, the government has seen investment of $2,60 in the ground and exploration. Canada raises the equivalent of about R5-billion yearly through the scheme. — Reuters