Dagga tax will boost economy – Tito; miners’ investor misery; Tongaat reels

By Jackie Cameron

  • Finance minister Tito Mboweni is convinced that dagga can be used to generate billions in tax to plug a hole in government finances. Tweeting from his farm in Magoebaskloof in the northeastern Limpopo province on Sunday, Mboweni said he urgently needed to raise more tax and decriminalising cannabis could help accomplish that goal, reports Bloomberg. Mboweni is due to outline plans to contain spending and bolster income in his annual budget speech on Feb. 26. Power shortages have constrained growth, and as a result the National Treasury is confronting a R52.5bn shortfall.
  • Mboweni’s idea to harness the weed South Africans love to smoke could be a good one. Miners attending the Mining Indaba have told how investors are shunning ‘dirty’ stocks for green-focused companies, cannabis stocks and cryptocurrency bets. Cannabis stocks and cryptocurrencies are among alternative assets that are luring retail investors away from miners, reports Reuters. Mining-specific private equity funds raised $0.3bn in 2019, a fifth of the amount raised in 2009. Environmental, social & governance (ESG) concerns have driven money into specialised ESG funds which often exclude mining stocks among other ‘dirty’ assets, say miners. “You talk to anyone at the moment, they say there’s no money,” said Boris Kamstra, executive director of Alphamin Resources, which manages the Bisie tin project in Democratic Republic of Congo, is quoted as saying.
  • The capital squeeze that started about two years ago has worsened recently according to Julian Treger, CEO of Anglo Pacific Group, a mining royalty and streaming company. The average cost of capital for early-stage mining projects rose by two percentage points over the past two years, he estimates. That’s according to Reuters who also shares the views of Caroline Donally, managing director at private equity firm Denham Capital, in Houston. She said previous investors who would provide equity appear to have withdrawn. A number of specialist funds have shut up shop, and generalists aren’t investing in commodities anymore,” said Donally, who is attending Mining Indaba, the world’s biggest mining investment conference, being held this week.
  • Miners warn that President Cyril Ramaphosa may be running out of time to make SA more attractive for business. South Africa’s government isn’t doing enough to make the country’s mining industry attractive to investors, according to Peter Leon, a partner at law firm Herbert Smith Freehills’s Africa practice. “You still have this top-down approach to regulation, rather than creating the right enabling environment for mining,” Leon said. The veteran mining lawyer pointed to an ongoing legal dispute over South Africa’s mining charter and a lack of clarity over the criteria for issuing mining licenses as examples of things that still need to be addressed, reports Bloomberg.
  • President Cyril Ramaphosa may be running out of time to enact the reforms required to attract significant investments in the country’s mining industry, reports Bloomberg. That’s the fear expressed by Sibanye Gold chief executive officer Neal Froneman, who prefers to look at opportunities in West Africa, the Americas and Australia. The risks of doing business in his home country will increase should weak economic growth and ballooning government debt be compounded by the loss of South Africa’s last investment-grade credit rating, he reportedly said. “There has been a distinct lack of turnaround, if anything we have gone backward,” Froneman said in an interview with Bloomberg before executives gather in Cape Town for Africa’s biggest mining conference. “To be clear and blunt, he also hasn’t made some of the difficult decisions and we are hurtling into a debt trap.”
  • South Africa wants to create a new power-generation venture to reduce the nation’s reliance on state utility Eskom, said Gwede Mantashe, the mines minister. The venture should ideally be a partnership between the state and private investors, and use a range of technologies, including solar power and clean coal, he told reporters at the Mining Indaba.
  • Tongaat Hulett plunged on the stock market after its suspension was lifted. It has been hit by a financial scandal of epic proportions. The share shed two-thirds of its value in the first hours of trade on Monday morning, following the lifting of its almost seven-month suspension of trade on the JSE.
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