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• FUNDING & INVESTMENT INTEL NEW INVESTMENT FUND LAUNCHED February 2017 marked the launch of an exciting new investment opportunity for the South African junior mining sector. Established by boutique equity finance group Jaltech and construction major Stefanutti Stocks, the JSS Empowerment Mining Fund will not only fill a funding void in this market sector, but will also offer an attractive investment opportunity to investors through extensive risk mitigation and tax benefits. LAURA CORNISH reports. T he JSS Empowerment Mining Fund is targeting R1 billion through two fundraising windows, the first of which closed in February. It will operate in a unique niche, providing private equity investment of between R30 and R500 million to qualifying South African junior miners. “This will alleviate one of the major challenges the junior mining sector has to contend with – looking for awkward amounts of From left: Russell Crawford, MD of Stefanutti Stocks Civils; Gaurav Nair, director of the JSS Empowerment Mining Fund; Derrick Hyde, director of the JSS Empowerment Mining Fund; and Ian Ferguson, MD of Stefanutti Stocks Mining Services money that place them in the higher investment risk bracket,” says Gaurav Nair, director of the JSS Fund. Importantly, the fund will support qualifying South African junior miners both in respect of operational expertise and financial stability. Stefanutti Stocks will provide contract mining and processing services as well as appropriate on-demand guarantees against mining production volumes and processing quality – vastly Tax rebate/deduction Government has implemented a tax incentive for investors in funds with a section 12(J) registration, in order to encourage investment in small enterprises in various sectors including the mining sector. Investors (any taxpayer) can deduct 100% of the investment from their taxable income in the financial year the investment is made. Effec t on a R10 million investment: Description Individuals Corporates Initial investment R10 million R10 million Tax relief (in the tax year of initial investment) (R4.1 million) (R2.8 million) Net investment R5.9 million R7.2 million Effective tax relief 41% 28% The investment in the fund needs to be held for at least five years to retain the tax benefit received above. 10 MINING REVIEW AFRICA | MARCH 2017 reducing the operating and financial risks usually associated with junior miners. To complement this risk mitigation, Jaltech offers financial expertise while third party and fund manager Venture Capital Management Services (VCMS) provides the necessary fund management skills set. “Junior miners globally often struggle to get affordable funding from financial institutions, particularly given recent depressed commodity prices. This is even more so in South Africa,” says Nair. “This gap has been recognised by the South African government who have sought to address the needs of small to medium business owners to grow their business and contribute positively towards the stimulation of the economy.” The Fund is one of just 43 entities in South Africa operating under the Section 12(J) of the Income Tax Act (Act 58 of 1962) for venture capitalist companies and will offer investors several benefits: • Returns in excess of CPI + 10% p.a. on the gross investment amount and when the tax deduction is considered, this translates to considerably higher returns on the net investment; • A 100% deduction from an investor’s taxable income in the year of their investment; and