MANDISI NKUHLU South African banks are still reluctant to provide financing for junior mining companies
The Export Credit Insurance Corporation of South Africa (ECIC) is developing an automated tool to improve its assessment of the financial and credit strength of corporations, says ECIC COO Mandisi Nkuhlu.
The tool can be used to assess mining companies, especially small to medium-sized mining enterprises that participate in small to medium transactions, he tells Mining Weekly.
This development follows statements made in 2017 by ECIC business development manager Paul Mojalefa, who claimed that the ECIC had committed to providing more support for small and medium-sized export transactions.
“With the business development team’s interventions, we have seen more enquiries for small to medium transactions,” says Nkuhlu.
The ECIC has previously assisted junior miners operating in other African countries by working with banks to extend their debt profiles and secure the continued financing of their projects amid the depressed mining climate.
Despite improvements in commodity prices, Nkuhlu claims that South African banks are still reticent in terms of providing financing for junior mining companies.
“The ECIC works in close collaboration with other financiers on the continent to support mining projects and junior mining companies, especially where South African lenders have less appetite for such junior miners, and provided there are South African contractors involved,” he says.
The ECIC, however, does not get involved in exploration projects until the project becomes bankable.
It considers several factors when evaluating mining applications for credit insurance, some of which might be expediated by the new automated tool.
Such factors comprise the risk elements of the country of investment, which include social and political concerns, and commercial risks, including the economic and financial viability of a project, as well as the offtake agreements.
Africa Rising
ECIC business development head Portia Dube last year told Mining Weekly that intra-African trade had been constrained in the past six years, owing to fewer countries contributing to intra-continental trade; disparate regulations; poor mobility of goods and poor mobility of people.
However, the widespread ratification of the African Continental Free Trade Agreement (AfCFTA) could help to improve the situation.
The AfCFTA, currently being negotiated by 55 African countries, is a positive interregional initiative intended by its architects to be the largest free trade zone globally, with a population of about 1.2-billion and a combined gross domestic product of $2.5-trillion.