AFRICANEWS
South AfricaMining: Once prestigious now in crisisEconomyBy James Brew (724 words)
In the wake of the recent drop, the price of an ounce of gold is the lowest in 18 years, less than US$290. Analysts expect some mines to close and the ripple effect to spread through the broader economy. It is estimated that for every 10 US dollars fall in the price of gold, the lost revenue and foreign exchange earnings will total R770 million. Although the demand for gold is strong - the World Gold Council says demand this past year was 11 percent higher than in 1996 - the decline in the price of gold has followed the surge in production of Australian, Canadian and American companies. But also contributing to the increased production of gold are modest but growing gold mines in other African countries, such as Burkina Faso, Ghana and Mali. Since Ghana deregulated its mining sector in the mid-1980s, gold exports are the economy's star performer. In spite of lowering the tax on mining profits, the government continues to raise vast revenues. The development of the gold industry has been an important factor in Ghana's recent economic growth. Another factor affecting the price of gold was the sale of gold reserves by the central banks of Switzerland and Australia. Lower world inflation rates appear to have eroded gold's traditionally role as a security against economic uncertainties. Other central banks are lending some of their gold reserves to mine operators and jewelry businesses, getting up to two percent interest per year. For mine operators, this means obtaining gold relatively cheap at short notice until supplies are replenished from their own production; for jewelers, it satisfies the seasonal demand for gold. The International Monetary Fund may have to sell some of its huge reserves in order to fund operations in the world's financial trouble spots. Reducing reserve holdings of gold by central banks has driven the price down, but is unlikely to further depress the price. Economist Nick Smith says South Africans are still mining the vein first discovered in the 1880s. A miner often spends two hours traveling from the surface to the vein three kilometres into the belly of the earth. Most Australian gold, by contrast, lies just below the surface, ready to be scooped up with little more than a pick and shovel. There are 20 major gold mines in South Africa and 12 of these are believed to be experiencing difficulties operating below cost. The present average operating cost to produce a kilogram of gold is R45, 000 (US$9,000.) and the average return price is about R50, 000 (US$10,000). In 1980s South African mines were the lowest-cost producers in the world, now they rank among the highest. Unfortunately, the government wasted countless billions on enforcing apartheid. Today, just when the government is trying to redress appalling social backlogs, the price has fallen to its lowest level in 18 years. Two-thirds of South African gold reserves have now been extracted, and as the mines get deeper they become more marginal, and more reliant on cheap labour. For the first time in three decades, output in the industry dropped to below 600 tonnes. The country has swung away the gold industry to manufacturing. Hundreds of thousands of jobs have been lost in the mining industry, and more are in jeopardy as a result of the latest slump. Economist Steve Brown says research into a possible worst-case scenario indicates that up to 80,000 miners could be jobless within the next two years. Members of the National Union of Mineworkers have been told not to accept as inevitable further retrenchments in the industry. National Union of Mineworkers spokesman George Molebetsi describes the situation as a crisis. He says 32,000 miners were retrenched last year and about 10,000 dismissed. These posts will never be filled again. Molebetsi accuses mine management of exaggerating the problem of lower bullion price in an effort to get rid of workers, and perhaps, as part of an effort to discredit the government. But Chamber of Mines spokesman Liewellyn Kriel says management carries out retrenchments only as a last resort. The NUM leadership will meet mine authorities in preparation for the gold summit scheduled for the end of next month. The summit is to discuss strategies and plan programmes to minimise job losses in a shrinking mining industry.
| CONTENTS | AFRICANEWS HOMEPAGE |
Contents can be freely reproduced with acknowledgements. The by-line should read: author/AFRICANEWS. Send a copy of the reproduced article to AFRICANEWS.
AFRICANEWS - Koinonia Media Centre, P.O. Box 8034, Nairobi, Kenya
|