Business

Welkom: The old oom of the gold boom

Lisa Steyn

Welkom's decay reflects the grim reality facing what was once one of the world's richest places.

Mine training centres have become run down in Welkom. (Delwyn Verasamy, M&G)

In the centre of Welkom stands the magnificent Ernest Oppenheimer theatre, a reminder of a bygone era in this now unravelling gold mining city. The cool dark interior of the building is cladded with Austrian wood panelling and the grand imported chandeliers are of the best crystal and glass. Hand-woven in France, mammoth tapestries line the walls which, in days gone by, flanked patrons adorned in the finest garments and trinkets bought from Europe.

But today the theatre stands empty. Its stage remains dark and dusty following a devastating fire in October 2011. Getting the ball rolling on repairs has been a long and arduous process in this city, which – once flush with dollars – can't afford to pay its electricity bills, let alone restore a theatre.

Like much else in this area, it has seen better days. At one time Welkom produced a quarter of the Western world's gold and the city's white residents prospered, living on what were once some of the richest gold deposits on the planet.

Not necessarily glitter
In 1980, the gold price was $1 700 an ounce – about the same as it is today – but one dollar would buy just 77 South African cents, more than a 1 000% loss of relative value to today's R9. It is said that city residents would buy a new car nearly every year. The adage apparently went: "When the ashtray is full, it is time to buy a new car."

But it seems all that is gold does not necessarily glitter. The Anglo American Corporation, with Ernest Oppenheimer as its cofounder and director, was the biggest employer in the area, with an estimated staff complement of 170 000, according to the Free State Goldfields Chamber of Business. But now it is little more than 30 000 – 21 500 employed by Harmony Gold and 9 300 employed by Sibanye Gold.

The Matjhabeng municipality, which encompasses Welkom and surrounding gold mining towns such as Virginia, Allanridge and Odendaalsrus, has a population of more than 400 000. According to census data, unemployment is estimated at 37% and population growth has been recorded as slightly negative.

Crime in the area has escalated and the auditor general, in his latest report, found many cases of maladministration in the municipality, which recently received notice of disconnection from Eskom because of a R145-million outstanding debt.

Harmony told the M&G it bought a number of the mines that were going to be closed by AngloGold and Gold Fields in the late 70s up to the early 90s – thereby extending the sustainability of areas such as Welkom, Virginia and Odendaalsrus.

"Up until now the traditional engine of the [Welkom] economy was the gold mines," said Marius Kemp, president of the chamber. Harmony's gold production in the Free State, for example, declined from 890 000 ounces in 2002 to 760 000 in 2012.

Although the gold reserves were far from depleted, Kemp said, the cost of extracting the metal might not justify the return. "It doesn't pay to mine low gold content.

Odds stacked against improved economic activity
However, "in 1960, Welkom GM Ltd gave notice of closure. But even today it is still operational to some degree."

Regardless, gold's diminishing role in the area's economy has seen businesses closing down every month.

The chamber fears that with no incentive to attract new industry the odds are stacked against improved economic activity. Not only have businesses been hit by rising input costs, property rates are sky high and labour costs are increasing.

Schalk van der Merwe, a labour consultant at Specialised Labour Services, said it seemed as though there was a war on employers. "In the Free State goldfields, we have seen how the economy is slowly starting to implode because of diminishing prospects."

In the past, before new-order mining rights were introduced, each mine had a manager's fund that the community could access for approved community projects. Now giving back takes the form of corporate social responsibility but, "economically, it is not stimulating", Kemp said.

Residents of the Welkom township of Thabong also said they did not see much happening. But, according to Henrika Baster­field, Harmony's investor relations manager, the company's commitment to corporate social responsibility projects and local economic development is "real and increasingly measurable".

Some of the community projects in the Welkom and surrounding areas include a sports academy, a jewellery school, a taxi rank project, a wellness centre, a business development centre, a hostel conversion project and a brickmaking co-operative.

"No real employment opportunities"
The Gold and Uranium Belt Impact Censoring Organisation (Gubico) is a community-based body that monitors the impact of mining in the area. It points out matters that need rehabilitation and works with communities collectively to assist gold companies to find solutions to the challenges posed by decades of mining. It feels more can be done.

Brown Motsau, the organisation's general overseer, said jobs were scarce in Matjhabeng. "There are no real employment opportunities for the youth here. Those who are educated, once skilled, go outside [the city] to look for work. Crime is high and people fight like vultures where there are jobs available."

Mining companies needed to help emerging entrepreneurs but Gubico felt that was not happening on a large enough scale.

An increasing number of "ghost towns" and abandoned shafts in the area are a stark reminder to the youth that time is running out. One is St Helena, a Harmony shaft that has been out of operation for several years. All that remains are broken-down buildings, which have either been bulldozed by the mine itself or vandalised and looted.

"These [buildings] were left and not used. That is what boggles our mind," Motsau said. "It seems to be a failure of communication between the mines and the municipality."

With the mines closing down shafts or not restructuring operations many skilled people are being left behind. Some make a living by mining illegally, risking arrest and even their lives. Not far from St Helena, illegal miners traipse through the veld on their way to abandoned mine shafts. Illegal mining exploded in the area in recent years, prompting a crackdown by police.

Gubico believes small-scale mining should not be treated as a scourge and could be turned into an economic opportunity. It is advocating that abandoned shafts, which still have gold reserves but are not lucrative enough for mines to develop, could be mined by entrepreneurs who, in turn, would employ members of the community.

Silicosis casts pall over gold mining's legacy
Almost three decades after its heyday, the ugly effects of mining on the communities in and around Welkom are becoming clearer.

The city is a key recruiting location for at least two silicosis class actions where former miners are adding their names to the list.

Silicosis is an occupational lung disease caused by inhaling silica dust commonly found at gold mines. Ramotuoane Motloung a 43-year-old former mine worker has added his name to a class action list.

"I've been around the mines since I was a young boy," Motloung said. He was retrenched as a result of restructuring at Harmony's Bambanani mine before moving to Lonmin's Marikana mine near Rustenburg where he worked as a subordinate manager.

Financially distressed, he resigned last year in order to access his pension plan but fears he will not find work at a mine again as he is unlikely to pass a medical examination. "I just cough. All day. Every day. For my last lung function test, the result was so poor the sister did it twice."

Nyakallong, a township in Matjhabeng, overlooks a mine dump and a putrid dam, on the shores of which children play. Locals say the water is toxic, a combination of underground water from the mine and raw sewerage from the residents.

Harmony said the dam is situated on municipal land and although the mine has a discharge permit for underground water it has not exercised this in the last three to four years.

Hendrika Basterfield, the mine's investor relations manager, said discussions took place with the municipality and the matter was reported to senior officials at the department of water affairs. "The agreed action plan was that the municipality will facilitate a task team that would look at improving the condition of the pan and eliminate the bad smell and fine salt dust that was an irritant to the residents. No further meetings were held but the municipality upgraded the pump station in 2008."

One community member felt that more needed to be done. "They [the mines] need to leave a legacy. But their legacy is that they are killing us and we are not being compensated."

A move away from mining
As mining production declines, the Free State Goldfields Chamber of Business is brainstorming ways to promote economic activities in the area that do not depend on the mines.

An obvious asset is the Phakisa Raceway, a world-class racing venue less than 20km out of town that has hosted the South African Motor GP on ­several occasions.

Refurbishing the original raceway, which was completed in 1999, cost a controversial R97-million, but the venue remains largely unutilised for most of the year.

"It is the jewel in our crown, but the community isn't really benefiting from it," Marius Kemp, president of the chamber, said, though the organisation is engaging with stakeholders to look at ways of exploiting economic opportunities around the raceway.

Kemp said there were some other opportunities on the ­horizon such as up-and-coming solar and bioenergy projects and a small and medium enterprise development programme is also on the go.

Marie Vermeulen of Rossouw Vennote Partners estate agency in Welkom said the market had not performed out of line with the rest of the country following the recession. She said there even appeared to be a renewed demand for housing, possibly owing to rumours that new shafts were opening.

For example, a development of 99 luxury clusters, priced from R1-million upward, sold out in a month. "This project just showed me there is a lot of money still in Welkom," Vermeulen said.


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