The recently negotiated 8% pay increase for gold miners will be a hollow victory for those who stand to lose their jobs.
Gilbert Mosala shuffles across the deserted parking lot of Buffelsfontein Gold Mine in central South Africa, home to the world's largest gold reserves. In the past year, almost 95% of his 2 500 colleagues were fired.
"I was one of the lucky guys," Mosala, who estimates his age at about 51 or 52, said in Fanagalo, a pidgin language frequently used in South African mines. Not only does Mosala still have a job, he, along with 107 000 other miners, won an 8% pay increase last month after the National Union of Mineworkers (NUM) led workers on a 48-hour strike.
"The increase is good, but I don't like to strike because then more people may lose jobs," Mosala, wearing blue overalls, a ripped green sweater and a fluorescent yellow vest, said during a break from his task of sifting through leftover ore.
Gold miners have gone from being among the most exploited of workers under apartheid, the racial segregationist policy that gave black South Africans inferior educations and dispossessed them of land, to being better paid than the average employee in the country.
Rising wages have been accompanied by personnel cuts, which amounted to 6 624 this year, about 5% of employment in the gold industry, according to Statistics South Africa. Total gold-mine employment is now less than a third of its level when the industry was at a peak of 480 000 workers in 1988.
South African gold mining companies such as AngloGold Ashanti, Africa's largest producer of the metal, are battling to contain costs that have almost tripled since 2007 as they dig deeper for the ore, wage demands exceed inflation and energy prices soar.
The Buffelsfontein mine's owner, Village Main Reef, shut it down in August after almost 60 years in operation after costs per ounce of the metal spiraled to 50% more than the gold price. Underground work has ceased and Mosala and the other 148 miners left at the shaft are doing essential tasks to keep the mine safe. They declined to join the strike.
"Buffels has come to the end of its life; it has been mined for almost 60 years," Village Main's chief executive officer Ferdi Dippenaar. "The gold left is low grade and deep." As for the pay increase, "We had a range and the 8% was at the top end. Let's say we gave 1% more than we would've liked."
A bedrock of the South African economy since the discovery of the metal in 1886 in Witwatersrand, near what became Johannesburg, gold mining spawned some of the world's biggest companies, such as Anglo American. It transformed South Africa from a farming economy into the continent's largest. And the industry provided opportunities for unskilled black males, who were restricted from certain jobs because of their race.
With the ANC banned as an organisation during white minority rule, unions were at the forefront of the fight against segregationist policies, pushing for living wages for the millions of black workers confined to menial jobs.
In 1974, eight years before Cyril Ramaphosa, now deputy president of the ruling ANC, formed the NUM, gold miners earned a monthly wage of about R41, the equivalent of $60 at the time. That was 15% lower than average household disposable income, which excludes taxes, according to data from the central bank.
Since reaching a peak of 1 000 metric tonnes in 1970, annual gold production has steadily fallen. The decline has accelerated in the past five years, with South Africa now the sixth-biggest producer behind China, Australia, the US, Russia and Peru. It had been number one in the world for more than 100 years, according to the Chamber of Mines. Output was 167-tonnes in 2012, or 6% of global output, versus 79% in 1970.
A slump in employment of almost a fifth since 2007 has been accompanied by a 78% surge in annual earnings per worker in the industry to R155 037 ($15,492) last year, according to data from the Johannesburg-based chamber. That compares with a 17% increase, to R119 542, for average household income in South Africa over the five years through 2011, according to the government's statistics agency.
"Falling grades, rising electricity prices, labour costs, falling productivity, those are all structural issues that are not going to change," said Michael Schroder, a Johannesburg- based fund manager at Old Mutual Equities who helps manage the equivalent of $4.1-billion of assets. "Interpolating the rate of how South African gold production has fallen, there won't be much left in 10 years' time."
South Africa's remaining gold resources are located deep underground, requiring some mines to reach as low as 3.9 kilometres below the surface. Temperatures can climb to as high as 60 degrees Celsius and humidity is close to 100%.
That's contributed to rising costs, which averaged $1 000 an ounce at South Africa's three largest gold producers in the first six months of the year, according to data compiled by Bloomberg. Toronto-based Barrick Gold, which is the world's biggest miner and doesn't have operations in South Africa, spent $558 an ounce in the period.
A gold bear market is leaving employers exposed. Gold prices are heading for the biggest annual drop in 16 years, plunging 21% since the beginning of the year to $1 323.23 an ounce in Monday as of 5:10pm New York time. An improving US economy and speculation that the Federal Reserve will curb its accommodative monetary policy has pared bullion's appeal as a store of value.
Pay increases at companies should be linked to improved productivity to ensure the industry survives, according to South African Deputy President Kgalema Motlanthe.
'Killing the Goose'
"What's the point of killing the goose that lays the golden egg?" Motlanthe asked in an interview in London on September 17. "You wouldn't want to smother these companies out of existence. It defeats the purpose."
Labour disputes in the country's mining industry have sometimes turned violent. Clashes between rival labour unions at Lonmin's Marikana platinum mine in August last year sparked the worst violence in the mining industry since the end of apartheid. At least 44 people were killed, including 34 miners who died after police opened fire on a group of striking workers on August 16.
Workers can't be blamed for the fate of the industry, which is in decline despite higher wage demands, said Lesiba Seshoka, a spokesperson for Johannesburg-based NUM.
"Don't tell us the economy will collapse if poor workers get a R400 increase," Seshoka said. "If it does collapse it's for the better because we're not benefiting anyway."
Mosala, who sends three quarters of his salary home to his 38-year-old wife and two children about 370 kilometers away in the Northern Cape province, says he hopes he'll be one of the miners picked to maintain the mine for a few more years.
If not, he has limited options. He's due a severance package of at least one week's wages for every year worked at the mine since 2005, when a previous owner liquidated the assets. Workers can also claim a portion of their monthly salaries from the government's unemployment insurance fund for a maximum of about eight months.
"The mine is going to close and there will be nothing else for us," Mosala said. "There is nothing. It’s going to be very difficult." – Bloomberg