Ferial Haffajee
`NOW my friends it is time for you to come to your friend in order to understand. The cattle have udders, come and milk them!”
It is 1899, and around the reef which was to become Johannesburg touts put up notices like this one to entice black labourers on to the mines.
At the height of the gold rush, Randlords needed workers to mine the reefs which dripped with the metal – it was what one writer called an “endless treasure”.
Between 1886 – when gold was discovered on the Reef – and the turn of the century, 100 000 men came to work the mines. They were the foot-soldiers of the industrial revolution which the prospectors at Langlaagte started when they struck gold.
By 1930, the mine owners were reaping annual profits of R90-million and half the population depended on gold for their livelihood.
But in 1997 it’s becoming too expensive to milk the cow and gold’s role in the economy has declined to a shadow of its former glory. In fact, for the three months to June this year, the gold mines are expected to post a combined loss of at least R100- million.
Reeling from a decade of decline, the industry – with a gold price seemingly heading for $300 – is now threatening to haemorrhage 63 000 more jobs if the gold price does not improve.
The value of gold has fallen like a pack of dominoes as more and more central banks across the world sell off their reserves.
Gold has lost its sheen. Once it was the favoured store of wealth of kings and the world’s rulers. Now there are easier and more sophisticated ways to guard prosperity.
The old law of supply and demand means there is also more gold than the world needs. And when central banks across the world sneeze, South Africa, as a major producer, catches cold.
Last week, the Australian Reserve Bank’s decision to jettison two-thirds of its reserves saw the gold price tumble to its lowest in decades. This followed a rush to sell started by Belgium and The Netherlands.
It was unexpected news for an industry which has shrunk horribly from its heyday. The National Union of Mineworkers (NUM) says 250 000 workers lost their jobs between 1987 and 1996.
Nine of South Africa’s mines are marginal, with their survival dependent on improvement in the gold price.
Seven of those mines are loss-making and together they employ 63 000 people. This week, the mining houses start reporting their financial results for the second quarter of this year. It is likely that more mines will teeter on the precipice as a lower gold price means it becomes less profitable to mine.
“You must mine profitably or you don’t mine at all,” says Roger Baxter, the chief economist at the Chamber of Mines in Johannesburg.
And while the discovery of gold was the bedrock of the modern South African economy, its decline has resulted in awful social costs. Every miner who is retrenched supports between seven and 10 family members.
Studies by the NUM show that 6,2% of all employed South Africans work in the mining industry. In the North-West province and the Free State, one in five employees work in the mining industry.
The provincial economies of the Free State, Mpumalanga and the Northern Cape are all dependent on mining to the extent of 45%, 38% and 26% of their gross domestic products (GDP) respectively.
But the tarnishing of gold is not new. The last time mining grew as a percentage of the country’s wealth or GDP was in 1993. Since then it has declined by 7,4 percentage points.
Mining still contributes about 3,5% to GDP, and the captains of industry suggest that undue panic over the sale of gold reserves has spooked investors, prompting the plunge. They point out that financial superpowers like the United States and Germany have no intention of selling their reserves.
But the damage has been done, and Jeppestown in Johannesburg, where all the mining houses are clustered, is between a rock and a hard place.
Since gold was first prospected, 47 000 tons have been mined – half the country’s reserves, which means there is lots more underground.
The problem is that the rest is more expensive and more difficult to mine. Our gold reserves lie deep, trapped in hard rock, unlike the new mines around the world where the mining is often open-cast and the gold is embedded in soft rock.
A lower gold price may make it too expensive to mine.
`The South African industry is responding to the challenges and focusing on productivity,” says Baxter. But the realisation that better-trained workers make better miners has only come recently; and the industry has now signed an adult basic education agreement with the NUM in a bid to lift productivity.
The longer-term aim is to overhaul working practices on the mines – to flatten the hierarchical system of “baas” and “baas- boy” which has led to high costs, and to invest in new technologies.
The industry also wants to get the most from its working mines. “Around 25% of the days available for mining are not used. We’re competing on costs, we’ve got no control over the gold price,” says Baxter.
That’s why the chamber wants the NUM to agree to full calendar operations, where a mine never stops working. That’s the practice among South Africa’s closest international competition.
More and more mining houses want to link wage increases to greater productivity.
But labour relations in the industry have gone beyond the “ticket-loafer” system of the 19th century where miners who did not achieve their drilling targets were given loafer-tickets and deprived of their meat rations.
This time, it’s going to take hard bargaining with union chiefs like Kgalema Mothlanthe who want big industries like mining to implement the showpiece labour legislation which the African National Congress has introduced. That means shorter working hours, generous pay for overtime and Sunday work.
Hard times lie ahead for an industry under pressure. And it’s a far cry from the golden age of the late 19th century, when the Rand was labelled “the richest gold mining area in the world”.