The Glitter Is Gone
What Saudi Arabia is to oil, South Africa was to gold. For over a century, it was the largest gold producer in the world. At its peak, South Africa generated two thirds of the world’s gold supply—more than four times as much gold as the next largest gold producer, which was all the nations in the Soviet Union combined.
Yet today, gold production in South Africa is plummeting by double digits per year. In 1994, South Africa turned out over 18 million ounces of gold—just slightly less than it had been producing for 20 years. But never again would it be so prolific: The next year, the industry went into dramatic and sustained freefall. Today, South Africa only produces around 6 million ounces annually—a level last seen during the 1920s.
Gold is critical to South Africa’s economy. Not only is gold bullion an invaluable monetary component of central banks, it is the single largest source of foreign revenue in South Africa. Along with platinum, gold is the nation’s most strategic export. Gold mining is also an important job sector; one quarter of the nation’s mining workforce is in gold mining and processing.
Sadly, the demise of South Africa’s precious metals mining industry is largely self-inflicted.
Many of South Africa’s biggest mines are very old and are reaching the end of their lifespan. This accounts for part of the national production decline. Rolling power blackouts that have recently plagued state-owned energy providers have also not helped.
But there is another, more important reason for the nation’s dramatic decline in gold production. International companies have become very wary of building mines there. Why? Because of racism.
Since the end of apartheid, South Africa has implemented Black Economic Empowerment (bee)—a race-based policy that mandates companies turn over 40 percent ownership and management to black persons or black empowerment unions. To comply with law, corporations are forced to give shares of their companies to black people and take on black executives regardless of their qualifications. bee laws have been criticized for simply shifting economic power and wealth to allies of the government’s anc party but doing little for the average South African.
Faced with having to hire workers based on race as opposed to skill or experience—and with the prospect of having to turn over business ownership—many foreign investors have balked at committing further investment in South Africa. Why risk millions exploring for gold only to have the government mandate that you give it away?
The South African government’s strong support for Zimbabwe dictator Robert Mugabe has also frightened foreign and domestic investors away. Like Mugabe, Julius Malema, confidant of President Jacob Zuma and leader of the anc’s youth league, is pushing to nationalize South Africa’s mining industry and is among those pushing for a controversial new policy to hasten the “redistribution” of white-owned land in South Africa. He advocates this policy even though the same policy transformed Zimbabwe from a major food exporter into a country reliant on humanitarian aid to stave off mass starvation—and despite the fact that the present policy has already turned South Africa into a net food importer, as of 2007.
The trouble facing South Africa’s white farming population looks set to intensify. The Zimbabwe Guardian captured the sentiment of the ruling anc: “South Africa should learn from Zimbabwe. … White commercial farmers in Zimbabwe did not heed the sign-o-the-times. … That naivety has cost them their livelihoods. … [T]here’s not much they can do anymore. The current is in motion. … If [South African white farmers] do not heed the signs; especially the calls for nationalization of farms and industries, then they have themselves to blame if that process is forcibly put in motion …” (March 20).
It used to be said that South Africa was slowly becoming Zimbabwe. The transformation doesn’t look all that slow anymore.
