Mining Layoffs Loom as Gold Loses Its Glitter

Things have never been so good--and so bad--for South Africa’s notoriously exploited gold miners.

The good news is that more of them are surviving each day’s work. Preliminary data show fatalities and injuries per 1,000 laborers dropping last year to one of the lowest levels, due in great measure to a new mine safety act that outlaws deadly conditions of the apartheid era.

The bad news is that about 30,000 fewer gold miners are benefiting from the safer environs, having been let go last year by cash-strapped mining companies. And with gold prices recently tumbling below $280 an ounce to their lowest dollar level in nearly two decades, some analysts are predicting that as many as 100,000 more miners--about one-third of the remaining work force--may lose their jobs if the free fall continues.

“It seems gold is losing its shine,” said George Molebatsi of the National Union of Mineworkers, the country’s largest association of miners. “If this were a Christian society, I would say we need divine intervention.”

Gold mining, the engine of South Africa’s economic machine under the apartheid system of racial separation that ended with all-race elections in 1994, has been in decline for more than a decade. Production last year was less than half the 1970 peak level. In 1986, gold sales earned half of the country’s foreign exchange; last year, they accounted for one-fifth.

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Though the industry has faced troubled times in the past, the outlook for gold is dimmer than ever. The European Union, as it heads toward a common currency, is contemplating unloading huge stockpiles of gold reserves. Central banks in Argentina, Canada and Australia, reflecting a growing international trend, have sold off large amounts of the precious metal, preferring to hold reserves in U.S. Treasury bonds and other paper assets.

And as the ongoing financial crisis in Asia has demonstrated, gold appears to be losing much of its centuries-old glitter as a safe haven for governments and investors weathering stormy times: The dollar price of gold has continued to fall during the Asian turmoil.

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“No one knows where the cost of gold is going to bottom out,” said Peter Bunkell, an advisor to the Chamber of Mines, a century-old association of major South African mining companies. “For the gold mining industry, to have a gold price where it is at the moment has potentially grave consequences.”

In the past, the high dollar price of gold and the slipping value of South Africa’s currency, the rand, have more than compensated for poor results at the mines. But with gold losing one-quarter of its dollar value in the past year--and some analysts predicting prices as low as $250 an ounce in the near future--some mining companies can no longer cover basic operating expenses.

“The fact that South African mines are expensive to operate and had to cut costs was known for 10 years,” said Henk de Hoop, mining analyst for BOE NatWest Securities in Johannesburg. “But people always expected the value of the rand or higher gold prices to save the mines. Now they realize it isn’t going to happen. The mines are going to have to save themselves.”

The stakes are high for many South Africans. Even with the cutbacks, the country remains the world’s largest gold producer, and with 310,000 workers at 30 major companies, the industry has been a bedrock of employment.

Economists estimate that each miner supports eight to 10 family members, meaning upward of 3 million people here and in neighboring Lesotho and Mozambique--homes to large numbers of immigrant miners here--rely on gold for their livelihood.

The mine workers union, its back against the wall, has called for a summit next month of government officials, unions and mining companies to deal with the plummeting gold price. Molebatsi, whose union began holding protest marches this week, said miners want to make sure that mining companies do not use falling prices as an excuse to reverse hard-fought gains by blacks.

“Up until now, black workers have been treated a little bit more than slaves to be discarded,” Molebatsi said. “There are now statutes protecting the workers, but the companies don’t want to deal with that. To them it is an added cost.”

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Reversal of Fortunes

It has been a decade of sinking fortunes for South Africa gold mining, which has seen a drop in the amount unearthed and in employment.

Number of mine workers:

1988: 515,000

1997 (est.): 310,000

Metric tons mined in 1997 (nearly 625)