Falling Prices Land Hard on S. African Gold Miners
In recent weeks prices of the precious metal have dropped to a 12-year-low, shaking the stock market and laying off thousands
RANDFONTEIN, SOUTH AFRICA
Harry Motlaanme grips a piece of paper spelling out the end of his 20 years as a gold miner, a victim of the vagaries of a glinting piece of metal.
The union office at the Randfontein Estates Gold Mine is streaming with hundreds of bewildered miners like Mr. Motlaanme, who after years in one of the world's most dangerous jobs is left with a family to support and unlikely prospects for another job.
With a mere 15,000 rand ($3,100) as a layoff payment, Motlaanme is still in shock.
"What can I do? I'll join the end of the unemployment queue for jobs which don't exist," he says.
Motlaanme is the human face of the recent fall in global gold prices, which have jolted South Africa, the world's biggest gold producer and Africa's strongest economy.
Since June 30, the price has slipped to a 12-year low of $320 an ounce - a critical point in terms of profits.
"At these levels we're looking at losing 55 percent of profitability and at least 50,000 jobs over the next six to 12 months. This has a major impact on the economy," says Leon Esterhuizen, a gold-mining analyst with stockbrokers Societ Gneral Frankel Pollak in Johannesburg.
The recent drop in the price adds to a decade-long decline in South Africa's key industry, and is most inconvenient for the black-led government, which has failed to deliver on promises for jobs to alleviate the 45 percent unemployment rate.
The effects of the gold slump are dire for the poor black men who make up most of the mining work force, which has shriveled to 350,000 from 530,000 a decade ago.
Other gold-producing countries are suffering from the low prices, but perhaps none more so than South Africa, which holds 40 percent of the world's reserves.
Since gold was first discovered there in 1886, 47,000 tons have been mined, or half its reserves. But the other half is costly to extract, encased in hard rock in some of the deepest mines on Earth. Low gold prices make it less viable to dig out.
This is not good news for an economy that depends on gold for 20 percent of its exports. During the second quarter, gold mines expected to report combined losses of at least $22 million.
Fears that prices will slip further have shaken confidence, eroding the Johannesburg Stock Exchange index by nearly 40 percent this year.
The worst news is for the miners who are losing their jobs. Randfontein's owners, Johannesburg Consolidated Investments Ltd., say there is no alternative but to sack 2,600 workers of the 12,776 total employed to ensure the future viability of the mine.
Less sanguine are the miners who expected that after harsh conditions under apartheid - the black unions were only legalized in the late 1980s - life under the new government would mean a far better life.
The irony of this particular case is that the company now has black management, to the irritation of the National Union of Mineworkers, which believed it would have more sympathy to their plight. "We thought it would highlight our needs to the management. But it didn't," says NUM shop steward Phillemon Mohlala.
The problem of layoffs spreads beyond South Africa to its impoverished neighbors, Mozambique and Lesotho, whose citizens make up a large proportion of the mining work force here. Some 70,000 Lesotho miners here have been fired over the past 10 years.
One of those laid off is Mozambican Domingos Jose Ngoveni, who worked for 10 years at Randfontein. Returning home to Maputo is no enticing prospect. He has a wife and five kids to support and little hope of earning an income. "Going home holds no joy without work," he says.
The layoffs also affect local commerce. At least four shops across from the hostel where the miners live have shut, and the fifth will probably fold soon, too.
Analysts say that, on the bright side, the price drop has forced a restructuring of the gold industry, cutting out dead wood. The employers' association and NUM recently reached a landmark agreement linking wage increases to greater productivity. Mines are likely to switch to seven-day-a-week production, as in other countries.
Mr. Esterhuizen says the picture is not entirely gloomy and that prices may rebound in the coming year. "Every time we come out of a slump, the industry emerges stronger," he says.