South African mining is in crisis
At the start of a 4am shift, gold miners scan their fingerprints and squeeze into tiny “mantrap” turnstiles, designed to prevent thieves from slipping through.
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Then they pile into cages and descend nearly three kilometres underground at Sibanye Gold’s Driefontein mine.
A warren of increasingly narrow tunnels lead to the reef, where miners blast a rock face rich with gold. It is gruelling work. Deep in the bedrock, the air feels as hot and humid as a tropical jungle.
Most of the world’s deepest (and historically richest) gold mines are clustered some 70km (40 miles) south-west of Johannesburg.
The deeper they go, the more expensive and difficult the work of extracting the ore.
Most mines are mature (Driefontein is 65 years old), and the cost of extracting the gold may soon exceed its value. Illegal miners known as “zama-zamas” (“taking chances”) are another problem, undeterred by the extreme depths and high-tech security.
At Sibanye’s nearby Cooke mine, a recent wildcat strike had the unexpected side effect of flushing out 461 zama-zamas who were being abetted by legitimate miners.
Nash Lutchman of Sibanye estimates that roughly 3.5-4 per cent of gold production across all of the company’s operations is lost to illegal miners. Industry-wide, they pilfer some 20 billion rand (about $1.5bn) a year. Sibanye’s tactical response team has faced gunfire and even grenades while chasing after zama-zamas.
Govt’s policies
South Africa’s mining industry is shrinking. At its peak in 1980, mining accounted for a fifth of the country’s GDP; the number now stands at 7.3 per cent.
High costs, low commodity prices, labour strife and falling productivity have all taken their toll. Mines have shed 70,000 jobs over the past five years. More cuts are coming. AngloGold Ashanti, a gold-mining giant, last week announced plans to lay off 8,500 workers, a third of its South African workforce. At Sibanye, many of the zama-zamas are former miners who return to work underground for powerful syndicates.
Mining firms are also being hurt by government policies. A new mining charter introduced last month by South Africa’s mining minister, Mosebenzi Zwane, would force companies to ensure that at least 30 per cent of their shares are in black hands, up from the current minimum of 26 per cent. Under the new charter, companies would be required to maintain this level of black ownership regardless of whether black investors sell out.
They would also have to pay out at least one per cent of their turnover each year to their black shareholders. Had this rule been in effect in 2016, black shareholders would have got 5.8 billion rand of the total of 5.9 billion rand paid as dividends, leaving almost nothing for anyone else, notes the Chamber of Mines of South Africa.