Communist to save mines

Meet South Africa's Jeremy Cronin and Julius Malema, battling over the notion of nationalising what's left of South Africa's mines.

JOHANNESBURG - 

Recent calls (again) to nationalise what's left of South Africa's mining sector are attracting increasing attention offshore, if you could see the queries ending up in my bunker. These are troubled times, all right. Consider the country's unstable Tripartite Alliance, the African National Congress; Congress of SA Trade Unions, and South African Communist Party (SACP), where only the ANC contests elections, and dominates.

The communists, some of the last living ones in the world, are a strange bunch. A good deal of the recent nationalisation bluster has been by way of regurgitations from Julius Malema, president of the ANC Youth League, who this week published (in an article attributed to him) an attack on an article published by Jeremy Cronin, deputy general secretary of the SACP, and also holder of a couple of arts degrees. A good communist, he is also a self-confessed poet, and also a deputy minister in the current national government.

Like any good communist, Cronin can do anything, and succeed. He effectively rejected nationalisation of South Africa's mines, and seems to have especially over-sensitized Malema when he wrote: "I suspect that cde [evidently an abbreviation for "comrade"] Malema and others are missing this bigger systemic picture because when they speak of mineral beneficiation they are thinking of bling . . . sorry, jewellery".

Like any number of developing counties, South Africa decries the value "lost" when produced raw materials (like gold) are then "beneficiated" elsewhere into high value products such as gold jewellery, as virtually perfected by the Italians. Tragically, Cronin, who, thankfully was and remains a paleface and possibly once had ambitions to be the next Ernesto "Che" Guevara, never gets vaguely near the realities of modern mining. Malema's response is jangled and tangled.

Neither gentleman gets close to considering the dire straights faced by any number of mines in South Africa. Both persistently claim concern over the country's horrible unemployment rate, one of the highest, percentage wise, in the investable world, but neither shows the faintest knowledge of the economics of mining in this country. Consider the country's gold mines, which started up commercially in 1886, upon the discovery of the Witwatersrand Main Reef, near Johannesburg.

Since then South Africa has produced more gold bullion than any other country, but the sector has been in output decline for 39 years. The apparent bottom line from a paper recently published in the South African Journal of Science is that South Africa's gold industry is on final deathwatch, despite claims of massive existing below-ground reserves.

Chris Hartnady, research and technical director of Cape Town earth sciences consultancy Umvoto Africa, has found that South Africa's Witwatersrand goldfields are around 95% exhausted, and anticipates that production rates should fall permanently below 100 tonnes a year within the coming decade. Gold production from the Witwatersrand, the biggest known gold field in the world, peaked at around 1,000 tonnes in 1970, and has declined ever since.

Beyond the swamp gases of politics, and in the realms of practicality, South Africa's gold mines are in deep trouble, right now, despite record dollar gold bullion prices. The strong rand, supported by one of the world's highest domestic interest rates, is just one problem. The bigger amorphous problem is government's absolute determination to intensify its interventions in the mining sector, be it by so-called black economic empowerment, by employment "equity", by race-linked procurement rules, by new-fangled royalties, by administered monopoly cost input increases (such as for electricity), by the habit of closing entire mines after an accident, by massive and rising security costs, and so on.

Gold mines are effectively already nationalised. Figures in the public domain show that the private sector, here and abroad, is effectively subsidizing domestic gold mines, in the hope that something, anything will improve.

This applies even to the domestic operations of South Africa's top three gold diggers, each a member of the elite global Tier I gold producer league, in the form of AngloGold Ashanti, Gold Fields, and Harmony. AngloGold Ashanti is the least South African, in terms of operating assets; Gold Fields holds a useful offshore portfolio, while Harmony is on the way to commissioning a big decent mine in Papua New Guinea. But even after accounting for the "hedge" of non-South African assets, the Big Three are struggling. Since the start of 2007, the three have generated negative free cash flow of US$2.2bn.

Funding of the deficits has come mainly by way of rights issues, i.e., fresh shares issued to stock market investors, raising a total of US$3.7bn in cash over the period, and asset sales, raising a total of US$1.9bn in cash. Rather than recognizing, never mind seeking, ways to assist embattled South African gold miners, the likes of Cronin and Malema remain hopelessly adrift in some weird and unwired vacuum.

SUBSCRIBE to Mineweb.com's free daily newsletter now.

Disclaimer

MINEWEB is an interactive publication, with rolling deadlines through each day, commencing in the Sydney morning,  and concluding, 24 hours later,  in the Vancouver evening.  If you believe your side of an issue deserves inclusion, but has failed to meet one of our deadlines, you are invited to notify the Editor in Chief in Johannesburg, and we will include you in our editing and expanding on our stories. Email him at alechogg@gmail.com

Print story      Email story      Subscribe to free newsletter

Back

 

responses to this article

The future of mining in South Africa South Africa's leadership needs to give its head a shake. As I discovered when trying to finance the acquisition of the the Eersteling Gold Mining Company in 2008 there are simply too many barriers put up by South Africa's regime and the players to . .more make South Africa an attractive destination for foreign investors other than perhaps the Chinese. The Department of Mines simply does not understand that unless it does an about turn on its policies that it will be impossible to even give away South Africa's mineral assets. The ANC has rendered the country's mineral assets (the little that remains) worthless. By contrast most other African seem to be coming to the realization that they have a great future through liberal and transparent policies. Not so SA. Once a pariah always a pariah - even if the reasons are vastly different. This is of course a huge a complex subject and I don't want to generalize, but having experienced the problem first hand it disturbs me that all the great intentions we once had for South Africa with the fall of apartheid have given way to a system that benefits few and leaves the poor in the dust. Greed seems to always have been the driver in South Africa day one. Time has done nothing to change this. . .less by Claus Andrup on November 23 2009, 10:46 Find this comment inappropriate? Report it

Name
Subject
Comment