At the beginning of the gold mining shift at 4 in the morning, miner submit their fingerprints for security checks and crowd through turnstiles (an added security measure), before lowering themselves down nearly 3 kilometers to Sibanye Gold’s Driefontein mine. Far below into the bedrock, in the humid air, miners attempt to dismantle a rock filled with gold using explosions to uncover their treasure.
A majority of the world’s deepest and most abundant gold mines are located in the area that lies about 40 miles southwest of Johannesburg. The deeper the mine, the more expensive and more difficult it is to extract the gold. Most of the mines are ready to be explored, but the significant expense of mining may soon surpass the value of the gold inside the mine.
Mining Security & Zama-zamas
In addition to the excavations, another thing that makes mining expensive is the security problem, including illegal miners who are called “zama-zamas.” They are undaunted by the intense depths and high levels of security and are eager to grab what they can from the mines. At a nearby mine, a wildcat strike cleared out over 450 zama-zamas who were being helped by legal miners. One estimate puts nearly 4% of gold production lost to the zama-zamas. Tactical teams have even been shot at while chasing after these illegal miners.
The South African mining industry is steadily declining. In 1980, mining made up about 20% of the country’s GDP. Now it accounts for less than 10% due to high costs and low commodity prices to name a few reasons. 70,000 mining jobs have been cut in the last half a decade and more are expected to come. Many of the zama-zamas are former miners.
The mining industry in South Africa has also been hurt by new government legislation. South Africa’s mining minister introduced a charter that forces companies to make sure that almost thirty percent of their shares are in black hands. Companies are required to maintain this new level of black ownership at all times. This means that companies need to pay out about 1% of their turnover every year to black shareholders. As an example, in 2016 black shareholders would have been paid 5.8 billion rand of the total 5.9 billion rand paid as dividends.
While the top executives in the mining industry are white, almost all of the miners are black. The government says it is outraged by this inequality, and this may be why it drafted and passed this legislation so quickly, without really considering the ramifications of the new law.
The first mining charter in South Africa was introduced in 2004 and then revised in 2010 after lengthy negotiations between the government and the industry leaders. The new charter was just handed over and so difficult to understand that the Chamber of Mines went to court to block the charter. Roger Baxter, CEO of the chamber said the new rules put mining jobs at risk and will dissuade investors.
South Africa’s country’s resources are already a tough sell to global investors. A recent survey ranked South Africa 74th of 104 mining jurisdictions. Unemployment is at 27.7% and the country went into recession in the first quarter of 2017, offering a shaky landscape for external investments.
More confusion comes from the upcoming election. The African National Congress is deeply divided. The charter is backed by President Jacob Zuma along with other populist policies which he says is part of his “radical economic transformation” although others think it is to distract attention from corruption scandals. Deputy president Cyril Ramaphosa is leading the call for a new charter to reconsidered. Unfortunately, a change at the top is required to really see a change in the South African mining industry – and this may be difficult to implement in the short term.