How can you own the most of something extremely precious to the world and yet grow sick and poor because of it? That’s the story of South African gold.
Seven of 13 miners who were trapped in yet another gold mine catastrophe in South Africa died over the weekend. Gold is the reason South Africa is what it is economically, and right now what it is isn’t too good.
The price of gold peaked in February, 1980 ($2101.18/ounce) and has fallen almost continuously to its current $1320. The loss in value contributed greatly to South Africa’s abandoning rather than modernizing many mines, but it’s more than that. The country got trapped by its own progress.
South African gold mines are now in the worst condition in living memory. This weekend’s mine disaster hardly makes news in South Africa. In February almost a thousand miners were trapped. Mine disasters are now commonplace in South Africa.
Owners – mostly multinationals – avail themselves of the country’s behind-the-times mining labor laws as a hedge against falling prices and demand. These poor laws were designed under apartheid to attract investment, and indeed, they did. In the days of apartheid South African mines were top notch and ruled the world.
But the almost revolutionary political change a quarter century ago scared off many investors. Not wishing to lose their preeminent position with gold the new South African leaders retained many of the old, bad mining laws.
As apartheid faded into history and the new regime’s more progressive policies developed, most prices for natural resources fell. Were it not for China, then India, the global demand for natural resources could be described as ‘sunsetting’ as renewable energy sources surged.
China’s needs, though, kept the South African mines going, and China’s foreign policy is complete and total nonintervention. Newer, more progressive mining laws mandating maintenance and increased worker care developed everywhere else in the world, even in China! But South Africa felt trapped by its ridiculously low mining costs (excluding worker and plant disasters).
Now the country finds itself in an abyss.
In the last decade or so, numerous mines have been abandoned. Companies have laid off thousands of workers. Many of these continued working the abandoned mines in treacherously dangerous conditions. They’re known as zama-zamas.
Technically “illegal” the government allows zama-zamas because they still generate enormous cash. Despite declining production and many mine closures South Africa’s gold exports were valued at just around $4 billion USD in 2015 (of $25.2 billion for all of its mining, including precious gems).
Turning a blind eye to the legality of zama-zamas has, no surprise, attracted many untrained unemployed. This has resulted in even more catastrophes. None of the injuries or deaths or illnesses to the thousands and thousands of zama-zamas receives any government compensation, because technically, they’re all illegal.
Five years ago the properly employed miners sued 32 gold mining companies in South Africa and last week the five largest companies announced they would settle with thousands of these miners.
The workers forced through the courts what the country’s legislature and leaders refused to do.
These workers will probably get somewhere between $300-720 million in compensation for unfair labor practices and lack of medical benefits and care. (The miners were expected to accept the offer last Thursday but have not yet done so.)
Whatever the properly employed miners achieve, zamas-zamas will still be left in the deep, dark cold of unsafe mines.