The Great South African Mining Disaster

February 24, 2010

Nic Holland, upon taking over at the helm at Goldfields, vowed to close down working places considered a safety risk. Being a man of his word and having the integrity of an old-style accountant he carefully assessed the risks and duly started shutting down workings considered to risky. Having not done the “Mining Math” properly in the first place, he found, perhaps too late, that he will eventually have risk free operations. That was however not the only reality that dawned upon him – he also found no risk means no gold and after all, that is what Goldfields is all about – mining gold. With every risky place they stopped the gold output fell inexplicably; A difficult concept? Not really. Most call it common sense. As the saying goes; you do not make scrambled eggs without breaking a few eggs.

Nic Holland was not the only one trying to get rid of the “risky” operations. Anglo American’s Cynthia Carroll went a bit further and sold all of AngloGold Ashanti, getting rid of a whole whack of dangerous operations in one foul swoop. She went further and then publicly claimed a massive reduction in mining related fatalities at Anglo – a novel variation on the concept of selling your problems to the uninformed – in this case selling your deaths, sweetened with a splattering of gold to the unsuspecting foreigners. Fortunately in this case the foreigners got a bit more than a smattering of gold with the Africa operations that came with the South African assets. My reckoning; if Julius and friends succeed in nationalising the South African mines with compensation the foreigners can get rid of the South African poison pill – the deal of a lifetime.

As this drama continues to unfold, South African mining production continues to fall sharply. At a time when the gold price is at its most favourable in decades, South African gold production has reached an all time low of 232 tonnes, less than half the 490 tonnes produced in 1985 and falling ever faster. Ironically, as the gold production from South Africa was dragged down by labour issues, government regulation and risk aversion, output from the rest of the world, particularly the rest of Africa and China rose sharply.

Looking at the latest round of reporting by mining companies, it is particularly noticeable how many companies reported a great number of production days lost due to safety issues a new inclusion in their reports. As in the case of Goldfields, the South African mining industry will come to the realisation that the easiest way to ensure no risk is to shut the mines down.

With the loss of 15 000 jobs in the mining industry in 2009, a year when resource prices were showing a recovery  from the global recession with the gold price reaching an all time high, South African mineral production continued to fall.   

Having said that, it is particularly noticeable how the cause of accidents and the reasons for Section 54’s, Mine closure orders, are glibly attributed to the owners and management. When an incompetent and reckless miner, holding a certificate issued under the auspices of the relative government department, blows himself and his colleagues up by smoking in an area which he has tested as being laden with methane, management is blamed, the mine is closed down and the bad and twisted – by the Union and the Department of mineral Resources – publicity, loss in production and subsequent revenue loss accrues to shareholder.

No wonder Patrice Motsepe is so keen to give his mines to Julius Inc., compliments the South African taxpayer. He learned from Cynthia Carroll.


Little Lies

February 10, 2010

It is disconcerting the manner in which everybody, from the President, including ministers and Chief executives, twist and distort facts to suit their little agendas. Even worse, is the manner in which they proudly tell their convoluted truths, not in the slightest concerned that their reputations may be harmed should they be exposed?

The same people who claim they are adhering to all principles of good governance unleashes their half truths on a public, punch-drunk from being bombarded by nonsense espoused by the pillars of society.

I am not talking here about politicians from the governing party or even politicians in general. We have come to expect lies and deceit from our politicians. Truth be said, we are disappointed and feel robbed if they fail us in this regard. No. I’m speaking of Cynthia Carroll, upstanding leader of the once mighty Anglo American.

Desperately fighting for survival, the once hailed saviour of a faltering organisation – like the legendary Phoenix or using an example closer to home, Shabir Shaik – rose from the ashes and flattened delegates at the annual Mining Indaba, when she proudly announced a staggering safety performance at Anglo American.

According to Carroll, Anglo reduced the fatalities resulting from mine accidents from 44 in 2006 to 19 in 2009, an improvement of 42% over three years.  A remarkable achievement, unless you dig a bit deeper to find that Anglogold Ashanti, responsible for 32 of the fatalities in 2006 are excluded from the 2009 figures by reason of Anglo American’s disposal of that asset in 2007.

Looking at current Anglo operations it should be noted that fatalities at Anglo Platinum remained flat at 17 – 18 fatalities through 2006 to 2008. In 2009, with fewer people employed and more of their production and revenue coming from joint ventures, resulting in lower risk, fatalities decreased to 13. A reasonable performance? Yes. Spectacular? Not in my book.

What it does teach us is to tell a convoluted story, peppered with twisted facts omissions and half truths. You may get away with it for a while, fooling even the so-called experts and informed. However at some stage you will be caught out and people will snigger when you make your profound statements; some may even tell you to your face that they feel insulted by you underestimation of their intelligence.

The Emperor and the Miners

November 21, 2009

Once upon a time at a Platinum Mine – in the far west of a country, well known for its dancing emperor and Clown Prince, the ruler saving money by multitasking the prince to fulfil the role of court jester and stand-up comedian – the workers, having been told, by the emperor that they were special and feeling they were entitled to all the riches of the platinum mine, an idea mooted by the Clown Prince, decided to cease work until their wages were higher than in any other place in the world.

The workers, quite rightly, believed they were solely responsible for bringing the ruler to power and anyway, he did promise them wealth and comfort beyond their wildest dreams should they carry him to power. The workers fought hard and dirty and got the emperor to power and this was payback time.

Much to the shock and surprise of the workers, now refusing to work in support of their demand for their promised rewards, the evil Mine Boss dismissed them, banished them from the mine asigning them to a life of hardship, a life without DSTV and washing machines. The Evil One brought in other workers; workers who promptly and without hesitation took over the meaningless jobs with great proficiency. Imagine the confusion, humiliation and surprise of the Banished, having been chased away like worthless dogs, witnessing the cockroaches that have been begging for jobs day-in and day-out at the mine gates, taking the jobs that rightly belonged to them, the members of the guild of miners, who swept the Emperor to power.

They were understandably upset and appealed to their guild and the Clown Prince and the Emperor to assist them with reinstatement but to no avail, because friends of the Emperor were also friends of the Evil One. When they saw there was no deliverance from the fate delivered upon them, they slinked back to their houses. There they lay about, drank beer frolicked with their wives, when mentioned wives returned from the fields, where they were trying to eke out a living.  However during lonely moments they, the Banished got together and counted there remaining and fast dwindling cash resources with great concern.

And so it came to pass. Whilst they were sitting around drinking beer and bemoaning their financial woes, having realised the money promised by the Emperor for the unemployed was barely enough to buy food, a scary short little man of demonic appearance arrived, as if out of nowhere, in their midst. This little man of much power declared himself to them as the Tokoloshe – master of malevolence

The Tokoloshe, having listened to doleful lamentations, presented them with a plan so evil, it almost froze the blood in the veins of the bravest warriors amongst them, one of them, Funa Pumile, so-called because of his urge to rest often, afterwards swore the HIV viruses in his body instantly died. The Tokoloshe as is his want, did not only give them a plan, his servant, dressed in a splendid blue uniform, not dissimilar to that worn by the Emperors Police, gave them short sticks that fired very small arrows at great force and velocity. One of the banished workers fired a test arrow at the wall of his hut to find his recently born baby as dead as a dodo. Strong muti indeed.

The Tokoloshe also had his personal witchdoctor at hand and he promptly supplied the banished workers with a potion, made from wondrous herbs blended with body parts of the now dead baby using a machine – borrowed from a workers kitchen, they haven’t reached the pawning phase of hardship yet – blessed by Russel Hobbs himself, to give them immense strength and make them impervious to the weapons of their enemies.

After drinking their potion, mixed with copious amounts of alcohol, and smoking lots of magical herbs the banished and rejected workers proceeded to the mine with sticks, dancing and singing, jubilant in the knowledge that they will regain their positions, and more. After all, did the Clown Prince not ask for the seizure of mines by the people? Did the emperor’s councillor on gold, gems and fabulous mineral wealth, not threaten the evil mine owners to fit-in-or-fuck-off? They marched with the knowledge that, as in the past, their ruler expects them to act strongly and take, with necessary force and commensurate trashing, what is rightfully theirs.

Soon after they arrived at the mine, whilst they were singing and dancing, summoning the great spirit of the Machine Gun and focussing their minds, now slightly befuddled by a haze of intoxicating herbs, a few rotund policemen, not dissimilar in appearance to Mr. Plod, good friend of Noddy, arrived and prevented them from approaching the Evil One where he was sitting in his sumptuous office sipping coffee and counting his fortune.

Having recognised friends and allies amongst the police and not wanting to hurt friends, they used tactics taught by the Tokoloshe and some of the Emperor’s advisers many years ago and staged a fake retreat. The police, not seeing any killing opportunities, promptly withdrew, signalling the opportunity for the banished workers to attack and breach the defences.  

And children, that is what they did.

They broke through the barriers of steel and concrete and proceeded underground. There they secured an area and promptly proceeded to, using the skills passed on by guild leaders and Emperor’s advisors, construct pipe bombs using pipes and explosives liberated underground. They secured a comfortable area, not to cold and not to warm, a suitable sleeping place, for those that do not have watch or bomb making duty, where they could dig in so to speak.

Once they secured their control centre they did what they do best underground; they promptly went to sleep, all of them except one, a man by the name of Katalile Minadagiwa, who, due to his inability to participate in logical debate and being a fan of the Clown Prince, having studied every speech ever made by the crown prince, was chosen to negotiate with the Evil Owner.

In the meantime, the police were called back and arrived with the police’s newly trained special forces, flown in by special jet, in tow. Whilst the suitably obese police commissioner shouted instructions, Katalile spoke to The Evil One on the telephone, demanding the presence of the ruler, the Clown Prince or the big cheese of the guild. 

Whilst this hullabaloo was carrying on the task force proceeded underground armed with rifles, grenades flame throwers and all manners of violence perpetrating equipment, to back up their newly acquired licences to kill, proudly displayed on cards contained in a little pouches hanging around there necks. Positively professional, reminding somewhat of the ID tags of conference-delegates, all very smart.

Yes children; they were ready and well prepared to marinate, tenderise and roast their adversaries. The scene was set for an epic battle. A fight to death – a battle for the hart and soul of the economy.

The first bomb was set off by the rebel miners, a policeman was pole axed by shrapnel from the pipe bomb and all hell broke loose. After the lapse of a suitably long period of time to justify the description of ‘epic battle’, surpassing in length and intensity of the well publicised turf wars of the Zama-zamas having produced a sufficient number of wounded on both sides, the begrudged miners were subdued and hauled away to be drawn and quartered by the Emperor’s men, at the behest of the Evil One, who, it was learned, made a sizeable contribution to the “Welfare of the Emperor” fund.

The mine owner subsequently liberated his money and moved it to a far of land with an honest Emperor and peaceful hard working people. There he started a new mine and became immensely rich.

The Clown Prince became bloated and fat, and his head – like a black hole, dark, empty and dense – imploded and he became rather pleasant blabbering incoherently day in and day out in the process, driving the Emperor insane, prompting him to embark on a crusade against fair-weather friends.

The mines in the once great land quietly died and the workers returned to the land where they tried to eke out a living and eventually succumbed to famine and pestilence.

Ed. What a load of non-sense. You certainly have a wild imagination

Eskom and Fani (the Funny) Zulu

June 24, 2009

The Eskom disaster is just not going to die and quite rightly so. The contrasting statements made by Barbara Hogan and Dipuo Peters highlights a disaster of gargantuan proportion and allowing liars, sorry, “Spin Doctors”, like Funny Fani Zulu and his incompetent boss, to create perceptions aimed at minimizing the devastating effect on our economy, is nothing less than criminal. Unfortunately, government representatives, having been the main contributor to our perilous situation, and Eskom are diverting attention away from the real issues once again, minimising the extent of the crisis and diverting attention from the real issues. They are, very successfully aiming their message, modeled for the consumption of the uninformed masses with deadly effect. Millions of South Africans believe them, many of them are payment defaulters, not necessarily poor, and beneficiaries of illegal connections, who do not, for the most part, understand or care about the impact of an imploding power utility.

Pointing out the disaster facing the South African consumer and economy inevitably results in the popular, head-in-sand retort;”Pre-94 Power generation was for the privileged part of the population, it now caters for a wider population”. This argument is only partly true. Domestic use of power constitutes only 15% of the utilities’ capacity; the balance is utilized by industry for worthless job creating pursuits such as manufacturing, mining, beneficiation and many others. Imagine the small-minded self-interest of money-grabbing capitalists wanting to light up hotels so that the privileged can stay in luxury, forcing the poor and perpetually disadvantaged to do meaningless jobs like cleaning rooms and waiting on tables.

Eskom committed four deadly sins that brought us to the precipice. The first sin was committed when, in 1999 the esteemed, and still valued despite his spectacular failures in Trade and Industry and Transport , Jeff Radebe and the incompetent Nosizwa-Ngakula, was told that  infrastructural capacity investment in Eskom is critical to sustainability. Their reaction, in typical African visionary fashion was; “Live for today, tomorrow will look after itself”. Some will justify the inaction, saying they must be forgiven for thinking the request to expand the utility was an evil plot by white counter-revolutionaries trying to force the new masters into making costly mistakes. Anyway, it is not very African to make quick decisions. Because of the postponement of expansion projects Eskom could now spend their money and efforts on other things such as the accumulation of bad debt, compliments of the payment defaulters.

Management could now embark on the second deadly. They could focus their full attention on the sacred crusade against the sins of the past. Their single-minded commitment to transformation left the organization purged of white management- and technical skills. In a noble campaign to rid Eskom of the injustices of the past and to make it an AA benchmark, huge resources, which could’ve been used to build infrastructure, was paid out in voluntary separation packages to highly skilled and experienced people. The waste of money was exacerbated on fast tracking of under-qualified, inexperienced and incompetent replacements. The successful implementation of corrective action was probably a bonus criteria and management rewarded themselves handsomely for their efforts. Ironically, they re-hired, often through “vile”  labour brokers, many of the skilled people purged from the company, at an exorbitant price. These former employees, unpatriotic swine,  are like mercenaries, only in it for a quick return with no long-term commitment.

The third sin committed by the newly liberated Eskom management was their mind-boggling inventory management strategy. I can only imagine it being instigated by some recently appointed “black diamond”, who successfully and with a “Cum” completed a “six month” on-line Executive Development Progamme for Inventory Managers. Our “whiz-kid” was probably so taken by JIT-management, he missed the chapter on strategic inventory and his excuse for his oversight is the fact that he comes from a part of the country where it does not rain too much. The Eskom executive team was so taken with the effect of inventory reduction on the balance sheet and their bonuses, the strategy was accepted with much acclaim.

Continuing their journey to self-destruction Eskom sinned in their dogged commitment to BBBEE initiatives at any cost. By awarding transport contracts to unsustainable companies, one-man operations with a “bakkie” and a busted scrap-yard truck and often-fictitious companies their actions are analogous to risking the oxygen flow to the heart of our economy. On top of the transport fiasco, coal supply contracts with BEE compliant coal miners were concluded on terms weighed in favour of the supplier. The tried and trusted cost plus contracts flew out the window and soon Eskom was faced by rising coal prices based on buoyant coal demand.

It was hoped that, with the appointment of Godsell as Maroga’s mentor and Ras Myburgh as his coach, we would see the end of stupidity that have beset ESKOM. One would’ve hoped to see the end of statements by Bulwica Sonjica advising us on electricity efficient sleeping habits. We should be forgiven for hoping that the return of competence and skill would be a main priority. Alas, the more things change the more they stay the same.

The inane statements continue. Should Maroga continue to tell us about good of power supply and the absence of load shedding I think I will hang myself on the roof rafters. We are not stupid. With the number of Ferrochrome furnaces shut down because of the economic crisis, we should have enough spare power capacity to feed a city the size of Johannesburg.  Maroga should be drawn and quartered every time he tries to shift the blame or put the “guilt monkey” on our shoulders, we did not cause this mess. As for the Funny Fani asking for understanding, I’m sorry no can do, it is unfair to put the bulk of the financial load on household consumers using 12% of your output.

Illegal miners – Unsung Heroes

June 3, 2009


The President of the Association of Informal and Illegal Miners of SA, Malaisha Kipastofile, called on the minister to enforce a code of practice that will ensure illegal miners can apply their trade safely. He was reacting to the minister’s call for a coordinated attack on the problem and her denial of their inalienable right to earn a living. Kipastofile said the reason for their activities must be laid squarely at the door of the government and the unions. He said the protectionist intent of the NUM and Cosatu has resulted in an out-of-balance labour market with artificially inflated salaries, causing large-scale unemployment and ever increasing job losses in an uncompetitive South African gold mining industry. Other mines will become targets when they, like the gold and diamond mines, become uncompetitive because of high cost of legal mining, which result in the willful and reckless abandonment of valuable in-situ gold resources. To the DME’s comment that the state will not carry the cost of the death of the illegal miners, Kipastofile said he was already in touch with Richard Spoor and the Associaton will sue NUM, The State and the Company for damages. Kipastofile further declared his intention to form a Union representing the unemployed. He said, we do not care about meaningful, and decent jobs, we just want jobs and pay so that we can feed our families.

 When told about the views of the Association of Informal and Illegal Miners of SA (AIIMSA), the spokesperson for the National Union of Mineworkers, Mina Kokomoya, said Kipastofile was a counter-revolutionary with ties to the security establishment of the old Apartheid regime and a cohort of Willie Madisha COPE. Kokomoya added that NUM would demand subscription arrears for the deceased miners since they were working on a mine where NUM has an agency agreement, which compels workers to become members of NUM. The union will however, not entertain claims against the Union by deceased illegal miners or their next of kin. Kokomya vigorously denied the accusation that Unions in general and NUM in particular were destroying employment opportunities. He said, “It is better to die like dogs than to work like slaves” He said he knew for a fact that at least 80% of the unemployed agrees with NUM on this issue.

 In a separate statement, Slack Notsosmart, COSATU spokes person, warned anyone contemplating the formation of organisations opposing COSATU of grave consequences. He said COSATU will not tolerate interference by non-workers in employment matters and threatened mass action in support of the wage demands, the banning of labour-brokers and subversion of the social dream. This tragedy of illegal miners must be laid at the door of labour brokers who undermine union efforts to uplift workers thereby promoting capitalist market myths. Asked about COSATU’s alleged intimidation tactics, Notsosmart said allegations of intimidation during any COSATU industrial action were perceptions created by the white owned media.

Leading economist, Adam Smith, believed that this tragedy could lead to a fresh look at the sustained viability of South African mines and could signal a reversal in the sagging fortunes of the South African gold mining industry. “This could provide us with an alternative model to extract gold from deep ore bodies”, he excitedly said.

A mining industry spokesperson, Tyranny Fortune expressed his admiration for the efficiency of the illegal miners and said, “Their commitment to the task ahead should be a lesson to all. Their ability to remain underground for long periods gives new meaning to the expression. “sleeping on the job” and the management are examining the possibility of applying this principle to current operations”. He added; “This is what we had in mind when we first thought about continues operations.” Fortune denied that the mine owners were discussing off-take agreements with the illegal miners.

The national director of Lawyers for Human Rights, advocate Jakob van Esel bemoaned the fact that the illegal miners, known as zama-zamas, had to recover the bodies of their colleagues themselves. He questioned the commitment and so-called bravery of Mine Rescue Teams and referred to them as ninnies for not volunteering their lives to safe the illegal workers, it is not that they are oppressed like the Emergency Workers currently on strike. The striking workers have the right to refuse assistance to the malingering elite, accident victims, who probably contributed to the situation they are and innocent victims of violent crime, committed by the oppressed poor. Unlike the striking emergency workers, the Mine Rescue Brigades consists of volunteers and have no real right to refuse laying their lives down for the oppressed illegals.

It is believed that the Inspector of Mines issued the illegal miners with a Section 54 order, which could result in a suspension of operations of at least 48 hours. It is also rumoured that the incident may result in a “DME Blitz” on Harmony operations. NUM are debating whether they should call for a 24-Hour sympathy stay away at Harmony operations.


May 27, 2009

* According to Mike Cutifani, CEO of AngloGold Ashanti, South Africa experienced  an unexpected fatality stoppage, a brief strike by drillers, a slow resumption of operations after the Christmas break and some technical difficulties — nothing particularly surprising or to be worried about. South African operations will be affected by the usual swathe of public holidays over the Easter period

Maybe that is exactly the problem. Everything normal and nothing to be worried about. Why don’t you just shut it down? If the government and the workers do not care, why should management and the investor care?


* Cutifani also stated that no greenfields exploration is being undertaken in South Africa and the country’s mature gold mining industry continues its steady decline.

Mine killer, job destroyer. I wonder what the Vodafools think about this lot. Selling the “crown jewels” to foreigners. I do not think they need to worry too much. The South African operations will be given back to South Africans through some BEE deal that will leave everyone poorer. The Minister probably thinks it has something to do with Cynthia Carol’s goodwill.


* Nick Holland , CEO of Goldfields, stated recently that Kloof reduced fatalities by withdrawing from remnants

Another one? Is he telling us the strategy is to withdraw until nobody is left underground? Surely, he does not believe that, not in this land of opportunity. Imagine, No work, no workers and no risk. It sound like a pretty good growth strategy and it should make the government and unions happy


* According to Holland, the future of Goldfields’ SA operations relies heavily on South Deep and the adjacent Kloof reserves.

This is becoming hard to swallow. Maybe South Deep is one of those visionary dreams, high on promise and low on delivery. By the time they have figured how to turn the rich promises to account, pigs would have learned to fly. Mind you, with the Mvhela stake in Goldfields and with Tokyo’s self-confessed connections with the witchdoctor fraternity, nothing is impossible. A bit of mumbo-jumbo and hey, flying pigs everywhere


* Harmony CEO Graham Briggs said, “We have positioned the company in such a way that we are able to deliver on our promise of paying a dividend in future. Our focus now remains on achieving our overall targets and delivering consistent returns,” he said. This after the March share placement, which followed on from an earlier share placement in December through which Harmony raised R979m.

You know a miner is in trouble when he says as little as possible about his operational performance whilst waxing lyrically about his ability to mine the stock market and then in a spell bounding display dazzles his audience with elaborate plans for the future.


*  It is termed a civil war but the squabble for control of Diamond Mining Giant, Rockwell Diamonds is nothing more than a childish scuffle between two parties with different opinions on how best to mine the Securities Exchange, with no concern for the small investor

At the end of the day, Rockwell Diamonds, under present market conditions, are probably worth as much as the glowing PowerPoint presentations of its magnificent prospects. The mammoth battle between the famous, some claiming to be famous, some inconsequential and the odd reject claiming fame, is rather absurd. As the combatants (Bristow, Bristow and Copeland  on one side and  Von Weilligh, Reynolds and Van Wyk on the other side) square up for the fight that will destroy what little value remains in the company, spare a thought for the employees and the small investor.


* Senzeni Zokwana, President of NUM said; “This marginalisation of women in general and black women in particular not only impacted negatively on the role of women in economic activity but further entrenched their exclusion in the different sectors of our economic landscape .This marginalisation inculcated cultural and gender stereotypes which victimised women particularly in the mining sector .In this regard entrenching the hegemony of male chauvinism in all layers of employment in the mining industry.

Now, many years on, and having had woman minister after woman minister of mines, one ending up as deputy president, and a woman CEO at the helm of Anglo, the mining industry are still miles of the target. Maybe the appointment of a new minister of mines and a minister to look after woman rights will bring fresh ideas. Maybe the Gauteng Premier inadvertently pointed the way forward when she pleaded for open minds on the decriminalisation of prostitution.

This triggered my imaginative mind and I thought of the great Senzeni Zokwana’s wise words; “black men believed also that women must remain in the rural areas or in townships while they dived and descended further into the curse of production in the dark bowels of the earth which have never been hospitable even to the male folk”. Now, if that is a not plea by leaders to make it attractive for men to have woman “on the job” with them, so to speak, whilst their wives are tending the fields, I do not know what it is. If sex is allowed, decriminalised underground in a manner of speaking, the industry will fill their quotas, we’ll clean up the streets by literally driving prostitution underground. It could even solve the skills problem. We’ll have a generation of people, conceived underground, who will unlike normal youngsters, take to mine work like ducks to water. The historic and traditional aversion to work, especially underground work, will cease to be a problem.

Death of an Industry

May 18, 2009

The bankruptcy of Pamodzi Gold is symptomatic of the dying South African Mining industry. With diamond mining reduced to the level of 19th century prospecting, scratching for a livelihood and the mighty De Beers, once prosperous and in total control of their destiny and market, now technically insolvent. The gold mining industry in South Africa with technical problems and challenges, are unable to find investors to start new mines. The platinum mining industry is struggling to maintain profitability in a realistic market environment. It is littered inefficiency, with BEE deals and unsustainable “mining ventures”.

Using the Pamodzi example and a bit of forward thinking I see Sentula finding a partner who will invest money to buy the “assets” at a rock bottom price. They will inject some working capital come up with a plan promising a pot of gold and raise more cash from the market. Mining will recommence the company will make losses but promises of future profitability will suck in the gamblers and the price of the stock will increase. A few people, mainly  management, investors and the astute dealers will make money, probably lots of it, however many people; greedy people, poor people and stupid people will loose money. Some will loose a little and say nothing to save them the embarrassment; others who lost a lot will kill themselves. When the mines reopen the unions and workers will rejoice. The Minister will laud the businessmen for showing confidence in the South African economy and the BEE partners will toast everyone for their contribution in making the rebirth of the mines possible. Being increase time the workers will embark on a strike for more pay. During the subsequent strike, management, under pressure, to keep the marginal operations going and to protect the revived baby from harm, brings in contractors to minimise disruption to production. This results in anarchy and the killing of a contract labourer by the strikers, causing the mine to grind to a halt. After severe financial losses, operations restart but a comrade dies in an accident and the workers down tools in sympathy. By now, the projected margins are paper thin or non-existent. A week later inspectors of the DME arrive for a “Blitz”. They find a worker not wearing his Rescue Set and issue a section 54 order. As a result, operations are generally suspended for 24 hours or more. The Mine Manager, a caring man, because of the stress and the threatened permanent closure of the mine dies of a heart attack. The mine in this period produced gold. Unfortunately, it was produced at a loss and no value was generated. The people who made this miserable tale possible will walk away. They will blame the markets but nobody will bother to deal with the real issues. During this time, five people died in road accidents and thirty people were murdered in the areas in which the mines operate.

Who would invest in such a venture? It is better to invest your money in a decrepit sewage plant gushing raw sewage into the Vaal River. At least the technology to clean human excrement is readily available and no one will call you a killer of people.

It is almost inconceivable. We are witnessing the demise of the South African gold mining industry. One of the two pillars that supported the South African economy for more than a century are crumbling right before our eyes giving rise to the obvious question; Why now; with the gold price at its highest level in 20 years? How do we allow an industry to die when we still have some of the biggest gold resources known to man? How do we stand by and see thousands of people losing their jobs in a country with the third highest unemployment rate in the world?

The reason for this is simple. Economics and the market. The cost of mining gold and the resulting lack of profitability of the business do not justify its existence. We all know that, or do we? Many do not realise the simple principle that the lack of profitability and resultant lack of competitiveness can, and will kill an industry. Conversely, and here is the dangerous part, many “leaders” who are aware of the ills of the industry, do not speak about it because it is not politically expedient to do so. I read an article in the M&G recently about a mineworker who religiously monitors the platinum price on TV. To him the price determines his continued employment or otherwise. The concept of profitability does not enter in the equation.. The sad reality is that he is only one of 400 000 mineworkers who hold this belief, people who believe that the mine owners set the price of the commodity they produce. Four hundred thousand mine employees do not know that cost has a telling effect on operations and they do not understand the factors impacting on cost. They only understand the “Market of Economic Myths” espoused by their leaders.

The terminal illness afflicting the gold mining industry stems from the nature and depth of our deposits. As a result, gold mining in South Africa, is technically complex. That should not be a problem. It took us one hundred years to get from reef outcrop to 4000 metres, a magical achievement. In the last 20 years, despite the increasing rate of technological development, we have gone nowhere because there was no money to develop technology Developing technology requires skills, expertise, investment and passion. The South African mining industry was built by hard work; the blood, sweat and tears of true pioneers. It was built by people prepared to take big risks in order to reap a well earned reward. Most of these attributes are now nowhere to be found. Skills fled, because of falling productivity, margins are paper-thin. The prevailing mood around the industry are characterised by a reluctance to face the truth, avoidance of tough decisions and a false sense that somehow a miracle will happen and all will be well. Today the culture in South Africa has changed. We must avoid risk, keep hard work to a minimum and reserve competition  for the sports field. Rewarding risk is politically incorrect, everybody have rights, privileges cannot be earned and should you by chance have skills or knowledge that, in the opinion of some, has been acquired unfairly, all efforts must be focused on avoidance of the effective use of that skills and knowledge. We live in an environment where people demand to eat eggs without breaking the shells. As a result of this madness, we have not seen any major gold mining project since the early nineties. Gold mining companies in South Africa are marginal and struggling whilst global companies operating in competitive market environments contain costs, maintain margins and deliver good profits. Barrick, Newmont and Randgold Resources are doing well whilst past have fallen onto bad times. The former king of gold, Anglo American, sold its gold division, Goldfields are struggling and the South African number three, and Harmony is a marginal miner. For the rest…nothing. South African gold production in 2007 was one third of levels in 1978, but more significant is that the period 1993 to 2007 accounted for two thirds of the wipe, certainly a rapid shutdown. Before we can even think of fixing the industry, we must face and understand the brutal truths facing us:

  • Mining has always been a risky and hazardous, so is motorcar racing and policing in South Africa. I am yet to see the SAPS strike every time a police officer is shot in the line of duty and many racing car drivers pay good money to put their lives at risk for the spectators. I can safely say it is more risky to just live in South Africa than working in a deep gold mine if you consider that the life expectancy of South Africans have dropped from 65 to 51 in the last fourteen years. For gold mining and mining to survive in South Africa, people are going to die.
  • Labour cost globally, and in competitive countries unlike in South Africa, are driven by supply and demand. Here, with abundant labour at our disposal we restrict employment through counter-competitive measures such as legally entrenched labour practices and unrealistic minimum wage levels. Artificially elevated wage levels with high unemployment are preferred to a market related living wage with low unemployment. People are going to have work harder for less.
  • Institutionalised laziness promoted by trade unions and political leaders in the name of ideology. The deliberate destruction of employment opportunities by declaring certain types of work as meaningless and undesirable, resulting in people resorting to crime rather than work. The power of the Unions will have to be broken.
  • A development fund can be created to develop the future and to allow our children to benefit from our resources, a reserve similar to the Norwegian Oil Model.

The Unions use safety to score points with members. They prey on the ignorant by portraying themselves as fighters for the poor and oppressed. In the process they keep their membership high and prevent the entrance of competitive alternatives

The CEO of Goldfields stated recently that Kloof reduced fatalities by withdrawing from remnants. Is he telling us the strategy is to withdraw until nobody is left underground? No work, no workers and no risk. It sound like a pretty good growth strategy and it should make the government and unions happy. Nic Holland, the hero killing all those meaningless jobs. Whilst researching and writing this, Anglo Ashanti results was published and CEO Mark Cutifani, in a very blasé manner of handedly fashion, painted a bleak picture for the future of Anglo Ashanti’s South African operations.

To return the gold mining industry to a growing industry we need commitment to profitability. Profitability will encourage investment in green fields projects and R&D. However, no amount of money will prevent the loss of life in the quest to conquer depth and nature. Maybe we need to be reminded of the number of people who died during the construction of the Panama Canal, the Hoover Dam and the conquest of space through space travel. Today we want to forfeit less whilst earning more than our predecessors who died to get us to 4000 metres underground.