S. Africa Mines Plagued by Mismanagement, Neglect

Donna Bryson, WTOP-FM (Washington, D.C.), November 28, 2010

Mawethu Mguli and hundreds of other workers at the gold mine in Orkney have gone months without pay at a time when gold is going for around $1,400 an ounce.

After the mine’s previous owners went bankrupt, the workers expected that a new partnership–headed by relatives of Nelson Mandela and President Jacob Zuma–would get operations back on track when it took over last year.

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South Africa sees getting its vast mineral wealth out of the ground as vital to creating desperately needed jobs, fueling growth and redressing the economic ravages of apartheid. But a toxic combination of a crumbling infrastructure, mismanagement and the specter of nationalization is frustrating the drive to improve and expand the country’s mines. Some are asking whether political connections mean more than competence in an industry that is a pillar of South Africa’s economy.

South Africa is the world’s richest mining country in terms of its reserves, according to a Citibank estimate that valued its mineral resources at $2.5 trillion. It is a major producer of diamonds and gold, and has major reserves of less sexy but still lucrative minerals like platinum.

Mining has accounted for an average of 7.7 percent of South Africa’s gross domestic product over the last decade, according to the Chamber of Mines, an industry trade group.

Half the country’s merchandise exports were mining products in 2009, when the industry employed half a million people. Another half million worked in fields dependent on the mines in this country with a population of 50 million where at least a quarter of the work force is unemployed.

Yet, during a global boom in commodities prices from 2001 to 2008, other countries with major mining operations outperformed South Africa, according to the chamber, whose members include such industry giants as Anglo American and DeBeers. The world’s top 20 mining countries saw mining GDP grow at an average of 5 percent a year during the period, while South Africa’s mining sector GDP dropped by 1 percent a year.

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The country’s mining infrastructure–from the power plants needed to get the ore to the surface, to the roads and rail lines to get it to market–is tattered. Talk of nationalizing mines in some political circles has spooked foreign investors. And questions about corruption among the civil servants became so heated that in August the country’s mining minister imposed a six-month ban on the issuing of prospecting licenses.

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Mining Minister Susan Shabangu told reporters recently she is working with other government departments to address infrastructure problems, including an energy shortfall that just a few years ago forced gold and platinum mines to suspend production because of lack of power. Eskom, the state-owned electricity company, blamed years of under-investment and rising demand.

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Shabangu says that while nationalization is not government policy, her African National Congress party is studying its feasibility. The issue is being pushed by Julius Malema, the vocal and populist leader of the ANC’s youth league.

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Nkosi, the former Chamber of Mines head, calls nationalization an “antiquated and discredited practice” that has impoverished African and other countries.

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Shabangu said inspectors found some companies had fraudulently claimed significant black ownership to qualify for licenses under so-called black economic empowerment rules established to give opportunities to South Africans discriminated against under apartheid. Other companies got licenses even though they were bankrupt. Inspectors conducting the audit were threatened or offered bribes–when they could find company officials to speak with at all.

Shabangu said black economic empowerment companies are a special concern, and that some are “clueless” about mining. She said the most widespread problem is companies never embarking on the search for minerals for which they have been granted licenses.

Mining is closely associated with apartheid–it was the industry, after all, of the migrant labor system that tore men from their families across southern Africa, creating a legacy of broken homes that persists today. For many, mining still epitomizes the apartheid equation of white power and black poverty.

Sandile Nogxina, the top civil servant in Shabangu’s department, told The Associated Press that the government is pursuing two goals: ensuring the industry grows, and ensuring blacks benefit from that growth.

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