They say that higher wages will cause the mines to close down. Then what is it worth, this mining industry? And why should it be kept alive, if it is only our poverty that keeps it alive? They say it makes the country rich, but what do we see of these riches? Is it that we must be kept poor so that others may stay rich? (Alan Paton, Cry, the beloved country)
Speaking to a crowd of poor South Africans nearly 70 years ago, Alan Paton’s character, John Khumalo, clearly had some notion of the ‘resource curse’, or paradox of plenty, first named as such by Richard Auty in 1993 (Auty 1993). By 2003, even the president of the South African Chamber of Mines, the mine-owners trade union, citing Jeffrey Sachs and Andrew Warner (Sachs and Warner 1995), said that this – the idea that the exploitation of natural resources, including minerals and oil, often has distorting effects on national economies – had become the ‘conventional wisdom’ (CMSA [Chamber of Mines of South Africa] 2003). In January 2015 an article in The Economist asked whether we were not seeing ‘the twilight of the resource curse’ in Africa as resource-rich countries began to diversify their economies (The Economist 2015).
By various measures, South Africa’s mining industry has been in decline over the last 30 or so years. The contribution of the mining sector to gross domestic product (GDP) was 22.2% in 1980 and 7.6% in 2014. Employment in mining appears to have peaked at 756,000 in 1986, and had fallen by a third to about 500,000 in 2012 – as a proportion of the available work force, or of people in work, the drop would be significantly larger – probably two or three times as great.1 It may well be that the relative decline of mining in the South African economy is a reflection of the growth of other sectors, such as manufacturing and services, as much as it is the result of a real decline in mining output, but there have certainly been dramatic changes in the sector in the last 30 years. These include the transformation of the domestic legislative and fiscal framework; the fall of gold, the rise of platinum, and then of coal and iron ore; as well as significant changes in the structure of mine ownership, and the nature of the work force. These include the emigration and globalisation of South African mining companies, and the emergence of black-owned companies; the decline of trans-national and internal labour migration; the rise of the labour broker and the casualisation of a proportion of the work force – the latter being capitalist responses to more liberal labour laws and unionisation.
It is probably a coincidence that the year of peak employment in mining in 1986 was also the year of the repeal of the Pass Laws, which had legally enforced oscillating labour migration between rural reserves, or other countries, and single-sex hostels, and prevented the growth of self-perpetuating black mining communities in South Africa. It was also the year of South African’s worst ever mining disaster when 177 men died in an underground fire at Gencor’s Kinross gold mine – a reminder of the dangers involved in an industry that may have taken 70,000 lives through accidents in a century, with a million more seriously injured, and many millions suffering from industrial diseases. It may, or may not be, a coincidence that peak employment in mining came three or four years after the registration, in December 1982, of South Africa’s first legally recognised black mine-workers union, the National Union of Mineworkers (NUM).2
In 1986, about 60% of labour migrants, who constituted about 90% of the mine work force – the other 10% were ‘white’ – came from South Africa and about 40% came from other countries in the Southern African region, such as Lesotho, Mozambique and Malawi. By 2012 the proportion of foreign workers in the greatly reduced mine labour force had fallen, according to official figures, to about 8% – from about 300,000 to fewer than 50,000 people.3 It was then estimated that 60% of mineworkers were born in the province in which they were working, but many of the latter may still have been technically migrants within large provinces, such as North West and Mpumalanga, because their homes were too far from their place of work to allow them to travel to work daily (Budlender 2014, 26–27). The figure for people born in the province was clearly lower, and the proportion of foreign workers was higher, in Gauteng province. In 2014 Sibanye Gold, by then the largest gold producer in the country, with most of its mines in Gauteng, estimated that the proportion of its 44,000 workers who were born in the province in which they worked was 31%, and the proportion of foreign workers was 29% (Sibanye Gold 2015).
The decline of long-distance labour migration, and the tendency, following the repeal of the Group Areas Act in 1991, for migrant workers to move out of the compounds and bring their families to live near the mines, or to establish second families on the mines, has resulted in the growth of squatter settlements in the vicinity of the mines, sometimes on mine-owned land, and, especially among platinum miners in the Rustenburg area, on land held in customary tenure – the former bantustans. It has also resulted in a decline in remittances to rural areas and to foreign countries. Within South Africa there has been some compensation for this decline through the growth of welfare payments to the old, the disabled, single-parent families and children, but there has been no replacement for remittances to neighbouring countries (Capps 2015; Crush and James 2002; Macmillan 2012).
This paper addresses the question why a democratically elected government, progressive labour legislation, trade-unionisation and moves towards Black Economic Empowerment (BEE) have made remarkably little difference to working conditions on South African mines in the last 30 years. It will consider the transformation in the political, legislative and macro-economic environment in which the mining industry operates, as well as changes in the pattern of mine ownership and control. It will also examine the varying trajectories of individual mineral commodities. Some significant changes, such as the fall of gold and the rise of the platinum group metals (PGMs), and then of coal, would probably have happened in any event, regardless of the political and legislative environment.
Living and working conditions
In the words of the Bench Marks Foundation (a South African church-based organisation which has been monitoring the mining industry and corporate social responsibility since 2001):
It is a tragedy that mining development in South Africa post 1994, under a universally elected democratic government, has achieved (with the assistance of the mining industry, the Mining Charter, the ubiquitous living out allowance,4 and the undue political influence of mining corporations over government), exactly the kind of urban slums in the form of squatter camps in the vicinity of every mine that researchers and industry experts have been warning about for decades. (Bench Marks Foundation 2014, x)
The following was given in evidence to the Marikana Commission by lawyers for the families of 36 of the 37 people who died from police bullets there in 2012:
Underground mineworkers at Lonmin in 2012 experienced both the rigours of the workplace and the challenges of their poor living conditions. In the workplace noise, cramped work stations, heat, dust, long hours, frustrations engendered by divisions of hierarchy, race and disorganisation combined with an environment fraught with danger and risks to mineworkers’ health. (Ntsebeza 2015)
Thousands of workers lived in squalid, mainly unserviced informal settlements.
Here, workers inhabited small, makeshift zinc shacks, where in winter, cold, wind and rain whipped through the ragged metal, and sewage and water at times drenched floors, while nonexistent sewerage reticulation meant squatting on often exposed pit latrines. Women and family members … roamed settlements to access water from the few functioning municipal stand pipes, or forged illegal water and electricity connections.
Poor living conditions, coupled with arduous working conditions, meant that these workers, often central to production, experienced a deep sense of humiliation and disrespect.
The 2012 wage strike thus became both a weapon with which to battle expanding claims on pay packets [including debt] as well as a symbol of the struggle to regain a sense of belonging in a post-apartheid South Africa where they had hoped to claim full citizenship. (Ibid.)
Working conditions on gold mines were not much better and had changed remarkably little over the decades. An adviser to the Association of Mineworkers and Construction Union (AMCU) wrote in August 2015 about long hours and low pay in Harmony and AngloGold Ashanti mines. Arguing in support of a basic wage of R12,500 per month, in place of the present basic wage of less than R6000 (less than $500), for which 70,000 employees of the major platinum-mining companies had been on strike for five months from January to June 2014, he demonstrated that some workers were being paid for a nominal 45-hour week with minimal overtime, despite having real-time working days, including underground travelling time and waiting for lifts, of from 9 to 13 hours a day, six days a week, without a lunch break. He also asserted that between 20 and 30% of underground miners had contracted silicosis from exposure to dust (Forslund 2015a).
The legislative framework
The transformation of the legislative framework within which the mines operate began more than a decade before the formal handover of power to the majority in 1994. Change began in response to the Durban strikes of 1973 and the Soweto Uprising of 1976. On the recommendation of the Wiehahn Report, amendments to the Industrial Conciliation Act in 1979 and to the Labour Relations Act in 1981 made possible the establishment of the NUM in December 1982. The repeal in 1986 of the Pass Laws was, as has already been indicated, a hugely significant step for the mining industry. The repeal of the Group Areas Act in 1991 removed legal restrictions on residence in ‘white’ South Africa and permitted mineworkers to bring their families to town, but it did not oblige mining companies or municipalities to provide them with decent accommodation.
An amendment to the Mines and Works Act – known when it was enacted in 1926 as the ‘Colour Bar Act’ – was passed in 1988 and removed the phrase ‘scheduled person’ from the Act. Black people could then acquire any one of thirteen mining certificates that had been reserved for ‘scheduled persons’ – white and Cape coloured people. The granting of a blasting certificate to a black mineworker on 5 December 1988 marked the formal end to more than a century of de facto, and 60 years of de jure, discrimination in employment on the mines. In the following year the Chamber of Mines reported that 580 blasting certificates had been issued to black workers and that 6000 jobs on the mines which had previously been done by whites, were being done by ‘people of colour’ (CMSA 1988, 1989; Nattrass 1995, 863).
Early speeches by Nelson Mandela, following his release from prison in February 1990, seemed to promise that a future democratic government would nationalise the commanding heights of the economy, including the mines. These speeches were written for him by members of the Mass Democratic Movement and the Congress of South African Trade Unions, including Cyril Ramaphosa, then leader of the NUM, and they did not reflect the views of the African National Congress (ANC) in exile. At an in-house seminar in Lusaka in 1988, Thabo Mbeki had discussed nationalisation and cited the disastrous consequences for Zambia of its takeover of the copper mines in the late 1960s. Joe Slovo, leader of the South African Communist Party, talked and wrote from 1986 onwards about a ‘mixed, though partially planned economy’ (Macmillan 2013, 287–288). The Freedom Charter did not mention nationalisation as such and its statement that ‘the mineral wealth beneath the soil … shall be transferred to the ownership of the people as a whole’ was worded in such a way as to leave open the question of how, and by whom, the mineral wealth would be extracted. By 1992 Mandela himself had stepped back from confrontation with the mining industry, citing a Damascene conversion at the Davos meeting in that year, though the influence of Harry Oppenheimer and talks between leaders of the ANC and business leaders at Oppenheimer’s residence, Brenthurst, may have been more influential (Sampson 1999, 466, 471, 493).
In his speech as president of the Chamber of Mines in June 1993, Bobby Godsell, the mining industry’s most progressive spokesperson, and a man who had established a good relationship with the ANC and the NUM, made it clear what the Chamber expected for the country as a whole: sensible transitional arrangements, elections open to all adult South Africans, a government of national unity, and social stability; and for the mining industry: an internationally competitive tax system, low inflation, sound monetary policy, the abolition of exchange controls, and balanced budgets. The industry also looked for taxes on profits, not royalties on mineral production, and for recognition that mines were wasting assets, requiring generous tax write-offs (Godsell 1993).
Godsell cannot have been very disappointed by the legislation affecting the mining industry that was produced by the government of national unity between 1994 and 1996 and the subsequent stand-alone ANC government. The Chamber of Mines did not regard the Labour Relations Act, 1995, the Mines Health and Safety Act, 1996, the Basic Conditions of Employment Act, 1997 or the Employment Equity Act, 1998 as ideal, but it acknowledged that they represented compromise solutions to important issues (CMSA 1994–97, 2001–02). The rise of outsourcing and of the labour contractor exploited a loophole in the Labour Relations Act, which failed to define the time for which workers could be temporarily employed. It was not until 2002 that the fundamental mining law, the Mineral and Petroleum Resources Development Act (MPRDA), which effectively nationalised minerals beneath the ground, was passed into law after several years of negotiations. It did not come into force until 2004. This provided for the conversion of prospecting and mining rights from ‘old order’ to ‘new order’ titles. There was a five-year transitional period for the transfer of mining titles and a shorter time-frame of one year for mineral prospecting titles. The principle underlying this legislation in relation to titles was ‘use it, or lose it.’ It facilitated new foreign direct investment, especially by mining ‘juniors’ from Canada and Australia, and also BEE deals, some of which involved traditional authorities converting rights to royalties into equity in mining companies. Linked to the conversion of mining titles were ‘social and labour plans’, which the mining companies had to have approved by the Department of Minerals and Energy and local authorities. These related to human resource development, local economic development, and the management of downsizing and retrenchment. Also linked to this legislation, and to BEE and BBEE (Broad-Based Black Economic Empowerment), was the Broad-Based Socio-Economic Empowerment Charter, which the Chamber of Mines signed in 2002 – it was updated in 2010. The BBEE Act was passed in 2003 (CMSA 2001–02, 2003, 2004, 2010).
Among the issues to which the charter referred were: human resource development, employment equity (including the employment of women), mine community and rural development, housing and living conditions (including the conversion of single-sex mine hostels to single-person or family living quarters), and equitable procurement. In terms of BBEE legislation, targets were set for the transfer of equity in mining companies to entities representing ‘historically disadvantaged South Africans’ (HDSAs). The best known of these targets was for 26% black ownership of mining enterprises within 10 years – that is, by 2014.
Discussions on a new Mineral and Petroleum Resources Royalty Bill began in 2003, but it was not enacted until 2008 and did not come into effect until March 2010 – after the completion of the conversions of title envisaged in the earlier MPRDA. Royalties are capped at 5% for ‘refined’ products, including gold and platinum, and at 7% for ‘unrefined’ products, including coal. The act makes concessions to Godsell’s early (1993) demand and the Chamber’s later arguments – royalties are not charged at a flat rate, but are related to the profitability of individual mines (CMSA 2005–08; Strydom 2012).
Generally speaking, the ANC government has since 1996 moved cautiously in relation to the mining industry, though there have, as we shall see, been some recent glitches. The reaction of the Chamber of Mines to the MPRDA, the Mining Charter, and the BEE and BBEE provisions, was initially one of relief – that it had avoided outright nationalisation and that any transfer of equity was to be on the basis of ‘a fair price paid between willing sellers and buyers’ (CMSA 2004). In the case of less welcome legislation, such as the Royalty Act and the Immigration Act, there were long delays in their implementation. The Immigration Act was passed in 2002 and provided for the payment of a 2% levy, payable quarterly in advance, on the wages of foreign mineworkers, but its implementation was delayed for five years, during which the number of foreign workers on the mines greatly declined.
The question of nationalisation was raised again by Julius Malema and the ANC Youth League in 2010, but was rejected by the ANC itself. His advocacy of nationalisation was one among many issues that led to his suspension and then expulsion from the ANC in 2013, precipitating the formation of the Economic Freedom Fighters (EFF) as a new opposition party. The ANC continued to show little interest in nationalisation and clearly saw BEE and BBEE as preferable alternatives (CMSA 2011–13).
The industry’s main complaints over the years were about delays in bureaucratic processes, such as the conversion of titles, the approval of social and labour agreements, and the issuing of water licences (e.g. CMSA 2005–06). There have also been contested cases where the Department of Mineral Resources (previously Minerals and Energy) has taken prospecting rights from one owner and transferred them to another – most notably in the case of Kumba Resources and the Sishen iron ore body, a case which went to the Constitutional Court and which the Department lost (Allix and Rabkin 2013).
There have also recently been grumbles about proposed amendments to the MPRDA that would empower government to declare some minerals, such as coal, ‘strategic’, and about demands for further ‘beneficiation’ – the processing or manufacture of mineral products in South Africa. The amended bill was passed by the National Assembly in November 2016, but it still has to be passed by the National Council of Provinces and then signed into law by the president.
Looking at the changing legislative framework from another angle, that of the trade unions, mineworkers and local communities, many questions arise. These relate to a lack of consultation in relation to the original legislation and later amendments, and to an excessive closeness between the government and the mining industry (e.g. NUMSA 2014). There are also questions as to whether the legislation adequately addresses environmental issues, such as the control of water resources, acid water, heavy water contamination and levels of radioactivity in wetlands close to gold and uranium mines, and very high levels of atmospheric pollution, with accompanying health hazards, especially in coal-mining areas. Witbank and Middelburg are said to be among the most polluted towns in the world (Turton et al. 2006; Adler et al. 2007; Bench Marks Foundation 2014).
An adequate investigation of the environmental legacy of mining in South Africa would require another paper, but there are issues relating to the abandonment of mines and the sale of mines near the end of their lives by large companies to smaller ones that lack the resources to fund their closure. There are huge issues relating to the mining industry’s continued ability to externalise socio-economic costs, such as housing and family welfare, and environmental costs, including the emission of greenhouse gases. There are also questions relating to the ability of the Department of Mineral Resources to control the mining industry, to insist on thorough environmental impact assessments and to ensure that contracts, such as the social and labour agreements on which ‘new order’ titles depend, are carried out.5 Evidence to the Commission of Inquiry into the Marikana massacres, and the report itself, made it clear that the British mining company Lonmin, of which Cyril Ramaphosa, former NUM leader and current deputy president of South Africa, was a director, had chosen to ignore its commitments under the Mining Charter on housing for its workers, and had done so with impunity (Marikana Commission of Inquiry 2015, 527–542).
There is also the question of whether the formation of a strong trade union representing mineworkers, and the enactment of progressive labour legislation, has done much to improve the pay and working conditions of mineworkers. There are suggestions that, after initial clashes in 1986–87 with Gencor and Anglo American, the NUM became too close to the mining companies, seeking to balance improved wages and conditions of employment with the preservation of its members’ jobs in the face of the rapid contraction of the gold-mining industry, then the largest mining employer (Nattrass 1995, 863–865). Figures are scarce, but it would appear that after a long period of lower-than-inflation wages increases, median wages in the mining industry as a whole increased by about 40% between 1997 and 2007 (Gwatidzo and Benhura 2013, Table 7, 24). NUM officials, including shop stewards, were increasingly co-opted by mining companies and financed by them. There was also the emergence of what has been described as a ‘revolving door’ through which trade union and ANC leaders, such as Cyril Ramaphosa and Tokyo Sexwale, acquired mining interests (the Shanduka Group for Ramaphosa and the Mvelaphanda Group for Sexwale), creating an unhealthy closeness between the mining and political leaderships (Wikipedia 2015e; Shanduka 2015).
This created a gap that began to be filled by AMCU from 2001 onwards, though the strikers at platinum-mining companies, including Lonmin at Marikana, in 2012, acted through workers’ committees without the support of either union.6 Low wages, a work force divided between ‘permanent’ mine employees and outsourced contract workers, shocking living conditions, and debt, together with the interstitial position and peculiarly harsh working conditions of rock-drill operators, induced workers to take on the management and the police as they did in 2012, or to take on all the major platinum mines (with the support of AMCU, which came to supersede the NUM as the dominant trade union among the platinum mines) for a five-month strike in 2014 (Rajak 2012; Forrest 2014; Chinguno 2015; Sinwell 2015).
Monetary policy
Bobby Godsell’s demand for prudent economic management: low inflation, sound monetary policy, the abolition of exchange controls, tariff liberalisation and balanced budgets, was also met – at least in the short run. The replacement in 1996 of the Reconstruction and Development Programme by the government's Growth Equity and Redistribution strategy was seen by the latter’s creators – Thabo Mbeki and Joel Netshithenze – as a self-imposed structural adjustment programme, and by its critics as a step away from economic radicalism towards ‘neoliberalism’ (Macmillan 2013, 288). In the early years of the new millennium, there were suggestions from the mining industry that Mbeki’s government, with Trevor Manuel at the fiscal helm, may have gone too far in the direction of deficit reduction, low inflation and sound monetary policy. The failure of the South African mining industry to respond in the early years of the global resources boom, which lasted from 2001 to 2008, was generally attributed to the strength of the rand, which discouraged foreign investment. Legislative uncertainty and bureaucratic ‘red tape’ were also blamed, as well as infrastructural issues relating to railways and ports, and cost pressures in relation to wages (though increased labour costs were not emphasised), electricity (from 2007 onwards), as well as water and steel, but the unintended consequences of ‘prudent’, or ‘neo-liberal’, monetary policy do seem to have been decisive (CMSA 2004, 2005–06, 2007).
Emigration and globalisation of South African mining companies
The two major changes in the ownership structure of the mines in this period involved the emigration of major South African mining companies and the moves towards BEE and BBEE. Emigration and globalisation began when the Anglo American Corporation merged in 1999 with its London-based external arm, Minorco – a company with global reach that had been funded by payments from the partial nationalisation of Anglo’s Zambian copper assets in 1970–73. The new company, Anglo American plc, had its primary listing in London and a secondary listing in Johannesburg. Its gold-mining operations were spun off into the separate AngloGold Corporation, initially a subsidiary, which in 2004 merged with Ashanti Goldfields to form the British-based AngloGold Ashanti plc. Anglo American reduced its stake in the latter company to 16.6% in 2008 and sold out completely in 2009. Anglo American plc retained majority control of its platinum and coal subsidiaries, Anglo Platinum (Amplats) and Anglo Coal, which were both the largest companies in their sectors within South Africa, though with additional global assets (Minorco 1998; Wikipedia 2015a).
The London listing of Anglo involved the unbundling of non-mining assets (such as Mondi Paper) and the dismantling of the complex structures that had enabled the Oppenheimer family to control both Anglo and De Beers from the mid 1920s, despite having only a minority interest in both companies. In 2001 De Beers was delisted from all stock exchanges and became a private company with its headquarters in Luxembourg – it later moved to Singapore – and with tripartite ownership: Anglo, 45%, the Oppenheimer family, 40% and the government of Botswana, 15%. De Beers was itself in transition as it was compelled in the 1990s to abandon the attempt to monopolise the sale of rough diamonds through the London-based Central Selling Organisation. It controlled 90% of this market in the 1980s, but only 33% by 2013. In 2011–12 the Oppenheimer family withdrew from the business, selling its stake to Anglo for $5.1 billion (Bloomberg 2011; De Beers 2015).
Gencor, a company with its roots in Afrikaner nationalism, had emerged in two stages: the Anglo American-backed takeover by Federale Mynbou of General Mining in 1964, and the latter’s takeover in 1980 of Union Corporation with the backing of the insurance giant Sanlam and Anton Rupert’s Rembrandt Group (Jones 1995). The merged company, Gencor, acquired Billiton from Royal Dutch/Shell in 1994 and, three years later, set it up as Billiton plc, an offshore holding company with a primary listing in London. Gencor’s remaining South African assets included Impala Platinum (Implats), which became a separate company – the world’s second largest platinum company, in which the Royal Bafokeng Nation acquired a 13% stake. A proposed merger between Implats and the mining assets of Lonrho, then controlled by the maverick magnate Tiny Rowland, was blocked in 1995 by the European Union. Lonmin emerged in 1998–99 to take over the platinum and coal assets of Lonrho. It is primarily listed in London, but has its headquarters in Johannesburg. In 2001 Billiton plc merged with Broken Hill Proprietary Mines to form BHP Billiton. This dual-listed Anglo-Australian company eventually became the world’s largest mining company (Wikipedia 2015b; Implats 2015). In 2015 it placed many of its non-core mining assets, including some of its South African mines, into a new company, South32, which has its headquarters in Australia and is listed in London and Johannesburg (South32 2015).
Gencor itself, with its remaining gold-mining assets, was merged with Gold Fields of South Africa in 1998 to become Gold Fields Limited, a global gold-mining company with a primary listing in Johannesburg. In 2012 Gold Fields decided to specialise in mechanised mining operations with open-pit and shallow underground mines in Australia, Ghana and Peru as well as the mechanised South Deep project in South Africa. In November 2012 it announced that the ‘mature’, underground Kloof, Driefontein and Beatrix mines in South Africa would be unbundled into a new company, Sibanye Gold, which was listed separately on the Johannesburg and New York stock exchanges in February 2013. Neal Froneman, the chief executive of Sibanye Gold, said that the mines had been unbundled because they were ‘deep, high-risk, labour-intensive operations’. He rejected Gold Fields’s rationale for disposal: that ‘these mines had to be high risk because of the deep ore bodies and had to be inefficient because of our labour regime' (Herbst and Mills 2015, 179–181). The mines were rapidly turned around and Sibanye Gold became in 2014 South Africa’s largest single gold producer. In September 2015 Sibanye announced its intention of taking over Amplats’s Rustenburg platinum interests. As of October 2016 the deal had not been concluded, but Amplats expected completion by the end of the year. Sibanye was making a bid to become South Africa’s ‘mining champion’ in response to a government demand for a strong locally based mining company (Gold Fields 2014; Amplats 2015; M. Creamer 2015c).
It is an open question whether the emigration and globalisation of South African mining companies had a significant impact on levels of investment within South Africa. In theory, emigration was supposed to make it easier for companies to raise foreign investment, and the diversification of investment to other countries may have been beneficial to companies that retained their primary base in South Africa, but there have also been suggestions that capital flight, usually managed through over- or under-invoicing and the sale of minerals to overseas subsidiaries, has increased in the post-apartheid period, allegedly reaching its peak at the height point of the mining cycle in 2007 (Ashman, Fine, and Newman 2011; Forslund 2015b).
Black Economic Empowerment (BEE)
There had been some voluntary moves towards the creation of black-owned mining companies for some years prior to the legislation that made it mandatory. This began with Anglo American’s unbundling of JCI (Johannesburg Consolidated Industries) in 1995 in a strategy similar to its transfer of Gencor to Afrikaner nationalist capital in 1948. Rustenburg Platinum was transferred from JCI to a new company, Anglo American Platinum (Amplats), while its property and finance interests were hived off, leaving the remaining mining assets of the company as a black empowerment (not yet BEE) vehicle chaired by Mzi Khumalo (Wikipedia 2015c). Some of Anglo’s coal assets were sold in 1999 to a new black-owned company, Eyesizwe. In 2001, the coal and iron ore-mining assets of ISCOR, the parastatal steel company, were unbundled into Kumba Resources, and in 2006, Kumba’s coal assets were brought together with Eyesizwe’s to form Exxaro, the largest HDSA-controlled coal-mining company. This was in 2013 the fourth largest coal producer, after Anglo Coal, Glencore (which had taken over Xstrata and the Optimum mine) and Sasol. Exxaro also owns 20% of Anglo-controlled Kumba Iron Ore (Exxaro 2015; Statistics South Africa 2015). AngloGold facilitated the emergence of Patrice Motsepe’s African Rainbow Minerals (ARM) through the sale to it in 1997 of non-core gold-mining assets on advantageous financial terms. In 2004 Motsepe took control from the Mennell family of Avmin, which had earlier inherited the mining assets of Anglovaal. The new ARM had a minority stake in Harmony Gold, of which Mostepe, said to be South Africa’s richest black man, became, and remains, chairman (T. Creamer 2004; Harmony 2015; Wikipedia 2015d).
In 2002, the Chamber of Mines reckoned that mining assets worth R8.4 billion, including 10% of gold mines and 8.5% of coal mines, had been transferred to ‘historically disadvantaged’ owners (CMSA 2002). In May 2015 the Chamber claimed, on the basis of an analysis of most of its members, that BEE participation had reached or exceeded the 26% target and that at the end of 2014 ‘meaningful economic empowerment participation’ in the mining industry by HDSAs had reached an average of 38% with a net value transfer of R159 billion – in spite of the world financial crisis of 2008 and the subsequent decline in commodity prices. There had been BEE investments over the period 2002–14 with an initial value of R116 billion, more than half of which was funded by debt – usually loans from the company involved. The figure of R159 billion represented the current net value of the investments after allowing for debt. The Chamber reckoned that 63% of transfers were to BEE entrepreneurs through 44 BEE companies, 22% of transfers were to local communities (with a total of 6.9 million members) and 15% were to employees (about 210,000 people). The highest level of BEE participation was in the coal-mining sector with 47.2% (a good deal of it in small companies). This was followed by PGMs with 38%, iron ore with 35.7%, gold with 27.3% and diamonds with 26%. The Chamber disputed the Department of Mineral Resources’ contention that for a company to be BEE compliant, it had to have transferred value to each of these three categories. On that basis, only 41% of its members were compliant (CMSA 2015).
The Chamber’s self-justifying, and possibly tendentious, statement did include some qualifications: that in so far as BEE deals were dependent on loans to be repaid from dividends, they were subject to market volatility; that lock-in provisions had prevented beneficiaries from selling at the height of the market; and that deals done at the height of the commodity cycle may have involved unsustainable levels of debt. It is clear that for these reasons many BEE transactions have failed. There was a suggestion in August 2015 that the 9% share-holding in Lonmin held by Cyril Ramaphosa’s Shanduka Group might fall into this category and be almost worthless. It was carried out at the top of the market and funded by a loan from Lonmin – the value of Lonmin shares fell by over 75% between June and September 2015 (Sergeant 2015, 10–11).
It is probably for reasons such as these that there is now an ongoing, and still unresolved (November 2016), dispute between the Chamber of Mines and the Department of Mineral Resources about BEE, revolving around the question ‘Is once empowered, always empowered?’ The Department has taken the position that if BEE transactions fail or shareholders sell their shares to people or entities that are not HDSAs, the 26% black ownership proportion has to be topped up. A Chamber of Mines spokesman asserted that if this view was sustained, it would affect five of the largest mining companies in South Africa, including AngloGold Ashanti, Amplats, Goldfields and Sibanye. It would ‘force mining companies to perpetually dilute other shareholders if the required BEE partners cannot be found in the open market … The consequences will be a shareholder revolt, divestment from companies and a significant constraint to raise capital’ (Seccombe 2015).
The vicissitudes of commodities
This paper, so far, has attempted to provide an overview of aspects of the history of mining in South Africa over the last 30 years that can be said to have been influenced by government policy, or the lack of it, and of negotiation between the government and the mining companies. There are, however, some changes in the nature of mining in South Africa, such as the fall of gold and the rise, and now, perhaps, the fall, of the PGMs, or the rise and possible decline of coal, which are dependent on world prices and the availability, or exhaustion, of South African reserves. This section of the paper seeks to provide an overview of the vicissitudes of the mining industry in terms of the trajectories of the major mineral commodities. (See Figure 1 for the contribution of different mineral commodities to mining production for the period 1993 to 2013.)
Percentage contribution of mineral commodities to mining production. http://www.statssa.gov.za/wp-content/uploads/2015/06/percentage-contribution-of-mineral-production.png.
Gold
The fall in gold production would in all probability have occurred as a result of the exhaustion of easily accessible reserves, regardless of local political, legislative or fiscal changes – though fiscal policies may have influenced exchange rates and levels of foreign investment. South African gold production peaked in 1970 at just over 1000 metric tons per annum – about 70% of world production, though the figures for production in the USSR were then uncertain. Output was still close to 1000 tons – about 962 tons – in 1980. By 1986, output had fallen to 640 tons – it was still just over 600 tons at the end of the decade, during which production from the United States, Australia and Canada greatly increased.
The decline in gold production that began in the early 1980s was attributed to a variety of factors including the exhaustion of older mines, and the need to sink very deep shafts and to work in some mines at depths of 4000 metres and more by the 1990s, with average grades that declined from 13 grams per ton in the 1970s to 5.2 grams in 1991, 5 grams in 2000 and less than 3 grams in 2011 (CMSA n.d.). The milling of old tailings – mine dumps – contributed to declining grades with the consequence that tons milled tended to increase as production declined. Higher-than-inflation increases in labour costs sometimes put pressure on profits, but there were lower-than-inflation wage increases in wages in the crisis years of the early 1990s as the NUM co-operated in an attempt to slow down job losses. The sell-off of gold reserves by central banks in 1992 contributed to a 45% drop in the rand price and was the cause of radical restructuring. Gold mines belonging to the Chamber of Mines shed more than 150,000 jobs between 1987 and 1993 – the total number of employees fell from 518,000 to 366,000 in those years (Godsell 1993).
South African production fell below 600 tons for the first time in 1994, below 500 tons in 1996 and below 400 tons in 2000–01. By that time, employment on the Chamber’s gold mines had fallen below 200,000. Gold production fell below 300 tons for the first time in 2005, by which time the work force was down to 160,000. Production in 2008 of 254 tons was the lowest since 1922, the year of the Rand Rebellion. By 2013, production had fallen to 167 tons and employment was down to 132,000. Levels of production and employment had fallen more or less in parallel since the 1980s – an indication that there was little change in the labour intensity of production methods (Statistics South Africa 2015, 55–57).
The dollar price of gold had peaked at $614 an ounce in 1980 and had averaged between $300–400 for much of the 1980s and 1990s, falling to $252 after IMF and British sales in 1999. It did not return to 1980 levels until 2007 and then peaked at $1100 in 2008 and $1921 in September 2011. But by that time the South African industry was unable to respond and production has continued to decline.
South Africa was overtaken by China as the world’s largest gold producer in 2007. By 2012 South Africa ranked sixth after China, Australia, the USA, Russia and Peru, producing only 5.8% of world supply. By one projection South African gold production would fall to 80 tons in 2020 with a work force of 55,000. The number of years to resource depletion was estimated in 2003 at 22 years and in 2012 at 39 years – the difference being largely a factor of price. In 2013 gold ranked fourth after coal, PGMs and iron ore in terms of its contribution to South Africa’s GDP. Production of iron ore had nearly doubled between 2004 and 2013 and the value of production had multiplied tenfold in rand terms, though prices fell back dramatically in 2014–15 (Ibid., 18, 37).
The remarkable thing about this story of decline in the gold-mining industry is that, while there has been substantial investment in ultra-deep mega-mines, such as AngloGold Ashanti’s Tau Tona mine on the West Rand, there seems to have been little change in the last 30 years in the labour-intensive techniques of underground mining that have been employed for over a century.
It was only in 2010 that AngloGold began to introduce new mechanical cutting technology at some of its mines, including Tau Tona. While this may not be suitable for all ore bodies, it can, according to one source, be a ‘game-changer’ that
puts an end to blasting, creates peopleless stopes and allows year round, around-the-clock continuous mining … it targets mining all the gold, only the gold, all the time by putting an end to 40% of the gold being left behind in pillars … and mining taking place in only 75% of the available shifts. (M. Creamer 2015a)
The PGMs7
South African deposits of PGMs – platinum, palladium, rhodium and three others – are unusual in that they are found together in relatively high concentrations and are not only found as by-products of other metals, such as copper and nickel. Platinum has been mined in the Rustenburg area since the 1920s, but it is only since 1969 that the complex refining process has been undertaken in the country – it was previously done in the United Kingdom. Demand for platinum began to take off in the 1970s when large motor manufacturers, such as General Motors, began to use it in catalytic converters as a way of reducing exhaust emissions and pollution (Davenport 2014).
In 1985 the value of PGMs produced in South Africa ranked third after gold and coal. Production was then about 122 metric tons with an average price for platinum of $270 an ounce. Production expanded rapidly, reaching 176 tons in 1993 and 309 tons in 2006. By 2008, the value of production had reached R91 billion, falling back to R58 billion, with production of 271 tons, in 2009. The significant increase in the rand value of production in these years resulted from higher output, rand devaluation and higher dollar prices. The price of platinum peaked at over $2000 an ounce in March 2008 and averaged $1200 in the first half of the latter year. Production of PGMs in 2012 was 254 tons with a rand value of R114 billion – falling back to R84 billion in 2013.
The value of production of PGMs overtook gold for the first time in 2001 and did so once again in 2003, remaining higher ever since. The number of employees on platinum mines, which was 91,000 in 1995, had overtaken the number employed on gold mines by 2007, reaching 186,000 in that year. The rapid growth of the work force was facilitated by the outsourcing of labour. In 2007 it was estimated that 42% of Amplats’s work force was outsourced, a much larger proportion than on Anglo’s gold mines (Bench Marks 2007, 44). Output of PGMs peaked in 2006–07, but employment levels peaked in 2012 at 198,000. Productivity – the value of production per employee – peaked on the gold mines in 1999 and on the platinum mines in 2001 (CMSA 2014). The decline in productivity after 2001 appears to have been linked to a decline in average ore grades. The strikes between 2012 and 2014 prompted moves towards the mechanisation of underground mining. In 2015 Amplats was planning to focus on high-quality mines with low-cost production methods, both opencast and underground. Underground mines would use ‘low-profile, extra-low-profile, and ultra-low-profile’ mining equipment, capable of working in stope heights of less than 1.2 metres (Amplats 2015) This would result in declining levels of employment – a process that was accelerated by the collapse of platinum prices in 2014–15, which has made many mines loss-making. The scale of platinum mining in terms of its contribution to GDP, and number of employees, was never comparable with that of gold at its peak. By 2013 coal had overtaken the PGMs in terms of the value of production, though not of exports.
Coal
In 1985 South African gold mines produced 173 million metric tons of marketable coal worth R5.6 billion and exported 44 million tons. Exports grew rapidly after the oil price crisis in 1973, but price controls were only dropped in 1986 and export permits were required until 1991. There are conflicting figures, but employment in coal mines appears to have peaked at about 100,000 in 1980 and fell gradually to a low of just over 50,000 in 2003, rising again to 72,000 in 2009 (including about 30,000 people employed by contractors) and 88,000 in 2014 (Eberhard 2011; CMSA 2014; Statistics South Africa 2015, 30–34, 52). Productivity increased from about 898 tons per man/year in 1980 to 3344 tons in 1995 and peaked at around 5000 tons in 2003.8 It had fallen back to 3100 tons by 2012. The rapid increases in productivity between 1980 and 2000 were achieved through mechanisation of underground mining and an increasing proportion of opencast mining. In 2012 slightly more coal came from opencast than from underground mines. The value of coal production at R65 billion exceeded that of PGMs (R58 billion) and gold (R49 billion) for the first time in 2009. Production in 2012 of 259 million tons was worth R104 billion. There had been a fairly rapid growth in the capacity of the privately owned Richard’s Bay Coal Terminal from 12 million tons in 1976 to 76 million tons in 2008, but the growth of exports was constrained by infrastructural problems, including a lack of capacity on the state-owned railways and on the roads (Eberhard 2011).
Coal and electricity
There is a very close relationship between the coal-mining industry and the electricity and liquid fuel sectors. Eskom accounts for 70% of domestic coal consumption and 93% of South Africa’s electricity comes from coal-fired power stations. Liquid fuel from Sasol accounts for 30% of that market. There is an equally close link between the viability of the mining industry as a whole and the availability of cheap electricity – continuous power is needed for water-pumping and the ventilation of underground mines whether or not they are actually producing. While commenting with satisfaction as late as 2007 on South Africa’s reliable supply of cheap electricity, the Chamber of Mines had been warning for several years that there was an impending crisis, which was attributed to a government decision in 1998, when Eskom became a public corporation, that it should not be allowed to invest in new power-generating capacity. This was to be left to the private sector, but state-controlled electricity prices meant that this was not an attractive prospect for private capital. This policy was reversed in 2004, but a long delay had occurred, which has been compounded by industrial action as a result of which new projects, such as Medupi, have so far failed to come on stream. The electricity crisis in January 2008, which caused many mines to reduce output, was also attributed to the mismanagement by Eskom of its supply contracts. More recently, there have been predictions that Eskom will meet a further crisis in 2018 when most of its existing contracts come to an end (CMSA 2004–08; Eberhard 2011). The political ramifications of the links between coal production and power generation have recently been vividly demonstrated by the report by the outgoing public protector, Thuli Madonsela, in ‘State of capture’, with its detailed account of the relationship between Escom, Glencore, Gupta-controlled companies and the Zuma family in relation to Glencore’s apparently forced sale of the Optimum mine (Madonsela 2016).
Diamonds
Although there were dramatic changes in the way the global diamond market worked from the late 1980s onwards, diamond mining in South Africa has remained relatively stable. De Beers continues to dominate the sector with about 70% of local production, the bulk of that coming from its Venetia mine in Limpopo Province. This was opened in 1992 – the sinking of two new thousand-metre shafts was begun in 2013 with the intention of extending the life of the mine to 2043. The new shafts will use largely robotic systems of mining the Kimberlite pipes from below and are expected to increase productivity by 30%. De Beers has facilitated the emergence of one new independent diamond-mining company, Petra Diamonds, through the sale to it of non-core assets such as the Cullinan and Kimberley (underground) mines (Herbst and Mills 2015, 133–135; Petra 2015).
Conclusion
The decline over the last 30 years in the contribution of mining to the gross national product, and the loss of low-paid jobs performed by unskilled, semi-skilled, and often illiterate, migrant workers, doing back-breaking work in deep-level mines, with long hours, high risks of death or injury through accidents and even higher risks of acquiring debilitating industrial diseases, can only be welcomed. Mechanisation has transformed coal mining, and there has been some mechanisation of gold, platinum and diamond production, but it is open to question whether the full mechanisation of the mining of the deep-level and thin-vein ore bodies, in which gold and the PGMs are commonly found, is possible. Opencast mining is now dominant in the coal sector, and increasingly common, in conjunction with underground mining, in the PGMs and in diamonds, but it has high social and environmental costs. These include the removal of many people from large areas of communal land in Northwestern province, and of commercial farmers in Mpumalanga and KwaZulu-Natal (Stewart 2015).
Since 1994 the South African government has treated mining with caution. The Chamber of Mines complains about bureaucratic interventions, which it labels ‘red tape’, and it is possible that this has had some deterrent effect on investment, but the industry counts itself fortunate to have avoided outright nationalisation. It can live with Black Economic Empowerment, though it has resorted to the courts on the issue of ‘once empowered, always empowered’, and there are some grumbles about the new amendments to the MPRDA. There have been changes in the characteristics of mining capital with the emigration of companies, the unbundling of old established groups, the rise of black-owned companies and the arrival of some new foreign investment, but there has been no fundamental change in the relationship between mining capital and the state.
The Marikana report makes it clear that the Department of Mineral Resources has failed to ensure the implementation of undertakings in relation to housing that were imposed as conditions for the issue of ‘new order’ licences. Responsibility for the failure to manage the transition from the migrant labour system to one where the majority of miners see themselves, and are seen by their employers, as permanently employed, even if their homes are elsewhere, must be shared between the government, the mining companies and local authorities. The government has neither insisted on proper housing, nor facilitated this through the provision of land and proclaimed townships. The mining companies have, in spite of promises, failed to provide for the housing and welfare of all their workers and their families.