While the increases in the price of gold received by the South African mines are well known, any analysis of the fundamental position of these mines must also take account of their steadily rising production costs. Chief among these cost factors have been substantial increases in wages and salaries.
According to a report of the South African Reserve Bank,
Average salaries and wages of employees in the gold mining industry increased by no less than 32.5% during the three quarters to March 31, 1974, compared with a corresponding period a year ago. It increased only by 10.9% in [the period] 1972-73.
The increases in the average remuneration of black employees were substantially higher…that is 44.5% and 25.1% during the respective periods.
The South African mines have traditionally been labor intensive. Recent figures place the total work force at around 670,000 men, of whom perhaps 10% are classed as skilled labor. This division is largely along racial lines, Apartheid having been instituted largely at the behest of the white unions which wished to exclude the Bantu from competition for the higher-paying jobs. The economic function of these arrangements is indicated by the fact that the white unions have been willing to allow upgrading of black labor in exchange for larger white wage settlements.
South Africa has for a number of years been plagued by a shortage of skilled labor, a situation which has enabled the white workers to force up their wages substantially. As indicated above, of course, a certain part of that scarcity is artificially induced by the racial laws. As a consequence, the mine operators have been active in seeking to ease Apartheid's restrictions on their ability to upgrade their Bantu workers.
There has recently been concern in Johannesburg that there might be a serious contraction in the availability of black labor, the greatest part of whom are drawn from outside the Republic and attracted by the higher wages offered by the mines.
The government of Malawi, for example, has recently forbidden recruitment of blacks in that country as a result of an aircraft crash which killed 70 black mine workers. A potentially more serious problem may be posed by the leftist take-over in Mozambique, a state which currently provides 30% of the mines' black work force.
However, any interference with the flow of workers into South Africa would be very costly to the new regime since the wages sent home by these workers are of great importance to the stability of the Mozambique economy.
For their part, the management of the mines are acting to reduce their dependence on labor intensive procedures. Mechanization is being introduced at many stages and training programs are being used to increase the productivity of labor. The mines are also reassessing their labor utilization. For example, pipes and ventilation ducts are no longer reclaimed from worked out shafts if it is determined that the old equipment could be abandoned and new equipment purchased and installed more economically. In addition, experiments with automatic ore sorting equipment have proven profitable in resorting dump rock and it is believed that in due course they can be used to sort mine run ore. The Chamber of Mines has also been very active over the years in developing new equipment specifically designed for conditions in the South African mines. This research has even extended to the development of the so-called microclimate jacket which has led to a marked improvement in work performance in the high temperature environment of the deep mines.
In what is likely in part a result of these efforts, the above-cited report by the South African Reserve Bank states that though the quantity of ore mined increased significantly, the number of people employed in the gold mining industry had declined during the past year.
One commentator, G.M. Thain, who reports regularly from Johannesburg on the mining situation, states that even though the mining men there acknowledge that production could be adversely affected by labor shortages in the medium term, many consider that the industry could well emerge with much greater production based on a total black labor force of something like 50% of that at present.
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Although the liberal media in the West, like the communist-controlled press in the East, paint the racial situation in South Africa in melodramatic terms, civil disorder does not appear imminent. It should be recalled that the Sharpsville riots, which were supposed to herald a great interracial bloodbath which would finally see the Boers swept into the sea by the aroused forces of New Africa, took place almost 15 years ago. Since that time there has been little internal disorder, despite a few "red scares" by the white Nationalist government. Recent disturbances at certain of the mines seem to have been of an inter-tribal, rather than interracial, character.
It should not be overlooked, of course, that the recent ascent to power of an apparently leftist regime in Mozambique may presage increased guerrilla activity against South Africa from bases in that country. To the extent that these guerrillas may pose the threat of a spectacular blow against some individual mine (and recall that many of these mines are peculiarly susceptible to flooding), an investor may prefer to spread his risk through investment in mining trusts rather than individual mines. How serious this threat may actually be is hard to assess, particularly given Mozambique's aforementioned economic stake in the wages generated by the South African mines.
Davis Keeler's Money column alternates monthly in REASON with John J. Pierce's Science Fiction column. Copyright 1975 Davis E. Keeler.
• "Labor Shortages Constitute Major Problem," Northern Miner (Toronto), Sept 26, 1974.
• "Mines Aim to Get Along with Fewer Workers," Ibid, Oct. 17, 1974.
• "New Mining Techniques," South African Digest (Johannesburg), Oct. 18, 1974.
• "New Mining Techniques," Mining Survey No. 68, Chamber of Mines, Johannesburg.
• Annual Report 1973, Western Deep Levels Ltd., Johannesburg (1974).
• The Mining Journal, London, Aug. 1974.