Authors: Alex Josey
Gold mining in South Africa is one of the
world’s toughest jobs. Most miners are blacks, working in arduous conditions,
1,800 metres underground, the temperature at times climbing past 25 degrees
centigrade despite huge air-conditioning plants. The Kinross Gold mine, about
100 kilometres outside Johannesburg, lies at the extreme edge of a giant 500
kilometres semi-circle where thousands of miners mine seven veins in the
world’s richest gold-bearing basin. The world’s biggest gold mine, Vaal Reefs,
150 kilometres southwest of Johannesburg, employs 41,000 workers, most of them
blacks. Altogether, about 430,000 Africans work in South Africa’s mines, most
of them in the gold operations which need the most labour. The average salary
is US$180 a month plus food and lodgings. A study by the main mining group, the
Anglo-American Corporation, described the life of the black miners as being
marked by ‘degradation, humiliation, corruption and sexual blackmail’.
An ILO report in 1978 said South Africa’s
black gold mine labourers were ‘living under prison-like conditions’. The gold
miners, said the report, ‘are subjected to almost unbearable conditions of
confinement, heat, noise and dust, making for an inevitably high accident
rate’. South Africa was expelled from the ILO in 1964.
The South African gold mines are believed to
go back perhaps 2,500 million years. Geological evidence has led experts to
believe that when the earth was young and the continents still unsettled,
nature’s forces—pressure, heat, cold and storms of unimaginable
violence—scoured from mountains debris containing gold which was carried by
glaciers and rivers to a great inland sea which was formed in what is now the
Transvaal high level. The gold washed down and settled in successive layers of
pebbles along the shore of this inland lake. Over a period of millions of years
this basin which must have been about as big as the Caspian Sea, silted up.
Extremes of climate over successive ages caused the land surface to buckle and
change. The gold, which Nature had collected and tidily stored in one place,
was embedded in rock that today dips from the earth’s surface to perhaps eight
kilometres or more below ground.
Today, South African gold miners are
venturing more than 3.2 kilometres into the earth’s crust—deeper than any man
has gone before. More than a quarter of a million men go underground each
working day into the complex mines beneath the veld. To get about 800 metric
tons of gold in a year the South African gold miners blast, haul to the surface
and crush, about 80 million metric tons of rock. The result is about 0.28 cubic
metres of gold.
Although South Africa produces most of the
world’s gold it is not the richest nation in the world. There are about 4
million white South Africans and they receive 75 per cent of the national
income (the 20 million black South Africans sharing the rest) and their living
standards rank with the world’s elite of Germans, Canadians and Swedes. The
black South African’s standard of living has been compared to that of the
better-off developing countries, like Malaysia and Zambia.
South Africa’s gold revenue surplus in 1979
came to over US$400 million.
Until 1920, South African gold was refined
in London. Since then it has been refined at Germiston near Johannesburg, by
the Rand Refinery, owned by the South African Chamber of Mines.
Mine bullion reaches the refinery in
1,000-ounce bars containing about 88 per cent gold, about 10 per cent silver
and a residue of copper, lead and zinc. It is refined by a chlorine process
which skims off the other metals to produce standard delivery bars with a gold
content of at least 88.5 per cent and a pure gold weight of 400 troy ounces. A
small amount of gold is electrolytically refined to an even greater purity of
99.99 per cent for some industrial uses (and all Russian gold is thus refined
and recognizable).
The South African gold mining industry is an
oligopoly domi-nated by seven mining groups working through the South African
Chamber of Mines. The mines of the seven groups produce 99 per cent of South
Africa’s gold, all of its uranium, 80 per cent of South Africa’s coal and most
of its diamonds.
In 1976 the first shafts were sunk at South
Africa’s newest gold mine near Carletonville. It is expected to have a life of
about 34 years and produce 800 tonnes of gold. It is expected to be operating
by 1981.
The gold world is surrounded by a cloak of
self-perpetuating secrecy, making accurate figures of supply and demand
difficult to come by. This difficulty is accentuated when it comes to
attempting to assess production and sales of the communist countries. The flow
of gold from Russia and other communist countries tends to follow economic
circles and sales coincide with needs for foreign currency for imported capital
equipment, or to buy grain to offset a bad harvest. In the opinion of experts
the Russians use the world gold market well and do not seek to depress the
market for political reasons.
Russia last published information about the
Soviet Union’s output of gold in 1935. The figures then were production, 150
tons; reserves, 745 tons. Since then a total of just under 3,000 tons were sold
to the West over 13 years to 1965, when sales were made every year building up
from a modest 70 tons a year at the beginning of that period to 1,400 tons
annually in the three final years. Then followed an interval of six years in
which there was nothing beyond some token sales. From 1973 to 1975, Russian
sales averaged over 200 tons a year. Experts guess that Russian production is
about 400 tons a year, with present reserves of 2,700 tons. The three biggest
mining groups are Severovostokzoloto, Yakutzoloto and Zaibakalzoloto.
In 1980, Consolidated Gold Fields estimated
Russian gold production to be in the range of 280 to 350 tonnes a year. By
contrast, South Africa, which mines about half the world’s gold, produced 706.4
tonnes in 1978.
In 1976, 1977 and 1978, the Soviet Union
sold more than 400 tonnes to the West; in 1979 about 220 tonnes.
In 1980, Russia’s gold production was
expected to rise. Two main mines had been identified, partly by satellites and
partly through intelligence from defectors such as Colonel Penkovsky. One of
these mines, Muruntau, in southwest Soviet Union, is thought to produce about
80 tonnes a year. This would make it the biggest gold mine in the world, the
next being Vaal Reefs, the Anglo-American mine at Klerksdorp in the western
Transvaal, which produced 67 tonnes in 1978. The other identified Russian gold
mine is at Zod, quite close to the Turkish border. This is much smaller. In
combination with other deposits in the vicinity it is estimated to produce 10
tonnes a year. Both Muruntau and Zod are mainly open-pit workings, though
underground reserves are also thought to be extensive. Muruntau, in particular,
may look forward to a long life. About 60 tonnes a year come from copper ore
mines and zinc mines. The balance of estimated production is provided by the
older mines in Siberia where the output is believed to be falling.
Russian gold reserves are thought to be
enormous. In 1934, Russian officials put the figure at 3,500 tonnes. Geologic
reserves are also considerable.
China produces perhaps 50 tonnes a year, the
third biggest gold producer in the world, on par with Canada.
In 1976, it was estimated that perhaps 300
tonnes of gold were sold from communist countries, including 80 tonnes from
China.
In 1980, it was reported that China intended
to develop three gold mines with estimated reserves of 200 tons of gold in east
China’s Shandong province. American and Canadian companies were to help.
Although the
British economist J.M. Keynes called gold a ‘barbarous
relic’,
ordinary people the world over (as well as many bankers), still see gold as a
sheet anchor against devaluations, insecure currencies and the hazards of war.
It is estimated that throughout history,
between 80,000 to 90,000 tonnes of gold have been mined, slightly less than
half of which is held in official monetary stocks either by central banks, the
International Monetary Fund (IMF) or the Bank for International Settlement. The
USA is believed to have 8,500 tonnes, IMF 5,000 tonnes, West Germany 3,650
tonnes and France over 3,000 tonnes. The rest exists in the form of jewellery
or contained in commercial products or forms part of the large private stock of
bullion held for investment purposes. Investment gold in private hands is
estimated to be around 20,000 tonnes. Much of the private gold in France
(one-fourth of the world’s privately owned gold stock of $15 billion) is
reputed to be buried in gardens, hidden under mattresses or in clothes closets,
while 4,000 tonnes of gold are believed to have been converted into jewellery
in India, much of it illicitly.
Many Vietnamese refugees in the 1970s
escaped with enough gold to establish a new life in America. It would be
difficult to persuade the boat people that they were wrong to abandon the now
worthless South Vietnamese piastre.
India has been described as the ‘eternal
sink of gold’. Indians venerate gold as a sacred symbol of the Indian goddess
of wealth and treat it as an essential ingredient in almost every social
ritual. A child is given gold at its birth and the bride receives gold as her
personal property when she gets married. As a status symbol, gold has no
rivals. Most of all, gold is valued in India, as elsewhere, as a sure hedge
against inflation. Gold has become an indispensable possession for every Indian
family. Even the poorest hoard it. India has little gold of its own and since
1947, the government has banned all gold imports. At once, the gold smugglers
moved in. Dubai, on the Persian Gulf, has become one of the most important gold
trading centres in the world regularly used by smugglers shipping millions of
dollars worth of gold bars from Europe to India and Pakistan. Dubai imported
259 tons of gold in 1970: only a fraction of that remained in Dubai, the rest
was quickly exported. The smugglers’ launches are indistinguishable from
thousands of genuine fishing boats operating off India’s immensely long and
open coastline.
Among the oldest pieces of gold jewellery is
the funeral mask of Tutankhamen (1400
bce
).
It was discovered by Howard Carter in 1922. It is now in Cairo Museum with many
other fabulous gold items.
Among the most renowned, modern pieces of
gold jewellery is the Prince of Wales’ investiture crown. It is of solid
22-carat gold. Originally, it was hoped to have it made entirely of Welsh gold
but there was not sufficient available.
As part of a campaign to eliminate gold’s
official monetary role, the International Monetary Fund in September 1975
abolished the official price of gold, and decided to dispose of one-third of
its stock. Half this amount would be returned to member countries in proportion
to their IMF quotas, the rest to be sold on the free market. The difference
between the official price, US$42.22 per ounce, and the price at which the gold
was sold would be used for the benefit of developing countries.
At the first auction in 1976, the IMF sold
121 tonnes of gold. After early unease and some drastic price weakness, the
market absorbed the IMF supplies with some equanimity.
In 1976, USA produced 32 tonnes of gold—3.2
per cent of the free world’s gold output that year. USA is the world’s largest
industrial market for gold, absorbing between 10–20 per cent of the world’s
supply.
In 1975, American citizens were allowed to
buy gold coins.
An American news agency report from London
in 1980 quoted Hill Samuel’s gold expert, Julian Philips, as saying that Saudi
Arabia planned to build up its gold reserves to US$8.8 billion by the end of
1980 and then by a further $3.05 billion a year. According to him the first
purchases, totalling 3,000 tons, took place between 15 July and 12 September
1979. Most of these purchases probably came from the Soviet Union.
William Rees-Mogg, editor of
The
Times
, is among those who firmly believe in gold. He argues that
in circumstances of instability, the attraction of gold as an investment is
greatly increased. Gold has a unique combination of qualities. It is a real
asset in the same way as other commodities, or land, or buildings, are real
assets. It does not depend for its value on credit or on estimates of its
future earning power. Gold is at the same time a liquid asset. It is possible
in almost all circumstances to change gold into money or into other kinds of
money, at an hour’s notice; and in extreme circumstances, gold can be used to
purchase other goods when money is not acceptable. Gold is, therefore, the only
investment which is almost 100 per cent real and almost 100 per cent liquid.
The classical argument against gold as an
investment is that it does not produce any income. In a period of price
stability this is a serious argument for confining investment in gold to a
small proportion of the total assets of an individual or of the reserves of a
nation.
Gold, insists Rees-Mogg, is the only
investment which has the virtues of cash and the virtues of reality.
M.S. Mendelsohn, a British economist, is an
opponent of gold. He points out that the use of gold as money went through four
important stages. The first, lasting about 2,000 years to the late 17th
century, was the era of the king’s money. Citizens brought the precious metal to
licensed moneyers who minted it, kept a small charge for themselves and passed
on seigneurage to the king for the use of the royal dies which gave the coins
their face value. The second and most renowned phase was the full gold standard
which prevailed in Britain during the century to 1914, and in the wider world
for the past forty years of that period. Official mints coined all gold brought
to them free of charge; all paper currency was convertible into gold at face
value; and the full freedom to import and export gold, which was an essential
part of the system, provided equilibrium between countries, though less
automatically in practice than in theory as it was customary for national banks
to cheat by borrowing gold from each other whenever a drain threatened unduly
harsh repercussions.