“The history of gold for a century after 1886 is the history of South Africa. More gold was mined in South Africa than anywhere else on earth, approximately one-third of all gold extracted in human history came from the country. This dominance has few parallels in commodity history. It’s hard to imagine the region’s recent history without gold but soon we will not need the power of imagination. South Africa’s gold industry is in steep decline and within a generation may cease to exist. How did this happen?” asked STIAS fellow Duncan Money, Consulting Historian.
Money pointed out that the unique structure of the gold industry in South Africa made it ill-suited to cope with changing circumstances in the late twentieth century as gold’s fixed price was abandoned and the industry globalised. “I believe it’s in this structure that we can find the explanation of the industry’s precipitous decline, not in the usual explanations of diminishing deposits or adverse government policy,” he explained.
“At the discovery of gold in 1886 there was no such place as South Africa. It was brought into being by the gold industry and the resulting migration patterns.” he added. “The history of gold and South Africa are inextricably linked. I’m asking why the industry disappeared in South Africa.”
Asking why people want gold, Money pointed out that compared to other metals it’s soft, expensive and generally quite useless. “But it’s association with value is deeply embedded in human history. It doesn’t tarnish, is malleable, combines well with other metals and can be melted over and over. These are all qualities that make it useful as a store of value.”
In the late 19th century people started to find gold all over the world and the idea of “a gold rush became part of the national psyche in many countries. Alluvial gold mining didn’t require much equipment so anyone with a pick and shovel could do it”.
“South Africa had some of that, but it was not identical to other countries,” he continued. “There was more gold (one or two orders of magnitude greater than anywhere else) but the nature was also different.”
Deeper and deeper
The initial discovery of gold in Johannesburg comprised surface outcrops, but it rapidly became clear that this was the tip of the iceberg and that there were vast deposits deep in the earth believed to have formed after an asteroid strike some 300 million years ago.
Gold mines stretched in a golden arc on both sides of Johannesburg and the initial camp of 3000 people became a city within 10 years. “Making money quick didn’t happen in South Africa but the ore body was predictable in size and over large areas.”
However, the ore was very deep in the earth and the reef went downwards in a diagonal slope. “The scale is difficult to convey,” said Money. “For example, Crown Mines stretched over 5.5 km in length in 1920 – roughly the width of Stellenbosch. By the 1980s Goldfields had 20 000 people underground every day at only one of their mines, in 900 kilometres of tunnels and three-kilometre-deep shafts.”
But it was complex. Money explained that unlike other global gold finds there were no visible nuggets. And over 140 years the average haul was 8 grams per ton – “in other words you had to mine a ton to get 8 grams and that’s only in the ore-bearing bits. It gets more complicated and the costs increase exponentially as you go deeper. It was a technical challenge to mine in South Africa at depths greater than anywhere else. The mines are so deep that they can cause earthquakes.”
“It was also extremely difficult for the miners with a one-degree increase in temperature every 100 metres. In 1924 there was the first recorded death from heatstroke – thousands followed. While mining companies didn’t deliberately kill their workforce, they experimented on them to find the limits of human endurance.”
Despite these challenges, by the 1930s the industry was formalised, stabilised and consolidated under the mining house system which brought together seven mining houses. “These still existed and collaborated until the 1990s then they crumbled like dust – they merged, were sold off, imploded. Anglo American is the only one remaining and is about to exit South Africa,” said Money.
Money also explained the impact of the gold price on the massive growth and subsequent decline of the industry. In the early part of the century the gold price was fixed – initially at just over $20 an ounce and later at $35. The gold standard meant that gold was linked to currency. However, international convertibility of the US dollar to gold ended in 1971. The gold price steadily increased and with the Rand falling against the dollar due to South Africa’s political situation the industry virtually “had a licence to print money with the gold price reaching over $600 per ounce in 1980”.
But South African gold remained hard and expensive to extract – made more challenging by changing geological conditions including the fracturing of the reef and, as the price declined, it became clear to the global industry including the seven South African-based companies that other countries offered cheaper sources of gold. Even ruthless cost cutting, with most of the costs borne by the workforce, did not solve the problem.
“The higher prices and difficulty in extracting meant that the South African gold industry went from dominance to irrelevance,” said Money. “Other countries – including in West Africa – could produce more cheaply. South Africa’s share of world production declined from over 70% to about 3% and the numbers of miners working dropped – it’s now down to about 100 000.”
“It’s estimated that only about half of the gold in the Witwatersrand Basin has been mined. There is undoubtedly more but the conditions are challenging.”
“The structure of the industry in South Africa was linked to long-term, stable horizons not quick returns. It went from speculative and short term to long term and it’s now back to speculative. The industry is a victim of its past success.”
Money also pointed to the massive disregard for the environment. Mine dumps created alien landscapes devoid of life and vegetation with some including cyanide and radioactive waste. The environmental liabilities exceeded the future gold value. The industry couldn’t afford to clean up and the companies that actually mined don’t exist to pay for the damage. The companies were worried about environmental and disease claims. (All the remaining big gold companies have lost major cases over compensation for lung diseases.)
“South African gold mines are now much safer,” he added. “But increased safety further rendered extraction non-viable.”
Asked about the impact of black economic empowerment, Money replied: “It was not transformative because the industry shrank simultaneously, but it undoubtedly created some very wealthy individuals.”
He also pointed to the interesting microhistory – “For 140 years a large proportion of men in Southern Africa worked in the gold industry – this ceased over the last generation and will not return. This has an impact on their understanding of the world, their access to adult manhood and their life trajectories.”
But at both the micro and macro level accessing the evidence is a challenge. “We can still speak to people but lots of the industry is obsessively secretive. Until recently only one company had opened its archives. That changed when the University of the Witwatersrand added Barlow World Rand Mines and Johannesburg Consolidated Investment Company to their archival collection but only some information is included,” explained Money – information Money hopes to access for his book project.
Michelle Galloway: Part-time media officer at STIAS
Photograph: Noloyiso Mtembu