YOU ARE HERE: LAT HomeCollections

Market Scene : A Gold Mining Slump Digs Into South Africa : Layoffs and falling prices have pushed this key part of the economy into a crisis that could stall political reforms.


WELKOM, South Africa — Franz Baleni faced two bombshells in a row.

The first one, evidently set by right-wing white supremacists, destroyed the office Baleni runs for the black National Union of Mineworkers in this racially tense mining town. No one was injured in the midnight blast.

The second stands to take a greater toll: an announcement from the country's largest gold mine that it will lay off nearly 8,000 mine workers, most of them members of Baleni's local.

"That's our main concern," Baleni said the other day as he talked with a reporter among the copiers and fax machines of the temporary office where he relocated after the bombing.

The laid-off miners were due minimal severance pay, had no training enabling them to move into other jobs and were to be summarily evicted from the mine company hostels where they had lived, sometimes for years.

"And now the members are very suspicious," Baleni said, "because all this talk of retrenchment always comes during our annual wage negotiations."

In fact, South Africa's gold mining industry is suffering through one of its deepest crises ever. In the last year more than 20,000 miners, virtually all of them unskilled blacks, have been laid off. Half of the 36 mines belonging to the Chamber of Mines, the national trade group, have applied for emergency subsidies from the government to stay open. Those mines alone employ 200,000 workers.

Compounding the crisis is the plunge in the worldwide gold price over the last few weeks to a five-year low, caused by a flood of sales from the Middle East and the Soviet Union. At the latest price of about $360 an ounce, around a fifth of South Africa's gold is being produced at a loss.

Analysts say the slump is likely to last longer and have greater impact on the country than previous ones for two reasons: The price of gold is expected to stay low for another year or more, and South Africa's fledgling political reform makes the health of the industry, a key prop of the national economy, critically important.

A lasting slump in the gold price could seriously hamper the architects of political reform here. President Frederik W. de Klerk changed the course of South African politics in February by lifting the ban on a number of anti-apartheid groups, including the African National Congress, and freeing ANC leader Nelson Mandela, among other activists.

But De Klerk faces a surge of opposition from whites concerned that they may lose their property and livelihood under a majority-black government. The only way to avert political crisis, many analysts say, is for the South African economy to expand enough to increase wealth and job opportunities for all.

Meanwhile, the rising expectations of blacks, if confounded by a recession, could foster disillusionment that might drain support from moderate black leaders, including the ANC's Mandela.

"Political reform is premised on a viable economy," said Robert Schrire, a professor of political science at the University of Cape Town. "If gold remains at this level for another 12 to 18 months, it could be a major body blow for the De Klerk regime, at a time when race relations are very sensitive and black aspirations have never been higher."

The gold-industry slump could even hurt the economies of some of South Africa's neighbors. Lesotho, Swaziland, Mozambique and Malawi send tens of thousands of young men across the border every year to work in the mines of the Transvaal and Orange Free State and send their earnings home.

The slump in gold mining is a major problem here because no economy in the world is as dependent on gold as South Africa's.

The mines themselves employ more than 500,000 workers, more than two-thirds of them black. Another 1 million South Africans, including dependents and suppliers, rely on the industry for their livelihood.

Gold accounts for just over a third of South Africa's exports, down from 50% a few years ago. Gold reserves have been South Africa's best, if not its only, hedge against foreign trade sanctions and other economic restrictions. South Africa's plan to repay $2.3 billion in foreign debt this year could be seriously compromised by a protracted gold slump, which could deprive the country of $1.2 billion or more a year in foreign earnings.

When the gold mines get a sniffle, the entire economy catches pneumonia. The recent plunge in the gold price fostered a selling panic on the Johannesburg Stock Exchange that affected bank and industrial stocks as well as mining issues.

Yet the worldwide price may be the least of the miners' problems. More bothersome is the long-term decline in mine productivity.

"By and large, the South African gold mining industry has reached its peak," said Hilton Ashton, an industry analyst in Johannesburg.

Los Angeles Times Articles