Gold, first mined by Europeans in 1886 near Johannesburg, soon became the most important sector in the mining industry. South Africa has almost one-half of the world's known gold reserves, located primarily in the Rand in what was once a prehistoric l
ake. Gold is also mined in the Free State. Industry analysts estimated in the early 1990s that South Africa had produced more than 43,000 tons of gold in the past century, and that at least that amount remained in reserves.
Gold occurs in seams embedded in rock strata, sometimes more than a mile below the surface. Deep shafts must be sunk, large amounts of rock must be blasted and brought to the surface, and the rock must be crushed and chemically separated from the gold
. Some gold mines then pump processed mine tailings underground to serve as backfill. Mining and processing are costly, especially in deposits where the gold seam is extremely thin compared with the surrounding rock. For example, in the early 1990s indust
ry analysts estimated that only 5.6 grams of gold were extracted from each ton of ore excavated. Nevertheless, the industry has consistently earned high profits and has accounted for one-third to one-half of the world's gold production in the 1980s and 19
90s. The country's fifty-seven operating gold mines produce between 600 and 620 tons of gold per year, representing almost 30 percent of the world production. Gold production in 1994 and 1995 fell below 600 tons for the first time since the 1960s.
Gold mining companies traditionally kept expenses to a minimum by paying low wages. Gold mines became known for their often exploitative labor policies, including the use of migrant workers on limited contracts, strict worker control in company compou
nds, and difficult working conditions. Labor costs were especially important in determining profits, because the price of gold was set at US$35 per ounce through the 1960s. After the price of gold was allowed to float in 1968, it gradually rose in respons
e to market demand, and companies could afford to produce less and still earn even greater profits. They then began to expand operations into so-called low-grade-ore mines. The volume of South African gold production fell, and gold prices skyrocketed to a
n all-time high of US$613 per ounce in 1980.
During the 1980s, the dollar price of gold fluctuated widely, but because of devaluations of the rand, the rand price of gold generally advanced. When gold prices fell in 1989, the industry found that many of the low-grade-ore mines were no longer pro
fitable. As the average value of the rand increased against the dollar, overall industry profits declined, and nearly half of the gold mines in operation were running at a loss. At least 40,000 gold mine workers were laid off in 1990, according to governm
ent estimates, and layoffs continued through 1993.
During 1994 all major gold mining houses except Johannesburg Consolidated Investments (JCI) were reporting lower profits as output fell in response to labor unrest and other factors. Randgold closed its Durban gold mine in mid-1994, owing primarily to
poor grades of available ore, and other mines were threatening to close within the next few years unless profits improved.
In 1994 JCI began to "unbundle" its corporate structure by dividing into three separate companies. Anglo American, JCI's largest shareholder (with 48 percent), retained its platinum and some diamond interests in one company, Anglo American Platinum. J
CI's gold mining and other industrial interests were separated into two companies, JCI Limited and Johnnies Industrial Corporation. Shares for these companies are being offered to the public, primarily as a vehicle for black investment and broadening part
icipation in this sector of the economy.
Diamonds and Platinum
South Africa's diamond mining industry dates back to 1867, when diamonds were discovered near Kimberley, now in the Northern Cape. The Kimberley diamond fields, and later discoveries in Gauteng, the Free State, and along the Atlantic coast, emerged as
major sources of gem-quality diamonds, securing South Africa's position as the world's leading producer in the mid-twentieth century. (Rough diamonds were produced in larger quantities in Australia, Zaire, Botswana, and Russia.) Through 1991 most of Sout
h Africa's diamonds were mined at only five locations, but a sixth mine, Venetia--in the Northern Cape--opened in 1992 and was expected to become a major diamond producer later in the decade.
The De Beers Consolidated Mines Company controlled most diamond mining in South Africa and influenced international trade through a diamond-producers' alliance, or cartel--the Central Selling Organisation. The cartel enabled diamond producers to contr
ol the number of gems put on the market and thereby to maintain high prices for gem-quality diamonds. The cartel was able to react to marketing efforts outside its control by temporarily flooding the market, and thereby driving down the price paid for an
Diamond prices fluctuated in the early 1980s, but the industry continued to expand even in the face of international recession and the discovery of the diamond-like cubic zirconia. Dollar prices for diamonds improved in 1985 but dropped again in 1987,
requiring De Beers to support the market by withholding diamonds from dealers. Thus, annual production of more than 10 million carats in 1985 and in 1986 dropped to 9.1 million in the late 1980s. Gem and industrial diamond output in 1994 was 10.8 million
carats, or roughly 11 percent of world production.
In 1990 the Soviet Union signed and openly acknowledged a contract to sell its diamonds (estimated at a value of about R13 billion over a five-year period) exclusively through De Beers. The action marked the first time in nearly thirty years that the
Soviet Union had openly associated itself in commodity dealings with South Africa. Later that year, De Beers announced a loan of R2.63 million to the Soviet Union, against the security of an equivalent amount in diamonds.
Platinum group metals (platinum, palladium, ruthenium, rhodium, iridium, and osmium), which occur together in ore seams and are mined in one operation, were discovered in South Africa in 1924. Most of the estimated 59,000 tons of reserves are in the B
ushveld complex of minerals; some concentrations are also found in the Transvaal and the Witwatersrand complexes. Platinum is used in automobile catalytic converters to reduce fuel emissions, as a catalyst in industrial processes, and in making jewelry.
South Africa is the world's leading producer of platinum. Its output of about ninety tons in 1993 accounted for almost 49 percent of world production. South Africa's platinum mines have profited, in particular, from the sale of rhodium, which sold for
almost US$6,000 an ounce in the early 1990s, but world market prices fell after that.
Data as of May 1996