- Associated Press - Wednesday, December 1, 2010

ORKNEY, South Africa | Mawethu Mguli and hundreds of other workers at the gold mine in Orkney have gone months without pay at a time when gold is going for around $1,400 an ounce.

After the mine’s previous owners went bankrupt, the workers expected that a new partnership - headed by relatives of Nelson Mandela and President Jacob Zuma - would get operations back on track when it took over last year.

“Unfortunately, it didn’t turn out that way,” Mr. Mguli said softly as he sat in his dimly lit room in the mine dormitory. The mine northwest of Johannesburg remains idle, and the workers are getting by on food handouts and odd jobs.

South Africa sees getting its vast mineral wealth out of the ground as vital to creating desperately needed jobs, fueling growth and redressing the economic ravages of apartheid.


But a toxic combination of a crumbling infrastructure, mismanagement and the specter of nationalization is frustrating the drive to improve and expand the country’s mines. Some are asking whether political connections mean more than competence in an industry that is a pillar of South Africa’s economy.

South Africa is the world’s richest mining country in terms of its reserves, according to a Citibank estimate that valued its mineral resources at $2.5 trillion. It is a major producer of diamonds and gold, and has major reserves of less sexy but still lucrative minerals like platinum.

Mining has accounted for an average of 7.7 percent of South Africa’s gross domestic product over the last decade, according to the Chamber of Mines, an industry trade group.

Half the country’s merchandise exports were mining products in 2009, when the industry employed half a million people. Another half million worked in fields dependent on the mines in this country with a population of 50 million, where at least a quarter of the work force is unemployed.

Yet, during a global boom in commodities prices from 2001 to 2008, other countries with major mining operations outperformed South Africa, according to the chamber, whose members include such industry giants as Anglo American and DeBeers.

The world’s top 20 mining countries saw mining GDP grow at an average of 5 percent a year during the period, while South Africa’s mining sector GDP dropped by 1 percent a year.

“How come, sitting on the largest mineral resource base in the world, we are not doing better?” said Sipho Nkosi, a former chamber president who now also heads the Exxaro coal-mining company.

The answers are not hard to find.

The country’s mining infrastructure - from the power plants needed to get the ore to the surface, to the roads and rail lines to get it to market - is tattered. Talk of nationalizing mines in some political circles has spooked foreign investors.

And questions about corruption among civil servants became so heated that in August the country’s mining minister imposed a six-month ban on the issuing of prospecting licenses.

“All of that is quite worrying if you’re an investor who’s invested or is going to continue to invest billions in this sector,” said Alison Turner, an analyst with the British firm Panmure Gordon.

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