South Africa weighs fate of 300,000 jobs

SOUTH AFRICA, dependent on gold mining for 300,000 jobs and a substantial share of its exports, will weather yesterday's Treasury announcement, said Johannesburg analysts. But they were concerned at the long-term effect of a perceived loss of faith in the metal.

For a country in which the daily gold price and the value of the rand are everyday concerns, the British announcement came as a new blow to a beleaguered economy. An analyst at Johannesburg-based Rice Rinaldi Securities said: "The industry has already largely completed its restructuring in response to the decline in the gold price so this is not the end of the world. However, if the trend continues and the price breaks the $270 barrier, then marginal mines with high production costs will look again at their staffing levels. I think the market will recover but this was not kind of Britain," said the analyst.

There was some criticism in South Africa of the Treasury's move to announce the forthcoming sale a long time in advance of the first auction, thus deepening anxiety in an already jittery market.

"Two years ago, Australia made a sale and only later announced it, thus delaying the traders' reaction until the metal had actually been sold," said the Rice Rinaldi analyst.

Year-on-year gold production in South Africa has been falling since 1996 and about 170,000 miners are estimated to be working in unprofitable pits.

There is concern about the referendum in Switzerland last month whose outcome points to a forthcoming end to the country's long-held peg to gold.

Furthermore, South Africa is ambivalent over International Monetary Fund discussions to sell gold so as to finance debt relief for the third world.

Thirty-one of the world's 41 poorest nations are African and the South African government has chosen to support the principle of debt relief.

But as the world's largest gold producer - and amid claims that debt relief will not ease grassroots poverty - South Africa's heart is not in it.