Gold has always been linked to wealth, power and control of resources. And it was gold which fundamentally shaped South Africa's economic development. This article in the popular economics series by NALEDI's James Heintz looks at the historic role of gold in the world's economies and the implications of the declining importance of gold for South Africa
Gold has always had a close connection with money. Historically minted coins would actually contain a certain amount of a precious metal - usually gold or silver. The value a coin had depended on the amount of precious metal it contained. If the amount of gold or silver were reduced, the coin would lose value and each coin would be able to buy less. This would then mean that prices would tend to go up since more money would be needed to make up the lost value - in other words, there would be inflation. Debasing a currency - that is, reducing the amount of precious metal a coin contained - was a serious crime in many countries.
Gold was also connected with the early development of banking. Hundreds of years ago, people would often leave their gold with a goldsmith for safekeeping. Goldsmiths, however, discovered that they could use the gold which people gave them to make loans. A goldsmith would lend out part of the gold which people had left and the remaining gold was used to meet obligations when someone demanded their gold back. This is very much like a modern bank where people deposit money, a bank makes loans from those deposits, and a certain amount of money - called reserves - is kept to meet obligations.
Both money and banking evolved from these historical forms to more modern ones. But gold still played a major role. The use of paper money and other types of currency became widespread. People, however, would not trust that a piece of paper like a rand note would have value unless it was backed by something valuable. Therefore, many currencies adopted a gold standard. A gold standard means that the currency could be exchanged for a certain amount of gold. The gold standard was believed to give value to paper currency and bank deposits.
The problem with the gold standard was that it fixed the value of the currency. This means that the value of the currency could not adjust easily to changing economic conditions. For example, if the value a currency linked to the gold standard was extremely high, imports of goods from other countries would be very cheap but exports would become very expensive. This could lead to a trade imbalance in which imports would increase dramatically but exports would decrease. Domestic production would be hurt at the expense of cheap imports from abroad. If the currency was linked to the gold standard, the value of the currency could not adjust to improve the situation.
Because of the problems associated with a currency fixed to the gold standard, many countries were pushed off the gold standard during the 20th century. In 1971, the gold standard was dealt a final crushing blow. The president of the United States at that time, Richard Nixon, halted gold sales and pushed the US dollar off the gold standard. From that moment on, most currencies in the world had their exchange rates determined in the market relative to all other currencies, not by the amount of gold they can buy.
Gold not only played a historical role in the world's money and banking systems, it was also critically important for the development of the South African economy. When gold was discovered near Johannesburg in 1886, the pattern of development in South Africa dramatically changed direction. Johannesburg grew rapidly and became the largest metropolitan area in sub-Saharan Africa. Industrial and financial developments were closely tied to the mining industry which, in turn, depended on a highly exploited labour force. Gauteng was destined to become South Africa's economic powerhouse largely due to the profound influence of gold.
The historical relationship between South African development and gold means that, even today, gold can exert a strong effect on the South African economy - from its mines and levels of employment to its stock exchange and financial institutions.
The figure below shows the international price of gold, measured in US dollars, from mid-1996 to the end of 1997. The price of gold has fallen substantially over this time period. As the price of gold tumbles, it places pressures on the profitability and viability of many gold mines. This can lead to significant reduction in employment, to pressures to adopt productivity agreements for mineworkers or to closures of marginal mines.
Once a mine is closed, it is expensive to resume production, even if the gold price begins to recover. While in most modern economies gold now has a small influence on the health of the economy, in South Africa this is not true.
Gold has become far less important in the world economy in the past two or three decades. The historical legacy which grants gold a role in money and banking is vanishing quickly.
Consider the behaviour of central banks in many countries. Many central banks still hold large reserves of gold as a safe investment and asset base. Recently, central banks have begun to sell off these gold reserves, causing the price of gold to fall. Central banks are shifting from gold to other assets with higher rates of return. As banks shift and the price of gold falls, holding gold makes even less sense and more banks could move to other types of reserves. It is unlikely that the gold price will recover substantially in the future and it could continue to fall.
What does this mean for South Africa? While gold still maintains a hold on the South African economy, its influence has diminished substantially. For example, in 1986 gold accounted for 41 percent of the total value of exports while in 1996 gold accounted for only 21 percent.
More diverse types of economic activities means the impact of a falling gold price will not be as severe. In addition, new technologies could improve the viability of gold mining in South Africa, even when prices have fallen. Nevertheless, it is clear that gold mining will face hard challenges in the future and its premier position within the South African economy will never be reclaimed.
Workers in the mines will be the group most adversely affected by these trends. Active government policies to minimise this impact, to develop an effective adjustment strategy, and to re-skill workers for alternative employment opportunities will be critical.
Eight years after independence, Namibia's workers face a challenge all too familiar to their South African counterparts - how to extend political democracy to the economy.
This was one of the challenges facing delegates at the second national congress of the National Union of Namibian Workers' (NUNW) in Windhoek last month.
NUNW president Ponhele YaFrance criticised the slow pace of economic transformation in Namibia and said true economic democracy would only be achieved if workers own the means of production.
"Economic transformation cannot be achieved on its own but through political power in which we as workers have to actively participate and try to make our impact on all political and economic decisions."
He told delegates that the congress theme, "Namibian workers ready to face the challenges in the next millennium" was a bold and clarion call which demanded dedication and commitment from workers.
While he praised the achievements of Namibia's ruling party, SWAPO, over the past eight years, he had harsh words for key government policies such as privatisation.
"Eight years of independence has taught us that exploiters and those with economic and political power do not understand quiet diplomacy but real action," he said. "This is the challenge we face in the 21st century if we are to live and be Namibians, the owners of the soil."
"the Namibian worker has laboured throughout the centuries. We have dug the mines and extracted wealth. We have tilled the soil for others, we have built the roads and all nice buildings in the country while we sleep in shacks and pondoks... We fed the stomachs of others while ours are empty. The time has now come for us to stand up and share the products of our labour with those who have enjoyed it for too long," YaFrance told delegates.
He said unions' long-term strategy should be to move from negotiating wage increases to direct economic participation and control.
"It is time to move from being perpetual labourers to managing and influencing decisions in economic development and planning. It is only through the ownership of the means of production by the workers that Namibia will realise the true economic democracy and independence," YaFrance said.
Unions must own mines, fisheries, financial and insurance institutions and farming. Joint ventures with "patriotic and genuine investors" would protect workers' welfare in times of retirement, retrenchment and unemployment.
The NUNW secretariat has already set up an investment company, Labour Investment Holding, and the congress mandated their CEC to officially create the "business wing" of the federation.
A resolution on self-reliance and empowerment adopted at the congress linked the move to the need:
YaFrance told delegates that the federation's joint ventures with several companies had the objective of generating funds, "thus empowering the workers".
"the agreements we have concluded so far are worth millions of dollars for the unions and would definitely lead to financial independence of the unions."
However, YaFrance cautioned unions against compromising their mission of defending their members' interests. "We should guard against being corrupted in the process of economic empowerment," he said.
The congress resolved that their CEC "should urge government to formulate policies on economic reconciliation".
The NUNW's eight affiliates have a paid-up membership of 62 270 members, out of a potential membership of 203 000.
According to the CEC report, some affiliates have shown steady growth. However, retrenchments have taken a heavy toll in some sectors, particularly those organised by the Food and Allied Workers Union.
The report said that ensuring job security was one of the most difficult areas facing the federation, particularly since "employers purposely retrench workers to undermine the bargaining power of the trade unions".
Some affiliates managed to resist retrenchments, others concluded favourable retrenchment packages for their members, including retraining of workers and severance pay. However, the lack of proper protection mechanisms in the Labour Act made the battle for job security more difficult.
The CEC said some affiliates remained weak and pointed to an NUNW survey last year which identified financial constraints and a lack of capacity, human resources and infrastructure as key obstacles to affiliate growth.
A lack of affiliate participation in the federation's structures, inadequate report-backs on decisions taken, and mass mobilisation were also identified as problems.
Gender: The NUNW's Department of Women Affairs, set up in 1992 to train women to take up leadership in the federation was weakened after funding dried up. Gender programmes are now carried out by the education department. The federation played a major role in the first Southern African Trade Union Women's Forum.
Demarcation: A Demarcation Forum was organised, but the CEC reported that, "despite the agreed recommendations, some unions continue to recruit members from other affiliates".
Trade union unity: A unity forum between NUNW affiliates and seven non-affiliated unions acknowledged the need for unity but felt that NUNW's affiliation to SWAPO was a stumbling block to this. It agreed that unity should be initiated at industrial union level rather than at federation level.
Labour Act: The congress characterised Namibia's 1992 Labour Act as "an ineffective regulatory mechanism of labour relations" which contains many loopholes. The NUNW has submitted its proposals on the Act to the Labour Advisory Council.
Wascom: The federation criticised the Government's Wages and Salaries Commission as having failed to reduce wage gaps and said it had instead widened inequalities.
Like COSATU, NUNW is affiliated to the Organisation of African Trade Union Unity (OATUU) and the Southern African Trade Union Coordinating Council (SATUCC).
Reaffirming its commitment to international solidarity and cooperation, the congress mandated the CEC to look into the possibility of affiliating to the ICFTU.
The federation condemned the violation of trade union rights in Algeria, Nigeria, Swaziland and Zimbabwe and called for the restoration of "the democratic culture of freedom of speech and association" in Zambia.
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The congress took a militant stand on the land question. Delegates want Chapter 3 of the Namibian constitution amended to ensure land redistribution to the dispossessed majority and called for a national referendum on the issue. NUNW leaders said the struggle for land had been central to the liberation struggle. But most Namibians remained landless.
According to the CEC report, the government had committed itself to allocate ten million Namibian dollars over a five-year period to acquire land for the landless. However, the farms being sold to government were useless and the better farms were overpriced.
NUNW president Ponhele YaFrance had harsh criticism for Government's "willing seller, willing buyer" approach. "the policy of buying the stolen land is enriching the thieves and empowering them more to rob us of even the little soil left." He called for the appropriation without compensation of land from those who own more than one farm.
"We are being told that the question of land is sensitive and must not be tampered with," YaFrance told delegates. "What we want to know is, to whom is the land sensitive, is it sensitive to the robber or the victim?"
"We would like to bring to the attention of government that the land is not sensitive, it is explosive and will bring another revolution."
| NUNW affiliate | Paid up | Potential | Retrenched |
| Namibia Food and Allied Workers Union (NAFAU) | 12 053 | 40 000 | 6 384 |
| Mineworkers Union (MUN) | 9 000 | 15 000 | 768 |
| Metal and Allied Workers Union (MANWU) | 6 269 | 19 000 | 1 459 |
| Namibia Transport Workers Union (NATAU) | 3 500 | 9 000 | 637 |
| Namibia Public Workers Union (NAPWU) | 18 549 | 45 000 | 457 |
| Namibia National Teachers Union (NANTU) | 12 000 | 17 000 | none |
| Namibia Domestic Workers Union (NDAWU) | 739 | 24 000 | 187 |
| Namibia Farm Workers union (NAFWU) | 160 | 34 000 | 642 |
| TOTAL | 62 270 | 203 000 | 10 534 |
Many of the political questions facing the NUNW are similar to those facing COSATU - its relationships with the ruling political party and the democratic government; how to influence policy-making and how to deal with divergence between SWAPO policies and government policies; dual leadership and accountability of political representatives.
The NUNW is affiliated to SWAPO, a relationship governed by an affiliation accord signed between the two parties in May 1997. While the federation scoffed at calls for disaffiliation, it is still grappling with the practical implementation of the accord. According to the NUNW CEC report to the congress, the federation and SWAPO "are in the process of arranging for meetings to agree on a mechanism for regular consultations".
While NUNW leaders have praised gains made by the SWAPO government since independence, the CEC report pointed out that much of SWAPO's Election Manifesto and the country's national development plan still need to be achieved. The congress pointed to areas of sharp divergence with government policy, particularly on land reform, privatisation and other socio-economic policy. And it is clear that the federation will have to step up its efforts to make its voice heard.
The federation has also put forward proposals for restructuring and reviving SWAPO, which will be discussed at a special SWAPO Party Congress in 1998. "To keep the government on the right track, a strong, dynamic party secretariat with functioning structures is of vital importance. In order to refocus and redirect our efforts towards fulfilling all the promises, the SWAPO Party needs to seriously restructure itself," the CEC report said.
The NUNW also believes that SWAPO should more effectively use its parliamentary majority to effect change. "With a majority representation in both houses of parliament, the Party should pass acts that are geared towards improving the lives of our people and equality," the CEC said, adding that MPs should consult the broader electorate on new legislation.
"We are sometimes forced to comment on bills through the media since no formal structures exist for civil society to provide its input. In some cases, ministers table bills that are in contrast with party policies or SWAPO's election manifesto and expects other SWAPO MPs to just accept such bills. This has led to open conflict on legislative matters."
NUNW refers to the "brain drain" which saw many unionists drawn into Namibia's parliament and government office. A congress resolution on dual leadership similar to COSATU's "two hats" debate supported dual leadership "where this was in the interests of the labour movement" with the proviso that the union position was not full-time and that no double salaries were received.
In an attempt to deal with the federation's concerns over the accountability of union MPs, the congress resolved:
The NUNW has reported good relations with Namibian president Sam Nujoma and the congress resolved that the Namibian constitution should be amended to allow him to stand for re-election. The federation will mobilise workers and lobby members of the National Assembly and National Council to ensure this.
FAWU media officer Kubeshni Govender writes about COSATU's Atlantis local in the Western Cape
The "coloured" residential area of Atlantis looks like any other township in South Africa: overcrowded accommodation, makeshift attachments to existing structures, and evidence of alcohol and social abuse. There are signs of renewed development with the building of a new court house, but across the dusty street the scrawls on the walls of a Manenberg, Chatsworth or Thokoza-type flat tell of a sorry past. Today the Alliance forces look to the 1999 elections to bring sunshine to their shores again.
This is the story of Atlantis. It is the struggle of COSATU local chairperson Joshua Horn and other members of the local who live with the reality of an ill-intended plan. Atlantis, like the myth of the underwater city, was also struck by an earthquake. In this case it was apartheid which shook the foundations of this municipality and submerged it in misery and deprivation.
In the early 1980s, the apartheid government had a plan. The blue print pinpointed a location 45 minutes from the city of Cape Town for the development of a new industrial and residential community. The engineers of the plan, the same proponents of the Group Areas Act and homeland schemes, provided white businesses with tasty financial incentives to trek to the West Coast and use government subsidies to start enterprises there.
As was the case with so many businesses which thrived on the privileges of the apartheid system, profits were made. But when the government subsidies ran dry, an exodus to the mainland began. Those who lost heavily were the people of Atlantis, who had invested their labour and built their community on false promises.
The capital flight left huge unemployment, social degradation, and a largely "coloured" population located on the dunes with nowhere else to go and nothing much to do but to join forces and fight.
Anthony Diedrich, COSATU's Western Cape regional educator, explains that 'people of colour', mostly from the Cape Flats, were drawn to Atlantis by promises of unlimited work opportunities. They supplied a workforce which fed the industries in Atlantis. The strategy might have worked had the businesses which settled in Atlantis intended to help develop the area. The aim, however, was to make a quick profit and leave.
"Sixty to eighty percent of the businesses which moved here were not viable and they weren't labour intensive either. It was an apartheid plan that went horribly wrong," says Anthony.
In 1987, when workers started realising their common problems, the Atlantis COSATU local moved into gear and started asserting its presence in the community.
Under the initial leadership of Danny Oliphant, now the ANC MP for Atlantis, the local started to bring people together to discuss broad labour issues and the social diseases that were plaguing this community.
"At the time we were in the middle of nowhere, we didn't belong to Cape Town or to the Swartland," recalls Oliphant. "There was great need because of the isolation. We brought business and community together."
The Atlantis Development Forum, which initiated discussions between labour, NGOs and business on the economic future of Atlantis, played a crucial role in assisting the economic survival of workers and their families.
Such alliances have lead to some victories in the local's fight for economic justice. One such struggle was in 1996, when Bokomo decided to move their processing operations to Malmesbury. Bokomo executives attempted to move the company without consulting the workers and approached an Australian investment company to this end. FAWU workers heard rumours of the plan and conveyed this information to the COSATU local.
"We unanimously decided to act before the negotiations went any further," says Horn, who is also a NUMSA shop steward. "the relocation would have meant the loss of hundreds of jobs and even more economic instability."
The COSATU local intervened and explained the social impact of the move to management, who promised to rethink their position. After a period of no response, the local took their case to Tony Ruiters of the ANC and appealed for government intervention.
The local drummed up community support and launched a media and door-to-door campaign. In the end this resulted not only in Bokomo remaining in Atlantis, but in the development of another factory which created more job opportunities in the area.
Given this history and the role played by COSATU and the Alliance in Atlantis, many were surprised when the National Party won the 1994 elections in Atlantis, like in so many other "coloured" communities in the Western Cape.
Horn and Diedrich have differing opinions on the reasons for this. The chairperson of the local believes that the election campaigners were lulled into a false sense of reality.
"Senior leadership thought that because they had been in jail and because of their sacrifices," that victory would be assured, says Horn. "Hence the lack of an organised programme from the Alliance. It is important that we must have a united focus in the next elections," he adds.
What about the SACP? Horn says the Party had very few members in Atlantis and, for practical reasons, decided to close the branch, leaving the ANC holding the political torch of the Alliance.
Diedrich believes the vote of the people of Atlantis was based on fear and ignorance. "the fear of losing what the apartheid government had granted them as a slightly more privileged group", caused this community to believe the propaganda of the NP, he says. So the majority of the community, afraid of their position under a new African government, voted NP and, Atlantis, like the Western Cape, was won. The tragedy is that, from the actions of Hernus Kriel, we know it was simultaneously lost.
Winning the 1999 elections is now the priority of the COSATU local. Horn says they have firmly fixed their sights on victory in 1999 and they understand that the battle has just begun.
"We've learned our lesson," says Horn of the 1994 elections. He believes that shop stewards must relearn how to campaign, and is convinced that, with a comprehensive and organised programme, the ANC can win the elections. They will have to preach the gospel, he says, "that we are the ANC that stands for the oppressed".
It is clear that his approach feeds this local. "People elected me. That in itself means that they saw something in me which makes them believe I will take the worker struggle forward. And I love to do that. Being part of COSATU is being part of the community."
With an estimated 50 percent unemployment rate in Atlantis, the COSATU local knows that its task is a difficult one. But it is a challenge they intend to tackle head on because they know that the livelihoods of hundreds of people depend on their efforts... whether the people of Atlantis know it yet or not.
