To:mikesloan who wrote (260)
From: John Barendrecht Monday, Jul 7, 1997 9:48 AM
Respond to of 80032
Gold's fall seen increasing S.Africa's job woes
By Paul Richardson
JOHANNESBURG, July 7 (Reuter) - Bullion's plunge to its lowest level in 12 years would trim both South African export earnings and reserves, but poses a more serious threat to the country's dire unemployment rate, economists said on Monday.
The gold price has fallen $15 dollars in the last week to the $318-an-ounce level -- a level last probed in 1985. In real terms, the dollar gold price is at its lowest level in 21 years, while in rand terms, it is at an 18-month low.
The fall in the price was sparked late last week by news that the Reserve Bank of Australia sold 167 tonnes of the metal in the first half of this year. Some analysts believe the $300 an ounce level is not far off.
``For the country as a whole, the impact will be felt in two areas,'' said one economist. ``Unemployment will suffer because if the rand/gold price stays at these levels, we could see job losses as a result of the closure of marginal shafts.''
On average, some 349,000 people were employed at South Africa's gold mines last year -- 6.5 percent of the country's 5.3 million non-agricultural workforce.
South Africa produced 495 tonnes of gold in 1996 and is expected to produce about 500 tonnes in 1997.
Unemployment in South Africa is currently estimated at around 30 percent and the reduction of that rate is one of the key tenets of government's macro-economic strategy which aims to create 410,000 jobs a year by the end of the decade.
``The unemployment situation is one of the major challenges facing the government at this point and if gold holds around these levels it will deteriorate further,'' the economist added.
Evidence of the pressure being brought to bear on the mining houses was borne out by Randgold and Exploration Co Ltd's (RNGJN.J) announcement earlier that it had decided to stop operations at its Benoni Gold Mining Co as soon as possible -- due to the lower gold price.
The other area where bullion's fall would impact would be on the country's current account, economists said.
``Gold contributes something like 15 percent to current account earnings. That percentage has been declining over the years -- and it is going to fall further at the current level of the gold price,'' the economist said.
Econometrix economist Tony Twine said that every $10 fall in the gold price lopped $160 million of South Africa's annual exports.
But E.W. Balderson economist Mike Schussler noted that the decline in gold export proceeds would be offset by the country's growing manufacturing exports.
``If gold had maintained the levels we saw in 1980 of around $600, we would have seen total export growth closer to the world average of about eight percent,'' he said.
``The gold and commodity prices have been holding South African export growth back. Manufacturing has been carrying it through as we become more manufacturing orientated,'' he said.
Economists said one of the more immediate impacts would be seen in the devaluation of the country's gold reserves, although this would be neutralised by the fact that the Reserve Bank's gold holdings had declined in recent years -- a trend that looked set to continue.
``If we look at the long-term tendency of the last five or 10 years, the Reserve Bank will probably reduce (its gold holdings) even further. Most international banks are around five percent which is probably where the Reserve Bank will be heading over the next five to 10 years,'' he added.
The Reserve Bank's gold holdings stood at 5.29 billion rand in May -- 24 percent of total reserves
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