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gold
Precious Metals  
22 November 2017

Illegal gold mining in South Africa worth over R7 billion a year

Gold’s high value, the large number of abandoned old gold mining areas and the ease of finding willing buyers has made it a commodity easily targeted for illegal mining.

According to PwC South Africa’s Mine Report 2017 the value of illegal mining and dealing of metals and diamonds in South Africa is estimated to be billions of Rand a year.

To put this in perspective, this equates to the revenue generated from approximately 430 000 oz of gold (at the current market price).

"Over the last several years news stories about illegal mining in South Africa have become more frequent," notes PwC.

"Whether it be the temporary closure of commercial mines due to the presence of illegal miners, the deaths of (or injuries to) illegal miners (often referred to as ‘zama zamas’) in abandoned mines, or the rescue efforts to free illegal miners who have become trapped underground, the topic has become big news and represents a significant issue upon which the government, unions, mining houses and the Chamber of Mines must act together to eradicate."

From a societal perspective, illegal mining is driven by poverty and unemployment. Furthermore, many retrenched miners have extended families that are financially dependent on them, which creates additional pressures.

A recurring theme with many illegal miners who have been arrested is that they previously worked in the formal mining sector but have been retrenched as the industry struggles with low commodity prices and other challenges.

"While South Africa’s own socio-economic challenges make illegal mining a lucrative alternative, our neighbouring countries also have high levels of poverty and unemployment resulting in a further supply of workers for the illegal trade."

According to Forbes and African economic outlook, Zimbabwe has 95% unemployment , Mozambique 24.49% and Lesotho 30.63%. The Chamber of Mines reports that 70% of illegal miners arrested are undocumented foreign nationals.

It is common practice for legitimate mine workers to be paid by illegal mining syndicates to transport food and other essential items underground to enable illegal miners to work underground for long periods without having to come to the surface.

An analysis of the companies included in PwC's study shows some key trends. Only four companies reported on the impact of illegal mining on their businesses—AngloGold Ashanti, Harmony Gold, Pan African Resources, and Sibanye-Stillwater.

AngloGold Ashanti reports that it was most impacted at its Obuasi mine in Ghana, which demonstrates that illegal mining is not just a South African problem.

The issue was also significant enough to be disclosed as a key audit matter (KAM) in AngloGold Ashanti’s annual  report for the year ended 31 December 2016.

Illegal mining in the recent news include:

  • Illegal mining of chrome in Limpopo province- It is claimed there has been a lack of police intervention despite pleas from mining companies for assistance in stopping a crime syndicate believed to be responsible for illegal chrome mining activity,
  • Illegal alluvial diamond mining in Namaqualand- High levels of unemployment in the region have led people to mine abandoned mine sites illegally. The local police do not have the manpower to stop this dangerous practice and
  • Illegal gold mining on Sibanye-Stillwater mines- The company has declared its intention to remove all illegal miners from its mine sites by January 2018 through methods such as a tip-off system, enhanced security teams and biometric access measures. To tackle the problem of illegal mining, the Chamber of Mines (especially through its standing committee on security) emphasises the need for mining houses, the Department of Mineral Resources and the South African Police Service to work together at every level of illegal mining activity from individuals working underground to the large syndicates that organise activity and sell the end product.

Feature image credit: Wikimedia

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