International Business History: Development of Mining in South Africa - Case Study Example

International Business History: Development of Mining in South Africa Name Course Name and Code Instructor’s Name Date Introduction South Africa is endowed with a wide range of minerals. The country is hailed for being the principal world reserve for various minerals such as platinum group metals, gold, chromium, manganese, alumino-silicates and vanadium. Other minerals found in South Africa include coal, iron ore, uranium, nickel and diamond. It is estimated that mining contributes to over 5% to the country’s GDP. The mining industry in South Africa has been one of the major employers of people of southern and central Africa in over a century. It was reported that the industry employed over 600,000 people in 1992. Main employees in these mines are black migrants hailing from rural districts. Development of mining in South Africa Archaeologists have reported that mining of minerals in South Africa dates back to middle Stone Age where various minerals were used for decoration purposes. It is also reported that 19th century records indicate that black people obtained minerals from the surface and mined them by making holes in the surface of the earth. True mining in South Africa is reported to have started in A.D. 770. Excavation by archaeologists indicate that there are dozens of mines that represent vertical or inclined shafts containing galleries that lead to solid rock cut into which dates back to this period. It is reported that during this time, Iron Age people acquired iron ore exposed by soil erosion for smelting and that mining involving sinking only evolved when the population increased (Mason, 1982). Gold It has been reported that from ancient times to 1989 over 40% of all gold ever mined came from South Africa. Earnest mining in South Africa begun in 1887 and it is at this time that Johannesburg began to fill with settlers. By 1970, South Africa accounted for more than 70% of gold production among non-communist world. However, the production of gold fell drastically between 1970 and 1990 mainly due to technical problems and high costs, which were attributed to labour intensive methods and deep mines (Wilson, 2001). The drop in gold prices in 1999 to a low of $250/oz was bad news to South African companies, gold miners and government. Although this rose to $290/oz in 2000, the gold industry had undergone dramatic changes in both South Africa and globally (Jones, 2010). The empowerment of blacks in South Africa mainly focused on gold industry. This resulted in change of ownership structure in the industry. Harmony Gold Mining Company has led the empowerment movement and it recently merged with ARMgold that was owned by African Rainbow Minerals. Although South Africa is the largest gold producer in the world, its production is estimated to have fallen by 6.5% in 2003 (Jones, 2010). In spite this, gold export still accounted for approximately 37% of dollar export revenue. Most of gold mines in South Africa are underground operations and stretch as deep as over 3.8km. The grades of gold in these mines are declining, mining depths are increasing and the gold prices are sliding and as a result, the cost of mining has increased (Miller, Desai and Lee-Thorp, 2000). Consequently, there has been stead fall in gold production in South Africa. In order to cut costs, many mining companies have restructured themselves and consequently resulting in massive layoffs of employees. It is argued that increased productivity of gold in South Africa is the main determinant of this industry’s future. Copper Modern copper mining in South Africa began on small scale in 1846 in the O’kiep copper deposits. The favourable assessment carried out in 1854 saw a short-lived boom in copper mining in the area. Copper mining has continued in the area since then although there were breaks in operations during the first and second world wars (Wilson, 2001). Another copper deposit at Phalaborwa operated as an open pit until 2002 and it is estimated that it produced over 3 Mt copper metals in addition to large amounts of magnetite and significant amounts of uranium, gold, zinconium and sulphides. Another copper mine is found in Musina district in which mining began in 1906 and ended in 1991 (Miller, Desai and Lee-Thorp, 2000). As at this time, three quarters of a million tones of copper metal had been extracted. It is reported that exists numerous copper occurrences in South Africa, which are still unexploited. Diamonds Diamonds were discovered in South Africa in 1866. Large-scale exploitation of this mineral began in 1870 in Kimberly area. Diamond mining is said to have been the main trigger that transformed South Africa from agricultural based economy to a mining and industrial based economy. South Africa dominated diamond production for 70 years during diamond rush. This rush called for establishment of technology and specialized equipment. Consequently, development of supporting industries emerged and the money generated created the initial pool of capital in the country. South Africa is still ranked among top five world producers of diamond and mainly produces high quality gem diamonds. The country produces a stable 10 Mct of diamond annually of which 90% is exported and it accounts for 9% of the world’s diamond production (Jones, 2010). Coal It has been reported that Zulu people used limited amounts of coal for iron smelting prior to arrival of white settler. Initial small-scale production of coal for domestic use began in 1842. Steamships began receiving bunker coal supplies from the Natal Colony in 1852. Coal extraction in Molteno began in 1870 and this field supplied diamond fields at Kimberly (Wilson, 2001). Small-scale exploitation of coal in Witbank area began in 1872 and this was mainly utilized at Witwatersrand gold mines. Large-scale exploitation of coal in Witbank area commenced in 1895. Another major coalfield in South Africa is Wtareberg, which is estimated to hold 60% of the country’s remaining coal reserves. It has been reported that South African coalmines produced 246 Mt of coal in 2006 a majority of which was utilized domestically and the remaining exported at a value of R21.2 billion. The country is said to be the sixth largest holder of coal reserves in the world. Iron and steel Exploitation of iron and production of steel using modern technology in South Africa began inn 1901. The establishment of the Union Steel Corporation (Usko) in 1911 marked the beginning of large-scale production of steel in the country. ISCOR, which was the major shareholder in Usko, acquired Usko’s steel assets in 1991. Cornelius Delfos acquired rights to mine the low-grade iron ore located in Pretoria in 1916 and industrial scale smelting of iron ores in Transvaal began in 1918. It is estimated that in 2007, a total of 5.357 Mt of pig iron and liquid iron, 1.736 Mt of direct reduced iron and 8.986 Mt of crude steel was produced by South Africa (Jones, 2010). Currently, South Africa leads in stainless steel and other ferro-alloys export market. Tin Tin mining in South Africa begun prior to colonial period and some of tin workings were re-discovered in 1905 in Rooiberg. Modern tin mining began in 1907 and continued until 1993. Other major producers of tin included Union tin mines, Stavoren-Mutue Fides Tin, Zaaiplaats Tin and Elands Tin where mining began in 1908. These mines were forced to close up due to the collapse of the International Tin council that was followed by a decline in tin prices. Chromium The occurrence of chromium in South Africa was first reported by Karl Mauch in the Hex River in 1865. Chromium mining on sustainable scale began in 1921 in Bushveld chromites. By the onset of Second World War, it is reported that over 180,000 tons of chromium was being mined in South Africa per year. South Africa became the largest exporter of chromites ore in 1960s, which extended to 1970s (Francis, 1972). The country still holds leadership in production of chromites in the world and it accounts for 41% of the global production of chromium. Moreover, South Africa is home to about 71% of the global chromite reserves. It is reported that South Africa produced 7.418 Mt of chromite in 2006 of which 30% was exported while the remainder was utilized for production of chromium fero-alloys (Jones, 2010). Fluorspar Exploitation of fluorspar in South Africa began in 1917 in the Zeeerust district. In 1950s, the Vergenoeg Flurspar Mine was discovered. Operations in the Witkop Fluorspar Mine commenced in 1972. Mining of fluorspar in South Africa was mainly stimulated by increased demand for the mineral in USA, which mainly utilized it for production of hydrofluoric acid and its derivatives. The growth of local consumption of the mineral was aided by the growth of steel industry (Jones, 2010). The main producer of the mineral is the Buffalo Fluorspar Mine in the Limpopo province. South Africa is the third largest produce of fluorspar in the world and fourth biggest exporter of the mineral. Manganese The history of manganese mining in South Africa dates back to 1900s when the mineral was mined on small scale at Hout Bay. Manganese deposits in Postmasburg District in mid 1920s and major production at this mines commenced in 1930 upon completion of a rail link. The Kalahari Manganese Field were discovered thereafter and mining in this area began in 1940. South Africa was the largest producer of manganese in the world in 2006 and it accounts for 80% of the world’s known manages (Jones, 2010). Platinum group metals Platinum group metals (PGM) comprises of platinum, rhodium, palladium, ruthenium, iridium and osmium. PGMs were first discovered in chrome iron ore located in Bushveld complex in 1906. The first platinum to be produced in South Africa took place in 1919 and was a by-product of Witwatersrand gold mining. PGM deposit that was unusually hydrothermal was discovered by Adolph Erasmus in 1923 in the Waterberg Mountains. This mine was exploited between 1924 and 1926. Sustained mining of PGM began in 1929 in the Merensky Reef. South Africa accounts for approximately 80% of the world’s known platinum reserves. The income from PGM exceeded that from gold in 2000 and 2001 (Jones, 2010). Bushveld Igneous Complex currently has 12 active platinum mines. Vanadium South Africa’s vanadium resources accounts for 44% of the world’s vanadium resources, which are found in titaniferous magnetite layers, situated within the upper zone of the Bushveld complex. Exploitation of these mines began in earnest in 1959 after development of a processing and smelting plant in Witbank. South Africa was a world leader of vanadium producer and exporter in 2006 (Jones, 2010). The mining industry in South Africa and its influence on the economy and political landscape Mining in South Africa has lead to emergence of global market in not only South Africa but in the whole of Africa. The development of mining in South Africa has very peculiar story because of the issue of Apartheid. This is whereby there was an existed of both highly advanced as well as deep poverty industries side by side (Jones, 2010). The development was aided by the fact that most of the industries there maintained a strong and good international connection. This happened irrespective of the fact that during apartheid the industries were barred from making investments overseas. With time, all of these mining industries have been able to make investments in other countries that are members of the common wealth, international banks and other developed countries. The development of mining in South Africa has attracted a great deal of investors in the multinational level. The establishment of the Johannesburg stock exchange was because of development of mining in South Africa in the 19th century and even today mining support one third of the market capitalization (Hoadley, Limpitlaw and Weaver, 2002). This explains the great part mining has played economically, politically and culturally. There is great potential for mining in South Africa especially since the discovery of gold deposits in the area called Witwatersrand. This is what triggered the South African war, which resulted to annexation of the country under British Empire from the year 1910 to the year 1961. It was during this particular period that the process of mining in South Africa was much improved due to the availability of new technique. As a result, trade in the international and national boundaries started. Gold of high quality as produced as new and innovative techniques were employed in mining by the new investors. On the other hand, there was an increase in the dangerous practices of labour whereby sophisticated ventilation were employed in the mines to ensure the protection of the employees working in the mines. It is the growth of mining of gold in South Africa that led to a more demand for industrial support from the entire world. As a result, there was multinational trade practiced whereby the more developed countries like Europe was willing to invest financially, labour wise and technically in the mining industry (Jones, 2010). By the year 1970, the Gold mines were very productive such that 68% of the gold produced globally was from South Africa. Today, mining of Gold plays a great role in giving the country a leading position in economic growth all over the world. It should be noted that the industry has contributed a great percentage in the growth of economy in not only South Africa but also in the whole of Africa (Hoadley, Limpitlaw and Weaver, 2002). This is because being the cornerstone of the economy; it has contributed in many of the economic activities, foreign exchange as well as the creation of jobs (Rhjin, 1959). It is continually adapting to the changes that are occurring regularly in the international, as well as local market. The industry of mining has been working in conjunction with IMF for the development of mining through offering financial support to the countries involved. IMF is the initials of international monetary fund. It is an organization that is of international class focused on overseeing the world’s financial systems (Hoadley, Limpitlaw and Weaver, 2002). It actually uses policies of micro economy associated with the countries that are its members. It main agenda is to attain stability of exchange rates internationally. It also facilitates some development by mean of enforcing economic laws and policies. IMF is known to serve over one hundred and eighty six countries through which it has brought about financial stability, monetary cooperation, international trade, reduction of poverty, offered employment as well as financial stability. It is one of the major contributors in the development of mining in South Africa. This organization was formed back in year 1944 on July. It was started with only 45 countries as members. At that juncture, the main aim was to achieve stability in the issue of exchange rates internationally. It was a very important monetary organization at that time because it played a great role in the effort to bring stability in the economy and South Africa was a beneficiary (Hoadley, Limpitlaw and Weaver, 2002). The organization was formed after the 45 representative governments came together in a financial conference in Washington. After the conference, the organization then was officially formed in 1945, 27th December (Jones, 2010). At the time, only 29 countries were ready to sign the agreement. The organization was actually started after the 2nd world war so as to achieve economic reconstruction of the countries and especially in Africa whereby South Africa was a main beneficially (Stephen, 2002). The economic influence of the organization increased as more members took a step to join it. Today the country members in the organization are about 200. The rise in the membership was boosted by the fact that many developing countries have gained independence as well as the fall of soviet bloc. Currently, the organization has one of the best governance and control in the world of business. This has resulted due to the great changes that are occurring in the globe economically and especially with the technological development in the industry of mining in South Africa (Rhjin, 1959). This has left the organization with the mandate of controlling the global financial system hence the need for very good governance. It has a regulation that governs the procedure of the way in which each country’s financial interest will be represented. It is actually greatly accountable to so many of its stakeholders as well as civil society, academia, media among others. It is mission is to attain stability as far as international economy is concerned. It is aimed at keeping every track on the development of the global economy as well as the countries that are its members. It also advices and when need be comes in to help those member countries with loan repayment difficulties (Rhjin, 1959). South Africa has greatly benefited from the organization with reference to the development of mining. Most of the companies that are involved in the mining industry have benefited from the services of the organization and especially the advices on the repayment of loans (Leys, 1975). It is involved in the issue of surveillance, which is one of the services South Africa has benefited from. It achieves this by keeping a close watch on the monetary system of the entire world. Also monitoring every economic system laid down by the member states. Based on global, regional and also national level it keeps a close watch on every economic development. It also offers microfinance advices as well as policy formulation to the member states. It is also committed to offer great technical assistance to the very low and the middle income earning countries. It helps them to mange all of their economic issues (Rhjin, 1959). It does this by proving training and helping them in the area of institutional upgrading on formulation of policies (Behrens, 2005). It is also committed in helping the member countries with the repayment of loans once they are stuck. This it does this with an aim of helping the country to rebuild its financial stability. The organization has some laid down rules, bylaw and law. Conclusion South Africa is vastly endowed with varied array of minerals. It is held that mining in south Africa began in the Iron Age period and has since been evolving and becoming sophisticated with time. Major mining activities in South Africa began mainly in the late 1800s. The mining industry in South Africa beginning with gold mining revolutionised the country’s economy transforming the country from agricultural based economy to mining and industry based economy. South Africa is a major producer of several minerals and it accounts for major reserves in the world for several minerals such as PGM. Although prior to platinum discovery, gold used to be the precious metal for the country, the dwindling prices of gold in world markets has seen revenue from minerals such as coal outweigh those from gold. The development of South Africa’s economy is largely attributed to its mining activities. Reference Behrens, J. 2005. The Dynamite Factory: An Industrial Landscape in Late Nineteenth Century South Africa. Historical Archaeology, vol. 39, no. 3, pp. 61-74 Francis, W. 1972. Labour in the South African Gold Mines, 1911-1969. New York: Cambridge University Press Hoadley, E.M., D. Limpitlaw & A. Weaver. 2002. Mining, Minerals and Sustainable Development in southern Africa, vol. 1. MMSD southern Africa, Johannesburg, South Africa, 77. Jones, G. 2010. Multinational Strategies and Developing Countries in Historical perspective. Working Paper 10-076. Pp 1-58. Leys, R. 1975. South African Gold Mining in 1974: 'The Gold of Migrant Labour'. African Affairs, vol. 74, no. 295, pp. 196-208 Mason, R. 1982. Prehistoric mining in South Africa, and Iron Age copper mines in the Dwarsberg, Transvaal. Journal of the South African Institute of Mining and Metallurgy, pp. 134-144 Miller, D., Desai, N., and Lee-Thorp, J. 2000. Indegenous Gold Mining in Southern Africa: A Review. South African Archaeological Society Goodwin Series, vol. 8, pp. 91-99 Rhjin, A. 1959. The Importance of the South African Mining Industry. African Affairs, vol. 58, no. 232, pp. 229-237 Stephen, G. 2002. Foreign companies in South Africa: Entry, performance & impact. An overview September, pp.1-28 Wilson, F. 2001. Minerals and Migrants: How the Mining Industry Has Shaped South Africa. Daedalus, vol. 130, no. 1, pp. 99-121 Read More