S. Africa economy soars on wings of gold boom
The soaring price of gold is providing a multimillion-dollar windfall for the South African economy -- and seems set to launch the country into an economically golden new decade.Skip to next paragraph
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Industrial and mining stocks are booming already, and it is taken for granted that there will be substantial tax cuts in this year's budget. This will help boost industrial expansion, and should improve the living standards of South African workers, too.
Earnings from gold in this mineral-rich country have increased more than 55 percent in two years.Working profits in the gold-mining industry have multiplied about three times since 1977, from $1.3 billion then to an estimated more than $ 3.6 billion for the whole of 1979.
Millions of this additional revenue have been pouring into the South African government's coffers. Its share rose from $373 million in the first nine months of 1977 to $1.3 billion in the first nine months of 1979.
Shareholders have not done too badly, either. Dividends paid in the first nine months of 1977 were $266 million. Dividends paid out in the first nine months of 1979 amounted to $682 million, up more than 2 1/2 times.
Meanwhile, the average price of gold stocks quoted on the South African stock exchange in Johannesburg has risen 105 percent since last January. But some stocks have trebled or quadrupled in value.
Not only gold shares have increased in price. Investors in South African stocks generally have had a splendid year. Shares quoted on the Johannesburg stock exchange have risen in price, on the average, 84 percent in the year. In money terms, this means that the value of investors' stock holdings has increased by about $28.8 billion to a record $64.8 billion.
Besides gold, the country has a wide range of other minerals and metals that are likely to be increasingly effectively exploited in the coming decade. These include coal, manganese, uranium, lead, zinc, mineral sands, and phosphates. By 1985, for example, South Africa's coal production will have doubled to meet the rapidly rising domestic and foreign demands.
The result of the mining industry's huge earnings will be felt throughout the economy. Not only will it help keep the country's balance of payments healthy, but it also will provide a vital stimulus generally by its demands for new equipment and the products of supporting industries.
Capital expenditure by gold mines alone in 1979 totaled $792 million and is expected to rise to more than $876 million in 1980.
All this has helped contribute to almost unrivaled optimism among South African businessmen and industrialists. And this is being supported by vitally important political developments.
The latter include the new, more flexible attitude adopted by the administration of Prime Minister Pieter W. Botha, who succeeded John Vorster a little more than a year ago.
Mr. Botha has indicated that he intends to modify South Africa's apartheid policy -- a policy that features compulsory racial segregation and has tended to constrict the nation's economic and social growth for decades. Black workers and businessmen have been promised a new deal, and big business generally has been encouraged to play a more constructive role in economic and social development, which it has been restricted from doing before.
It remains to be seen, however, if the Prime Minister is prepared to change any of the fundamental tenets of apartheid. Meanwhile, Mr. Botha has started to prune and reshape the government service to make it smaller and more efficient. For a start, he has announced that he will cut the present 39 separate government departments to 22.