White living standards could drop, too; S. Africa's gold bust hits blacks hardest
Many black laborers in South Africa's textile industry have stopped eating meat, says a trade union official, because they cannot afford it.
It's highly unlikely that any of these workers invest in gold. But as South Africans, their individual fortunes march in step with the world price of bullion. And for the moment that means bypassing the butcher shop.
South Africa is the world's largest noncommunist producer of gold. That was good news in 1980, when gold sold for a lofty $875 per ounce. It is bad news today, with the gold price hovering around $320 per ounce.
The lower price of gold has sent the South African economy into a slide made worse by the weakened economies of its industrialized trading partners.
For the next two years economists here forecast a bleak scenario of rising unemployment and a falling standard of living.
Behind that forecast is growing uneasiness about the social consequences of adding economic disappointment to the political frustrations of blacks, who - although they are a majority of the population - remain essentially powerless in white-administered South Africa.
Starting from an economically inferior position, blacks will carry the brunt of the economic downturn. Rural blacks will find it more difficult to get permission from government authorities to enter white urban areas where scarce jobs will be reserved for township populations. Blacks with work will probably make slower progress catching up with the wages earned by whites. The average wage of blacks is about one-fourth that of whites.
Also, the government will be hard pressed to make its policy of strict segregation more palatable to blacks; it had intended to make its policy easier to swallow with reforms that would promote greater economic equity among the races. Government spending on education, housing, and welfare for blacks will probably be less than it would have been under more favorable economic circumstances.
The difficulties posed by lower gold prices are made clear in the new 1982-83 national budget. It anticipates an economy that will grow only 1 to 2 percent in real terms this year. Spending rises more slowly than inflation, meaning a cut in real terms.
The tough budget ''comes at a time when expectations by underprivileged people are high and when a showdown is pending between those who want to get to grips with the realities of peaceful change and those who merely want to adhere to existing privilege,'' says Parliament's opposition spokesman on finance, Harry Schwarz.
Most economists feel South Africa needs a real growth rate of some 4.5 percent just to stay even with its rapidly expanding black population. An even higher growth rate would be needed to reduce unemployment. Black unemployment, according to the government, is 8 percent, but it is far higher if black homelands are figured in.
But South African consumers will pay for the lower gold price. When the price falls $100 per ounce, the government loses roughly $1 billion in tax revenue from gold mines. Consumers wind up helping to offset that loss to the South African economy.
Already the government has slapped a 10 percent surcharge on all imports, which will boost the price of consumer goods. The general sales tax has been raised by 25 percent. And gasoline, airfares, rail tariffs, and bread will be more expensive as well.
If there is a silver lining to the budget for government opponents, it is that South Africa has been pressed to spend more on butter and less on guns.
''The cuts haven't taken place in areas of social requirements,'' Mr. Schwarz says.
Preliminary analyses of the budget show housing and education expenditures have been increased by amounts that are higher than the rate of inflation - although they are not so high as the government would have asked for in better economic times. Defense spending, by contrast, is to increase by 8 percent this year--a rate that is below the 13 percent inflation rate.
The major variable in the economy remains the price of gold. Most gold analysts here say the decline in the price of gold is due to continuing high interest rates in the United States.