Gabriel Pontin London Politica Gabriel Pontin London Politica

Zama Zamas or Artisanal Miners? How cheap labour and abandoned gold mines have created a rift between neighbours

 

Background

South Africa’s rich mineral wealth once brought European invaders to its shores, yet today as the state struggles to keep the lights on, illicit mining has become endemic in the country. Abandoned mines are still full of gold and have been taken over by illegal miners backed by influential business leaders both national and international. These miners (primarily working in Free State Province) are known as Zama Zamas, a Zulu term that loosely translates to "someone who is trying" or “a hustler”. They operate in a criminal underworld that is often violent, dangerous and exploitative. They are often heavily armed and primarily come from South Africa and neighbouring countries such as Lesotho and Zimbabwe. The high unemployment rate in South Africa (currently at 32.9%) leads many to search for any work available legal or otherwise. Youth unemployment stands even higher at 46.5%, with younger workers more attracted to the physically demanding work of the mines.

South Africa holds over 50% of the world’s gold reserves and gold mining makes up around 7% of South Africa’s GDP. There are approximately 6000 abandoned mines in South Africa (remnants from the collapse of the legally recognised mining sector post the gold price crash in 1989). Thus, illegal mining in South Africa is not a new problem and many Zama Zamas were at one point legally recognised miners left without work after the collapse of the legally recognised sector, but reports of Zama Zamas raiding and sexually assaulting members of South African settlements has led to riots in Johannesburg and the burning of the homes of suspected Zama Zamas. But much of the political reaction in South Africa and neighbouring Lesotho, however, has not been in economic terms but social and criminal ones.  In fact, National Police Commissioner, Lieutenant General Fannie Masemola’s description of the conditions by which the police can measure success is in the satisfaction of the community as opposed to the actual prevention of illegal mining. 

Effect on Lesotho Relations

Relations between South Africa and Lesotho have become strained as a result of the Zama Zama problem. Most recently, 31 people were killed by a methane blast at a gold mine that was officially designated as disused, with the South African authorities claiming the victims to be Zama Zamas from Lesotho. Lesotho has provided cheap labour to South African mines for nearly 130 years, but the rising tensions over foreign Zama Zamas in the country has led to new political tensions. The 31 dead from the largest catastrophe at a mine in recent years are not valued enough to have major efforts undertaken to retrieve their bodies, with their illicit status and foreign origin both reasons for the government to prefer to not waste resources on a treacherous and possibly methane filled mine. Many Lesotho nationals both in and out of the small mountain kingdom have lost relatives to mine accidents in South Africa and many have not been able to retrieve the bodies of their relatives. Many of these miners were the breadwinners of their families and the loss of their income leaves families in Lesotho without income or support. When asked by the BBC’s Africa Daily podcast, one Zama Zama from Lesotho said he entered mining as a profession because “hunger drives us to do such things”. The Government of Lesotho has recognised the intense poverty of the country leading to many seeking illegal work in neighbouring South Africa. Around 50% of Lesotho’s population lives in poverty, with unemployment sitting at 18.04% as of 2022.

The South African government has claimed that if the bodies buried in abandoned mines are from Lesotho, then the retrieval of their bodies cannot be South Africa’s responsibility alone. Gwede Mantashe, South Africa’s minister of Mineral Resources and Energy, told a press conference that “If all those bodies are from Lesotho, it means that there is a responsibility… that the Lesotho Government has. So it can not just come to us on the basis of ‘there are bodies underground please take them out.’” He went on to say, “many of them come heavily armed and therefore both governments must have a cooperation in dealing with that crisis as two governments.”

Criminals or Wealth Creators?

However, claims of Zama Zamas being especially violent should be taken with a grain of salt, as Professor Robert Thornton, at the University of Witwatersrand, advocates for use of the term “artisanal miners” to emphasise the entrepreneurial nature of immigrant miners who create vast numbers of jobs and contribute much to the South African local economies. The “non-standard” mining skills of Zama Zamas allows for the exploitation of gold resources major industrialised mines cannot access and directly interact with global gold markets. With better legislation, government support, and improved training they could become part of the social and economic fabric of the country. He claims that most miners are not “stealing gold” but extracting gold that is unreachable by the industrialised mines, additionally he claims that many Zama Zamas originate from South Africa itself and come from many backgrounds, i.e. not just the poorest of the poor. 

South Africa Vs Lesotho, or South African Ethnic Conflict?

David Van Wyk, Chief Researcher of the Bench Marks Foundation (an organisation specialising in the monitoring of multinational corporations in South Africa and the wider region of Southern Africa), claims that in many ways the conflict between Lesotho and South Africa can be alternatively understood as a tribal conflict within South Africa. Many in the Free State, the province most associated with gold mining, speak the same language as those from Lesotho (Sotho) and share a tribal identity as a result. Any Sotho speaker can become a victim of the situation. The colonial history of South Africa contains many land grabs by South African colonial authorities of traditional Lesotho lands leading to the creation of the Free State. Van Wyk thinks it an awkward possibility that Lesotho could quite simply turn around and begin to make land claims of the South African government if tensions continue to rise.

Van Wyk points to the South African government’s tendency to depend on policing on issues such as these, as opposed to regulation and legislation, is leading the situation becoming more and more out of control akin to the current situation in Katanga Province DRC. He suggests “that they be organised into co-operatives and that the co-operatives get registered with the industry and Department of Mineral Resources. We suggested that there be a central buying agency of the gold from the syndicates that are now the main beneficiaries while the hardworking people die in poverty. We speak to the Zama Zamas on a daily basis and they are desperate, they want to be regulated and legislated for.”

Conclusion

The current situation demands cooperation and collaboration between the governments of South Africa and Lesotho. Rather than viewing the issue solely through a lens of blame and responsibility, both governments should work together to find sustainable solutions. By addressing the root causes of poverty and unemployment and providing legitimate opportunities for economic growth, it is possible to transform the Zama Zama issue from a source of conflict into a catalyst for positive change in the region.

Addressing the Zama Zama problem requires a multi-faceted approach, involving comprehensive legislation, cooperation between governments, and a focus on economic development. By acknowledging the potential of these artisanal miners and providing them with opportunities for legal and regulated work, South Africa can harness its mineral wealth to benefit its people and foster stronger relationships with its neighbours.


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Frank Stengs London Politica Frank Stengs London Politica

Financial turmoil’s fallout for commodity markets

 

The fallout from last week’s SVB crisis sent worrying signals across global financial markets, and caught crude oil and other commodities in the downdraft.  Oil prices tumbled on fears that the crisis would spread, feed into the physical economy, and cause a potential economic slowdown. The events, however, also saw even the most ardent bulls (Goldman Sachs) change their oil price outlooks as hedge funds began buying oil put options. 

WTI crude sank below $65 per barrel and Brent was down about 10 per-cent on a weekly basis. The price decline was accentuated by forced selling of speculators who had built up bets on higher prices in recent weeks - assuming that Chinese oil demand would recover and Russian oil exports would wane in response to strengthening sanctions. Russian oil flows, however, proved more resilient than previously thought. Furthermore, swelling oil stocks, signaling weak demand because of the mild winter, could not be ignored by the markets.

Gold (and other precious metals), on the other hand, saw increased demand as investors increasingly sought for a safe haven for their investments. As a result its price rose above $2000 an ounce, for the first time in a year.   

The irony of last week’s events is that the Saudi government is now paying the price, after the Saudi National Bank ruled out putting up more cash for Credit Suisse. Not only did Credit Suisse shares plunge, resulting in a UBS takeover and a $1 billion Saudi loss, but also did it trigger a macro meltdown that carried Brent and WTI with it. 

Outlook

The ultimate impact on commodity markets will depend on the degree of transnational contagion following the collapse of SVB and UBS' acquisition of Credit Suisse. Spreading of the crisis will likely affect the physical economy and halt demand for oil, resulting in more price declines. Containment, on the other hand, assures traders that the physical economy will be relatively unaffected, allowing prices to gain steadily.

But there are more factors at play. The financial turmoil affected the Fed’s monetary tightening, the effects of which will trickle down into commodity markets, specifically crude oil. Wall Street earlier used the SVB crisis to demand that the Fed does limited or no more monetary tightening, until it is certain that the economy is sound and it won’t accelerate towards recession. Fed officials, on the other hand, argued that they have the tools to handle the SVB contagion and it is more important that the fight against inflation continues with more rate hikes. A hawkish stance on interest rates will raise consumer and manufacturing costs, which will reduce demand for oil and likely result in a price drop. 

Inflation, however, showed signs of slowing down with the CPI rising 6 per-cent in February, down from 6.4 per-cent in January. As a result, the Fed increased its rate by 25  basis points, instead of the more hawkish 50 basis points. The Fed, however, did not rule out increasing its rate in the future. In line with the Fed, the BoE also increased its rate by 25 basis points, after its annual inflation rate jumped to 10.4%.  

Price declines have also raised the prospect of the U.S. government buying oil to replenish its strategic petroleum reserve (SPR) - a move that could stabilize demand. The White House set a price range of $67-72 per barrel where it would buy back crude oil, and prices are currently below the bottom range. The Biden administration, however, has not committed yet and stated to view the situation day-to-day. 

On the OPEC(+) side, Saudi and Russian officials met to discuss the stability of global oil markets. Price declines have raised the prospect of intervention from OPEC+, and news of the Ruso-Saudi meet-up was enough to see oil prices gain some currency and raise beliefs of some kind of intervention. 

In the longer-term, price declines could be upset by increasing Chinese demand. On Wednesday, the IEA said that China is expected to drive a two-million-barrel rise in the world’s daily oil demand this year, pushing it to a record 102 million. Expecations in the oil market, however, vary, because the Chinese government set its growth rate target at a modest 5%, signaling a changing economic environment, which could impact oil demand.. 

Stronger fundamentals ultimately will decide whether oil prices go up to down. The expectation now is that fundamentals will reassert over time, meaning that the banking turmoil impacted commodity markets only in the short-term. Ultimately, however, this rests on the degree of contagion in the financial system. Ongoing developments in the financial system, Fed interest rates, SPR buybacks, OPEC intervention, and Chinese demand, therefore are key events to watch for in the future. 


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