Selling gold to help some of southern Africa’s poorest and most heavily indebted countries would seem like a good idea at first glance, but the fact is that the International Monetary Fund (IMF) scheme could cause far more human misery and economic chaos for SADC countries like Namibia, South Africa, Tanzania and Zimbabwe.

The gold industry is already reeling from the sale by the Bank of England of 25 tonnes of gold at US$261.20-an-ounce during an auction which was oversubscribed. Gold prices, already at a 20-year low, dropped further to US$256.90-an-ounce, a decline of US$36-an-ounce since May when Britain’s central bank announced its plan to sell off 415 tonnes of its 715-tonne reserve. The sale netted the bank about US$210 million. Hundreds of thousands of workers in the gold mining industry in southern Africa could lose their jobs, wreaking economic havoc in countries already struggling to stabilise their economies.

Even more controversial is the IMF’s plan, supported by the Group of Seven
(G7) industrialised nations, to sell 10 million ounces of its gold reserves to finance debt relief for countries like Tanzania and Mozambique. The latest blow came when the Bank of Switzerland announced it will sell 1,300 tonnes of excess gold reserves as early as next year.

Selling the gold will undoubtedly create new economic problems for the mineral-rich region and may well weaken the economies of 36 of the 41 most indebted countries in the world which the IMF wishes to help by relieving them of crippling external debt. In addition to the SADC countries, Ghana, Mali and Burkino Faso in Africa will be seriously affected as well.

Already 5,000 miners in South Africa have been laid off without severance pay by the East Rand Proprietary Mines, the first of several mines expected to go bankrupt from falling bullion prices.

Zimbabwe’s Chamber of Mines, deploring the British and IMF decisions, says 30,000 jobs in the gold mining sector are at risk, affecting the lives of as many as 150,000 people dependent on the gold sector.

Many southern Africans, from presidents and gold barons to trade union leaders are furious at the world’s new disdain for the once precious metal. “It doesn’t make sense to say we’ll weaken your economies and then give you a little debt relief,” says Trevor Manuel, South Africa’s Minister of Finance.

“The answer to the debt problem is write-off, not selling gold, Patrice Motsepe, Executive Chairman of African Rainbow Minerals, a black empowerment group.

And President Thabo Mbeki, in a move calculated to gain support in the U.S., reversed his earlier position and came out firmly against the IMF plans. Since the IMF sale requires some 85 percent support from its board, and the U.S. has 17 percent of the votes, Congress could effectively veto the plan. Republicans have introduced legislation to block the proposal and the U.S. Congressional Black Caucus has added its opposition.

Paradoxically, southern African mines have been steadily cutting their costs of production to become more competitive with such countries as Australia and Canada where producing an ounce of gold costs about US$250 but the price is falling faster than mines can retool.

And, say gold analysts, prices are plummeting at a time when world demand for gold outstrips supply so, if it were not for the central bank and IMF sales, the price of gold would be going up. Jewelers, dentists, electronics makers and personal hoarders absorb about 4,000 tonnes of gold annually while mines throughout the world produce just over 2,500 tonnes, the shortfall being made up from recycled gold, forward sales by mines and sales by central banks.

The big question mark is the 35,000 tonnes of bullion stored in those central
bank vaults which used to be kept as a hedge against economic downturns. About 80 percent of the trading in gold futures is by speculators, not users.

And the London-based World Gold Council, which represents the industry, calculates that while the IMF could realise about US$108 million-a-year by selling gold, those same highly indebted countries have already lost US$224 million from the US$36 drop in gold prices in the last three months.

Others are critical of Britain as the main coloniser of countries being hurt the most, noting that South Africa has been the world’s biggest gold producer for more than a century.

“In the 19th century, Britain profited enormously from the gold mines in southern Africa. The Anglo-Boer war was a gold war — Britain was losing to Germany in gold competition and saw South Africa’s mines as a solution. Now, it’s the same old colonial power that’s giving this region another blow,” says Prof. Sampie Terreblanche, a political economist from the University of Stellenbosch.

James Motlatsi, head of the South African National Union of Mineworkers (NUM), agrees and, along with thousands of NUM members picketed the British and Swiss embassies in Pretoria demanding Blair stop selling gold.

“When you destroy gold-mining, you destroy millions of lives. We say to Britain, you cannot run away from your social responsibilities.”.

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