If trade unions are working on the assumption that the good times will come again, they need to think again. Crucially, even if prices did pick up again, the cost bases of SA’s producers are much higher now.  In gold, labour costs have risen 25% and electricity prices 200% over the past several years, and those together make up 70% of the cost base. In commodities such as gold and iron ore, our producers are much higher on the cost curve than their global peers, so their competitors, even in advanced countries such as Australia or the US, can still make money at low prices.  It’s not just that SA’s producers stand to be driven out of the market if they can’t compete — it’s also that investors inevitably ask why they should invest in South African producers at all, when there are much better options elsewhere. 

That’s especially so because the cost issues are just part of it; the constant changes and unending uncertainty in the regulatory environment, especially on the black empowerment front, and the ailing power grid are other deterrents. As the chamber sees it, the gold industry is at a crisis moment — hence its push for a social compact.

Read the full report Crisis, what crisis?  Unions a microcosm of denialism by Hilary Joffe on 22/7/2015 in BDLive.