South African industry is in the throes of a transition which by 2000 will see this economy's reliance on gold for the bulk of its foreign exchange income become a thing of the past.
While South Africa has historically been linked with gold, the need to industrialise coupled with the high cost of the country's deep gold mine operations and the declining price of this commodity will, within a few years, see export earnings from the sale of steel and ferro-alloys outstrip those garnered by the precious metal.
Indeed a study carried out by commodity analyst, Mr George Grohmann, at Johannesburg-based company Rice, Rinaldi, Turner and Co., has shown that the low costs of ferrous commodity production in South Africa has spurred exponential growth in this industry. The total value of production in this industry, both export and local sales, rose from $2.78bn in 1985 to $5.52bn last year. A projected income of $5.9bn in 1997 should exceed gold earnings of $5.6bn which declined from a high of $8.7bn in 1988. In the year 2000 exports of $6.2bn worth of ferrous commodities alone (total value is expected to be $8.2bn) will exceed gold production which has been put at $5.4bn. (Platinum, by contrast, is expected to fare better rising from a value of $0.9bn in 1985 to $1.76bn last year and projected at $2.55bn in 2000).
The reasons for this industrial paradigm shift are self evident. South Africa holds 68% of the world's known chrome ore reserves, 80% of its manganese ore and 45% of its vanadium all of which are vital ingredients of ferro-alloy and ultimately steel making. Furthermore, electricity costs are comparatively low with ferro-alloy producers enjoying a commodity price linked tariff, with a similar agreement possibly on the cards for steel. Another comparative advantage is cheap, albeit unproductive, labour.
These factors have in recent years seen a major shift southwards in ferro-alloy production capacity and South Africa now controls over 50% of the world ferro-chrome market and a number of new expansions are under way which should consolidate its dominant position and reinforce the current regime of low prices at which only the low cost South African and Zimbabwean producers appear capable of making an acceptable profit. South Africa is the location of 2.6m tonnes per year of the world's 5.6m tonnes per year ferro-chrome capacity. This process is expected to be further accelerated as China and the countries of the former USSR transform into...