As mining companies in South Africa contemplate divesting from the country following last year’s violent labour strikes, local governments are facing mounting pressure to prop up public services.

For years, South African authorities have required global miners to help with the provision of better public services.

According to the Wall Street Journal (WSJ), as economic and labor troubles shake up the mining industry, communities are facing a double hit.

With many companies closing mines, rural communities are grappling not only with large-scale job losses, but also with a blow to social services the mining firms proffered.

Several mines in South Africa are closing or restructuring. In November, the JSE-listed Gold Fields, South Africa’s second biggest gold miner, spun off two of its oldest mines in the country into a separate company because it said the mines required a different management approach to extend their life span.

Anglo Gold Ashanti, another JSE-listed gold miner, said it is in the middle of reviewing its mines in the country and that it may have to shut some that aren’t profitable.

Aquarius Platinum, the JSE-listed platinum miner, put two mines in South Africa on what is known as “care and maintenance” in the past year and said that it had to cut spending on community projects as a result.

In September, the South African subsidiary of Canadian-listed Great Basin Gold, the owners of the Burnstone Mine, filed for bankruptcy protection.

Most of the mine’s 1.400 employees were fired. Projects the miner had agreed to take on to improve Siyathemba, this mostly black township in northern Mpumalanga province were left unfinished.

Lou van Vuuren, Great Basin Gold’s former interim chief executive officer, said the company had suspended work at Burnstone after overall costs rose and production targets were missed.

While electricity prices and labor account for the bulk of mining costs, social spending also contributed, he told WSJ.

He said the company was looking for buyers or other funds to save the mine and revive community projects.

South Africa’s government requires companies seeking a mine licenses to spend some of its profits on community development projects.

It is believed that in 2011, mining companies spent 1.3 billion rand ($147 million)—or 1.4 percent of profits before taxes—on community development.


Elsewhere on Ventures

Triangle arrow