Exacerbated by power supply problems, particularly in the first quarter of the year, South Africa, for many years the world's largest gold producer, has now fallen to third place in the world league after China and the USA. Indeed 2008 output was the lowest from South Africa for 86 years.
While the power crisis, which led to the whole gold mining sector being shut down for a week at the end of January, and supplies to mines reduced to 90-95 percent of their demand levels for the rest of the year, was in part responsible, the country's output has been declining for some years now, indicative of its aging mines and increasing depth of operation. Closures for safety reasons have also contributed to the decline, with mines closing down following serious accidents and deaths while these are investigated.
These closures have been effective in focussing management on the safety problems endemic to the country's exceedingly deep mining operations which exacerbates problems faced by underground miners elsewhere. Indeed mine fatalities have been falling and are only a fraction of those recorded in countries like China. Given the big South African gold mining workforce - amounting to some 166,000 people - on a per capita basis this is actually better than in many other mining countries. Be that as it may, any death is unacceptable, and the moves being made by the mining companies under pressure from the South African government through the mines inspectorate, and accompanying legislation, are being welcomed by the mining trade unions.
Last year's gold production totalled 220,127 kg (7.08 million ounces) - a 13.6% fall from the 2007 figure. Fourth quarter production at 55,524 kg (1.78 million ounces) was 0.9 percent down on the third quarter and fully 10.7 percent on the fourth quarter a year earlier.
It is hard to see South African production recovering in the foreseeable future given the country's aging mines. Higher gold prices won't necessarily help as there is then a tendency to mine lower ore grades which, without increasing mine throughput which cannot be done quickly in most cases, actually leads to further falls in metal output.
South Africa's declining output is an important contributor to a global fall in gold production estimated at around 4 percent in 2008. Gold though remains vital to South Africa's economy accounting for about 2.5 percent of GDP and 7 percent of the country's exports.