BM-Ed-ATB/Fort Knox Sometimes, not often, things go a little better than you expected.
Perhaps the Sandton traffic was lighter than usual, or the lift was standing waiting or Jacob Zuma decided to not appeal a court ruling.
Very rarely this might happen to you financially.
A share price might go up unexpectedly, an investment could somehow fire up. Perhaps you got a promotion rather unexpectedly after someone else left in a hurry.
There was a time, long before what we now call “Cyril’s economy”, when you might even have received a bonus that was bigger than expected.
I realise you might have to search your memory a bit for any of these things happening in your life. But it is still important to consider: what would you do with a sudden windfall?
Many people in the gold-mining industry have this problem now.
This week, Pan African Resources confirmed its interim profit for the six months to December was R2.4-billion.
DRDGold said its operating profit was up to R2.71-billion, while earlier today Gold Fields said its profits had more than doubled in their full financial year.
There have already been others and there will be more, particularly as the gold price still hangs around $5,000/ounce. And will probably remain there for at least as long as Donald Trump is in the White House.
It does lead to an interesting question: how much will our society benefit from this? Does it really do very much for our economy?
The first and most obvious answer is yes, simply through the royalties from gold that are paid to the government.
A report from RMB Morgan Stanley has suggested that royalties and taxes from our mining sector would rise from about R30-billion in 2024 to about R40-billion last year.
This is a huge boost at a time when National Treasury is determined to pay back debt.
It will be less of a boost when Anglo American finally leaves our shores and goes to Canada. Then those corporate revenues will be lost to us, I presume for good (although they will still have to pay royalties).
As MiningMX has explained, this year the government could get about R80-billion from the mining industry.
Of course, the people who will benefit the most are the shareholders of these mining companies.
All of them have declared record dividends, and they will be returning a huge amount of money to shareholders. That’s great for those shareholders, but less great for you and me.
But, of course, if you have pension money invested in the JSE in virtually any way, you will get something. Anything linked to the index has moved up dramatically because of the gold price, while your pension fund managers should be fired if they didn’t go into gold a while ago.
Then, of course, there is the investment we have already seen in increasing gold production. Any company with a shaft that can produce more will be pouring money into that shaft.
That in turn will benefit the equipment manufacturers and suppliers in that area.
And then there are the workers, the people who actually get the stuff out of the ground.
It seems unlikely to me that many of them will get huge salary increases, certainly nothing like the way the gold price has moved.
The obvious reason for this is that you can’t peg wages to the gold price. It would be a recipe for absolute disaster.
That said, I’m hoping that some of the mining union pension funds are invested in gold so there could be some benefit there.
I suspect that among the individuals who will do best in all of this are the bosses, the people who run these mines.
But only if they are big shareholders in their own capacity.
You might remember what happened the last time the price of a metal mined here jumped so dramatically.
In 2022, after platinum prices spiked there was huge anger at the “salary” paid to the head of Sibanye-Stillwater, Neal Froneman.
Considering he had refused to pay higher wages to members of the Association of Mineworkers and Construction Union, and then received more than R300-million, the outrage was obvious.
But, as he explained (I imagine more than once), this was not really a salary at all. It was not a cost to the company. Rather it was a long-term share incentive scheme. As is common at this level, executives are given shares with the incentive of raising the price.
I can’t help but wonder if we might see a repeat of all of the outcry again. Someone, somewhere is surely going to have something similar, with the same kind of result.
I completely understand and agree with the idea of an share incentive scheme. I get why people do it.
And despite the technical explanations that this does not come at a cost to the company concerned, I think it might still leave a sour taste in the mouth.
It’s not just for the usual reason, that our racialised inequality means so many people are forced to live on so little while one person gets so much.
I think it’s about the fact that while they are always very clever people at the top of their game, who have often beaten the opposition, it’s not really the result of their hard work.
Gold Fields did not increase its share price so dramatically over the past two years because of anything its current CEO has done. And the CEO who came before him might have been a much better CEO. But there was no way he could have benefited in the same way.
It’s a reminder that, as in investing and as in life, it’s just not fair.
“Twas always thus, and always thus will be.” – John Keating, Dead Poets Society. DM