—and of materials, and in addition to heavy increases of taxation.56 Even
if there had not been strict control over new capital issues, it would
not have been easy to raise fresh capital for the mining industry under
the circumstances—rising costs and the uncertainties of the future
would have deterred the investor, both in London and in South Africa.
Even after the conclusion of the war, the outlook continued unpromising.
Since 1939 . . . working costs per ton have increased at an average rate of about lid. per year and the rate of increase is itself increasing—between 1945 and 1946 the rise was no less than is. lod. If
this trend continues, and if the price of gold remains unchanged,
profitability must soon fall to such a low level that large sections of
the industry will become unpayable . . . the present steep decline in
profitability implies the danger of the closing down of a considerable
proportion of the present producing mines. . . . The president of the
Chamber of Mines has estimated that the eleven mines most closely
affected by the rise in costs employ nearly one-quarter of the
industry's labour force, so that their early extinction would be
likely to create serious unemployment. The gold-mining industry of the
Witwatersrand must, in the nature of things, decline and the Union's
gold production can only be maintained by the successful and energetic
development of new-areas such as have been located in the Orange Free
State and along the West Wits Line. If the rise in costs relative to
revenue were to continue, it would, by throwing large tonnages of ore
outside the range of payability, accelerate the decline of the
Witwatersrand and aggravate the problem.57
dependants
also reduced the attractiveness of the mining industry to Native labour
and the drain on food supplies added to the difficulties of feeding the
Natives in the compounds. In the end, Native wage-rates had also to be
increased.
56 Moving the adoption of the report and accounts of the Chamber of Mines for the year 1942, Mr. Carleton-Jones explained that:
'The
combined effect of the basic tax, graduated tax and special
contribution, on the basis of the latest available information, is that
the State is now taking nearly 71 per cent of the taxable profit after
making allowance for lease payments as well as for gold realization
charges and other payments made to the State which are included in
working costs. Furthermore, the State will take 72\ per cent of
any increase in profit resulting from an increase in revenue and 77J
per cent of any increase in profit resulting from a decrease in working
cost. The contribution to State revenue from mining profits is further
increased by the super tax borne by individuals in respect of dividends
received from the mines or dividends received from companies holding
shares in such mines, and again by the non-resident shareholders' tax.
Under the present rate of taxation investors have virtually no
inducement to provide further funds, especially in view of the mining
risk, the large capital expenditure required to establish a modern
deep-level mine and, even if the mine becomes a dividend-payer, the
long period between the date of the investment and the first payment of
a dividend' (syd annual report of the Chamber of Mines, p. 52).
67 Social and Economic Planning Council: Report No. 11. Economic aspects of the gold mining industry (December 1947), paragraphs 24, 26.
