Since South Africa is one of the world’s largest producers of gold, it is no doubt that their gold reserves will be huge. And this is what keeps the economy standing, even in these dire moments. Gold is known as the safe haven for the store of value, this is why many governments try their best to hold them in their reserves. The reason for this could vary, however, the goal is the same – to secure the future of the economy, and the rate of the national currency. The amount of gold held by a government in their reserve is not what is important here, rather it is the value of the gold that is more important. South African policymakers are expected to frame their political and economical outlook based on the value of their gold reserve.
South Africa’s gold reserve
South Africa produced 15% of the world’s gold in 2002 and 12% in 2005, including producing as much as 30% of annual global production as recently as 1993. South Africa’s gold exports were estimated at US$3.8 billion in 2005, despite falling demand. South Africa had a potential reserve of 6000 tonnes as of the end of 2018. According to the Mineral Council of South Africa, 75 percent of South African mines are now loss-making due to declining gold reserves. One of the most profitable industries generated capital, attracting immigrants from all over the world in the hope of increasing their profits, funding road and railroad building, and advancing South Africa to the top of the continent’s economic rankings.
However, it did not last too long. The economy has reached a halt. In the last two years, the rand has lost 30% of its value versus the dollar. China’s once-insatiable appetite for minerals has waned. After deposits were exhausted much earlier than anticipated, the mines where so many people were wealthy were shut down. In order to survive, a generation of impoverished South Africans and refugees have broken into them and scavenged illegally. The mine’s assets then began to deteriorate. The residual gold was so inaccessible that extracting it would be prohibitively costly and unsafe for a large corporation. The mine was shut down, and the shafts were filled with concrete.
The pandemic is wreaking havoc on the economy, which will take a long time to rebound from. South Africa’s economy was still in decline before the pandemic. The need for urgent livelihood security is putting citizens’ help to the test, and long-term recovery would necessitate public confidence.
One of the factors that have greatly been affecting the economy of South Africa is the high rates of inflation the country is facing right now. In order to come up with the proper plan to reduce the ongoing economic crisis, it demands the proper analysis of the behavior of the financial market, in general. The specialists believe that the large amounts of gold held by South Africa’s central banks will help in resolving the inflation problems. The demand for gold in the country has increased since it is considered a safe store of value, it will be able to maintain the value more than the local currency.
Also, although the country’s economy has greatly been hit by the effects of the pandemic, it is reportedly recovering and the import and export rates are more promising. The export of gold is one of the things that will ensure the economy of South Africa during these tough economic conditions in 2021. The gold reserves not only have sustained the country’s economy at a macro-economic level, but it has developed the economy at both community and local levels. Gold is one of the most desired precious metals of the world and is demanded both for its financial and cultural value. Since the 20th century, gold has been a vital part of the world’s currencies and until the 1970s, it was linked to US dollar prices.
The value of the rand is directly connected to its gold. Many gold mines suffered the effects of the pandemic as the general lockdown and social distancing were widespread leading to the closing of several mining operations. But as the lockdown eased off and miners resumed operation, the high demand for gold is being resolved as the much-needed production has resumed, leading to a slight increase in the value of the rand.
Summing It Up
Finally, to sum up, every country appeared to be indifferent economic conditions after the global covid pandemic that also hit the world’s economy. All of them are trying to implement their own specific ways of economic recovery based on the resources they have in the country. Since gold is used for many purposes by several countries around the world, it never loses its value in the role it plays to change the policies and economies around the world, and its value for the South African economy at this moment and through to 2021 is not any different. It is a sure fact that South Africa’s gold reserve will keep its economy afloat through 2021, although it is not as easy as it sounds, yet, gold’s power as a value will take effect.