EDITORIAL & OPINION — COMMENTARY – Sales will harm African miners

Dear President Clinton,

South Africa has inaugurated its second democratically elected president, Thabo Mbeki. Among the challenges he faces is the terrible shock to

his country’s economy caused by the dramatic drop in the price of gold. The many other gold-producing countries in sub-Saharan Africa are struggling with the same blow to their emerging economies.

Ironically, the US$30 decline in the price of gold can be traced, in part, to announcements to sell some of the International Monetary Fund’s gold

reserves to fund debt relief for some of these very countries. The IMF announcement, coupled with the proposal by the British government to sell some of its gold reserves, saw the price plummet to below US$260 an ounce

from nearly US$290. This drop has already reduced the export earnings of the gold-producing Heavily Indebted Poor Countries (HIPC) by more than US$150 million per year.

Make no mistake, we believe strongly in debt relief, and we intend to pursue every avenue to provide as much real relief as possible. However, selling gold reserves is the worst possible way of financing debt relief.

Gold reserves are a large part of the natural wealth of many poor countries and are therefore one of the few avenues for economic development. More than three-fourths of the HIPC nations targeted for the IMF relief plan

are gold producers. The mining industry draws much of its workforce from the poorest and most rural communities in the sub-continent. If the price of gold remains at its current 20-year low of US$258 per oz., 40% of South Africa’s gold production will become unprofitable and 80,000 miners will lose their jobs.

Debt relief does not require IMF gold sales in order to be effective. In fact, the proceeds from the gold sales that are actually targeted for debt relief are virtually nil. According to one calculation, there would be less than US$60 million per year available to retire the estimated US$220

billion HIPC debt.

— The preceding is a condensed version of an open letter sent to U.S. President Bill Clinton from the Washington, D.C.-based Black Caucus Foundation, a non-profit group that promotes the influence of African Americans in policy-making. The letter was signed by that organization’s chairman, Eva Clayton, and 25 other members.