When gold is poured it doesn’t glitter. It drips out in thick globs of orange. If a small amount splashes you, it will burn a hole right through your hand. Yet, the moment it is out of the furnace, you can feel your hand drawn toward it. This is the allure of gold: the most sought after commodity in the world.
In the sooty recesses of the 93-year-old Rand Refinery, to the east of Johannesburg, South Africa, almost 50,000 tons, a third of the world’s gold, has been melted by craftsman clad in singed overalls. In a place that never sees the light of day, where the churning of machinery can deafen you and the light and gas from furnaces can blind you if you don’t wear safety glasses; no one leaves without a full-body x-ray.
<img loading="lazy" decoding="async" class="alignleft size-medium wp-image-1964" src="/wp-content/uploads/2017/04/IMG_5232-200x300.jpg" alt="" width="200" height="300" />
It takes 15 minutes to pour 10 bars, each worth R5.7 million ($570,000). By the time it’s cooled, the rising price of gold makes it worth a million more.
“In this industry no day is the same as the previous day, especially right now when gold is so volatile,” says Howard Craig, CEO of Rand Refinery.
The refinery turns raw gold, flown in from the mines by a fleet of heavily armed helicopters and trucks, into bullion. In churning out the wealth of nations, these men are able to do what machines cannot; pour molten metals into casts to a perfect weight of 12.6kg. The refinery makes its money by this smelting and refining of the metals.
In October, things were cooking when gold was selling at $1,790 an ounce. Since then, the gold industry has hit a downward spiral of fluctuating prices, ending $300 lower at around $1,400.
“I’m still very bullish about gold and a lot of people panic when they see the gold price drop by $150, like it did in the last couple of weeks. But for me what was really encouraging was [when] people came into the market and we have seen such massive purchasing and demand as a result of the price going down. I think, as a leader at a gold refinery, you have to believe in it. But I think there are some good fundamentals that underpin that belief,” says Craig.
Adrian Saville, an investment analyst from Cannon Asset Managers, believes that, this year, gold’s role as a buffer against economic uncertainty has waned.
“First, the US has a much firmer footing in its economic recovery. Second, through 2012 there was a huge question mark over the survivorship of the euro, especially surrounding Greece and the so-called Grexit [Greece’s possible exit of the Eurozone]. Today, some of this anxiety has been taken off the table and the euro appears to be on firmer ground. Third, in early 2013, investors have been encouraged by Japan’s massive liquidity boost, which has helped reflate the Nikkei and restore some lost confidence,” says Saville.
The analyst says that, as the price has decreased, the historical relationship with other precious metals has revived.
“At first glance gold has no inherent investment value. Gold has no real industrial application; it is a lump that people want or desire. In this way, the gold price is largely sentiment driven, which is hardly the basis for successful investing. But, at the same time, when countries are wildly printing money, gold offers people a stable store of wealth and that makes it very appealing. In 2000, two million Zimbabwean dollars would have bought you a wheelbarrow of gold. In 2008, you would have had a wheelbarrow full of paper,” says Saville.
They say, get too close to a fire, or molten gold, and you will get burned. It seems, for the moment, the allure of the shiny yellow metal is worth the risk. The trick is, getting out before you get a hole in your hand.

Is The Golden Bubble About To Burst?

One name was in the head of Cameron van der Burgh amid the lights, screaming and chaos at the poolside—that of his friend, Norwegian world champion swimmer, Alexander Dale Oen. Just a few months before, Dale Oen was altitude training in Arizona, in the States, looking forward to winning gold medals in London. On April 30, the 26-year-old collapsed and died from a rare heart complaint.
“We were friends and I was training to beat him when he died and it almost felt like he left something with me that helped me with my journey. As you can see, at the end of the race there is a picture [of me] pointing to the sky in his honor. It was relief that I was able to achieve what I wanted to do with the help of someone to look after me. I felt I was swimming with him,” says van der Burgh during a visit to FORBES AFRICA in Sandton.
“I would always go fast, so in the second 50 meters, I would fatigue. Alex was always very fast in the second 50 and so was I in this race. I could almost feel maybe this guy was smiling down on me afterwards… When I got home that night I looked at the medal and reflected. It is like you have to study for four years for one final exam, lasting 58 seconds, if you fail you go back to day one. I was very lucky to be on the other end of the scale.”
<div id="attachment_1199" style="width: 310px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-1199" class="size-medium wp-image-1199" src="/wp-content/uploads/2017/04/149537322_10.jpg.-300x200.jpg" alt="" width="300" height="200" />Swimming: 2012 Summer Olympics: South Africa Cameron van der Burgh victorious after winning gold with world record time of 58.46 seconds during Men&#8217;s 100M Breaststroke Final at Aquatics Centre. London, United Kingdom 7/29/2012 CREDIT: Peter Read Miller (Photo by Peter Read Miller /Sports Illustrated/Getty Images) (Set Number: X155279 TK5 R1 F131 )</div>
Van der Burgh, born-and-bred in Pretoria, South Africa, is the grandson of a Karoo farmer and probably one of the most polite and unassuming world champions you will ever meet. You wouldn’t bat an eyelid if you saw him cleaning his dad’s pool in the Pretoria suburbs. He is also a man who believes in home; he turned down offers from Australia to become the first-ever world swimming champion to be trained in Africa. Along with his fellow South African gold medalist, Durban-based swimmer, Chad le Clos, he believes their win could boost swimming in South Africa.
“We have shown the country that swimming is worth investing in. There is a lot of money out there and I am sure the guys in rugby and cricket will be complaining because we will be taking money away from their sports,” he says.
On the face of it, van der Burgh is the consummate narrow-eyed sport professional. Since the age of 11, days when he beat all-comers easily, without training, his cellphone PIN has been 2-0-1-2, his year for the Olympics. By the age of 16, he was losing heart and could have tossed it all away if it hadn’t been for a painful freak accident.
It was the South African national championships in Durban and van der Burgh hadn’t made the finals and was beginning to wonder if he ever would. Instead of tearing through the pool he was out of it and messing around with a mate on the high diving board.
“I jumped once and it was OK, the second time I was wet. There were big banners saying don’t jump off the diving board. I got to the top of the stairs, my foot slipped; I fell three meters onto the tiles and broke my ankle. Boys will be boys,” he says.
“Three months and two operations later I was recovering when I saw all my mates were training away and I wasn’t even able to jump into the water. It was then I decided to push myself further.”
It wasn’t easy. For four years, training began at 8am, with grueling hours in the pool and gym, followed by a massage until 6pm.
“It is a hard life. It is a lonely sport with lots of sacrifices. I do get lonely,” he says.
The fruit of this labor has been crazy days, far from lonely, with people drawn to him like flowers to the sun. On the eve of the semi-final he had to switch off Twitter because 10,000 messages a night were keeping him awake. People have asked him to sign their arms and legs; one man asked him to attend his child’s birthday party. You can be sure more than a few South Africans will name their children Cameron. He was also amused by entering the gold medal club.
“Gold medalists like Phelps are in their own world and they don’t talk to you. I noticed, the day after I won, that they nod to me now,” he says.
The man himself can’t wait to go surfing in Jeffreys Bay, off the east coast of South Africa. He learned how to surf three years ago and says he is very good at paddling.
The future lies in financial management, which van der Burgh is studying through the University of South Africa (UNISA). He has already invested in a company offering accounting services to the mining industry.
In January, he will begin training for the 2016 Olympics, which he is sure will be his last.
“I want to go back and win the medal. So then I have done my job and can haul my togs up. I see it like a gladiator—after you have finished your job you can live and you can be proud,” he says.
Africa will be proud too.

The Golden  Gladiator

Runners Kipchoge Keino and Pamela Jelimo are divided by age, but united by the fact that they are both Olympic champions. The contrast in their Olympic lives tells the story of half a century of change for African athletes.
Keino—known as “Kip”—ran when athletics was an amateur sport. Jelimo burst onto the scene as a professional athlete. For her, the Olympic medal meant ‘increased personal brand value’—as the marketing men say these days.
Kip, 72, a two-time Olympic gold medallist, is chairman of the National Olympic Committee of Kenya (NOCK). He has kept his lean, athletic, whipcord frame that propelled him down the track to glory in Mexico.
Kip won the 1,500 meters gold in the 1968 Olympics in Mexico City, amid the energy-sapping, thin air caused by the altitude, on a day he defied the doctors, who recommended that he pull out. Legend has it that Kip was stuck in Mexico City’s notorious traffic before the race and had to run a mile to the stadium to make the starting line-up in time. In the race, Kip beat United States track star Jim Ryun by more than 20 meters—a record, before going on to win the silver in the 5,000 meters. He was just 23.
<div id="attachment_816" style="width: 210px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-816" class="wp-image-816 size-medium" src="/wp-content/uploads/2017/04/50438922_10-200x300.jpg" alt="" width="200" height="300" />Kenyan track star Kipchoge Keino (L) finishing ahead of teammate Ben Jipcho (574) in the 3,000-meter steeplechase final at the Summer Olympics. (Photo by John Dominis//Time Life Pictures/Getty Images)</div>
Four years later, in the 1972 Olympics in Germany, he won gold in the 3,000 meters steeplechase and silver in the 1,500 meters.
“To be an Olympic champion takes a lot of dedication from an individual,” he says.
“The Olympic gold was for you, the country and the continent of Africa. There were very few athletes from Africa in those days and it is not like what you have today.”
Kip says his biggest problem was getting time off from work.
“Sometimes being on duty meant missing meals and then you had to go train, even without a meal. There was nothing like nutrition,” he says.
“During our time we had no coaches. It was up to you to personally work on your skills in your own free time. We were not allowed to go out for more than 28 days a year because of a rule put in place by the International Association of Athletics Federations. In those days, we had amateur status, not like today.”
Kip was a police officer from the late 1960s, rising through the ranks to become chief inspector. He retired from athletics in 1973.
Jelimo embodies the renaissance of Kenyan women in athletics: for the first time, they have better prospects of bringing home gold than the men.
Jelimo, 22, the reigning 800 meters Olympic champion, is also a police officer. But unlike in Kip’s day, there are more flexible working hours to allow for international athletics events.
Also unlike Kip, Jelimo has a number of trainers—including Bryan Engelherdt and other runners like Daniel Sirima—to help her prepare. She is expected to be one of the hotshots at the London Olympics as she runs for a second gold in the 800 meters.
It hasn’t been easy. Jelimo may have gone back to winning ways this year, clinching gold at the World Indoor Championships in Turkey in March, but injury, namely a strained Achilles tendon, has been her biggest opponent.
“I have suffered for three years because of many injuries, but I pray that I will continue working hard and keep the spirit burning, so that by the end of June, I will be in my best competitive form.”
<div id="attachment_817" style="width: 484px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-817" class="size-large wp-image-817" src="/wp-content/uploads/2017/04/Forbes.Africa-Dr.Keino-12cm8cm@300dpi-1024x683.jpg" alt="" width="474" height="316" />Kip Keino</div>
The Olympics is her main objective. “I know that I am the defending champion, but the main objective will be to run under two minutes in the Kenyan qualifying rounds to make it to the Olympics.”
Jelimo, then 18, won gold at the Beijing Olympics in 2000, which was the icing on the cake for a very successful year. She became the first Kenyan to win the $1 million Golden League Jackpot that very year. Those earnings were a just reward for the years of toil in which her parents struggled to put her through school.
“Athletics is like a cake and everybody wants to have a piece of it.  Sports is very rewarding and people should take it seriously [if they have the] talent,” she says.
Kip was actually one of the athletes at the forefront of making the sport professional. “We were not being paid for running. So the year after the Munich Olympics, we decided to form an International Track Association (ITA), where the athletes would run in field events and make money. The athletes would be paid like in other sport such as tennis. The IAAF [International Association of Athletics Federation] realised that ITA would overtake them and so IAAF also started paying athletes the money.”
The prize money has made athletics more lucrative as a sport and as Jelimo works her way back from injury, she acknowledges the increasing competition in the sport.
“It is hard coming back, after being out, to compete with people who have been training for three months. You cannot take a race and say it is simple. There is no race which is that simple,” she says.
Some of her main challengers for the Olympic gold are fellow Kenyan runner Janeth Jepkosgei and the South African, Caster Semenya.
“I don’t fear anybody when I am in the field. When I am in shape, I am in shape because you know everybody is fighting for it and you should be fighting for it. It is all mental,” she says.
Kip says there is rising competition and that victory is hard these days.
“Well, for Kenyans it can be natural, but what about the other people in the world? They can also be nurtured to compete. Anybody in the world can do anything with the talent God has given them,” he says. “There is nothing special about Kenyan athletes. The only thing that is special is their training. They prepare themselves physically and mentally.”

A Tale Of Two  Runners

Tanzania’s political landscape is dominated by the ruling Chama Cha Mapinduzi (CCM) party, which was re-elected into power in 2010. CCM may remain in power despite whispers of infighting and corruption and a rising challenge from the opposition.
President Jakaya Kikwete fired the ministers of finance, energy and minerals over allegations of corruption and mismanagement. Since November, President Kikwete has faced increasing political and public pressure over corruption allegations on members of his cabinet. Over the last two years Tanzania has plunged 32 places in Transparency International’s Corruption Perception Index. In the 2010 survey, Tanzania ranks 116 out of 178 countries.
Nevertheless, Tanzania’s economic prospects look bright, especially in contrast to subdued growth in the Eurozone. Over the past decade, economic growth has averaged above 6%. Both the International Monetary Fund (IMF) and the World Bank expect growth to reach 7% in 2012, higher than the 6% for the continent overall. The Economist magazine has identified Tanzania as one of seven economies that it predicts could grow 7.2% on average annually.
Prudent macroeconomic policies, anchored by the country’s engagement with the IMF, will support growth. Macroeconomic policy will be focused primarily on poverty reduction to uplift the lives of millions of marginalized people. Growth will likely be driven by reforms in the agricultural sector to encourage commercial investment which will likely buoy the country’s biggest employer.
Infrastructure development aimed to address bottlenecks, particularly in the energy sector, will boost the construction sector. The services sector—transport, telecommunications and finance—is also expected to be a key growth contributor, as investors continue to show a keen interest in these sectors.
Mining, one of the economy’s mainstays, will also favorably contribute to growth. Tanzania is the continent’s fourth largest gold producer and foreign investment in the sector is high. Oil and gas discoveries will further buoy the extractive sector as investors flock in. Tanzania’s gas reserves are estimated at over 10 trillion cubic feet. The World Bank expects gas revenues to boost domestic growth over the next decade.
There are several risks to the country’s positive outlook. The main risk to growth lies within the country’s energy sector. Tanzania faces a chronic energy crisis following a drought in 2011 which led to the authorities instituting the emergency power plan (EPP) to help alleviate the crisis. Tanzania has one of the cheapest power tariffs in the region yet only 13.5% of the population have access to electricity. In January the authorities increased tariffs by 40% to cater for the higher cost of energy production. Energy tariff increases will in turn drive inflation higher to the detriment of the economy at large.
Inflation has been another bugbear for the economy. Inflation increased in 2011 on the back of higher food and energy prices as well as weaker shilling. In 2012 prices have remained stubbornly high—year-on-year inflation was recorded at 19.0% in March, down from 19.4% in February. In the face of elevated inflation coupled with uncertainty surrounding the stability of the shilling, the Bank of Tanzania (BOT) is likely to be reluctant to loosen monetary policy. The IMF expects inflation to decline to single digits by year-end. However this view is heavily dependent on this year’s harvest.
Lastly, uncertainty surrounding global growth also poses a risk to Tanzania’s growth outlook. The European sovereign debt crisis is probably the country’s biggest risk factor. With the European Union a key export destination, a deeper and prolonged contraction in growth, is likely to dent demand for Tanzanian exports.
At a regional level, the authorities are likely to be focused on the further integration of the East African Community (EAC). The BOT governor, Benno Ndulu, in February this year pledged that the government will improve the investment climate in order to attract regional and global investment. With the Europeans’ woes the world will be closely watching when the monetary union of the EAC will come into effect. Given the lessons from the European Union this may well be put on the back burner for some time to come.

Choked By An  Energy Crunch

Deep in the heart of the hot and dry mining town of Carletonville, west of Johannesburg, is the modest headquarters of a small company trying to move mountains.
Natalie Killassy grew up in Carletonville—the heart of South Africa’s gold mining industry—and knows the often harsh life of mines and miners. Her family have lived there for generations and when she was a child, she often felt the grief of mining accidents. The deep mines of Carletonville burrow down around 4km into the earth and are prone to lethal seismic activity that can bring shafts crashing down.
<div id="attachment_647" style="width: 484px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-647" class="size-large wp-image-647" src="/wp-content/uploads/2017/04/CTP2641-1024x632.jpg" alt="" width="474" height="293" />Staff working on the backfill bags in the bag factory</div>
As director of Stitch Wise, Killassy has made a business out of helping to rebuild the shattered lives of injured miners, while at the same time trying to prevent others from suffering the same fate.
Stitch Wise is a safety gear company which makes huge bags that save lives underground. Miners pour backfill—liquid mud created by blasting that solidifies—in the bags. The bags save the cost of transporting waste to the surface, as well as providing a shield against rockfalls underground.
It has taken 16 years to build up Stitch Wise, which sprang from an 18-month study into the world’s deepest gold mines. For the first eight years, the business did not pay dividends as every cent was reinvested.
“We come from humble beginnings where we couldn’t afford forklifts to lift the bags as they surfaced. We only had one sewing machine and today everything is automated,” says Killassy.
Nearly a third of her workers are injured miners who are trained to make the bags and patented safety equipment. The company is 26% owned by its employees through a broad-based black economic empowerment trust.
<div id="attachment_649" style="width: 484px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-649" class="size-large wp-image-649" src="/wp-content/uploads/2017/04/CTP2689-680x1024.jpg" alt="" width="474" height="714" />Stitch Wise Director, Natalie Killassy, standing next to her patented bag material</div>
“Businesses are built on people and we need to add value to people’s lives—that helps you build a business. You need to allow them to take ownership, through that you develop pride… Social entrepreneurs are people who do things that touch their hearts,” says the softly spoken Killassy.
The mining companies—AngloGold  Ashanti, Gold Fields and Harmony Gold—have poured money into the idea and Killassy is trying to get companies to spend more on safety.
The company was chosen by Endeavour, an Oppenheimer family funded NGO, and became part of the group in 2004. Endeavour selects promising entrepreneurs, assists them in improving their business models and has so far picked 300 in 25 countries.
“It is quite a rigorous process; they basically panel beat your business and you as an entrepreneur.”
<div id="attachment_650" style="width: 484px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-650" class="size-large wp-image-650" src="/wp-content/uploads/2017/04/CTP2724-1024x680.jpg" alt="" width="474" height="315" />Knee and arm pads produced by disabled staff at the safety gear factory</div>
With innovation and experienced mentors backing her, Killassy’s Stitch Wise is setting its sights on the rest of the continent and South America’s Chilean mines.
“Mining is going to be around for a long time and we need to grow with it.”
Killassy grew up in the tough world of mining in Carletonville. She has grown to be as tough in business.

Angel of The Underground

The South African Reserve Bank (SARB) has admitted that not all required quality criteria were met in the production of krugerrands by the South African Mint—which is wholly owned by SARB.
Tests on certified krugerrands have been carried out in the presence of FORBES AFRICA journalists. The results show that some contain less than the required amount of gold. The highly-valued collector’s items make up an industry worth billions of dollars. Depending on the gold price a one ounce, proof krugerrand is worth around $2,000.
<div id="attachment_613" style="width: 484px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-613" class="size-large wp-image-613" src="/wp-content/uploads/2017/04/IMG_2917-1024x683.jpg" alt="" width="474" height="316" />Patrick Willis</div>
Patrick Willis, a South African gold investor of 12 years, is behind the claim. He noticed that a number of his krugerrands were losing their lustre—often a sign of too much copper and zinc. These are base metals used to strengthen the gold and decrease wear and tear.
“The issue is that they are under spec. I made the discovery about the colour. It has not happened anywhere in the world, where a national mint produced coins for sale that are under spec,” said Willis.
Tests on several krugerrands found that some were “under specification”—as they say in the trade. By law each krugerrand has to contain at least 91.7% gold. This measure is so important that international gold mints often include a small amount of ‘extra’ gold to ensure they reach the stipulated requirement. A gold assay test proved that one of the coins in question had merely 87% gold. That is nearly 5% less than it should be.
“If I see such a result, I will panic. I’m not pointing any fingers. This is quite anomalous [referring to the 87% result]. I’ve never seen something like that on a coin before. It cannot be explained by sample prep [the margin is too large]. That is a big red flag right there,” says Jaco le Roux.
He is an employee of Spectromed—a company which sells and conducts tests using Niton XRF analyzer guns—who tested multiple krugerrands using the Niton analyzer in front of FORBES AFRICA journalists to verify the results.
The disgruntled krugerrand owner took up the issue with SARB. Natanya van Niekerk, acting head of numismatic coins, at the SA Mint replied:
“As the krugerrand is the flagship of the South African gold industry and has reputational value to South Africa, we will leave no stone unturned to rectify the situation. I am of the opinion that the coins in question are now strictly speaking illegal and that the Reserve Bank has the right to demand all the coins to be returned.”
Hlengani Mathebula, head of group strategy and communications at SARB released an updated media statement on April 13, claiming: “…investigations into the matter have revealed that some of the proof krugerrand coins casted between April 2011 and May 2011 may not meet all the required quality specifications.” Early investigations show that of the 1,500 krugerrands minted in this time only six have, so far, have been found to be under spec.
The SA Mint called a meeting with a number of local and international dealers. They explained that the April and May 2011 batches were under spec. In his most-recent statement Mathebula continued, “…should any of the dealers have reasonable concerns that some proof krugerrand coins may not comply with all required quality criteria, they could return such coins to the SA Mint.”
At stake is the reputation of the gilt-edged SA Mint which created an optimum way in which to market South Africa’s gold. Kruggerrands are one of the safest and most effective ways to secure assets against uncertain markets. They are called ‘liquid gold’ since there’s never a shortage of buyers who can easily turn them into cash.
Willis risked devaluing his investments by performing Niton XRF tests and destructive fire assays on proof krugerrands. The SARB is threatening FORBES AFRICA’s anonymous source with legal action for “destroying legal tender” in order to conduct the fire assays. During a fire assay test, the metal object is smelted to determine its composition. However the concentration of gold would not be accurately proven, without such procedures. This is because the Niton analyzer is not a certifiable method of testing gold quantity. It is not as accurate as a fire assay. However results can be proved against known certified materials.
“The Niton analyzer gives a chemical analysis within a couple of seconds. It quantifies content and concentration in metallic objects. The results are shown onscreen. Its limiting factor is that it depends on the sample prep. If the sample is not clean, or flat or contains impurities on the surface, the results may be misleading,” says le Roux.
The same sample underwent a fire assay at two independent refineries. The results from First Refinery showed it was 87.40% gold while the results from Rand Refineries showed 87.46% of gold concentration. These results prove that the Niton analyzer was fairly accurate in comparison to the fire assay. When the SA Mint was alerted to the results on October 25, it collected the samples and test results to conduct their own investigation.
“Our assay indicated that this batch was in spec when we casted this. If we are at fault, we will make it good to the customer as we followed our procedures and something could have happened. We want to know what happened to ensure it is not repeated in the future,” wrote Tom Davel—while he was still in office—in correspondence with our source.
There is no proof that this is linked to the suspension of both the managing director, Andile Mvinjelwa, and the general manager of Numismatic Coins, Tom Davel on December 8. Their press release stated: “The board has become aware of certain technical issues within the operations of the South African Mint Company. Investigations into the matter have been instituted and are ongoing.” No results from the pending investigation have been produced.
In the statement related to the two suspensions at the SA Mint last year, Mathebula said, “The Mint is a high-security area for SA and I cannot reveal any details of the operations. There are no irregularities. Technical operational issues are being investigated.” He maintained that the suspensions could “never be related to fraud.”
A disappointed Willis said, “Surely, that kind of company would want to be transparent with everybody, seeing as it is a touchy subject and a worldwide distributed product from South Africa. If I were a dealer in South Africa or any other country, and I had coins which were part of the batch that is said to be under spec, I would certainly want to return them to the SA Mint and say ‘give me back my dough.’”

All That Glitters  May Not Be Gold

Record breaking albums; sold out concerts; endorsement deals worth millions and screaming fans. This is the stuff dreams are made of, but in this day and age Africans are finding it elusive.
<div id="attachment_183" style="width: 484px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-183" class="size-large wp-image-183" src="/wp-content/uploads/2017/04/39_Asa-680x1024.jpg" alt="" width="474" height="714" />Asa at Arts Alive, Johannesburg</div>
Many young hopefuls fall for the allure of the music industry. They want to be the next Lady Gaga, 30 Seconds To Mars or Lil Wayne. Unfortunately, very few will make it and even those who do will find the cold reality that Africa’s mighty music market, South Africa, is not as lucrative as its American counterpart.
The reason? It is a small market, plagued by lagging technology and mismanagement.
The global economic downturn has hit industry sales. According to the Recording Industry of South Africa (RiSA), sales dropped by 6.9% between 2009 and 2010 and 14.7% between 2008 and 2010.
An artist who appears to have bucked this trend is newcomer, Zahara, a guitarist and vocalist from a small town near East London in South Africa’s Eastern Cape. She made news when it was reported that her debut album, Loliwe, sold more than 100,000 copies in just 19 days.
With the market where it is, the sceptics scoffed and there were whispers of cooked numbers. Zahara is managed by TS Records and distribution is handled by EMI Music.
Tyson Mqomo, a manager at EMI, refutes these allegations.
“We were also taken by surprise, but this has happened before, we did not make this up,” he says.
No matter how many Zahara sells, album sales alone will not sustain a music career or pay for lavish lifestyles, according to Clive Hardwick of Bula Music.
Hardwick has simplified the maths. If you have a compact disc (CD) that retails for $10, the retailer keeps 35% and pays the remaining 65% to the distributor. This wholesale price of $6.50 is divided up even further. Six per cent is for the manufacturing, 10-20% is kept by the distributor, and an artist could earn anywhere around 15%, depending on their contract. Five per cent pays for the producer and 6.76% is allocated for copyright. In the end the record label receives anywhere between 25% and 30%.
The average recording cost is $7, 269 and making a music video, marketing and CD sleeves pushes up expenses further.
There are currently around 1,500 record companies registered with RiSA, these include the big boys; Sony Music, Universal Music, EMI and Gallo Records. An estimated 50% of South African music releases come from these major recording companies. Across all recording mediums, 2010 sales in South Africa reached $43,770,901 for homegrown music; against $51,178,161 for international music.
The numbers don’t lie. It’s clear that there isn’t enough money going around. However, there are alternative sources of income. It just takes selling power, but unfortunately that does not come with star power.
John Langford, CEO of Big Concerts, says live performances are “the bread and butter”. FORBES AFRICA investigated how much. A certain hip-hop group asks anywhere between $3,632 and $9,685 for South African performances and $15,000 internationally. A South African male RnB singer earns $4,843 per performance and a songstress recently charged $11,637 for performing at an awards show.
To make matters worse, a good recording artist does not necessarily make a bankable performer. If you thought that local artists rake it in as supporting acts for visiting big shots, think again. The worldwide industry norm is that the locals sing for free, or even pay promoters for the privilege. This is known as “tour support” in Europe and it is the price you pay for a link with a big name.
Endorsements, sponsorships and merchandising can help boost profiles and bank accounts, only if managers are busy and sell their artists. Look at Lira, The Parlotones and HHP in South Africa.
Unimaginative management is not the only problem hampering the growth of the industry. Digitally, Africa is behind the rest of the world. Most people do not have broadband and South Africa is yet to establish an iTunes equivalent. The continent’s studios are also technically not on par with the international ones, which is one reason one why African artists fly to the States and Europe to record an album. The recording fees fly with them.
Everyone in the industry that FORBES AFRICA spoke to feels that government has failed them in ensuring effective laws to fight piracy.
From Johannesburg to Lagos you will see them at the traffic lights. Ten dollars can get you 10 CDs on the street before they even hit the shelves. Every now and again the police will round up the traffic light buccaneers and confiscate the copies—in the time it takes to memorize a Chris Brown song, the guys are back selling on the streets.
The South African Copyright Act of 1978 states that; “You may not make a copy of a sound recording without the permission of the author.” The onus is on the author to prove that such permission was never given and that is the problem for artists.
FORBES AFRICA has contacted South Africa’s Department of Trade and Industry for comment, several times, but so far has had no response.
There is so much talent among African artists, surely a celebration of home grown music would help add scarce money to the pot. Hardwick says there are boundless opportunities for African musicians to collaborate and conquer continental markets.
“Africa has a very unique sound. What Africa needs is a focal point for the African music industry,” he says.
For now, there are two lessons to be learnt. First, do not get into the music industry for the money. Second, an artist worth a buck needs a big hit and a hardworking team around them. If it were that simple everyone would be making money.

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