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Albania  
  SOUTH AFRICA NEWS REPORT

REPUBLICAN REFERENCE

Area (sq.km)
1,219,912

Population
43,586,097

Capital
Pretoria

Currency
rand

President
Thabo Mbeki

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Background:
The Union of South Africa that followed the Boer War (1899-1902) operated under a policy of apartheid - the separate development of the races. The 1990's brought an end to apartheid politically and ushered in black majority rule. Southern Africa as a whole is a very different place than it was two decades ago. Old single-party dictatorships and white minority government have given way to nascent democratic governments with varying degrees of success and maturity. On 10 May 1994, Nelson Mandela took office as the first president of the 'new' South Africa'. His inauguration marked the end of a long struggle to achieve a non-racial political regime and the beginning of an equally difficult and protracted process of state and nation building that is intended to lead eventually to the realisation of a stable democracy. 
The 1990's can be viewed as a success. The diminution of political violence, the relatively peaceful transfer of power, the continuation of the transformation process, albeit painfully slow, can be regarded with pride and promise. The retirement of Mandela as president in 1999 saw the second round of successful majority-rule elections. The succession process was amazingly smooth. Thabo Mbeki was officially named to ANC's candidate for president back in 1997. Mbeki may lack Mandela's charisma, and his capacity for fairness and sensitivity, but his style is different and more efficient and businesslike. Mbeki will remain unchallenged as president in 2002, but the ANC remains deeply divided.
South Africa is the most developed country in southern Africa, and the regional leader economically and politically. But South Africa (and every other country in the region) has its own problems. The political transition from a race-based polity to one based on majority rule is almost complete, yet subject to tensions. Changes have occurred with relatively little violence. Aside from the former Soviet-bloc countries, no nation has experienced greater change than South Africa over the past decade. The non-racial democracy is still in its infancy and still requires nurture and development. 
South Africa has the most sophisticated economy in black Africa. Unlike other African countries its manufacturing sector is relatively advanced. It is the largest sector of the economy, contributing about a quarter of the GDP. Agriculture is also relatively diversified, producing wine, citrus products and wool for export and maize for internal consumption. Agriculture accounts for about 4 percent of the GDP. The population is growing fast at 2.6% pa. In 1999 it totalled 45 million - 76% African, 13% white, 8.5% coloured, and 2.5% Asian. The GNP per head is over $3000 (compared to $300 in Nigeria) but this figure masks inequitable distribution of wealth between the races.
In Southern Africa as a whole, South Africa accounts for less than one-third of the population but for more than 75 percent of the GDP. Its economy is 3.4 times larger than the combined economies of the other members of the Southern African Development Community - SADC (Angola, Botswana, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Swaziland, Tanzania, Zambia, Zimbabwe). This suggests that South Africa occupies a position in Africa similar to the United States within the global economy. While the United States accounts for 26 percent of global GDP, South Africa accounts for about 44 percent of Africa's GDP. South Africa's economic outreach into and beyond the region grew substantially after the ending of apartheid, and shows every sign of continuing to do so. Many of South Africa's largest conglomerates, banks, and financial institutions have found openings for investment in some twenty countries in Africa. The countries of greatest immediate interest are Angola because of its oil and mineral resources, and the Democratic Republic of the Congo with its huge potential for mining development.

Update No: 03 - (26/03/02)

Economists remain positive about South Africa's growth prospects but are worried about interest rates and inflation. Confidence in the economy did not increase last month due to concern about the situation in Zimbabwe and the inflationary effect of the rand's depreciation last year. This outweighed the expectations of a global economic recovery that should be positive for South Africa. Standard Bank economists say the weight of a weak global economy will be with the South African economy for some time, despite signs that the US has resumed growth. South African gold shares surged to fresh highs in Johannesburg on March 25 as gold renewed attempts to pierce US$300 per ounce, trading at R297.90 per ounce. The gold price hit its highest level since February 8, propelling JSE Securities Exchange SA gold shares and lifting the gold index to a six-year high. Shares in gold groups such as Gold Fields and Durban Roodepoort Deep pushed the index up more than 9,6% to its highest level since January 1996. 
The rand tumbled almost 3% on March 14 on the news that President Robert Mugabe had won Zimbabwe's presidential election. It went as low as R11.91 against the US dollar compared with an opening level of R11.45, before bouncing back to R11.60 in late trade. Dealers said government's reaction to the result would be crucial to the rand's prospects. At the end of March the rand had stabilised somewhat at around 11.50 to the dollar. The commission of inquiry into the depreciation of the Rand started with public hearings March 4. Early this year, President Mbeki appointed a team of experts to lead the inquiry into the exchange rate of the rand and related matters after it recorded a sharp depreciation of more than 47 percent in less than six months. The team, headed by Advocate John Myburgh, includes Southern African Development Bank CEO Mandla Gantsho and Christine Mary-Ann Qunta - a lawyer, newspaper columnist and member of the board of the Competition Commission. The commission is expected to submit interim reports to President Mbeki from time to time, with the first one on or before 30 April. Many sceptics have already dismissed it, calling it a waste of taxpayers' money that politicians will probably use to seek scapegoats and absolve themselves of responsibility.
President Mugabe won the 9-10 March poll when he narrowly beat his closest rival, Movement for Democratic Change leader Morgan Tsvangirai, by almost 400,000 votes. The results were immediately described by the opposition and the international community as not free and fair. Robert Mugabe was re-elected Zimbabwe's president in a poll that Western observers have condemned as severely flawed. South Africa's observer mission, however, described the vote as "legitimate" while its Parliament endorsed it as "credible." Representatives from Nigeria and South Africa are in Zimbabwe March 26, hoping they can help ease the increasing isolation of President Robert Mugabe's government. They have pledged to seek a solution to Zimbabwe's increasing international isolation, following its suspension from the Commonwealth last week. South Africa continues to support its neighbour Zimbabwe, and voiced displeasure March 24 at what it described as an inclination by developed nations to punish all of Africa for Zimbabwe's sins. President Mbeki has voiced concern over Zimbabwe and in his strongest comments yet on Zimbabwe, he urged that country's government to "avoid a further worsening of the situation." The decision to suspend Zimbabwe from the Commonwealth for a year - along with the provision of food aid and help to resolve the land issue - has laid "the basis for Zimbabwe to extricate itself from the political and economic crisis it confronts," Mbeki said. He also said South Africans should learn from Zimbabwe's mistakes and their approach to Harare's ills should avoid encouraging similar problems at home. On Zimbabwe's suspension from the Commonwealth for a year, Mbeki said the 54-member body was committed to supporting Zimbabwe's process of reconciliation, facilitated by Nigeria and South Africa. 
Some commentators in South Africa have questioned the country's stance on Zimbabwe and point to the fact that international sentiment is vital to future growth and survival. They want to see a stand against Zimbabwe and in particular its ageing, desperate and destructive leader, Robert Mugabe. Many are anxious to show that South Africa is different to Zimbabwe, and not heading down the same road. They want Mbeki to condemn Mugabe's behaviour and free South Africa to become a world player. About 100 people picketed outside parliament March 26 to demand the South African government take a stand against human rights abuses in neighbouring Zimbabwe. Friends of Zimbabwe chairperson Bertha Zakeyo said the group was also protesting against the response of the South African observers and parliament to the controversial presidential election. "We come to parliament because we feel deeply disappointed that our parliament has endorsed such a sham of an election. Archbishop emeritus Desmond Tutu on March 24 expressed his serious distress about South Africa's reaction to the Zimbabwean presidential election. "I am deeply, deeply, deeply distressed and deeply disappointed that our country could be among those who say the election was legitimate or free and fair when we are claiming to be adherents of democracy," International financier and an investment advisor to President Mbeki, George Soros, says he is disturbed to learn that some of Zimbabwe's neighbours have recognised President Mugabe's election victory. Soros told a panel at a United Nations Conference on Financing for Development, that Mugabe's triumph in Zimbabwe's elections, which the opposition says were rigged, has dealt a setback to African nations trying to attract investment. Soros has said that "Mugabe stole the election by preventing people in urban areas from casting their vote," and that "The elections in Zimbabwe have cast doubt on the ability of African states to create suitable conditions for private investment."
South Africa, Zimbabwe's largest trading partner, is spearheading regional efforts to prop up Zimbabwe's ailing economy. The two countries are heavily dependent on each other. An estimated 60 percent of Zimbabwe's trade is either with South Africa or through that country. Furthermore, South Africa is also being affected by the poor economic performance in Zimbabwe. Foreign investors tend to view southern Africa as one country, hence disturbances in one nation, impact on the others. The South African trade minister said economic sanctions against Zimbabwe would not work if members of the Southern African Development Community did not back them. Support in the region is seen as vital for Zimbabwe, particularly in view of the fact that the European Union, the United States and other international organisations are planning to impose more sanctions against the country. Robert Mugabe is reportedly working hard at assembling a cabinet to back his policies but economists have warned that the move may jeopardise the economic recovery package South Africa is preparing for that country. The South African government is preparing a programme that is expected to boost Zimbabwe economically, but this must be linked to political stability, in a country faced with a 67 percent unemployment rate and rocketing inflation of 117 percent.
The Department of Trade and Industry said March 6 that the exemption of South African steel from American import duties is good news for the country and the economy as a whole. The department's chief director for trade negotiations Tshediso Matona said this was a major boost for steel companies such as Iscor. US President George W Bush last night announced a sweeping three-year regime of duties, ranging from eight to 30 percent on a broad array of steel imports. Although this move carries major positive spin-offs for local industry and the economies of southern Africa, it also carries with it certain dangers for countries that have not been acknowledged. South Africa, as one of the leading states among the developing countries, has an obligation to criticise the move by the US government to impose 30% duties on a range of steel products. This violates World Trade Organisation (WTO) agreements in an age of globalisation and integration. Although it is quite understandable for South Africa to celebrate the short-term respite given by the US, detailed analysis of the implications of the US decision show that South Africa will lose in certain areas in the long run. The South African economy relies on international capital to a large extent. The current exemptions on developing countries may bring benefits but at the expense of relations with other key allies. For example, the US is no longer the biggest market for South African steel. About 600,000 tons out of a total of 3-million tons is exported to Europe while 40% goes to the Far East by far the largest market.
A South African court on March 25 upheld a ruling that the government must make more widely available a drug, which reduces the risk of HIV-positive women passing on the virus to their children. South Africa, with an estimated one in nine people HIV-positive, has the largest infected population in the world. Aids activists want all pregnant women to have access to the drug. Aids activists believe that the government's reluctance to use the drug originates from President Mbeki's unorthodox views on the disease. Mbeki has argued that the extent of the Aids pandemic is exaggerated and has questioned the link between Aids and HIV. On March 25 Archbishop Desmond Tutu added his voice to those calling on the government to respect the court's decision and act with greater urgency. He condemned the government's haphazard response to the AIDS pandemic. He called on South Africa to look to other countries that are successfully fighting AIDS and compared the fights against AIDS and tuberculosis to the anti-apartheid struggle. "We must fight these diseases with the same passion, the same commitment, the same determination," said Tutu, who won the Nobel Peace Prize in 1984 for his role in fighting South Africa's apartheid regime. 
Merrill Lynch said March 18 that the expected global recovery will benefit developing economies. Economists say South African exports are expected to lead domestic economic recovery, with the mining industry being well placed to lead the sector. Economists say a gradual economic recovery is anticipated this year and will be led by the US. Traditionally the mining sector is a leading sector in domestic economic recoveries, and 2002 is expected to be no different. This is due to global demand for domestic exports impacting on local export growth prior to domestic consumer and investment demand. According to the report, a weak Rand should provide further support for the demand for domestic exports during the first half of 2002. The global economy that suffered a sharp decline last year due to the September 11 attacks on the World Trade Centre in the US is starting to show some recovery. A slew of positive economic data out of the US in early March has pointed to a strong economic recovery, leading the global market upwards and raising hope that South African stocks might also be on the way up, without depending on a depreciating currency.

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Big airlines gear-up for in-flight net access

AEROSPACE giant, Boeing, said the first customer for its in-flight broadband service, Connexion, would be taking the wraps off its first fully Internet- enabled airplane shortly. 
The German carrier Lufthansa will roll out the 747, retrofitted with antennas and a host of on-board electronics. The two companies will begin a pilot test in April and hope to launch a commercial service offering passengers Internet access and a choice of television programming in December. The service will initially be targeted at business clients on long-distance flights who will be required to pay between 15 to 20 dollars to check their email, browse the web, or make their own choice of television program.
"Corporate accounts are very attractive markets," said Scott Carson, president of Boeing's Connexion business unit, who said he was confident of signing up two US carriers for the service by the end of the year. The commercial launch of Connexion, which was first devised in 1995 and is already being marketed to the private corporate jet market, has been pushed back because of the impact of September 11 on the airline industry.
It was initially scheduled to be up and running by now, but a full commercial launch is now slated for the first quarter of 2004, Carson said. By the end of the decade, Boeing predicts the service will have revenues of between three to five billion dollars.

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FOREIGN ECONOMIC RELATIONS

Ukraine, South Africa agree to broaden trade ties

The Republic of South Africa and Ukraine are planning to expand their bilateral trade and economic relations, the Russian RIA-Novosti News Agency quoted an official communiqué as stating. The communiqué sums up the results of a meeting held between South African Deputy Foreign Minister, Aziz Pahad, and Volodymyr Yelchenko, Deputy State Secretary to the Ukrainian Foreign Ministry.
Aziz Pahad said at a news conference held to discuss the results of talks that the businessmen of the two countries have little idea of the wealth of opportunity they might tap into by expanding trade and economic relations between South Africa and Ukraine. "We are obliged to prompt them towards mutually beneficial partnership," he said. As of today, trade turnover between the two countries is just US$36m, which is absolutely unacceptable, Pahad said.
He said that South Africa and Ukraine will shortly sign an agreement on avoidance of double taxation. Also, treaties on cooperation in tourism, science and technology are "being worked on."
For his part, Volodymyr Yelchenko said that Ukraine is interested in South Africa's experience and technologies to modernize Ukraine's mining industry. According to Yelchenko, the Republic of South Africa could also play a significant role in promoting Ukrainian products in other countries in the Southern African region. 
The Ukrainian delegation headed by Volodymyr Yelchenko was on a visit to the Republic of South Africa. The two countries established diplomatic relations 10 years ago.

Mercosur Trade Mission Comes to SA

The Latin American Common Market, Mercosur, is preparing the first joint trade mission involving all its four members and the destination is SA, Business Day has reported, quoting Brazilian and Argentinean diplomats in Pretoria. Mercosur also has Uruguay and Paraguay as members.
A Mercosur diplomat said: "Top businessmen from the four countries are expected to take part in this mission, which is due to take place towards the end of June.
"They will be coming to Johannesburg, but there is also a possibility that some would also visit Cape Town, or possibly Durban."
The mission is expected to be headed by Argentinean Foreign Minister, Carlos Rukauf, whose country currently holds the presidency of Mercosur.
There is also due to be a trade negotiation meeting between SA officials and their counterparts from Latin America, on the dismantling of tariffs in a number of key sectors at the end of this year. This would be the first stage on the way to a possible free trade area agreement between SA or Southern African Development Community and Mercosur.
Government trade experts are currently expected to meet early in May, but they may put their discussions back to around the time of the trade mission.
"The aim of the discussions between SA and Mercosur officials would be to make progress in identifying sectors that could benefit from tariff reductions," said the Mercosur diplomat.

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INFORMATION TECHNOLOGY

Sparkling year for iTouch 


MOBILE communication applications provider iTouch plc - founded in Cape Town and now listed on the London Stock Exchange - has announced another set of sparkling results for the year to December 2001, with revenues up 260% on 2000, margins on the increase and cash available in excess of £36 million. 
"Much of the company's growth was fuelled organically with strong demand for Voice (formerly referred to as IVR) and SMS, with revenues growing in both corporate and consumer businesses, and with a particularly strong showing from the South African operation", says founder and chief executive Wayne Pitout. 
In 2001, Group Voice revenues increased 153% to £5.0m, whilst Group SMS revenues were up 495% to £6.1m. Other Group revenues were £3.9m, up 236%. The gross profit in 2001 was £8.1m and the gross margin was 54%. 
"iTouch South Africa has had a very strong second half, with Rand revenues up 71% on the first half. Taking into account the depreciation of the Rand in the second half of 2001, sterling revenues increased by 43% half-on-half," says Pitout. Second half sterling Voice revenues were up 275% on the first half, significantly helped by the company's involvement in the Big Brother show. 
Second half sterling SMS Content revenues in South Africa were up 101% on the first half reflecting continued interest in the iTouch SMS Mobile Originate service that allows users to "pull" SMS text information (such as news and sports results) onto their mobile phones. 
Ivan Fallon, Chairman, said: "iTouch's first full financial year as a listed company has been an excellent one. We have now had six consecutive quarters of good growth, with revenues in the fourth quarter, our best yet. Cash outflow (excluding acquisitions) in the final quarter was £1.5m and we ended the year with a strong cash balance." 
"The current year has started well, we are in a strong financial position and we are making good progress towards our goal of achieving profitability." 
iTouch has now secured 20 contracts with mobile networks in the six countries in which they operate. 
The strategic focus on reaching the corporate market bore fruit over the year with an average of 678 SMS Corporate customers on the books during the second half of 2001, an increase of 75% over the first half of 2001, and an average number of SMS Corporate messages sent per month of 2.1m in the second half, an increase of 72% on the first half, with strong growth in Australia, South Africa and the UK. 
Voice in the second half was well ahead of the previous half year with over 2.5m call minutes on average per month, a 177% rise on the first half. Growth was strong in the UK (boosted by the acquisition in October 2001 of the Interactive Voice business from Thus plc), Australia (as a result of the Telequity acquisition), as well as in Ireland and South Africa where iTouch managed the Big Brother votelines.

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INTERNATIONAL ECONOMIC AFFAIRS 

SA wants Cites agreement to sell its ivory stock


The recent clamour by South Africa to be allowed to sell its stockpile of ivory, points to a renewed campaign to have trade in elephant products legalised during the coming Convention on International Trade in Endangered Species (CITES) meeting in November in Chile, Business Day has reported.
This will mean down-listing elephants from Appendix I to Appendix II, which will open up trade in live animals, ivory, and goods made of ivory.
South Africa had asked to be permitted to trade its ivory stockpile of 30,000 kg beginning in 2003, saying that it needed the resultant revenue to fund its conservation efforts. The proposal by the South Africa's Department of Environmental Affairs and Tourism is likely to see it ask member nations of the CITES to vote to allow it to sell its stockpile of Kruger National Park ivory, when next they meet in November.
But conservation bodies have come out in opposition against the proposal, saying it will encourage poachers.
The International Fund for Animal Welfare (IFAW) regional director for Southern Africa, Mr Jason Bell, expressed outrage "that the South African government is prepared to create a legal ivory market that can only encourage and support the growth of an already voracious illegal market that trades in poached ivory."
That South Africa intends to use the revenue from the ivory sale to fund conservation efforts in the country is contrary to the stipulations of CITES' Convention of Parties (COP). In 1997, COP10 directed that South Africa could not use poverty as a reason to sell its stockpile of ivory. It could only dispose of its ivory via an agreement with a willing donor who would provide the required funds in exchange for the ivory. Such a donor was in turn prohibited from commercialising the ivory and could only place it in a museum, store it or burn it like Kenya did in 1989.
Conservationists further say the sale of the South Africa ivory stockpile would be counterproductive, as it would increase the threat to elephants from poachers and give some "legality" to an already existing illegal trade in elephant parts.
This would be a loss to countries like Kenya, which rely on elephants for non-consumptive tourism revenue.

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TOURISM

De Beers okays start of Big Hole tourist project 


Global diamond mining giant, De Beers, has said that its board has approved the 1.5 million rand first phase of a project to develop the Big Hole precinct into a world-class tourism facility. 
The Big Hole, in Kimberley in the Northern Cape, is the site of one of De Beers' premier diamond mining operations that closed in 1914, while Kimberley remains the group's mining headquarters. 
Work would start immediately, De Beers said, and would include a new geological display, an upgraded industrial diamond display, and attention to more accurate representation of the early history of the diamond fields. Much of this was scheduled for completion in advance of the World Summit on Sustainable Development in Johannesburg in August this year and the Cricket World Cup in March 2003. 
The 1.5 million rand first phase of the project would include the investigation of a concept solution for a dynamic tourism facility that could continuously adapt to the needs of a changing 21st century market, and that aligned with the company's sustainable development program. This would include external stakeholder opportunities, positive local procurement of goods and services, job creation, and opportunities for small, medium and micro enterprises. 
De Beers Chairman Nicky Oppenheimer said: "De Beers remains committed to Kimberley, our corporate home for the past 114 years. As our mining activity in Kimberley scales down, this project is intended to develop a De Beers-initiated legacy that will have lasting value for the people of Kimberley. 
"It is important to us that we create a facility that is financially viable and self-sustaining. It is equally important that this project is rolled out as a private/public partnership and we welcome the support of Premier Manne Dipico and MEC for Economic Affairs and Tourism Thabo Makweya, and the involvement of other relevant stakeholders in the project." 
It was intended that the concept solution study would be completed in time for submission to the De Beers Board in November this year or March 2003 for approval of the second phase.

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TRANSPORT

Chamber welcomes restored train service 


The Cape Chamber of Commerce and Industry has welcomed the decision by Metrorail to reinstate the 84 trains it stopped last November. 
"The commuter rail service is vital to the economy of the City and the Western Cape and we simply cannot afford to see the service reduced," said Mr Albert Schuitmaker, director of the chamber. "What we need is a better, safer service because this will benefit Metrorail, the commuters and business." 
The Chamber was one of the organisations which put pressure on Metrorail to restore the full service and Mr Schuitmaker said he was pleased that these efforts had helped to resolve the problem. 
There was also a long-term concern about the service. He said his impression was that commuter traffic on the roads increased and with rising fuel prices it was adding to costs. 
Every time there was a disruption in the service, Metrorail lost passengers to other forms of transport and there should now be a concerted effort to win back those customers. 
"We have a rail infrastructure in Cape Town that most other South African cities would envy, but we are not making the best use of it. Surely the time has come to engage in some meaningful consultation with the public, business and other interested parties to find ways to make the service safer and more efficient," Mr Schuitmaker said.

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