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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: 07 - (26/07/02)
African Union Inauguration
At least 40 of the continent's presidents and monarchs were in the port resort of Durban July 9, for the inauguration of the African Union (AU). The
53-member AU (all African nations except Morocco, which withdrew from the OAU in 1985 after the disputed territory of Western Sahara was admitted as a
member.) modelled on the European Union (EU) will, in contrast to OAU, have the right to intervene in the affairs of its member states, when there are cases
of genocide and war crimes. Although the AU is seen as the brainchild of the Libyan leader, Muammar Gaddafi, South Africa's President Thabo Mbeki will be its
first chairman. In an opening speech at the ceremony, Mr. Mbeki urged Africans to start exporting manufactured goods in order to raise their living standards.
According to him, "Africa's experience of the last 40 years calls for a radical change of the structure and content of the continent's political, economic,
and social relations with the rest of the world.
Gaddafi and Mbeki, the two most powerful men in Africa are waging parallel battles for the soul of the continent with their opposing ideas of what the AU
should be. Through the ideals and programmes of the New Partnership for Africa's Development, the rapid growth and recovery plan for the continent, Mbeki is
appealing to the intellectual highbrow and to the moral conscience of African society to drive his crusade. Gaddafi, on the other hand, surrounds himself with
pageantry and seduces other African leaders by liberally handing out gifts and American dollars. In this way he has created a club of blindly loyal, highly
indebted supporters among African leaders and citizens. At the final meeting of the Organisation of African Unity and the first of the AU, almost every head
of state who spoke felt the need to pay homage to Gaddafi for initiating the new continental structure and for his passionate backing of African unity.
Gaddafi has made no secret about his aspirations of a "United States of Africa". Like America, this would have one president ruling over a federation of
states, each of which would be presided over by a governor. He wants one African army, uniform trade and foreign policies, and one leader representing all
the African states to deal with the rest of the world. Gaddafi is adamant that Africa does not need the assistance or involvement of the West to improve its
lot. As leader of one of the wealthiest nations on the continent, he would argue that he has the funds to bankroll whatever development projects are
necessary. Mbeki's mission is to create a band of like-minded African democrats who share his goals of competitive markets, technological advancement,
progressing economies and industrious populations The first year of the AU's existence is set to determine whose style will win the day. Despite the AU's
emphasis on the importance of democracy, the leaders at the summit were drawn from a mix of elected heads of state, those who seized power and still others
who have changed their country's rules to retain their grip on power. And the problems facing Africa remain the same: abject poverty, a massive AIDS pandemic,
endemic malaria, a crippling debt burden, tough terms of trade with the rest of the world, and some 20 conflicts ravaging the continent.
The world's biggest Aids conference closed July 12 in Barcelona with former South African president, Nelson Mandela, leading calls for new commitment in
the fight against the deadly disease. This rounded off a week of talks dominated by demands for more funds to treat millions of sufferers in the developing
world. The sophisticated drugs, that have turned HIV infection into a manageable condition in the West reach only one in a thousand in Africa, the epicentre
of the crisis. Two decades into an epidemic that kills one person every 10 seconds, the gulf between rich and poor is starker than ever. A debate has raged
throughout the conference over the balance between prevention and treatment in the developing world, home to 95 percent of the world's 40 million infections.
Prevention is more cost-effective, but to ignore the provision of medicines for those already infected is not acceptable. Despite steep price cuts for poor
countries and competition from generic drugs, combination therapy remains out of reach for the vast majority of those in the developing world. A range of
developing countries from the Caribbean to sub-Saharan Africa have taken advantage of the favourable climate at the conference to conclude agreements for
cheaper antiretroviral drugs and funds for HIV prevention and treatment programmes. But for South Africa the world AIDS conference has once again been a
missed opportunity. Little seems to have changed the world's perception that the government lacks commitment to fight HIV/AIDS. Amir Attaran of Harvard
University was blunt, addressing a session on barriers to antiretroviral treatment, he said: "The biggest hurdle to HIV treatment in South Africa is Thabo
Mbeki." While the cabinet has reversed its opposition to antiretroviral treatment by resolving in April to offer the drugs to rape survivors, this message has
not got to a world still gob-smacked by the president's flirtation with scientists who dispute the very existence of the HIV virus. South Africa has the
biggest population of HIV positive people in the world. The health department puts the figure at around 4.5 million people. Others say it is closer to six
million. With no antiretroviral treatment, most of these people will die.
Economic Freedom Index
South Africa shares 47th place in the world on the economic freedom ranking contained in the Economic Freedom of the World 2002 Annual Report. The 6th
global economic freedom report ranks 123 nations on 37 variables with data provided at five-year intervals back to 1970. This allows readers to track the
progress of countries across the 30-year period and clearly identify trends in economic policy in the countries analysed. Economic freedom is based on
personal choice, voluntary exchange, freedom to compete, and protection of persons and property. This requires the rule of law, property rights, limited
government intervention, freedom to trade, and sound money, and the report seeks to capture the extent to which countries follow these desirable policy
options. The current ratings are based on 2000 data, the latest year for which comprehensive information is available. The Annual Report, published by
Canada's Fraser Institute in conjunction with South Africa's Free Market Foundation and 53 other independent institutes from around the world, ranks countries
on their level of economic freedom. Only Mauritius 30th and Botswana 35th are rated as having greater economic freedom than South Africa of all the countries
in the African region. Although South Africa has not moved up the rankings significantly it is holding its own against many other countries that are
liberalising their economies.
A staggering 12,8-million people will be affected by severe shortages in staple foods as United Nations and world attention is focused on the looming
famine in South Africa's neighbouring states, a similar tragedy within the country's borders is already in the making. Saliem Fakir, South African programme
coordinator for the IUCN-World Conservation Union, says NGOs estimate that about 22-million people in South Africa live in abject poverty. The prices the
poorest of the poor must pay for staple foods have increased dramatically over the past year -- the cost of maize and other cereals has doubled. So millions
who struggled to feed themselves in the past are facing even more dire circumstances today. The rapid devaluation of South Africa's currency over the past
year has battered the efforts of NGOs that distribute food in the region because most cereals are priced in dollars. Rocketing prices for staples such as
maize have forced the groups to cut back aid for needy communities. For the next nine months the World Food Programme has identified nearly 13-million people
in need of food aid, about 6-million of them in Zimbabwe. The agency says it cannot predict what will happen next year, but warns that the crisis may evolve
into a wider humanitarian disaster. At the moment it is rushing to preposition food in the region to avoid what it says could be a disaster. It is the
combination of the Zimbabwean situation, El Nino related weather patterns and HIV/AIDS that makes prospects for the year ahead so bleak. Next year's seed
stocks will be down many villages across the region because of low crop yields this year. Zimbabwean white farmers ordered off their properties will not be
able to plant later this year. UN agencies and other NGOs are preparing a massive operation to avert the effects of the famine looming in Lesotho, Malawi,
Mozambique, Swaziland, Zambia and Zimbabwe. Much of the emergency food aid will be imported from South Africa.
South Africa is starting to feature among the top global investment destinations as fund managers view emerging markets in a more positive light, says
Frater Asset Management MD James Frater. His upbeat assessment of South Africa's prospects is echoed by Old Mutual Asset Managers (Omam) executive director
Peter Linley, who says local equities should remain the "preferred asset class" while international markets struggle under the strain of economic and
geopolitical uncertainty. Confidence in the South African economy was once again highlighted July 9 when 26 foreign banks granted a one billion US dollar
loan to the South African Reserve Bank in London. The move is expected to boost the country's foreign exchange position and investor confidence. Foreign
investment in South African property also appears to be continuing unabated
Seven black empowerment groups competing for a stake in South Africa's second phone operator have failed to impress the judges, with their bids showing
questionable technical skills, weak financial proposals and a complete failure to comply with the tender requirements. The scathing verdict comes from Next
Generation, a group of legal, accounting and technical experts appointed to help the Independent Communications Authority of South Africa (Icasa) select the
strongest bidder. As well as criticising the empowerment bids, its 88-page report casts serious doubts on the viability of the second network operator as a
whole. Government intends for the licence to be 51% held by an experienced foreign operator able to provide serious competition to Telkom. The foreigner is
expected to work with an empowerment partner holding 19% and with state-owned Eskom and Transtel, holding 30% between them. Government's main aims in imposing
a black partner are to boost empowerment and to give the operator credibility via their understanding of South Africa's social and technical issues. Yet those
hopes could be dashed as the applicants displayed little understanding of the technologies involved. Their financing plans were condemned as equally dubious.
A second network is unlikely to be profitable for at least five years, so a foreign operator needs partners with deep pockets. No applicant could show
significant funding or the ability to raise further capital. In every bid, the banks funding their efforts would be the prime beneficiaries of any revenue for
up to 20 years. Moreover, Next Generation said that none of the contenders would add any value to a foreign bidder, and their very presence could deter
potential investors from taking that crucial 51% stake. Even the inclusion of Eskom and Transtel, which already operate telecoms networks, was of dubious
value, it said. Their technologies might be so out of step with the needs of a second carrier that they could prove a liability rather than an
TMC acquire shareholding in TSA
The Toyota Motor Corporation (TMC) of Japan announced July 17 its acquisition of a majority shareholding in Toyota South Africa (TSA). Yoshio Ishizaka,
vice-president of TMC, said in a media statement that TMC had increased its holding in the local firm from 35.7 percent to 74.9 percent with the purchase of
shares from JSE-listed Wesco Investments. "This controlling shareholding allied to substantial investment in Toyota South Africa signifies a strengthening
of our commitment to South Africa and our intention of growing our business in this region," Ishizaka said. "Toyota Motor Corporation has enjoyed a
relationship going back more than 40 years with Toyota South Africa and the Wessels family. Since 1961 TSA has enjoyed consistent growth under the
outstanding leadership of the late Dr Albert Wessels and the present chairman, Bert Wessels." Ishizaka said TSA was now set to become "a significant exporter
of fully built up vehicles, starting with the building of the new Corolla for the Australian market early in 2003."
SAA reports profit
National carrier South African Airways (SAA) has reported headline profit of R553-million for the year ended March 31 2002 compared with a loss of
R998-million the year before. The net profit after tax increased to R2,144 billion versus R408 million in 2001. SAA attributed the increase in headline
earnings to increased revenue, improved operating cost management and income from other financial management programmes. SAA said that for the purpose of
disclosure it continues to report results on a headline earnings format. As such headline earnings do not include the profit/losses made on the sale of
aircraft and other assets, but do include one off exceptional items. SAA increased revenue 26.1% to R13.664-billion from R10.839-billion before, mainly due
to increased passenger revenue, cargo revenue and third party maintenance work performed in technical. SAA said a highlight of the financial year was the
start of a 10-year fleet modernisation program, which includes the purchase of 41 new Airbus aircraft. The new aircraft will be able to carry containerised
cargo on SAA's domestic, regional and long haul services, adding to the strong income base.
Villagers to Gain From Mpumalanga Airport
Villagers near the new R350m Kruger Mpumalanga International Airport in Nelspruit will be watching the jets taking off and landing with more than the
usual interest they have a 10% stake in the project, Business Day, Johannesburg reported.
The airport, which is being built by global power and automation technologies group ABB, should be opened in September. A lot of work has already been
undertaken to ensure local empowerment.
"As the first greenfields airport in SA for many decades, we had the unique opportunity to incorporate all the modern aspects of sustainability including
economic contribution, environmental assessments and corporate social investment," said ABB South Africa Chief Executive, Carlos Poe.
He said the local Mbuyani community, from which a portion of land was acquired for the airport and its 3,1km runway, were at the outset given a 10% share in
In addition, the local community will receive a specified fee of about R5 for every departing passenger. Poe said further opportunities existed for
empowerment partners to own a share of the airport.
Employment during construction, which commenced just more than a year ago, had received special attention, with at least 50% of the 950 construction personnel
being sourced from the Mbombela area.
ABB said that local people would also be given preference for the more than 100 permanent positions that it was expected would be created, depending on the
growth in airport business.
Meanwhile, where possible, the managers of the project had tried to contract small firms with existing skills for defined portions of the project, to assist
in supporting business skills development, the group said.
"The environmental standards met by the airport were stringent," said ABB. "It complied with all necessary legislation and has in some instances surpassed
"At a cost to the airport, a special filtration system has been implemented to capture wastewater from the runway, cleaning it before it passes to nearby
farmland," said ABB. "The airport buildings have been designed aesthetically with thatched roofs and matching natural colours to blend in with the African
Project manager John Manning said that in one ravine near the runway, a community spring had been preserved. Manning gave the assurance that local people
would have unrestricted access. The preservation of the spring was made possible by redesigning and reinforcing the runway embankment at a cost of an
When the airport is operational, ABB plans to begin looking into the corporate social investment aspects of the community.
BUSINESS & FINANCE
Technology Incubator Opens in Pretoria
An incubation centre for young technology companies has been opened in Pretoria under an ambitious scheme to provide premises and business services and
mentoring for entrepreneurs, reports Business Day, Johannesburg.
The Softstart centre is one of several incubation hubs being planned by the Godisa Trust, and backed by the arts, culture, science and technology department,
the trade and industry department and the European Union (EU).
The hubs will house innovative, early stage software entrepreneurs and help them build a sustainable business.
The Softstart centre is one of the first incubators it has launched, and is situated on the campus of the Council for Scientific and Industrial Research
To find its first batch of tenants, Softstart is now inviting software entrepreneurs with long-term potential to submit proposals.
Young companies selected for the centre will have access to shared services such as a receptionist, Internet access, conference facilities and rentable
equipment such as PCs, printers and projectors. Softstart will also facilitate start-up capital.
"Time is money, especially in the software business," said Softstart CEO Ben Zaaiman. "Anything we can do to help an entrepreneur with a good product has
tremendous value," he said.
Time used to set up an office could be better spent developing a product or finding customers, he said, so Softstart would handle those mundane tasks while
entrepreneurs focused on their innovations. Many building blocks had to be assembled to create a sustainable business.
"Tenants will need to develop evidence that their business concept is feasible. Proposals will also need to reflect innovation, medium-term earnings potential
and the promise of long-term growth.
"We are also looking for proposals that will contribute to the diversity of the Softstart portfolio," said Zaaiman.
The centre is offering different levels of support. One option does not include office space, but training and networking services. Another option gives the
start-ups permanent office space, while a third will see Softstart put money into promising ventures to boost their growth.
For entrepreneurs who have not yet turned their ideas into action, Softstart staff will provide mentoring services to help them turn a concept into a business
Energy Africa Set to Build On Offshore Success
Oil exploration and production company Energy Africa is set to follow its "phenomenal success" off Equatorial Guinea over the past year by drilling in
the same blocks but away from the OkumeOveng complex where the other discoveries have been made, Business Day, Johannesburg reported.
Addressing the annual meeting, chairman, Idris Mansor, said he was confident of further successes, "although of course we cannot expect every well to be a
discovery and some will be drilled partly for purposes of geological and seismic information."
The most recent well drilled to test a previously unexplored reservoir system, the F3 well in Block F, was not a commercial success.
However, Mansor said it did encounter a potential oil source rock interval below the primary target.
He said Energy Africa's active development programme would need external funding, with the US$50m limited recourse facility secured during the past financial
year to be augmented by another tranche of debt.
Mansor said there was also some disappointment over two appraisal wells drilled, to try to prove the reserves of offshore Namibia's Kudu gas field. Reserves
of a minimum size were needed for operating partner Shell to proceed with proposed liquefied natural gas plans.
Eskom bid for electricity concessions
South African-based Eskom have turned out to be the major bidders for two electricity concessions in Uganda. The Utility Reform director, Emmanuel
Nyirikindi, opened two bids for Uganda Electricity Generation Company (UEGC) and Uganda Electricity Distribution Company (UEDC) respectively. Eskom emerged
the sole bidder for the generation concession (UEGC) and then teamed up with the UK-based CDC Globoleq to form a consortium to bid for the distribution
consortium (UEDC). The two bids, which comprised a transaction and financial proposal, were opened July 2. Both concessions (UEGC and UEDC) will run for 20
years, with each being licensed by the Electricity Regulatory Authority (ERA). The two firms are expected to agree on how their businesses are to be
FOREIGN ECONOMIC RELATIONS
Romania, South Africa ready to strengthen bilateral ties
Romania's government is willing to bolster its commercial ties with South Africa, according to Senate President, Nicolae Vacaroiu, iafrica.com reported.
To do so, Romania will send more trade missions to the African state, the Romanian official was quoted as saying.
Following an official four-day visit to South Africa, Vacaroiu told reporters that securing ties with South Africa will help Romania forge other investments
across the African continent. "Both Romania and South Africa consider that with US$45m two-way annually, our economic relations are not operating to their
potential," Vacaroiu noted. "In pursuit of our mutual wish to improve this, we will be developing more trade missions between Romania and South Africa," he
added. "South Africa should be the gateway for Romania into Africa. Equally, Romania is South Africa's point of entry into central and southeastern Europe."
Vacaroiu spoke with South African President, Thabo Mbeki, during his visit.
MINERALS & METALS
Avgold Overcomes Start-Up Troubles
Avgold increased its earnings in the June quarter as gold production at its new R2,1bn Target Mine lifted sales, reports Business Day, Johannesburg.
The mine in the Witwatersrand Basin opened in March. While Avgold said there had been some start-up difficulties, gold output from Target, which was added to the income statement starting in May, boosted net earnings to R13,8m from R8,1m recorded in the March quarter.
Headline earnings a share in the final quarter of Avgold's financial year rose to 2c from 1c in the previous quarter as gold production in the period grew to 66472oz from 21649oz in the March quarter. Sales climbed to R171m from R65m.
Targets's new metallurgical plant had start-up problems though, and some ore mined was of a lower grade than expected.
Gerhard Potgieter, an executive director at Avgold, said that in spite of this Target was producing gold at an average price of US$156/oz in May and June. Gold has been trading at US$290/oz to more than 300/oz in the June quarter.
In May and June Target milled 172500 tons, lower than design capacity, as a result of difficulties at the mine's new mill. Ultimately, Avgold plans to build up production at Target with a production goal of 350000/oz a year.
The company is looking at the possibility of expanding its Northern Free State gold operations, and is carrying out exploration drilling on the Paradise property.
Tisco mulls setting up ferro-chrome plant in S Africa
Tata Iron and Steel Company (TISCO) is considering a proposal to set up a ferro-chrome plant in South Africa entailing an investment in the region of Rs 250 crore and Rs 300 crore, Tisco's Managing Director, B Muthuraman, said recently "We will take the final decision in the next few months".
He recently inaugurated a Rs five crore integrated service facility for cold rolled coils of R S Steel Tech, a sister concern of Ramsaroop and Sons, one of south's leading distributors for Tisco, India times reported.
Muthuraman indicated that Tisco is looking at Kerala-government-owned Titanium company. "We are talking to the Kerala government", he said and indicated that Tisco was open to acquiring steel companies to enhance its capacity.
"We are looking at some more steel. The addition of capacity may not be in Jamshedpur. It may be existing capacity elsewhere. We are seriously and definitely looking for more steel to enhance our capacity", Muthuraman said.
He said Tisco has signed an MoU with the Tamil Nadu government to carry out a techno-commercial feasibility study on extracting titanium which is in the form of mineral sand. The study would cost Rs 15 crore and would be completed by next year-end, Muthuraman added.
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