FREE GEOPOLITICAL NEWSLETTER

South Africa  
  SOUTH AFRICA

REPUBLICAN REFERENCE

Area (sq.km)
1,219,912

Population
43,586,097

Capital
Pretoria

Currency
rand

President
Thabo Mbeki

SPECIAL REPORTS

"Special Shi'a Report"

Afghanistan

Axis-of-Evil



NEW BUSINESS
OPPORTUNITIES

a free service

FREE World audit country reports on democracy, corruption, human rights and press freedom
democracy
check


CNN.COM
ELECTION WATCH


Currency converter
currency
converter


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: 01

The Johannesburg Stock Exchange began February marginally firmer as rampant gold stocks rescued the overall index from weaker financial stocks. Gold stocks reached record highs in the first week of February. The weak rand has boosted bullion prices while dragging down banking stocks. AngloGold planned to spend about R3 billion on mine expansions and another R571 million on exploration this year, the country's largest gold producer disclosed during its financial results presentation. AngloGold's net profit for the December quarter of R916 million was exactly double that of the previous three months. After a failed takeover bid for Australia's premier gold producer, Normandy Mining, AngloGold said it would make more money from focusing on its own projects than chasing expensive acquisitions. 
Ericsson SA has posted a 30% growth in sales to R4 billion in the past year, it said last week, defying huge losses reported in January by its Sweden-based parent company. The Ericsson group recorded a net loss of 21.3 kronor (R23 billion). Ericsson SA operates in the sub-Saharan territory with businesses in more than 40 countries. It claims a 40% market share in the telecommunications network infrastructure supply business. Its customers include MTN, Econet, MSI, Nigeria's telecoms utility Nitel and Portugal Telecom. The managing director of Ericsson SA, said the region contributed about 2% to the groups annual sales. He said Ericsson planned to substantially grow its business outside South Africa in countries such as Mozambique, DRC Congo and Zambia, issuing new cell phone licences.
South Africa and European Union officials signed a trade agreement on January 28th to expand South Africa's duty-free exports of wine and spirits. The agreement heralds an important step toward freer trade between Europe and South Africa, and it will strengthen Pretoria's long-term economic outlook. But a multitude of economic hurdles remain - and without a stable rand, growth will be limited. The agreement increases South Africa's attractiveness as a destination for foreign direct investment. The wine and spirits agreement has been a sticking point in expanded trade relations between South Africa and Europe for the past seven years. South Africa had been reluctant to relinquish the use of names like sherry, port and ouzo, which are identified with European products. 
The rand is likely to remain under pressure ahead of uncertainties such as the budget speech on February 20th and the Zimbabwean elections in early March. The spread of HIV/Aids in South Africa has contributed significantly to the decline in foreign investment (FDI), according to BusinessMap's investor survey released at the end of January. The HIV/Aids crisis has increased the risk profile for investment in the Southern African region, with investors seeking a premium rate of return of 15% to 20% in South Africa and above 25% in the rest of Southern Africa. The survey states that although South Africa has the highest number of people living with HIV/Aids in the SADC its relatively good infrastructure makes it more attractive for FDI. The Stellenbosch Bureau for Economic Research (BER) has forecast that economic growth rates are expected to be depressed by the impact of HIV/Aids. Macro-economic performance will be hard hit by HIV/Aids infection, resulting in a reduction in human assets and a negative impact on consumer spending, which will shift to health care and funeral expenses. The government is likely to suffer from larger deficits with increased public sector spending on health care resulting in lower spending in other sectors like capital expenditure.

« Top

FINANCIAL NEWS

Gold headed for US$335 level


As if South African gold miners weren't already riding the crest of a wave along comes a phenomenal surge in the in the metal's dollar spot price beyond the key US$300 per ounce level, allAfrica.com has reported.
The likes of Anglogold, Gold Fields and Harmony all recently reported exceptional results for the final quarter of 2001 due in the main to sharp rand weakness. That in turn translates into a healthier gold price in rand terms.
Gold's US$16 improvement since the start of this week means that gold miners can now sell an ounce of bullion for R34l73, a 6% premium in 48 hours. At the margin an increase of that order is significantly magnified and means that the rand gold price has jumped more than 50% in just five months.
While speculators might be tempted to short-sell gold at these relatively lofty levels, Gregor Krall, the technical analyst at NIB Securities, warns that the rally may not yet be over. In fact Krall's charting methodologies suggest that "we're heading for anywhere between US$315 and US$335 so I'm still bullish on gold." Krall adds: "There's a small triangle formation and the break out was actually US$288 per ounce and that projects strength to about US$325."
Taking longer-term patterns into consideration, Krall says based on a high of US$418 in February 1996 and the recent low in the order of US£255 "a retracement of that downward move gives you levels of about US$315 and US$335," which was also the case when gold spiked in October 1999.
Krall admits to being a gold bull "for quite a while now" and that it's "nice to see it finally happening." He does add the proviso that he hopes this is "not a sign of a fragile financial system.

« Top

INDUSTRIAL INVESTMENT

Where is Competitiveness Fund going


There are some excellent support programmes in place, offered by the SA Government to provide cash grants for new and existing businesses - but delivery is often 'agonisingly slow' and an improvement in this area is sorely needed, Cape Business News has reported. 
That is the view of many of the small and emerging businessmen, who should be gaining benefits from these programmes to enable them to set up new businesses or make existing ones more competitive. But with applications in many cases buried somewhere in the darkest recesses of the Department of Trade and Industry (DTI), or rejected for reasons which many find hard to understand, businessmen become antagonised. 
Their view is confirmed by Theo Meintjes of Dectra, a chartered accountant and specialist consultant who has spent the last 18 years specialising in the Government's support schemes. 
"Unfortunately, the time taken to process applications in many instances is excessive, and this is sad because the country and the businesses the schemes are supposed to serve badly need whatever help they can get," he says. 
A case in point is the Competitiveness Fund (CF), a cost sharing grant scheme which has been run by a private sector consortium on behalf of the Department of Trade and Industry, using funds sourced from the World Bank. The aim of the scheme is to improve the competitiveness of South African firms, bringing improved profitability through greater and more efficient penetration of both export and domestic markets. 
These aims would be achieved by providing firms with financial incentives of up to R600 000 to avail of external services and expertise. 
The intention is laudable, and is exactly what the country's businesses need in order to become world-class, says Meintjes. But the contract of the consortium is coming to an end and there is no clarity about the future of the fund. It appears as though the fund will be continued under the direct administration of the department. There is also talk of a change in the rules in order to increase the maximum subsidy and also support economic sectors that are currently excluded.

« Top

MINERALS & METALS

Rareco in line for R16 million for development

The Cape mining industry continues to churn out the most fascinating corporate tales, Cape Business News has reported.
The latest intriguing development involves Somerset West-based Rare Earth Extractions (Rareco), whose seven year tenure on the JSE Securities Exchange has been marked by a remarkable lack of progress.
The company listed in 1994 hoping to exploit a monzanite deposit at Steenkampskraal for rare earth chlorides for use in industrial magnets.
Unfortunately Rareco - for a variety of internal and external reasons - could not get its act together to actually produce anything that would (if you'll excuse a cruel pun) draw any magnet manufacturers.
The mining project has remained on the back burner for a number of years as Rareco went on a desperate search for financial backers. Interestingly enough in that time an overly ambitious TriDelta Magnets, which attracted much attention on the JSE, went from bust to boom within two eventful years.
The fallout from the TriDelta debacle - even though the two companies are not comparable - should have been enough to put investors off anything to do with magnets for a long time. In fact, one shareholder tried unsuccessfully to wind-up Rareco recently.
But step up the fearless Industrial Development Corporation (IDC), which has agreed to make R16m available to Rareco for the development of its rare earth project. This represents a significant portion of the total funding needed to get the project underway According to a terse announcement, the IDC has made the R16m available subject to certain conditions. No details were given around the conditions but it would be safe to assume the IDC - especially after learning some harsh lessons with Saldanha Steel - has taken steps to underwrite its 'investment' with the necessary corporate safeguards. It's worth pondering whether an option on an equity stake in a productive Rareco will form an integral part of IDC's conditions?
Nevertheless the IDC funds seem to have got the ball rolling for Rareco, who is now awaiting responses from financial institutions around further funding.
In addition Rareco has plucked up the courage to suggest a rights offer to its long suffering shareholders.
While so many small mining projects in the Cape end up generating more controversy than revenue, it is hoped Rareco can get its rare earth project off the ground.
The capital intensive project would offer employment, and eventually earn much needed foreign exchange considering the demand from industrial magnet makers in Europe.
As we've indicated earlier in this article there is a great degree of scepticism around small mining concerns, and even more scepticism about anything to do with magnets.
Hopefully Rareco, which has been in limbo for so long, can present a convincing argument to institutional and individual investors alike. The IDC's participation might just be the catalyst.

« Top

TRANSPORT

Mozambique, South Africa sign rail deal


Hopes are high that South African investment in Mozambique railways could improve trade and employment in both countries BBC News has reported.
Under the deal, South Africa's public railways, Poornet, can run its trains from the border to the port of Mozambique capital, Maputo.
This should offer better access to southern Africa from the Indian Ocean.
South Africa's public railways Spoornet is to pay US$67.5m for the rail concession and will invest 200m rand (US$17.2m) in the Mozambique rail network.
The track was badly run down during Mozambique's civil war.
A further US$61m will come from the Mozambique Port Development Company - a European funded organisation.
Mozambique hopes that the deal will increase tax and tourism revenues as well as boost investment, Khulu Phasiwe from the South African newspaper, Business Report, told the BBC's World Business Report.
"One of the biggest projects which they (Mozambique) are aiming to rebuild is the port of Maputo and South Africa is going to put some US$10m to rehabilitate the railway line at Maputo," he said.
Spoornet's luxury Blue Train travelled from Pretoria to Maputo to mark the signing of the deal and the hope that will be that the Blue Train will bring in more visitors to the country.
The deal marks the completion of projects that were part of the Maputo Development Corridor - a plan for upgrading the infrastructure, economy and living conditions for people in north-eastern South Africa and southern Mozambique.

« Top

 

CUSTOMISED REPORTS

 

INVESTMENT BACKGROUND REPORTS

Our analysts and editorial staff have many years experience in analysing and reporting events in these nations. This knowledge is available in the form of geopolitical and/or economic country reports on any individual or grouping of countries. Such reports may be bespoke to the specification of clients or by access to one of our existing specialised reports. 

For further information email:

reports@newnations.com

Considering an investment or a trip to any newnation? First order our Investment Pack which will give you by e-mail the last three monthly newnation reports and the complete worldaudit democracy check for the low price of US$12. The print-out would be a good companion to take with you. Having read it, you might even decide not to go!

To order please click here:
Investment background report

« Top

« Back




Published by 
International Industrial Information Ltd.
PO Box 12 Monmouth 
United Kingdom NP25 3UW 
Fax: UK +44 (0)1600 890774
enquiries@newnations.com