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Albania

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  SOUTH AFRICA

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. 

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Update No: 09 - (01/10/02)

Mandela and Mbeki criticise US foreign policy
In a hard-hitting interview with Newsweek magazine, Nelson Mandela says US President George W Bush must leave Iraq to the United Nations. He condemned United States intervention in the Middle East as "a threat to world peace". He repeated his call for Bush not to launch attacks on Iraq. He charged that the US President was trying to please the American arms and oil industries. Furthermore President Thabo Mbeki and other African leaders went head-to-head with the US to prevent Bush from shifting the focus of the United Nations and the world away from their Africa plan to his war on Iraq. As Bush went all-out in the UN to convince the world that Iraqi leader Saddam Hussein should be attacked, Mbeki and other African leaders sought to downplay the issue and tried to head off Bush's attempts to woo oil-rich African countries at the expense of the New Partnership for Africa's Development. The sentiment, expressed by other diplomats, came as former President Nelson Mandela stepped up his criticism of Bush's war on terror. Most of the countries Bush seeks to court are either steady oil producers or in the heart of West Africa's oil exploration area, which provides the US with 15% of its oil. Salih Booker, director of the advocacy group Africa Action, told Reuters that he feared Bush's interest in Africa's oil would trump his stated commitment to promoting democracy and economic development on the continent. "Oil largely defines US relations in Africa," he said. "Those countries that have oil, regardless of their democratic credentials, will get first service in line over other African countries."

Black Empowerment
The government has proposed that at least 35% of the economy should be in black hands by the year 2014, sparking fears in business circles of further market jitters. However, the Department of Trade and Industry was quick to distance itself from the proposal September 26. The emerging consensus in the government is that there should be industry-specific targets for empowerment, of the type that is being negotiated in mining, rather than an overarching benchmark. The leaking of a draft government mining charter in July, also containing ambitious black ownership targets, shaved 12% off Anglo American mining stocks in one day. The proposal of "at least 35% effective black participation" in the economy by 2014 appears in a department "discussion paper" tabled in the trade and industry chamber of the National Economic Development and Labour Council (Nedlac). "Effective participation", the document says, should be measured in terms of "increasing levels of black participation in ownership, control, skilled occupations, employment and income". There is uncertainty in business circles about how the 35% figure was arrived at, how it would be reached and how compliance would be measured. Investor anxieties appeared to focus on how black entrepreneurs would raise the necessary capital to buy 30% of a R750-billion industry over 10 years. Significantly, the document reflects growing pressures on the government, particularly from its trade union and communist allies, to broaden empowerment beyond the enrichment of a few. 

Mining Charter
An advance copy of South Africa's redrafted mining charter, circulated to key industry participants September 27, has ownership redistribution worth R100 billion ($10 bn) at its heart, roughly 16 percent of the current South African mining industry. While this only relates to existing assets, it is only half the amount envisaged by the South African government in the first draft of the charter leaked in July. That document said 30 percent of existing South African assets should be in black hands within 10 years. The new charter is expected to specify a 5-10 year time frame. It also details skills development, share ownership schemes for black employees and training. It was circulated to members of the minerals and energy department, the Chamber of Mines, the South African Mining Development Association (SAMDA), and The National Union of Mineworkers (NUM). SAMDA is an organisation representing small black mining business in South Africa. The redrafted charter will be circulated among the principals of the organisations for additional comments and then handed back to a focus group for refinement. 

Engineering - Alstom to sell 42% to Black Empowerment Groups
Anglo-French engineering group Alstom plans to sell 42% of its holding in its South African operations to two black empowerment groups. The deal will lead to Kgorong Investment Holdings, which already holds 12% and Tiso Capital Partners becoming the leading empowerment groups, leaving the parent company owning 10%. Local management and its bankers will also take a stake. The deal, announced September 26, means that Alstom's South African operation is increasing the holdings of its black shareholders in a business environment in which it has become almost mandatory to have an empowerment partner. This is especially true if companies want to do business with government. Alstom, which specialises in developing energy and transport infrastructure, is looking to do work on two government linked projects - the R15bn upgrade of the rail utility Spoornet's ageing locomotive and wagon fleet and the Gautrain rapid rail link. Alstom is part of the Gauliwe consortium, one of the two that prequalified for the development of the Gautrain, which will connect Pretoria, Johannesburg and Johannesburg International Airport in a high-speed rail network.

Foreign Investment
Foreign direct investment in South Africa in the second quarter of 2002 slumped to stand at R2.383bn, compared with the first quarter's impressive start of R14.02bn. This was the finding of a survey commissioned by BusinessMap Foundation and released September 25. BusinessMap's director Reg Rumney said the figures once again stress how one or two big deals and privatisations affect investment flows from abroad. Although quite a few investments were made, the figures were disappointing. There was only one "reasonably big" second quarter announcement Toyota Motor Corporation of Japan's investment of R1bn in Toyota SA. The investment meant Toyota's share in the domestic company had climbed by 39,3% to almost 75%, by purchasing 12,4million shares of the SA operation for R994m. This year's current quarterly average, at R8.202bn, is still the highest since BusinessMap began to track foreign direct investment. The dollar amount of $719m beats past quarterly averages. The second biggest single investment in this quarter was in the defence electronics sector, with UK based BAE Systems acquiring a 30% stake in state defence company Denel Aerospace and Ordnance for R375m.

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AUTOMOBILES

Toyota SA Steps Up Exports 

Toyota announced plans for a new R3.6bn export programme, September 19, as part of its Japanese parent company's bid to produce "yen-free" vehicles for the global market. The deal will provide a boost to the South African economy, doubling production of pick-up trucks and multipurpose vehicles at the Toyota plant in Durban to 60,000 units a year. "South Africa will be an important and integral player in a new, globe-spanning project to supply Toyota pick-up trucks, multipurpose vehicles and major vehicle components to countries in Europe, Africa, South-East Asia, Latin America and other regions," Toyota announced. The Toyota factory in Prospecton near Durban already produces around 30,000 units a year for the local market. Under the new plan, this production will be doubled to 60,000 units annually, with the additional 30,000 units for export. "We are very excited about this new development, which should be seen as another big vote of confidence in the South African motor industry's ability to meet global standards as a supplier of quality products," said Toyota SA President Johan van Zyl. In July, Toyota implemented a R1bn investment in its South African offshoot, boosting its stake to 75%, with the Wessels family's listed vehicle Wesco retaining the remaining 25%. Since July progress has been made rapidly to include South Africa in significant global vehicle and component supply programmes. Additional investment to expand exports is expected to reach R3.5bn over the next few years.

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AVIATION

Airbus Training Centre

European aircraft manufacturer Airbus has announced plans to set up a training centre in South Africa that will service the local aerospace industry. The centre, which will be a joint venture with the Council for Scientific and Industrial Research (CSIR), will be part of an offset deal emanating from the sale of 41 jetliners to South African Airways earlier this year. Airbus signed a memorandum of understanding with the CSIR at the African Aerospace & Defence 2002 exhibition in Pretoria September 19 to develop the training centre. The centre, which is scheduled to be up and running by April next year, will specialise in non-destructive testing (NDT) and provide a new industrial international certification. According to Airbus vice-president for Africa Kiran Rao, this offset deal will be the first of many coming over the next few months. He said his group was keen to go into joint ventures with black empowerment companies. Rao said Airbus had "cast its net wide" to identify potential partners from the small enterprise community and that empowerment was a "central thread" to its industrial participation programme. Rao said in the long-term the centre would not just be used for the aerospace industry, but for a range of other industries that needed a NDT validation. Such industries would include automotive, nuclear, steel and energy sectors.

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CONSTRUCTION

Angolan reconstruction creates opportunity 

Excellent opportunities exist for South Africa's private sector in Angola as it attempts to reconstruct itself after 27 years of civil war, deputy foreign minister, Aziz Pahad, said on September 25th. Angola's long-term investment potential is vast. Its oil industry has helped Angola consistently attract the largest slice of foreign direct investment of all southern African countries in recent years. Angola supplies about 10% of the oil needs of the US and this could increase to 25% in the near future. Pretoria's relationship with the Angolan government has been strained, but according to economist Tony Twine, Angola's revival would help South Africa and the rest of the Southern African Development Community (SADC). Angola, which is the second largest oil producer in Africa and the third largest diamond producer in the world, has been spending more than half its revenue on military operations in its protracted war with the rebel movement Unita. Since the death of Unita leader Jonas Savimbi, the government has signed a cease-fire with Unita and recently a memorandum of commitment to peace. Pahad told Parliament's foreign affairs committee that an important milestone was the creation of an Angolan parliamentary commission for peace and reconciliation. He said South Africa had to intensify its efforts to support the peace in Angola and this should cut across all sectors from government to business and the non-governmental sector. 

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FOREIGN ECONOMIC RELATIONS

China and South Africa sign groundbreaking ICT agreement

South Africa and China have signed an agreement to co-operate on information, communication and technology (ICT). Communication minister, Ivy Matsepe-Casaburri, signed this agreement together with the Chinese industry and information minister, Wu Jichuan, in Cape Town, September 19. In terms of the agreement, the two parties will cooperate in communication policy and regulatory framework, technical standards and certification, radio frequency spectrum, and management tools such as computer assistance. The two parties will also explore areas of human resources development, sharing of experiences in satellite and other communication networks, exchange of information concerning communication technologies and policies within the framework of international organization. The signing is seen as one of the important initiatives to keep South Africa on par with global economic imperatives.

Russian-South African trade at US$65.2m in Q1

In the first quarter of 2002, trade turnover between Russia and the Republic of South Africa stood at US$65.2m. Of this figure, exports accounted for US$37.9m and imports for US$27.3m, the Russian Economic Development and Trade Ministry said, New Europe reported recently.
In 2001 trade turnover between the two countries amounted to US$81m, with US$5.8m in exports and US$75.2m in imports. The Economic Development and Trade Ministry said Russia exports to South Africa mineral fuel and oil products (nearly 30% of trade turnover), fertilisers (some 20%), ferrous metals (nearly 30%), optical equipment, vehicles, inorganic chemical products, as well as equipment for the nuclear power sector.
Currently, Russia mainly exports to South Africa ferrous metals and potassium fertilisers. South Africa exports to Russia ore concentrate, cinder, sugar, fruit, ferrous metal products, vehicles and equipment.

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INFORMATION TECHNOLOGY

Technology - Bytes Technology Group

Bytes Technology Group is buying UK-based Plato Computer Services for between R369 million and R459 million, based on current exchange rates. Plato, which began operations in 1984 as an independent software and services consulting business, is a multi-functional supplier of IT services to a broad range of blue chip customers. The acquisition is costing Bytes at least 22.5 million in cash. Plato's performance in the year to 31 December will determine how much of a further 5.5 million cash is to be paid. Bytes says although existing UK subsidiary Bytes UK is profitable, it has been concerned for some time about the potential vulnerability associated with its extensive dependence on its software licensing business. "To this end, the group has embarked on an objective to diversify its IT activities in the UK, a strategy which it is believed would best be achieved through the acquisition of a broad-based IT services business to complement Bytes UK's existing offering.

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MINERALS & METALS

Trans Hex Secures Angolan Diamond Concessions

Trans Hex, a Johannesburg listed diamond miner, has secured two Angolan diamond concessions, which have the potential to produce more than 400,000 carats of diamonds a year. The company, which is 20% held by Mvelaphanda Resources, has entered into a joint venture with the Angolan State Diamond Organisation (Endiama), and will mine alluvial diamond concessions with reserves of more than 1,7-million carats. 
This is the first diamond deal approved by the Angolan council of ministers since the end of the civil war in the country. The two concessions, Luarica and Fucauma, both alluvial deposits, are about 1000km northeast of the capital, Luanda. Trans Hex said September 25 that its initial investment in the two mines would be $30m. Production at both mines is scheduled for early 2003 and according to Angolan law all the diamonds will be sold through diamond marketing company Ascorp, a joint venture between the Angolan government and Israeli diamantaire Lev Leviev. 
Annual revenue from the mines could amount to $1bn. Initially, because of a preferential repayment agreement with its partners, Trans Hex's stake in the operations could be over 50%. On repayment Trans Hex will hold 35% in one project and Endiama 38%, while in the other Trans Hex will hold 33% and Endiama 35%.

Platinum revenues overtake gold

South Africa is the world's leading producer of platinum, once considered gold's poor cousin, but now widely coveted. The global demand for this expensive, ductile and lustrous metal presents an economic opportunity for South Africa, which is experiencing a R20-billion platinum rush that has resulted in platinum revenue overtaking that of gold. 
Platinum-group metals attracted R27.1-billion-worth of income in 2000, ahead of gold's R25.3-billion, according to Mining Weekly -- and platinum did this with fewer people and ounces. It is expected that South Africa's output of the element will rise from its 1999 production levels of 3.9-million ounces a year to more than seven million ounces in 2006. Platinum is non-corrosive and its catalytic properties have made it desirable for a number of industrial processes. It is an essential element in high-tech products and increasingly popular for jewellery.

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