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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: 13 - (04/02/03)

Africa's Truth and Reconciliation Commission row resolved
The last obstacle to the publication of the final report of South Africa's Truth and Reconciliation Commission (TRC) has now been removed. In an out-of-court settlement in Cape Town, the TRC agreed to amend a number of sections, which blamed the mainly-Zulu Inkatha Freedom Party for human rights abuses during the final years of apartheid. The TRC, chaired by Archbishop Desmond Tutu, was set up to investigate human rights violations under apartheid, to advance reconciliation and the reconstruction of a new South Africa. The final report is set to be published this year, opening the way for thousands of victims of the apartheid era to receive compensation. Doctor Mangosutho Buthelezi and his Inkatha Freedom Party (IFP) had questioned the findings of the report and a Cape Town court case was brought to challenge 37 entries directly accusing both the IFP and Doctor Buthelezi of human rights abuses. The interim report, which was submitted to then President Nelson Mandela in 1998, described the IFP as "responsible for approximately 30% of all the violations reported to the commission". Some 12,000 people were killed in political violence in the province of KwaZulu-Natal in the early 1990s. President Thabo Mbeki was due to be handed the final document last year, but the objections raised by Mr Buthelezi and the IFP delayed it's publication. The judge at Cape Town high court approved the settlement, which includes a number of changes of wording in the final report, although not all the concessions demanded by the court action. "There were about 30 or so changes to the final report, but these changes were cosmetic. It does not in any way change the core findings of the commission," TRC spokesman Richard Lyster told the French news agency, AFP. 

Iraq - South African Opinion
President Thabo Mbeki is to hold bilateral talks with British Prime Minister Tony Blair on February 1 in the United Kingdom as part of efforts to avert war in Iraq. South Africa's Department of Foreign Affairs said that Mbeki would stress, as he did in his speech to the United Nations General Assembly last year, that multilateralism was the only response to the issue. Mbeki also seeks to rekindle Blair's interest in Africa. While the meeting has been planned for a long time, it comes at a critical juncture. The US and the UK are still trying to build a coalition against Iraq, and they need to consult and justify their stance to avoid further diplomatic damage. Even with the differences over Iraq and Zimbabwe, South Africa's ties remain close with the UK. One British diplomat insists the differences on Zimbabwe and Iraq are those "of approach, not of objectives". But Pretoria has declared Zimbabwe's ruling Zanu (PF) an ally. British trade interests in South Africa, including the arms deal, are simply too large to sacrifice by trying to put diplomatic pressure on South Africa over Zimbabwe. In the post apartheid era, South Africa's foreign policy thrust is toward Africa and the developing world rather than the west. Its reputation in the UK has been damaged largely because of wide press coverage of violent crime, government confusion on HIV/AIDS policy, and its highly criticised silence on Zimbabwe. Nevertheless, Blair's recent attention to Africa, and the New Partnership for Africa's Development (Nepad) has struck a chord with South Africa. President Mbeki fears that rocketing oil prices brought on by a Middle East war could condemn Africa to deep economic crisis. The impact could be severe enough to undo any benefits from a 2002 agreement for leading industrial countries to expand aid to Africa. Worries about the impact of a conflict on oil supplies have kept prices in sight of $30 a barrel. Most analysts expect the outbreak of war would push prices sharply higher. Former president Nelson Mandela also expressed his opposition to war in Iraq with a scathing attack on United States leader George W Bush on January 30, saying the American leader wanted to plunge the world into a "holocaust" with his planned attack on Iraq. Speaking at the International Women's Forum in Johannesburg, Mandela also said that Tony Blair's support for Bush had made the British leader the US "foreign minister". Mandela said Bush was acting outside the United Nations. His attack comes only days after the UN weapons inspection team released its findings to the world body. Its head Hans Blix told the UN that inspectors needed more time to verify allegations that the Arab nation possessed such an arsenal. Mandela added that if Iraq had not co-operated fully, it was the UN's prerogative to take action.

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AUTOMOBILES 

Further Japanese investment expected 

Government and business are anticipating potential investment by Japanese automotive companies, after Toyota Japan became the first Japanese company to gain a controlling stake in a South African car manufacturer last year. South African Vehicle Manufacturers Association president and BMW boss, Ian Robertson, has commented that Toyota Japan's investment in South Africa was likely to be followed not only by other Japanese vehicle makers, but also by component manufacturers. 
In support of his view, Robertson pointed out that in Europe and the US Japanese investment had prompted other companies follow suit. The agency announced that it would lead a focused automotive business mission to Japan. The delegation will meet the procurement divisions of Toyota and the Toyota group of companies as well as Mazda, Honda, Mitsubishi, Subaru and Nissan, promoting the potential of investing in South Africa.

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AVIATION

SAA mulling purchase of 'super-jumbo'

South African Airways (SAA) is likely to improve its operating profit during the current financial year, while the airline is considering purchasing the Airbus A380 "super-jumbo" in the coming years, SAA chief executive, Andre Viljoen, announced in France in late January.
Viljoen was speaking in Toulouse, south-western France, where he will take delivery of the first plane of SAA's new Airbus fleet on Friday night. South Africa's national carrier has ordered 41 new Airbus aircraft to be delivered over the next 10 years, which will replace its ageing, mostly Boeing, aircraft.
Viljoen told journalists the company's improved performance was, however, dependent on the market remaining constant.
In 2001, SAA reported an operating loss of more than R1-billion, but made a turnaround the following year. In the nine months ended December 2002, SAA had already recorded an operating profit of R381-million, Viljoen said.
Had the new Airbus fleet been in place for the current financial year, ending March 2003, the operating profits would have quadrupled due to cost savings the planes offer.
Viljoen added the company was looking into purchasing the super-jumbo, which could replace SAA's eight Boeing 747-400s. The A380 has the largest seat capacity of any commercial airliner, carrying up to 550 people. A number of airlines have already placed orders for the aircraft, which is due to enter service in 2005. The final assembly construction line is currently being completed in Toulouse.Airbus made $3,5-billion from the deal with SAA, which Viljoen described as a deep partnership.
The chief executive will receive the A340-600, while the next plane is expected to be delivered very shortly. The two aircraft will be flown in South Africa for a few weeks and will then be used for SAA's Hong Kong and Frankfurt routes.

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CHEMICAL INDUSTRY

Sasol commissions R1bn alcohol plant

Listed petrochemicals group Sasol (SOL) has commissioned its technologically advanced R1-billion new alcohol plant at Secunda in the Mpumalanga province the company said.
The world-scale plant enables Sasol to have the most extensive portfolio of alcohols in the world, marking yet another milestone in its quest to capture a larger share of the international chemicals market.
Sasol CEO Pieter Cox said: "I view with great satisfaction the completion of our new alcohols plant. This plant, now fully operational, will add an annual capacity of 120 000 tons of C12 to C15 Alcohol for supply to international customers.
"The project forms part of Sasol's overall corporate growth strategy to add further value to feed-streams that are available from its oil-from-coal processes. It has enabled us to get into export markets and through that to establish many global relationships which consolidate our presence in international markets."
The alcohol plant is operated by Sasol Olefins and Surfactants (O&S), a division of Sasol Chemical Industries. Alcohols are used as building blocks for surfactants, industrial chemicals and performance chemicals and the new alcohol will be marketed under the name SAFOL.
The decision to build the new plant was announced in October 1999 when Sasol reached an agreement with Davy Process Technology (DPT) to license its Low Pressure Oxo process technology to enable the production of alcohols from the longer-chain alpha olefin components available.
Sasol O&S manufactures a broad range of products for the surfactant and chemical intermediate markets. Manufacturing sites are mainly in Europe, South Africa, and the US and products are delivered worldwide. 

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FINANCIAL NEWS

SA equities set to perform

The South African equity market is set to perform in 2003 as safe haven flows to gold can send the price "sky high", said Gad Ariovich, Economist at Anglorand Securities, at an investment seminar on 28th January, Mail & Guardianonline has reported.
"One of the things that one must bear in mind is that the gold market is a tiny investment market in global terms. This means that if a small number of investors decide that they will move a small proportion into an historical safe haven, then this could send the price sky high," Ariovich said.
The gold price has gained more than 25% since it traded below $300 an ounce in August 2002 to current prices of around $373/oz.
"Iraq is not the only reason why investors are flocking into gold. In addition to war jitters we have an erosion of trust in the US dollar, as well as worries about the Japanese banking system and what that might do to other financial systems," Ariovich said.
The US Office of the Comptroller of the Currency (OCC) Derivatives Report showed that total US commercial bank derivative positions increased by $3,1-trillion in the third quarter 2002 to $53,2-trillion.
If a mere 2% - the historical norm - of these deals go sour and a creditor is unable to pay on demand, then the resultant $1-trillion loss would wipe out the capital of most US banks.
This risk is not negligible given that eight of America's 12 largest corporate bankruptcies have taken place since the beginning of December 2001.
In August 1998, US Federal Reserve chairman Alan Greenspan cajoled US commercial banks into supporting the highly leveraged hedge fund, Long Term Capital Management (LTCM), so that its derivative exposure could be unwound in an orderly manner.
Greenspan said at the end of 2002 when commenting on asset bubbles that: "History indicates that bubbles tend to deflate, not gradually and linearly, but suddenly, unpredictably, and often violently."
"Apart from the higher gold price, South African equities should also gain from the attractive valuations, which are low both in the historical South African context and by comparison with most other equity markets," Ariovich said.
"The government has got its house in order on the policy front with regard to fiscal and monetary policy and South Africa is about to reap the benefits of the past few years of discipline," Ariovich said. 

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FOREIGN ECONOMIC RELATIONS

Colgate Palmolive Zimbabwe relocates to South Africa

Colgate Palmolive Zimbabwe, one of the country's leading manufacturers of detergents, soap and toothpaste, is reportedly winding down some of its operations and moving to South Africa due to the declining macro-economic environment. The move deals a heavy blow to the country's shrinking industrial base adding to an already high unemployment level. Management reportedly fired all contract workers in December. About 70 workers out of at least 160 employees faced the axe as the curtain came down at one of the country's major toothpaste producers. Indications are that Colgate Palmolive will cease operating some of its departments January 31 2003. Management said that the centralisation process would see the African market being served from South Africa and Morocco. Although the company's management insisted that it was downsizing operations, workers remained pessimistic as multi-million dollar machinery and equipment was dismantled and packed, ready for the move to South Africa. 

Trade with Gulf Region set to increase

Despite the impending threat of war in the Middle East, trade between South Africa and the Gulf region is set to boom as a new trade deal is being brokered with the United Arab Emirates (UAE). The South African ambassador to the Arab state, Dikgang Moopeloa disclosed that the new deal was being designed to entrench trade relations between the two nations. Moopeloa said that the deal had three legs: investment, trade, and an agreement that would allow companies to avoid the double taxation of goods. The United Arab Emirates, driven by its business capital Dubai, has been positioning itself as the hub for international trade with the Middle East. Moopeloa said that South African companies would benefit by exploring trade opportunities in the region from within the United Arab Emirates. There are 34 South African companies doing business from within Dubai, including Murray and Roberts, Grinaker LTA and Woolworths. 
A number of South African companies, including Multichoice, had set up business in one of Dubai's "free zones". These zones allowed foreign companies to base themselves in Dubai and take advantage of a number of special incentives. These included allowing the companies to avoid paying any taxes, owning 100% of their businesses and repatriating as much of their profits as they wish. To set up in a free zone in Dubai, a foreign company would have to enter into a joint venture with a local company, ceding majority control to that firm. Moopeloa said that the aim was to double the number of South African companies in the United Arab Emirates by 2004. In 2000, total foreign trade between the two countries was estimated at $82m. In 2001, however, trade between the two countries tripled to $285m. This gave South Africa a 1% share of the total trade volumes in Dubai. Moopeloa dismissed the suggestion that the brewing conflict in the Gulf should dull any appetite for business in the region as the UAE and Dubai were far away and politically removed from the situation in Iraq. In a separate development Deputy Foreign Affairs minister Aziz Pahad discussed the opening of a South African Mission in the Kingdom of Bahrain. He explored the possibilities of private sector trade with the Arab kindgom when he met with Bahrain's Deputy Prime Minister Sheikh Abdullah Bin-Khalid Al-Khalifa in Manama, Bahrain. Pahad held extensive discussions with the Bahrainian Yousuf Mahmood, under secretary of the Foreign Affairs Ministry and his delegation January 25. During his meeting Pahad discussed the possibilities of expanding upon the political and economical relations. 

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MINERALS & METALS

Harmony raises US$124m overnight

Harmony Gold announced January 29 it had placed eight million new shares with institutional investors, an opportunistic move it completed in the space of only a few hours on the back of significant institutional demand. "$124 million is a lot of money and we completed the raising overnight. There's a lot of demand and I wouldn't be surprised if the other gold companies go out and raise cash on the back of this," said Harmony commercial director Ferdi Dippenaar. The group issued the shares at $15.50 a share, 5.5% below its close of R144.00 a share on the JSE Securities Exchange January 28. 
The new shares make up 4.6 percent of Harmony's issued share capital. Harmony said this latest $124 million equity raising would used to fund a raft of growth plans across its South African production base. One Johannesburg based gold analyst said Harmony had chosen an opportune time to top up its R1.4 billion cash pile mostly amassed at the last share issue, given that for the meantime the risk for South African gold shares was almost solely on the downside. 

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TELECOMMUNICATIONS

Telkom to be listed on Stock Exchange

Telecommunication giant Telkom is to be listed on both the JSE Securities Exchange South Africa and the New York Stock Exchange on March 4, Public Enterprises minister Jeff Radebe announced January 30. Speaking to reporters in Johannesburg, the minister said government had been advised to extend its share application phase until the listing day, saying such an extension would be in the interest of South Africans. More than 1.5 million South Africans have so far registered for both discounted Khulisa (for historically disadvantaged individuals) and general share offers. "You will, however, agree with me that the extension is in the interest of all ordinary South Africans, and noting that the IPO is our flagship we want to ensure that ownership of Telkom is as widely spread as practically possible," explained the minister. The government is offering 139 million shares at between R33.50 and R40.90 per ordinary share implying a market capitalization of approximately R18.66-billion to R22.78 billion. Mr Radebe said the listing would play a major role in local economic growth further driving economic transformation and development in the country. 

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