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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: 12 - (09/01/03)
Finance - Reserve Bank
President Thabo Mbeki surprised the market December 19 by appointing an outsider and former Bank of England executive director to the post of deputy governor of the Reserve Bank. Ian Plenderleith replaces the well-respected James Cross, who retired as senior deputy governor at the end of last year due to ill health. Plenderleith will take responsibility for the money and capital markets division. He will also take control of international banking, managing gold and foreign exchange reserves and the open forward book. In addition, he will chair the monetary policy implementation committee and sit on the monetary policy committee. Bank governor Tito Mboweni said the appointment, which was made by Mbeki in consultation with Finance Minister Trevor Manuel and the Bank's board, sent a signal that Mbeki wanted "people to work with the market, not against it". Plenderleith retired from Bank of England in May after 37 years. He was responsible for its financial market operations and a member of its monetary policy committee. "We hope that he will pass on his contacts and knowledge to senior staff, who in the next 10 years will play a crucial role in the executive management of the Bank," Mboweni said. Plenderleith is considered a relative hawk, having voted for the more conservative interest rate option at most of the Bank of England's monetary policy committee meetings he attended this year. He said he brought considerable "central banking experience", but lacked the "detailed, intimate knowledge of the South African economy". In general, economists welcomed the appointment as a positive move, but expressed surprise at the appointment of an outsider.
Inflation - To be lowest since 1960
South Africa is on course to experience the lowest inflation figures since the 1960s says Merrill Lynch's Jos Gerson. He predicts the Reserve Bank's targeting measure, Consumer Price Inflation less interests on Mortgage bonds, to drop four fold by 2004 to 3.5% in line with the currency's strengthening trend. That will make it comfortably within the Bank's revised targets of a 6% maximum. Gerson expects the numbers for 2003 to maintain a higher average but end the year significantly lower than expected. "The important issue is that inflation will drop and will decline in 2004 to levels not seen since the 1960's," he says. The bank expects inflation (CPIX) to average 8.4% next year while the market consensus is 8.1%. Although Merrill Lynch says it is not certain about its forecast, it says its expects inflation to drop to 4.3% by year end.
Automobiles - Motor Industry Development Programme
The December announcement detailing the extension of the Motor Industry Development Programme comes at an important time for the South African motor industry because the global vehicle market is expected to slow down. Providing it is seen as a way of getting international vehicle manufacturers to consider making new models of vehicles in this country, said National Association of Automotive Component and Allied Manufacturers executive director Clive Williams. He was reacting to the extension of the programme from 2007 to 2012. Williams said that with the slowdown, which was expected to last five to seven years, vehicle manufacturers would be under pressure to cut costs.
Vehicle exports to rise 21.6%
South Africa's vehicle exports are expected to rise 21.6% in 2003, according to a new projection by the automotive industry association, Naamsa. The Naamsa forecasts, which were published at the weekend, suggest that exports next year will total 155,000, up from this year's projected figure of 127,400. This year will have seen an increase in exports of 18%, compared to last year's total of 108,000 units. Deloitte & Touche partner Duane Newman said that even if the rand remained strong and held on to its recent gains, he would expect the Naamsa projections to be "pretty accurate". Newman also said that the South African automotive industry should enjoy some benefit from the revised Motor Industry Development Programme (MIDP), which was announced in December by the trade and industry department. He said that there were no major shocks in the extended MIDP automotive industry-support structure, which would run to 2012, and that this had given security for planners. He also noted that efforts were under way to attract more investment in South Africa in vehicle and component production.
Diamonds - Prospects for year ahead
2003 is set to bring changes in South Africa's multibillion-rand diamond industry, which has always been dominated by a few players, De Beers in particular. The Diamond Act 56 of 1986 is to be reformed. The overhaul will begin with the publishing of a draft of the Precious Metals Bill which is expected early in 2003. Abbey Chikane, chairman of the diamond board and the Kimberley Process, said the reforms would focus on facilitating the entry of historically disadvantaged South Africans into the lucrative diamond industry. "The diamond act was passed long before 1994 and does not take into account the new agenda of the current dispensation. Our intention is to restructure the diamond industry beginning with the repeal of the current legislation to be followed by the abolition of the diamond board in order to replace the old act with a more progressive act which takes in the objectives of government. Some industry players are saying that De Beers' hold on the world diamond market is being threatened as other mining companies and diamond entrepreneurs whether in Russia or Africa begin to set up their own sales channels. De Beers, though, has a strong hand to play and it is, perhaps, more likely that, rather than the Precious Metals Bill disrupting the diamond market status quo, a flexible compromise will be worked out as was the case with the Minerals and Petroleum Resources Development Act.
US changes stance on generic medicines
The US appears to have backed down on its resistance during recent World Trade Organisation (WTO) talks to allowing developing countries to import or manufacture generic drugs to treat public health crises. Despite being blamed for the breakdown of negotiations, the US now says it will permit developing countries to override patents on drugs produced outside their countries to treat HIV/AIDS, malaria, tuberculosis and other infectious epidemics. The pledge was made as an interim solution following the breakdown of the WTO talks. The US previously argued that the rule should be restricted to just three diseases HIV/AIDS, malaria and tuberculosis. Now US trade representative Robert Zoellick says the US is seeking a solution that will provide life-saving drugs to those "truly in need". He urged other countries to join the US in its pledge not to challenge WTO members that break WTO patent rules by exporting drugs produced under compulsory licence to developing countries. The new US pledge is an interim solution, which will allow developing countries to import drugs from other WTO members to treat HIV/AIDS, malaria, tuberculosis and other infectious epidemics.
The ANC has emerged from its 51st conference flying the flag for black capitalists by promising that it will act firmly to pursue their interests. A new theme of the ANC's economic policy framework, which otherwise remains broadly the same, is the strong emphasis on black economic empowerment, which is described in a conference resolution as "a moral, political, social and economic requirement" of South Africa's future. The empowerment contingent formed a strong lobby at the conference, which provided a resounding endorsement of the ANC's economic policies. In line with its new emphasis on black economic empowerment, the ANC's guiding document, "Strategy and Tactics," was amended to include the "elimination of apartheid property relations" as a critical element of its programme. In his opening speech, President Thabo Mbeki mooted the idea of a global transformation charter to outline the goals of economic transformation to the investment community to avoid instability and uncertainty. Mbeki also suggested that, to keep the owners of private capital on board, the government "will have to provide the necessary incentives". The ANC's incoming national executive committee will have to work on these details.
Media - SABC may drop CNN for Arabic Network
The South Africa Broadcasting Corporation (SABC) is considering the possibility of dropping its CNN broadcasts in favour of Qatar-based Al-Jazeera, Persian Gulf news network. The Star reported December 30 that SABC spokesperson Ihron Rensburg said the key objective was to provide a range of perspectives and news events. However, no decision had been made. Al-Jazeera plans to reach out to the west starting in February with an English-language Web site. "It will be original news in English tailored to a western audience," said Joanne Tucker, managing editor of the Web site. Al-Jazeera hopes to offer English voice-overs of Arabic news bulletins on the TV channel by the middle of next year and launch an English-language channel by the end of the year or early 2004. Al-Jazeera began broadcasting in 1996, bringing scrutiny to governments in the Middle East where many of the region's news outlets are under some form of official control. It started an Arabic Web site, www.aljazeera.net, in January 2001 that offers news, analysis, video clips and programming from the channel. About 39% of the Arabic site's visitors come from North America and Europe, according to the Web site.
South Africa moving toward ULSD, Euro-4 vehicle limits
Following consultations with oil companies, automakers and environmental/public-health advocates, South Africa's government has now put forth draft clean-fuel and
clean-vehicle standards that could be finalized early this year, Jack Peckham wrote in Hart's European Fuels News.
The draft proposal would convert today's 500-ppm sulphur voluntary limit on diesel fuel to a mandatory 500-ppm limit in 2006, followed by a 50-ppm sulphur ULSD limit in 2010.
To a limited extent, Sasol (a Fischer-Tropsch diesel producer) is already marketing an ultra-low sulphur diesel (ULSD) called "TurboDiesel" at a growing number of "Exel" and "Sasol" branded stations as well as some other major and independent stations. Sasol describes this fuel as "compatible with exhaust systems' catalytic converters and particulate traps."
According to Theunis Burger, Director of Petroleum & Natural Gas (Department of Minerals & Energy), the proposal would mandate the phase-out lead from gasoline in 2006, and ban MMT from unleaded gasoline (except for "lead replacement" until 2008).
The proposal also would require Euro-2 emissions limits in 2006 (effectively mandating catalytic converters), and Euro-4 limits starting in 2010 (for newly homologated vehicles) and 2012 (for all new vehicles).
Other gasoline changes: Sulphur limit would be cut to 500-ppm in 2004 and 50-ppm in 2010; benzene (tentatively - still under discussion) would be cut to 1% by 2010, and aromatics (tentatively) would be cut to 25% by 2010.
Nothing in the proposal mandates in-use vehicle retrofits with low- emissions devices, such as diesel particulate filters (DPFs). However, with ultra-clean diesel fuel gradually becoming available at retail, it's conceivable that local or provincial authorities could develop retrofit programs, Burger told us in response to our question. Such retrofits conceivably could be applied to heavy-duty vehicle fleets such as local buses or trucks, for instance.
The gasoline/diesel clean-fuels specifications are estimated to represent an investment cost to South Africa's oil refiners of about US$1bn, although the country's synfuels producers (Sasol and PetroSA) already can meet ultra-low sulphur specifications thanks to investments made many years ago.
The top management of Toyota SA remains with the Wessels family, with the appointment of vice-chairwoman Elisabeth Bradley as chairwoman of the company December 9. The appointment follows the unexpected death of her brother and former executive chairman, Bert Wessels, who succeeded his father, the founder of Toyota SA in 1961. Current president Johan van Zyl was appointed as president and CEO of the company. He will be supported by executive vice-president, Sumio Fukaya, the most senior representative in South Africa of Japan-based Toyota Motor Corporation (TMC). The appointment of the Japanese executive, as well as a comment by the MD of TMC, could be seen as confirmation that the Japanese group was still set on its ambitious expansion plans for Toyota SA. Elisabeth Bradley says that in the longer term she expects ownership of South Africa's largest automotive company to move entirely into Japanese hands. Bradley said that it had taken eight years to negotiate the latest R1bn investment by Toyota Japan in the local operation. The investment deal was finalised last month. Toyota Japan owns 75% of Toyota SA, up from its previous 34% stake, while the Wessels family's listed Wesco vehicle holds 25%. Bradley said that a number of Japanese experts were helping boost standards at Toyota's plant in Durban, in preparation for the launch of an export programme. About R4bn is being invested in Toyota SA to transform the company from a manufacturer for the local market into a key supplier to Toyota outlets internationally. "The first Corollas are expected to be exported to Australia in the first week in March, and we would expect to export 12,000 to 15,000 units next year, with our exports probably increasing to 75,800 a year over a five year period," said Bradley. Toyota Japan now view South Africa as a better production base than had been the case previously. Industrial land is very cheap, energy is very cheap and labour rates are lower than elsewhere. Management salaries are lower because of the cost of living. Bradley said while she did not expect Toyota Japan to make a move for complete ownership in the next five years she could foresee a move to acquire full ownership of Toyota SA in the longer term. Bradley warned that Toyota SA would have to perform to world standards, and would have to put up a convincing case for each component and automotive assembly job it received. "The Toyota Motor Corporation did not grow to that size by being charitable," she said.
Volkswagen SA planning R2.1bn investment
Volkswagen SA is planning local investment worth R2.1bn over the next six years, and is also planning to start exporting South African built Polo cars for the first time, the company said December 10. The increased investment a big jump from the R1.12bn invested in the five years from 1998 to this year will be in plant infrastructure, product upgrades and improved facilities at the company's Uitenhage plant. Chief Exectutive Hans-Christian Maergner said the self-funded investment was a "vote of confidence in this country and would enable the company to offer further exciting products in the years ahead".
Aviation - SAA/Air Tanzania partnership deal
South African Airways (SAA) and Air Tanzania signed a deal on December 2 whereby the South African national carrier will acquire a 49 percent stake in the East African airline. The signing ceremony was attended by officials from the Tanzanian and South African governments. Both governments hold the majority stake in their respective airlines. Of the US $20-million (R185.2-million) SAA paid, US10-million (R92.6-million) would cover the cost of acquiring the 49 percent stake while a further US10-million would be used to recapitalise the new company. SAA CEO Andre Viljoen told those attending the ceremony in Tanzania that the partnership offered potential for the growth of both parties. "I would like to welcome Air Tanzania to the SAA family. This partnership does not only offer opportunities for growth, but also for establishing a strong and reliable presence in East Africa. We are extending our wings to cover the African sky and other regions of the world in line with continuing our expansion policy and strategy of networking Africa," Viljoen said SAA would send an interim management team to help establish the new company. "For an initial period, SAA will manage the new airline while suitable candidates to manage the new company are being sought."
FOREIGN ECONOMIC RELATIONS
South Africa - US Trade Deal
The South Africa Chamber of Business (Sacob) has identified key areas of concern on which it said government negotiators would have to get clarification and, if necessary, resolution during free-trade agreement talks with the US. Negotiations are expected to start early 2003 on the proposed deal, which is viewed as the most important free-trade agreement for South Africa since the start of its globalisation process in 1994. The agreement would include South Africa and the entire Southern African Customs Union. The agreement would also give South Africa secure preferential access to the US import market, worth just more than $1.2-trillion a year. But Sacob warned that there were areas of potential concern on US trade policy that needed to be attended to in free-trade negotiations, as well as in continuing dialogue with the US to ensure a level playing field and to maximise the benefits. Among Sacob's concerns were the extent of US subsidies and support for industries such as agriculture, airlines and aircraft manufacture.
Telkom share offer "Not discriminatory"
The initial public offering (IPO) of shares in the communications parastatal Telkom was not discriminatory, the Department of Public Enterprises said on 7th January, South African Press Association has reported.
"The share offer has been structured in such a way that all South Africans have an equal opportunity to register for, and to purchase, shares in the company," said Dr Eugene Mokeyane, head of the IPO office in the department.
"There is nothing to prevent any South African -- regardless of race, gender or ability -- from registering for or buying shares under either the general or the Khulisa offers."
He said the Khulisa offer was introduced to ensure that lower income groups, who are predominantly historically disadvantaged, can apply for shares. Historically disadvantaged South Africans will get preference in the allocation of these shares. This offer, however, has a ceiling of R5000 per applicant and R50000 per stokvel (savings club).
Mokeyane said the IPO office wanted to give lower income earners and historically disadvantaged individuals the opportunity to invest in shares.
"For this reason, we have stated that we will give preference in the event of over-subscription to historically disadvantaged South Africans -- to give them an opportunity they may not have had in the past.
The ceiling of R5000 per applicant would limit the participation of wealthy individuals through the Khulisa offer. Shares bought through the Khulisa offer could not be sold for three months.
Mokeyane said the government was committed to continuing with the public listing of Telkom on the JSE Securities Exchange and the New York Stock Exchange before the end of the current fiscal year.
"We are experiencing an unexpectedly high response to the current registration drive, and believe the majority of South Africans see the benefits of this process."
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