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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

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: 18 - (03/07/03)

Foreign Investment Risk Ratings
South Africa did not score highly in the country risk ratings announced by the Economist Intelligence Unit at a seminar in Johannesburg June 6. Failure to meet inflation targets, restrictive labour markets and foreign policies worry investors, but the strong rand gives reason for optimism. South Africa was ranked as the 27th riskiest country out of the top 60 economies in the world. The unit rates a country on issues shaping its business operations covering the political, economic policy, liquidity and economic structure risks. South Africa was given a C rating (average) for political risk. Key issues which adversely effected the rating were concerns over foreign policy and the power of the ANC. "There is a risk that the ANC could consolidate its hegemony at the expense of a democracy," said Andre Astrow, deputy editorial director of the unit. Astrow said that South Africa's handling of the Zimbabwe crisis had done untold harm to the way that the country was perceived and the situation was seen as a real foreign policy failure. Economic policy also scored a C rating. This rating was mainly due to disappointment in meeting inflation targets and the highly regulated labour market. "Labour market reforms continue to be one of the biggest disappointments of the Mbeki administration," said Astrow. Economic structure received a B rating, however there is concern that South African growth will be negatively affected by the sharp slowdown in the world economy. The country's overall risk rating was put at 46 points (out of a possible maximum risk of 100), while its overall grading was given as a C. The symbol A represents a low-risk country such as Singapore and an E rating represents a maximum-risk country. The reports are designed to aid foreign investors in assessing the level of risk associated with investing in specific countries.

Mbeki Upbeat About G8 
Africa is finally getting the kind of attention it should from eight of the world's richest countries, the Group of Eight (G8). This was the message conveyed by President Thabo Mbeki addressing members of the Presidential Press Corps in Pretoria June 3. The President was addressing the PPC on the outcomes of the meeting between the African leaders and the G8 held in Evian, France on June 1. 'There was no matter that we presented to them about which there was disagreement,' he assured. He explained that part of the reason was that there had been broad consultations between the G8 leaders' personal representatives to the continent and their principals prior to the summit in France. 'So by the time they got to the meeting in Evian they were familiar with the matters that had to be decided,' he said, adding that they went to the summit with the aim of presenting specific projects. These specific projects included, amongst others, peace and security, trade, investment, debt relief, health improvement, water resource management and education. President Mbeki said the process of broad consultations dated back to 2000 when African leaders sold the idea of a developmental programme of the continent to leaders of developed countries. As a consequence, the developed countries agreed and invited President Mbeki and company to the G8 meeting in Genoa, Italy, who then presented principles underlying the continent's socio-economic blueprint, the New Partnership for Africa's Development (NEPAD). President Mbeki said the fact that Africa's Personal Representatives To Leaders Of The G8 was the only permanent structure of the G8 that reflected the understanding of the nature of the depth and the complexity of the challenge.

Exports to US Increase 
South African exports to the US under the African Growth and Opportunity Act (AGOA) jumped 45% last year, according to a new US administration report on the preferential trade access programme. This shows that South African exporters are beginning to take real advantage of the AGOA programme, which offers tariff-free and quota-free access for thousands of products from South Africa and dozens of other African countries into the US market. "South Africa increased its total AGOA exports from $923m in 2001 to 1,3bn in 2002, a 45% increase," according to the report, which was compiled by US Trade Representative Robert Zoellick. "AGOA exports constitute 32% of total South African exports to the US." The Americans said that the automotive sector "continued to lead the pack" in exports. BMW SA is the most successful exporter to the US under AGOA, with the tariff savings under the US programme enabling it to sell its cars from South Africa more cheaply into the US market. The export of South African transportation equipment to the US rose by 81% to 544m last year. Exports of South African apparel and textiles trebled, while exports of agricultural goods rose by more than half. South Africa outperformed the African average, which saw an increase in exports under AGOA of just 10% to 10.2bn. 38 sub-Saharan African countries are eligible for AGOA, with 19 eligible to receive AGOA's textile and apparel benefits. The report also notes that the US is sub-Saharan Africa's largest single-country export market, accounting for 26% of all exports from the region in 2001. The report went on to say: "The US imported $9bn in merchandise duty-free under AGOA last year, a 10% increase from 2001 despite the general decline in imports from the region and the overall decline in global trade." The document also noted that negotiations were under way on establishing a free trade area between the US and the Southern African Customs Union and said such an agreement "will complement the administration's continued efforts to advance its trade policy in the region".

US Presidential Visit Expected in July
US President George Bush is expected to finally make his long-postponed visit to South Africa and three other African countries in July. If Bush's African tour, from July 7 to 15, materialises, it will coincide with the second African Union (AU) summit, to be held in Mozambique from July 4 to 12, where the continent's security policy, as well as the implementation of a peer review programme under the New Partnership for Africa's Development (NEPAD), will be high on the agenda. While he is expected to bring pledges of support for NEPAD, Bush is also likely to raise concerns about some African states accused of violating human rights, such as Zimbabwe. Bush will also want to know how the AU plans to persuade these countries to embrace the rule of law and democracy. The official line on the US presidential visit to Africa is that it is aimed at strengthening diplomatic relations and showing solidarity with the continent's renaissance spirit as embodied by the New Partnership for Africa's Development (NEPAD). However, some analysts suspect that there is more to President George Bush's trip than meets the eye. They argue that Bush is reaching out to Africa in a desperate search for alternative oil suppliers for his country. The US embassy in Pretoria insists that the visit, if it happens, will be a follow up to the Bush administration's increased emphasis on its Africa policy, which has opened up US markets for the benefit of developing countries and committed R120bn to fighting HIV/AIDS in Africa and the Caribbean over five years. But Catholic Relief Services (CRS), a think tank based in Baltimore in the US, warned that American interest in Africa was not only charitable. Their report titled Bottom of the Barrel, released June 17 revealed the fact that Africa was swiftly becoming a key supplier of oil to the US, which already imports 17% of its oil from sub- Saharan Africa. Within the next decade nearly a quarter of the supply will come from the region. The report was written by Ian Gary (CRS's strategic issues advisor for Africa) and Terry Lynn Karl (Stanford University professor of political science). Sub-Saharan Africa is in the midst of an oil boom and foreign energy companies are pouring billions of dollars into the region for the exploration and production of petroleum. Oil production will double and more than $50bn (the largest investment in African history) will be spent on its oil fields by the end of the decade.

US blocks military aid to South Africa
The US has suspended military aid to South Africa worth US$1m, according to the South African news agency, Sapa. This follows a decision by the South African Government not to grant Americans immunity from prosecution by the International Criminal Court (ICC) in The Hague. Other African countries affected include Niger, Mali and Benin. Under a US law passed last year, military aid will be cut off from any state, which failed to exempt American soldiers from ICC prosecution by 1 July 2003. The Bush administration is opposed to the new United Nations institution because it fears US personnel could be targeted for political reasons. The United States has suspended over $47m in military aid to 35 countries around the world. But Mr Bush could grant waivers if it is in the national interest. The US gives South Africa about $1m in military aid annually, according to the Pretoria-based South African Institute of Security Studies (SAISS). "The decision is insignificant; it is nothing to worry about," said Henry Boshoss of the SAISS. The announcement by the US State Department in Washington comes exactly a week before President George Bush's visit to South Africa. President Bush, accompanied by his Secretary of State Colin Powell, is due to arrive in South Africa on 8 July for a two-day visit.

Currency - Merrill LynchTips Stronger Rand
Merrill Lynch economists estimate that the rand is undervalued at current levels and could improve to R7 to the dollar by the end of the year as a number of factors could play in the rand's favour. This view is counter to market consensus that the rand's appreciation this year was overdone and that it was set to weaken by the end of the year to about R8.70 to the dollar. Merrill Lynch economists Nazmeera Moola and Jos Gerson estimated fair value for the rand was between R6.50 and R7 to the dollar, based on their purchasing power parity model. High domestic interest rates compared to historically low interest rates in the US, Europe and other developed countries were cited as one of the main reasons for the rand's rapid appreciation since the second half of last year. This argument goes that the wide interest rate differential makes South African bond as well as money market investments attractive to foreign investors looking for high yields.

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AUTOMOBILES

Strong Rand Helps Toyota's Profit


Toyota SA is profitable again, thanks to the strong rand, according to the company's non-executive chairman Elisabeth Bradley. This was revealed in the latest annual report of Wesco, the Wessels family's listed investment vehicle, which holds 25% of Toyota SA. Bradley is executive chairman of Wesco, which has a 40,05% stake in vehicle component firm Metair on top of its holding in Toyota SA. Bradley explained that Wesco had changed its year end to March to fall in line with the reporting cycle of Toyota of Japan, which now holds 75% of Toyota SA, following a R1bn deal in November last year. Therefore, the Wesco annual report contains data for the 15 months to March. She said that as Toyota SA was a big importer, the strong rand had helped to restore its profitability. The prospects for Toyota SA were improving with the return to profitability "but acceptable return on our investment is still in the future".

Scania Expansion Through Africa

Swedish truck and bus manufacturer Scania's local subsidiary has made significant new investments in South Africa with the opening of a new head-office complex and assembly plant at Aeroton, west of Johannesburg. The company has also opened new branch offices and service centres on the East Rand and in Richards Bay in KwaZulu-Natal. Scania SA MD Ulf Grevesmühl says the moves are aimed at expanding Scania's heavy-duty truck and bus operations and to co-ordinate its sales, service and technical support activities in southern Africa. Scania now has the capacity to more than double its output of trucks and buses in South Africa, he says. The investments come after one of Scania SA's most successful trading years. Last year it substantially increased its share of the South African market, and became the country's top exporter of heavy duty trucks and buses, says Grevesmühl.

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AVIATION

SAA R5bn Paper Loss

SA Airways (SAA) is due to announce currency-related losses of up to R5bn for 2002-03, the result of recent rand strength, which has harmed the national carrier's balance sheet. SAA's currency-related losses will come as a blow to the airline, given that it is expected to post strong growth in revenue and operating profit for the year ended March 31 2003. In the year ended 2001-02, when the rand was trading at about R10 to R11 to the dollar, SAA made a R2.5bn gain from derivative instruments, which benefited the balance sheet. By the end of the following financial year, the rand was trading at about R7 to R8 to the dollar, which resulted in a R5bn reversal. SAA's revenue is likely to rise to more than R17bn from R14bn. This is in line with greater demand for SAA's services amid growing passenger numbers both locally and internationally while the airline has focused strongly on cutting costs and driving service improvements.

SAA Closes R2.bn Tender for Jet Engines

SA Airways (SAA) closed the tender for a R2.8bn contract to supply the carrier with engines for its new single-aisle Airbus A319 and A320 fleet this week. The contract will create a new wave of investment in South Africa because the winning bidder will be required to reinvest about 30% of the net value of the contract into local projects, in line with government's industrial participation policy. SAA confirmed that it had received tenders from CFM International and from International Aero Engines (IAE). The carrier ordered 11 Airbus A319 and 15 Airbus A320 aircraft last year for its fleet modernisation programme, but SAA reserved the right to select the engines for the aircraft. SAA says it will now analyse the tenders and negotiate with the two companies around issues such as price and guarantees. The carrier is expected to announce the winner in mid- August, and offset investment is expected to follow soon after. Delivery of the engines will be made between 2005 and 2011. IAE believes it stands a good chance of winning the contract. The consortium says that over the past five years more than 55% of the Airbus A320 customers selected the IAE's engines to power their aircraft. The consortium, which includes Rolls-Royce, UTC Pratt & Whitney, Japanese JAEC and DaimlerChrysler's MTU, says its shareholders already have "excellent" industrial relationships with South Africa in a variety of industries. CFM has provided SAA with the engines for its Boeing 737800s and the A340-300. The company is a joint venture between General Electric of the US and French engine maker Snecma.

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BANKING

South African return planned by Standard Chartered

Standard Chartered, the emerging markets bank plans to return to South Africa for the first time since it pulled out of the country in 1987 during the apartheid era, reports the Financial Times.
The London-listed bank also said that it was carrying out a feasibility study that could lead to it opening its first branch in Afghanistan.
StanChart has already applied for a banking licence in South Africa, which it hopes to get approved by the end of June.
About US$30m (£18.6m) has been earmarked by the bank for its expansion in South Africa.
Peter Sullivan, chief executive of Africa operations, said StanChart wants to open a branch in Johannesburg for corporate and institutional clients.
It only has a representative office int eh republic but wants to be abloe to take advantage of increasing trade between South African companies and countries in Africa and Asia.
"We have seen good levels of growth in South Africa and trade between African companies and the Far East is increasing," Mr Sullivan said.
However, he said StanChart only planned to "dip a toe into the water" in South Africa because the market is "not easy" and is already dominated by four large banks.
"Buying a bank there in the near future is not likely to happen for us," he added.
Standard Chartered's connection with South Africa dates back to 1862 when Standard Bank of British South Africa was founded.
The bank merged with Chartered Bank of India, Australia and China in 1969, forming Standard Chartered.
However, in 1987, StanChart severed connections with South Africa when it sold its 39% stake in Standard bank Investment Corporation.
At the time, StanChart said the sale was intended to rebuild its capital position, although apartheid pressures are thought to have played a part.
The bank's exit in 1987 was among the largest divestments made by a company leaving South Africa.
Standard Chartered is in 50 countries but has never had a presence in Afghanistan.
It is undertaking a feasibility study on whether it should open a branch that might be used by charities and agencies involved in reconstruction of the country.
A senior bank executive has visited Afghanistan recently.
Africa is becoming an important part of StanChart and in 2002 the continent contributed 8% of the group's pre-tax profit - despite problems in Zimbabwe.
In the past few years StanChart has entered new African markets including Nigeria in 1999 and Côte d'Ivoire in 2000.
Later this year it will spend US$10m increasing its presence in Nigeria where it has three branches.
It plans to open new branches in Ikeja, Apapa and Lagos within the next 18 months.
"Given our knowledge of the country, we see clear opportunities in Nigeria, particularly in consumer banking," Mr Sullivan said.
Razia Khan, the bank's chief economist for Africa, said many African economies were now primed for growth.
She said investors searching for yield were recognising the benefits of investing in Africa - which, unlike some Asian economies, is not suffering from deflation.

Banks Agree On MGX Refinancing

The consortium of banks that have been negotiating with MGX around restructuring its debt have agreed to a refinancing plan, the moneyweb website reported.
This comes in the wake of the resignation of Peter Flack and Lindsay Robertson, the two FRM Strategies principals that had been working on a turnaround at the company since late November last year. They resigned on when their contract expired recently over a disagreement with the banks - Flack wanted the banks to convert a portion of the debt into equity, the banks said they would not.
Philip Cullingworth of lead banker in the consortium Citibank said it did not feel that a conversion of debt into equity was the only approach, considering the dilution of shareholders. He said the consortium had worked in good faith with Flack right up to his resignation, but that it also had a constructive relationship with the residual board and this was working well.
Flack said some months ago that the two options for MGX were its liquidation or a refinancing. Cullingworth says it has always been the intention of the consortium to allow MGX to continue as a going concern as it sees value in the underlying businesses, for example the leader in document management, Metrofile.
MGX's board met to discuss the way forward and released a SENS announcement on their plans.
The refinancing that has been agreed with the banks, involves firstly an extension of the R100m term loan that should have expired recently until 31 October.
Then, the bankers will convert R210m of the debt into "a range of redeemable convertible instruments", that will be issued by an MGX subsidiary. A further R118m will be converted into similar instruments, but issued to MGX. The remaining R120m in debt will be assumed by the jewel in MGX's crown, Metrofile.
Cullingworth said this route was very positive for all stakeholders. The company will not be required to service the interest unless it has the cash flow to do so. On the R120m being assumed by Metrofile, he said this had been considered a sustainable level for the company.
MGX group has not appointed a new CEO, but has appointed Christopher Seabrooke to act as the non-executive chairman. He will work with the executive directors to manage the company until a CEO is appointed "if it is deemed necessary by the board of directors".
On FRM, MGX said in its announcement that the group had been appointed "to assist the company with the formulation of and implementation of a recovery plan", but the contract had expired and could not be renewed.
Both MGX and Citibank have been invited to be interviewed on Classic Business this evening.

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FINANCIAL NEWS

Rand Will Depreciate, Says Merrill Lynch Survey

The consensus among SA fund managers is that the rand has run out of steam, according to a Merrill Lynch survey, Business Day reported.
The survey showed that not one of the 15 managers surveyed expected the rand to appreciate over the next 12 months, forecasting a rate of R8,69 to the dollar 12% off the current spot rate of R7,78.
Over the same period, managers revealed themselves as equity bulls and cash bears, with most considering the equity sector to be undervalued. For the first time since early 2001, they were underweight cash, and few indicated a desire to invest their cash now.
This position was partially supported by one-year equity and bond returns, which stood at 19% and 8% respectively.
"After the recent rally, managers seem reluctant to chase the equity market right now," the report said. "Our near-term composite indicator has recently hit sell territory and confirms this concern."
This seemed to indicate that while fund managers believed there was value to be had in equity markets, they were not yet ready to take a punt on where that value might be. This echoed world trends where, despite modest signs that confidence was returning to the market, fund managers were hesitant to return to equities until there was a decisive upturn in the world economy.
David Bowers, chief investment strategist at Merrill Lynch, said: "Before fund managers end their love affair with bonds and switch into equities, they need to see much more compelling evidence for an upswing in the world economy."
Merrill Lynch research indicates that local managers do not want to make big-sector bets and are nearterm buyers in the mineral extractors and consumer goods sectors, while selling bank stocks and, for the first time since the surveys inception, technology, media and telecommunication stocks. However, on a 12-month view, the favourite sectors are banks, beverages and retailers while household, assurers, gold and the information technology sectors have few friends.

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MINING

Impala Platinum to Invest R9bn

Impala Platinum anticipates investing R9bn over the next decade on capital expenditure at its Rustenburg mine to maintain output at 1-million ounces of platinum a year. Corporate affairs director Cathie Markus said June 16 the group recognised that mining deeper would need a new vertical shaft. The move would maintain production levels for the rest of the mine's 30-year lifespan. The company had delayed sinking a new shaft by sinking several new declines below the existing shafts, but this option was now reaching its limits. The capital expenditure programme involved constructing a R6bn shaft system, now in the advanced planning stage and expected to be finished by 2011. Markus also said another R1.5bn had been earmarked for the development of No20 shaft, due to start production in 2008, while the remaining expenditure would be dedicated to current mining projects. Markus did not expect the capital expenditure programme to create new jobs directly, as the project was not an expansion, but there was a possibility that new jobs might be created in industries that supplied Impala.

SABMiller China Investment

SABMiller has announced the acquisition of a 29.6% stake in Chinese brewer, Harbin, for about $87m or roughly R650m. SABMiller has bought the stake from the China Enterprise Development Fund (CEDF) and will replace it as the largest shareholder in Harbin. A Strategic Investor Agreement will also allow SABMiller to appoint at least two directors to the eleven-member board of Harbin, and will "provide the framework for the sharing of best practices and the transfer of relevant expertise". The acquisition intensifies the battle to become top foreign brewer in the world's biggest beer market, with AnheuserBusch, the world's biggest brewer, also taking shares in a big Chinese brewer this week. China is among the world's fastest-growing beer markets, with consumption increasing at more than 6% a year. A new subsidiary of SABMiller, called Gardwell will be created to house the stake. Some of Harbin's existing management team will acquire a 5% stake in Gardwell, and synergies will be sought for the sales, distribution and procurement areas of the businesses. Since entering the Chinese market in 1994 through its joint venture with China Resources Breweries, SABMiller has substantially extended its reach, and now operates 30 breweries in 9 provinces in China and is one of the few foreign brewers to operate profitably in China. The deal with Harbin has, however, been done outside of the CRB joint venture. Harbin, which boasts the oldest beer brand in China, is listed on the Hong Kong stock exchange and is China's fourth largest brewer. The company has followed its own acquisition trail over the past year, buying three breweries in 2002 to push its sales volumes to approximately 10.4 million hectoliters. Graham Mackay, Chief Executive of SABMiller said the transaction represents another step in "SABMiller's strategy in China of focusing on local brands to build regional leadership". The deal follows the acquisition by SABMiller of Italian brewer, Birra Peroni earlier this year, and the merger with US-based Miller Brewing at the end of 2002. It would appear that the growth plans at SABMiller remain firmly in place, with chief executive of the group, Graham McKay telling shareholders in the group's latest annual report that international expansion remains high on the priority list.
Distell Liquor Wins Court Battle Against UK Based Diageo Liquor
South African liquor producer and distributor Distell has won a court battle against UK-based liquor producer Diageo to continue producing and distributing Gordon's Dry Gin in southern Africa. The Pretoria High Court decision brings to an end a court case that began in 2001 when Diageo's local representative, Guinness UDV, gave notice of its intention to terminate its 27-year-old agreement with Distell to produce, distribute and market Gordon's locally. In terms of revenue, Diageo is the largest producer and distributor of liquor in the world. Distell corporate affairs director André Steyn said June 30 that the group welcomed the latest judgment, which followed on the "successful" conclusion of the Distell merger case at the Competition Tribunal. The tribunal recently ordered Distell to relinquish control of two of its key brands in the SA proprietary spirits market the Martell and KWV brands. The decision was aimed at eliminating the potential monopoly by Distell in the proprietary spirits market after Stellenbosch Farmers Winery and Distillers merged to form Distell.
South African Natural Gas Reserve
A US oil firm exploring off South Africa's west coast has given an upbeat estimation of the size of natural gas reserves, saying they are more than enough to sustain a major gas industry. Forrest Oil, which is in partnership with Petro SA and has discovered gas in the offshore Ibhubesi field, north of Saldanha Bay, estimates the reserves at 13-trillion cubic feet. This is about half Britain's total North Sea gas reserves and a considerably bigger find than any other discovery off the South African coast. In its just-released regional gas development plan, Forrest said the gas was difficult to extract and there was not yet a market for it in Western Cape. But Forrest remained confident that it would be viable. The Forrest Oil development plan for the next seven years calls for three large combined-cycle gas turbine power stations, a new gasto-liquid fuel plant at Saldanha Bay, and hundreds of kilometres of undersea and overland pipelines to convey gas to the southern Cape where it would supply the Mossgas plant and even Port Elizabeth for industrial purposes. Power stations one at Saldanha, a large one in Cape Town and a third at Mossel Bay would be an essential part of the customer base and Eskom would be a key player in the development plan.
Bytes acquires Xerox Subsidiary
Bytes Technology has completed its R235m move to acquire the 50% of its Xerox SA subsidiary that was held by US based Xerox Corporation. Xerox SA will now trade as a wholly owned subsidiary of Bytes after the deal went through on approval by the Competition Commission, the Reserve Bank and Bytes shareholders. Bytes should not take many years to recoup its cash, as it will now retain all the profits it previously had to split 50-50 with its US partner. In the past financial year Xerox SA enjoyed revenue of R951m and profit of R106m, of which R53m went overseas. In the coming year the division's MD, Rob Abraham, aims to turn over R1bn with a related rise in profits. The operation will be re-branded Bytes Document Solutions after initial plans to trade as Xeratech were scrapped following negative feedback from the staff. "The name Xeratech went away because our staff wanted to be more aligned with the Bytes group," said Abraham. The division will continue as sole distributor of Xerox products in South Africa and neighbouring countries under an exclusive 10-year contract. "Our South African customers will continue to have access to the latest Xerox products as and when they are launched internationally. They will experience the same levels of service that they have come to enjoy over the past 39 years," said Abraham. Xerox sold its stake in the joint venture after a tightening of corporate governance in the US in the wake of accounting scandals. Xerox itself was found guilty of improperly booking at least 3bn in revenue, and possibly closer to 6bn, over a four-year period, and was fined $10m by the Securities and Exchange Commission. That prompted Xerox to relinquish its direct ownership in offshore operations as its lack of management control meant it could not vouch for their figures.

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TOURISM

Western Cape And Cape Town Consolidate Marketing Drive

A new Western Cape tourism marketing organisation that will merge the efforts of the province and the city of Cape Town will get a boost with the signing of a memorandum of understanding, following a briefing to the tourism industry, Business Day reported recently.
The process will see Cape Town's tourism organisation and that of the province housed under the umbrella of a Section 21 company, provisionally called the Destination Marketing Organisation (DMO), from July 1 until a final body is formed by next April, says Dirk Joubert of consulting firm ODA.
The main aim is to market Cape Town and the province as a single destination brand.
Criticism about a lack of private sector involvement and the haste with which consolidation is being pushed through has emerged.
According to Joubert, the first phase of the project "was politically initiated", but he claims the process has subsequently become more inclusive after extensive consultation with the private sector.
"The proposals are generally acceptable. Obviously there are some details that need to be thrashed out, but it shows the government is serious about this government-led private sector initiative," he says.
Joubert says, in the meantime, the process of amalgamation will continue with the city's component to be reorganised by October, and the new provincial legislation, repealing existing legislation, to be in place, at the earliest, by the end of the year.
A DMO board will be set up by July 1 and the appointment of a CEO, in a transparent process, will complete the structure of the new organisation.
Joubert says the bulk of the staff in existing positions will be accommodated in the new structure while some incumbents, in more senior positions, might have to re-apply for new positions
Anton Groenewald, head of tourism and major events for Cape Town, says the memorandum of understanding will bind the council and the province. "Our aim is to stabilise some of the institutions as quickly as possible so that we have a three-to-five year programme in place that is devoid of political interference," says Groenewald.
He says the process has been driven by market information "by what the customers need and what our audience is saying about us".
"The political mandate will remain the same regardless of who is at the helm."
Carol Nhlumayo, chief director of tourism in the province, said the process was a strategy that extended beyond politics and was in the best interests of the province and of all involved.

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