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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: 16 - (08/05/03)

Mbeki, Obasanjo in Zimbabwe Talks
President Thabo Mbeki and his Nigerian counterpart, Olusegun Obasanjo, arrived in Harare for crucial talks with President Robert Mugabe May 5th, intended to seek a solution to Zimbabwe's economic and political crisis. The African leaders' meeting with Mr Mugabe is part of a collective to assist the people of Zimbabwe to find national reconciliation. Zimbabwe has been in the mire since its presidential elections last year that saw Mr Mugabe getting a landslide victory. However, the opposition Movement for Democratic Change (MDC) has since cried foul after allegations of vote rigging and intimidation emerged. The crisis has worsened as Zimbabwe is experiencing the biggest fuel and food shortages in years. President Mbeki also met with Morgan Tsvangirai, MDC leader, to try and foster dialogue between Zanu-PF and the MDC counterparts. The visit comes amid deep suspicion among the upper echelons of President Robert Mugabe's ruling Zanu (PF) party and opposition leader Morgan Tsvangirai's Movement for Democratic Change (MDC). Mbeki's office has denied that an exit plan for Mugabe is on the agenda, and has stressed that the visit is to try to re-establish negotiations between Zanu (PF) and the official opposition. It is also reported that the US Secretary of State for Africa, Walter Kansteiner, would visit southern Africa in an attempt "to increase regional pressure for a regime change in Zimbabwe overseen by a transitional government leading to fresh internationally supervised elections. Democratic Alliance leader Tony Leon said: "There is no doubt that the crisis in Zimbabwe has become a test of credibility of SADC and the new African Union.

Winnie Mandela Fraud Conviction
Winnie Madikizela-Mandela was found guilty on 43 counts of fraud and 25 of theft on April 24th. Her broker was convicted on 58 counts of fraud and 25 of theft. The accused were found guilty of "fraudulently obtaining loans of over US$120 000 in the bogus names of African National Congress (ANC) members". Though Madikizela-Mandela remains popular among the poor, her reputation has been tarnished by a series of legal problems. The most serious was her conviction in 1991 of kidnapping and being an accessory to assault in connection with the death of Stompie Seipei, 14, a township activist. Her six-year jail sentence was reduced to a fine on appeal. On being sentenced on April 25th, Madikizela-Mandela immediately resigned from parliament and from her post as the head of the Women's League of the ruling African National Congress. Facing a jail sentence of at least eight months, but still confident her innocence will be proved, Magistrate, Peet Johnson, sentenced her to five years' imprisonment, of which one was suspended. The reactions to this sentence both inside and outside of South Africa have been as polarised as people's attitude towards her life and struggles. To her critics and political opponents, this sentence is a clear-cut case of "commit the crime, serve the time". And they hoped that she would be finally buried politically. However, the trials and tribulations of Winnie have not always been about the finer points of the law, but bitter political and ideological struggles about the past, the present and the future of South Africa and the interface of gender and popular struggles. In polite circles of government, diplomats and pro-establishment forces in South Africa, in Africa and outside, it is no longer politically correct to talk positively about Winnie. But among many activists she remains an icon. The more she is persecuted the higher her status. Whether in prison or out of the ANC, Winnie will remain a formidable force to be reckoned with. And for as long as there is a general perception that it is not yet 'uhuru' (freedom) for the majority of the black people of South Africa, she will remain the populist voice of the voiceless that keep the liberation goals on the agenda. She may be down, but definitely she is not out.

South Africa and Australia Challenge to EU Law
South Africa is backing an Australian challenge to new European Union (EU) food labelling laws, which could restrict the right of other countries to produce a range of food products under traditional names. The battle is similar to the one fought and lost by South Africa against the EU over the labelling of wines and spirits, and which led to South Africa surrendering the right to use names such as port, sherry, grappa and ouzo. Australian Trade Minister, Mark Vaile, recently announced that Australia would challenge the EU over rules that prevent the use of certain descriptions for foodstuffs and agricultural products. Australia is concerned at the scope of the EU legislation, which covers the registration and protection of geographical indications on products such as cheese, beer, processed meat, fruit and cork. Indications identify a product as coming from a specific geographical area, and the effect of the EU system could be to prevent South Africa from producing its own feta or parmesan cheese, and could outlaw the use of a range of other names on other food products. Vaile said that the EU approach was inconsistent with current World Trade Organisation (WTO) rules prohibiting discriminatory treatment, and also does not give proper protection to trademarks that may have a reference to a geographical area as part of a trademark.

Unemployment
South Africa has suffered yet another blow in its fight against unemployment thanks to the rampant rand, high interest rates and a weak global economy. The Purchasing Managers Index dropped to its lowest levels since September 1999 continuing a sharp decline in manufacturing activity that began in March. The Index, compiled by the Bureau of Economic Research, dropped to its lowest levels since September 1999 continuing a sharp decline in manufacturing activity that began in March. This month saw a reversal in the uptrend that began two years in the employment (sub) index. It plunged 5.2 points to 42.9. "Manufacturers are probably being forced to go beyond just merely holding back on employing new workers, to actually retrenching staff to cut costs in the face of weaker sales and pressure on export margins," says Investec Asset Managers' André Roux. The decline in the employment index comes only days after most mining houses, who are some of the biggest employers in the country, expressed concern over the strengthening currency. 

Pan-African Parliament 
President Thabo Mbeki has expressed hope that the proposed Pan-African Parliament will be able to flex its muscles when it starts operating. He was speaking during the opening of the fourth Pan-African Conference of Public Service Ministers on the Spier Wine Estate in Stellenbosch, May 4. When launched, the parliament will function as a consultative body to African Union (AU) members. However, it will not have any legislative powers for a five-year period until 2007 when it becomes a legislative assembly. The parliament is seen as one of the key steps to making the AU a continent-wide organisation with the powers to back up its ambitious goal to usher Africa into world influence via responsible governance and economic clout. At least 42 ministers are expected to attend the conference, including Directors-General of governments departments, and donor bodies such as the World Bank. Some of the discussions at the conference will focus on public sector reform and a review on donor support for this process on the Continent.

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ENVIRONMENT

Waste management firm looks to mining
 

Roshcon, a waste management and infrastructure company in the Eskom group, plans to boost its slimes-dam management and mine-waste contract business. 
The company recorded turnover of R441m last year and seeks to lift this to more than R510m this year, Business Day has reported. "We have gone through the whole process of commercialisation and have been profitable for a number of years," said Managing Director, Mark Cawood. 
Although the company's infrastructure development arm brings in most of the revenue through its electric infrastructure work, Cawood says the company is actively increasing its waste-management business. Sales this year should reach about R70m. 
The company has developed its industrial waste management; industrial, hazardous and household waste transport and the operation of landfill sites. 
Roshcon sees mining as a key growth area. It has coal-stockpiling contracts with Anglo Coal and Eyesizwe and mines, crushes and screens ferro- and silicamanganese slag for Samancor. 

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FINANCIAL NEWS

DBSA signs 80m euro infrastructure deal

The Development Bank of Southern Africa (DBSA) and the European Investment Bank (EIB) have signed a 14-year, €80-million infrastructure global loan deal to finance local government projects, reports Sapa. 
"This agreement is in line with the two institutions' drive to promote economic development, capacity building and poverty alleviation in South Africa through the financing of small and medium scale projects especially at local government level," the DBSA said.
The EIB had been a major strategic partner of the DBSA since 1995, with total loans already fully disbursed currently standing at about R2-billion. These loans had funded 171 multiple infrastructure projects at local authority level, the DBSA said. 

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MINERALS & METALS

Anglo American Corporation disposes of stake in Anglovall Mining

Anglo American Corporation has disposed of its entire 34.5% stake in fellow South African miner Anglovaal Mining to a consortium comprising African Rainbow Minerals Gold (ARMGold) and Harmony Gold for a cash consideration of R1.7 billion ($231 million) it announced May 2. ARMGold is South Africa's major listed black-controlled gold mining company and Harmony, the country's third largest gold miner, has some black ownership on its register. Avmin controls Assmang Ltd, with major iron ore resources in the Northern Cape, while Kumba is South Africa's biggest iron ore producer. Kumba is the world's fifth largest ion ore producer in the world and is the primary focus of Anglo's growing iron ore production ambitions. Anglo said the transaction is also linked to its commitment in December 2002 to a substantial black economic empowerment initiative involving iron ore. Anglo chief executive Tony Trahar said: "Should Anglo receive Competition Tribunal approval in respect of Kumba, Anglo will have secured a significant shareholding in Kumba whose major business is in the iron ore sector." "Anglo American will continue to discuss with the South African government and other interested parties the opportunities to further develop South Africa's iron ore potential so as to create a globally competitive iron ore mining industry in the Northern Cape." The merger agreement between African Rainbow Minerals Gold (ARMgold) and Harmony Gold is still subject to several conditions, but it is highly likely the two companies will become one under a new Harmony banner.

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TELECOMMUNICATIONS 

Bidders prepare to do battle

There are revived efforts to end Telkom's monopoly as five bidders prepare to do battle for a controlling stake in the second fixed line network. Five is not a huge number, but is considerably more than many people expected after the licensing process stumbled from one disaster to another. Now, at last, there is a real chance of finding a credible and skilled operator with the financial muscle to create a viable business. The tender closed only on April 30 and it is too early for any considered assessment of the bids. But there are serious names among them. The consortiums are bringing the support, if not the direct involvement, of operators including BT, Deutsche Telecom, Telenor, Telia and China Telecom. Telkom's monopoly expired last May, and the initial plan was for its new rival to switch on its network that day. Eskom Enterprises and Transtel, which together hold 30% of the licence, invested R1.5bn in infrastructure to start work on day one. A year later, they still do not know who their majority partner will be. One major delay was that an initial call for bids attracted only two consortiums, Goldleaf and Optis, and both were dismissed as inadequate by the Independent Communications Authority of South Africa (Icasa).
Automobiles 
South Africa's automotive sector has seen phenomenal growth in recent years, with the value of exports doubling from R20bn to R40bn since 2000, according to new statistics published April 23 by the Automotive Industry Export Council. The statistics reflect the success of the export-promoting Motor Industry Development Programme (MIDP). The council's statistics show that vehicle sales shot up in value from R7.4bn in 2000 to R11.4bn in 2001 and R17.2bn last year. The automotive component sector, which is an even bigger earner of foreign currency for South Africa, saw a surge in exports from R12.6bn in 2000 to R18.6bn in 2001, with a slight slowdown in the pace of growth to a figure of R22.9bn last year. The head of the automotive manufacturers' association, Naamsa, Nico Vermeulen, said the surge in the value of exports in recent years had partly been because of increased volumes and partly a result of the weaker rand. He said that the momentum of export growth would be affected by the strengthening of the local currency in the second half of last year. A leading car industry executive has warned that the strong rand is threatening South Africa's competitiveness as a producer of vehicles for export. The warning came from the CE of Mazda, Lewis Booth, who is on a visit to South Africa to address a motor dealers' conference in May. The automotive industry is one of the recent success stories of South Africa both in terms of export success and in attracting foreign investment. If this industry were to suffer a reversal of its fortunes as a result of an uncompetitive currency, this could have a dramatic effect on the economy and on the balance of payments. BMW, DaimlerChrysler, Volkswagen and Toyota all have successful vehicle-export programmes, while Ford is exporting the RoCam engine. Ford and Nissan are considering further investment in vehicle production for the export market.

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TOURISM

Sharp rise in SA hotel investment

As part of the growing interest in South Africa's tourism and leisure industry, particularly on the part of offshore investors, Golding Hotel Investment Consultants (GHIC), part of Pam Golding Properties, South Africa's largest unlisted residential property group, has concluded deals in excess of R220 million for the financial year ended February 2003, the group said recently, Business Day has reported. This represents an increase of 76% over the previous year. 
At the same time, according to GHIC managing director, Joop Demes, a survey of 25 of the major hotel operators in the industry in the centres of Cape Town and Johannesburg reflected an average increase in revenue per available room of 25% to 35% for the 12-month period ended December 2002, compared with the previous year. 
This greatly increased traffic in the main centres is having a positive spill over effect into other areas such as the Cape Winelands, and the eco-tourism or game farming areas of Mpumalanga, as well as the Garden Route area. 
"While global instability is placing global hotel operators under tremendous pressure, the industry in South Africa is bucking this trend aggressively, further boosted by increased tourism and high-profile events such as the World Summit and Cricket World Cup," Demes said. "Delegates and visitors to two recent major international trade shows - the International Trade Show in Berlin and the World Trade Market in London - reconfirmed the huge interest in and popularity of South Africa as a tourist destination." 
Demes added that while it was still more cost-effective for foreign investors to buy an existing operation than to build, it was exciting to see a growing trend towards new buildings being constructed, which include two 5-star country boutique hotels in the Cape Winelands, a 5-star resort hotel soon to commence on the Garden Route, and a boutique niche hotel operation - a new concept popular in the US and Europe that was soon to be introduced in Cape Town by a UK investor. 
"An added attraction is the government's incentive for the hospitality industry of up to 30% rebate on capital expenditure for the construction of new buildings or the expansion of existing operations. This of course has further advantages in terms of creating employment and boosting the economy." 
He said that due to supply and demand Cape Town is attracting a large share of the greenfields projects, while Gauteng, being more a corporate market, is also enjoying significantly increased investment in the hospitality and leisure industry. 
As a result, and identifying a gap in the market, GHIC recently launched an office in Gauteng under Hennie Nasveld, who is also covering the Mpumalanga area. 
Recent transactions concluded by GHIC include: A boutique hotel operation in Cape Town CBD sold to an investor from the UK; A country hotel near the Kruger Park sold to a US investor; Country hotel on the Garden Route sold to a German investor; Sale and lease back of a large five star hotel in the Cape to an international listed hotel company; A new boutique hotel development on the Garden Route being launched by an investor from the US; Two new exclusive hotel operations to be launched on prestigious wine estates in the Cape Winelands; and A country hotel on the outskirts of Johannesburg sold to an investor from Cyprus. 
GHIC is also currently negotiating two further transactions regarding greenfields projects in Cape Town, while Demes says that in addition, two offers made in Johannesburg on behalf of foreign investors have been accepted by the vendor and are currently under due diligence. 
He added that foreign investors in the South African hospitality and leisure market incorporate mainly two different buyer profiles. 
First there was the emergence of owner/manager investors from the main countries which feed South Africa from a tourism point of view, typically the UK and Germany, who find their home markets overcrowded and are seeking a guest house or country hotel at an investment of between 4 and 5 million rand up to 20 million rand. 
Then there were corporate investors from America, the UK and further afield who are prepared to invest from 20 million rand upwards, he said. 

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