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SOUTH AFRICA


  
   

 

In-depth Business Intelligence

Key Economic Data 
 
  2002 2001 2000 Ranking(2002)
GDP
Millions of US $ 104,235 113,300 127,900 35
         
GNI per capita
 US $ 2,600 2,820 3,060 94
Ranking is given out of 208 nations - (data from the World Bank)

Books on South Africa

REPUBLICAN REFERENCE

Area (sq.km)
1,219,912

Population
43,586,097

Capital
Pretoria

Currency
rand

President
Thabo Mbeki

 

Update No: 34 - (02/11/04)

South Africa launched one of its biggest post-apartheid corruption cases October 11, opening a trial that could affect Deputy President Jacob Zuma's hopes for the presidency. Zuma's former financial adviser and associate Schabir Shaik faces charges of corruption and bribery linked to arms deals worth billions of dollars. The cabinet rallied around Zuma, saying it was satisfied by his recent public denials of corruption. Zuma, 62, long expected to take over from President Thabo Mbeki in 2009, dismisses the accusations against him as "baseless and untruthful The final charges allege that payments made to Zuma by Shaik totalling R1.2m were corruptly made as part of a continuing scheme to influence Zuma to use his office or position to advance Shaik's private business.
Reserve Bank Governor Tito Mboweni shrugged off high international oil prices affecting projected inflation October 14, by leaving the repo rate unchanged at 7.5 percent. This means the interest rate will also be unchanged at 11 percent. However, economists said the Bank's decision to keep rates static did not rule out further rate cuts if oil prices declined or the rand continued to strengthen. Economists are sharply divided over whether the 1.4% year-on-year increase in the producer price index in September, well below analysts' forecasts will be enough to persuade the Bank to cut interest rates again. High crude oil prices, which could translate into at least a 19c/l increase in the price of fuel in November, and booming consumer credit demand could persuade the committee to keep rates unchanged.
The mid-term budget reflected an economy gaining momentum, boosted by low inflation and interest rates, while adjusting adequately to the strong rand. Finance Minister Trevor Manuel reminded analysts October 26 that the treasury's economic growth forecasts scoffed at last year for being overly optimistic, have proved to be closer to reality than most market players had expected. The national treasury expects gross domestic product (GDP), which grew at a sluggish pace of only 1.9% in 2003, to rise 3.9% next year, 3.7% in 2006 and 4.2% in 2007. This is an average rate of about 4% a year for the next three years, putting South Africa on a higher growth path than the 2.8% achieved in the first 10 years of democracy. Manuel also reaffirmed that South Africa will continue to prioritise Africa's development by helping in nurturing economic growth, peacekeeping initiatives, expanding infrastructure and essential services throughout the region. He added that government was now on a sustainable path to stimulate growth and development in the region.
The announcement by global ratings agency Moody's Investors Services that it may boost South Africa's international credit rating has raised hopes of an improved rating from the other two big credit rating agencies, Fitch and Standard & Poor's (S&P). Moody's said October 14 that it had put South Africa's foreign currency rating of Baa2 on review for a possible upgrade, based on the country's higher forex reserve levels and stronger growth prospects. The announcement, which was seen as a vote of confidence in the economy, gave an immediate boost to the rand. 
Barclays Bank's bid to take control of Absa could be a success following President Mbeki's backing of the deal. Mbeki said the bid was an indication of Barclays' confidence in the future of South Africa. Finance workers union Sasbo has already given a thumbs-up to the deal should Barclays make an offer. Telkom is expecting to report a surge in earnings per share when it releases its latest interim results to the market in November. The group says in a trading statement that it is finalising its results for the six months to 30 September. It says it expects an increase of between 60% and 80% in basic earnings per share and between 50% and 70% in headline earnings per share for the period.
South Africa and its partners in the Southern African Customs Union (Sacu) will not conclude struggling negotiations for a free-trade deal with the US by the planned December deadline. This will throw South Africa's free-trade agenda off balance, delaying access to the massive US market and putting other planned trade negotiations in jeopardy. Sacu and US negotiators, aiming for a deal that would give local and US companies better access to each other's markets, ran into difficulties earlier this year. Negotiators last met in July and have cancelled two negotiating sessions that were intended to culminate with the signing of the free-trade deal in Washington. The delay could effect the start of negotiations with South Africa's other potential free trade partners such as India and China. 
President Mbeki's policy of quiet diplomacy towards Zimbabwe received an unexpected boost from Movement for Democratic Change (MDC) leader Morgan Tsvangirai October 28. In a turnaround, Tsvangirai welcomed the attempt by Mbeki to broker a settlement to end the crisis in his country. The MDC previously questioned Mbeki's impartiality as a mediator and the effectiveness of his strategy. Tsvangirai also wants to see polls postponed from March to June to allow for comprehensive reforms to be implemented in line with SADC rules. The possibility of delaying next year's parliamentary election in Zimbabwe was raised in talks with Mbeki during October. 

Nepad - Mbeki and Obasanjo Seek Expansion
President Mbeki with President Obasanjo of Nigeria and a number of African leaders, donor agencies and civil society groups met October 22 in Sandton to discuss possible new directions for the New Partnership for Africa's Development (Nepad). The meeting coincides with the three-year anniversary of the release of the Nepad document setting out broad goals for the continent's economic revival. It comes at a time when a growing number of academics and observers are asking whether the grand vision for Africa's future may have stalled. Nepad has gained strong oral backing from donors, and there have been pledges to increase aid to Africa, but some argue that tangible results have not been delivered. Having raised expectations about African development, Nepad is under mounting pressure to deliver. Probably coming under scrutiny at the meeting will be progress on cross-border and development-corridor projects, on which Nepad is meant to focus. While the programme may not have met popular expectations for project delivery, it has gained the enthusiastic support of donors and helped establish the new framework for peace and security on the continent. Adoption of the peer review mechanism by nearly 30 countries has boosted acceptance of Nepad's good governance principles. But some argue that while the continent now has the vision and institutions in the form of the African Union's (AU's) Peace and Security Council to address security and dispute-resolution matters, it has failed to halt massacres in Sudan's Darfur region, and to bring about a political settlement in Zimbabwe. There is uncertainty over the future of the Nepad Secretariat, whose head Wiseman Nkuhlu Mbeki's economic advise r is due to leave his post toward the end of the year. No successor has been named. Nepad is still being criticised by civil society groups, who complain they were not sufficiently consulted in the drafting of the original document that set out the programme. This meeting has the potential to gain a greater political buy-in from these groups. Mbeki and his Nigerian counterpart Olusegun Obasanjo will address the gathering, followed by heads of donor agencies including World Bank president James Wolfensohn.

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AUTOMOBILES

South Africa could make a million vehicles a year

The South African vehicle industry could be one of the top 10 producers in the world in as little as five years' time if it pushes production up to 1-million units a year, says BMW SA head Ian Robertson belies that with multiple shifts over a six-day week the country could be one of the top 10 manufacturers in world. Robertson, speaking at the Auto Africa 2004 car show October 27, said increasing production to 1-million units a year meant the parent companies of local manufacturers in Europe, Japan and the US would take investing here more seriously. In an industry valued at $1-trillion globally each year, SA produced only 0,6% of 50-million vehicles, but provided a good opportunity for the country to boost its economy and raise employment. Robertson said that while SA had made considerable progress in developing the industry over the past six years, it "could not stand still" as it would soon be competing against other developing countries for a piece of the global vehicle market. He said the country had an advantage as it had sophisticated vehicle manufacturing and customer bases, even as other developing countries were still trying to develop a motor industry. SA already had the capacity to make 1-million vehicles a year, as local manufacturers were on average only operating one shift with a little bit of overtime. If two-and-a half shifts were worked in a six-day week, the country could easily make 1-million vehicles a year, he said. Robertson said if vehicle sales grew 10% a year, SA would be making 1-million vehicles a year in eight years' time. If they grew 15%, this figure would be reached in only five years. Vehicle sales in the year to date are almost 20% ahead of the same period last year. Robertson said there was correlation between economic growth and vehicle sales. This relationship could be seen in the fact that this year's predicted sales of 460000 vehicles were set to break the record of about 410000 created in 1983. Growth in the black middle class is also expected to support growth in vehicle sales over the next few years. Robertson said the car industry should support empowerment, as black consumers were becoming a powerful force. Over the past three years, about 300000 blacks increased their monthly income to between R6000 and R12000. Meanwhile, Trade and Industry Minister Mandisi Mpahlwa made clear government's empowerment expectations for the industry at the opening of Auto Africa October 26. He said because many car and component makers were owned by multinational companies, they would not be forced to sell equity to empowerment companies. Foreign ownership had not exempted information and communication technology companies from that industry's empowerment charter. These companies, however, could apply for a certificate of non-compliance if they had a genuine reason not to conform to a demand they be about 25% black-owned. Mpahlwa said government regarded it as more advantageous to allow multinationals in certain parts of the motor industry to commit to their own black economic empowerment (BEE) initiatives, rather than to force them into a single approach through a charter. "We are open to negotiation with global companies who might elect to extend BEE ownership upstream or downstream, rather than ownership in the company itself," he said. In what appeared to be a veiled warning to motor vehicle companies to speed.

Daimlerchrysler R1bn plant

DaimlerChrysler South Africa is expected to spend more than R1 billion in preparation for the new Mercedes-Benz C-Class model to be built at the plant in East London. Speaking from the Auto Africa show in Johannesburg, DCSA chairperson Christoph Köpke said the new C-Class, dubbed model number W204, will go into production in 2007. He said the new model, which was confirmed for the plant here at the end of July this year, would be for domestic and export markets and would include left- and right-hand drive models. DCSA currently only produces cars for right-hand drive markets, which excludes it from many lucrative northern hemisphere export markets, particularly the United States. Producing both left- and right-hand drive models would allow DCSA to take advantage of the benefits provided by the US African Growth and Opportunity Act by exporting there - but Köpke would not say to which markets DCSA would be exporting the new model. He added that the current capacity at the DCSA plant here would be increased from 45,000 units a year to 80,000. "If production in East London reaches 80,000 units, it would lead to an additional 800 jobs at the plant." Köpke said that DCSA would also be encouraging between 10 and 14 new suppliers to establish manufacturing plants in South Africa. He said the investment by these suppliers in South Africa "would create 3,000 job opportunities at first-tier supplier level".

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ECONOMY

European firms give thumbs up to SA economy

European companies operating in South Africa have given the government and economy a vote of confidence but their concern about HIV/AIDS, Zimbabwe and labour productivity drew a sharp response from African National Congress (ANC) politicians. The Bilateral Chamber Consultative Committee an informal grouping of business chambers representing about 3000 foreign companies with more than R360bn in investments in SA conducted a survey among 252 of its member companies from May to June. The findings were presented to Parliament's trade and industry portfolio committee October 22. The seven European chambers that participated were from Germany, France, the UK, Italy, Sweden, the Netherlands and Finland. While the survey findings were positive in many areas, some ANC MPs, including committee chairman Ben Martins, latched on to the negative perceptions and expressed scepticism about its objectivity and the validity of the findings. Some MPs said that a survey about perceptions might not be reflective of the true state of affairs in SA if it was based on racist beliefs. The MPs also questioned the reasons for including questions about Zimbabwe, which they said was no different to any other African country. Of the companies that responded, 59% said developments in Zimbabwe had affected their businesses, while 79% rated government's HIV/AIDS policy as "bad to very bad". The British Chamber of Business in Southern Africa's parliamentary representative, Patrick McLaughlin, pointed out that for many companies Zimbabwe was an important trading issue and was perceived to have damaged the business environment.

South Africa tops Botswana in competitiveness

South Africa become Africa's most competitive country, taking the mantle from its neighbour Botswana, a global competitiveness report released by the World Economic Forum (WEF) says. This competitiveness index measures whether countries have the right systems in place to produce economic growth over the long term and the WEF said SA was moving in the right direction in its bid to push growth to 5%. The glowing report on SA saw it moving one place up from a global position of 42 to 41 out of 104 countries analysed while Botswana slid from 35 to 45. But the WEF expressed concern that the stronger rand was tarnishing what would have been an even better performance. Last year the rand gained 23% against the dollar and the WEF report appears to provide proof that the rand's gains had knocked the country's competitiveness. It also slammed SA for its inflexibility on labour, and said that high crime levels and the effect of HIV/AIDS on business had also harmed SA' s performance. SA was hailed as a "bright exception" in an otherwise dismal showing from countries in sub-Saharan Africa. SA's rating is higher than countries such as Brazil, China and Italy but showed SA still had some way to go towards putting the basic macroeconomic fundamentals in place that pushed Finland, the US and Sweden to the top of the list. Importantly, SA was rated within the top quarter of all countries when it comes to business competitiveness ranking as the 25th best when it came to a microeconomic environment that allows companies to flourish. This trumped the likes of the United Arab Emirates, Spain and Chile. The rules surrounding doing business on the JSE Securities Exchange SA were the sixth best in the world, while SA's accounting and auditing standards also received a thumbs-up. Also, SA's transparency of government policy-making was 16th best in the world, while the country's soundness of banks was 21st in the world a finding that will be noted by Barclays as it sets about firming up its bid for Absa. WEF economist Jennifer Blanke said SA would have gained even more ground had its macroeconomic stability not pulled it back. "SA did gain ground in this year's survey, but was held back by the low savings rate and its macroeconomic environment." However, SA was almost stone-last when it came to the obstacles the country puts in place to prevent its companies hiring foreign labour.

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EXPORT 

Trade concessions for agriculture exporters

The European Community has agreed to grant tariff preferences on limited quantities of selected products to South Africa. The concession will enable certain South African exporters of specific agricultural produce to trade their goods throughout the European Community (EC) at reduced export duty levies. The new trade arrangement is a result of the Trade, Development and Co-operation Agreement (TDCA) between the EC and South Africa that was entered into on January 2000. This agreement provides for the establishment of a Free Trade Area between the two countries in accordance with the World Trade Organization (WTO) rules and the strengthening of European development assistance to South Africa. "The Department of Agriculture will be administering the EC agricultural quotas on behalf of government and therefore export permits will be issued for the accessing of quantities at reduced levels of duty," spokesperson Steve Galane explained in a statement. The selected products that can be exported at reduced levels are cheese, cut flowers, frozen strawberries, canned fruit (pears, apricots and peaches), frozen orange juice, pineapple juice, apple juice, sparkling wine and white and red wine. "Export permits will be issued only to registered exporters in South Africa for trade with specific European countries," added Mr Galane. Applications for export rights must be submitted to the department before 15 November 2004.

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FINANCIAL NEWS

Africa fails in bid for greater power

Developing countries have failed in their bid to win more voting power for Africa at the IMF and World Bank. African leaders visiting Washington for the two organisation's meetings argued they have too little say in the running of the institutions. Europe has 10 seats on the IMF and World Bank boards, but Africa, which receives almost half of all loans from the two bodies, has only two. "Political consensus" was the way forward, said IMF head Rodrigo de Rato. "A good deal of the operations of the fund and the bank are in Africa," said Malawi finance minister Goodall Gondwe. "If the fund and bank are going to be effective, they need to hear an African point of view." South African finance minister Trevor Manuel said altering the bank and fund's voting structure and board composition was "the most challenging of issues" for the lenders. Addressing the demands, IMF managing director Rodrigo de Rato acknowledged many were "disappointed by the lack of progress in deciding how to change quotas and voting rights of developing countries to reflect evolution of the world economy". "This is an important issue for the future of our institutions and membership should address it by continuing to seek a political consensus," he said. The African calls came after ministers from the Group of 24 (G24) developing countries made clear their dissatisfaction with the lack of progress in re-allocating IMF votes. The ministers voiced "strong disappointment and concern that, after two-and-a-half years, no progress has been made on the issues of increasing basic votes and revising the quotas of developing countries in the IMF". The G24 ministers said if World Bank President James Wolfensohn did not seek another five-year term, there should be "a transparent selection process (to choose a successor), with a view to attracting the best candidates regardless of nationality". By tradition, the top post in the World Bank is reserved for an American while the job of IMF managing director goes to a European. 

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FOREIGN TRADE 

Imports from Nigeria totalled R3.6 billion in 2002

South African imports from Nigeria totalled 3.6 billion rand in 2002, up from 1.6 billion rand in 2001 and 1.26 billion rand in 2000. Oil has been the main import. "South Africa and Nigeria are at the forefront of efforts to promote the continent's interests on the international political and economic stage," South African Deputy President Jacob Zuma said recently. In September he hosted Nigeria's Vice-President and a delegation in a commission meant to promote trade and bilateral relations between the two nations. Nigeria has investment potential in foodstuffs and beverages, spirits, vinegar, tobacco, wood and other fibrous pulp, paper, base metals, solid minerals extraction, infrastructure and oil and gas, Felix Ohiwerei, Chairman of the Nigeria Investment Promotion Commission, has said. Godwin Oboh, Group Managing Director of Union Bank of Nigeria, also speaking at the event said that Nigeria and South Africa are the two economic giants of the African continent. Oboh said the two countries "would lead the continent from its troubled past and install it as the stable home of business and prosperity." Together, Nigeria and South Africa account for more than two thirds of sub-Saharan Africa's economic output. "Nigeria has much to offer from minerals to vast farmlands for agricultural development. We have potential for lucrative tourist resorts and the MTN Nigeria investment has proved that there is cash to be made in Nigeria," Oboh said. Nigeria is blessed with a tropical climate and fertile soil. MTN Nigeria is a subsidiary of South Africa's MTN Group and is the leading cellular operator in Nigeria. Within three years its network subscriber base has risen to 2.5 million. Oboh said that a few hundred rogue individuals had tainted Nigeria with what is known as the 419, an e-mail based scam in which someone claiming to be in possession of immense wealth lures unsuspecting people to join them in business ventures before stealing their cash. Nigeria is determined to diversify its oil-reliant economy but it is facing some difficulties. It needs to convince the world that it can export more than just crude oil. From telecommunications to oil and gas, textiles to tourism and financial services, shoes and newspapers, Nigerian entrepreneurs are touring South Africa to showcase investment potential in sub-Saharan Africa's largest economy. Nigerians are saying that perceptions that Nigeria is deeply corrupt and has nothing more to export than oil has gravely hurt Nigeria and hampered its emergence to take its position alongside South Africa as one of the continent's leading economies.

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INDUSTRY 

R2.1b water project for Eastern Highveld area

Cabinet has approved the construction of a R2.1bn water project that will guarantee water supply for big energy companies and other urban and industrial users until 2030. The project will pump water from the Vaal Dam to link with existing water supply networks near Secunda in Mpumalanga, thus supplying Eskom's power generation, Sasol's synthetic fuel industry and other industrial users. The project is part of the Department of Water Affairs and Forestry's investment programme, outlined in the recently approved National Water Resource Strategy. The strategy is aimed at ensuring that economic infrastructure keeps up with the demands of the growing economy. The department said while hundreds of jobs would be created during the construction of the project, its most important impact would be "to sustain the tens of thousands of jobs in the region and to keep the wheels of the economy turning". Commenting on the proposed project, Water Affairs and Forestry Minister Buyelwa Sonjica said the Eastern Highveld of Mpumalanga was the energy hub of the country. "It is underlain by extensive coal reserves which fuel both Eskom's power stations and the huge Sasol oil from coal plants. These industries need absolutely reliable water supplies," said the Minister. She said the existing network needed to be expanded to support the planned growth of both industries. The Minister added that both Eskom and Sasol had indicated that large quantities of water were required within a short time to support the electricity generating, mining and related socio-economic developments in the Eastern Highveld area. "Growth projections in electricity demand have indicated that all power stations will soon be required to operate at full capacity. SASOL's water demand will also increase due to changes in process and increased production despite substantial improvement in water use efficiency. "The combined effect of these changes, together with increased demand from other domestic and industrial users, requires that additional bulk water supplies be brought to the area", she explained, adding that the best way to do that was to bring water from the Vaal Dam. Ms Sonjica said most of the money to be spent on the project would be recovered from Eskom, Sasol and other economic users, while the portion associated with municipal services would be funded by the Exchequer.

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INTERNATIONAL RELATIONS 

China and South Africa

China is both a tantalising opportunity and a terrifying threat to South Africa. A country of over a billion people with the fastest industrialising economy in the world, China is just the tonic that mineral-rich but economically stagnant South Africa needs, and the country's mining industry has risen to the challenge. Coming from nowhere a few years ago, Kumba Resources, South Africa's leading iron ore producer, today supplies eight million tons of iron ore to China's hungry steel industry, says Kumba chief executive Con Fauconnier. "China is a country on a solid growth path. Its government is coping well with managing its economy," said Fauconnier, speaking at the SA Institute of International Affairs recently on business opportunities in China. China has become a major importer of other minerals from South Africa, especially platinum and diamonds, which have captured the imagination of the high-living, free-spending emerging Chinese middle classes and the super-rich. But how then can China pose a threat to South Africa? A brief glance at unfolding trade relations between China and South Africa tells part of the story. Less than 10 years ago, China and Hong Kong were relatively minor exporters to South Africa, selling less to us than the rest of Africa. Today exports from China and Hong Kong to South Africa are double those from Africa, and almost double what we export to China. The story of South African trade with China is a replay of the old story of South Africa's trade relations with Europe. We sell them raw materials and they sell us manufactured goods with a predictable result - an unfavourable trade balance against South Africa. There is, however, a major difference between our trade relations with Europe and our trade relations with the emerging industrialising economies of Asia such as China, Thailand, Indonesia, Malaysia and India. Most of what the Europeans and Americans sell to us today - machine tools, aircraft, submarines, computers, movies, high-end luxury goods - we do not produce ourselves. The emerging Asian countries, on the other hand, sell us what we are capable of producing and are in fact already producing - textiles, clothing, footwear, household goods and the like. In other words, Asian countries compete against South Africa on its home ground, taking jobs away from South Africans. As suppliers of raw materials to the Asian countries, we do not compete with their industries, nor do we take jobs away from them. Of course we cannot blame the Asian countries for South Africa's inability to compete; the blame lies squarely with our economic policies, past and present. South Africa's industrialisation was based on the importation of foreign technology and capital, commonly referred to as foreign direct investment. This was how the country's mining industry developed; this was how our manufacturing and financial services industries developed. The problem with this model is that it functions smoothly only when there is a plentiful supply of minerals and other natural resources and when there is a plentiful, relatively cheap, low-skilled labour force outside the modern economy that can be drawn upon with relative ease. China and South Africa must co-operate in developing more and more of their own technology in, for example, the fields of machine tools, software, pharmaceuticals, research and development, and so on. This form of co-operation is a great deal more demanding, however, than a mere trading relationship and requires more effort than merely buying and selling. It will call for an even greater effort in the case of South Africa, whose education system, especially in the fields of mathematics and the physical sciences, leaves much to be desired.

South Africa and Iran 

The South African Government and the Islamic Republic of Iran signed a Memorandum of Understanding to co-operate on housing development and technology October 13. The agreement was signed at the conclusion of a four-day visit by an Iranian delegation hosted by Housing Minister Lindiwe Sisulu. Among other issues covered in the agreement, the Memorandum of Understanding covers the exchange of expertise between the two countries to assist with solving problems of increasing urbanisation and housing architectural practices. The two countries will explore possibilities for joint research in the fields of physical planning at national and regional level, urban design and Geographic Information Systems. Both governments also committed themselves to building centres and organisations for research in the two countries to exchange information and expertise in housing development. They also agreed to promote co-operation between companies in the building and construction sector, particularly in mass construction of housing and construction of low cost and appropriate prefabricated housing units. This could include opportunities for investment, the facilitation of specialized exhibitions or seminars on construction material and services, exchange information to tender possibilities and the development of networking opportunities between the private sectors in both countries. Iran has similar housing challenges and these are exacerbated by that country being prone to environmental hazards such as earthquakes. Thus, the Iranians are interested in how to build physically secure human settlements. To this end they will also be meeting the Centre for Scientific and Industrial Research tomorrow to discuss technology options that can be useful to them. To ensure the smooth implementation of the agreement, a joint working group for the general management of all projects undertaken in pursuant of the Memorandum of Understanding was established and will interact regularly reporting to both ministers in six-month intervals. The Iranian delegation was led by the Minister of Housing and Urban development, Ali Abdol-Ali-Zadeh accompanied by Deputy Minister of Housing and Managing Director of the National Housing and Land Agency, Ferydon Darvish Zadeh, Iranian Ambassador, Mohammadali Ghanezadeh and other senior officials.

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INSURANCE 

South Africa in top 10 emerging insurance markets

Africa's insurance growth potentials has taken a further leap going by the listing of South African among world's Top 10 Emerging Insurance Markets. In life insurance, the country cut 11% share of the premium volume and 3.8% of the non-life premium volume generated by the top markets. The report contained in Swiss Re's Sigma No 5/2004 also states that the ten markets account for more than two thirds (2/3) of premium generated in emerging markets. In the life market, the ten markets' portion of premiums generated in all emerging markets came to 87.1% or USD163.5billion. For the non-life business, their share of the market currently stands at 65.7% or USD80.7billion. South Africa's life premium volume totaled USD20.7billion while non-life premium position is USD4.6billion. South Africa accounts for about 82% of premiums generated in the continent as well as having the one of the highest insurance penetration in the world. This situation is greatly aided by its large and modern economy. However, the report shows that Asian markets generate most of the emerging market insurance premiums. South Korea tops the list followed by China. Other countries in the Asian domain that made the list include, Taiwan, Hong kong, Singapore and India. Some Latin American countries also following economic liberalisation policies of their governments are also seeing insurance expanding. Brazil and Mexico are the only two countries that made the list while reawakening Russia's share of emerging market's premium is increasing. Some of the factors said to be responsible for increasing insurance demand include in Asia particularly and other top emerging markets are economic growth, wealth; income distribution, risk awareness, insurance regulation, trust in insurance. Others are compulsory insurance, claims awards, public role in health and workers' compensation insurance. It is also believed that economic stability, savings rate, tax benefits as well as pension system are significant contributors to insurance growth in the emerging markets. However, this situation contrasts with what obtains with other emerging markets like Nigeria where insurance penetration is very low despite many years of crude oil export which analyst believe should have placed it among top emerging markets today. The report observed that motor insurance is the "dominant non-life business line in most emerging markets." This, it attributed to the compulsory insurance in third party motor liability in most countries. Besides motor, the Economic Research & Consulting unit of Swiss Re remarked that the "importance of accident and health insurance depends heavily on government's role in this line of business." But observers of Nigerian government reforms say that given effective implementation of compulsory provisions of Insurance Act 2003 and the pensions reform, insurance penetration in the country will greatly improve in the years ahead.

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LAND REFORM 

R13bn shortfall

The land affairs department has disposed of 537,000ha of state-owned land in the past 10 years, Land Affairs Minister Thoko Didiza said in her department's annual report, tabled in Parliament October 4. Didiza and her department are under increasing pressure to speed up the restitution and the redistribution elements of the land reform programme. Didiza said she remained convinced that using state land is the correct way to proceed with land reform. Despite the challenges, the department was confident that the restitution process would be completed as directed by Mbeki on December 31 2005. However, she then conceded October 19 that government would not be able to raise the R13bn needed to complete its programme of land restitution by 2006 as expected. The main aim of the land reform, which includes restitution and redistribution, is to ensure that 30% of farmland is in black hands by 2014, but only 3% of that land has been transferred to black owners so far. Land reform in SA has become an urgent priority for government to avoid forcible seizure and redistribution of land as it has occurred in Zimbabwe. Land rights groups, unions and political parties have warned the county will go the same route if land is not given back to landless blacks as speedily as possible. Realising that the current budget will not enable the land claims commission to meet the target, government is exploring other "creative" forms of raising the funds for the restitution programme, including obtaining external funding from international donor organisations and negotiating joint partnerships between claimants and owners of disputed farms. Addressing the media in Pretoria after the commercial agriculture working group meeting with President Thabo Mbeki, Didiza acknowledged that the cost was a huge stumbling block in achieving the target, and said Finance Minister Trevor Manuel was likely to raise the issue in next week's medium-term budget policy outlook. She said 56400 of the 79000 land claims had been finalised. Government had allocated an estimated R404.6bn for the 2005-06 financial year. The 56400 claims had already cost the department about R1bn. The problem, said Didiza, was that the remaining number of claims, although much smaller, was more costly and problematic because most were claims made in areas where there had been a lot of investment. " With the remaining claims the problem is that as government we have to pay for the land and the improvements made." AgriSA president Lourie Bosman said calls for the scrapping of the willing-seller, willing-buyer system were misinformed because even under the expropriation system, market value of the land had to be paid.

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MINERALS & METALS

Gold Fields asks court to block Harmony bid

Gold Fields' directors were summoned to a crisis board meeting October 18 as the company prepared to repel a hostile takeover bid by rival Harmony Gold . Harmony had officially launched an offer to acquire all of Gold Fields' shares in a deal worth R52.9bn October 18, swapping them for Harmony shares, an offer Gold Fields regards as "grossly inadequate". Under the Harmony offer, Gold Fields shareholders will get 1.275 Harmony shares for every Gold Fields share, which represents a 29% premium to the 30 business day volume-weighted average up to October 14. The fight continued when Gold Fields opened another front in its war to stave off a hostile takeover bid by rival Harmony October 27 this time bringing in the high court. It has already taken the issue to the Competition Tribunal and the Securities Regulation Panel, and advised its shareholders not to accept the offer. The mining house announced it was asking the high court to "declare the (Harmony Gold) offer to be unlawful and to interdict its implementation". Gold Fields argued that the bid was in breach of a criminal provision of the Companies Act. This was because Gold Fields' shareholders had been given notice of the Harmony offer through a circular. Gold Fields said it had received legal advice that "the offer does not comply with the provision of section 145 of the Companies Act of 1973, as amended, in that it was not accompanied by a registered prospectus and is, as such, unlawful and of no legal effect." Gold Fields spokesman Willy Jacobsz said: "It (Harmony) has created a deal which disenfranchises shareholders. "As custodians of our shareholders' rights, Gold Fields has a duty to expose and prosecute what we perceive as a criminal act," he said. Gold Fields may also be planning to bring forward the date of a meeting of its own shareholders to vote on the reverse listing of its non- Southern African Development Community assets into IAMGOLD of Canada which might be enough to torpedo the Harmony offer. Harmony has argued that the IAMGOLD deal, mooted before its offer, would destroy value for Gold Fields shareholders. Harmony executive Ferdi Dippenaar said Gold Fields' actions were "exactly what we had expected them to do. "It is definitely based on creating uncertainty , to influence the thinking of shareholders. From a Harmony perspective, we would argue that the Gold Fields shareholder will be better off under a Harmony environment."

Iscor to become part of new Mittal steel empire

Africa's largest steel maker, Ispat Iscor, will become part of the world number one steel producer after its controlling shareholder, LNM Group, announced October 25 that it would merge with its subsidiary, Ispat International. Ispat International's simultaneous $4,5bn acquisition of the US's International Steel Group helped catapult the former number two group to the top spot. The merged entity, Mittal Steel, with an estimated $30bn in annual revenues, will be listed on the New York Stock Exchange and Euronext Amsterdam. Analysts said this might mean Ispat Iscor would have to up the ante in terms of disclosure and transparency in line with strict New York Stock Exchange standards. Consumers have called on the local steel maker for some time to become more transparent, particularly in terms of its pricing. Ispat Iscor declined to comment on the prospects of increased disclosure. The company said the formation of Mittal Steel would not have a direct effect on Ispat Iscor.It would, however, enhance the local steel maker's ability to reach global markets in terms of competitive procurement, said spokesman Phaldie Kalam.
Analysts also speculated that the move could mean another name change for the former Iscor, which recently changed to Ispat Iscor when LNM Group took control. Lakshmi Mittal, the UK's fifth-richest person, will remain at the helm of the new Mittal Steel, where he will be chairman and CEO. His son, Aditya Mittal, will be president and group chief financial officer. Mittal Steel will be established through a reverse takeover of Ispat International by LNM. The merged group will have operations in 14 countries and 165,000 employees. Lakshmi Mittal said the move was a significant step forward in the globalisation of the steel industry. It was reported that the MD of UK-based steel industry analysis group Meps, Peter Fish, said the merger would increase the group's bargaining power and reduce costs. Ispat International yesterday reported record net income of $460m for the September quarter, compared with a net loss of $10m previously. Ispat Iscor last week reported a 347% jump in headline earnings for the same period.

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PETROCHEMICALS 

World Petroleum Congress in South Africa 2005

State-owned oil company PetroSA has managed to bring on board the national oil producers of Angola, Algeria, Libya and Nigeria to co-host the 18th World Petroleum Congress in SA next year. This is the first time the congress is being hosted in Africa. With oil prices rising dramatically due to, among other factors, political tension in some oil-producing regions, including Nigeria, and a rising global demand for oil, the congress could open avenues for more oil supply coming from Africa instead of the Middle East. Briefing the media October 13 on the upcoming congress, PetroSA MD and CE Sipho Mkhize said that with oil prices reaching above $50 a barrel, countries were looking at other regions to source oil. "The congress will expose opportunities that are available on the African continent to multinational companies," he said "Major players in the global oil industry will converge in SA, bringing technological knowledge and access to funding alternatives for the industry. " World Petroleum Congress director-general Pierre Riemer said the congress had a membership of 60 countries. He said 90% of these were oil producers and consumers of oil and petroleum products. Riemer said between $8m and 9m would be spent to host the event, which was expected to attract between 4000 and 5000 delegates for the congress and the exhibition to be held alongside it. Commenting on the recent rise in oil prices, Riemer said it raised concern about reserves. "The price is not consistent with the demand. Maybe there are other factors that we have not looked at that are influencing the oil price," Riemer said. The Nigerian National Petroleum Corporation's senior technical assistant, Ayo Balogun, said October 13 that a high-level South African delegation involved in the petroleum industry was due to visit Nigeria in November.

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STATE POWER AND TRANSPORT UTILITIES 

South African Airways no longer part of Transnet

Public Enterprises Minister Alec Erwin announced October 20 that South African Airways (SAA) will no longer form part of Transnet but will be a separate entity still owned by government. He made the announcement while addressing the media following a Cabinet meeting in Cape Town. "Cabinet confirmed that SAA would be moved off the Transnet balance sheet as soon as it is practically and financially possible. "Accordingly Transnet will in future focus on rail, port and petro-pipeline as its core area of business," explained the minister. The minister also revealed a new multi-billion Rand investment into Transnet and energy provider Eskom. Cabinet approval for an R84bn investment by Eskom in generation, transmission and distribution capacity over the next five years consolidates a shift in government thinking towards retaining key utilities in state hands while investing heavily in infrastructure. However, Erwin reiterated government's commitment to launching initial public offers (IPOs) within the energy and transport sectors over the next five years when announcing a combined capital investment package for Transnet and Eskom of R165bn. The minister said he believed the R165bn investment programme R44bn of which would be funded by the private sector would have positive effects for the economy and capital markets. Various foreign companies may bid to build power plants in South Africa following government's announcement that it would reserve R23bn of its power expansion drive for the private sector. South African groups may also respond to a tender the government will issue in January 2005 for a 1400MW power plant to cost about R2bn.Government said that it must add as much as 7000MW to the electricity grid to avert power shortages expected to start in 2007 when excess power held by electricity utility Eskom starts to run out. State utility Eskom will play the lead role in delivering new power stations, but private companies will also be allowed to build plants for the first time. This will go some way towards breaking Eskom's monopoly.

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