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Key Economic Data 
  2003 2002 2001 Ranking(2003)
Millions of US $ 159,886 104,235 113,300 29
GNI per capita
 US $ 2,780 2,600 2,820 93
Ranking is given out of 208 nations - (data from the World Bank)

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Thabo Mbeki


Update No: 37 - (01/02/05)

At a time when the international community is preoccupied with crises in Iraq, the Middle East, post-war reconstruction in Afghanistan and aid to countries hit by the Asian tsunami disaster, many commentators have justifiably concluded that Africa would be off the radar screens of donor countries save for limited military and humanitarian interventions in a few countries. However, 2005 could go down as a milestone for the still-unfolding New Partnership for Africa's Development (Nepad). There is evidence of unfolding new realities that could help position Africa for economic regeneration. There is the reluctant acceptance by rich nations of their historical contribution to Africa's current sorry state of affairs. It is hoped that The Commission for Africa will act to do something about the well-known ills tormenting the continent. The commission, set up by British Prime Minister Tony Blair last year to formulate an action plan for the poverty-stricken continent, is due to publish its report in March. UK Chancellor of the Exchequer Gordon Brown, Finance Minister Trevor Manuel, 12 African finance ministers and commissioners and representatives of African institutions such as the African Development Bank, African Union and the New Partnership for Africa's Development, met over January 17 and 18 to discuss the commission's draft economic proposals. They welcomed the broad approach adopted in the draft report, which covered peace and security, governance, human development, accountability, growth, poverty reduction, trade and financing development. The meeting urged Group of Seven finance ministers to agree on 100% multilateral debt relief at their March meeting.
The rand has defied all odds for the third year running, ending 2004 far stronger than many market watchers had predicted. After record performances in 2002 and 2003, the rand was the world's second best performing currency last year, beaten only by Poland's zloty. Figures show that at R5,61 to the dollar, the rand gained 18% last year, while the zloty strengthened 24,6%. The currency could also maintain its current strength well into the new year, with the dollar expected to continue testing new lows against the euro and other major currencies. Although a strong rand is good news for consumers, as interest rates are likely to remain low, it is bad news for the country's exporters, who are already battling under the rand's strength. Falling food and petrol costs drove inflation lower in December, prompting calls for the Reserve Bank to avoid delaying cutting interest rates when its monetary policy committee meets February 9-10. Statistics SA data showed a slowdown in the Bank's targeted inflation measure, CPIX (consumer inflation less mortgage costs), to 4,3% year on year, compared with November's growth of 4,6%. 
Expressing condolences to former South African President Nelson Mandela on the recent death of his only surviving son, the Executive Director of the Joint United Nations Programme on HIV/AIDS (UNAIDS) said his candour in disclosing that his son had died in the pandemic was vital in the fight against stigmatising AIDS victims. "Mr. Mandela's public acknowledgement that his son, Makgatho Mandela, had died from an AIDS-related illness is a demonstration of the practical leadership that Mr. Mandela gives to the international efforts to fight stigma and discrimination," Mr. Mandela's son died early January at the age of 54. Mr. Buthelezi helped to break South Africa's silence on the disease last year when he announced that two of his children had died from AIDS-related causes.
There was strong criticism of the plea bargain secured by Sir Mark Thatcher. He was convicted January 13 of financing an attempted coup as part of a plea bargain that allowed him to leave the country with a suspended four-year jail term, a R3m fine, and an undertaking to assist prosecutors in prosecuting the masterminds of the abortive bid to remove Equatorial Guinea President Obiang Nguema from power. Public reaction to the plea bargain has been fierce. The African National Congress Youth League said Thatcher had effectively got "nothing more than a slap on the wrist" in what was a "miscarriage of justice". Others, including legal experts, suggested the trial should have run its course. Thatcher admitted to bankrolling a helicopter that was to be used in the coup, but claimed he believed it was to be used for commercial activity.

NEPAD and The Commission for Africa
The Commission for Africa set up by British Prime Minister Tony Blair represents the strongest endorsement of Nepad from the west so far. Britain has promised to make substantial progress on Africa a top priority of its presidency this year of the Group of Eight (G-8) industrialised nations. This deserves an immediate endorsement by SA and others striving to secure for Africa a bigger slice in the rapidly integrating global economy. Sceptics will question the substance of pledges that have so far failed to keep pace with rhetoric at recent G-8 summits. After five years of warmly welcoming President Thabo Mbeki and other African leaders to G-8 summits and reiterating their support for the vision of the New Partnership for Africa's Development, these encounters risk becoming ritualistic. The commission proactively identifies Britain's presidencies this year of the Group of Eight (G-8) and the European Union, as well as the United Nation's review of the millennium development goals, as a rare chance to propel Africa to the centre of the world's political agenda. In particular, it would lobby the richest countries to do three things. First, to agree on a comprehensive financing programme: persuading other developed countries to declare their timetables on increasing development aid to 0,7% of national income; work towards achieving 100% debt relief; and double development assistance to fight poverty by immediately raising an additional $50bn a year through a new international finance facility. Second, through the facility make progress towards the millennium development goals on health, education and halving poverty. Third, to ensure that the Doha multilateral round of trade talks is in the interests of poor countries.
Notwithstanding the commission's indisputably noble objectives, there are suspicions about the real motives behind it. Conspiracy theories abound as Africans ask themselves if this is about Africa's development or a mere ploy by Blair to regain popularity after the Iraq misadventure. The prevailing view, however, is an encouraging one: undisclosed motives (whatever they are) are not an issue as long as Africa gets the advantage. The extent to which the plan can work is perhaps the most disturbing issue. A challenge the commission acknowledges is that of coming up with programmes of action that are ambitious enough to make a difference to Africans, but that are not so radical to be considered politically undeliverable by donor countries. Consensus on the proposed financing programme would at best not be easy to strike. It is highly unlikely all G-8 countries (or the key ones for that matter) would commit to the 0,7% gross domestic product target or total debt cancellation any time soon. The UK itself will reach that level only in 2013, just two years before the millennium development goal deadline. Only Denmark, the Netherlands, Luxembourg, Sweden and Norway have made good on that promise. To compound the situation, some key G-8 members, such as France and Germany, are experiencing budget constraints with their deficits going beyond limits imposed by the European Commission's growth and stability pact. It would take a great deal of political will for these countries to make binding commitments of a resource-intensive nature. The US is not in a better position. With Iraq war spending and last year's $412bn budget deficit to worry about, it is unlikely to prove generous. Personal vanities of world leaders could prove another obstacle. This also applies to domestic politics. For instance, some commentators have cited the much- rumoured rivalry between Blair and Brown as potentially disastrous to the commission's vision. Moreover, donor countries sometimes prefer unilateral aid programmes predicated on their strategic interests, and not the needs of poor countries. Considerable progress may, however, be realised in the area of trade. Sustainable development efforts in Africa are to a large extent undermined by many donor countries' domestic economic policies, such as agricultural subsidies, tariff escalation and dumping. Commission proposals on global trade reform might resonate with Africa's position and consequently curtail scepticism about the Doha round.

World Economic Forum Meeting
President Olusegun Obasanjo and South Africa President Thabo Mbeki joined UK Prime Minister Tony Blair, former U.S. President Bill Clinton and other world leaders in Davos, Switzerland January 27 to call for emergency assistance for Africa. Obasanjo spoke at the World Economic Forum in the Swiss ski resort where 2,250 political and business leaders have gathered to address key issues facing the world economy. In a lively discussion, Obasanjo said, "Unless we have peace and security we don't have the ability to do anything else." He said that "the situation in Africa must be seen worldwide as an emergency" which requires urgent global assistance. Obasanjo added that African nations need a critical mass of funds to make a difference for their people. He said Africa's current priority was ensuring continued peace and security for sustainable development to be assured. Noting that assistance to Africa often tended to be linked to disasters, the President told the audience that Africa had come of age and pledged that funds raised to solve Africa's problems "will be faithfully utilised." The issue of the membership of the United Nations (UN) Security Council dominated the meeting of the Executive Council of African Union (AU) January 27 as African countries position themselves for the would-be position as a result of UN planned reform to expand the security council. Speaking in Abuja at the on-going mid-term summit of AU, the Acting Head of Communications to the continental body, Mr. Desmond Orjiako, said part of the 20 recommendations made by the Permanent Representative Committee for the consideration of the Executive Council of the union include the need for a common position on representation for Africa at UN. Other recommendations include the drafting of legal instruments by legal experts for the establishment of an African Court of Justice, HIV/AIDS/ polio eradication among others.

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Car Sales Race to New Peak in 2004

South Africa's automotive industry is toasting a bumper 2004, with total sales of about 481,000 vehicles smashing all records. South Africans flocked to dealerships as new cars became more affordable, thanks to lower interest rates, stable car prices over the past two years and rising disposable incomes. Last year's total vehicle sales figure surpassed the previous record of 453,541 units, achieved in 1981. Vehicle sales last year surged 26% over 2003's figures, far exceeding industry forecasts of a 5%-10% hike. The figures include sales by members of industry body, the National Association of Automobile Manufacturers of SA (Naamsa), as well as those of importers that are not Naamsa members. The growth, which occurred across the board of vehicle types, was an accurate barometer of SA's economic health, McCarthy Motor Holdings chairman Brand Pretorius told a media briefing January 6. "The tide has turned in SA," Pretorius said. He predicted that sales would breach the half- million mark next year, ending at about 535,000 units, as the outlook for macroeconomic fundamentals remained positive. This would represent an 11% rise on the record base that was established last year. Naamsa also forecast double-digit growth. Vehicles had become significantly more affordable over the past two years, mainly as a result of the six-percentage-point decrease in interests rate since 2002, said Pretorius. On average, it took South Africans 208 weeks' earnings to purchase a vehicle in 2002, said Pretorius. This figure was now down to 174 weeks. Pretorius said there was "still a long way to go" in terms of vehicle affordability . He said it was possible that vehicle prices might increase this year as input costs such as labour and steel had risen significantly, among other factors. There was a substantial increase in the number of black people buying new vehicles last year, although there were no data to illustrate this, said Pretorius. Broad analysis showed that about 15% of all new vehicles and almost one out of every three used cars were being purchased by black people. Strong economic growth and low interest rates have driven demand, and analysts expect the trend to continue. NAAMSA said it expects sales to top 500,000 in 2005. During 2004 "South Africa was one of the best performing markets internationally" for car sales, NAAMSA said. While domestic demand is set to continue to enjoy rapid growth, foreign sales could come under pressure, analysts said. The vehicle industry accounts for about 13% of South Africa's total exports. However, the world auto market has its problems and analysts warn that overcapacity and the strength of the rand could hit exports.

Car Makers Set to Boost Export

South Africa's vehicle exports are set for a huge boost with Toyota SA saying it intends increasing its exports tenfold annually to 100 000 units by 2010. This compares with vehicle exports of just more than 100 000 last year by SA's entire vehicle industry, which accounts for about 6,4% of gross domestic product and generates about R40-billion in annual export revenue. These figures are set to rise substantially over the next few years as Toyota's exports ramp up, as Ford's new export programme kicks off, and with other major car manufacturers consistently increasing exports. General Motors' purchase this month of a large tract of land in Port Elizabeth also fuelled fresh speculation that the car maker, the world's largest, will start a substantial export programme in the near future. Vehicle exports declined last year as a result of the strong rand, dropping to an estimated 109 450 units. This was down from 126 661 in the year before and 125 306 in 2002. The National Association of Automobile Manufacturers of SA (Naamsa) was not concerned about the decline, saying earlier that SA's role as a manufacturer and supplier of car components and vehicles was firmly established. It expected exports to pick up this year as new export programmes were implemented. Toyota's export plans amplify the vote of confidence in the domestic market that Japanese parent company Toyota Motor Corporation displayed two years ago when it increased its stake in Toyota SA to 75%. The company's export growth plans have spurred a host of investments and potential investments at Toyota and its suppliers. Toyota SA president and CEO Johan van Zyl named six Japanese companies as among several global suppliers that had committed to "coming to SA". These include Takata Petri, Denso, Yazaki and Sumitomo, among others. Toyota is investing R1-billion to install a paint plant at its Durban factory as part of a R3,5-billion programme to expand and upgrade production facilities. The investment will enable Toyota to almost double production to 200 000 units a year. Only at these levels would Toyota SA have the economies of scale that would render it globally competitiveness, said Van Zyl.

Indian Car Maker in South Africa for Long Term

Indian car maker Mahindra & Mahindra is committed to a long term operation in South Africa , says Vijay Nakra, CEO of Mahindra SA . Nakra said recently that this commitment was illustrated by the local Mahindra operation's 35000 spare parts in storage, and by the fact that each of the car-maker's customers received an Automobile Association membership when buying a vehicle. The company, which entered the South African market late last year, is now setting up a dealership network that will give it coverage in the major metropolitan areas. Nakra said the group had dealerships in Pretoria, Johannesburg, Cape Town and Durban, and planned to set up outlets in Bloemfontein, East London and Port Elizabeth this year. The group has teamed with Bosch Service Centres to provide nationwide vehicle maintenance and Berco Express to provide parts to any licensed service outlet countrywide within 24 hours. Mahindra is in partnership with Arelco, a local company run by entrepreneurs Moeletsi Mbeki and Ivor Ichikowitz. Mahindra was not afraid of competing against established players in an already crowded market that had seen the arrival of rival Indian car maker Tata in the past year, he said. Nakra said that Mahindra 's decision to come here was not influenced by Tata's decision to do so. He said the group was not troubled at the prospect of a market with more than 20 competing manufacturers, as it was already competing against some of these companies in India and its other export markets in Europe, Latin America and the Middle East. "SA is one of the key export markets of the future," Nakra said.

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Buyout Talk in Bank Sector

South Africa's banking sector has started the year on a frenzied note, with rumours of more foreign banks making a play for local banks sending share prices soaring. However, a speedy conclusion to Barclays' bid for a majority stake in Absa is unlikely; its offer seen as a litmus test for other foreign entrants is now unlikely to be made before March. In the face of growing speculation that Barclays is poised to walk away from the deal, Absa renewed its cautionary notice January 10, saying discussions with Barclays were progressing. Barclays applied formally to the registrar of banks for permission to proceed with an offer in December. "Timing of the approval process by the regulatory authorities is not known," said Absa. Absa CEO Steve Booysen, who is still on leave, said earlier it would be in the interests of all stakeholders if the process "moved swiftly". Head of legal services at the Reserve Bank supervision department Michael Blackbeard said his department was "aiming to have a submission ready for the minister by mid-February", and they were "working at full steam." Since Barclays first announced it would make an offer for Absa, the local bank's share price has gained 20%, rising a further 1,21% yesterday to close at R72,67. With the share price soaring, a report in London's Financial Times newspaper speculated that Barclays would walk away from any deal with Absa if it would be dilutive to shareholders. However, a local bank analyst said Absa's share price would have to rise much higher than it was now before it became unattractive to Barclays. He said one issue that could complicate the deal would be if the latest speculation about a merger between Barclays and US bank Wells Fargo proved to be true. The Guardian reported January 10 that the two banks had held talks to create the world's fourth- biggest bank worth $100bn. "That could delay the process, which could irritate Absa as well as the regulators," the analyst said. "Nobody knows what Wells Fargo's attitude would be to an emerging market franchise." Meanwhile, Standard Chartered CE Mervyn Davies has played down rumours that it could make a bid for FirstRand's banking unit, First National Bank. Davies was announcing a 3,3bn deal to buy South Korea's Korea First Bank. The analyst said Standard Chartered was unlikely to make two "material" acquisitions in such a short time.

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Wine Industry Focuses On Equity

The first draft of an empowerment charter for the wine industry should be published by March, with the final document presented to the industry in October, Gavin Pieterse, chairman of the industry's new Wine-BEE steering committee, said January 25. Announcing the formation of the steering committee, Pieterse said it had been created as an independent industry body "with maximum legitimate representation of all stakeholders". The grouping of the highly fragmented industry's major elements under one umbrella committee is seen by many as a major step towards creating stability in a sector plagued by problems such as seasonal redundancies and widespread alcohol abuse. The 15-member committee includes Vinpro, the representative body of wine producers, the wholesale merchant forum, the black business wine sector, nongovernmental organisations, women's groups, labour and municipal district councils. An initial goal is to create a wine industry scorecard. This will develop guidelines for ownership through equity, asset ownership, land reform, shareholding, employment equity through training and skills development support. Other aspects include preferential procurement and business development support. Targets for the scorecard will be decided after industry-wide consultation. Pieterse said that to achieve the goal of a "representative sustainable, profitable and durable industry" and eliminate current backlogs, the creation of benchmarks and scorecards would lay out for the industry exactly what each farmer, cellar owner, retailer was required to do. "Capacity requirements to be delivered by the charter have been well thought through," Pieterse said.

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Interest Rates 

The Reserve Bank missed the boat by not cutting interest rates last month and should make up for it at next month's meeting of its monetary policy committee, economists have said amid further signs of slowing inflation. With producer inflation feeding through to consumer prices with a two- to three-month lag, lower factory gate prices bode well for consumer inflation. Economists said there was nothing preventing Reserve Bank governor Tito Mboweni cutting rates when the monetary policy committee meets again from February 9-10. Wiphold Treasury's group economist, Craig Zaayman, said the committee was likely to realise that it was falling behind if it did not cut rates soon. "In retrospect, the committee should perhaps have cut rates in December, but I can understand why they didn't, given the fears about spending. That is all the more reason why they should act now." Zaayman said inflationary concerns about rising credit demand and consumer spending were misplaced, since spending had gone into increasing the asset base in the economy. There had also been significant productivity and efficiency gains in the economy, which taken together with rising domestic demand, were not necessarily inflationary. Zaayman said there was enough room for the Bank to slash rates by two percentage points this year. The Bank kept its repo rate steady at 7,5% last month, citing strong domestic spending and a volatile rand, as reasons for its cautious stance. Eskom Treasury economist Mandla Maleka also criticised the Bank for not easing rates last month, saying it had missed a "golden opportunity". However, it may be too late for the Bank to cut now, given the stimulatory spending environment and further hikes in US interest rates, which could weaken the rand. Rising US rates could narrow the interest rate differential between SA and the US, making local interest-bearing assets less attractive to foreign investors, thereby putting pressure on the rand. A weaker rand would boost inflation as import prices rise. "The Bank may surprise us and cut interest rates next month, but then they would have to hike again in nine months' time," Maleka said. However, Old Mutual Asset Managers believes the Bank will not hike rates in the face of rand weakness. "Given government's focus on job growth, we think there is a shift of emphasis in the Bank to be more growth-supportive," said Old Mutual's head of asset allocation and strategy Charles de Kock. "If the rand weakens, we don't expect the Bank to jump on the brakes." With real interest rates sitting at 7%, there was still room for the Bank to cut rates, De Kock said, but he did not expect a move at next month's meeting.

Moody's Gives SA Economy Thumbs Up

South Africa's equity and bond markets received a welcomed boost January 12 when leading ratings agency Moody's raised SA's sovereign rating one notch higher to Baa1. Moody's cited the marked improvement in SA's foreign exchange reserves and faster economic growth as justifying a higher grade. SA joins other key emerging market countries in the Baa1 category, such as Chile, Mexico and Thailand. The upgrade puts SA one level below the coveted A category ratings. The Baa1 rating is also one notch above the BBB rating of rival agencies Standard & Poor's and Fitch. Treasury director-general Lesetja Kganyago said the improved rating would allow SA to borrow on international markets at cheaper rates. He said the gap between the yields on SA and US government bonds had declined sharply since last year, reflecting the attractiveness of South African debt to foreign investors. Kganyago said the improvement in SA's forex levels, which now stand at $14,9bn, made the country less of an outlier compared with its peers. The country's growth performance, which was being driven by domestic spending, was also sustainable. Moody's noted that the current account deficit the widest measure of SA's trade with other countries was likely to widen as imports continued to rise and an "overvalued rand" impeded export competitiveness.

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SABMiller Growth Continues

Global brewer SABMiller released a trading update for the nine months to December showing it was sustaining trends in growth and profitability that were evident at its half-year stage. For the six months to September the group reported total organic growth in lager beer volumes of 5%, which it said yesterday had continued into the third quarter. At the interim stage, turnover grew 14% and adjusted earnings 38%. An analyst said the investment community had been bracing itself for a deceleration in growth in the US as Miller Brewing was coming off higher comparative numbers for last year, but the deceleration was less than expected. The latest trading update was broadly in line with trends at halfyear, he said, although the mix was a little different. SABMiller said volumes of beer sold in SA rose 4% in the third quarter and the nine-month period. Subsidiary Amalgamated Beverage Industries grew volumes 6% in the December quarter and 7% compared with the corresponding ninemonth period in the previous year. Good weather and robust consumer spending had contributed to the growth. According to a separate presentation by management on the group's Africa and Asia businesses yesterday, SA accounted for 18% of global lager sales volumes in the 12 months to September, and 39% of earnings before interest, tax, depreciation and amortisation. In the US, Miller Brewing's domestic sales to retailers fell 0,3% for the December quarter, in a weak trading environment, but it gained market share. For the nine-month period, domestic sales to retailers rose 1,5% over last year. Shipments to wholesalers performed similarly, both in the quarter and the year to date. Brewer Anheuser-Busch said two weeks ago that its wholesaler sales to retailers fell 0,3% last year and 3,2% in the fourth quarter. It increased its US beer shipments to wholesalers 0,4% to 103million barrels last year, over 2003, based on continuing growth of brands such as Michelob Light and Bud Lite. But its fourth-quarter shipments to wholesalers fell 1,5%. SABMiller said beer volumes in central America rose 3% in the third quarter and 2% in the year to date, while sales of carbonated soft drinks fell 8% in the quarter and 6% in the year to date because of tough market conditions in El Salvador. In Europe, organic growth in lager volumes rose 6% in the third quarter and 5% in the nine months, while the Africa and Asia region, which includes operations in India and China, grew volumes 10% in the quarter and the nine months. The analyst said yesterday's presentation on Africa and Asia showed that SABMiller's strategy in Africa was moving from being driven primarily by volume and efficiency to encouraging consumers to move up the value chain from sorghum beer to mainstream and then to premium beers.

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South Africa and Sudan Agree to Joint Oil Exploration

President Mbeki and Sudanese President Omer Hassan Ahmed al-Bashir have agreed to encourage co-operation in exploring Sudan's vast oil reserves.
The agreement was reached during a three-day visit by Mbeki to Sudan late December and signals SA's growing interest in expanding its African oil exploration activities. SA has expressed similar interest in the Equatorial Guinea and Angolan oilfields. Oil multinationals, eager to secure as much of their oil outside the volatile Middle East region have also been scrambling to reach exploration deals with African governments. Large Asian oil companies from China, Malaysia and India are already active in southern Sudan. The South African and Sudanese governments committed themselves to expanding and consolidating relations between the two nations. Mbeki was accompanied on the trip by Foreign Affairs Minister Nkosazana Zuma, Defence Minister Mosieuia Lekota, Trade and Industry Minister Mandisi Mphalwa and Deputy Minerals and Energy Minister Lulu Xingwana. The two presidents discussed the work of the African Union committee on the post-conflict reconstruction of Sudan, which is chaired by SA, as well as African, regional and international issues. 

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South Africa Favoured for US Investment

South Africa remained the top beneficiary in 2003 of US foreign direct investment of all countries in sub-Saharan Africa not exporting petroleum, a new US investment report shows. Oil-rich countries Equatorial Guinea and Nigeria attracted the largest sums of US foreign direct investment flows in that year, with $823m and $340m respectively, according to a US International Trade Commission report released January 24. At $89m SA saw substantially less US investment than its oil-producing counterparts. Cameroon, a country that does not export petroleum, was not far behind SA, garnering US foreign direct investment worth 73m in 2003. But SA still led the pack comfortably in terms of net inward portfolio equity flows in sub-Saharan Africa. The report says that as in previous years, SA accounted for virtually all foreign portfolio investment flows into the region, which totalled $500m in 2003. Meanwhile, total exports from sub-Saharan Africa to the US jumped almost 40% to about 25,5bn in 2003, compared with 18,2bn in the previous year, the report says. The report is the fifth annual report in a series on trade and investment flows between sub-Saharan Africa and the US. The big jump in sub-Saharan exports was attributed largely to a rise in oil exports to the US. Sub-Saharan Africa's nonenergy-related exports to the US also rose solidly. The report noted an increase of 20% in these exports to $7,8bn. According to the report, the bulk of goods exported to America from sub-Saharan Africa remained basic materials to which little or no value was added. The US report attributes growth in sub-Saharan exports in part to the benefits, such as duty free access, that certain African countries enjoy under the US's African Growth and Opportunity Act (Agoa). It says exports from sub-Saharan African countries that are eligible for Agoa benefits increased 36,3% to $14bn in 2003. While exports from sub-Saharan Africa grew strongly, US exports to the region rose 13% in 2003 to about $6,7bn, from 5,9bn in 2002. The US exported far more services to sub-Saharan Africa than the other way around, however. The report attributes the increase in US exports to the region mainly to increased exports of transportation equipment, agricultural products, and electronic products.

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DRC: Mbeki in Talks With Congolese Political Leaders

President Mbeki has held talks with key political leaders of the Democratic Republic of Congo in a bid to lessen tension within its government and save the democratic transitional process from collapse. Mkebi arrived in the Congolese capital, Kinshasa, on January 12 for meetings with President Joseph Kabila and his four four-vice presidents. One vice-president, Jean-Pierre Bemba, had threatened to pull his movement out of the country's transitional institutions if by 31 January preconditions for elections are not met. Bemba heads the Mouvement pour la liberation du Congo, one of the main former rebels groups now represented in the transitional government. Some of the preconditions to which he referred come under the South-African sponsored all-inclusive accord signed in December 2002 by Congo's belligerents, unarmed political groups and civil society. The cornerstone of the accord is for power-sharing within the current transitional government and its institutions, including the diplomatic corps, the police, secret and other security services. Bemba, and another former rebel movement, the Rassemblement Congolais pour la Democrtaie (RCD), have accused President Kabila and his family of blocking this process. The delays are threatening the elections due by 30 June. The president of the Independent Electoral Commission, Apollinaire Malu Malu, announced that elections might have to be pushed back, although they would still be held this year. His announcement led to a demonstration in Kinshasa in which four people were killed and several others injured. 

Cote D Ivoire: Mbeki Gets More Time to Mediate 

President Mbeki briefed African leaders January 10 on his efforts to prevent Cote d'Ivoire relapsing into full-scale civil war as opposition leaders in the country accused President Laurent Gbagbo of preparing to resume hostilities. Leaders gave Mbeki more time to negotiate peace in Cote d'Ivoire, but his mediation initiative ran into trouble hours later when rebels boycotted a special cabinet meeting January 11 at which he was guest of honour. A rebel spokesman accused Mbeki, who has been trying to broker a peace deal for the past two months, of "betrayal." The African Union's Peace and Security Council wrapped up a summit in the Gabonese capital, Libreville, with a plea to all the Ivorian factions to overcome political sticking points and proceed with disarmament to pave the way for elections in October. It also recommended that the UN Security Council delay imposing travel bans and asset freezes on key individuals seen as blocking the peace process in order to give Mbeki more time. But rebel leaders failed to turn up for a planned meeting with Mbeki in Cote d'Ivoire's official capital Yamoussoukro saying they would prefer to see him later in South Africa. The rebels, who have occupied the northern half of Cote d'Ivoire since civil war erupted in September 2002, may have been irked by the AU's refusal to call for further UN sanctions on the country. Shortly before the Libreville summit, the G7 coalition, which groups Cote d'Ivoire's New Forces rebel movement and the four main opposition parties in parliament, issued a statement accusing President Laurent Gbagbo of preparing for an imminent return to war. It urged the United Nations to impose a second round of sanctions immediately. An 18-month ceasefire between Gbagbo and the rebels was broken in early November, when government forces launched an abortive offensive to try and recapture the north. The flare-up in violence prompted the AU to call in Mbeki, a seasoned mediator, to try and put Cote d'Ivoire's flagging peace process back on track. A key step would be to get the country's power-sharing government of national reconciliation working again. A former agriculture minister in the government of the Ivory Coast's founding father, Felix Houphouët-Boigny, Konan and fellow opposition leader Alassane Ouattara were in South Africa late January for talks with Mbeki. The president also met Guillaume Soro, leader of the New Forces rebel group.

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Looking Ahead in Hope After Trade-Deal Flops of 2004

Last year was meant to be a landmark year for South Africa's trade agenda as four deals heralding a significant change in the way SA trades with the world were due to be signed. However, only one of the deals was in fact signed. Whether the three remaining deals will be concluded this year remains to be seen. Further delays in these negotiations, however, will have a knock-on effect on the start of talks with new free trade partners such as India and China. The deal that was concluded last year after three years of talks was a preferential trade arrangement between the Southern African Customs Union (Sacu) and trade bloc Mercosur, which comprises Brazil, Argentina, Paraguay and Uruguay. It forms the basis of a more comprehensive deal yet to be negotiated. The agreement now in place will allow companies operating in the Sacu zone to pay lower tariffs on 1000 products exported to the Mercosur zone, whose exporters will, in turn, enjoy lower tariffs on 1000 products exported to the Sacu zone. Sacu's negotiators are now able to focus on faltering talks on a free-trade deal with the US. Talks virtually came to a halt last year when serious differences emerged over issues such as investment and agriculture. Efforts to set a date for the next negotiations session between Sacu and the US have not been successful so far. The process was hampered by the US elections and the holiday season in SA. SA's chief trade negotiator, Xavier Carim, says that a few meetings with US negotiators will have to be held before he can say whether the deal can in fact reach finality this year. Peter Draper of the South African Institute of International Affairs says the deal will probably not be concluded this year as positions are "pretty far apart on a number of significant issues". The other important deal SA hopes to seal by December will stem from the world trade talks under the Doha Development Round banner, although its progress or lack of it is entirely beyond SA's control. SA and other developing countries are hoping for a successful conclusion of the Doha round, as it will allow them to increase their share of world trade. The deadline last month for the Doha round has been moved to December this year. It is hoped that talks will be completed before the sixth ministerial meeting of the World Trade Organisation, scheduled to take place in Hong Kong. Carim and Draper are not confident that the Doha round will be finalised by December. Draper estimates it will take another two years before this deal is ready to be signed. The third deal earmarked for conclusion by December is a free-trade agreement between Sacu and the European Free Trade Association (Efta), which consists of Switzerland, Norway, Liechtenstein and Iceland. The deal came very close to being signed last month, says Carim, but there was not enough time to tie up all the issues. Negotiators now hope to conclude the deal in February. Sacu companies will be able to export as many industrial goods duty free to the Efta zone as they please once the deal is signed. 

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Textile Industry 'In Need of Rescue'

Government should urgently devise a rescue package to pull the textile industry out of its job-shedding crisis, the opposition Democratic Alliance (DA) said January 24. DA spokesmen Mark Lowe and Enyinna Nkem-Abonta said such a package should include assistance for enterprises compelled to move into more competitive niche markets as well as reskilling programmes for employees affected. The crisis has been caused by the influx of cheap Chinese imports and the strong rand, which undermine the local industry's ability to compete in domestic and international markets. The Southern African Clothing and Textile Workers' Union estimates that about 16 000 jobs were lost in the past year alone in the clothing, textile, footwear and leather industries. Lowe and Nkem-Abonta also said over-regulation of the labour market was also to blame. The market should be deregulated, so that minimum wage and other regulations were relaxed to lower production costs. The trade and industry department should investigate whether China still subsidised its textile industry, and whether it was applying unethical employment practices. If it was engaging in unfair trade practices, the department should act, the DA said. The department should also negotiate with China to explore the possibility of phasing in the liberalisation of textile imports more slowly, "to reduce the impact on the local textile industry and allow it time to adapt". Ways should also be sought to reduce the cost of imported raw materials, and reduce or remove import duties on these materials, the two said. They said the department's task team on the crisis had not produced any results, having met only twice last year.

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No New Mines Says Gold Fields

Gold Fields CE Ian Cockerill says South African gold producers are struggling to benefit from record gold prices because the rand's rally against the dollar is wiping out earnings needed to invest in new mines. The value of the rand against the dollar has more than doubled in the past three years, raising costs for Gold Fields, AngloGold Ashanti, and Harmony, SA's biggest gold miners. The companies pay most costs at local mines in rands and get dollars for the metal, whose price jumped 8,1% to an average $435/oz in the latest quarter, a 16-year high. "The challenge for all of us is not only to make profit at an operating level, but to make enough to reinvest," Cockerill said. Gold output in SA, the world's largest producer, has plunged about 60% since 1971 to 376 tons in 2003, the Chamber of Mines said. Costs are rising as companies dig deeper for gold and unions push for higher wages, which make up about half of mining costs. The gold industry accounts for 13% of SA's export earnings and employs 195000 people, government statistics show. Mineworkers' pay rose 7% in July after a 10% increase in 2003, exceeding SA's inflation rate of 4,4% a year. Mining gold in SA cost $349/oz in the third quarter, 40% more than the global average, says Bruce Alway, an analyst at GFMS in London. Gold Fields may report next week that earnings before items and goodwill have risen to R157,5m in the three months through December, from R102m the previous quarter, according to a survey of four analysts.

Bullish Global Outlook for Steel

The bullish outlook that emerged from an international steel conference in Paris mid-January for the steel market this year and into next year supports local forecasts for continued good performances by SA's primary steel producers, Ispat Iscor and Highveld Steel & Vanadium. But it also means that there is little hope for relief, at least this year, for steel users whose margins have been battered by sharp increases in steel prices. World steel demand should continue to grow about 5%, the Organisation for Economic Co- operation and Development (OECD) said after the conference organised by it and the International Iron and Steel Institute. Crude steel production last year passed the 1-billion-ton mark for the first time amid strong demand, mainly from China. Both Ispat Iscor and Highveld's half-year profits have soared on the back of the buoyant steel market, which prompted steel price hikes. Both companies are expected report solid profits for their full financial years early February. In addition to the bullish global outlook, steel demand in SA is expected to continue growing solidly as government increases fixed investment, particularly in electricity and rail infrastructure. Good short-term global prospects are, however, tempered, with a caveat from the OECD saying that a crisis may arise in several years' time, should capacity expansion exceed market needs by a significant amount. The OECD says that global crude-steel-making capacity is being raised from 1,18-billion tons a year last year to an estimated 1,3billion tons next year. Ispat Iscor, which is to be renamed Mittal Steel SA, is also raising capacity, and 1-million more tons will come on line by next year. The OECD also says the sharp price increases and, in some instances, shortages that occurred in three key raw materials iron ore, coking coal and coke are seen as easing. Some investment in new capacity is taking place, with prices expected to settle at levels that will nonetheless be higher than those prevailing several years ago. Much-needed industry consolidation is expected to continue to take place, as the enhanced financial strength of companies provides the means to explore mergers and acquisition more actively. The OECD says consolidation is considered an important development that should help the industry weather cyclical downturns more effectively. "Although considerable consolidation has already taken place, the industry remains highly fragmented at the global level, with the ten largest producers accounting for only about 30% of total world steel production," says the OECD. It says it is concerned, however, that smaller producers, competitive as they might be, might not be able to remain as stand-alone operations.

Anglogold Ashanti's Profit Plummets

Anglogold Ashanti has reported a steep fall in profit and earnings for last year, blaming much of the problem on rising costs, the slow turnaround at its Obuasi mine in Ghana, and the returns it received from hedged output. AngloGold's net profit for last year fell to R567m from R2,3bn in the previous year. As a result it has undertaken a major restructuring of its hedge book to ensure that future sales are closer to market prices. It plans to extend cost cutting and focus efforts on the turnaround of Obuasi. The practice of hedging involves agreeing to sell future gold production at fixed prices before the mineral is mined. AngloGold CE Bobby Godsell said January 27 one reason that last year was "tough" was that the company "was more exposed to forward sales at lower prices than we would have wished". In the December quarter there had been a gap of $38/oz between the spot price of gold and the amount received by AngloGold for its production, he said. Godsell said the company's South African operations had a good year in 2004, with a 2% fall in cash costs. "To hold costs at the R60000/kg level is an extraordinary performance," he said. "This was despite a 7% wage increase, and increases in prices for electricity and water of close to 10% not to mention a big rise in the steel price." However, he said costs outside SA had increased, and efforts were continuing to keep the lid on costs. Godsell said his major area of concern was the turnaround of the Obuasi mine, which was run by Ashanti before the merger with AngloGold last year. "The Obuasi mine has continued to under-perform, and we are not satisfied with this." He said it had been expected that the turnaround would take four to six quarters, so he was not surprised that the mine was still under-performing. Headline earnings a share fell to 280c from 1068c, and the dividend for the year fell to R3,50 from R7,10 in 2003. Analysts said that the results were close to expectations. AngloGold also announced the signing of a new three-year, $700m revolving credit facility to replace its existing $600m facility at an improved interest rate. In another development, the company announced that its board had approved a $121m expansion of its Cuiaba mine in Brazil, which will increase production from 190000oz a year to 250000oz. Godsell said a speedy and efficient conversion of mining licences under the mining charter would help allay foreign concerns about empowerment in SA. He said it was important that it should be demonstrated that SA did not have an anti-mining regime, and the conversion of licences from the old order to the new would be a good way of showing the world that government backed the industry. He said it was inevitable that the conversion process would take some time as there was no precedent for what was happening, and mining companies were having to comply with issues such as rural development and job plans without being able to refer to any precedent.

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Aspen Gets U.S. Approval to Supply $15bn Aids Drive

JSE Securities Exchange SA-listed Aspen Pharmacare, Africa's biggest generic drug maker, has won US regulatory approval for some of its AIDS drugs. This opens the way for it to supply the medicines to developing countries through the Bush administration's $15bn programme to fight the disease. By the end of last year, about 39,4-million people were infected with HIV and as many as 6- million needed treatment with anti- retroviral (ARV) AIDS medicines, according to the United Nations. Aspen is the first generic supplier to have won access to the President's Emergency Plan for AIDS Relief (Pepfar) in the US through its registration with the US Food and Drug Administration (FDA). "It's a hell of a milestone for us. I don't think many people would have bet on a company from SA being the first to get (FDA) accreditation," said Aspen CEO Stephen Saad. The company won FDA approval for its drug manufacturing plant in Port Elizabeth last month, which is a prerequisite for FDA registration of its drugs. No other generic drug makers with voluntary licences to make copies of patented AIDS drugs had obtained FDA approval for their manufacturing facilities, he said. The FDA has given "tentative approval" for Aspen's co-packaged versions of nevirapine tablets and a pill combining lamivudine and zidovudine. Tentative approval is granted when the drugs are still under patent in the US. GlaxoSmithKline, the world's biggest maker of AIDS drugs, holds the patents on the combined lamivudine and zidovudine pill, which is branded Combivir, while Boehringer Ingelheim holds the patent on nevirapine, which is branded Viramune. This combination is the world's most widely used triple cocktail regimen, but is not the most widely used in SA. Saad said Aspen was seeking FDA approval for other generic AIDS drugs, but declined to provide details. FDA approval means Pepfar funds can be used to purchase Aspen's approved drugs for treatment programmes in countries where the local regulatory authorities have approved their use. 

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Spar to Open 130 New Branded Stores

The Spar group will bring another 130 branded stores on-stream in the current financial year, while investing R190m in a Western Cape distribution centre and extending its Nelspruit and KwaZulu-Natal facilities. Chairman Mike Hankinson and CEO Peter Hughes said that through these ventures and the upgrading of another 140 facilities, the newly listed group sought higher revenue and improved operating margins. Spar's annual report, released January 19, said the new stores would include Spar supermarkets, Tops bottle stores and Build it home-improvement facilities. Food giant Tiger Brands unbundled and separately listed Spar on a one-for-one basis last October. Hankinson and Hughes said that the group had bedded down its north and south Rand distribution centres. The R350m paid to Tiger last September for Nelspruit Wholesalers reduced cash resources and would mean Spar earned "only a small (amount of) interest" this year compared with R8,9m last year. But the group remained "a strong cash generator", and would offset last year's cash outflow by next year. The directors expected Spar to generate R350m before this year's dividend payments and would retain a 2,25 times dividend cover. Dividends will be paid six-monthly. Hankinson and Hughes said Spar would focus on a new marketing campaign that emphasised "guarantees" in terms of price, value and service, while its customer service campaign would enter "phase two". Build it recently flighted its first television advertisements. Tops is to set up 50 new stores during the year. The 2%-3% growth in food inflation, countered by an 11% revenue growth, meant Spar achieved an 8% real growth last year. Hankinson said this was ahead of the market and, when including Nelspruit Wholesalers, saw Spar lift revenues nearly 20%. Looking ahead, the directors said the favourable exchange rates and lower interest rates boded well for the retail market, but cautioned that food consumer spending did not "change dramatically" with economic shifts. "The food business has also been affected by low inflation and even deflation in some product categories. "Additionally, the market is exceedingly competitive and is hotly contested by several major chains," they said. Competitors had also expanded into franchising, meaning Spar now competed for retail members.

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Decision On Telkom Rival 'During 2005'

A decision on which of two bidders will be awarded a controlling interest in the long-delayed second network operator will be announced "during the course of 2005", a communications department spokesman said January 25. The drawn-out time-frame dashes any hopes that customers will soon be able to deal with a rival to Telkom, even though the bidders for the 26% controlling stake were named in October last year. Speaking at the African Telecoms Summit in Sandton, the department's GM: telecommunications, Devan Naidoo, said: "It is anticipated that the licensing will take place during the course of 2005." Asked specifically when the winning bidder could be announced, Naidoo said the decision would be made this year, but he was unable to say how far advanced the adjudication process was. Last November, the department attributed a delay in the closed tender process on the bidding parties themselves, saying they had both requested more time to complete their formal proposals. Bids were submitted by Old Mutual Asset Managers and Tata Africa, an offshoot of India's Tata industrial conglomerate. Meanwhile, the other parties in the second network operator consortium Nexus with 19%; Transtel and Eskom Enterprises with a joint 30%; and CommuniTel and Two Consortium with 12,5% each have yet to agree on the terms of the shareholders' agreement and their respective roles in the operation. One source confirmed that the parties were still holding discussions in an effort to prevent Nexus from proceeding with a judicial review into the entire licensing process. Nexus is unhappy about the inclusion of Two Consortium and CommuniTel as shareholders, since both were rejected as substandard when they initially bid for a stake. The long delays have already undermined the business case for the second network operator, because Telkom has used the hiatus to sign long-term contracts with many of its highest-spending corporate customers. Its viability may also have been eroded by Communications Minister Ivy Matsepe-Casaburri's decision to liberalise the telecommunications market from February 1. Some analysts believe the liberalisation negates the need for a second network operator, because data networking companies and internet service providers will be able to carry voice calls over their networks and lease their spare capacity to other players, giving customers more choice of service providers. Other analysts argue that the liberalisation of the sector has actually increased the need for a second network operator, since numerous small operators will want to lease a national network infrastructure from a wholesale provider. Speaking at the summit, Naidoo said liberalisation of the industry was a national imperative to create a globally competitive telecommunications sector, to reduce the cost of doing business and to accelerate economic development.

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Top Two Ports to Get R2bn Upgrade

Transport parastatal Transnet January 25 approved a R2bn investment to improve capacity at Durban and Cape Town ports, a move designed to alleviate congestion due to accelerating economic growth. The upgrading of container terminals at the two ports is part of Transnet's five-year, R37bn infrastructure plan, given the goahead by the cabinet last year. Leading exporters such as iron-ore producer Kumba have complained to government about the lack of transport capacity in the country, which they say threatens the competitiveness of the export sector in the country as a whole. President Mbeki, in his state of the nation address last year, focused on infrastructure development as vital to lowering the cost of doing business in SA. Accelerating economic growth has resulted in bottlenecks at the major ports including Durban, SA's biggest harbour. Gross domestic product grew at an annualised rate of 5,6% in the third quarter the fastest growth in more than eight years. Economists estimate that growth could top 4% this year. Transnet CE Maria Ramos said "These projects (are) consistent with our strategic vision of reducing the cost of doing business in SA." Of the R2,075bn that Transnet has approved, R1,437bn will be spent on developing a container handling facility at Durban harbour's Pier 1. Durban handled 64% of SA's container trade, Ramos said. Transnet did not say when the upgrades would be completed. However, it did say that R600m would be used to upgrade the container terminal at the Cape Town port. 

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Cosatu Mission to Zimbabwe 

The African National Congress (ANC) says the Congress of South African Trade Unions (Cosatu) can go ahead with the controversial visit to Zimbabwe that is opposed by President Robert Mugabe's government. In a surprise move likely to spark tension between SA and Zimbabwe, the ANC said January 25 it would have no problems with the union federation returning to Harare. COSATU said the situation in Zimbabwe was critical, as the present legal and political situation was not conducive to holding free and fair elections, due in March, and alleged that labour unions were being suppressed. The country has one of the highest inflation rates in the world, resulting in a steady erosion of household purchasing power. New laws restricting freedom of association and freedom of the press have also been heavily criticised. A COSATU delegation was deported from Zimbabwe in October last year, on allegations that their mission was more political than labour-related. An application for permission to send another fact-finding mission was turned down mid-January. In a joint communique with Wellington Chibebe, secretary-general of the Zimbabwe Congress of Trade Unions (ZCTU), COSATU secretary-general Zwelinzima Vavi said a delegation would be sent to Zimbabwe by the first week of February, in a show of solidarity with workers in Zimbabwe. " Zimbabwe's minister of public service, labour and social welfare, Paul Mangwana, told IRIN that COSATU would not be allowed to use union issues to cover a mission meant to interfere in the internal affairs of the country. "The nature of the COSATU mission is political," he claimed. "South African labour unions do not govern or influence labour issues in Zimbabwe. COSATU wants to gain cheap mileage by traversing their activity boundaries - they should limit their activities to South Africa. We have active labour unions in Zimbabwe, and anyone who says they are not being allowed to function is talking absolute nonsense," Mangwana charged. "As the responsible minister, I can confirm that the labour situation in Zimbabwe is normal. We are in contact with unions, and I have not received any complaints from them. We are negotiating with them [and business], including the same ZCTU that makes all these claims, in the Tri-partite Negotiating Forum." 

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