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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: 041 - (31/05/05)

South Africa's National Intelligence Agency (NIA) is investigating a wave of housing riots. Sporadic unrest in isolated rural townships in recent months escalated in the past fortnight with riots around Port Elizabeth and Cape Town which saw police fire rubber bullets and tear gas at rock-throwing protesters manning burning barricades in scenes reminiscent of the darkest days of apartheid repression. NIA spokeswoman Lorna Daniels confirmed May 29 that the agency was investigating the causes of the upsurge in violence, an unusual move which analysts said shows that the authorities take the disturbances seriously. The recent wave of township riots over a lack of housing and basic services is sparking concern that the growing unrest could destabilise the continent's youngest democracy. 
A new report states that African economies grew more than 5% in 2004, their highest growth in eight years, spurred by high commodity prices. The African Economic Outlook, produced by the OECD and the African Development Bank, praised "steadily prudent economic policies". But it pointed out that Africa was still vulnerable to regional conflicts. And it called for more debt relief, action against corruption and support for small businesses. The report highlighted the humanitarian crisis in the Darfur region in Sudan, economic collapse in Zimbabwe and conflicts in Ivory Coast and parts of the Democratic Republic of Congo as factors constraining growth. The report was launched in Abuja, Nigeria, at the African Development Bank meeting on 17 May.
Barclays is to pay 33bn rand (£2.9bn; $5.5bn) for Absa, South Africa's biggest retail lender. South African Finance Minister Trevor Manuel has given the go-ahead for the move by the UK's third largest bank. The deal marks the biggest single foreign investment in South Africa, and makes Barclays Africa's largest bank. "This may well open the floodgates of investment in South Africa," said Colin Coleman, Goldman Sachs' managing director in South Africa. "It would be our hope that other global multinationals view the country in the same light as Barclays - a high growth, emerging market opportunity." Several hundred people demonstrated in central Johannesburg May 28 against Barclays plans to return to retail banking in South Africa. Barclays was forced to leave the country in 1986 under pressure from anti-apartheid activists, but re-established a small investment banking presence 10 years ago. The demonstration was organised by Jubilee South Africa a group, which has taken legal action in the US against a number of major multinationals which operated under apartheid despite international embargoes. President Thabo Mbeki countered that investments by both Barclays and General Motors constituted "an inspiring and unequivocal vote of confidence" in the democratic South Africa. 
In a wide-ranging critique of British Prime Minister Tony Blair's Commission for Africa report, Democratic Alliance leader Tony Leon says there is a risk of reforms on the continent slowing down if countries "are showered with new flows of aid before they have fixed problems with corruption and mismanagement". Leon's comments, which were submitted to Blair Mid-May, were based on a speech he delivered in Sofia, Bulgaria. "Doubling aid, for all the noble aims of such a step, would be useless unless the capacity of African countries to spend that aid effectively was doubled first. Some are able to handle new aid, but others are not," Leon said.
UN agencies condemned vitamin proponent Matthias Rath for his attack on life-prolonging anti-AIDS drugs May 11. Just days before he faced a court challenge in South Africa. The Advertising Standards Authority (ASA) has ruled against two adverts placed by him in the national press. The ruling came as the Treatment Action Campaign (TAC) took him to court to stop him alleging that TAC is a front for the pharmaceutical industry. Rath has run a year long campaign in South Africa against antiretroviral medicines, used to slow the progression of HIV, saying they are poisonous and that his vitamin products can do a better job. The highly charged case has prompted Médecins Sans Frontières to call on the health department to unequivocally state that nutrition alone would not save people with HIV from death. In a joint statement the World Health Organisation, the UN Children's Fund and UNAIDS described Rath's claims as "misleading and potentially dangerous". "Misrepresentations of this sort are both dangerous and unhelpful. In countries where it is widely available, antiretroviral therapy has turned HIV/AIDS from a 'death sentence' into a chronic but manageable disease," the UN agencies said. UNAIDS executive director Peter Piot told a press conference in Johannesburg, South Africa, May 25. 
New research states that almost one in three deaths in South Africa are caused by Aids making it the leading killer. In two provinces, the figure is as high as 40%, says an unreleased report by South Africa's Medical Research Council. Research was based on the study of death statistics for the year 2000. A researcher admitted that the report relied partly on estimations, since Aids-related deaths are not always identified on death certificates. The high death rates due to HIV/Aids highlight the urgency to accelerate the implementation of the comprehensive plan for the treatment and prevention of HIV and Aids. The MRC report is the first to include a provincial breakdown of Aids-related deaths. In KwaZulu-Natal province, 41.5 % of deaths are attributable to Aids, followed by Mpumalanga with 40.7 percent, the report says. The health department has declined to comment on the report, arguing that the document has not yet been "officially" released. The findings in the report, which is already available to news agencies on request, showed that almost 30 percent of deaths in 2000 were caused by HIV/AIDS.
South Africa's reputation as a mining investment destination has "suffered a lot of damage" because of Harmony's hostile bid for Gold Fields, Mvelaphanda Resources CE Pine Pienaar said May 17. He said this was the message he had received on a recent overseas investment road show, and a big effort was needed to restore the country's attractiveness among offshore investors. Mvelaphanda owns 15% of Gold Fields' local assets, and has the future right to convert this to a smaller percentage holding in the listed gold company. "All the investors we spoke to in the US, Britain and Europe were very concerned about South Africa as an investment destination, in the mining sector," said Pienaar.
A South African court has barred the Mail & Guardian newspaper from publishing a story involving an oil management company. The investigative weekly frequently faced legal action from the state under apartheid, but has operated freely since 1994. The paper had reported that the ruling ANC had received taxpayer funds from the oil company Imvume and it was intending to run a follow-up story at the end of May. Asked for comment by the paper, Imvume's lawyers responded that the company's business activities and support for the ANC were a private affair, while ANC lawyers said their clients were not obliged to discuss donations received. "We've been gagged," Mail editor Ferial Hafajee said. "Our biggest concern is press freedom, but we will respect the court's hearing," she added.
African Ministers of Health attending the 58th World Health Assembly (WHA) in Geneva, Switzerland spoke with one voice regarding the continued migration of health professionals to developed countries. The WHA is the supreme decision-making body of the World Health Organisation (WHO) that meets annually to determine the organisation's bodies. The Ministers are concerned that international migration and recruitment of personnel undermines the main investment that most African countries have made in improving their health services and further weakens the health systems in the continent. Other interventions involved improving working conditions for health workers and providing scarce skills and rural allowances to attract and retain health workers in the public health sector in general and rural or under served areas in particular.

G8Summit - UK Business Buy-in for Aid Plan
The British government is intensively lobbying big business with interests in Africa to back the recommendations of Prime Minister Tony Blair's Commission for Africa report ahead of the Group of Eight (G-8) summit in July. Senior UK public servants are enlisting business to ensure the G-8 summit fully supports the commission's proposals. Among the commission's recommendations are a doubling of aid to Africa, extensive debt relief and opening up of developed countries' markets. A largely British business group, Business Action for Africa, is trying to bring large corporations together to draw up an action plan ahead of the summit, in order to influence G-8 governments. Its founder members are UK-listed companies including Anglo American, SABMiller, Rio Tinto and Unilever. The action group wants business to become "a locomotive for change" in Africa. It hopes business can begin to play a more significant role in African development through a commitment to greater social responsibility and strict adherence to codes of conduct. Members are also being called upon to spread good news about investments in Africa. A buy-in from business is also needed to put into action the commission's recommendations for extractive industries, which require greater transparency about the payments made by oil companies to governments as well as help from banks in the repatriation of stolen funds. As part of their lobbying British officials will attend the World Economic Forum's annual southern African summit in Cape Town from June 1-3, and a meeting of the US Corporate Council on Africa from June 21-23.

Support for Africa Aid Plan Tops Mbeki's Agenda for Bush Meeting
President Thabo Mbeki meets President George Bush in Washington June 1st to lobby his support for an ambitious plan for increased aid for Africa to be discussed at the Group of Eight summit in July. White House spokesman Scott McClellan said Bush looked forward "to discussing their common concern for global security, conflict resolution in Africa, economic development, trade and investment, and fighting HIV/Aids in Africa". Mbeki's spokesman, Bheki Khumalo, confirmed the visit. But he and other South African officials stressed that Mbeki's main concern would be to discuss the G8 summit in Gleneagles, Scotland, to be hosted by UK Prime Minister Tony Blair. Blair has promised to make Africa one of the key concerns of the summit, the other being climate change. So a major focus of the summit should be the Commission for Africa which Blair appointed and which recently published ambitious recommendations for increased aid from the G8 countries to Africa. These included a doubling and later possibly tripling of development finance, large debt relief and substantially increased access for African exports to G8 markets. These recommendations would implement much of the G8 Africa Action Plan the G8 leaders adopted at their 2002 summit in Kannanaskis, Canada, but which has only partly been implemented. Serious differences have emerged among the G8 countries over the Blair Commission's recommendations, especially its proposed international financing facility. The US has made it clear it cannot support this facility and is lukewarm about other recommendations of the commission. Japan, Germany and Italy are also opposed to much of the plan. Mbeki himself has said he is concerned that the G8 governments should overcome their disagreements before the Gleneagles summit so it did not become a debating forum but a meeting to agree on practical steps to implement the G8 Africa Action Plan and the recommendations of the Africa commission. On trade, Mbeki and Bush are likely to discuss the stalled negotiations for a free trade area between the US and the Southern African Customs Union, of which South Africa is the major member. The talks have broken down over, among other things, US demands for labour and environmental standards to be met in producing goods for export into the US market.

Amnesty Criticises SA Over Slow Roll-Out of Aids Drugs
Amnesty International criticised government in its annual report, released May 25, for the slow roll-out of antiretrovirals. By August last year, when the London-based human rights group visited SA, only about half of government's target of 53000 people had access to antiretroviral drugs through state-accredited facilities. This was short of the figure of about 500,000 people that the Actuarial Society says require treatment with antiretroviral drugs. The initial target date was March last year, but government moved it out by a year. It said recently that only 42,000 people were receiving antiretrovirals. Amnesty also said President Thabo Mbeki "publicly minimised the concerns of service-providing and advocacy organisations about the high levels of rape and the link with the epidemic of HIV infection among younger women". According to the AIDS Law Project, connected to the University of the Witwatersrand, 50000-60000 people are receiving antiretrovirals at private health-care facilities. The Actuarial Society says about 5-million South Africans are infected with HIV, and 10% of them require treatment with the drugs. SA was also criticised in the report for poor access to justice and health care for rape survivors and for deaths in police custody. Child and adult rape survivors interviewed by Amnesty said they experienced "considerable" difficulty getting further medical treatment or psychological care, the rights group said. This was due to a combination of social stigma, unemployment, and lack of secure housing. Amnesty did give SA credit for improvements in the justice system for rape survivors, including policies on family violence, child protection and sexual-offences units. The rights group also said "credible allegations of torture or ill-treatment" were made by criminal suspects, refugees, and political activists. And it said corrupt practices by immigration officials obstructed access to justice by asylum seekers.

Cosatu - Jobs Strike in June
The Congress of South African Trade Unions (Cosatu) plans to go on a nation-wide strike on June 27 to protest against the "catastrophic loss of jobs and intolerably high levels of unemployment in the country", Cosatu secretary general Zwelinzima Vavi said on May 26. More than 10 000 jobs have been lost since January, and 30 000 more are under threat as companies continue to shed jobs, partly as a result of the strong rand. The unemployment rate in the country stands at 40% "if we count all those who want paid work". Vavi said the National Economic Development and Labour Council (Nedlac) had declared a deadlock in negotiations between employers and unions. "In the next few days, Cosatu will submit notices that permit workers to embark on protected rolling mass action, including pickets, demonstrations and a series of stayaways. The first stay away will be on June 27," he said. The June strike will be followed by monthly protests until January 2006. These will include pickets and lunch-hour demonstrations. In December action will peak, with a mass rally planned to coincide with Cosatu's 20th anniversary. Vavi took a swipe at the ANC discussion document, which proposes amendments to labour laws. "We reject suggestions that there is a link between the labour market and unemployment. The document suggests a dual economy requires dual labour laws. But separate labour laws for different groups will just entrench exclusion and inequality. "Cosatu will not let workers be pushed back into conditions where their rights depend on where they are from, their age or the size of their employer," he said.

Protests Against Slow Social Improvements
Without a massive injection of ideas and energy, the ANC has no chance of meeting its election promise to halve poverty and unemployment by 2015. They are global afflictions, structurally entrenched by apartheid, which bolster the social segregation that still blights South Africa. Street protests across the country underline the growing impatience of the masses, who have still to benefit tangibly from the 1994 transition to democracy. By the most conservative estimate, 10 million South Africans are still so poor that they depend on government hand-outs just to survive. At least 4.5 million people are actively looking for work. More than a decade after winning power the ANC faces increasing pressure to deliver promised social services. During May angry protestors blocked roads, set up burning barricades, sung liberation struggle songs and demanded that local authorities in the coastal cities of Cape Town in Western Cape province, and Port Elizabeth in Eastern Cape province address their needs. These developments have caught the attention of President Thabo Mbeki. He told parliament May 25 that "nothing that is happening, or has happened in our country, suggests that our new democracy is threatened". But he pointed to "fault lines" in South African society "that can emerge and generate conflicts that we do not need". One problem area underlined by the demonstrations was the feeling "among some of the poor that, so far, the democratic order has failed them". The recent protests "reflect and seek to exploit the class and nationality fault lines we inherited from our past, which, if ever they took root, gaining genuine popular support, would pose a threat to the stability of democratic South Africa", Mbeki told parliament. Ashwin Desai, a researcher at the Centre for Civil Society at the University of KwaZulu-Natal, said the demonstrations were "a genuine cry about the neglect, which is very apparent, and the distance between government and ordinary people". "The sheer scale and geographic spread [of the discontent] has forced Mbeki to recognise these things as more than a conspiracy [by particular groups] ... they are genuine protests against expectations that the government themselves have created: of free basic services, homes and jobs for all." After the first democratic elections in 1994, people gave government the benefit of the doubt, just on sentiment and because a non-ANC regime is not one people find palatable, but they're asking why things are taking so long.

Southern Africa: UN Leaders Call for Action
Three United Nations leaders issued a call in Johannesburg May 25 for the world to refocus its attention on Southern Africa, as the region faces the triple threat of HIV/AIDS, food insecurity and weakened state capacity. UN Special Envoy James Morris, UN Children's Fund (UNICEF) executive director Ann Veneman, and UNAIDS executive director Peter Piot warned in a joint statement that despite great strides made by governments and the international community in meeting the most critical needs of the region, the 'triple threat' still stalked Southern Africa, and more investment was needed if the gains of the last three years were to be sustained. "Emergencies come and go, but we are now in an acute phase of a chronic problem, and the effects of this are going to be with us for generations to come," Morris said. "This is not about one issue or one country - many factors are converging to undermine the livelihoods of millions of people in Southern Africa. The complexity of the situation demands that we must do all we can to help governments in the region." Due to the current dry spell and crop failure an estimated seven million people could need food assistance over the coming year. Although, final analysis of regional crop assessments is expected in early June. The UN leaders noted that three years ago, at the height of the Southern African crisis, many countries in the region were without food security, access to treatment for people living with HIV/AIDS, or programmes to target the growing number of orphans and other vulnerable people. As a result of concerted efforts by governments, civil society, the UN system and the international community, there was now greater diversification of crops and sources of income, which was helping to mitigate the impact of erratic weather; several countries had developed action plans to create safety nets for the more than four million orphans and other vulnerable children; and up to 176,000 people now received antiretroviral (ARV) treatment. However, one million people were still not receiving ARVs. Morris met with 10 UN country representatives from Southern Africa on Wednesday morning to review and examine current interventions, joint programming, UN reform, and strategies for addressing the multiple impacts of the triple threat. The three leaders emphasised the complexity of the triple threat. "Without food, antiretrovirals are less effective; without antiretrovirals, children become orphans; and without a healthy and educated next generation, Southern Africa will have great difficulty breaking the cycle of poverty," they stressed. "Over twenty years into the epidemic, we know that an exceptional response is required," said Piot. "We need to make sure that HIV prevention, food security and HIV treatment are integrated into a comprehensive response: this is the only way to get ahead of the epidemic. We must aim for universal access to HIV prevention and treatment."

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Delayed Aviation Treaty to Come Into Effect

The Yamoussoukro Decision, which seeks to liberalise African aviation, is to be implemented in phases by the end of next year. The four-day African Union (AU) air transport conference, which was held at Sun City Mid-May has set definitive time-frames for implementation of the treaty, sending a strong message of its seriousness on the opening of the African skies for competition. The Yamoussoukro Decision was initially planned to be fully implemented in 2002, but was hampered by social instability and lack of political will in some countries. The draft resolution for the implementation of the accord was adopted yesterday, and it committed governments to the full implementation of the treaty by the end of next year. In the interim, the AU has commissioned a study to establish the challenges faced by governments in implementing the accord. A monitoring body was also appointed to harmonise national and regional air transport policies. Guidelines on the criteria for evaluating compliance of the treaty would be distributed to Africa's 53 states within the next three months. The guidelines for the harmonisation of competition rules would be adopted within six months. According to the report, African transport ministers were "extremely concerned with the ordinate delay in the implementation of the Yamoussoukro Decision". President Thabo Mbeki urged AU heads of state to "accelerate efforts" to implement the accord May 18.
President Mbeki says Africa needs a comprehensive and concrete programme of action for aviation, in line with Nepad and the Millennium Development Goals (MDGs). He said the aviation industry was currently in a "parlous state of affairs" and that airlines were often unreliable with frequent cancellations, which were not only inconvenient but also unproductive for Africa's economic growth. President Mbeki was speaking May 18 at the opening of the African Union (AU) meeting of ministers in Sun City, North West, to find ways of enhancing the continent's aviation and air traffic system.
Speaking of the aviation industry's potential to stimulate economic growth, President Mbeki alluded to statistics by the International Air Traffic Association (IATA) that revealed that airlines brought to the global economy about four million direct jobs with US400 billion Dollars output and 24 million related jobs or US 1.4 trillion Dollars.

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Increase in Offer From Barclays

Barclays' acquisition of Absa appears to be a "done deal", with minority shareholders welcoming a significantly changed structure and improved R82,50 offer from the UK bank may 9. If shareholders vote in favour of the deal at a scheme of arrangement meeting on June 13, Absa will be owned by the UK bank by July 13. Shareholders representing 63% of Absa's shares have already given their support to the deal. Barclays' proposed R33bn investment in Absa, which would be SA's largest foreign direct investment, could signal the beginning of more major investments in SA, Absa chairman Danie Cronje said. "It leaves us with the impression that this is a beacon for foreign confidence in investment," Cronje said. "This is an investment I think SA should be proud of." Barclays' new-look deal for a majority stake in Absa includes a 4,4% increase to the R79 offer that was indicated previously, as well as a new structure, which will be conducted in two phases. The first requires shareholders to sell 32% of their shares if the scheme of arrangement meeting votes in its favour on June 13. The second phase, a voluntary offer, will ask shareholders to sell a further 28% or more of their shares to give Barclays the 60% stake it is looking for. Because Sanlam and Remgro, the bank's two largest shareholders with a combined 28%, have already agreed to sell all their shares, other minority shareholders can tender less for Barclays still to reach the 60% it wants in Absa. Cronje said a final dividend of R2 a share would also be paid to shareholders. Absa's board and management have already given their recommendation for the offer. It also has the support of Absa's empowerment partner Batho Bonke. "We feel the price is right and the dividend is appropriate with the circumstances Absa finds itself in," Cronje said. "The scheme of arrangement will go to shareholders. We need 75% of shareholders to approve that at the meeting and we feel the support that we have for this transaction will make it successful." If the deal goes ahead, Cronje said Absa's board would be largely unchanged, apart from the addition of Dominic Bruynseels, CEO for Barclays Middle East and Africa, as an executive director. And two new Barclays non-executive directors, including David Roberts, Barclays' retail and commercial banking CEO, and Barclays finance director Naguib Kheraj. They will replace Sanlam and Remgro's representatives on the Absa board. Barclays expects to grow Africa's contribution to its annual revenue from a "modest" 3% to 15% by 2007, if its bid for Absa is successful. Speaking on May 6 at the launch of a report entitled Delivering Financial Services to Africa, Barclays MD for sub-Saharan Africa and the Indian Ocean Malcolm Hewitt said a successful outcome to the bid would also grow the number of African countries in which Barclays operates from 12 to about 15.

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AGOA Increases Exports

Exports from the 37 African countries eligible for duty-free exports to the US under that country's African Growth and Opportunity Act (Agoa) jumped 88% to $26,6bn last year over 2003, says the latest Agoa annual report, submitted to the US congress by US President George Bush May 23. US exports to sub-Saharan Africa rose a quarter to $8,6bn, according to the report released by the US Bureau of International Information Programmes. The figures support the widely held view in the US and Africa that the five-year old Agoa initiative has been successful in stimulating trade between the two regions. The initiative has already been extended, and a study is under way into expanding it to include a wider range of countries and products. The study will be completed in July. The bulk of the increase in sub-Saharan exports came from oil, although non-oil exports also rose a solid 22% to $3,5bn. Oil-producing nations recorded the largest increases. Nigeria's exports under Agoa grew 56%, Gabon's 25% and exports from Republic of Congo almost doubled. A 29% rise in South African exports under the act also came mainly from commodities, such as platinum, diamonds and ferroalloys. The report says exports of vehicles and parts from SA to the US continued to increase. More than 98% of US imports from Agoa-beneficiary countries entered duty-free, says the report. The benefits that exporters in SA and its customs union partners enjoy under Agoa at the moment are expected to be locked in and expanded on under a free trade agreement that both regions had hoped to seal in December last year. Talks stalled around the middle of last year, however, and have not yet been resuscitated. The US report yesterday blamed "capacity constraints" in the Southern African Customs Union - comprising SA, Botswana, Lesotho, Namibia, and Swaziland - as well as divergent views for the slower-than-expected progress. Negotiations are expected to resume "later in 2005". The Agoa report says foreign direct investment from the US into sub-Saharan Africa was estimated to have increased to $10,6bn in 2003 from $8,9bn in 2002.

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SA, Bulgaria to Improve Economic Relations

Deputy Foreign Affairs Minister Aziz Pahad held bilateral political and economic discussions with his Bulgarian counterpart Petko Draganov May 25.
Foreign Affairs said the two discussed the status of bilateral political and economic relations as part of efforts to maintain and improve those ties. Deputy Minister Dragonov also briefed Mr Pahad on Bulgarian foreign policy priorities with particular reference to NATO, the European Union and global reform of governance including the United Nations. Mr Pahad briefed his Bulgarian counterpart on South African foreign policy priorities, engagement within the African Union (AU) and conflict resolution and prevention in Africa. Developments in the Middle East with particular reference to the conference on the region Mr Pahad attended last week also featured in the discussions. Last year South Africa's exports to Bulgaria amounted to more than US 4 million Dollars and in return imported goods worth more than US 6 million Dollars from Bulgaria.
Sudan and DRC Congo to Receive Public Services Support
South Africa will despatch separate teams of experts to Sudan and the Democratic Republic of Congo (DRC) to help the two rebuild their nearly non-existent public sectors. The two countries are struggling to emerge from decades of devastating internal conflicts that saw among others, the collapse of public infrastructure and services. Public Service and Administration Minister Geraldine Fraser-Moleketi told Parliament today that officials would provide "technical and limited financial support" to various public service institutions in the DRC over a three-year period. This, she said, would include auditing the number of public servants on government payroll to help with salary administration, human resource planning and management. They will also help with anti-corruption initiatives, and the setting up of a national public administration training institute. "These are necessary pre-conditions to building an effective service delivery machinery," Ms Fraser-Moleketi said. The move to reform the Congolese public sector, argued the minister, was to "set that country on the way to realising its full potential". She also announced that senior officials from the South African Management and Development Institute (SAMDI) and her department would visit Sudan next month to help capacitate the public sector especially in skills development. Meanwhile, the minister also revealed that South Africa's preparations for the AU peer review were "advancing well". "By the end of July we will have started engagements with all the affected sectors. Our national process will lead to the preparation of a self-assessment report and the formulation of a programme of action before the end of 2005," she said. Once this had been done, Parliament will be invited consider the country report before it is submitted to the African Union (AU).

SA, Nigeria Join Forces to Secure Seats At UN Security Council

South Africa and Nigeria will "work together" to secure the two permanent seats for Africa in the reformed United Nations Security Council. Deputy Foreign Affairs Minister Aziz Pahad made the announcement May 5 at the preparatory meeting of the SA-Nigeria Bi-National Commission scheduled to take place later this year. Mr Pahad said while there were six African countries vying for the continent's two permanent seats on the council, "South Africa and Nigeria have decided to work together to ensure we get the two seats in the Security Council." Commentators have tipped South Africa and Nigeria as the two strongest candidates for the seats, due to their involvement in peacekeeping operations in the continent and because both countries have the biggest economies. According to the criteria laid down by the panel on UN reforms, new members of the council should have contributed "most to the UN financially, militarily and diplomatically," particularly through contributions to the UN's assessed budgets and participation in mandated peace operations. The other candidates are Libya, Egypt, Senegal and Kenya. However, Mr Pahad said while the six African countries sought candidacy for the seats, the whole issue "should not divert us as Africans from dealing with poverty and underdevelopment in the continent." Mr Pahad's statement comes after President Thabo Mbeki's parliamentary comments last month, reiterating that Africa's two seats should have veto powers, to enable the global body to fight poverty and underdevelopment. Developing countries are arguing against the current power balance within the UN, which they say has resulted in the UN ignoring global poverty, genocide, human rights abuses and the underdevelopment of developing nations.

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SA Hopeful for Investment Upgrade

Ratings agency Fitch said May 12 that SA's chances of getting a sovereign rating upgrade within the next 18 months were looking good. Fitch senior director Paul Rawkins praised SA's economy. "The budget came in much better than we expected." Any rating upgrade was most likely "within the next eighteen months". An upgrade from the current investment-grade rating of BBB would make it cheaper for SA's government to borrow money. It also would encourage foreign investment as foreign investors typically chose countries with higher ratings. Last October Fitch placed SA's currency rating on a "positive outlook", suggesting that the country's overall sovereign rating could be upgraded soon. In January the largest ratings agency, Moodys Investor Services, upgraded SA to a Baa1, equivalent to a BBB+ and only one notch below the coveted A category. Standard & Poor's gave SA a BBB rating in May 2003. Fitch has released a special report on what it would take to raise the credit profile of sub-Saharan Africa. It said this region should take advantage of the stronger international environment "to build on macroeconomic stability, press ahead with reforms and improve the investment climate". Fitch's A category included a number of developing countries, including Chile, South Korea, Malaysia, Israel and Hungary - but not any African countries. In Africa only Tunisia has the same BBB investment-grade rating as SA. Most sub-Saharan countries have a B rating, although Fitch director Veronic Kalema said many were making progress by improving their economies, stabilising politically and reducing debt.

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Coega Stainless Steel Plant in Pipeline 

A new plan is being drawn up to site a stainless steel plant at Coega in Eastern Cape, with discussions under way to find an anchor investor for the $5bn project. The plant would be a major boost to Coega, and could become an anchor project for the port's planned industrial development zone, given continuing uncertainty over the prospects for building a $2,2bn aluminium smelter there. The steel project would involve twice the investment of the aluminium project, and would bring significant new employment to Eastern Cape. If the stainless steel plant goes ahead, one way of helping to fund it could be through a stock exchange listing, according to sources close to the project. London-based resources company Kermas, which recently purchased Samanchor chrome in a $469m deal, is one of the prospective participants in the Coega stainless steel project, as will be the Industrial Development Corporation and Bateman. There will also be an empowerment shareholder in the consortium which, the sources said, could start operating next year. Discussions are under way with three global players in the stainless steel industry to recruit another international investor, who would provide both expertise and finance. 

Coega Gains Textile Plant

COEGA industrial development zone in Eastern Cape has secured its first tenant in the form of a R200m niche textile plant, which is expected to employ 1200 people in two to three years. Coega chairman Moss Ngoasheng hailed the investment by Belgian company Sander International together with empowerment company ICAN as a milestone May 18. He said 75 more potential projects, including the mooted multibillion rand Alcan aluminium smelter, were in the pipeline. The viability of Coega, which government is developing at a cost of more than R7bn, has been questioned against the backdrop of the struggle to secure investors and because the project was politically motivated, rather than economically. Ngoasheng said "we are not building a white elephant". He hoped the textile plant announcement was the first of a series of investments to follow over the next 18 months. Small black empowerment company ICAN, led by motivational speaker David Molapo, would fund the project and own 51% of it. Established 15-year-old Belgian textiles company Sander would own the balance. Sander, founded and led by former opera singer Alex Liessens, would provide the intellectual property and technology for the project which will supply products to SA, the US, Europe, Middle East and Australia. The announcement comes as the South African textiles and clothing industry is collapsing under the onslaught of cheap Chinese imports. Liessens said Sander produced high-end niche products, mainly fire retardant fabrics for the hospitality and automotive industries, among others. Orders for 250000m of fabric from the new plant had already been secured, said Sander Liessens said Sander chose Coega as its first investment destination outside of Belgium, partly because the zone was geographically well placed for shipments, such as to the Middle East and the US.

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Major Initiative for IBM SA

IBM has given its South African subsidiary a massive vote of confidence, and a substantial cash injection, by using it as a base to provide technical support for its customers around the world. About 250 technicians have been recruited to staff the newly opened contact centre and that will grow to 700 by year's end if IBM can find or train up sufficient skills in the South African market. Ultimately thousands of jobs may be created to offer technical support and to run the back-office systems for dozens of corporate customers. However, while the centre represents a major foreign direct investment by IBM, it has caused some ructions locally and abroad. IBM SA GM Mark Harris admits to upsetting several local rivals by luring away their technicians, particularly those experienced in mainframe and Unix technologies. Other recruits previously worked for IBM's customers. Internationally, the move is creating job loses at contact centres in the UK and the Netherlands, as work previously handled there is being transferred to SA. IBM said it would be cutting up to 13000 jobs, mainly in Europe - and the South African venture is a contributing factor. The centre is also likely to win some customer support deals handled in the US. IBM also had to persuade its customers that having their support handled from SA did not pose a business risk. Such sensitivities caused long delays before the US-parent company made a decision to base the business in SA. IBM executives visited SA more than two years ago to assess the standard and volume of technology skills, the telecommunications infrastructure, local wages, labour laws, the education standard and overall living conditions. In the end, SA was chosen against competition from the more mature outsourcing location of India and the emerging Chinese market.. The parent company has provided an undisclosed budget to enhance the network infrastructure and install telephony exchanges and helpdesk equipment. Wages will also be paid by the parent company as the staff are serving global customers. "This is foreign investment on a huge scale," Harris said.

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Rand Hurts Exports, and Production

Manufacturing production grew at its slowest pace in 13 months in March, as exports were stalled by the strength of the rand, figures released by Statistics SA (Stats SA) May 12 show. This has fuelled speculation that the Reserve Bank may lower rates again before the end of the year to support the sector. Analysts said that the rand's performance would be a key factor in determining the prospects for the sector. Manufacturing output rose 1,2% year on year in March and 0,9% month on month. The sector contributes almost 17% of gross domestic product and its growth is used to measure expansion in the economy. Output declined in the first two months of the year, to 3,2% year on year in January, and 3% in February, as the strong rand continued to restrict growth in the production side of the economy. March was the fourth consecutive month of decline. The rand has gained about 10% against the greenback since the beginning of the year. Lower production was reported by six of the 10 manufacturing divisions. "The cut in interest rates in April and continued reasonable growth in personal disposable incomes suggest that consumer spending will remain strong in the months ahead, although year on year growth will ease off the higher base," Nedcor chief economist Dennis Dykes said May 12.

Steinhoff Makes £105m Bid for Chunk of UK's Homestyle

Furniture maker Steinhoff International is bidding for a stake in struggling UK furniture retailer Homestyle, for a maximum cash consideration of £105m (about R1,22bn). The move is an attempt to keep in step with the UK trend of retailers making furniture for their own chains. Steinhoff CEO Markus Jooste said Homestyle was one of Steinhoff's leading customers and being closely tied to a manufacturer would put the group on an "equal footing" with its UK competitors. Steinhoff already has a presence in the UK in its bed manufacturers Reylon and Sprung Slumber. If UK authorities give their approval, the furniture maker will soon have a holding in a retailer which generated a turnover of £588,7m, incurred an operating loss of £32,1m and had a net debt of £85m for the year to May 1 last year. New management was brought into Homestyle a year ago to turn the group around. Jooste said the new management team was doing well and further improvement would come from Steinhoff's involvement. Homestyle's turnaround can be seen in the company's latest set of results, which saw its operating loss from continuing operations reduced from £6,2m to £2,3m and a reduction in net debt to £57,5m for the 26 weeks to end-October. While Steinhoff could take up to 73% of the publicly listed Homestyle, it planned to hold only 45% of the company, Jooste said. The move into the UK retail sector is the latest departure from its core furniture-making operations following the take-over of leading transport and logistics company Unitrans after it exercised its option to buy construction group Murray & Roberts' 44% holding in Unitrans, last year.

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Court Ruling Halts Harmony Takeover Bid 

The Gold Fields board gathered in Johannesburg May 23 to discuss the company's future strategy now that it has been unshackled from Harmony's hostile bid. The bid collapsed May 20 after the high court issued a ruling that was fiercely critical of the Securities Regulation Panel (SRP) and said that the bid had expired before Christmas. Analysts said a major focus of the meeting would have been the 11,5% of Gold Fields shares that are held by Harmony, but which Gold Fields would like to see in friendlier hands. "One option is for Gold Fields to buy the shares themselves, as they are able to do - and they have the cash," said an analyst. "However, one wonders how easy it would be for Gold Fields CE Ian Cockerill to do business with Harmony's (CE) Bernard Swanepoel? "Gold Fields would want a discount to the market value of the shares, while Swanepoel will seek a premium, as gold shares have been bounding upwards with the stronger rand (gold price)." An industry player said that one way to sweeten the deal might involve Gold Fields selling Harmony its Beatrix mine in Free State, which was previously owned by Harmony. "If I was in Swanepoel's shoes, I would want something for doing a deal, and getting Beatrix back may well be on his mind," he said. Swanepoel said May 23 that he had received "no serious offers yet, but I have no serious intention to dispose of the shares. In a falling rand environment, the shares are doing well." If Gold Fields does not itself bid for the shares held by Harmony, it is possible that Norilsk Nickel of Russia, which holds 20% of Gold Fields, could do so. Norilsk intends to place its stake in Gold Fields into a new vehicle, Polyus, which may be listed in North America, and this could also be the future home for Harmony's 11,5% of Gold Fields. There is widespread speculation that Gold Fields may un-bundle its offshore assets, and these could in future be merged with Polyus, creating a major new international gold player. Norilsk had a strained relationship with Gold Fields last year, having backed Harmony's hostile bid, but it is believed that there is now a far friendlier relationship between the two. This could be further developed if Norilsk were to be offered seats on the Gold Fields board. "It is difficult to predict what Norilsk will get up to, as there are uncertainties about the company's freedom of manoeuvre because of concerns that the Russian regulatory authorities may not approve a further offshore adventure for Norilsk, and may not have been happy with the original purchase of 20% of Gold Fields last year," said the analyst. "Of course, Norilsk could be a potential buyer for Swanepoel's 11,5% of Gold Fields." The SRP would not comment yesterday on Friday's high court ruling that it had shown bias in favour of Harmony. Gold Fields has been considering seeking damages from the panel, or from Harmony, and the ruling could lead to mounting pressure for a revision of takeover rules in the country, as these appear to prevent a hostile takeover attempt standing any chance of success. 

Minister Criticises Mining Companies 

Minerals and Energy Minister Phumzile Mlambo-Ngcuka has accused mining houses of hiding behind the strong rand while paying high executive perks and dividends. Mining companies blame the strong rand for the woes the sector is in and have, together with the unions, called for government intervention to weaken it. The call has largely been successful, with the Reserve Bank saying its recent decision to cut the repo rate was aimed at breathing life into some sectors of the economy suffering from the rand. The African National Congress wants a more aggressive buying of dollars and a quicker relaxation of exchange controls to effect a "competitive" rand value. Mlambo-Ngcuka said May 19 that while the rand was a factor in its troubles, the industry had failed to adjust its business plans to a stronger currency. "The strength of the rand by itself is not a make-or-break factor," she said. She announced the establishment of a tripartite committee - government, the Chamber of Mines and trade unions - that would examine ways of managing the crisis in the gold-mining industry, which has shed more than 8000 jobs in the past 18 months alone. "We will not only be looking at the rand - we will be looking at a range of measures," she said. "SA's gold mines are deep, the infrastructure is complicated, and the geology is quite different from that of countries we're competing with. Working costs are high and there are commodity cycles. She said sections of the Minerals and Petroleum Resources Development Act would be tightened to ensure social and labour plans were implemented. But she assured the industry that no more black economic empowerment demands would be placed on it. The mining charter would be aligned with trade and industry department empowerment codes. Meanwhile, Minerals and Energy Deputy Minister Lulu Xingwana said she was "exasperated and disappointed" that De Beers had replaced a "white male CEO (Gary Ralfe) with another (Gareth Penny)".

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Oil Companies Unstuck On Currency

The rand's appreciation against the dollar took its toll on South African oil companies in 2003, with aggregate operating profits dropping 41% to R3,6bn from R6,1bn the previous year. The South African Petroleum Industries Association (Sapia) said in its 2004 annual report, released May 23, that this was largely a result of refining margins declining in rand terms as the currency appreciated against the dollar. Local refiners' margins are determined in dollars and are linked to global trends through the basic fuels pricing system. Although dollar margins were higher in 2003 than the previous year, the stronger rand meant they were lower in rand terms. Sapia, which represents BP, Caltex, Engen, PetroSA, Sasol, Shell and Total, said aggregate refining profits were also squeezed by plant shutdowns, while the decline in rand oil values during the year resulted in significant stockholding losses. However, marketing profits were higher than the previous year due to a 6,93% increase in the regulated marketing margin granted by government. The industry's marketing margin at the end of 2003 was 37,3c/l, up from 28,3c/l in 2002. The margin is estimated to have risen to 39,3c/l last year. Yet Sapia said the industry's aggregate after-tax return on assets deteriorated to 4,2% in 2003 from 8,4% the previous year, the lowest level it has reached in the association's 10-year history. Adjusted on a replacement-cost basis, 2003 profits represent a return on assets of 6,9% and a margin of 8,6c/l, which the organisation pointed out was lower than the return on bank deposits. In his report Sapia chairman Simphiwe Mehlomakulu said it was "particularly heartening" that many other local industries had followed the organisation's lead in signing industry empowerment charters. "The implementation of the charter includes much more than ownership," he said. "Procurement, employment equity, capacity building and the creation of a supportive culture are also vitally important. "All Sapia members are trying to achieve the objectives of (the charter). Only four years into the 10-year period, significant progress has been made regarding the ownership objectives, and the emphasis last year was therefore on the latter two areas." Black control of the petroleum products market, including black empowerment stakes in Sapia members and the market shares of black-owned companies Afric Oil and Tepco, was 22,2% in the case of petrol and 23,7% for diesel last year. And the percentage of goods and services bought by petroleum companies from black suppliers rose to 17% in 2003 from 10,6% the previous year. However, the proportion of blacks in senior positions in the local oil industry fell to 31% from 33% in 2002, and the proportion of women in senior positions dropped to 11% from 16%.

Sasol, Asian Firm to Set Up Joint Plant in China

Chemicals company Sasol and Asian group Wilmar Holdings have agreed to form a joint venture to build a fatty-alcohols plant in the industrial port city of Lianyungang in China at an as-yet undisclosed cost. At 60000 tons a year, the plant would be the first "world-scale" alcohol plant in China, Sasol's olefins and surfactants business in Germany said May 24. Construction could start as soon as September this year and the plant could be commissioned by the middle of 2007, subject to the board approval of both companies. Fatty- alcohols are used to produce a wide range of goods such as cosmetics, textiles and detergents. Sasol Olefins and Surfactants MD Anton Putter said Wilmar's leadership in tropical oils and established presence in China, combined with Sasol's leadership in the alcohol market, created significant synergy. Establishing the first world-scale alcohol plant in China would allow Sasol to continue to grow with key multinational customers as they expand their operations in Asia, he said. Sasol would be the exclusive distributor for the sales and marketing of the alcohols produced by the joint venture. The feedstock would be fatty acid, produced at the same location by Wilmar. Sasol said it was the largest global producer and marketer of C6+ alcohols - a type of fatty alcohol - with capacity of more than 600000 tons a year. Sasol Olefins and Surfactants have production operations in German, the US, Italy and SA, with smaller operations in Slovakia, the United Arab Emirates and China. Sasol Olefins and Surfactants accounted for 28% of Sasol's turnover last year.

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