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Books on Serbia & Montenegro
REPUBLICAN REFERENCE
Area (sq.km)
102,350
Population
10,825,900
Capital
Belgrade
Currency
New Dinar
President
Boris Tadic
Private sector
% of GDP
40%
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Update No: 046 - (01/11/05)
Zuma-Mbeki feud threatens Security Agencies
South Africa's intelligence and security community has been plunged into an
unprecedented crisis that commentators say is threatening the stability of the
country. The dramatic purge of the top leadership of the National Intelligence
Agency (NIA) is the latest development in a protracted war between factions in
the security services aligned either to President Thabo Mbeki or former deputy
president Jacob Zuma. Until now it has been thought that the Scorpions would be
the first security casualties of the Zuma-Mbeki dogfight. But the tables turned
when Intelligence Minister Ronnie Kasrils suspended intelligence chief Billy
Masetlha, his deputy, Gibson Njenje, and counter-intelligence chief Bob Mhlanga.
Now the NIA finds itself fighting for its credibility as they face an inquiry
over illegal monitoring of ANC bigwig Saki Macozoma. Events can be traced back
to the Hefer commission in 2003, set up to probe claims that former National
Prosecuting Authority head Bulelani Ngcuka was a spy for the apartheid
government. Since then, the war of the security agencies has escalated and spilt
out into the public on several occasions. Most recent was an armed stand-off
between the Scorpions and the police VIP Protection Unit at Zuma's Johannesburg
residence and a still-unexplained fire at ANC headquarters. The Khampepe
commission of inquiry into the future of the Scorpions has exposed divisions
within security agencies. These fights have now raised questions about whether
any of the security agencies acts to uphold the constitution or private
political agendas. As the mudslinging intensifies, it is clear that neither the
Scorpions nor the NIA is immune to political manipulation. "Definitions of
threats to state security are beginning to include threats to individual and
economic interests," said political analyst Aubrey Matshiqi. Announcing the
suspensions of the spy agency's top leadership, Kasrils went to great lengths to
assure the public that the politics of succession in the ANC had nothing to do
with his action. He does not appear to have convinced everyone. Zuma and ANC
Youth League president Fikile Mbalula questioned his actions. Mbalula claims to
have contacted Kasrils with complaints that he was being illegally monitored by
state agents. He says the minister's response was to dismiss him. Zuma pointed
out to a newspaper that his complaint against Ngcuka was endorsed by the public
protector, yet no action was taken. This raises uncomfortable questions for
Kasrils, whose actions appear to be inconsistent, if not partisan. However, a
senior government insider says irrespective of the factional battles, the
Macozoma incident highlights a lack of professionalism in the NIA. The
incompetent conduct of the Macozoma surveillance appears to bear this out. In
the end, the Khampepe commission will decide the future of the Scorpions, while
intelligence inspector-general Zolile Ngcakani will decide the fate of the
suspended NIA top brass. But neither of these two processes will stem the
creeping politicisation of the country's security establishment.
In a move likely to put further pressure on the Scorpions' investigation of
Jacob Zuma, the former deputy president's trial date has been set for July 31
2006 in the Durban High Court, the National Prosecuting Authority (NPA) said
October 12. The date was agreed on by the NPA, Zuma's defence team and the Judge
President of KwaZulu-Natal, Vuka Tshabalala. This means investigators must sift
through 93,000 pages of documentation seized from Zuma and his associates, to
formulate an indictment to be served on Zuma in November. At his last court
appearance, supporters chanted insults against Mbeki and burned T-shirts
emblazoned with the president's face. Reflecting the split within the ANC, South
Africa's law enforcement and intelligence agencies are arguing in a special
commission over the future of the elite Scorpions unit that led the
investigations into Shaik and Zuma. The Scorpions were set up several years ago
under the authority of the justice ministry to target the most serious offences
in a country with one of the world's highest crime rates. But critics say the
agency has abused its position and used its investigations to pursue political
agendas. Masetlha's submission to the commission accused the Scorpions of
compromising national security by cooperating with foreign intelligence agencies
like the U.S. Central Intelligence Agency and Britain's MI5, backing the
suggestion that the Scorpions should come under police control.
Generosity to the neighbours
South Africa announced a R140 million (US$22 million) donation to the UN
World Food Programme (WFP) and the Food and Agriculture Organisation (FAO) to
alleviate food shortages in Southern Africa. The Department of Agriculture and
Land Affairs said in a statement that the government had agreed "to provide
humanitarian food aid assistance and to support the rehabilitation of
agricultural production in seven countries in the region ... Lesotho, Malawi,
Mozambique, Namibia, Swaziland, Zambia and Zimbabwe." "It (the
government) has agreed in principle to make R140 million available this year,
with the main focus on rehabilitation of agricultural productivity, and in
proportion to the identified respective country needs," the statement
noted. Of the total donation, 70 per cent R98 million (US$15.4 million) would be
used to assist households to become agriculturally productive again. Aid
agencies have blamed drought, a shortage of seeds and fertilisers and weakened
capacity due to HIV/AIDS as the main factors responsible for the agricultural
decline in Southern Africa. Twenty-five per cent of the total donation R35
million (US$5.5 million) would be allocated to direct food relief through WFP,
while the remaining five per cent R7 million (US$1.1 million) would be used to
support the regional early warning system. "The South African donation
comes at a time when nearly 9.2 million people require emergency food aid in
Southern Africa. This is the third major South African donation to WFP, and
clearly shows the government's support for the people of the region," said
WFP spokesman Mike Huggins.
The next president
President Mbeki's successor will face the task of smoothing over the holes
created by his policies on Zimbabwe and HIV/AIDS, says an article in the next
edition of a US foreign policy journal. An article to be published in
November-December issue of Foreign Affairs says the next president, to take
power in 2009, will have to "repair the damage that Mbeki has done through
his misguided approach to black empowerment and through his policies on Zimbabwe
and AIDS." Jeffrey Herbst, provost of Miami University in Ohio, writes in
the quarterly journal that Mbeki's successor will need to develop "a
political approach that goes beyond racial solidarity," to fix up the
problems as well as build on the successes of Mbeki's administration. If the
ruling African National Congress (ANC) is to remain relevant, it must put aside
its role as a struggle organisation. The party must replace "its primary
focus on resistance to apartheid with greater emphasis on the development of
non-racial politics and socio-economic equality." Herbst specialises in
African affairs. While the article is critical of the ANC and the president, it
does have strong words of praise for South Africa for its macro-economic
stability and democracy. Empowerment has helped create an iconic black business
elite and extend the ANC's influence outside politics, and help it win more
investment for SA. However, it has not spread wealth widely, or encouraged the
black population into the formal economy. He also criticises a tendency of Mbeki
and the ANC to lash out at critics by labelling them racist.
Arms deals - and corruption
South Africa says it is discussing the future of an arms contract with
India, after the Indian government apparently cancelled the deal. An Indian
military journal reported the deal with South African state arms maker Denel had
been cancelled, after allegations of corruption. India had been investigating
the deal since April. Denel denies any impropriety. The journal, SP's Land
Forces, based its article on a statement made by the Indian defence minister in
July. "There is prima facie evidence of violation of clauses relating to
use of undue influence and agents/agency commission, as contained in the
contracts of Anti-Material Rifles (AMR) signed in 2002," Indian Defence
Minister Shri Pranab Mukherjee said in a statement published on the ministry
website in July. "A decision has been taken to initiate action to cancel
all contracts entered into with Denel," the statement concluded. Government
officials in Delhi would not comment on the latest reports. In the apartheid
era, South Africa was a successful exporter of weapons, despite sanctions, but
in recent years Denel has struggled. It has been losing money and there have
been frequent changes of senior personnel. The trade union Solidarity has put
out a statement saying the cancellation of contracts with India will cost
thousands of jobs.
South Africa slips on Corruption Perceptions Index
Although Transparency International believes the axing of former deputy
president Jacob Zuma has "improved" foreign perceptions of how
seriously South Africa views corruption, the country still slipped in the
organisation's recent corruption perceptions index. Surprising many, South
Africa slipped two notches to 46th in an index of 156 countries, from 44th last
year, sending a message that those polled, local business leaders and analysts,
remain unconvinced by corruption-busting measures. This came despite a number of
prosecutions of top officials in the past year, and even though President Mbeki
hinted at a total onslaught against corruption, saying he would not hesitate to
remove corrupt municipal officials, even at the risk of destabilising that
district. But the survey was roundly criticised by Prof Stan Sangweni, who
chairs SA's Public Service Commission and is a member of the Anti-Corruption
Forum. Sangweni said the report fell "short of giving a meaningful
contribution", exposed Transparency International's questionable
methodology and reflected only the views of business leaders and analysts,
rather than the wider public. He asked how government's handling of the
corruption scandal surrounding Zuma could not have spurred SA to a higher
position. Transparency International chairman Peter Eigen, speaking from London,
admitted that there were holes in the organisation's methodology, such as the
fact that it measured only perceptions rather than actual improvements. But
Eigen said SA's drop was by such a small margin it had "no significance at
all". He said President Thabo Mbeki's axing of Zuma had been seen
internationally as "a very encouraging sign", and underlined the fact
that SA was "perceived as strong", and was placed just under many
European countries on the table and ahead of others such as Greece. SA's place
at 46 means that it is the third-best in Africa, behind Botswana (39) and
Tunisia (43), even though Africa brought up the rear of the table. But
Transparency International's research appears to clash with other surveys on the
issue. A US-based research organisation, the Centre for Public Integrity, for
example, groups SA among the top third of "strongest countries" when
it comes to tackling corruption, whereas the Transparency International survey
puts SA within the ranks of the lowest two-thirds. Also, Research Surveys' head
of public sector research, Claudia Fenor, said that "generally, public
opinion from a variety of sources showed an improvement in perceptions over the
South African government's efforts to combat corruption". Hassan Lorgat,
head of Transparency International SA, used the forum to call for government to
allow the Scorpions crime-fighting unit to remain independent, rather than
placing it under the auspices of the South African Police Service. "The
Scorpions have great influence in our society and have had great victories (in
tackling corruption)," he said. This suggests that if the Scorpions were to
be absorbed into the police, it would negatively affect the perceptions that SA
is serious about eradicating corruption. Eleven surveys were compiled to get
SA's score, including that of the Economist Intelligence Unit, the report of the
United Nations Economic Commission for Africa and the World Economic Forum's
competitiveness report. Eigen said that SA was "vulnerable to
corruption", given its rich natural resources in mining, and had a
well-developed arms industry. In 2002, Transparency International said the arms
industry accounted for 50% of all corrupt transactions. In October, state-owned
arms supplier Denel was accused of paying bribes to secure lucrative arms
contracts in India.
South Africa optimistic of WTO success
Although the road leading to a successful World Trade Organisation meeting
in Hong Kong in December is "rocky", government is optimistic of a
breakthrough. Trade and Industry Minister Mandisi Mpahlwa told the media October
27 that government was "working at breakneck speed" to ensure there
was a breakthrough in the talks on cutting trade barriers and trade subsidies
during the World Trade Organisation ministerial meeting scheduled for 13-18
December. "The process leading to Hong Kong is a big and rocky path and we
really have to work at break-neck speed to ensure a successful meeting. "We
are cautiously optimistic we can register success in Hong Kong," he said,
after opening the WTO National Consultative conference at Gallagher Estate. He
said unlike Cancun in 2003, where trade talks deadlocked, Hong Kong should move
to "specifics and modalities" of cutting subsidies and tariffs.
"Our view is that by 2010 we would like to see an elimination of
subsidies," the minister said, referring to the financial subsidies that
the US and European Union offered their farmers. Minister Mpahlwa said a US
proposal to cut subsidies in phases was lauded but needed to be done to get the
EU to agree to cut agricultural subsidies to their farmers. "Our assessment
however is that the main challenge to moving the agricultural negotiations
forward lies squarely with the EU which needs urgently to put forward a proposal
that responds positively," he said. Labour representative Tony Ehrenriech
said although a lot more work was needed to be done, he was hopeful the meeting
would be successful. "We remain hopeful that South Africa will advance the
developmental agenda of Africa," he said. Minister Mpahlwa proposed a
10-point plan that started with the elimination of export subsidies and
"trade distorting" domestic support particularly on agricultural
products of export interest to developing nations. He said the Group of eight
industrialised nations should provide non-reciprocal duty free and quota free
access to all products from least developed countries amongst other points.
However, all delegates were in agreement that for Hong Kong to succeed,
modalities on total elimination of agricultural subsidies was vital.
Mbeki endorses move to expropriate land
President Mbeki has endorsed land expropriation in SA, but says it must be
done in an environment of "fair compensation". Frustrated by the slow
pace of land reform via the "willing seller willing buyer" system, the
ruling African National Congress and its allies have called on government to
quicken the pace through expropriation. They argue that farmers are deliberately
inflating farm prices to stall redistribution. Government is expected to make
its first expropriation, a farm in Lichtenburg, North West, after a failure to
agree on a price. Mbeki told Parliament October 27 that expropriation would
speed up the reform process. "We say that expropriation is provided for in
the constitution but the constitution also provides that there must be
compensation, fair compensation," he said. Organised agriculture reacted
with alarm recently when notices of expropriation were sent to a number of
farmers by the land affairs department. The concept of expropriation has raised
the question of what constitutes fair compensation. However, allegations have
sprung up of farmers being offered less than half the market value of farms.
There have also been questions of government using the productive value of the
land rather than the market value when deciding on compensation. Referring to
the row around Deputy President Phumzile Mlambo-Ngcuka and her statement that SA
could learn from Zimbabwe in the matter of land reform, Mbeki said that
"merely because the Zimbabwe solution was studied does not mean SA seeks to
emulate it". He said those who had criticised Mlambo-Ngcuka's remarks were
"scaremongers." AgriSA president Lourie Bosman said: "Most of the
problems leading to slow pace of land reform can be traced to government's lack
of capacity. "Before resorting to expropriation, government should
reinforce its own capacity," he said. Transvaal Agricultural Union GM
Bennie van Zyl supported AgriSA's stance, saying expropriation would derail
investment in the sector.
African food crisis looms
Southern Africa will face a severe food shortage if early warnings are not
acted on, the South African Red Cross Society said October 5. "The world
community must heed the early warnings about the impending crisis in the African
region so that we can prevent another disaster like the one in Niger," said
Francoise Le Goff, head of the Harare-based Red Cross regional delegation for
southern Africa. The west African country of Niger is in the grip of a food
crisis after poor rains and locust invasions destroyed crops and livestock.
While conditions are improving and food prices coming down, the Washington
DC-based Famine Early Warning Systems Network last month warned of shortages
again next year. Drought, HIV/AIDS and poor governance have put more than
10-million people in Lesotho, Malawi, Mozambique, Swaziland, Zambia and Zimbabwe
in danger of a similar crisis. Le Goff said $27m was needed to feed the
1,5-million most vulnerable communities from December to March. Speaking at the
launch of the 2005 World Disasters Report compiled by the International
Federation of Red Cross and Red Crescent Societies, Le Goff said the Red Cross
would approach large donor organisations and government agencies to raise the
money that is required for aid. She said governments needed to make it easier
for humanitarian agencies to operate and have access to vulnerable people,
rather than ignoring the issue. "Some governments in the region have denied
there is a problem with food security while their people suffer and die,"
she said. Only by mobilising resources and volunteers within the next six weeks
could a regional disaster be prevented, Le Goff said. The organisation's 2005
disaster report focuses on information and the importance of early warnings to
help mitigate the damage caused by disasters. "Although humans may be
powerless to prevent disasters, there is much we can do to minimise their
effects," executive manager of the South African government's Disaster
Management Centre Louis Buys said at yesterday's presentation. Although early
warning mechanisms were expensive, they were able to save lives and cost less
than disaster responses, he said. "The importance of information and
communication cannot be sufficiently stressed." Buys said if coastal
communities in southeast Asia were given even a two-hour warning of the
approaching tsunami that hit the region last December, it would have given an
opportunity for people to evacuate, as some people living in coastal cities in
India were able to do. "The lack of communication, co-ordination and
indecisiveness of the US government and disaster management services seen during
Hurricane Katrina "caused untold damage", Buys said. "Disasters
seek out the poor and destroy them and leave in their wake poorer and more
vulnerable families and regions," National President of the South African
Red Cross Society Mandisa Kalako-Williams said. She stressed the importance of
simplifying early disaster warning information and communicating it to
communities in a timely and simple way so that they are able to act on it.
"People need information before a disaster as much as they need food, water
and shelter after the event," Le Goff said.
Moscow cool on South Africa's UN ambitions
Despite a visit in October to Moscow by a 64-strong delegation of South
African government and corporate officials, the largest ever to go to Russia
relations between the two countries appear to be cooling. On the Russian side,
there is unspoken frustration at the year-long campaign by President Thabo Mbeki
to secure a South African seat in the expanded United Nations (UN) Security
Council, without sufficient consensus from other UN members. Sources in Moscow
are aware that Mbeki made the admission of SA to a permanent seat on the
security council a personal priority this year. High-level African sources, who
attended the Group of Eight (G-8) summit at Gleneagles, Scotland, in early July,
said they believed Mbeki, there as an African Union observer, had asked Russian
President Vladimir Putin for Russian support for SA's security council
ambitions. Regarding talk of a UN seat for SA, the Russian foreign ministry said
they "do not have such operational information". Mbeki then ordered
Foreign Affairs Minister Nkosazana Dlamini-Zuma to Moscow to meet her Russian
counterpart, Sergei Lavrov, on July 12. She was told in no uncertain terms that
Russia would not support expansion of the security council unless there was
demonstrable backing for this from the entire UN membership which Dlamini-Zuma
could not demonstrate. The Russian foreign ministry issued a statement
confirming that Dlamini-Zuma had made the security council seat her priority.
Dlamini-Zuma returned to the same issue when she met Lavrov in Moscow early
October. By then, most UN representatives had concluded that the move for
African permanent seats on the security council had been stopped by US action.
Why then were Mbeki and Dlamini-Zuma repeating their request for Russian
backing? Lavrov's ministry issued a new statement, acknowledging Dlamini-Zuma's
visit, and repeating its line that reform of the UN should be carried out
"on the basis of the widest consent, and what is even better, the consensus
of member states". There was nothing new in the Russian position, but
officials at SA's foreign affairs department said they believed the Russians
were "still open" on security council reform, adding that "the
situation is changing all the time". Dlamini-Zuma and Lavrov are reported
to be on friendly terms. On the South African side, sources at major mining
companies have expressed concern that South African government officials,
including new Minerals and Energy Affairs Minister Lindiwe Hendricks, have done
too little to deal with Russian restrictions on South African mining companies
investing in Russia -- and perhaps have done too much to endorse Russian
involvement in SA's mining sector. It has been customary for the two governments
to issue a detailed report on the results of their annual Intergovernment
Commission on Trade and Economic Co-operation (ITEC). This did not happen after
the latest meeting, and only a brief press conference was held to discuss the
results. Instead Russia's co-chairman at ITEC, Natural Resources Minister Yury
Trutnev, issued a summary of his own interests as expressed at a meeting with
Hendricks. Trutnev repeated previous statements he has made on behalf of the
Renova group's plan to mine manganese in the Kalahari. The minerals and energy
department's head of licensing, Jacinto Rocha, said in August that it had issued
a manganese exploration and mining licence to Pitsa ya Setshaba, Renova's black
empowerment partner. Trutnev also announced that he had met with a delegation
from De Beers. Russian sources confirmed that there was such a meeting. Neither
De Beers nor Alrosa has reported publicly on the meeting, and both were
surprised that Trutnev did so. The two world leaders in diamond mining are
assembling a work group to consider joint exploration for diamonds in
northwestern Russia. However, there are significant obstacles to co-operation,
including new Russian legislation preventing foreign diamond-miners from mining
any diamonds they discover.
US Official sees 'Five African Lions' by 2015
Nigeria, Tanzania, Kenya, South Africa and Ghana could rival "Asian
tigers" like South Korea by 2015, says former Assistant Secretary of State
for African Affairs Herman J. Cohen. In a Washington File interview October 6,
Cohen, who was assistant secretary of state for Africa from 1989 to 1993, said
he expects "good things" from the "five African lions,"
including consistent gross domestic product growth of 7 per cent or more a year
and the development of a common market for Tanzania, Kenya and Uganda. In the
1960s, Hong Kong, Singapore, South Korea and Taiwan were at comparable levels of
wealth as African countries, Cohen said. Since that time, the "four Asian
tigers" have experienced astonishing rates of sustained growth, while their
African counterparts, for the most part, have stagnated. Cohen said he believes
the trend is reversible, provided the lions return to their agricultural
strengths and maximise their inexpensive labour force through manufacturing.
"More money is not necessarily the answer," the former ambassador to
Senegal and The Gambia emphasized. "If you look at all the money that's
gone into Africa since the Second World War, there have been 25 Marshall Plans
[the U.S. plan for the reconstruction of Europe after World War II]. So money is
not an issue. The question is how you use it and what the policies are."
Acknowledging that debt has been a continual problem, Cohen commended President
Bush's "creative" solutions, in particular his push for multilateral
development bank assistance in the form of grants rather than loans. In 2001,
when nearly 100 per cent of assistance to the world's poorest countries was
provided as loans, Bush challenged the World Bank to stop the
"lend-and-forgive cycle" and provide 50 per cent of its aid as
assistance grants. Today, approximately 45 per cent of the bank's aid to the
poorest countries is provided in the form of grants. Ghana, Kenya and Tanzania
all benefit from the program. These three African lions also illustrate Bush's
policy of "backing winners" a strategy that concentrates "the
lion's share" of U.S. development assistance on those countries most likely
to "roar," says Cohen. Ghana, for example, is currently set to receive
assistance under the President's Millennium Challenge Corporation (MCC), which
provides development assistance to those countries that rule justly, invest in
their people and encourage economic freedom. Kenya and Tanzania also are being
considered, having been designated "threshold countries" those
committed to undertaking the reforms necessary to improve policy performance and
eventually qualify for MCC funding in 2004. "Why not concentrate resources
in these countries to make sure they do succeed?" Cohen mused. "People
criticise the MCC for the way it's been administered, but I think the idea
behind it is a very good one." The administration's substantial increases
in financial assistance to Africa elicited praise from Cohen, who commended the
tripling of U.S. assistance to Africa to US$3.2 billion in 2004 as well as the
US$15 billion HIV/AIDS prevention program, the majority of which benefits
countries in sub-Saharan Africa. To date, the program has helped treat 235,000
Africans, 90,700 of whom live in Nigeria, South Africa, Tanzania and Kenya. The
ambassador was less enthusiastic, however, about the emphasis on teaching
abstinence that often accompanies HIV/AIDS assistance: "Let local
governments decide how to handle it, based on their culture," he said.
Cohen's tiger-lion comparisons inevitably invoke questions about the growing
influence of China on the African continent. Chinese investment in Africa has
more than tripled since 2000, passing the US$30 billion mark in 2004, and
Chinese-Kenyan trade alone has doubled in the last three years. He sees these
developments as positive: "China could do a lot for Africa. China is hungry
for resources. Whatever Africa has to offer, they need it." Cohen has
continued to work in African affairs as president of Cohen and Woods
International, a strategic planning firm that represents African governments and
multinational corporations. He remains optimistic about the continent, despite
"the disappointments of Zimbabwe and Côte d'Ivoire." Moreover, he
continues to hold high hopes for the five lions: "Between now and 2015, if
Africa can produce the equivalent of five Asian tigers, we can declare
victory."
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AUTOMOBILES
GM to bring Cadillacs into SA
US Vehicle manufacturer General Motors (GM) could soon start distributing its
Cadillac brand in SA, the company said October 5. The addition of Cadillac
models will enable General Motors to take advantage of the boom in the local
economy, spurred by low interest rates and resultant strong consumer demand. In
April this year, the company announced its plans to make its Hummer H3 range at
its Port Elizabeth factory next year. The company has said that the Hummer H3
models would be produced for both right-hand-drive and left-hand-drive markets.
General Motors SA manufacturers and distributes brands such as Chevrolet, Isuzu,
Opel and Suzuki. General Motors SA spokeswoman Denise van Huyssteen said October
5 that the company intended to broaden its product portfolio to enable it to
compete in more segments of the local market. The Financial Times quoted Maureen
Kempston Darkes, head of General Motors operations in Latin America, Africa and
Middle East, saying the South African market was ready for Cadillac imports.
Econometrix economist Tony Twine said the success of the government-initiated
Motor Industry Development Programme had seen local manufacturers adding more
models to their product ranges. Twine said, given that most major badges already
had a presence in SA, "the potential for further expansion is fairly
limited". Prior to General Motors coming back to SA, a small independent
retailer imported and sold the Cadillacs in SA. "But I believe that, given
their strong and wide dealer network, General Motors SA stands a good chance to
do well," said Twine.
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AVIATION
SAA director quits
National carrier South African Airways (SAA) has parted ways with its chief
operations officer Kyrl Acton, who joined the airline just six months ago. The
national carrier said october 3 that Acton, who started in April, "had
decided to leave the company to pursue other commercial interests". It
declined to give details of Acton's departure, including his remuneration
package. But sources at the airline said Acton was fired by company CEO Khaya
Ngqula after the two executives could not agree on strategies to sustain the
airline's profitability. Acton declined to comment on the reasons for his
departure or where he was going. Ngqula was not available for comment. Public
Enterprises Minister Alec Erwin has apparently been informed about Acton's
departure, and had given Ngqula the green light to offload him. Erwin's
spokeswoman Gaynor Kast could not deny or confirm the minister's involvement in
Acton's departure, saying the hiring and firing of staff was an operational
matter that involved the company and its board. Acton joins a growing list of
officials who had either been suspended or fired since Ngqula took the reigns at
the company nearly a year ago. Seven senior managers, including human resources
head Nolwazi Qata, finance head Mark Shelly and marketing GM Nonhlanhla Khoza
are currently suspended pending investigations into their cases. The charges
against them vary from corruption to abuse of power. SAA spokesman Onkgopotse
Tabane said that the cases were at different stages. Acton's appointment five
months ago was seen as key to SAA's newly developed turnaround strategy focusing
on improved customer service, network growth and profitability. With 25 years'
experience working in the airline industry, analysts said Acton was one of the
few executives at SAA with extensive knowledge of the sector. Announcing Acton's
appointment in April, SAA described the Irish national as "a seasoned
aviation executive with a wealth of experience". Ngqula said at the time
that the appointment of Acton was "one of the most critical areas to be
achieved as part of SAA's re-engineering process". Acton had beaten nine
other short-listed candidates to take the chief operations position, the first
such post in the airline's 70-year history. It was clear Acton had a huge role
to play in its turnaround strategy. He had eight general managers reporting to
him. He started his career with Ireland's national carrier Aer Lingus, where he
rose to become CE for passenger service. In 1995 he joined Chile's national
carrier, Lan Chile, as senior vice-president responsible for planning and
development. He played a leading role in the airline's initial public listing in
1997. He later joined information technology firm Unisys as transportation
vice-president, overseeing its aviation markets in Europe, the Middle East and
Africa.
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ELECTRICITY
Eskom posts R5.2bn profit
South Africa's biggest state-owned enterprise, Eskom, reported to parliament
October 19 that its group profit after tax has risen to almost R5.2 billion in
the past financial year. The electricity utility also exceeded its
electrification target in the same period. Presenting its annual report to the
Portfolio Committee on Public Enterprises, an Eskom executive said that by
2005/06, 3.2 million homes would have been electrified since the advent of
democracy in South Africa in 1994 - an average of about 300 000 homes a year. At
the same time, electricity prices in South Africa were among the lowest in the
world: they were lower than several highly industrialised countries in North
America, Scandinavia and western Europe, the report stated. Its average price of
electricity is currently 16.04 South African cents per kilowatt hour, compared
with an average of about 9 US cents (about 59 SA cents) charged in Germany and
about 7 cents (about 46 SA cents) charged in the United States. In terms of
scale of activities, the report stated that Eskom was among the top eleven
utilities in the world in terms of generation capacity, and was among the top
seven in the world in terms of sales. The giant utility's total assets currently
amount to R109,2 billion and it employs over 31 000 staff, according to the
report. However, the chief executive told the portfolio committee that Eskom's
costs per new electricity connection were now starting to increase, due to the
fact that it was now bringing electricity to more rural areas with low
population densities and with greater distances to cover. The utility would also
be greatly expanding its generation capacity - to an intended extra 5,304
megawatts by 2009 - and had projected an increase in capital expenditure of over
R25 billion by 2009. At the request of its shareholder, the government, Eskom
has changed its financial year from December to March, making this year's
reporting period 15 months long. In the 2005 financial year to end March, Eskom
said it spent R157 million on corporate social responsibility projects, while it
spent R10.3 billion on black economic empowerment entities, of which R1.1
billion was spent on black women-owned enterprises. HIV and AIDS continue to be
a strategic focus area for the utility, which has contributed R83 million
towards research for the development of a vaccine for the virus. In terms of
Eskom's special focus on voluntary, confidential HIV testing and counselling, it
noted an HIV prevalence rate of 8.9% of its employees in 1999. By 2003 the
prevalence rate was therefore predicted to be as high as 13.5% by 2003, but,
interestingly, Eskom noted after a follow-up study in 2003 that the prevalence
rate stood at a lower figure, of 10.7%.
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FOOD & DRINK
SABMiller in US$478m Offer for Backus
SABMiller announced October 25 that it would consolidate its newly acquired
position in Latin America, confirming it would make a US$478m public offer for
the shares in Peruvian brewer Cervecerias Peruanas Backus it did not already
own. The offer is one of a number of offers due to be made in the near future
following its US$7,8bn take-over of Bavaria, South America's second-largest
brewer in September. In this deal, SABMiller paid US$3,5bn for the Santo Domingo
family's 71,8% stake in the Peru's largest brewer, and took over debt of US$2bn.
The company intends to make offers to the minorities in Bavaria, which will cost
about US$1,4bn. The offer to Backus -- majority owned by Bavaria -- constitutes
about half of the remaining value of what SABMiller announced it intended to
spend at the time of the Bavaria deal. The company said that it had already
gained the approval of a large minority shareholder at the quoted price, saying
that Cheswick Commercial, which holds about 20% of the class A voting stock in
Backus, had agreed to tender its shares.
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FOREIGN INVESTMENT
Investment Up 2%
Foreign direct investment (FDI) flows rose 2% after three years of decline
according to the latest World Investment Report, the definitive annual survey of
FDI flows by the United Nations Conference on Trade and Development (Unctad).
The big story was the 40% increase in flows into developing countries,
particularly Asian countries, led by China (which took in $61bn of FDI last
year). All Africa managed to do was to keep inflows constant, at $18bn, with
most going into oil producers such as Nigeria and Angola. The continent still
receives only 3% of global FDI inflows. And SA, which saw a fall in inflows last
year, doesn't even feature in Unctad's list of the top 10 African recipients. We
do rank high as outward investors. The Unctad report says outflows from Africa
doubled last year (to $2,8bn), most of that by SA's companies. We are pretty
good at exporting capital but not too good at importing it -- at least not as
direct investment, defined by Unctad as "involving a lasting interest by a
home-economy entity in an enterprise in a host economy" and, in technical
terms, involving an equity stake of more than 10%. But while we may not be too
good on direct investment, SA has proved pretty good at attracting large flows
of portfolio and other foreign investment in local equity, bond and money
markets. Indeed, that tendency to attract portfolio rather than direct foreign
investment is one of the peculiarities of SA, contrasting it with other emerging
markets. In SA, in the past decade, a recent International Monetary Fund study
showed the split between portfolio and FDI inflows had been 70:30; the ratio is
reversed for other comparable emerging markets. But there is no doubt SA has
done well out of portfolio and other inflows lately. They have enabled us to
finance deficits on the current account of the balance of payments as well as
build up foreign reserves. But the conventional wisdom is that these
"hot" money flows are skittish. FDI, the argument goes, is a more
durable source of foreign investment that will do more for the economy in the
long run. But it's not that simple. Which is why it's not clear that we should
necessarily worry about the Unctad figures. For one thing, FDI isn't always that
"cool", nor are portfolio flows always "hot". The change in
the way international investors view emerging markets may mean fund flows into
emerging market bond and equities markets are a lot more stable than they used
to be. More profoundly, though, FDI inflows aren't guaranteed to be good for
economic growth prospects; nor should we assume that FDI outflows must be bad.
It all depends. Says Edge Institute economist Stephen Gelb: "It's not just
about the money. It's more about the quality of the FDI we receive." The
debate, he argues, should focus on the growth benefits that come through quality
FDI. That depends on issues such as whether inward investment brings
improvements in technology and productivity, as well as enhancing local skills.
Such improvements would boost long-term growth prospects. In this quality sense,
though, outward FDI could as easily have benefits for the economy as the inward
version. There is no reason why our companies shouldn't be buying companies
abroad, or entering joint ventures, to access better technologies and skills,
rather than just to enter new markets and grow profits. In some cases, they may
well be. But there's no clear evidence. And we know very little about the real
effect of incoming FDI. This is, however, where there are some worrying trends
evident in the second half of the Unctad book, which looks at transnational
corporations and where they do their research and development. That's important
because if SA were doing well as a recipient of some of the research and
development activities of foreign investors, that could be one indicator it was
getting something out of FDI in terms of technological capacity and skills. The
Unctad study finds multinationals are locating more research activities in
developing countries. But SA's share of the research spend of US multinationals,
for example, is below average for emerging markets. So the quality questions
about foreign investment need to be asked. But the money is not entirely
unimportant. As it happens, this year is set to see a big FDI turnaround as the
proceeds of Absa's Barclays purchase flow in. But SA's current account deficit
is likely to stay with us for a while, especially if growth accelerates. That
has to be financed by capital inflows. Portfolio inflows may well hold up. But
there are concerns, among economists and ratings agencies, about the composition
of SA's capital inflows and how robust they will be in coming years. So the FDI
money matters. But so does the quality. And the measures that will encourage FDI
with maximum economic benefits are likely to also encourage the best kinds of
domestic direct investment.
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HIV/AIDS
De Beers aids plan recognised
Against a backdrop of increasing demands from activists and medical
professionals for government to speed up the provision of AIDS drugs, the
world's biggest diamond producer, De Beers, has walked off with a prestigious
international award for its work in combating the epidemic. De Beers was among
six companies recognised by the Global Business Coalition on HIV/AIDS for its
efforts to fight the epidemic. The United Nations estimates close to 40-million
people are infected with HIV, the virus that causes AIDS, 60% of them in
sub-Saharan Africa. In SA, more than 6-million people are infected. De Beers won
an award for its workplace HIV counselling and testing programme, which has seen
a sharp increase in the number of workers volunteering for confidential HIV
screening. For example, 95% of the workers at Koffiefontein, one of De Beers'
seven South African diamond mines, were tested last year. "Testing is
important because it changes behaviour," says Busi Boikanyo, a nurse
employed by health-care company Careways Group to conduct counselling and
testing at De Beers' Cullinan mine, near Pretoria. Testing also identifies
workers who, with the help of a "wellness" programme, can take steps
to stay healthy, and start treatment if necessary. In September, the Cullinan
mine launched one of its regular testing drives, hoping to improve on last
December's 65% take-up. Two weeks into the programme, 70% of the company's 2700
workers had come forward. Mine managers and union leaders went for HIV tests to
encourage stragglers. The mine has made important changes since last year's
testing programme, says National Union of Mineworkers shop steward Freddy Madike.
Workers were uneasy about using in-house medical services, fearing their results
would not remain confidential, and so Careways was brought in. Workers
complained about standing in long queues at the end of a tough shift, and asked
for testing facilities inside the 760m-deep mine. This was done. "We are
the gentlemen of mining," says Cullinan operations manager Ivan Vidulich,
explaining that the relatively wide and shallow diamond mine can easily
accommodate HIV testing. Cullinan's HIV/AIDS co-ordinator, Thabo Manne, says
surrounding residents have asked the mine to provide testing facilities for them
too, a sign of the trust they place in its abilities. He concedes their interest
may be triggered by reluctance to use overburdened government clinics, and a
desire to avoid being tested by people they know. Fear of stigma often prompts
people to seek HIV tests outside their communities, he says. "Whites from
eastern Pretoria often prefer to go to Refilwe (a black township) for HIV
testing." Madike says workers are more willing to be tested now that
treatment is available, as without it many prefer not to know they have a fatal
disease. In July 2003, De Beers announced it would provide AIDS drugs to
employees and their partners, and workers who had been retrenched or had
retired. Although government had signalled its intention to begin providing free
AIDS drugs a few months earlier, it began to do so in earnest only shortly
before the April 2004 elections. De Beers does not provide AIDS drugs to
workers' children, but refers them to nearby government clinics. Madike says the
unions hope children can be brought into the programme. The increase in testing
has boosted the number of workers and spouses enrolled on AIDS treatment
programmes but, like many mining houses, De Beers has been surprised by the
relatively slow take-up of the life-saving medicines, says its HIV/AIDS
community programme manager, Tracey Peterson. The company estimates 10% of its
10000 workers in SA are HIV-positive. By the end of August, only 310 were
enrolled in its wellness programme, and half of them were taking AIDS drugs.
"Many people believe media reports that antiretroviral medicines are not
the only way to deal with the disease. So they opt for traditional remedies that
claim to be cures," says Manne. Few workers' spouses have taken up the
offer of free AIDS drugs, despite De Beers providing treatment wherever they
live, says Peterson, highlighting an issue that may be more a reflection of
workers' infidelities than shortcomings in the company's communication strategy.
There is no doubt unions and the company's management have made a significant
effort to persuade employees to get tested for HIV, but underpinning what they
do is the grim reality of the AIDS epidemic. "Don't forget -- workers have
seen their colleagues dying," Madike says.
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INTERNATIONAL ECONOMIC RELATIONS
SACU-U.S. Trade Talks Resume
Efforts by SA, its customs union partners and the US to sign a free trade
deal resumed early October after a year-long stand-off, but negotiators warned
that the hardest part was yet to come. The first few steps in the second bite at
the deal in Botswana were "cautious". "The real difficulties
still lie ahead, but this was an important first step," said SA's chief
trade negotiator Xavier Carim. Negotiators plan to meet once every eight weeks
or so with the aim of concluding negotiations towards the end of next year. This
is two years later than the original scheduled completion date. Talks ran
aground after serious differences emerged between the Southern African Customs
Union (Sacu) and the US. In one of several efforts over the past year to revive
talks, officials from both sides agreed at a meeting in Geneva in July to resume
talks in bite-sized chunks. The focus of the Botswana session was on industrial
tariffs. Carim said a large part of the talks involved updates on technical
developments such as tariff amendments, as there had been several changes in the
time negotiations were stalled. Negotiators touched on some of the sticking
points including mainly "new-generation issues" such as intellectual
property and government procurement, which do not traditionally form part of
trade deals between two regions. The two participants tried to identify areas of
convergence and divergence in difficult areas. The aim was not to "get into
the substance" of these issues at the Botswana meeting, Carim said.
"With respect to trade in goods and industrial tariffs, we are relatively
confident that we could have a deal there," said Carim. Negotiators are
looking to schedule the next session in the middle of November. It will tackle
the sensitive areas of agriculture and textiles. Sacu hopes to lock in the
benefits its exporters enjoyed under the US's African Growth and Opportunity Act
permanently through a free trade deal, as well as giving exporters increased
access to US government tenders.
Agreement to Strengthen SA-Zambia Relations
Foreign Affairs Minister Nkosazana Dlamini Zuma and her Zambian counterpart Lt
Gen Ronnie Shikapwasha signed an agreement October 18 aimed at strengthening
co-operation between the two countries. The agreement seeks to establish a
commission for the implementation of the 1996 general agreement on co-operation
in the economic, social, scientific, technical and cultural fields. It is also
meant to provide the two governments with a process to implement co-operation in
a structured and workable format, a need expressed by the Zambian government
last year. The two leaders noted the report of a meeting held by senior
officials from the two countries in Pretoria where outstanding areas of
co-operation and agreements were discussed. The two ministers urged the
officials to accelerate discussions on these outstanding agreements so they
could be concluded soon. Addressing reporters, Lt Gen Shikapwasha thanked South
Africa for helping his country during the prevailing fuel crisis. The fuel
shortage, he said, was as a result of refurbishment work being done to the
country's main refinery. Lt Gen Shikapwasha added that South Africa made it
possible through private sector-driven initiatives for the needed fuel to be
exported into Zambia by rail and road. "The South African government has
played a big role to mobilise wagons and trucks that were needed to carry out
this exercise. " Lt Gen Shikapwasha said Zambia had waived up to 35 percent
of taxes on all fuel imports to allow for the price at pump stations in Zambia
to be the same as when the fuel was produced and sold at refineries there. Dr
Dlamini-Zuma expressed appreciation at the solidarity and support Zambia had
given to South Africa's struggle for liberation. She also reiterated South
Africa's commitment to consolidating close relations with Zambia. After the
meeting with Dr Dlamini-Zuma, Lt Gen Shikapwasha paid a courtesy call to
President Mbeki.
South Africa and Iraq to increase trade relations
South Africa and Iraq have resolved to increase political and trade relations,
especially in the oil sector. This emerged following the first South Africa/Iraq
bilateral meeting between Foreign Affairs Deputy Minister Aziz Pahad and his
Iraqi counterpart Talib Al-Bayati at the Union Buildings in Pretoria October 5.
Mr Pahad told reporters that the parties discussed broad economic relations, and
in that context, the Iraqi delegation informed them that the Iraqi oil industry
had "tremendous" potential for involvement and investment. Deputy
Minister Pahad said Iraq had the second largest oil reserves in the world. He
said relevant departments from both sides would look more into the potential of
economic relations between the two countries. "The deputy minister [Al-Bayati]
has stressed that there is a lot of potential in Iraq in the post-conflict
situation and reconstruction and development process for international
partnerships generally and specifically for South Africa," said Mr Pahad.
Economic trade between South Africa and Iraq increased from over R90 million in
2004 to over R200 million during the first five months of this year - even
during years of conflict there. "So we have discussed the potential of
visits between our business sectors. "There are a lot of Iraqi business
people based in [neighbouring] Dubai, Jordan and Kuwait and we think that can
become the starting point between the business sector and parastatals (state
enterprises)," Mr Pahad explained. Deputy Minister Pahad added that he was
happy with the "thorough" briefing he received from Mr Al-Bayati
regarding the constitutional process unfolding in Iraq. These include the
referendum on the draft constitution that is scheduled for later this month,
which will be followed by elections in December. "[The Iraqi] government is
confident that there will be a very successful turnout and that a political
process is on the roll. We also received a briefing on the security situation
there," said Mr Pahad. He said the South African government had always
believed Iraq was "very strategically placed" and when peace finally
came it would be a major political player in the Middle East region. South
Africa was also seriously considering opening a mission in Iraq, precisely
because the country was not represented there. In addition, trade is expected to
increase with the recession of conflict there. The South African delegation to
the meeting briefed the Iraqi delegation about developments in the country and
in Africa as well as South Africa's interest in increasing economic relations in
the region, including in Iraq. On his part, Deputy Minister Al-Bayati said
Iraq's transitional government had started bringing democracy there, citing the
upcoming referendum and elections for "real term government". He said
Iraq viewed South Africa - the only African country Iraq has an Embassy in - as
important and that it envisaged strengthening existing political and economic
relations with it. "There is a lot of potential resources in Iraq such as
oil, gas and minerals. Iraq needs oil for reconstruction and we need all kind of
help from friendly countries and South Africa can do a lot to help the Iraqi
people and government," said Mr Al-Bayati. On security issues, Mr Al-Bayati
said Iraq was up against groups like the Al-Qaeda that did not believe in
democracy and attacked women and children. "They consider everybody who
takes part in elections, referendums or democratic processes as infidels who
deserve to be killed. Car bombs are targeting innocent civilians and it is our
responsibility to protect our people and maintaining security. "We had a
vacuum of power because of the collapse of the [Saddam Hussein] regime and the
dismissal of the army and police force but now we are in the process of
rebuilding our army, police force and security organisations," he
explained. He added that when the elected Iraqi government ran the country, its
security forces would be capable of maintaining security, they would discuss
with the multinational force that is deployed there to take over from them.
"We will keep them for as long as they are needed and will not be kept [in
Iraq] longer than they are needed," he explained.
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PETROCHEMICALS
Total's Natref Move 'Bolsters Merger Case'
Oil company Total has chosen to forgo its right to buy another 13,6% of the
Natref refinery from Sasol, a decision Sasol says strengthens its case for a
merger between its liquid fuels division and Engen. The planned, merged Uhambo
Oil would have less of a dominant position if Total exercised its option. Total
and all the other major global oil corporations operating in SA are opposed to
the merger, which they say would be to the detriment of the fuel industry,
consumers and the economy. Total SA owns 36,4% of the inland Natref refinery,
and Sasol owns the balance. If approved, the merger would see Sasol transfer
ownership of Natref to the proposed merged entity, Uhambo Oil. But Total had
first right to grow its stake to 50%. The second witness in the Competition
Tribunal hearing on the merger, Sasol Oil MD Ernst Oberholster, said October 6
that Total had decided not to exercise the option as agreement could not be
reached on the price it would have to pay. Oberholster said Sasol and Total had
appointed respective consultancies. Both consultancies consulted a single third
party. The three together arrived at an agreed price, which Total said was
"too high". A Total representative said that it was not viable in view
of its long-term projections. A source, who wished to remain anonymous, said:
"Clearly they (Total) were not too worried about foreclosure if they walked
away." Total and other oil companies fear Uhambo will have the incentive
and ability to foreclose, meaning it will not sell fuel to oil companies despite
having sufficient supplies. These oil companies rely heavily on Sasol for fuel
supplies in the inland region, where Sasol has more than 80% of production
capacity. The global Total group owns 51% of Total SA, a black consortium owns
25% and Rembrandt the rest. Meanwhile, BP told the tribunal yesterday that Sasol
appeared to have tried systematically to restrict opposing oil companies' road
and rail transport from the coast to inland areas. Oberholster conceded that
this had formed part of "scenario planning" in the past, but said this
was considered only where capacity could be legitimately limited. BP's legal
representation also pointed to a Sasol document in which foreclosure was
contemplated. Oberholster said while this may have formed part of scenario
planning, Sasol did not intend to foreclose as it would be illegal for Sasol as
a dominant player to do this. Oberholster said Sasol and Engen would derive
synergies to the tune of R600m-R750m a year from the merger if it were to go
ahead. He said the merged entity would be less than 1% of the market
capitalisation of global petroleum giant BP. Oberholster also said that while
the merged entity would have a retail market share of about 34%, it would be
very difficult for it to grow that share substantially. He said the efficiencies
that would emerge from the merger would "factor through to lower petrol
prices".
Corruption damaging to oil and gas industry
"The most important contracts are the ones we have with the societies in
which we operate. Respecting these will enhance the image of our industry,"
says Eivind Reiten, President and Chief Executive Officer of Norsk Hydro AS. Mr
Reiten was speaking at the corporate governance plenary on the final day of the
18th World Petroleum Congress (WPC) in Johannesburg September 29 that looked at
the factors that influence the image of the oil and gas industry. He said that
trying to buy credibility through social investment, technology and skills
transfer was not enough. "Factors that influence the image of the industry
go far beyond sponsoring. Corporate responsibility should be integrated in our
daily business. It has to be integrated in order to filter through [the
organisation and the industry]," he said. Mr Reiten said that corruption
was a major problem with the World Bank saying that more than $1 trillion was
made in bribes only. This amount did not include things such as embezzlement. He
said transparency should be demanded in this industry. This call for
transparency was echoed by the chairperson of Transparency International Peter
Eigen as corruption is most damaging to the image of large global players. Dr
Eigen said corruption affected the world especially countries in the south
struggling to overcome poverty. This he attributed to the states' inability to
expand jurisdiction past its borders in a globalised economy. Dr Eigen said this
had to do with the time horizon of the democratic state which was a short span
while the extractive industry had a longer life span. He added that this was
also a result of northern governments who tolerated investors and exporters who
participated in corrupt activities, and the southern governments who accepted
these activities. "Corruption is just one example of governance failure.
What can be done by the extractive industry which is more at risk than other
sectors," he asked. Here Dr Eigen said civil society through organised
groups could play a crucial role through forming a coalition with other actors
namely governments and business. This as the extractive industry was thought to
be the most susceptible to corruption as extensive research had shown that
countries rich in natural resources, if they also hade weak political and social
institutions, often had poor growth and developmental outcomes and high levels
of poverty. In these cases, corrupt governments often collude with corrupt
investors, bankers and other private sector actors to steal the proceeds of
extractive industries, rather than investing them in the country's development,
said Kimberly Ann Elliot of the Institute for International Economics in a
Testimony before the Senate Foreign Relations Committee in July 2004. Dr Eigen
cautioned however that it was very easy for corrupt activity to enter into a
community, but once it had settled it was difficult to root out. He quoted
Nigeria as an example saying that the country was doing good work through the
Nigeria Extractive Industry Transparency Initiative (NEITI). Through this
initiative Nigeria is making its petroleum revenues and contracts transparent.
Dr Eigen also said that African leaders have understood how deadly corruption
can be for countries and added NEPAD has an important role to play in driving
out corruption. When asked if the world was winning the battle against
corruption Dr Eigen responded: "In my personal opinion it is going
down." He added that because of the intervention initiatives that are in
place there is a greater awareness of corruption, the media reports on it thus
making the problem seem as if it is worse than in previous years. Rooting out
corruption, concluded Mr Reiten, involves having a long term perspective and
working consistently to eradicate it.
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TELECOMMUNICATIONS
Iran contract with MTN network
Iran is finalising a new contract with South African firm Mobile Network (MTN)
after throwing TeliaSonera AB's Turkish affiliate Turkcell out of a venture to
set up the country's second mobile network. Ebrahim Mahmoudzadeh, the head of
the Irancell consortium set up to manage the multi-billion dollar project, said
MTN had deposited the license fee required to take the 49 pct stake originally
awarded to Turkcell. The depositing of the cash with an Iranian bank is a first
step to negotiating contract details and signing a deal. The comments are
further confirmation that Turkcell is out of the running, despite the company's
assertion that it remains involved. The head of the board of Iran's state-run
telecoms company said October 3 that 'in the eyes of the Telecommunications
Ministry and the Iranian partners in the project, Turkcell is no longer
involved'. Turkcell was initially awarded the contract in February 2004 in a
landmark deal to provide a mobile phone service to some 16 million users over
the next 15 years, subject to the payment of a licence fee. But the agreement
suffered a setback last year when Iran's conservative-controlled parliament
objected to giving a foreign firm a majority stake in the venture. The Turkish
firm's stake was then cut from 70 to 49 pct, a move deputies said was necessary
to protect Iran's National security.
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