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Books on South Africa
REPUBLICAN REFERENCE
Area (sq.km)
1,219,912
Population
43,586,097
Capital
Pretoria
Currency
rand
President
Thabo Mbeki
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Update No: 051 - (30/03/06)
Dem.Alliance take Capetown City Hall
Clever political strategies and tactics, and two weeks of late-night
meetings helped the Democratic Alliance (DA) outmanoeuvre the ANC to gain
political control of the City of Cape Town. Helen Zille was appointed the city's
executive mayor during the council election March 15. She beat former mayor
Nomaindia Mfeketo by three votes after garnering 106. As the mayoral chain was
placed around her neck, an ecstatic Zille said the outcome proved South Africa
was a maturing democracy. "I am so honoured that so many people put their
trust in me and I am honoured to accept the position." Early voting
patterns had suggested the DA, with 90 seats, had won the support of the ACDP,
with seven seats, the Africa Muslim Party, 3, the UDM, 2, and one each from the
FF Plus, United Independent Front and the Universal Party. The battle for
control had been on a knife-edge, with alliances seeming to shift day by day and
hour by hour. The ANC had remained confident their party would continue running
the city in coalition with the ID and the AMP. The question now is how long the
alliance with the smaller parties can last. The pact is based on a similar 1999
co-operation agreement between the then National Party and the Democratic Party.
The parties will establish a leadership committee, committing themselves to
achieving consensus on the council's administration and to retaining the right
to disagree or criticise the majority viewpoint.
The ANC still managed an overwhelming victory nation-wide in the local
government elections. Some see this as a blow to democracy with a one-party
dominant state more entrenched than ever. Only 48% of the fewer than 10 million
voters voted and, of those, 67% voted for the ANC. While political commentators
interpreted the vote as one of confidence: that the electorate was expressing
ethnic identification with and loyalty to the ANC, they failed to see what was
really going on and why. The ANC won the elections only partly for its
popularity. Its manipulation of pre-election conditions is also part of its
success. The ANC gets the biggest chunk of the election budget proportional to
its vote. Government uses state resources to boost its campaign while municipal
trucks remove opposition posters. With 20 million poor and 30% unemployed, and 6
million infected with HIV/AIDS, it seems people take what they can get from a
party that commands the nation's resources.
The DA'S tactical victory in the battle for Cape Town has of course rubbed salt
in the ANC;s wounds. It became clear March 15 that the ANC had lost out in every
attempt to make alliances that would have given it the city, as the DA and its
allies secured the key positions of speaker, mayor and deputy mayor. Now the ANC
needs to take stock of what went wrong in Cape Town, as the support the ruling
party enjoys in the rest of the country keeps eluding it there. If the ANC
wanted to be honest, for starters it would no look further than its provincial
leadership. If the party had not been afflicted by internal divisions in the
province, filtering down to the rank and file it would have outperformed all
other election contestants. Divisions filter down to lower structures as members
seek to sideline those they perceive to be outside their camp or failing to
support particular leaders. As a result, the ANC had to relearn one of the
oldest lessons: a divided people will always be defeated. The fight against
apartheid succeeded because the liberation movement managed to unite people
against the system. This is not the case in post-apartheid Cape Town, where
divisions among whites, the coloured majority and ethnic Africans are as clear
as those in the ANC's provincial leadership. The party showed amazing arrogance
as it sidelined smaller, established parties in favour of the relative new
comer, the ID, which has 23 seats and underestimated the significance of the
ACDP, which had secured enough votes to qualify for seven seats on the council.
There are divisions over whether the DA's victory is good or bad for Cape Town.
Many people argue that the change is important because the ANC already governs
270 of the 284 municipalities, which including five of the six metros, and
controls all provincial legislatures in addition to its national two-thirds
majority. This school of thought tends to believe that a DA-led Cape Town is
good for democracy, because it represents the large majority of opposition
voters who did not want to be ruled by the ANC. But there is a silent majority
that is probably perturbed by the latest developments. Those trapped in the
grinding poverty of Cape Town's under-developed townships are anxious to know
what will happen to them, since the history of this country reflects that when
whites are in charge, blacks tend to get short-changed. The alliance that
underpins the DA-led government in the Cape metro is likely to be fragile and
prone to attack.
Inkatha Leadership
Embattled Inkatha president Mangosuthu Buthelezi said he would step down
from his position should party members tell him to do so in the wake of the
IFP's dismal showing in the municipal elections. At a press conference in Durban
March 6, Buthelezi said the party conference would be held early in order to
"resolve the leadership question". "I am calling an early
conference to resolve the leadership question in a democratic fashion, so that
our party conference in July will be able to focus solely on mapping the way
forward towards an IFP victory in the 2009 general election," he said. The
conference would be held on April 8.
Security Guards - The biggest growth industry
Thousands of security guards paraded through Cape Town in support of demands
for higher wages. The national strike by Satawu members, who say they will be
joined by 12 affiliated unions if a settlement is not reached, is an attempt to
force security firms to accede to pay demands. The unions want an 11% increase
across the board, with an additional 4% increase for the lowest-paid workers,
and four months paid maternity leave. The unions believe employers are failing
to deal seriously with the demands by offering a 6% increase and a 0.6%
additional increase. Some of the issues at stake include nightshift allowances,
which workers want increased from R2 to R3.50 an hour, a cleaning allowance (for
their uniforms) from R8 to R15, an increase in the company's provident fund
contribution from 6.5% to 7% and a meal break for all security workers. There
are about 280000 registered private security guards in South Africa,
outnumbering the country's police by more than two to one and nearly 5000
registered security companies. They are employed for the purpose of armed
response, guarding and escort services. The industry has experienced a boom
since the fall of apartheid, when levels of violent crime, previously confined
mostly to the country's townships, shot up in the former white suburbs. The huge
demand for greater security has yet to translate into better living conditions
for those doing the guarding. There is growing resentment among those employed
to guard the lives, belongings and businesses of others in a crime-infested
society with little faith left in its police service.
Black middle Class Drives South African Boom
South Africa's black middle class is driving the post-apartheid consumer
boom in the country, a report has said. The group is responsible for almost a
quarter of the 600bn rand (US$96m) spent yearly by consumers, the University of
Cape Town's Black Diamond study said. Government measures to bring the sector
into the mainstream economy have helped its growth, the report added. The black
middle class, making up two million of the 45 million population is expected to
grow by 50% a year. The black middle class is defined as people who earn at
least 154,000 rand a year, and the sector has surged by 368% between 1998 and
2004. The group accounts for 23% of total consumer power in this country, which
has been achieved in a very, very short period and continues to grow very
rapidly indeed. The buying power of the black population had taken off with the
end of apartheid in 1994 which had "enormous and immediate effects - access
to jobs, finance, credit, homes, education," the report said. Before the
election of Nelson Mandela as president at that time "black society was a
single, monolithic, classless society with limited, menial jobs, no home
ownership and under-educated". Now companies are hoping to cash in on the
boom by moving into townships once devoid of any big names. They are hoping to
take advantage of the fact that three-quarters of the black middle class
population live in formal homes in such areas. Fashion retailer Edgars
Consolidated Stores and grocery supermarket Shoprite have already opened a
number of outlets in townships, including Soweto. Woolworths has also said it is
hoping to open 10 township stores.
UN Chief praises South Africa's leading role
United Nations Secretary-General Kofi Annan leaves office this year after 10
years at the helm and in his final months is battling to implement his plans to
reform the UN to make it more managerially efficient, the security council more
representative and to establish a human rights council. Annan lavished praise on
South Africa March 14, lauding its rising reputation for tolerance, mutual
respect for others and its determined approach to conflict resolution in Africa
and the world as a whole. Addressing parliament after meeting earlier with
President Mbeki while on an official three-day visit, Mr Annan said South Africa
was "pointing the way" for Africa, where "a new approach"
was required for development. South Africa was the first UN member-state that Mr
Annan visited after his inauguration as UN secretary-general in 1997. Mr Annan
said South Africa was pointing the way by what it was doing at home, in its
sub-regional neighbourhood, in its leading role in Africa and in the wider world
as a whole. South Africa "reminds us all of the remarkable African capacity
for forgiveness and reconciliation, despite the pain of racial discrimination
and oppression", he said. On top of this, the "robust economy, stable
democracy, support for the rule of law and perhaps most importantly the fully
inclusive constitution have made South Africa a beacon of tolerance, peaceful
co-existence, and mutual respect between people of different races, languages
and traditions. In terms of pointing the way through its "leading
role" in Africa as a whole, Mr Annan cited South Africa's role as the
biggest foreign investor in the rest of sub-Saharan Africa and its leading role
in forming the New Partnership for Africa's Development. He also noted South
Africa's lead role in transforming the Organisation of African Unity into the
African Union and the establishment of the AU's peer review mechanism. Wrapping
up his visit March 15, he conferred with former President Nelson Mandela in
Johannesburg and toured Soweto, where he laid a wreath at a memorial for one of
the first victims of the uprising in that township 30 years ago. Mr. Annan later
arrived in Madagascar on the second leg of a visit that will also take him to
the Republic of Congo and the Democratic Republic of the Congo (DRC).
Legal Association Critical of South Africa's Prosecution Policy
The International Bar Association (IBA) has expressed deep concern regarding
amendments to South Africa's prosecutions policy, which grants the government
new powers to give immunity to criminals and thereby undermine the human rights
of victims. A clear example of the possible detrimental effect of the new policy
is the power it gives to the National Director of Public Prosecutions (NDPP) to
decline to prosecute murder even though in South African law there is no statute
of limitations or prescription on the crime of murder. Dr Phillip Tahmindjis,
IBA Programme Lawyer, says, "The 1996 South African Constitution retained
provisions relating to amnesty, but only for the purposes of the Truth and
Reconciliation Commission, with a limited period of amnesty being granted to
perpetrators who came forward prior to 11 May 2004. These criteria have been
replicated for the purposes of the National Director of Public Prosecutions
exercising his or her discretion over all cases in future. To use these criteria
to prioritise cases would be legitimate. But to use them to assist in exercising
discretion not to prosecute can amount to an impunity for crime. This is a
breach of the human rights of the victims." Furthermore, the IBA's
Executive Director, Mark Ellis, says, "This is neither appropriate nor
effective policy in today's South Africa. The human rights of victims should be
of paramount importance and people should not be allowed to escape prosecution
simply because a policy is arbitrarily applied to the decision as to whether or
not an individual should be prosecuted." Mr Ellis, has written directly to
South Africa?s Minister of Justice, Ms B S Mabandla, outlining the IBA's
concerns.
No arrests in US$16m Cash Heist
Police in South Africa suspect that the theft of a reported US$16m from a
plane at Johannesburg's airport March 26 may have been an inside job. The cash
had been flown in from the UK and was being transported to Tanzania and one
other African country. A police spokesman said they had made no arrests and had
no firm leads in the airport's biggest robbery. A gang armed with AK-47s managed
to access the plane inside a supposedly top security section of the airport.
South African Airways, which owns the Boeing 747 plane, said it was seeking a
meeting with the airport authorities to discuss security arrangements.
Political Influences in Zuma Trial?
Jacob Zuma's defence team suggested in the Johannesburg High Court March 8
that political influences had played a role in a 31-year-old woman's decision to
lay a rape charge against Zuma. The team asked her for reasons why she called
Intelligence Minister Ronnie Kasrils before reporting the case to police. Zuma's
advocate, Kemp Kemp, asked the complainant whether she was aware, after the
alleged rape in November last year, that National Intelligence Agency boss Billy
Masetlha had been suspended from his position because of misconduct relating to
the surveillance of a businessman. She said she knew about the suspension but
did not know the details. She also said she did not know if Kasrils was in
Zuma's camp. Kemp was referring to the succession battle in the ruling African
National Congress that had split the organisation into pro- and anti-Zuma
factions. Zuma's backers believe his legal troubles, including the rape trial,
are part of a political plot to dent his chances of succeeding President Mbeki
in 2009. The complainant had said she regarded Zuma as a father figure following
the relationship Zuma had had with her father, who died in 1985. The cabinet
also expressed concern at the behaviour of certain members of the public
pertaining to court hearings on sexual violence. In a statement the cabinet
called on those wishing "to express their solidarity in the Johannesburg
rape trial of the former deputy president to ensure nothing is done which
undermines the rule of law".
Current Account Deficit at 22 Year High
Economists have voiced concern over the state of SA's balance of payments as
the deficit on the current account soared to its worst level in 22 years. The
Reserve Bank said in its first Quarterly Bulletin of the year that the deficit
on the current account, which measures the difference in value between the
import and export of goods and services, rose to 4,2% of gross domestic product
(GDP) last year, from 3,4% in 2004. In the fourth quarter, the deficit rose to a
record R71,6bn (4,5% of GDP), from R68,4bn (4,4% of GDP) in the third quarter.
The steadily growing deficit suggests that the rand will weaken to restore
balance between exports and imports, as currencies tend to do when current
account deficits breach the benchmark of 3% of GDP. This could have severe
implications for inflation, as the strong rand has helped keep inflation in
check by keeping the prices of imported goods down. It could also mean higher
interest rates, if the Bank's monetary policy committee sees the need to damp
demand and combat higher inflation by tightening monetary policy.
South Africa Asks for Single SADC-EU Trade Deal
South Africa, together with its counterparts in the Southern African
Development Community (SADC), has asked the European Union (EU) commission for a
single trade deal to govern all trade between the two regions. SA's chief trade
negotiator, Xavier Carim, said the economic partnership negotiations, together
with the current review of the SA-EU free trade deal, presented an important
opportunity to align SA's EU trade with that of other SADC countries. The EU has
started talks with various SADC countries towards establishing "economic
partnership agreements" with them. A single agreement covering all SADC
countries might require amending SA's own free-trade deal with the EU that has
been in place for five years, Carim said. The SADC proposal to push economic
partnership negotiations towards achieving one trade deal would also ensure that
integration in the region was not compromised, said Carim. The lack of economic
integration between countries in the development community has long been a
concern to the South African government and other community members.
Incorporating SA's partners in the Southern African Customs Union into its EU
free-trade deal could be done almost immediately, said Carim. Achieving a single
EU deal with other SADC countries could, however, be complex and would take more
time, he said. Carim said he expected an official response from the commission
to the SADC proposal in the next month or so.
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AUTOMOBILES
South Africa: Brace for 17% Surge This Year
WesBank's prediction for vehicle sales, made at the company-sponsored 2006 South
African Guild of Motoring Journalists Car of the Year Banquet, sees total
vehicle sales increasing significantly to 725000 this year, up 17% against
actual sales last year of 618011. This is against a backdrop of strong vehicle
growth of 26,05% in 2004 and 28,5% last year. The bank also forecast that
vehicle sales would reach 1-million units in 2010. Over the last few years,
WesBank has been more bullish than some in terms of total vehicle sales
predictions and in view of the rapid growth of the last few years has been one
of the most accurate, too. Most industry analysts failed to forecast the immense
growth in the last two years, their appraisals on the market being,
understandably, pessimistic. The continued strong growth can be attributed to
the sustained growth of the South African economy and the continued commitment
made by government and the industry to the sector. The second factor supporting
growth is SA's open market, allowing for a range of new entrants. For the first
time, derivatives now exceed 1000 models and this continues to increase.
According to WesBank CEO Ronnie Watson: "The motor industry now contributes
7,4% to SA's gross domestic product. For this reason, the motor industry is the
third largest and most expanding sector in the South African economy, indicating
the underlying transformation and normalisation of the economy." SA's
economy has grown well above global averages over the last 10 years and
indications are that the country is well on its way to reaching the 6% growth
mark that should result in much needed job creation. The export market continued
to strengthen despite the strong rand and with an average of more than 10000
units each month. Over the coming year, WesBank see three main factors driving
the domestic market. The growth of the black middle class has seen nearly
4-million people entering the middle-class market since 1994 and although this
shows a significant societal change it still only represents 10% of the
population -- so there is significantly more growth potential. The importance of
women to the vehicle industry is another factor not to be underestimated. Women
now account for a significant and consistently rising share of the market. The
third growth area is the youth market. Coming off a low base in 2001, this
sector wields a growing influence representing nearly 66% of the population, all
younger than 35.
Renault budget Model Could be Manufactured in South Africa
There are significant prospects French car maker Renault will manufacture
Europe's cheapest car, the Logan, in SA, a move that could improve vehicle
affordability and boost the country's vehicle production base. SA's perceived
vehicle affordability problem has been investigated by the trade and industry
department and by the Competition Commission, but this has not resulted in
prices being cut. Renault SA's MD, Roland Bouchara, said March 10 that the
country was now definitely being considered as one of the future host countries
for assembly of the Loga. "There is a real chance that it could be made in
SA, although we cannot say at this stage that there is a good chance," said
Bouchara in an interview. The Logan would be made available in SA regardless of
whether or not it would be assembled here, said Bouchara. This means that the
vehicle could also be imported. The Logan was developed initially for the
Romanian market, where there is demand for a low-cost sedan, but it has also
sparked substantial demand in Europe. More than 30000 Logans have been ordered
since its launch in September 2004. The car is being assembled in Romania and
Russia, with production starting last month in Morocco. India will start making
right-hand drive Logans next year. Doris Roberts, spokeswoman of Renault SA,
which is SA's largest car importer, said the group would have to assess whether
there was sufficient global demand for right-hand drive Logans to justify
production in SA in addition to India. It was possible, however, that some of
the Logan family of cars could be made in India and others in SA, she said. The
company has doubled sales of Logans over the past two years, selling 19500 last
year. Bouchara said that if the Logan became available in SA, the company could
double sales again in the next three years. Renault was now just behind BMW with
a 5% share of the market, Bouchara said. It hoped to double its market share by
2009. Aggressive expansion of its dealership network from 40 three years ago to
nearly 70 this year supported growth in sales. Renault SA, which is 49% owned by
the listed Imperial group, will launch a campaign to "rectify" the
perception that its vehicle parts are more expensive that those of local car
manufacturers. A Malcolm Kinsey report comparing the cost of Renault's parts,
including labour, shows that Renault was among the top three most affordable,
said Bouchara. He said Renault had not increased the prices of any of its
vehicles in the past three years.
General Motors Keen to Bring Cadillac to SA
General Motors SA (GMSA) was considering distributing Cadillac models in SA as
part of its plan to bring new models to SA, the company said March 28. The
company's plans to launch the Hummer H3 are already at an advanced stage. GMSA
is extending the capacity of its Struandale, Port Elizabeth, plant to
accommodate the Hummer, to be launched in SA later this year. GMSA's workforce
will increase by 500 as a result. "Because we already distribute Saab and
will soon assemble the Hummer H3, it makes sense to bring the Cadillac as
well," MD Robert Socia said. He would not say when the company would start
selling the car. "At the moment there is no decision on the matter,"
he said. There is growing demand for the Hummer and Socia said the company had
about two months' worth of orders for manufactured vehicles. The expansion of
General Motors' (GM's) brands in the local market takes place at a time when the
industry is benefiting from low interest rates and from the motor industry
development programme. The government initiative encourages the export of
vehicles and components by giving manufacturers import rebates. GM vice-chairman
Robert Lutz said that the group expected growth in the local vehicle industry to
continue. The company regarded SA as an emerging market, alongside countries
such as India and China. GM planned to make SA the main export base for the
Hummer H3 to right-hand-drive markets and is well positioned to grow its market
share, Lutz said. GMSA's market share in SA increased from 2004's 10,8% to 13,6%
last year. GM vice-president Maureen Kempston-Darkes said that the company
expected total sales of 1-million units a year in SA by 2010, "if growth
continues."
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AVIATION
SA Airlink Fights EU Safety Blacklisting
SA Airlink, a franchise of South African Airways, is to appeal against a
European Union (EU) decision to blacklist its partner airline Swaziland Airlink,
arguing that it falls under SA's Civil Aviation Authority (CAA), which it says
is well-respected overseas. There is concern about the effect the list could
have on tourism, a huge money-spinner for Africa and Swaziland in particular. SA
Airlink CEO Rodger Foster said March 24 that Swaziland Airlink, of which his
company owns 40% with the remainder belonging to the Swazi government, was
banned only because it was registered in Swaziland and the EU had concerns about
the effectiveness of that country's safety oversight body. Swaziland Airlink is
managed by SA Airlink, and uses only South African-registered aircraft and South
African-licensed pilots. SA Airlink is about to become the second airline in SA
to receive operation safety audit accreditation from the International Air
Transport Association. According to the EU, airlines that have been banned have
the right to express their point of view, which they submit in writing and which
is then added to their file for consideration, and can ask to be heard by the
European Commission or attend a hearing in front of the EU's aviation safety
committee. The ban prevents airlines from landing at any airport in the EU.
Announcing the ban, EU transport commissioner Jacques Barrot said travel
agencies that continued to book on blacklisted airlines ran the risk of legal
action by consumers if anything should happen while flying with that airline.
Several plane crashes last year prompted the EU to consider establishing a
uniform approach to evaluating air safety. The list is to be updated every three
months and is based on deficiencies found during checks at European airports
such as the "use of poorly maintained or antiquated aircraft, the inability
of aircraft to rectify shortcomings identified during inspections or inability
of (the aviation safety) authority responsible for overseeing an airline to
perform its task properly". Gilbert Twala, who heads the accidents
investigations unit of the CAA, said that the majority of the blacklisted
airlines did not fly to SA, but said the authority had taken note of the list
and would conduct its own inspections. "Some of these airlines already have
operational restrictions and have to apply for permission to land here
anyway," he said.
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BLACK ECONOMIC EMPOWERMENT
Kumba Stake Sale Rated Top Empowerment Deal
Think-tank BusinessMap named Kumba Resource's sale of 58% of itself to the
Eyesizwe consortium for R9,2bn as the "empowerment deal of the year"
March 16. Wiphold CEO Gloria Serobe was named "empowerment leader of the
year", while the Industrial Development Corporation got the award for the
best financier of empowerment deals at a function in Sandton. Although there
were 350 big deals worth more than R55bn last year, there is concern that the
number of large empowerment deals may be dropping. Big deals to the value of
R62bn were concluded in 2004. BusinessMap said the figure of 7% of shares in JSE-listed
companies that were in black hands was still well off the 25% target set by the
trade and industry department. The company had found that at a superficial
level, about 10% of the JSE was in black hands, but, because of different
ownership structures used, on a see-through basis, only 7% was actually
controlled by blacks, said research director Colin Reddy. Reddy conceded that
the calculations were "perhaps too rough", and needed to be more
dynamic. However, he said there was "still some place for deals with
companies such as Sasol and Sappi, so hopefully the level can still improve this
year".
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ENERGY
Electricity Crisis Harms Cape's Economy
The electricity crisis in Cape Town has caused "immeasurable damage"
to the economy and severely dented investor and citizen confidence, Andrew
Boraine, CE of Cape Town Partnership, told a business forum meeting March 9. The
head of the non-profit company created to upgrade the city centre said it was no
longer "business as usual" for the city. "The issue is not just
about the electricity distribution system," he said. "The backbone of
Cape Town's economy is infrastructure." Cape Town's infrastructure was in
crisis compared with its international competitors and there was an urgent need
for targeted investment that would have a big impact on economic growth, he
said. "These include road, rail and airport capacity, the port, basic
services infrastructure, information and communications technology, and business
infrastructure." Boraine said it was desirable to double the residential
population in the city in the next 10 years from its present 50000. This could
be achieved by boosting the number of people living in residential areas and on
future projects such as the planned District Six development, he said.
Development projects for the 2010 World Cup could leave lasting benefits for the
city, Boraine said. The province has said proposals for the construction of a
stadium at Green Point include a transport system that is 80% state-owned and
20% privately owned. "This presents an opportunity to improve public
transport to the central business district, including a possible rail link from
Cape Town International Airport, implementing an inner city public transport
system and upgrading pedestrian links and public spaces," he said. Boraine
said that the city was making good progress in black economic empowerment, with
significant changes to the property ownership structure in the city in the past
five years. At least 40% of all major buildings were now owned by empowerment
groupings and black-owned companies had participated in more than R2bn worth of
property developments since 2003, he said.
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FOOD & DRINK
SABMiller in Emerging Markets Acquisition
Global brewer SABMiller has completed its acquisition of 48,4% of Slovakian
brewer Topvar after approval from the Slovakian antimonopoly office. Controlling
shareholders will sell further shares to enable SABMiller to increase its
interest in Topvar to at least 67% by the end of September. Earlier this week,
the company's share price increased on market speculation that SABMiller might
be in line to buy Australian-based Foster's portfolio of breweries in emerging
markets. Foster's has indicated that it is considering outsourcing production
while retaining ownership of its brands in the emerging markets of China,
Vietnam and India. SABMiller already owns breweries in these markets and brews
Foster's beer under licence in the US. SABMiller and Scottish & Newcastle,
which produces Kronenbourg beer and Newcastle Brown Ale, have emerged as market
favourites for the acquisition. SABMiller made an offer for 100% of the
investment shares of Peru's largest brewer, Backus, for a total of about $400m.
Backus became an indirect subsidiary of SABMiller in October last year when the
company acquired a controlling interest in Colombia's Bavaria group, the
second-largest brewer in South America. SABMiller said at the time of the
acquisition that its strategy would be to buy out other shareholders in
Bavaria's various operations around the region. SABMiller CE Graham Mackay told
analysts at the Consumer Analyst Group of New York's annual conference in
February that the company's opportunities for growth in emerging markets were
"far greater" than anywhere else in the world, and that SABMiller's
broad exposure to these growth areas would benefit the group. Mackay said
emerging market consumers were moving to beer as an aspirational, mainstream
alternative to cheap spirits, increasing the beverage's share of total alcohol
across the emerging market landscape and increased per capita consumption of
beer.
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INSURANCE
Old Mutual Now in Full Control of Skandia
A last-minute rush ahead of the final closing of Old Mutual's offer for Skandia
on March 14 pushed the group's stake in the Swedish savings group eight
percentage points higher. Old Mutual said it had received acceptances for its
R38bn offer from Skandia shareholders holding 98,09% of the group's shares and
votes on a fully diluted basis. It had 90,02% of Skandia. Old Mutual said that
with its holding of Skandia above 90% it intended to initiate a compulsory
purchase process under Sweden's Insurance Business Act to buy the outstanding
shares. It would start the process as soon as it could under Swedish law, which
was likely to be in June. "I am delighted that we have reached our goal. We
have acquired a great company and are working with our new colleagues as we get
ourselves in shape to take advantage of the many opportunities that lie
ahead," CEO Jim Sutcliffe said. The acquisition gives Old Mutual a strong
footprint in Sweden and the UK, complementing its businesses in SA and the US.
In total, it will have businesses in 46 countries in all continents. The deal
makes Old Mutual about the seventh-largest life assurer in Europe with a market
capitalisation of more than £10bn. Last month, former finance director Julian
Roberts, who has taken up the post of Skandia CEO, said about half Old Mutual's
shareholder base is now in the UK, with 35% in SA and about 15% in the US. He
said there had been growing investor interest in Old Mutual from UK fund
managers who were either underweight or did not own Old Mutual stock.
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INTERNATIONAL ECONOMIC RELATIONS
South Africa and India Meet to Strengthen Relations
Deputy Foreign Minister Aziz Pahad hosted the Indian Minister of State for
External Affairs Anand Sharma in Pretoria March 24, for bilateral political and
economic talks. The meeting between the two was held within the context of South
Africa's priority to promote South-South co-operation for increased market
access, trade and investment. In the same light, South Africa, India and Brazil
constitute the India-Brazil-South Africa (IBSA) Forum, a historic partnership of
countries of the south that aims to achieve the afore-mentioned objectives. This
in the interest of eradicating poverty and underdevelopment while creating a
better life for all people of the South, the department added. "Issues on
the meeting's agenda are expected to include among others, the status of
bilateral political and economic discussions between both countries that are
governed through the Joint Ministerial Commission and the South Africa - India
CEO's Business Forum," the department explained. The CEOs Business Forum
was launched in October 2004 after Indian President A.P.J. Abdul Kalam's state
visit to South Africa and constitutes several Indian and South African
businesses. It aims to assist in stimulating trade and investment between the
two countries. Meanwhile, trade between South Africa and India continues to grow
with total bilateral trade approaching a level of R14.5 billion in 2005. Of that
amount, exports to India constituted R7.5 billion while imports from India stood
at R7.02 billion and India currently ranks as South Africa's 13th most important
export and import market. The main Indian products South Africa imports are
motor-cars and vehicles for the transport of goods; rice, medicaments, cotton,
yarn, finished leather goods, machinery and instruments, handmade yarn fabrics,
spices, handicrafts and handmade carpets. On the other hand, the products India
imports from South Africa are chemicals, gold, silver, coal and briquettes, iron
and steel, inorganic and organic fertilisers, pulp and waste paper and precious
and semi-precious stones. Also, the sheer size of the Indian economy, which is
the 14th largest manufacturing economy in the world, gives it an influential
position in the global market in which South Africa has a key interest, the
foreign affairs department explained. "Since South Africa and India have
similar developmental challenges, their collective capacity in bargaining and
voicing concerns that affect their economies in international forums is made
highly effective. As a key emerging regional economy, India provides a platform
for the re-integration of the South African economy with that of South
Asia," it said. South Africa and India also signed a merchant-maritime pact
that will see increased cargo shipping movement and boost trade between the two
countries, which already stands at R14,07bn. Transport Minister Jeff Radebe and
Indian counterpart TR Baalu signed the agreement at Parliament March 23.
Economic Relations With Arab Nations
Trade and Industry Minister Mandisi Mpahlwa has called for business people in
South Africa and Qatar to forge closer working relations and to explore
investment opportunities in both countries. Mr Mpahlwa was addressing a trade
and investment seminar in Qatar during his visit there. At the seminar, a
Memorandum of Understanding (MOU) between the Chambers of Commerce South Africa
(Chamsa) and the Qatar Chamber of Commerce and Industry was signed regarding the
minister's call. Also, Mr Mpahlwa held bilateral talks with the Qatari Minister
of Economy and Commerce, Mohamed bin Ahmed bin Jassem Al Thani, in this regard.
He returned March 16 from a week-long visit to the Gulf States of Saudi Arabia,
Qatar and Oman. In Saudi Arabia he attended the second session of the South
Africa-Saudi Joint Economic Commission. Mr Mpahlwa and his Saudi counterpart,
Hashim Yamani, issued a joint communiqué at the end of the sitting of the
commission. South Africa and Saudi Arabia have identified numerous areas of
co-operation in a bid to strengthen trade and investment between the two
countries. In this regard, the two countries would establish sub-committees in
areas of economic co-operation, as well as technical, social and cultural
co-operation. The sub-committee on economic co-operation is expected to increase
trade exchange, with Saudi Arabia willing to increase the exports on other
products besides oil to South Africa. In this regard, Saudi Arabia expressed its
readiness to export various petrochemical products to the country while South
Africa would increase exports in mining, electro-technical, financial services,
agricultural equipment, agro-processed products and automotive components, among
others. In the Sultanate State of Oman, Mr Mpahlwa held bilateral talks with
ministers of oil and gas, commerce and industry, transport and
telecommunications, defence affairs and foreign affairs. The minister was
accompanied by a South African delegation comprising representatives from the
departments of education, defence, environmental affairs and tourism, and
minerals and energy, as well as Chamsa. The Deputy Minister of Foreign Affairs,
Aziz Pahad, and the Deputy Minister of Defence, Mluleki George, also accompanied
him.
Mozambique Relations Remain Strong
South Africa has become Mozambique's leading investment partner. Economic
adviser to Mozambique's ministry of industry and commerce, Sergio Carlos Macamo,
told delegates at the PriceWaterhouseCoopers South Africa/Mozambique investment
seminar in Nelspruit March 14 that Mozambique was exporting 50 percent of its
products to South Africa. Likewise, Mozambique was also importing 50 percent of
its products from its neighbour. "We're exporting and importing more from
South Africa," Mr Macamo said. The partnership between the two countries
stem from the R25 billion Maputo Development Corridor that was initiated in 1996
and has already resulted in the massive upgrading of transport infrastructure
between the two countries. The N4 toll road links Gauteng to Maputo harbour,
which is closer to Gauteng than the Durban port. Mr Macamo said Mozambique was
offering attractive investment packages and had preferential access to European
and US markets. "We have also made it easy for private businesses to invest
in our country through simplifying industrial and commercial licensing," he
added. Mozambican companies, he said, were looking for partners in glass,
textile and rubber ventures. Mr Macamo said there were also vast opportunities
for South African investors in mega projects such as coal mining, bio-diesel
manufacturing, aluminium and the refurbishment of railway lines. Chief executive
officer of the South Africa/Mozambique chamber of commerce, David Robbetze, said
the risk of investing in Mozambique was small. Mr Robbetze said Mozambique was
politically stable, had a positive relationship with South Africa and was a
"sweetheart" internationally. Mr Robbetze acknowledged that land
ownership and transport were limited, and skilled labour was short. According to
the head of the linkages division of Mozambique's Investment Promotion Centre,
Antonio Macamo, the country's economy had been growing at 8.2 percent since
1998. "Our infrastructure is under massive improvement, and there is ample
availability of natural resources such as coal, land and natural gas," Mr
Macamo said.
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MINING
Anglo American Plan for $2bn in Share Buybacks
South Africa's largest company, Anglo American, surprised the market by doubling
its share buyback programme, which means that it will now spend $2bn on buying
back its own shares. With fewer shares in issue, headline earnings a share will
increase, a silver lining for investors despite the fact that Anglo American is
struggling to keep pace with rivals BHP Billiton and Rio Tinto. As a result of
the announcement, Anglo's market value of R335bn climbed more than R5,5bn as the
stock gained 1,7% on the JSE and 3,6% on the London Stock Exchange (LSE). Anglo
American said the repurchase would increase its earnings a share and contribute
to efficient capital management. Analysts said this was also the first
noticeable statement that the group was likely to be swimming in cash in the
next few months, as it aims to contain costs and move away from gold. Under the
restructuring plan, Anglo plans to sell or list paper maker Mondi on the LSE,
reduce its current 51% stake in AngloGold Ashanti, sell Highveld Steel &
Vanadium and revert to its core business of mining. This is likely to leave
Anglo with far more cash than it needs, leading to the odds of more buybacks and
special dividends, following this $2bn buyback and another $500m special
dividend. The programme will also help underpin Anglo American's share price in
the next few months, as the number of shares being bought back amounts to nearly
4% of its issued shares. Old Mutual Asset Managers resource analyst Anwaar
Wagner said the restructuring gave Anglo American many options. "These will
include either reducing debt further, increasing dividends, buying back more
shares, approving new projects or pursuing acquisitions," Wagner said. But
some have said the restructuring will take longer than initially thought. One
analyst, said the process would take longer than the market was happy with.
"People were expecting fireworks and the process to be wrapped up within
six months," said the analyst. "But the Highveld Steel & Vanadium
sale, for example, has gone slower than people expected, especially the overseas
investors." Besides selling various operations and improving its capital
management, Anglo still faces a battle to keep pace with BHP Billiton and Rio
Tinto. Although Anglo American recently announced a 38% increase in earnings for
the six months to December, BHP Billiton said its most recent half-year earnings
had grown 48% while Rio Tinto's profits climbed 78%. Last week, investment bank
Morgan Stanley said the asset sale would leave Anglo American
"disappointingly unchanged" as the company appeared to have no clear
strategy on where to invest the proceeds from the sale of Highveld Steel &
Vanadium, the listing of Mondi and the sale of AngloGold stock. But Anglo
American has a pipeline of projects worth $6,7bn: coal, ferrous metals,
diamonds, gold and platinum.
Mining Giants to Oppose Zimbabwe's Mine-Grab Bid
Major South African mining groups with operations in Zimbabwe are expected to
raise strong opposition to the Zimbabwean government's plans to take a majority
stake in mining operations, almost half of which it would not pay for. The value
of Zimbabwe's mining sector is estimated to be at least US$20bn. The country has
the second-largest resources of platinum in the world after SA. Analysts say the
plan, reminiscent of Zimbabwe's chaotic land seizures, would destroy mining, one
of the last few remaining working sectors of the economy. They warned the move
could inflict further irreparable damage to the mining sector, which was already
reeling from the effects of the prevailing economic crisis. Independent
consultant John Robertson said the new legislation amounted to "economic
sabotage" against an already collapsing economy. He said it would keep new
investors at bay and hurt those already in, while reducing prospects of economic
recovery. According to media reports in Zimbabwe and local sources, Zimbabwean
Minister of Mines Amos Midzi told the Zimbabwe Chamber of Mines that the cabinet
had approved draft proposals to require mining companies to surrender 51% of
their assets to the government and/or indigenous groups, depending on the
commodity. The government would pay only for 26% and the remainder would be a
"free carry". Midzi said alternative foreign investors had been
identified to take up the equities in current mines if external shareholders did
not co-operate. Implats finance director David Brown said these were draft
proposals, not final legislation. "We believe the proposal is not in the
best interest of developing a platinum industry in Zimbabwe, and we believe the
percentage figures and ownership methodology are not consistent with previous
discussions," he said. Asked whether the Zimbabwe government's latest
proposals would cause Zimplats to freeze a previously reported $2bn expansion
programme, Brown said it would be premature to discuss such a move because
Implats did not believe the outcome would necessarily follow the proposals.
Aquarius Platinum CEO Stuart Murray said the group's joint-venture, Mimosa
platinum mine, was in the midst of a $14m expansion programme, and Aquarius had
no intention of halting that expansion. Metallon Group head of corporate affairs
Nonkqubela Maliza said Metallon did not believe the proposals would go through
in their current form. If they did, it would be disastrous for Zimbabwe's
economy. However, Metallon Gold had already allocated 30% of its assets for
indigenous partners, and was in negotiations with potential partners, Maliza
said. Metallon Gold owns five mines in Zimbabwe and two exploration projects. It
is the country's biggest gold miner. Webber Wentzel Bowens senior associate
Kevin Williams said the Zimbabwean government's proposed requirement of a
free-carry was fairly common in other countries, including Mali, Namibia,
Botswana and the Democratic Republic of Congo. However, it was not in line with
World Bank recommendations.
Metallon Ordered to Pay $7,4m by Zimbabwe
South African mining conglomerate Metallon Corporation has been ordered by the
Zimbabwe High Court to pay $7,4m to a Zimbabwean company for breach of contract.
Mettallon, owned by tycoon Mzi Khumalo, was ordered by Judge Yunus Omerjee to
pay Stanmaker Mining the amount, which is almost half what Khumalo paid for five
leading goldproducing mines. Khumalo bought Independence Gold, comprising the
How, Shamva, Arcturus, Mazowe and Redwing mines from Lonmin for $15,5m. However,
the deal almost collapsed after Metallon delayed paying the amount, despite
paying $1m to secure the company's gold claims. Metallon had also agreed with
Stanmaker to form a joint venture to acquire the Independence Gold shares from
UK company Cableair, a wholly owned subsidiary of Lonmin. But Metallon started
negotiating with Lonmin without Stanmaker's consent. Stanmaker wanted Metallon
to pay $12m, but Omerjee reduced the claim to $7,4m. The $12m represented 40% of
the $30m that the parties had agreed to pay for the Cableair shares. "On
the breach of agreement, the plaintiff is awarded damages of $7,4m with interest
thereon from October 28 2002 to date of payment at rates prevailing, from time
to time in the US," Omerjee said. "The rate of interest applicable
cannot be that prevailing in Zimbabwe but that applicable in the country where
the currency is the home currency." Omerjee also said Khumalo had acted in
bad faith by dropping Stanmaker as its empowerment partner. Metallon later
entered into agreement with Manyame Consortium as its empowerment partner, but
that partnership also collapsed. Metallon lawyer Cedric Pukrin had argued that
his client was not in breach of contract because there was only an
"agreement to agree", which was not legally binding.
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PETROCHEMICALS
Sasol Investments
There is nothing extra-ordinary about the looming negotiations between
petrochemicals group Sasol and Indonesia's PT Bumi over a proposed $3bn plant.
That there was a marginal movement in the company's share price is itself
telling. While Sasol has not commented on the matter, such a move was expected,
considering the company's other coal-to-liquid projects. These include plants
being built in Nigeria and Qatar, while feasibility studies are under way in
China and the US. Progress is advanced. The Qatar project is expected to be
operational in the second quarter of this year, while activities are well under
way in Nigeria. The mooted investment in Indonesia is, therefore, neither the
first nor the last such investment in the coal-to-fuel area for Sasol. Many more
are on the way, with Sasol spokesman Johann van Rheede saying the company had
received interest "from all over the world". One thing is for sure,
Sasol is not short of suitors. With international crude oil prices at record
levels, it makes sense for companies to convert coal into liquid. Because Sasol
has the technology, it has attracted attention from various companies who want
to keep their own costs down. With Brent crude at more than $62 a barrel, coal
looks the better investment. That is exactly the reason for PT Bumi's enthusiasm
to join hands with Sasol in the mooted project -- turning coal into diesel is
more profitable. This has presented Sasol with a perfect opportunity to realise
its expansion ambitions outside SA. The coal-to-liquid operations are an
important part of that. As a matter of fact, growing the coal-to-liquids and
gas-to-liquids business is one of Sasol's primary growth drivers. The others are
developing the integrated chemicals portfolio and exploiting upstream
hydrocarbon opportunities.
Sasol, and Eyesizwe Coal have established a joint coal mining export business
worth R1,4bn in what Sasol said was the first step in an empowerment strategy
for its mining division. The new venture, called Igoda Coal, will be one of SA's
largest empowered coal export firms, according to Sasol. Sasol Mining, a wholly
owned subsidiary of Sasol, will own 65% of Igoda with Eyesizwe owning the
balance. The companies will provide R46m and R25m equity respectively. The move
is in line with requirements stipulated in the mining charter. Sasol Mining,
which has no black equity ownership, said it would expedite plans to achieve
"about 20%" empowerment shareholding by 2009 and full compliance with
the charter's target of 26% by 2014. Sasol expects to make further announcements
in this regard this year. "One of the first announcements will be at Sasol
Mining equity level," it said. Eyesizwe CE Sipho Nkosi said in a Sasol
statement that the new venture was another affirmation of Sasol's commitment to
empowerment. Sasol has been criticised for lack of transformation in the past.
CE Pat Davies said the announcements signalled that Sasol was "creating
sustainable empowerment ventures". Sasol said that it did not foresee any
conflicts of interest with regards to Eyesizwe's imminent merger with Kumba
Resources. Sasol group communications manager Marina Bidoli said there might be
future synergies, but that these could be explored only once the Kumba deal was
finalised. Igoda would mine, beneficiate, market and supply utility coal for the
international export market, said Sasol. It would produce a minimum export
production of 3,6-million tons a year, the petrochemical firm said. It would
comprise the full value chain of Sasol's coal export mining business. These
included the Twistdraai Colliery and beneficiation plant at Secunda, the
marketing and logistics components of its coal export business, as well as Sasol
Mining's 5% shareholding in Richards Bay Coal Terminal. Sasol said that as a
result of the deal the black economic empowerment ownership component in Sasol
Mining now comprised an estimated 8%. It said that the 8% was calculated on the
tonnage of coal produced. "The calculation works out as an effective 8%
ownership in Sasol Mining". Sasol said Sasol Mining's intention was to
create a "new, sustainable black economic empowerment entity, which will be
involved in selected mining operations".
Ferrostaal R1.7bn Cape Oil Projects
German-based industrial giant MAN Ferrostaal has unveiled a major investment in
SA with the establishment of two facilities in Western Cape worth R1,7bn to
service the growing offshore oil and gas industry. The two projects, an offshore
fabrication yard at Saldanha Bay and a service and refurbishing hub at the port
of Cape Town, will go some way towards fulfilling the company's 3bn euro offset
agreements with government, as part of its participation in the arms deal. MAN
Ferrostaal chairman Matthias Mitscherlich announced the developments at the Oil
Africa 2006 conference, saying the direct investment in both locations amounted
to R220m. The balance of R1,5bn would be "indirect" investment that
would see operational equipment, at present under-utilised or at risk of being
scrapped, relocated from other parts of the country and being put to full use at
the new locations. The projects would inject much-needed impetus into the
Western Cape economy and were expected to create at least 720 new jobs in
Saldanha and another 700 in Cape Town, with indirect job opportunities for
between 12000 and 14000 people, Mitscherlich said. He said the projects were
directly aligned to government's Accelerated and Shared Growth Initiative for
SA. He also said that much-needed skills development in terms of the offset
programme would be offered, as would skills transfer from the MAN group, which
had 30 years' experience in the oil and gas industry. "In addition we have
the cream of South African industry who are involved in the project," said
Mitscherlich. These include Grinaker LTA, DCD Dorbyl Heavy Engineering, DCD
Dorbyl Marine, SA Five Engineering and Globe Engineering Works. Mitscherlich
said he was confident the project would be completed in 10 months. Brian
Blackbeard, of Atlantis Marine Projects, MAN Ferrostaal's South African partner,
said that at present SA had only 6% of the potential market in the offshore oil
and gas industry, due to lack of infrastructure and co-ordination of logistics.
With the new facilities local companies could now ramp up capacity and, through
more aggressive marketing, increase their stake in this sector. Blackbeard said
the fact that new oil fields were springing up in west Africa meant increasing
demand for new platforms and maintenance of existing ones. He said the facility
would immediately be able to offer business as existing yards worldwide did not
have spare capacity. "The advantage of the two projects is that they offer
new capacity on African soil, geographically the closest facility compared with
Asian, European, Mexican and European facilities." Blackbeard said the
potential turnover for the first phase at Saldanha, starting next year, was
R500m, with a projected turnover in Cape Town of R340m. After completion of an
environmental assessment for the second phase of the project, the R500m turnover
could double. Blackbeard said the Saldanha unit would be using 1000 tons of
marine-grade steel a year and, as a domestic user, would be charged a price
lower than the international unit price. Tasneem Essop, Western Cape MEC for
environment, planning and economic development, said Western Cape had been
waiting for a "long time" for this project to get off the ground and
"it bodes well for the province to establish the oil and gas sector as a
critical growth sector".
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TELECOMMUNICATIONS
Virgin Mobile Seeks 10% Market Share
Fourth cellular network operator Virgin Mobile planned to win a 10% share of the
market within five years by creaming off the most lucrative clients who were
discontented with the existing players, its CEO said March 16. The operator
would launch in June or July, targeting well-heeled consumers who wanted better
service than they got, said CEO Sajeed Sacranie. Virgin Mobile will sell
pre-paid and contract cellular services by opening 12 dedicated retail stores in
upmarket shopping malls. Discussions are under way to sell its packages through
some retail outlets but not in the mass market chains favoured by Vodacom, Cell
C and MTN. Virgin Mobile does not expect a huge migration of discontented
customers from the existing networks but it expects to win a material share. By
targeting only top-tier consumers it would not rival even the smallest existing
player, Cell C, in size "but we expect 10% of the market within five
years", Sacranie said. There are about 30-million cellphone users in SA,
with Vodacom claiming to have 18-million, MTN 9-million and Cell C 3,2-million.
Analysts expect the market to reach 40-million in the next few years.
"There is not going to be an avalanche of people saying 'here's Virgin,
let's all go'," said Sacranie. He said this was because the other networks
were doing their jobs "reasonably well". The new company is a 50-50
joint venture with Cell C and will operate over the Cell C network. That has
allowed the creation a fourth player without a new licence, no fourth licence is
available in SA and without building new infrastructure. That vastly mitigates
the financial risk, as Virgin Mobile can debut for less than R700m using network
facilities that have cost Cell C upwards of R10bn. The deal gives Cell C a
chance to earn 50% of the profits from users who have shunned its cheap and
cheerful image. The newcomer has no intention of sparking a price war, and
analysts have speculated that Virgin may even charge a premium to capitalise on
its brand. Sacranie said they would take the middle ground by offering easy to
understand packages at competitive prices. Virgin Mobile's trump card may be the
ability to offer customers a range of deals and discounts with its sister
companies, the Virgin Active gyms, Virgin Atlantic airline and Virgin Money
financial services to be launched in SA later this year. Sacranie would not say
exactly how many customers it expects to win, nor how much it expects its users
to spend each month. Cell C's average revenue a user is the industry's lowest at
R120 a month, with Vodacom reaping R147 and MTN enjoying the highest at R168.
The tie-up with Cell C has been under discussion for more than a year, but
Sacranie said the lengthy process was not caused by any concern about the
network's quality or capacity. "Cell C has been upgrading its network and
it's been implicit in the deal that they met certain minimum standards. They
have delivered the desired level of service," he said.
Telkom Offers R2,4bn for Business Connexion
Telkom has mounted a fresh bid to take over information technology company
Business Connexion, raising its initial offer to R2,4bn, and gaining the support
of five key Business Connexion shareholders. The offer has raised eyebrows in
the fiercely competitive telecommunications sector, with key players arguing
that it could further enhance monopoly operator Telkom's stranglehold on the
industry. News March 22 that Telkom had raised a previously rejected bid to a
more generous R9 a share saw Business Connexion's share soaring 91c to hit R8,95
before closing at R8,80. Telkom's offer of R9 plus a dividend of 25c a share is
worth R2,43bn. Telkom has long had its eye on the information technology group,
but Business Connexion's board snubbed a formal bid last year as too low to be
worth presenting to its shareholders. This time Telkom is taking no chances, by
wooing the shareholders before approaching the board. Five key investors holding
more than 50% of the 262-million shares have given "a combination of
written and in-principle support â-oe to proceed with the potential
offer". Telkom said it would not be goaded into raising its bid again, and
if this offer was rejected it would walk away. The amount Telkom previously bid
was never made public, and Business Connexion's financial director, Alan
Farthing, declined to say how much more substantial the R9 offer was. Asked
whether investors were likely to accept this bid, Farthing said "according
to Telkom, they have already five shareholders with more than 50%". Even if
investors accept the deal, it may be scuppered by opposition from the industry.
Internet Solutions, a wholly owned subsidiary of Dimension Data, has said it
will approach the Competition Commission with an objection if Telkom attempts to
buy any IT player. Internet Solutions CEO Angus MacRobert said Telkom already
dominated the market for telecommunications infrastructure and should not be
allowed to absorb any player that would let it dominate the market for IT
services as well. Far from being allowed to increase its stranglehold, Telkom
should have its wholesale, retail and internet divisions torn apart by the
Competition Commission, MacRobert said. While the deal would be a major shakeup
for the IT industry, it was small in terms of Telkom and its market
capitalisation, one analyst said.
MTN Calms Fears Over Iran Venture
Cellular giant MTN has gone a long way to quell concerns about the potential
risk of its investment in Iran, telling analysts the Islamic nation could
quickly become its third-largest market. MTN has invested E450m in Irancell
after winning a 49% stake in the second network operator, and promised
spectacular growth to put more fizz into its figures. MTN is making so much
money it declared a dividend of 65c a share, despite facing a massive network
roll-out in Iran, building up four newly acquired networks in African countries,
and potentially bidding for a licence in Egypt. CEO Phuthuma Nhleko pulled off a
successful balancing act March 23 by pleasing investors with the dividend and
reassuring analysts of growth. The newly changed year end makes comparisons
difficult, but for the last full year to March 2005 it earned R28,9bn. Figures
for the nine months to December showed revenue of R27,2bn. Net profit for the
nine months hit R6,7bn thanks to a healthy profit margin of 41,3%, pushing
headline earnings a share to 359,8c. Despite speculation MTN may hang on to its
cash to expand new activities in Zambia, Congo Brazzaville, Cote d'Ivoire and
Botswana, Nhleko said the 65c dividend still left enough cash to fund its
current growth and more to come. The heavy investments pushed MTN from holding
R3,2bn in cash into net debt of R1bn. Nhleko expects peak funding in Iran to hit
$1,5bn, and to arrange funding so MTN will not need to invest any more money
itself. The roll-out would cost more than that, but much of the funding would
come from cash generated once the network launched in August. The Iranian
government has set MTN a tough target of quickly covering 50% of the population,
and political and economic uncertainties add an element of risk. MTN had the
ability to overcome the challenges and make a success of the venture, said one
analyst. "There is some potential for disappointment and surprises, but you
have to back them because they've done it before," he said. Similar
concerns were raised when MTN first invested in Nigeria, now the star of its
show. Its Nigerian network turned revenue of R9bn into an after-tax profit of
R2,8bn in the last nine months, and almost doubled its subscribers to
8,3-million. All its networks, with the exception of SA, have an ebitda margin
of more than 45%. The margin of 32% in SA was dented by a long distribution
chain with intermediaries taking a cut of profits, said Nhleko. The local
network added 2,2-million users, but average revenue a user fell from R184 to
R164 a month. That was "quite acceptable," he said, and would decline
as MTN went deep.
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