|
Books on South Africa
REPUBLICAN REFERENCE
Area (sq.km)
1,219,912
Population
43,586,097
Capital
Pretoria
Currency
rand
President
Thabo Mbeki
|
Update No: 055 - (28/07/06)
COLLAPSE OF WTO NEGOTIATIONS
World trade talks collapsed July 24 after nearly five years of halting
progress towards a global pact worth billions of dollars in benefits to
developing countries such as South Africa. Officials and diplomats said resuming
them could take years. Trade negotiators failed to reach agreement and World
Trade Organisation (WTO) director-general Pascal Lamy recommended that the
organisation's 149 members suspend talks. Developing countries had hoped to reap
US$86bn in proposals and the Congress of South African Trade Unions said the
suspension of talks was an opportunity developing nations should seize to
negotiate a better deal.
President Thabo Mbeki presented concrete proposals on how the Group of Eight
(G-8) industrialised nations could accelerate aid to Africa. Mbeki attended the
G-8 summit in St Petersburg, Russia, which, among other things, assessed the
progress made on commitments made at last year's summit of leaders at
Gleneagles, Scotland. The G-8 leaders committed themselves to doubling aid by
2010, cancelling the debt of some of the poorest countries, supporting fair
trade and providing universal access to HIV/AIDS treatment. The head of the
South African Institute of International Affairs' New Partnership for Africa's
Development (Nepad) and governance unit, Ross Herbert, said the G-8 leaders
could claim they had taken several steps to meet their Gleneagles commitments,
such as writing off debt and increasing aid. No progress had been made, however,
on trade concessions and opening the markets of developed nations to the
agricultural products of Africa and the rest of the developed world.
Missed Chances After WTO Talks Collapse
Officials and diplomats claim that resuming collapsed trade talks could take
years. World Trade Organisation (WTO) director-general Pascal Lamy has not
suggested a time or date at which talks could resume. This came after talks
among the Group of Six - Australia, Brazil, the European Union (EU), India,
Japan and the US - broke down. Gaps in the positions of key players remained too
wide, said Lamy. South Africa's chief trade negotiator Xavier Carim said the
development was a "serious setback". Unless urgent action was taken to
revive the round there would be a "huge opportunity cost". There was a
lot on the table for developing countries, he said. The World Bank has estimated
that $287bn could be gained from global trade liberalisation, which would lift
66-million people out of poverty. Developing countries would reap $86bn of the
total gains. Francois Charlot, an adviser with Mali's agriculture ministry,
said: "Everybody will lose out and there are those who will lose out more,
including Africa." The Congress of South African Trade Unions said the
suspension of talks was an opportunity developing nations should seize to
negotiate a better deal. Spokesman Patrick Craven said the union did not welcome
the collapse, but that a bad deal such as the one that was being tabled would
have been worse. South African commentators and other developing countries lay
the blame at the feet of the US and EU, which they said had made insufficient
moves to lower farm subsidies and import tariffs on farm products. Craven said
the main blame had to lie with the US and EU for putting their own
"selfish, short-term" interest first. Carim said: "It's not
useful to enter into a blame game but the core issues from the beginning have
been US domestic support and EU market access offers." The US and EU were
also blaming each other. EU trade commissioner Peter Mandelson said: "The
US was unwilling to accept or, indeed, to acknowledge the flexibility shown by
others. Surely the richest and strongest country in the world, with the highest
standards of living, can afford to give as well as take?" US trade
representative Susan Schwab said: "Unfortunately, as we went through the
layers of loopholes ... we discovered that a couple of our trading partners were
more interested in loopholes than they were in market access." Business
Unity SA CEO Jerry Vilakazi said the local organised business was disappointed
"but not surprised" with Lamy's statement. "The signs have always
been there," Vilakazi said. He said the suspension of the talks would give
developing countries an opportunity to trade among themselves. Trade adviser to
developing countries Hilton Zunckel said there had been signs for some time that
the talks were foundering. He said the collapse of the talks would see WTO
members focus on bilateral and regional trade agreements. Peter Draper, research
fellow at the South African Institute of International Affairs, said: "The
question is whether it is brinkmanship underpinned by major powers' negotiating
tactics that has led to the breakdown or genuine irreconcilable differences…
If it is the former, then the question will be for how long the negotiations
will be suspended."
HIV/AIDS and the SA economy
Computer software billionaire Bill Gates met with South African President
Mbeki July 12 in Pretoria, to discuss issues relating to HIV/AIDS. Mbeki, who
has drawn criticism for his response to the pandemic, admitted that health was
one of the "principle challenges" facing South Africa and the
continent as a whole, and said he wanted to discuss how Gates could help. Gates
described the country's progress in rolling out anti-AIDS drugs as
"disappointingly slow." He was quoted as saying, "Everyone would
like to see more patients on treatment ... in this country a lot of the credit
for progress goes to the activists." Gates said he was willing to share
whatever ideas the Bill and Melinda Gates Foundation, a philanthropic
organisation, might have on improved HIV prevention, treatment and care.
HIV/AIDS is expected to have a negative impact on South Africa's economic growth
in coming years, but the effects will not be nearly as severe as previous
predictions, according to a new study by the local Bureau for Economic Research
(BER). An earlier World Bank report suggested that the nation's economy would be
pushed to "the brink of collapse," but the BER was confident that
growth would only slow to an annual average rate of 4 per cent between 2000 and
2010, from a projected 4.4 per cent in the absence of AIDS.
However, BER researchers warned that the economy would be a lot worse off
without proper prevention, treatment and care programmes in place. "Without
treatment, AIDS would reduce the expected size of the economy in 2020 by about
8.8 per cent. But a large-scale treatment programme would cut the impact by 17
per cent between 2000 and 2020," the BER said. In November 2003, the South
African Cabinet approved the 'The Operational Plan for HIV/AIDS Care, Management
and Treatment', considered one of the largest and most ambitious treatment
programmes in the world.
Zimbabwe Immigrants Overwhelm SA
South Africa deported more than 51000 illegal Zimbabwean immigrants between
January and June this year as floods of people fled economic collapse. The
Department of Home Affairs says it is now deporting 265 Zimbabweans a day. Last
year, 97433 Zimbabweans were deported compared with 72112 in 2004. The
government is considering building a second detention centre in Limpopo to cope
with the dramatic increase in illegal immigration from Zimbabwe. The exact
number of Zimbabweans in South Africa illegally is not known but analysts and
government officials have estimated it at between three and five million. The
latest figures come as South African health services struggle to cope with
thousands of foreign patients who have not been budgeted for. Phuti Seloba, the
Limpopo health spokesman, said July 22 that more than 800 patients, most of them
illegal immigrants, had been treated over the past three months at Musina
Hospital near Beit Bridge, in the northern region of Limpopo province. More than
200 patients were admitted at the hospital. Of them, 19 died but only eight of
the dead were claimed by their relatives, forcing the department to conduct
pauper's funerals for those unclaimed. Seloba said the department could not deny
the immigrants healthcare. Zimbabwean police stationed near the Beit Bridge
border with South Africa claim they have recorded a 29% increase in deportees in
January this year compared with the previous year. The Matebeland South police
spokesman, Assistant Inspector Trust Ndlovu, said police had recorded more than
35000 Zimbabwean deportees between January and May. In May, the cash-strapped
Zimbabwean police handed over the job of dealing with deportees to the
International Organisation for Migration (IOM), an intergovernmental
organisation operating in 100 countries. The IOM has since established a support
centre for the deportees near Beit Bridge. At the centre they are offered food,
shelter and transport to their homes. Nick van der Vyver, head of the IOM at
Beit Bridge, said his organisation received a total of 16394 deportees in a
period of six weeks. The Department of Home Affairs has taken a financial knock
from the influx of illegal immigrants. The government spent a total of
R218-million on immigration control last year -- more than double the amount the
department spent in 2004. The increase in expenditure is "largely as a
result of tightening control at Lindela [detention centre], an increase in the
number of deportations and refugee control," according to the department.
The notorious Lindela detention centre outside Krugersdorp, west of
Johannesburg, which keeps foreigners due for deportation, is struggling to cope
with the numbers of illegal immigrants. The cost of detaining illegal immigrants
has gone from R21.95 a day per detainee in 2001 to R75 a day today. The
department also confirmed it was considering plans to build another detention
centre near Beit Bridge to deal with the influx. The proposed detention centre
has already been discussed with the Zimbabwean government, but department
spokesman Nkosana Sibuyi said a final decision had not been made. Home Affairs
officials are also negotiating with Zimbabwe to allow the deportation trains to
enter the country. At the moment, Zimbabwean deportees are offloaded at Beit
Bridge. On being deported, most of the deportees quickly find their way back
into South Africa through makeshift entry points along the crocodile-infested
Limpopo River. Immigration analysts say the increase in the deportation of
Zimbabweans shows that the influx of illegal immigrants from that country is on
the rise as the economic meltdown continues unabated. Van der Vyver said 92% of
those deported from South Africa were men. He said that in one week at the
beginning of July his organisation had received 35 Zimbabwean children who had
apparently been abandoned by their parents at the border. The children had been
referred to social services in Zimbabwe. Dr Sally Peberdy, project manager of
the Southern African Migration Project at Wits University, said the deportations
showed that there was an increase in the number of Zimbabweans in South Africa
illegally. "The other thing that the figures possibly indicate is that
there are new people [from Zimbabwe] coming that never came before. They are
easy to find and they are not good at evading arrest," she said. Professor
Mike Hough, head of the Institute for Strategic Studies at the University of
Pretoria, said more Zimbabweans were flocking to South Africa than those being
deported. He said the Department of Home Affairs did not have a plan to curb the
influx. "An increasing number of illegal Zimbabwean immigrants are living
in informal settlements and it has become easier for them to evade arrest,"
he said.
Eskom Will Double in Size Over Next 20 Years
For all its financial muscle and monopoly power, Eskom faces unprecedented
challenges as the electricity utility embarks on the biggest power station
construction and refurbishment programme SA has ever seen. "I don't think
anyone has quite grasped yet how gigantic this build programme is (and the kind
of) opportunities it presents for this country, particularly our manufacturing
economy," says Public Enterprises Minister Alec Erwin. Eskom estimates SA
will need about 47000MW of additional capacity by 2025, more than double its
current installed capacity of 42000MW. That is about 2000MW more each year. This
means a second Eskom plant will be built over the coming two decades. While the
majority of the new power stations will be coal-based due to SA's rich coal
resources, Eskom is also looking at gas, nuclear and renewable energies. The
private sector has been given a look-in, and will deliver a portion of SA's
power needs. Eskom has divided up the construction programme into stages, having
committed R97bn for the first five years to build new power stations, refurbish
existing plants and expand the transmission line. Government is keen to ensure
that a significant portion of the materials and skills needed to meet the needs
of Eskom, as well as those of other state enterprises, comes from SA. It is
developing a procurement policy, called the Competitive South African Supplier
Development Programme, which will use the multibillion-rand state utility
investment programme to boost local sectors. The focus is on developing a
procurement policy that will not result in big price premiums, but give
preference to local industry. "The intention is to revive certain
industries in SA," says Erwin. Eskom's investment programme is the largest
such initiative currently under way. Eskom CEO Thulani Gcabashe said mid-July
that despite it being a tough year, the group's financial performance in 2005-06
had provided a solid platform to fund the R97bn investment programme. "The
year was characterised by a significant number of challenges, particularly in
the generation and transmission of electricity to the Cape. Valuable lessons
have been learned," he said. The 2005-06 results show that money will not
be a problem when funding the investment strategy. Eskom's results may show
profit on a downward trend and electricity sales largely stagnant, but its
balance sheet is strong. Gcabashe points to a return on assets of 9,2%, almost
R12bn in cash flow from operations and a debt-equity ratio of 0,18 as proof of a
strong balance sheet, and its ability to fund the investment programme. Its
initial fundraising programme was well received, and future funding will be done
on a 50:50 basis, says chief financial officer Bongani Nqwababa, made up of cash
flows, local borrowings and offshore borrowings. "It's easy to remember
that way," he says. The challenges lie in ensuring the capital expenditure
programme takes off. Gcabashe says they include finding sufficient skilled
people to build the new power stations and ensuring materials can be sourced
timeously. Suitable land will have to be bought and environmental impact
assessments undertaken. On top of all of this, many of Eskom's existing power
stations are nearing the middle of their life spans and need major maintenance
work. It's a big job, but Gcabashe remains upbeat: "We have both the
experience and commitment to meet these challenges and play our part in the
ongoing development of SA."
«
TopAUTOMOBILES
Car Import Boom Leaves Poor Wanting
In the past two years, SA has been a bit like the family where the patriarch
mortgaged the house to buy a two-seater convertible. Even those who can't come
along for the ride may end up paying for it. Developments in the motor industry
are a telling illustration. As soaring mineral prices combine with an influx of
short-run investments to push up the rand, the floodgates have opened on
imports. Meanwhile, the economy has become more vulnerable to a fall in world
commodity prices, which are notoriously unstable. The motor industry is often
presented as an economic success story because of its export growth. In the 10
years to 2005, SA's foreign sales of transport equipment rose tenfold in nominal
terms, to just more than R30bn. Their share in total exports climbed from 3% in
1995 to 10%. Until 2003, the only problem with this picture was the limited
effect on employment. The motor industry employs about 100000 people. Despite
major capital formation and government support, that number has not grown much
in the past 10 years. Jobs in components production rose about as fast as the
formal sector as a whole, and assembly plants downsized. The past two years have
raised additional concerns, even though motor exports remain relatively robust.
In particular, fully imported cars have flooded the local market, reducing the
scope for local products while bulking up the trade deficit. The driving force
behind this trend has been the rand's high level in the context of harsh income
inequalities. Imports of fully assembled new cars doubled in value between 2003
and last year alone. In contrast, imports of components for local assembly
plants increased only 25%. As a result, where fully assembled vehicles made up
just 30% of motor imports in 2003, by last year they had risen to 43%. The
influx of imported cars aggravated the soaring trade deficit. Between 2002 and
2005, total imports increased 13% a year in rand terms -- but imports of cars
soared 50% a year, rising from 3% to 7% of total imports. Some economists argue
that this is all to the good, as it brings cheap cars to the people. But how
many South Africans can afford to buy their own car, even one of the relatively
cheap new imports? The black middle class remains more a fable for media pundits
than a reality, as income inequality in SA remains among the worst in the world.
Growth in the past three years has helped only slightly. In September last year,
half of all employed Africans earned less than R1500 a month -- not much more
than the payment for even a small new car. If we factor in unemployment, incomes
look even worse. In September 2004, two-thirds of households spent less than
R800 a month in total. They could hardly add a car to their bills. In short, the
consumer benefits of the import boom have gone mostly to the prosperous.
Luxuries may be defined as goods and services that most of the population can
never afford. A car is almost a necessity in some richer countries and in SA's
leafy suburbs. But for most South Africans it lies beyond their wildest dreams.
Meanwhile, the import boom hurts the poor directly and through opportunity
costs. It displaces local production, making it harder to address the
unemployment crisis. In contrast, if the rise in imports came from a surge in
capital goods and equipment, it might fuel long-term growth in the economy and
ultimately employment. And how does SA pay for the new imports of consumer
goods? The way it has for the past 100 years: through the sale of minerals. Last
year, minerals comprised 56% of SA's total exports, up from a low of 42% in
2000. But we cannot expect high mineral prices to last forever. In the past,
when commodity booms like this one swept over SA, they brought prosperity mostly
to the rich. When mineral prices fell, they left behind junkyards full of
imported toys, a weakened industrial base, and soaring joblessness. We need
creative ways to leverage a more sustainable outcome from today's high mineral
prices.
«
Top
BLACK ECONOMIC EMPOWEREMENT
Empowerment May Take a Back Seat in Chase for Growth
Government has long been coy about measuring the impact of black economic
empowerment (BEE) on the growth of the economy. The consumer boom, it is
generally agreed, has been fired largely by middle-class black spending. But the
latter are not necessarily made richer by BEE. Low interest rates and a strong
rand would also rate as key factors in the boom. Under pressure, though,
government may have just given us an inkling of how it measures BEE as a growth
driver, with a key cabinet minister saying that SA cannot afford to have its
R340bn capital expenditure projects held back by empowerment initiatives.
Addressing businessmen, Public Enterprise Minister Alec Erwin said that while
government valued BEE, the programme could not stand in the way of government's
massive infrastructure development programme. The government wants to spend
between R320bn and R340bn over the next five years in a programme to upgrade and
develop, among others, transport and power infrastructure. "Everything is a
race at the moment," Erwin told a meeting with the business umbrella body
Business South Africa (Busa) July 15. "Yes, we must ensure there is BEE and
women empowerment, but none of these can delay the roll-out of these projects.
We cannot afford that luxury." "It is pointless having a BEE economy
that is growing at 1%. We've got to hit the growth rate," the minister
added. While BEE remained a key requirement for tender applications, government
could not wait for BEE entities to be rolled out, Erwin said. "A week's
delay is a week too long." Erwin's comments are likely to rile some
colleagues in the ruling African National Congress (ANC) and unionists in the
tripartite alliance. The SACP and the Congress of South African Trade Unions (Cosatu)
are the arch critics of government's BEE programme. They both argue that the
government lacks sincerity and is only paying lip-service to empowerment. The
black middle-class which, until now has been the main beneficiary of the
programme, may also balk at the comments. Such statements from the government,
critics argue, could stall the very process it is championing. "Its like
signing a blank cheque for established business to go it alone without us,"
says a leading black businessman who declined to be named. "The minister's
statement is tantamount to admitting the initiative is not working. And if it is
not working, then who is to blame," the businessman asks. Busa CE Jerry
Vilakazi says he hopes that the infrastructure will not be rushed at the expense
of transformation. "If that is what he meant, we would urge him to
reconsider because if government does not take the lead with preferential
procurement, the process could not work," says Vilakazi. "He (Erwin)
did say, however, that BEE remains a major criteria. My sense is he was urging
companies not to wait to become compliant," Vilakazi says. Although capital
investment in the economy over the past few decades has tapered off to a
trickle, a number of state-owned enterprises will now embark on several
large-scale projects almost simultaneously. These will move government from a
low procurement environment to one in which it will be spending roughly R100m a
week, creating a massive demand on the private sector to supply to these
projects, Erwin says. Erwin's frustrations also reveal a surfacing of the
conflict between government's desire to level the wealth gap and the imperative
of meeting certain targets to keep the country and economy working. Government
has missed many targets in its delivery programme, resulting in civil strife in
some local authorities. The minister also had stern words for the private
sector, warning that local businesses would not get preferential treatment from
government in tendering processes. In the past, local businesses benefited from
tender and price premiums. This approach would not be repeated. "There will
be no special allowances, no special protection from government ... there will
be no government underwriting of these investments. We'll be giving a lot of
information and have a lot of discussions and facilitate." Businesses
would, however, have to supply on an internationally competitive basis because
the programme was large and would establish the ideal platform to create major
export opportunities in the future, Erwin added. The challenge will be to manage
all these programmes at the same time. With key equipment and skills already in
short supply, government and state-owned enterprises needed to work much more
closely with business to ensure the private sector could supply the needs of
government, the minister said. He reiterated that business would have to be
competitive to take advantage of the opportunities. Government departments were
working in close co-ordination with one another to fill gaps and align
processes. Regular meetings were also held with state enterprises like Transnet
to identify possible synergies and duplications. Erwin said government was
monitoring the macroeconomic dimensions of the projects and their effect on the
balance of payments, the import balance and capital markets, and also assessing
the impact of the projects on supply chains. He said government would look at
speeding up processes like licensing and the issuing of environmental and water
permits for priority projects. There were mechanisms to speed up processes, he
said, adding that his department was dealing closely with the department of
environmental affairs and was consulting with international experts about best
practice abroad.
«
Top
FOOD AND DRINK
SABMiller Expansion in China to Open Way for Snow Brand
SABMiller is to extend its reach in China with the purchase of a 100% equity
interest in the Zhejiang Yinyan Brewery and the brewing-related assets of the
Anhui Huaibei Xiangwang Brewery through its Chinese associate, China Resources
Snow Breweries. The two were acquired for a consideration of $42,3m and $10,1m,
respectively. However, incorporating Yinyan Brewery's net debt of $6m and CR
Snow's intention to invest an additional $1,8m in the business, the total
investment cost in Yinyan Brewery is expected to be $50,2m. Following a further
investment of $7,4m at the Xiangwang Brewery, the total investment cost will be
about $17,4m. The Yinyan Brewery is situated in Zhejiang province on the east
coast of China and is close to a number cities such as Shanghai and Hangzhou.
The group said it planned to upgrade Yinyan's brewing capacity to 2,4-million
hectolitres from the current 1,8-million hectolitres. SABMiller said its
national beer brand, Snow, would be produced as soon as it was practical and
once the acquisition had been completed. The brewery was well positioned to
further extend the footprint of Snow, the group said. In May, CR Snow announced
it would invest $35,3m in building a new brewery in Harbin City, in Heilongjiang
province in the country's northeast, to extend the reach of the brand. The
facility is expected to be completed in 18 months. The premium-label beer was
launched as a national brand in China last year. Total sales volumes increased
47% last year to 15,8-million hectolitres. Snow has a 13% share in the world's
largest beer market. MD of SABMiller Africa and Asia, André Parker, said the
acquisitions would reinforce CR Snow's market position in the region and provide
a larger platform to expand Snow in these strong growth areas. The Chinese beer
market has traditionally been fragmented and dominated by numerous local brands.
But SABMiller's effort to create a national footprint for Snow has seen it go
head to head with Tsingtao Brewery. SABMiller's main competitor in the US,
Anheuser-Busch, holds a 27% interest in Tsingtao, which has a 15%-16% share of
the Chinese market. Snow grew 52% to 17,3-million hectolitres for the year ended
March, making it the number one brand in China by volume.
Sugar Producer Illovo Approves ABF Takeover
Shareholders of Africa's biggest sugar producer Illovo unanimously approved a
takeover bid by Associated British Foods (ABF), which offered £317m, or
R3,8bn, to buy a 51% controlling stake in the group in May. The company said
99,6% of Illovo's shareholders had backed ABF's bid for control of the company
at Illovo's annual general meeting July 12 and agreed to waive the condition
that the company must offer to buy all shares on the same terms according to
stock exchange rules. Illovo chairman Robbie Williams will retain his position
after the acquisition has been implemented, while ABF will appoint three
non-executive directors to the Illovo board. The acquisition will give it access
to low-cost production in African countries including Malawi and Mozambique,
which will be able to export sugar duty-free to the European Union in 2009.
Illovo has operations in Zambia, Swaziland and Tanzania. Williams said sugar
production was forecast to increase marginally to 1,875-million tons for the
season, while cane production was expected to be 2% higher than last year at
5,5-million tons. Illovo reported headline earnings a share growth of 127% to
104,2c for the year ending March. Williams said the performance was largely due
to increased sugar production, improved domestic sales, an increase in sugar
prices, cost savings and lower financing costs. He said that while the world
sugar price was strong, it remained volatile, like that of many other
commodities. The rand-dollar exchange rate is more favourable for the company
than in the previous year, he said.
SABMiller Has Mixed Political Motives
SABMiller might be clear in its global ambitions to merge the Statue of Liberty
with Table Mountain, but it is far more confused when it comes to sponsoring
politics. There appears to be no consistent game plan on exactly which political
parties benefit. SABMiller, which is now the second-largest brewer in the world
after Anheuser-Busch, released its annual report learly July, which saw it
proudly bleat that "political donations are only made by exception".
Yet the brewer still found its way to siphon a bucketload of cash into the
Americas -- a process it says it undertook "after careful
consideration". Its US subsidiary, Miller, "made contributions to
individual candidates for political office and to party committees in the
USA" -- about R2,3m in all. In central America, it donated about R1,8m to
"a number of registered political parties". The reason? To
"support the democratic process", it said. Notably, its new Colombian
subsidiary, Bavaria, donated about R14m "to a number of candidates and
parties who expressed support for the multiparty democratic process". But
how strong exactly is SABMiller's philosophy of supporting democracy? For
example, the brewer did not donate any money to SA's political parties last year
-- during a time in which there was a local government election. Yet, for the
latest South African national election, it donated R5m to political parties
because of a "strong belief that a strong democracy requires healthy
political parties, particularly in a newly established democracy". An
admission in last year's annual report about its US donations -- strangely
absent from this year's report -- provides greater clarity. Last year, SABMiller
said its US donations of more than R7m were made to "campaigns and running
costs of individual elected officials and candidates who indicated their support
for the beer industry". Of course, SABMiller has a lot more to lose by not
joining the US lobbying bandwagon. Not only is there an entrenched system of
donations (see: Jack Abramoff, lobbyist and Republic Party stooge recently
convicted for fraud), but its Miller brand has also suffered a series of
alarmingly xenophobic attacks from rivals about its South African heritage. But,
given the scandals that are linked to donations (the sort that thrust a Kebble
arrow into the African National Congress Youth League's credibility), it is only
a matter of time before companies that seek political favour in exchange for
donations are compromised.
«
Top
FOREIGN AFFAIRS
Japan Asks South Africa to 'Talk to' North Korea
South Africa IS being asked to do its bit in helping resolve the growing
international crisis over North Korea's missile tests with Japanese
representatives meeting in Pretoria for talks with Deputy Foreign Affairs
Minister Aziz Pahad. Japan called on SA to discuss the issue with North Korea
because of Pretoria's good relations with Pyongyang. Speaking at the opening of
a SA-Japanese partnership forum meeting in Pretoria July 10, Japan's Deputy
Foreign Minister, Yasuhisa Shiozaki, said SA's diplomatic ties with North Korea
placed it in a good position to discuss the missile crisis. North Korea's Deputy
Foreign Minister, Kim Hyong Jun, is to visit SA next week for talks expected to
cover nuclear nonproliferation and disarmament. North Korea drew international
condemnation July 5 after it test-fired seven missiles into the Sea of Japan.
Analysts are unsure, however, whether SA could make a meaningful contribution
South African Institute of International Affairs analyst Kurt Shillinger said
that while SA "likes to play a role as a constructive peace broker, I don't
see it coming up with any breakthroughs". But Shillinger conceded that
"SA is in a position to reach more isolated regimes than other players,
firstly because it is a non-aligned nation, and secondly because it carries
stature among southern states". However, earlier this year SA angered its
western allies by abstaining from a key vote by the International Atomic Energy
Agency on whether Iran should be referred to the UN Security Council over its
nuclear plans. While North Korea might see this as an indication that SA might
have some sympathy with its missile programme, Shillinger said the stance on
Iran "has done SA some harm when it comes to how this country is perceived
by the international community".
Cosatu wants South Africa to Cut Ties With Israel
An alliance of nongovernmental bodies, including the Congress of South African
Trade Unions (Cosatu), has called on government to end diplomatic relations with
Israel in an attempt to force a tougher stance on the Jewish state. They are
also asking government to recall its ambassador from Tel Aviv and ensure that no
South African serves in any capacity in the Israeli security forces. The
organisations told reporters in Johannesburg July 10 that they also wanted South
Africans to boycott Israeli products and support sanctions against the Israeli
"apartheid state" until it ended the occupation of Palestinian
territory. "We call on workers not to buy Israeli goods in supermarkets.
That money will go back and make sure they (Israel) buy more weapons (to attack
Palestinians)," said Cosatu president Willie Madisha. The calls follow the
latest attack on Palestine, which has seen Israeli bombings in Gaza, including
on a university, in retaliation for a Palestinian resistance operation aimed at
a military target and the capture of the an Israeli soldier. Palestine
Solidarity Committee spokesman Salim Vally told reporters that the committee
planned to organise a national day of action in SA in solidarity with
Palestinians. "We are fully behind calls made on actions to be taken,"
said South African Council of Churches general secretary Eddie Makue. Deputy
Foreign Minister Aziz Pahad said the recent attacks and kidnapping of a soldier
had created a situation of grave danger and concern. Government wants the
soldier returned.
«
Top
MINERALS AND METALS
Anglogold Enters Joint Venture in Colombia
Anglogold Ashanti has entered into another joint venture agreement to explore
properties in Colombia with major Chilean copper producer Antofagasta. The
agreement is in line with AngloGold's policy in Colombia of exploring certain
properties on its own and bringing in partners on others where it expects to
find base metals as well as gold. The global gold producer said July 14 it had
signed heads of agreement with Antofagasta, which is listed on the London Stock
Exchange, to explore an area of southern Colombia for gold and copper deposits.
AngloGold will put all of its applications and contracts into the joint venture
and Antofagasta will have to spend $1,3m (R9,7m) within the first 12 months on
exploration. If Antofagasta spends another $6,7m on exploration in the next four
years, it can earn up to 50% of the venture. Once the properties are 50-50
owned, a joint committee will decide which areas are copper-dominant and which
are gold-dominant. Each of the parties can fund a bankable feasibility study
into the properties and increase interests up to 20%. Antofagasta is one of the
world's largest producers, with three mines in Chile producing about 467000 tons
of copper last year. It also explores for copper, mainly in Chile and Peru.
Turnover last year was $2,4bn, slightly less than AngloGold's $2,7bn. AngloGold
announced in June that it had formed a joint venture with Toronto-listed Bema
Gold to explore a selected group of AngloGold properties in northern Colombia.
The new joint venture company is expected to be listed in two years.
«
Top
PETROCHEMICALS
PetroSA Hopes to Treble Income With Fuel From Gas
PetroSA said July 12 that its gas commercialisation plans could see the state
agency increasing revenues and profits threefold over the next five years.
PetroSA is following in the footsteps of its much larger counterpart, Sasol, by
setting up partnerships in other parts of the world with a view to establishing
commercial gas-to-liquids plants for the production of fuel that is seen as a
cheaper and cleaner alternative to oil. Apart from the financial upside for the
state-owned enterprise, the expansion and commercialisation of its
gas-to-liquids operations holds huge promise for the country's balance of
payments. SA currently spends about 15% of its total import bill on oil. If
PetroSA increased its production it could constitute a considerable saving in
foreign exchange outflows, said chief financial officer Nkosemnthu Nika. The
gas-to-liquids expansion plans are in line with government policy to diversify
its energy sources. Indications are the start-up of the first large-scale
gas-to-liquids plant could be as early as 2010. The commercialisation plans
kicked off with a technology development programme in 2001. The initiative is
related to low-temperature technology, which is a joint venture between PetroSA,
Statoil and Swiss company Lurgi. A semi-commercial plant was built in Mossel
Bay, which proved successful. This will form the basis of future applications of
the technology in large-scale gas-to-liquids projects. PetroSA is pursuing an
aggressive growth strategy to remain sustainable. Its aim is to increase
production output to 65 000 barrels a day by 2010. Current operations have gas
feed-stocks that will last only until 2008. The company has, however, undertaken
the South Coast gas development project at a cost of $448,5m, which would secure
feedstock until 2013. The project was on schedule, with May as the target for
the first gas to reach the refinery, CE Sipho Mkhize said. PetroSA is pursuing a
number of foreign opportunities for commercial gas-to-liquids developments. Of
these, undertakings in Algeria and Egypt were the most advanced, with an
announcement on a $4bn plant in Algeria expected between September and November,
said the GM of the company's gas-to-liquids refinery, Robert Nohamba. PetroSA
would have a 25% stake in the project. "PetroSA is on the brink of a
breakthrough. If we can clinch this it could have a huge potential upside for
the country," he said. In Egypt, prefeasibility studies on a prospective
gas-to-liquids plant would commence next year, Nohamba said. Apart from
prospects in Algeria and Egypt, PetroSA is exploring opportunities with
countries in the Middle East, South America and Australia. It already has a
stake in a proposed fuel-grade methanol project in Qatar, in line with the
objective to commercialise its gas-to-liquids know-how. In the company's
corporate strategic plan, it is envisaged that the realisation of its gas
commercialisation plans would see PetroSA trebling revenues to about R20bn over
the next five years, from the current R6,5bn. Sasol's groundbreaking
gas-to-liquids plant in Qatar would be the first large-scale plant to produce
liquid fuel from gas when production starts in August. Until then PetroSA still
rules the roost with its Mossel Bay plant, once regarded as a white elephant,
but which remains the largest of only three gas-to-liquids plants in the world.
Sasol Outlines Plans for Global Expansion
Sasol plans to increase its spending to meet its growing list of international
projects, saying July 11 that it could be pumping up to R20bn a year into these
projects in four years' time. In July, Sasol confirmed a second-phase
feasibility study that is expected to see it build two plants in China at a cost
of $10bn, while the Indian government said Sasol had held talks in that country
on another $6bn investment. In a newsletter, in which deputy CEO Trevor Munday
said Sasol had "entered a significant new era", Sasol said it would
spend R13bn this year. In an important signal for investors, Sasol noted
"it is possible that capital expenditure could approach R20bn a year
towards the end of the current decade". But it said it could not nail down
specific spending figures because it was still uncertain exactly how it would
proceed in certain countries. These include Qatar, where it is looking at
expanding its gas-to-liquids plant; Australia, where it is considering setting
up a similar plant; and the two plants in China. It has projects in the works in
a number of other countries, including Nigeria and Iran. Sasol's gearing -- a
figure that shows its debt as a percentage of its total shareholders equity --
is currently 29%, which suggests it still has some space to manoeuvre. Not only
has this dropped from 42% at the end of 2004, but Sasol's board has also given
it permission to raise the figure to between 30% and 50%, which means the group
can take on more debt to fund expansion. Sasol also confirmed that it had
received bids that would allow it to sell a core part of its chemical operation,
Sasol Olefins and Surfactants (O&S) -- a division that makes most of its
money selling detergents, soaps and cleaning products. In its update, Sasol
confirmed that "bids were received in June 2006 and follow-up discussions
and negotiations with short-listed bidders are to be held during July and
August". This is a major retreat for Sasol, which bought the O&S
business in 2001 for R8,3bn -- its largest acquisition up to that stage. But
because S&E uses oil as the raw material from which to produce its products,
the rocketing oil prices put the division under pressure. Sasol said that while
it planned to hang on to certain parts of the S&O business, including the
German assets of Sasol Solvents, it planned to "sell the bulk of the global
Sasol S&O business, most of which is concentrated in Germany, Italy and the
US". Palomar Equity Research analyst David Allen said the sale of the
S&O business was a smart move, which was likely to give it up billions of
rand, which it can use for its capital expenditure programme. "That
business was not a terribly good buy anyway in 2001, with an overcapacity (in
the market) and not great pricing," he said. Many analysts expect Sasol to
get a similar price for S&O sale that it paid four years ago, about R8bn --
not a particularly bad result given the poor market for those products and that
Sasol will keep certain parts of the business. Allen said that while the market
watched Sasol's debts closely, it had always been able to keep the figure low
through partnering with other companies around the world. "Its strong
relationship with Chevron, for example, has given Sasol more (financial)
flexibility in how it structures deals," he said. Another analyst said the
R20bn spending level was quite a conservative estimate, and the actual spending
in 2010 could exceed that.
India Looks to Sasol for $6 Billion Coal-to-Fuel Plant
Petrochemicals company Sasol has joined a growing list of South African
companies looking to put down roots in India, as it considers a deal that could
see it spend billions of rand to build a fuel plant in the country, according to
India's government. With oil prices at record highs, Sasol's technology to
produce fuel from coal has attracted intense international interest --
underlined July 10 when Indian Finance Minister Palaniappan Chidambaram lauded
the possibility of Sasol's investment in the country. If Sasol decides to
proceed, this would put it in an enviable position in the two fastest- growing
economies in the world. Other South African companies have also recently moved
into India. Retailer Shoprite opened its first outlet in Mumbai in 2004, Naspers
has opened an office in India and the Airports Company SA and Bidvest teamed up
to land a 30-year concession in February to run Mumbai's airport. Chidambaran
told news agency the Press Trust of India July 10 that the Sasol investment was
a very exciting opportunity that was "likely to run into $6bn". He
said Sasol would begin with an initial $1bn investment. He was speaking after a
meeting with the country's Investment Commission, which had had discussions with
Sasol. This R42bn would be roughly the amount Sasol would need to invest to
build a typical coal-to-liquids plant that would pump out 80000 barrels of oil a
day. But Sasol was cagey about the Indian discussions, saying only that it had
done "a preliminary evaluation and (is) engaging in discussions with
various interested parties". Discussions are still at an early stage, with
no immediate plans for any feasibility study, so it is still possible that Sasol
may opt not to proceed -- although the Indian government's public statements
would suggest there was some meeting of minds. Chidambaram said that India would
consider creating "a fulltime job for an officer to handle the (Sasol)
investment and see it through". He also praised Sasol's coal-to-liquids
fuel technology and said India would "have to give (Sasol) identified coal
blocks" to allow it to begin doing business. India has among the largest
global coal reserves, according to the World Energy Council, with more than 200-
billion tons -- 7% of the world total. Sasol's stock climbed only 0,4% July 10
after the news but this was still a good performance as the oil price fell,
which normally knocks Sasol's stock. An analyst from a South African brokerage,
who did not want to be named, said that while Sasol had become the flavour of
the month amid sky-high oil prices, any investment in India would be "too
far in the future to have any real impact on Sasol's investment case".
"You're talking about 10 years before you see anything in India because it
takes four to five years to simply build a plant, let alone other
planning," he said. Corrupt US energy group Enron landed a lucrative $2,9bn
deal to provide electricity to India's Maharashtra state but the deal collapsed
in 2001 when the state was unable to pay for the power, which was being sold at
four times the going rate. Enron, General Electric and other companies lost
millions.
«
Top
TELECOMMUNICATIONS
MTN Pays $3,6 Billion to Investcom for International Assets
MTN has paid out $3,6bn in the first tranche of its $5,5bn acquisition of
Beirut-based Investcom, in a move it describes as one of the largest payments
made by a South African company for international assets. Investors holding
99,5% of Investcom have accepted MTN's buy-out bid, mostly opting for a
combination of cash plus shares. MTN has issued just more than 183-million new
shares on the JSE to fulfil the share portion of its payment. On July 5 the
network operator raised R6,3bn in a local bond issue to help fund the
acquisition, and has raised the rest of the cash portion through bank loans. CEO
Phuthuma Nhleko said the integration of Investcom into MTN had already begun.
Most of Investcom's managers are joining MTN, which will shore up its own
management capabilities. That will also let MTN benefit from Investcom's
experience in the Middle East, which is new territory for MTN. Investcom's
experience will help MTN with the new network it is building in Iran, where it
holds 49% in the second network operator, Irancell. The Iranian deal was struck
before MTN announced the Investcom deal, but Nhleko has previously said that the
Middle Eastern experience it is now acquiring could be applied to help it
understand the regulatory, political and economic conditions in Iran. "One
of the qualities Investcom will bring to the group is additional experienced
management and a great depth of knowledge in terms of the new markets we are
developing," Nhleko said July 17. "This acquisition enhances MTN's
growth prospects, securing a number of important new markets for us. "When
we announced this transaction in May, we described it as a well-considered
partnership that would entrench our leadership in telecommunications in Africa
and the Middle East, and optimise value for our shareholders. "I am more
convinced than ever that this is the case," he said. With Investcom's
operations now on board, MTN is active in 21 countries in Africa and the Middle
East, and has a subscriber base of 28-million
«
Top
|
