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SOUTH AFRICA


  
  

 

In-depth Business Intelligence

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

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Area (sq.km)
1,219,912

Population
43,586,097

Capital
Pretoria

Currency
rand

President
Thabo Mbeki


Update No: 052 - (04/05/06)

The Challenges of Freedom
South Africa marked its 12th Freedom Day April 27 amidst challenges including unemployment, crime, poverty and corruption. However, despite these challenges, the country has enjoyed continuing democracy 12 years after the end of apartheid in 1994. In a televised Freedom Day speech President Thabo Mbeki said: "In the past 12 years our country has experienced a stable democracy freedom, a growing economy and a steady progress to building a better life for all." However, all the freedoms and economic growth have not come without casualties. A striking feature of the post-1994 period has been the loss of the momentum, coherence and purpose of civil society. It is important for democracy to reclaim civil society's particular role. 
The Treatment Action Campaign (TAC) a South African AIDS lobby group, has handed a damning indictment of the government's response to HIV/AIDS to the UN. The TAC, who were blocked from attending the forthcoming UN General Assembly Special Session on AIDS (UNGASS), criticised President Mbeki and his administration, saying AIDS claimed at least 1,000 lives daily in South Africa, while the government continued to sow confusion. Brenden Varma, a spokesman for Annan's office, told local media that the TAC's submission had been forwarded to UNAIDS for input and comment. "UNAIDS will provide a proposed course of action soon. I understand the government of South Africa has not changed its position," he noted. Meanwhile, the government has remained firm in its objection to the presence of the TAC and its affiliate, the AIDS Law Project, at UNGASS, on the grounds that they could use the platform to vilify the government.

ANC Centralisation Alienating Supporters
The African National Congress (ANC) is alienating its own supporters through the increasing centralisation of power, the influential Economist magazine says in its latest survey on SA, released April 6. "Over the past few years it has concentrated more and more power in Pretoria at the expense of the municipalities and the provinces at the same time as increasing the control it exerts over the lower ranks of the party," the survey says. "This has begun to produce a backlash among its own supporters." The survey, titled Chasing the Rainbow and authored by the weekly journal's Africa editor, Richard Cockett, appears in the latest edition of the Economist, which is widely read by potential foreign investors. It is a balanced report, high-lighting both the successes and failures of government and Cockett said he hoped it would help change international perceptions in some areas in which "the outside world's perception lags quite a lot behind reality". Among these is crime, an area in which public-private partnerships have "worked wonders". Cockett said he insisted on holding the launch of the survey in the Johannesburg city centre because it was still widely believed by foreigners to be a dangerous place to go. "Whereas only a couple of years ago people avoided using their mobile phones in the streets to avoid attracting muggers, they now talk into them with gusto," he writes in the survey. Other issues, which are the most frightening to potential foreign investors but which are "more benign than their detractors make out", are land reform and black economic empowerment. "Formulated in the spirit of compromise and pragmatism that has characterised the best of the ANC since 1994, they involve hardly any direct government coercion," Cockett writes. He lays into the ANC over its inability to transform itself into a modern, democratic party, saying: "The ANC still has a top-down authoritarian structure where loyalty to the political cause is prized above almost everything else, including competence. "The greatest weakness of the ANC's top-down system is that the party is inclined to dismiss ideas from outside its own bureaucracy," he says. Cockett also takes issue with SA's handling of the Zimbabwean crisis, saying it is "the only blot on... Mbeki's otherwise successful foreign policy."

Cape Town
The battle for political control over Cape Town is escalating, with the opposition ANC and Independent Democrats turning to the province in a bid to thwart Mayor Helen Zille's administration. The ANC wants the city placed under an administrator, arguing that the council is not properly constituted, but Zille has rejected the strategy as "absolute nonsense", saying: "Everyone is working like hell to deliver, while the ANC and ID take a paid holiday." Premier Ebrahim Rasool April 12 said he hoped "stability" and "maturity" would prevail in the council. There was reason to be "concerned" about "a government that controls a budget of almost R20 billion being distracted" by political dispute. He made it clear, however, that the province would work closely with the city, whoever was running it. Reacting to the ANC's request for the dissolution of the council, Zille said: "The constitutional requirements in terms of section 139 of the constitution make it clear that, for a city to be placed under administration, it must effectively be unable to deliver services or pay its bills. The ANC and ID are seeking to portray the city as a beleaguered administration hamstrung by disputes over the supposed legitimacy of its decisions. 

Mediating Burundi
South Africa has announced that it will take over peace talks between the government of Burundi and the country's only remaining rebel group, the Forces Nationales de Libération (FNL). "South Africa was approached by the president of Tanzania and the government of Burundi to take over the facilitation process," Mdu Lembede, South Africa's ambassador to Burundi, said April 27 on state-owned Radio Burundi. He said South African President Mbeki agreed to take on the role after consulting with the chairman of the Regional Initiative for Burundi, Ugandan President Yoweri Museveni. The South African government has designated a chief facilitator for the talks, Lembede said, but he did not give the name. Technical teams representing Uganda, Tanzania and South Africa "will meet in Dar es Salaam and consult the FNL and the government of Burundi to fix the agenda and timetable for the talks," he said. The Tanzanian government had agreed to facilitate the talks in early April but they were postponed in the last minute

Buthelezi Still IFP Leader
Inkatha Freedom Party (IFP) leader Mangosuthu Buthelezi's political gamble to take full responsibility for his party's woes paid off April 8, with the party giving him a vote of confidence. The IFP under Buthelezi has seen its fortunes dwindle from being the third-largest party in Parliament at independence to an also ran in the 2004 parliamentary elections. It has lost the KwaZulu-Natal provincial legislature, its power base, to its main rival, the African National Congress (ANC). Party functionaries and political analysts largely blame Buthelezi's autocratic leadership style and the IFP's failure to transform itself from a traditionalist organisation to suit modern political dictates, for the demise. Its showing in March's municipal elections heightened tension in the party, with some calling for Buthelezi's head. In response, Buthelezi called the extraordinary conference offering to take full responsibility for the poor performance at the polls and resign. "You have my resignation. The IFP has my resignation. South Africa has my resignation. I am ready to walk out of the perimeter of this venue, never to come back on the public stage of politics," he told the one-day conference at Umlazi, outside Durban. "I want to know if our party needs new leadership at this point in time, it is the interests of the party that are paramount," said Buthelezi. With a show of hands those present said they wanted him to continue, dispelling rumours the party was now ready to ditch Buthelezi, who has been at its helm since its formation in 1975. The decision means Buthelezi got a renewed mandate to run the IFP until his term expires in 2009. The IFP has struggled to broaden its predominantly-Zulu support base. It won 28 seats in the 2004 parliamentary elections, down from 43 in 1999 and 1994. In the March municipal poll it secured 7,6% of the vote, compared to 8%-9% in 2000. Buthelezi said the identity, purpose and function of the IFP were being questioned, both by people inside the party and outside, as well as by the media. He blamed his party's poor show on a lack of funds and accused the ANC of election fraud. "They stole our votes as well, in systematic action of electoral frauds and rigging throughout the province of KwaZulu-Natal and other regions."

Land Reform No Cure for Poverty 
South Africa needs much more than land redistribution to tackle rural poverty, the Organisation for Economic Cooperation and Development (OECD) warns in a report on the country's agricultural policies, released April 19 in Pretoria. The Paris-based OECD, consisting of the world's 30 most industrialised countries, said handing more agricultural land to SA's black majority was not enough to cure the country of widespread poverty. SA has highlighted its land- reform programme as a key means of reducing poverty, especially in rural areas, as it tries to reverse unequal land distribution created by apartheid and colonial laws. But the OECD said that, given its limited resources of water and arable land, SA should focus more on improving social services and infrastructure in impoverished rural areas. "Rural economic infrastructure, such as rural transport, telecoms and information technologies, is crucial for the development of economic activities in rural areas, including commercially sustainable farming," the OECD said. "Equally important are the provision of social services and investments in infrastructure that will provide a knowledgeable, skilled, healthy, economically active society in rural areas." The report is the first on the agricultural sector in SA, the continent's biggest economy. Government wants to put 30% of farm land in black hands by 2014 in a bid to return blacks to land forcibly taken from them under apartheid rule. So far, government has reached just under 4% of its target. The report echoed frequent criticism that lack of official skills and support for new farmers had hampered transformation in agriculture and resulted in a number of black farmers failing. It also pinpointed a lack of funding. Speaking at the local release of the report, Land Affairs and Agriculture Minister Thoko Didiza sidestepped the OECD's warnings on land reform, focusing her speech on South African agricultural policies and the low level of subsidies. South African support levels as a share of farmers' receipts are 5%, against 20% in the US, an average of 31% in the OECD, 34% in the European Union and 58% in Japan.

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AUTOMOBILES

Indian Mahindra's Car Sales To Increase

Indian conglomerate Mahindra & Mahindra's foray into the South African vehicle market marked only the tip of the iceberg of its plans for the country, the group said April 19. It was looking "aggressively" at opportunities in SA for its other businesses, it said. These include information technology, tourism, farm equipment and automotive components, among other things. The group's vice-chairman and MD, Anand Mahindra, told South African media that the group was engaged in a strong global drive and viewed SA as its most important foreign market. It believed SA would join countries such as Brazil, India and China in forming one of the fastest growing markets in the world, said the vice-chairman. Mahindra & Mahindra, which generated about 40% of its US$3,2bn annual revenue from vehicle sales, has sold more than 2600 vehicles in SA since entering the market 18 months ago and expected sales to grow "exponentially" this year. It recorded revenues in excess of R300m from its sales in SA last year. The company, which has just launched a full-house single cab bakkie at R139000, was positioning itself as a supplier of upmarket products at good prices. It said rivals had lowered prices in response. Mahindra, which has 31 independent dealerships in SA, said part of its competitiveness was due to having some of the lowest innovation costs in the world. The group, which claims to be the third fastest growing automotive business worldwide, said SA had all the necessary attributes, such as good infrastructure and engineering skills, to make it a logical manufacturing venue.
The company would consider manufacturing in the country if it attained critical mass of about 1000 single platform vehicles a month. It was presently selling about 300 vehicles a month. The Indian company planned to explore opportunities to source components from SA for its vehicle assembly plants in India until then. The group exported 5500 vehicles from its plants in India last year. This was an 82% increase over the previous year. It aimed to generate 20% of vehicle sales revenue from exports in the next three years, up from 5% at the moment.

Chinese Scooters Available in SA

Italmoto SA is the official and sole distributor of a new range of scooters to be introduced into the South African market. Eagle-Wing Scooters are manufactured by Benzhou Vehicle Industry Group in mainland China and are now available in SA. The Benzhou Factory was founded in 1994 specialising in scooter production. They manufacture 200000 scooters and 300000 engines a year for local and export markets. "After much research in the past year, Italmoto SA has taken the decision to import and distribute a scooter range to compliment our existing motorcycle brands of MV Agusta, Cagiva and Husqvarna in South Africa," says Marco Liberatore, MD of Italmoto SA. "Back in 1996 and 1997, Cagiva used to manufacture scooters, but they decided to focus and concentrate only on motorcycles since then," says Liberatore. "Italmoto SA investigated importing other Italian scooter brands, but cost effectiveness was one of the most important reasons for not bringing them in yet." With the dramatic growth of the Chinese market and the achievement of fastest growing emerging market in most recent years, Italmoto SA took on the challenge to investigate opportunities and products available form China. Liberatore says that scooters are playing a bigger role in basic commuting. There are four models in the range. The Powermax 125T will retail for R8000, the Retro 125T for R10000, the F4 125T for R11500 and the Lux 150T for R13500. All these models feature four-stroke engines, have an electric start and include an immobiliser and remote control. Italmoto SA also offers a factory warranty of six months from date of purchase. All necessary spare parts will be available from Italmoto SA to ensure the ongoing credibility of the Eagle-Wing brand. Eagle-Wing Scooters will be available from most existing MV Agusta, Cagiva and Husqvarna dealers. Additional new appointed dealers throughout SA are under investigation to increase availability.

Local Investment Boost for Porsche SA

LSM Distributors, the authorised importer of Porsche cars and sports utility vehicles into SA has formalised a long-term business association with Hlongwane Consulting through the acquisition by Hlongwane of a 30% equity in LSM Distributors, with an option to grow this in time. Hlongwane Consulting is a black owned, managed and controlled company that owns several subsidiaries through which it makes investments in strategic business areas. The company has interests in the health-care, property and mining sectors and will be entering the automotive sector through this latest transaction. LSM Distributors, trading as Porsche Centre SA with Toby Venter at the helm, has been the authorised importer for Porsche cars in SA for the past 10 years. During that time, Venter and his team have grown the Porsche brand significantly, delivering more than 2000 new Porsches into the market. Venter's hands-on experience within the automotive industry and racing circles over the past 20 years has gained him a unique and diverse knowledge and understanding of the Porsche brand. This commitment by Hlongwane Consulting will be a significant boost to the Porsche brand in SA and is in keeping with the worldwide vision of Porsche AG to see the continued growth and expansion of the marque. The parties say Hlongwane Consulting brings considerable business experience and expertise to the table to help realise this long-term vision.

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AVIATION

SAA Joins Star Alliance

South African Airways (SAA) has gone into partnership with the leading aviation alliance in the world, Star Alliance. This partnership adds seventeen routes to its existing international routes. SAA Country Manager Heinz-Louis Benseler announced April 12 that the airline had joined the Star Alliance that is a family of 17 world airlines and three regional carriers. Regional member carriers, which are Adria Airways (Slovenia), Blue1 (Finland) and Croatia Airlines, enable the Star Alliance network to offer new connections to smaller markets around the globe. The partnership, according to Benseler, is significant not only for South Africa and the countries it operates in, but for the entire continent for which there will be a spin-off. "This will bring the world to Africa and Africa to the world," he stated. Spreading its wings to 20 destinations on its own and 30 destinations with its partners, the airline started negotiating to become a member in the year 2000. According to the President and Chief Executive Officer of SAA, Khaya Ngqula, the time had come for the South African airline to become a member of the Star Alliance. Given 57 requirements for one to qualify to become a member, Ngqula described the exercise as challenging but worthwhile. "This is truly one of the best achievements for the airline," he stated. Further, the partnership is seen as a way to unveil the African skies and through its abundant African spirit it will inspire the world beyond the continent to consider visiting Africa and indulge in the beauty that it can offer. With over 15 000 global Star Alliance flights per day, the partnership is most likely to promote and boost the trade and tourism industry in the Southern African region and particularly Namibia. "We will focus on promoting the Southern African region and Namibia to be specific," assured country manager Benseler. Star Alliance Chief Executive Officer Jaan Albrecht in flypast video material was quoted indicating that the Star Alliance is a successful partnership that would protect its leadership in the aviation industry. For South African Airways customers, the partnership would enable them to access the world easily and another advantage is the priority service that its customers get at airports. Star Alliance has over 600 lounges open to its customers around the world and would maintain its standards (hospitality) in this competitive industry, Albrecht added. Welcoming SAA on board, Chief Executive Officer of the German airline Lufthansa Wolfgang Mayrhuber congratulated SAA for being a member, adding that Lufthansa has long wanted SAA to be part of the Star Alliance family. He assured that his airline and other members of the alliance would collectively ensure that SAA achieves its vision to create mobility in the world, which is equally important for global development. Star Alliance is the first aviation alliance to include an African airline and SAA is the first African airline to join such an alliance. SAA is the leading airline on the African continent and is 72 years old. The airline carries more than 7 million passengers a year on a route network that serves 34 cities in 26 countries. SAA has a fleet of 60 aircraft. Star Alliance exists in 153 countries and has 852 destinations. Star Alliance is embarking on a massive year-long campaign to promote SA as a tourism destination. 

SAA and Comair in Competition Tribunal

South African Airways (SAA) and Comair will face off at the Competition Tribunal in September following a complaint that the national carrier has been abusing its domestic market dominance. The public hearings into the matter are expected to bring to an end an acrimonious three-year legal battle between the two companies. The tribunal gave both parties until the end of July to compile and exchange their supporting documents so that the case can proceed without delays when the hearings get under way. Comair, which operates British Airways in SA and low-cost carrier kulula.com, lodged a complaint with the competition authorities in October 2003. The JSE-listed company complained to the Competition Commission that SAA had offered override incentives to travel agents and that the scheme had influenced travel agents to sell more SAA tickets at the expense of other airlines. The commission conducted an investigation, which found that SAA's conduct in paying high commissions had induced travel agents to sell SAA tickets at the expense of other airlines. It recommended that the tribunal impose an administrative penalty of up to 10% of SAA's annual turnover for the 2003-04 financial year. In July last year, the tribunal ruled against SAA in a similar case that was lodged by Nationwide Airlines. In that ruling, the tribunal said it had found conclusive evidence showing SAA had abused its dominant position by offering incentive schemes to travel agents. Such practices were in breach of the Competition Act. The tribunal said the schemes were detrimental to the interests of consumers, created barriers to entry for other airlines and impeded SAA's competitors from expanding. SAA was then fined R45m, which constituted 2,25% of nearly R2bn of its sale of domestic tickets bought through South African travel agents in the 2000-01 financial year. SAA had initially said it would appeal against the tribunal's ruling, but later changed its stance. The national carrier has reportedly arranged to pay the fine by the end of next month. The ruling has also opened the way for Nationwide and Comair to proceed with civil claims against SAA . Nationwide estimates that SAA's anticompetitive behaviour has cost it more than R200m. SAA's request to have the Comair case postponed until its Nationwide appeal has been concluded was rejected by competition authorities. The national carrier's request that the two cases be consolidated into one, since they dealt with the same issue was also rejected. Meanwhile, SAA and its regional feeder airlines could be slapped with a 10% fine each on their 2004 revenue if found guilty by the tribunal. In March last year the Competition Commission found that SAA, together with SA Express and SA Airlink, had colluded to "simultaneously introduce a fuel surcharge of equal amounts on the price of tickets on all legs of domestic flights, which resulted in price increases."

Jo'Burg Airport Armed Robbery

South African police have arrested 10 suspects, two of them Zimbabweans, over the armed robbery involving US$11 million at the Johannesburg International Airport in March. South African police spokesman Senior Superintendent Vishnu Naidoo, said that eight of the suspects were arrested a few hours after the heist on 25 March in Johannesburg while the two Zimbabweans were arrested in Beitbridge the following day. The plane had just touched down from the United Kingdom. The money was being taken to one of the buildings at the airport, when the gang pulled out their rifles and made off with bags full of US$11 million. Police recovered US$6 million from the suspects. Authorities could not rule out the possibility of an inside job, saying investigations were still on. In 2001, a KLM flight was robbed of diamonds and US dollars, while a Swissair flight was also robbed of cash and jewellery at the Johannesburg International Airport in the same year.

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FOOD & DRINK

SAB Empowerment Deal

South African Breweries (SAB) said mid-April that it had finalised the sale of 40% of its crown bottle top manufacturer, Coleus, in an empowerment transaction with Nokusa Consortium, led by Nokusa Investments. Coleus produces 4,9-billion crowns a year for the brewing and bottling industries in southern Africa and had a turnover for the year ending March 31 last year of about R132m. Figures for this year are not yet available. More than 600 parties registered interest in the deal last September, when SAB advertised for interested empowerment investors. Nokusa will be involved in Coleus at a strategic and operational level, and will have the right to appoint two directors to the five-member board. Nokusa Investments is an investment company led by six black entrepreneurs with experience in managing large-scale businesses. It is led by chairman Moses Hadebe, a former executive at Accenture and Jimmy Chaba, chief financial officer of Nokusa Consulting. The consortium includes Shandura, which has 13 professional women beneficiaries, including Izindophi Community Project, a predominantly rural women's grouping from KwaZulu-Natal with 11 beneficiaries, and the Kapano Disabled Movement, with 29 members. As part of the deal, a separate share-appreciation bonus plan will be implemented for all Coleus employees that gives 65 black employees an exposure equivalent to a maximum of 5% of Coleus's equity. SAB bought Coleus, then the Rheem crown factory, from Highveld Steel in 2003. In terms of the original purchase, SAB committed itself to improving the plant and to a 40% empowerment ownership deal within a specified time frame. SAB has invested R16m in the plant to ensure that a viable supplier of crowns would remain in SA. Coleus is now SA's biggest producer of metal bottle closures. Although crowns can be sourced cheaper from South America, Europe and Asia, SAB said it had committed itself to purchase from Coleus. SAB communications manager Michael Farr said SAB had re-capitalised Coleus and put the company back into profitable territory as "it would have made us totally reliant on overseas suppliers who are currently cheaper, but may not be cheaper forever". While more expensive crowns did not add much to the price of the finished product for the consumer, Coleus depended on the high volumes purchased by SAB.

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FOREIGN AID

UN Boosts Support for Industrial Development in Southern Africa

The United Nations will increase its support for industrial development in southern Africa through the opening April 19 of a regional office in Pretoria for the UN agency dedicated to sustainable industry for the reduction of poverty. The South African office of the UN Industrial Development Organization (UNIDO) will cover Angola, Botswana, Lesotho, Malawi, Mozambique, Namibia, South Africa, Swaziland, Zambia and Zimbabwe. The South Africa office brings to 22 the number of offices in Africa for the Organization, which is now represented in some 40 countries worldwide, either by a designated country or regional office or by a UNIDO desk located within a UN country office. Additionally, UNIDO operates a network of 19 investment and technology promotion units, 35 national centres to promote cleaner production, 10 technology centres and 44 subcontracting and partnership units in various countries. A UN specialised agency, UNIDO helps developing countries produce goods they can trade on the global market, providing training, technology and investment to make them competitive, while encouraging production processes that neither harm the environment nor place too heavy a burden on a country's limited energy resources. The agency, headquartered in Vienna, has 171 Member States.

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INTERNATIONAL ECONOMIC RELATIONS

Trade With India Soars

Trade between India and South Africa increased by a massive 75% between 2004 and 2005, according to the Department of Trade and Industry. "South African exports increased by 100%, while imports increased by 55%, making India South Africa's 13th-largest trading partner in terms of both exports and imports. Total trade has therefore increased by 75%," said the department's Willem van der Spuy, director: Asia International Trade and Economic Development. "The underlying reason for this increase can be attributed to growing awareness in South Africa about opportunities in India, as well as Indian awareness about opportunities in South Africa. "This growing awareness at one level has contributed to companies seeing new opportunities for trade. On another level, existing trading relationships have deepened as confidence and trust have grown." Ajay Swarup, India's consul-general in Durban, said trade had grown from R8.2-billion in 2004 to R14.5-billion in 2005. "It is a remarkable upsurge,' said Swarup. "The major South African exports have been gold, diamond, machinery equipment, automotive components and chemicals. It's not just minerals, which some countries tend to import from South Africa. It's mostly manufactured goods. "Most imports to South Africa from India have been textiles, pharmaceuticals, garments, machinery and automobiles." He said mutual appreciation of each other's quality and the reliability of each other's suppliers had been contributing factors to the increase. "Also, the close political relationship and cultural affinity play a part. There are so many similarities between the countries." Suresh Goel, India's consul-general in Johannesburg, said South African exports to India grew from R3.7-billion to R7.4-billion, and Indian exports to SA rose from R4.5-billion to R7-billion. He said trade was not only in primary commodities but in manufactured and value-added items. "What is of greater interest is that our partnership is not just limited to trade. We are partners in multilateral and bilateral forums," he said. "Our partnership is evolving into a more substantial one where we work together in several disciplines. "In the area of technology and investment, the number of Indian companies coming to SA and the number of SA companies that have gone into India is truly amazing. "Our estimate of Indian investment in South Africa would be in the order of US$200-million. According to some estimates, another US$500-million will come through in the next few years." Goel said tourism had also grown by more than 50%. "What is satisfying is that people going from here to India are not just Indians going to discover their roots. We are seeing more people of all communities now visiting the country for both business and pleasure." Nazir Malek, owner of Malek Travel and Tours, said India had always been a favoured travel destination. "India is tourist-friendly, and there is no hassle obtaining visas. It is favoured more by Indians who are curious to visit the land where their forefathers came from," he said. "I found it necessary to set up an India desk at our offices, with an Indian national offering clients first-hand information about the country. Who better to sell the destination than someone from there?"

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MINING

Major Upgrades for SA Gold Mines in Ghana

The two major South African gold companies operating in Ghana are investing millions of dollars in plant upgrades and exploration to extend the lives of operations depleted by many years of mining. At AngloGold Ashanti's Obuasi mine the need for investment stems partly from depletion of reserves and partly from three years of neglect by the previous owners. Under new ownership, US$100m has been spent to date on upgrading infrastructure at Obuasi. AngloGold plans to spend US$91m this year of which more than half is on "stay in business" items, and another 40% on ore-reserve development. Expenditure includes US$25m for two refrigeration plants to bring down underground temperatures. This should have a major effect on productivity as Obuasi's underground temperatures without refrigeration can be around 36C°. Another US$45m has been budgeted for a five-year programme to explore below the 50th level at Obuasi. A feasibility study has begun into a "mini deeps" mining project with a relatively short time horizon, and the Obuasi Deeps project, which has a longer time horizon. AngloGold executive officer Robbie Lazare said that if the Obuasi Deeps project went ahead a rough estimate of the cost based on similar projects in SA would be about US$600m to US$700m, At AngloGold's Iduapriem mine, capacity expansion budgeted for this year is US$15m. A feasibility study is under way into upgrading the crushing and milling plants. Mine MD David Renner said that if the board approved the spending the upgrade would cost about US$25m, but should bring costs down by between 12% and 15%. Last year the mine's average total cash cost was US$320/oz. Renner said that Iduapriem's reserves of oxide, that is to say softer ore closer to the surface, had been mined out. A search was under way for additional oxides to feed the mine's heap leach plant. Iduapriem had held some discussions about co-operative arrangements with Gold Fields, whose Tarkwa mine was nearby. At Tarkwa, spending is aimed at expanding reserves and increasing efficiencies to keep costs down. Tarkwa is a low-cost miner of shallow reserves with a cut-off grade at its heap leach plant of about 0,38g/t and 0,65g/t at its mill. In the December quarter total cash costs were US$280/oz.

Gold Fields Could Take Stake in Mali venture

South African gold miner Gold Fields is in a prime position to take a stake in a mining venture in Mali, which the exploration company, Glencar, has described as containing "bonanza grade" gold deposits. It was reprted April 24 that Dublin-based Glencar Mining, listed on the Irish Stock Exchange, said it would seek a partner to help finance and develop its Komana gold project in Mali. Glencar CEO Hugh McCullough said the company planned to deliver the results of exploratory work at the site shortly, although it might not make a decision on a partner for as long as a year, depending on drilling results. "There is something very significant there," McCullough said. "I would be am confident this will go to the next level." Glencar's shares have risen 138% this year. In September last year Gold Fields and Glencar announced they had signed a nonbinding agreement that would give Gold Fields a 25% interest for funding US$2,5m of exploration at Glencar's Bokoro, Sanioumale and Farasaba licences in Mali. It could increase its stake up to 65%, depending on its funding contribution. The parties also said Gold Fields had been given the right of first refusal on the Komana project. "Komana looks like a very promising project and we are watching it with interest," Gold Fields spokesman Willie Jacobsz said. "We are pleased to have first refusal on this particular project." Gold Fields, like other major mining groups, funds junior exploration companies in return for rights to participate in mining projects if a viable deposit is found. The strategy minimises the costs and risks of new exploration ventures.

Chamber Upbeat About Gold Production

Gold output in SA, the world's biggest bullion producer, would slow its decline this year and might even stabilise on the basis of a brighter economic outlook, the Chamber of Mines said April 20. The industry body said a high gold price increased the profitability of mines and released larger amounts of profitable ore to mine. This encouraged firms that had slashed output last year to produce more. "The improved economic outlook this year means a much slower rate of decline, or even a stabilisation, in production," the chamber's CE Mzolisi Diliza said. South African gold companies reined in production and shut unprofitable shafts last year as average operating costs outstripped the gold price and a strong rand ate into earnings. Output fell 13% to 296 tons, the lowest level since 1924. However, the chamber said a slower appreciation of the rand and a stronger gold price, which hit 25-year highs in Asian trade recently had made mining more profitable. The gold price averaged about R109000/kg in the first quarter of this year and is now R120000/kg, the chamber said. Buoyant prices for platinum group metals would support growth in this sector, which had become the largest component of the South African mining industry, with sales of R38bn last year. The chamber said higher precious metal prices would neutralise the effect of soaring crude oil prices on SA's balance of payments. Assuming an exchange rate of R6 to the dollar and based on last year's production numbers, each 10% rise in gold and platinum prices sustained for an average of a year would generate an additional R5.3bn in exports. "This should more than offset a 10% rise in the crude oil price, which would add an additional R1.9bn to the import bill," Diliza said. Higher oil prices would spur inflation and push up the cost of mining. Numis Securities analyst John Meyer said investors should look at increasing their weightings in the mining sector. The latest International Monetary Fund forecasts for global growth, which suggest the world economy could grow about 5% a year for the next two years, give further optimism to commodity traders and miners. Meyer said mining companies' share prices would benefit, not only from the cash effect of high commodities prices, but also from expectations of higher long-term prices. 

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PAN AFRICAN PARLIAMENT

Pan African Parliament Funds Still Insufficient

The Pan African Parliament (PAP) is still grappling with insufficient funds and human resources to be able to function as expected, says President Gertrude Mongella. Officially opening the fifth ordinary session of the PAP May 2, Ms Mongella pointed out that she had pleaded with the African Union (AU) Assembly during the previous summit in Sudan, to approve the Parliament's initial proposed budget as opposed to the allocated US$5.8 million(about R36.5 million). "The Assembly resolved to review upwards our current allocation," she said, adding that they were sending a delegation to an AU sitting on May 8 to discuss the supplementary budget for the PAP. The PAP had originally presented a budget of US$11 million for the Assembly's approval. Even that, according to Ms Mongella, had been trimmed. She said, though she did not have any idea to how much the AU would increase their budget at its meeting, "we do hope to get the originally requested budget". As another alternative to obtaining funds and following a resolution previously, the PAP has established a Trust Fund to address the body's financial constraints. The Trust Fund, which should be registered soon, would be used to mobilise funds from willing donors in the continent and worldwide. PAP The President also announced the appointment of a leading accounting firm, KPMG, to audit the PAP's financial books. "Although we do not have enough resources, we want to develop a good financial habit. That is why it is important that our books should be audited," she said. She could not say when the audited statements would be presented before the Parliament, noting that they might be presented at the next session of the Parliament later this year. Meanwhile, the Parliament is expected to discuss among others the rationalisation of the regional economic blocs, a new approach to peace and security and how to play an oversight role to the New Partnership for Africa's Development (Nepad) and the African Peer Review Mechanism (APRM). Ways to find links and discussion forums between PAP and civil societies in the continent would also be looked into during this sitting. Furthermore, Ms Mongella has commended the Parliament's 10 committees for drafting "viable" working plans. The working plans will be debated and adopted towards the end of this session before implementation. "The next stage will be to develop the financial plan to be completed before the next session," said Ms Mongella.

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PETROCHEMICALS

Sasol to Open Plant in Qatar

South Africa's Sasol Ltd fuels company will launch the world's first commercial gas-to-liquids plant in Qatar, the company said April 19. The plant would start producing 34000 barrels per day in June, but would quickly expand to 100 bpd. Sasol chief executive officer Pat Davies said: "The inauguration is on June 6. We will produce 34000 bpd in the first phase, but we plan to expand that with our partners to a 100000 bpd." The project will be run Chevron and an local partner. Chevron will be responsible for most of the North American and European marketing activities. Sasol is by far the largest producer of synthetic fuel from coal in the world. Sasol has technology that allows it to convert coal and natural gas to liquid fuel and will use this technology to expand far beyond South Africa's borders. The company can produce up to 150000 bpd of coal to liquid fuel. Offshore investments are part of the company's plan to double capacity.

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TELECOMMUNICATIONS

Telkom Strikers Back to Work

More than 10,000 members of the Communications Workers' Union (CWU) locked out of Telkom's premises for nine days returned to work April 28 following an agreement between the trade union and Telkom on improved wages and benefits. The end of the strike is expected to minimise hostilities between the parties, characterised by accusations and counter accusations, and enable them to resolve outstanding issues. CWU has accused Telkom of negotiating in bad faith, forcing the trade union to embark on protest marches, pickets and go-slows. Telkom retaliated by locking all CWU members out of its premises, saying that they would only be allowed back once the union had accepted its offer. CWU said it had accepted Telkom's revised offer of a 6.25% wage increase and a bonus payment of R10000 for the lowest paid employees. Workers in middle management and supervisory positions would receive bonuses of R12000 and R15000 respectively. The agreement would be in force for the next three years. In terms of the agreement, the wage increases will be effective from April 1 this year until the end of March 2009. The bonuses will be paid on July 25 each year, provided the company meets its financial and performance targets. CWU initially demanded a bonus payment of R50000 per employee and an 8.5% wage increase for the lowest paid workers and 7.5% for employees in supervisory positions. The union's deputy president, Karthi Pillay, said the new offer signed by both parties was "not an ideal agreement, but a very good one nonetheless." Telkom has also agreed to extend the moratorium on "forceful" retrenchments until the end of March next year. Pillay said two outstanding issues that needed to be dealt with were the agency shop and the allocation of shares to employees. The wage increase and other benefits that CWU fought for would be enjoyed by all employees, even though many did not participate in the strike, he said.

MTN in US$5.5bn Dubai deal 

MTN, Africa's largest mobile phone operator in customer numbers, has agreed to buy Investcom, a Dubai-based telecoms firm for US$5.53bn. The take-over is set to make MTN the second-largest emerging markets mobile phone operator. The deal will give MTN 28.1 million customers across 21 countries. MTN head Phuthuma Nhleko said he was "delighted" with the move which "delivers the next stage in MTN Group's emerging markets growth strategy". "This well-considered partnership entrenches our leadership in telecommunications in Africa and the Middle East," he added. Sean Gardiner, emerging markets telecom analyst with Morgan Stanley, said that the deal was a "positive step" for MTN. "I do not think the price is that outrageous given the amount people are paying for African assets and the potential synergies," he added. While Africa's mobile market is still relatively small, with penetration levels of about 9%, it has been increasingly attracting African, Middle Eastern and European telecom firms who see growth potential. British firm Vodafone recently raised its stake in South Africa's Vodacom, while Kuwait's MTC bought Celtec last year for US$3.3bn. MTN said it was offering US$3.85 a share for Investcom, and would also offer a cash and shares alternative. Lebanon's Mikati family, which holds just over 70% of Investcom, has given the go-ahead for the deal. 

Telkom Has Rival in Bid for Business Connexion

Telkom's R2.4bn bid for Business Connexion is under threat after an unknown rival launched a potential counter-offer with all the indications pointing at a foreign company looking to buy into the South African market. Business Connexion said it was considering an expression of interest from another potential bidder. No value was disclosed and the deal was "subject to numerous conditions precedent", the company said. Telkom has bid a hefty R9 a share plus a dividend of 25c, which is widely seen as over-generous. But in foreign terms that could appear highly affordable for any information technology (IT) services company or network operator looking for growth in an emerging market. The new rival may also be offering less than Telkom, as Telkom's move has raised numerous objections from the industry and faces fierce opposition. Business Connexion shareholders may prefer to accept a rival bid, even if it is lower, rather than face a longwinded battle with an uncertain outcome at the Competition Commission. No large local IT or telecoms players are trading under a cautionary, ruling out a local listed company as the mystery bidder. The second network operator seemed the most likely candidate. The acquisition would give it instant relationships with large corporate clients and a slew of IT services to sell with its telecommunications offerings, making it a stronger rival to Telkom. But that speculation was sunk when the operator issued a statement saying that it had not made a bid. Bytes Technology is also keen to acquire the company, and made a bid late last year that Business Connexion rejected as too low to present to its shareholders. Yesterday, Bytes CEO Dave Redshaw confirmed that Bytes was not back in the running, and he doubted that anybody in SA would be prepared to pay the amount that Business Connexion was holding out for. That leaves either private equity investors or a foreigner. Private equity investor VenFin is sitting on R1bn which it intends to pump into hi-tech companies. But a VenFin source said he was not aware of any bid. Possible foreign buyers are global IT services companies such as Computer Sciences Corporation (CSC) or EDS, or a network operator looking to grow its African presence, such as UK-based BT. Analyst Irnest Kaplan believes Business Connexion is worth about R7 a share, so Telkom's R9.25 carries a huge premium. But that may still look cheap for an international player. "Any big company looking at the globe and asking where things are going to improve would pick SA, because we have an upgraded outlook for the next 10 years," Kaplan said. They would see Business Connexion as an easy entry point because of its blue-chip clients, its excellent skills and its strong brand, he said. Telkom wants to clinch the deal to gain "a meaningful presence" in software, technical support and business process outsourcing, to broaden revenue as profit from voice calls dwindles.

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TRADE TALKS

SACU-US Trade Talks Remain Unresolved

Several business and non-governmental organisations lay the blame for what some describe as a halt in free-trade talks between Southern African Customs Union (Sacu) and the US at the door of the world's largest economy. The US's approach to the talks has been seen as inflexible by it asking Sacu members SA, Namibia, Botswana, Lesotho and Swaziland to sign up to the "template" that the US applies in free-trade talks with other countries or blocs, rather than engaging in real negotiation. US negotiators' hands are somewhat tied by their mandate to negotiate nothing less than a comprehensive free-trade deal not only with Sacu, but with all the US's prospective free trade partners. There has been little negotiation by the US, according to Michael McDonald, a representative of Business Unity SA (Busa), who says that the US has not moved "one inch" from its original highly ambitious position. While Sacu commentators apportion the blame to the US, the root of the seemingly insurmountable stalemate that has stalled talks several times over the past three years, is found in Sacu. The union is the oldest in the world, yet it still has vastly disparate levels of trade policy development. The lack of harmonised policy has rendered the union unwilling or unable to conclude a comprehensive free-trade deal with the US, a deal that in addition to trade in goods and services, means that the partners make commitments on "new generation" issues such as investment and intellectual property rights. Sacu, led by SA's chief negotiator, Xavier Carim, put forward what it described as a reasonable request last year, suggesting that the two parties negotiate an initial basic free-trade deal, shelving the new-generation issues until there was greater harmonisation within Sacu, or at least a plan to achieve common policies. The US team, led by Assistant US Trade Representative for Africa Florie Liser, has stuck to its guns, saying it cannot submit anything less than a comprehensive trade deal to the US congress. Brendan Vickers, a representative of the Trade Strategy Group, says the US is not prepared to recognise the degrees of economic and policy development within Sacu, and the fact that the union is the first bloc to resist signing the US's "one-size-fits-all" free-trade template is something of a victory. However, Trudi Hartzenberg of the Trade Law Centre in SA says that Sacu may have been short-sighted in failing use this opportunity to push for harmonisation and commit to a comprehensive deal. "Sacu's future free-trade deals will have to be just that. The benefit for Sacu in its planned trade deals with China and India will come from new-generation issues, not from trade in goods." The lack of movement towards harmonisation is illustrated by the latest draft of SA's mooted new industrial policy. "Sacu is not even mentioned in the draft," says Hartzenberg. A new plan is on the table to take the struggling Sacu-US talks forward, The two parties said that they had agreed to develop a "joint work programme" that would see talks about the tough issues continuing. At the same time, the two sides would attempt to conclude co-operation agreements in specific areas such as customs and sanitary requirements to help smooth trade flows, they said. However, some described the outcome as little more than a last-resort strategy to pick the "low-hanging fruit" in recognition that a free-trade deal was not achievable. Despite both sides saying that they remain committed to a free- trade agreement, all deadlines were removed from the talks at the Pretoria meeting. Moreover, Sacu and the US have acknowledged that it is probably impossible to conclude negotiations by year-end in order to pass congress before the Trade Promotion Authority Act expires in July next year. Expiry of the act, which provides for trade deals to be passed more easily, together with the increasingly protectionist mood in the US, are widely expected make it considerably more difficult, if not impossible, for a Sacu-US free-trade deal to be sealed. "It would be a great pity if we lose out on these talks, particularly because this is such an opportune time to do it," says the director of the American Chamber of Commerce in SA, Luanne Grant, noting that US President George Bush will not stand for another term and therefore owes no allegiances to farmers or industrialists, allowing him to "make promises". Raymond Parsons of Busa, which believes real opportunities such as job creation will stem from a fair free trade deal with the US, says another opportunity to speedily secure a favourable trade deal "may not occur again soon". Grant echoes this, maintaining that the US's unilateral African Growth and Opportunity Act, which has helped SA's exports to the US double every year for the past five years, will not last forever, while McDonald says it can be removed "overnight". A free-trade deal was expected to encourage much-needed direct investment by US companies in Sacu. "There would now be a question mark in the US over why the deal was turned down," says Grant. It is widely agreed that good free- trade deals can serve as tools to promote economic growth and create jobs, among other benefits, which is why most countries are in a race to wrap up free-trade deals as part of their efforts to increase their share of global trade. The country's free-trade agenda has fallen far behind its original aims, which were to have trade deals in place with the US, the European Free Trade Association and Latin American bloc Mercosur more than a year ago, and to start talks with India last year. Vickers says the enitre US-Sacu episode has served as a wake-up call. Hartzenberg says that Sacu will have to rise to the challenge of harmonising its regulatory environment "with some urgency."

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WORLD ECONOMIC FORUM

World Economic Forum on Africa 

Top African political and business leaders will participate in the World Economic Forum on Africa in Cape Town, South Africa from 31 May - 2 June 2006 to discuss Africa's next steps along a sustainable growth path. Under the theme "Going for Growth", the continent's premier gathering of leaders in business, politics and civil society will identify action priorities to sustain a 5% growth rate, engage business as a catalyst for change in Africa, draw lessons from best-performing states and sectors, address new risks and assess new opportunities. Over 700 participants will review what was delivered during the 'Year of Africa' in 2005 and what is in the pipeline. They will analyse the impact of China and India on Africa as well as ways to improve the branding and perception of the continent. "The World Economic Forum on Africa will focus on the individual success stories driving growth and discuss ways to scale up these pockets of success", said Haiko Alfeld, Director for Africa of the World Economic Forum. "Business has a key role in building credibility of reform and rebranding efforts, not least to counter the 'collective contagion' still afflicting Africa," he added. Among the participants are South African President Thabo Mbeki, President Armando Emilio Guebuza of Mozambique and President Jakaya Kikwete of Tanzania. The co-chairs of the World Economic Forum on Africa are Syamal Gupta, Chairman, Tata International, India; Jim Goodnight, Chief Executive Officer, SAS Institute, USA; Maria Ramos, Chief Executive Officer, Transnet, South Africa; and Charles Soludo, Governor of the Central Bank of Nigeria. Among other initiatives at the World Economic Forum on Africa, the Forum will launch a business alliance to reduce chronic hunger on the continent. In this proposed public-private partnership, committed Forum member companies and hunger experts will design a model for businesses to work together to attack the root causes of hunger through initiatives including expanding rural market systems, disseminating effective business models and micro-finance. Political and business leaders will take part in a globally televised BBC World Debate from the Forum 2006 on The Future of African Growth, which will be moderated by Nik Gowing.

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ZIMBABWE 

President Mbeki Meets MDC Faction Leader 

President Mbeki has held talks with Arthur Mutambara, the "pro-senate" faction leader considered the rising star of opposition politics in Zimbabwe. Diplomatic sources confirmed that Mbeki met Mutambara and his Movement for Democratic Change (MDC) faction early April to discuss the Zimbabwean crisis. The MDC team, which was comprised of Mutamabra, faction deputy leader Gibson Sibanda, secretary-general Welshman Ncube and deputy secretary-general Priscilla Misihairabwi met Mbeki at his Union Building offices in Pretoria for more than two hours. The MDC faction confirmed that the meeting had taken place. Sources said Mbeki was happy with Mutambara's attempt to rebrand the MDC to shed its alleged "western puppet image", perceived as a deterrent to wider support. "Mutambara told Mbeki his faction was Pan-Africanist, anticolonial, anti-imperialist and supported regional and African economic integration as well as Nepad and he was very pleased," a source said. "Mutambara also said his political allies in Africa included the ANC, PAC, Cosatu and South African Communist Party. He said he had nothing to do with the Democratic Alliance (DA) and its leader Tony Leon. Mbeki liked it." It was the first time the MDC group had met Mbeki since Mutambara became leader of the group in February. Mbeki had last met Sibanda and Ncube in October in the aftermath of the MDC split over participation in the senate election. Founding MDC leader Morgan Tsvangirai, who now leads one of the factions, refused to attend last October's meeting with Mbeki. The South African leader was said to have been disappointed because he wanted to prevent the split of the MDC. Sources said Mbeki was further disappointed by the contents of a report released during a recent congress of Tsvangirai's group. The report claimed Mbeki was not an honest broker in the country's political impasse and his quiet diplomacy was meant to buy time for the Harare regime. President Robert Mugabe indirectly told Mbeki in February to keep away from Zimbabwe. There was concern that Mbeki had washed his hands of the opposition after it split before the senate elections last November.

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