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SOUTH AFRICA


  
  

 

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)

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: 058 - (06/11/06)

Two and a half cheers for the UNSC
South Africa received 186 out of the 192 possible votes in the United Nations (UN) General Assembly supporting its candidacy for a two-year, non-permanent seat on the UN Security Council October 16. As the excitement and congratulations fade, many have been questioning the value of what has been achieved. Not all world leaders view anything less than a permanent seat on the council worthwhile. South Africa will become one of three African members of the 15-member Security Council on 1 January 2007, joining the Republic of Congo (Brazzaville) and Ghana among the 10 non-permanent and non-veto-wielding members of the UN Security Council.

Now that South Africa has a security council seat representing Africa will it have the capacity to achieve what it wants? There is no shortage of issues for the South African delegation to raise in the council's private consultations and public debates. Deputy Foreign Affairs Minister Aziz Pahad said October 26. South Africa would be using the "greater opportunity" afforded by its security council seat to pursue its quest for comprehensive reform of the UN. Such pursuit of UN reform includes ongoing attempts at expansion of the UN Security Council. Should Africa, with Asia, Latin America and the economic giants Germany and Japan, not be more appropriately represented? 

South Africa withdrew as a mediator in the Cte d'Ivoire conflict, with President Thabo Mbeki's spokesman saying that its two-year membership of the UN Security Council would create conflicts of interest. Also, in the face of hostility and doubt, there was little point in persisting. Sceptics also point out that South Africa is just over a decade into a profound transformation. It has limited experience and institutional memory for dealing with issues that have perplexed the world since the UN was created. Cte d'Ivoire has been split since rebels took control of the north of the country four years ago after an aborted coup. Four thousand French troops and a UN peacekeeping force of 7,000 are in the country to prevent open war. Mbeki began his African Union (AU) endorsed efforts at mediation two years ago.

The new big player in Africa
China has pledged to double its aid to Africa and provide $5bn in loans and credits over the next three years. Chinese President Hu Jintao made the announcement at a summit in Beijing attended by nearly 50 African heads of state and ministers November 4. The summit is focusing on business with more than 2,000 deals under discussion. African leaders welcome their booming trade links with China, but critics accuse Beijing of dealing with repressive regimes. Beijing prefers the view that it is just doing business and has no political agenda. China will also train 15,000 African professionals and set up a development fund to help build schools and hospitals. China's drive to buy African oil and other commodities has led to a big increase in two-way trade, worth $42bn (22bn) in 2005. 

Africa is a growing market for Chinese goods, but critics say Beijing is stifling African manufacturing. Some have voiced concerns over how Chinese-owned firms treat African workers. Human Rights Watch said that all powers involved in Africa, including China, should place human rights at the centre of their policies. "Africans do not need another external power enabling abusive regimes," the group said in a statement November 4. However, many economists argue that overall, China's growing economic ties to Africa are benefiting the region. China's contribution to the global gross domestic product had risen sharply to 24,5% in the six years to last year, from 18% in the 1990s and 9% in the 1980s. In contrast, the contribution of the US to the global economy had fallen to 16,3% since 2000, from 20,2% in the 1990s and 23,3% in the 1980s.

2010 World Cup
The South African government will spend more than R15bn ($2bn) on hosting the 2010 Fifa World Cup. The country's finance minister Trevor Manuel announced the figures to the South African parliament October 24. The bulk of the money will be spent on building new football stadiums and refurbishing existing ones. There is public concern that South Africa will be poorly prepared and not able to afford to host the event. Mr Manuel outlined his plans for the World Cup while delivering a medium-term budget policy statement to parliament. "The 2010 Fifa World Cup provides South Africa and the region with a once-in-a-generation opportunity to showcase our land and our hospitality in a sporting festival that knows no bounds," he added. 

The Reserve Bank raised interest rates by 50 basis points, to 8,5%, as expected October 12, despite an improved inflation outlook. It was the third increase since June, bringing the total for the year so far to 150 basis points. Bank governor Tito Mboweni put the improved outlook down to the "luck" that oil prices had fallen below $60 a barrel from above $80 just two months ago. But he made it clear the committee was not taking any chances, leaving the door open for more rate hikes, which economists predicted would be in December and early next year.

South Africa's high levels of crime are continuing to deter foreign investors, a business group has warned. The comments of Johannesburg-based Business Against Crime group come after the country's latest crime figures showed a sharp rise in armed robberies. Although rape and murder rates had fallen, the organisation said the overall crime rate had to be reduced, especially ahead of the 2010 World Cup. The South African Police Service said that attacks on cash delivery vans had increased by 74% between April 2005 and March 2006, while armed robberies of shopping malls and other retail outlets had jumped 32%. "Especially with the World Cup coming here in 2010, we don't want to push away tourists." 

Tackling the UN
It was widely expected that SA would clinch one of the 10 non-permanent seats of the United Nations (UN) Security Council, but there was nevertheless a satisfying sense of victory when the announcement was made October 16. The move is long overdue. In the 60-odd years of the UN's existence, and the 12 years after democracy, SA has failed to secure a seat on the council. The strong focus of the Mbeki administration on international and African issues has seen SA at the forefront of a range of regional and international bodies. This is part of a carefully crafted strategy to position SA as the champion of the developing world, a project that President Mbeki has worked hard at for many years. Indeed, the amount of time the president has spent courting alliances with regional and global powerhouses has earned him criticism at home for not focusing sufficiently closely on domestic issues. So the security council seat is an important milestone in SA's quest to redefine global priorities by shifting the focus away from global security and back to poverty, development and unemployment. As a non-permanent member, SA will have one vote on the council. Although it will not have the right of veto, which is reserved for the council's five permanent members, SA can still play an influential role by guiding discussions behind the scenes on a range of important issues. That responsibility will fall to the delegate appointed to represent SA, Dumisani Kumalo, the veteran ambassador to the UN who is set to take up his new post from January. Kumalo is upbeat about SA winning the seat, saying recently that it would allow SA to put on the agenda those issues that are important, namely development and poverty. But the task facing Kumalo, and SA more broadly, is not an easy one. From the beginning of next year, the UN will have a new leader, Ban Ki-Moon. The South Korean foreign minister is well known as a diplomat and conciliator, but he may not be as sympathetic to the issues of developing nations as was the well-regarded Kofi Annan. Ban will have to execute a delicate balancing act if he is to succeed in the task facing the body - trying to keep the peace among a group of increasingly fractious global powers while implementing much-needed internal reform. The Iraq war showed just how tough the secretary-general's job can be. US President George Bush remains hostile to Annan for his opposition to the war, while several other nations are angry that he did not oppose the war strongly enough. On the global diplomatic front, North Korea will be the first big test for Ban. The country has emerged defiant in the face of sanctions imposed by the UN Security Council, saying they are tantamount to a declaration of war. That situation will not be resolved any time soon, just as the Iran and the Palestinian issues are likely to dominate the council's agenda for the next two years. Inevitably, it will be the conflicts in Africa - Darfur and Somalia among them - that will be a focus for the council as ill-resourced peacekeepers battle to bring some order to these conflict-ridden areas. So SA will be hard-pressed to drive the critical issues of poverty and underdevelopment higher up the agenda. But there can be no doubting the importance of this role, nor of SA's responsibility in attempting to bring equality to the UN. Until Africa, Asia and Latin America have permanent representation on the council, it will neither be credible nor retain the moral high ground as the custodian of global democracy. There is little doubt that it will be extremely challenging, but SA's long-awaited seat at the table of the security council gives us an opportunity to influence global opinion on how these issues are dealt with. It must not be squandered.

South Africa in Global Top Four on Budget Transparency
South Africa ranks in the top four countries worldwide in terms of the transparency surrounding its budgets, according to an international survey. The survey by Open Budget Index placed South Africa fourth out of 59 countries, making it the only developing country in the top tier of the index. "One of the things that they [Open Budget Index] rate very highly is the amount of transparency and the Medium Term Budget Policy Statement is a very important part [of this]," said Finance Minister Trevor Manuel October 25, briefing the media ahead of his medium-term budget speech to the National Assembly. The Open Budget Index 2006 is produced by a Washington DC-based non-governmental organisation that promotes budget transparency. South Africa scored 85 points out of 100 for the transparency of its budget in the survey, which evaluates the quantity and quality of information provided to citizens. New Zealand scored the highest on the index, at 89 points, followed by France with 87 points, Britain with 86 points and then South Africa. Particular mention is made by the Open Budget Index report of the pre-budget statement - the Medium Term Budget Policy Statement, of which today marks the 10th anniversary - and the People's Budget, which is a newspaper-sized, summarised version of the budget designed to enhance accessibility. Citing the Open Budget Index report, the Treasury said there was room from improvement in areas such as year-end actual spending reports and the accessibility of audit reports. "The MTBPS, the Budget Review, Estimates of National Expenditure and our provincial and local expenditure reviews all contribute to this achievement," the minister said to the National Assembly, referring to the high transparency rating. "But we are not yet where we want to be. We still have too little debate in this House and in the country on budget priorities." 

Social Challenges Holding South Africa Back
The scourges of crime, HIV/AIDS and corruption mask the remarkable political, economic and social achievements in SA over the past 12 years, leading trend analyst JP Landman told the annual Agri Outlook conference in Pretoria October 26. "There is more to life than crime, AIDS and Zimbabwe," Landman told the gathering of agribusiness, farmers and farmers' organisations. Organised agriculture has blamed these issues and fears of a Zimbabwe-style land grab for constraining growth in the farm sector. Landman, however, pointed out how the downward trend in the economy had been turned around since the democratic elections in 1994. Landman referred to an Old Mutual scenario study published in 1992 that said three challenges had to be overcome for SA to become a modern state: the extension of political rights to citizens (the easiest); getting the economy going (more difficult); and effecting social development (the most difficult). Democracy and sustainable economic growth had been achieved, as well as a degree of social development, Landman said. Since the inauguration of former president Nelson Mandela, the economy had accelerated from its 1% growth in gross domestic product (GDP) during the gold boom in the 1980s, to 2,5% during Mandela's term, 3% at the turn of the century and to 4%-4,5% today. If the contractions in mining and agriculture were factored out, GDP growth would be closer to 7%, he said. Landman expected GDP growth to hit an average of 5% by 2010. Such growth was sustainable because of the simultaneous increase in national wealth and slowing population growth, which was at 0,9% last year and was forecast to be 0,3% in 2010.

Survey Places South Africa Among Worst For Bribery 
South African companies are among the worst in a group of 30 leading exporting countries when it comes to bribery to get business in foreign markets. A report released October 4 by Berlin-based anticorruption watchdog and lobby group Transparency International ranked South African companies as the sixth most likely to bribe. Transparency International Bribe Payers Index 2006 surveyed the inclination of companies from 30 leading exporting countries to bribe abroad. Firms most likely to bribe to get foreign business were, in this order, those from India, China, Russia, Turkey, Taiwan, Malaysia and SA. Least inclined to bribe were firms from Switzerland, Sweden, Australia, Canada and the UK. The findings of the survey were based on questions asked of more than 11,200 business' executives from companies in 125 countries about the practices of foreign firms in their country. The executives, who were promised anonymity, were asked about the propensity of foreign firms that did the most business in their countries to bribe. A score of 10 indicated a perception of no corruption, while zero meant corruption was viewed as rampant by companies from a particular country. South African companies received an average score of 5,61, compared with those from Switzerland, seen as least corrupt, at 7,81, and those from India, worst in the rankings at 4,62. The survey's release brought a sharp reminder from Public Service and Administration Minister Geraldine Fraser-Moleketi, who chairs the National Anti- Corruption Forum, that South Africans could face criminal charges for bribery outside the country. She said members of the forum, which includes organised business, had taken an oath to fight corruption. She would not comment on SA's ranking or the survey methodology and no comment was available from representatives of business. Local Transparency International chairman Hassen Lorgat said the report showed his organisation was as serious in fighting "the supply side in corruption" from business as it was "the demand side" from governments.

Bitter Feuds Within Tripartite Alliance
A war of words between President Thabo Mbeki and SA Communist Party general secretary Blade Nzimande signalled further cracks in the tripartite alliance. Nzimande responded October 8 to an attack at the ANC's national executive committee meeting in which Mbeki described him as "extraordinarily arrogant". Mbeki said Nzimande's continued attacks on his leadership and the ANC amounted to "serious provocation". An equally angry Nzimande hit back, saying the president had failed to provide leadership in the crisis engulfing the ANC and instead used its alliance partners (the third of which is Cosatu) as a scapegoat. "I differ with (Mbeki's) political overview, both its thrust and its conclusion this attack trying to separate the SACP from its general secretary is extremely unfortunate," Nzimande said. "The reason is that the allies are being used as a scapegoat, as a substitute to dealing with problems in the ANC and the alliance. "I would ordinarily have expected that the president would rise above this and seek to provide leadership to the ANC and to the alliance, rather than embark on a course that would only further poison this atmosphere." The clash between the two men has been interpreted by other NEC members as the "naked viciousness" of the succession battle in the ANC, which has caused havoc across the tripartite alliance. One NEC member, who attended the meeting where Mbeki and Nzimande openly differed, said: "What we are seeing now is the same dirty war that we saw before, during and after the Cosatu congress. It's all about succession, which goes to the root of the control of the ANC. It's not personal, but about differences in policy direction." Nzimande said he believed the motive behind Mbeki's attack was the destabilising of the party before the SACP's congress next year. Nzimande has been at the forefront of a so-called leftist campaign to defend ANC deputy president Jacob Zuma against what his supporters see as the abuse of state re-sources to thwart his presidential ambitions. This campaign, according to the NEC member, hurt Mbeki, who construed it as a personal accusation that he was abusing state resources to deal with his political rivals. Cosatu also hit out at Mbeki himself, saying that under his leadership the country was drifting to-wards a dictatorship. It was the president's turn to launch a scathing attack October 7, with Nzimande the central target. Mbeki told the meeting that Nzimande was deviating from his own party's constitution, which encouraged unity within the alliance. "Contrary to Blade Nzimande's extraordinary arrogance, which leads him openly to despise our movement, the SACP's 2002 constitution lays down an approach towards fraternal organisations whose spirit and intent Nzimande clearly does not respect," Mbeki said. Nzimande said Mbeki was not necessarily articulating an ANC position. "We don't believe that the ANC as a whole shares an approach that tends to alienate the alliance partners," he said. ANC spokesman Smuts Ngon-yama denied that Mbeki's remarks were an attack on Nzimande: "It's a frank, open discussion that the ANC is having with its allies."

Archbishop Tutu's Warning on South Africa
Archbishop Desmond Tutu, the respected clergyman, recently spoke with deep anger and frustration about the state of things in South Africa. Because of his credentials in the fight against apartheid as well as in the innovative house-cleansing pain-soaked burden he carried as the Chairperson of the Truth and Reconciliation Commission, his verdict must get the attention of all Africans who care for building on the gains of the struggle for freedom and democracy in that land. The rampant violence, rape, armed robberies, escalating poverty and despondency that has gripped South Africa, however, does not come as a surprise. It was all there in the womb of apartheid as a system of organised official socio-economic crime. It is important to look at historically similar experiences. One example is the case of ex-slaves in Brazil after legal emancipation. The lifting of the terror of brutal labour formerly imposed on Afro-Brazilian slaves was followed by mass refusals to sell their labour for any form of wages. With angry former slave owners (who controlled political and economic power) feeling bitter and vindictive, no social safety nets were provided for ex-slaves who were thrown out en masse from farms as well as denied unemployment benefits. Horrendous poverty, disease, squalor, slum housing, and alcoholism became rampant among black ex-slaves. Similar conditions were also seen in British Guyana and Haiti with the end of slavery. In Jamaica, Cuba and other slave economies in South and North America, the continued monopolisation of land by former white owners and absentee landlords turned poverty into a permanent hell. The former slave owners would turn around to blame the poverty on the laziness of victims of landlessness. Alcoholism, lack of self-respect, anger displaced into violence against women and fellow blacks have been a permanent feature of African-American society. South Africa presented a peculiarly hate-filled variant of slave society. The writer Bessie Hess called it a "loveless country" where "the oppressed groups (were) hounded day in and day out, their homes broken up, their movements restricted". Every white face, she said, put oppressed groups (the so-called "Coloureds", "Bantu" and "Indo-Malays") under "unceasing torment of hate, hate, hate". The African National Congress and the South African Communist Party would put emphasis on the incredible quantum of labour extracted from able-bodied black men for long hours in unsafe mines underground and on white-owned farms. In 1976, this white Afrikaner power gave the world a glimpse of its barbarism by gunning down black children in the streets as television cameras captured the tragic drama. Beatings of protesting black people against oppression had been routine long before 1948 when apartheid was officially instituted by the Nationalist Party. A document attributed to President Pik Botha in 1985 exhorted Afrikaner scientists to invent genetic weapons for ensuring the sterilisation of black women and men; as well as racially selective virus-based diseases. In short, it was a system that was intensely immoral and ungodly. The challenge which these social histories present to Archbishop Desmond Tutu and other post-apartheid social engineers is the imperative of finding the measures for healing mental wounds and cultural monsters bred by these conditions. This is a challenge which the Liberation Committee of the Organisation of African Unity, OAU, never created capacity for studying and devising strategies for confronting. The African academia failed to heed the warning set out by Franz Fanon with rare brilliance, revolutionary anger and passion in his works "The Wretched of the Earth" and "Black Skins, White Masks." The African National Congress, the Front for the Liberation of Mozambique, the South West Africa Peoples Organisation, and the Movement for the Liberation of Angola - as liberation movements which fought long wars for liberation - all failed to develop tools for confronting these problems. President Mandela touched its surface with the Truth and Reconciliation. The conflicts in Southern Sudan, Darfur, Sierra Leone and Liberia, which have vital racial and ethnic elements, clearly indicate that this is a challenge which NEPAD must incorporate in its programme of building good governance all across Africa. Archbishop Tutu's recent outburst is a timely call for the urgent need to return to the one unfinished business which Fanon drew attention to but did not live long enough to continue working on in post-colonial and post-apartheid Africa. That is the focus by politicians and freedom fighters on economic and political power, while ignoring mental liberation all across the African continent.

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AGRICULTURE

Social Challenges Holding South Africa Back
The scourges of crime, HIV/AIDS and corruption mask the remarkable political, economic and social achievements in SA over the past 12 years, leading trend analyst JP Landman told the annual Agri Outlook conference in Pretoria October 26. "There is more to life than crime, AIDS and Zimbabwe," Landman told the gathering of agribusiness, farmers and farmers' organisations. Organised agriculture has blamed these issues and fears of a Zimbabwe-style land grab for constraining growth in the farm sector. Landman, however, pointed out how the downward trend in the economy had been turned around since the democratic elections in 1994. Landman referred to an Old Mutual scenario study published in 1992 that said three challenges had to be overcome for SA to become a modern state: the extension of political rights to citizens (the easiest); getting the economy going (more difficult); and effecting social development (the most difficult). Democracy and sustainable economic growth had been achieved, as well as a degree of social development, Landman said. Since the inauguration of former president Nelson Mandela, the economy had accelerated from its 1% growth in gross domestic product (GDP) during the gold boom in the 1980s, to 2,5% during Mandela's term, 3% at the turn of the century and to 4%-4,5% today. If the contractions in mining and agriculture were factored out, GDP growth would be closer to 7%, he said. Landman expected GDP growth to hit an average of 5% by 2010. Such growth was sustainable because of the simultaneous increase in national wealth and slowing population growth, which was at 0,9% last year and was forecast to be 0,3% in 2010.

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AUTOMOBILES

Car Makers Plan to Grow SA's Exports


South African vehicle manufacturers are accelerating their export programmes. The South African motor vehicle industry is well on course for record-breaking growth, with an expected 40% increase on last year's exports. A National Association of Automobile Manufacturers of SA (NAAMSA) representative, who prefers not to be named, says the body this year expects exports of passenger cars and light commercial vehicles to reach 196000 units, up from last year's 139 912 units. Naamsa figures for the first quarter show that new vehicle exports soared by almost 58% compared with the same period last year. The projected 40% increase for the year as a whole remains more modest than the 50% Naamsa predicted in May at the release of its quarterly review. In the report Naamsa said exports would increase from 139 912 units to 210 400 units. But with local vehicle manufacturers sitting on export programmes worth billions of rands, indications are that, while foreign sales may miss the initial target, they are unlikely to lose momentum during the remainder of the year. Toyota recently announced plans to increase production from 600 units a day to almost 1 000 a day within the next two years. Half of this production is for export, CEO Johann van Zyl says. Toyota exports Hilux and Fortuner bakkies to European and other African countries. Van Zyl says the company wants to produce 220 000 units a year over the next three years. Toyota executive vice-president Tokuichi Uranishi says the company has chosen SA for the Hilux export programme because of the benefits of the Motor Industry Development Programme (MIDP) and the free trade agreement with the European Union (EU). Ford Southern Africa said earlier this year that it would increase production to supply its growing Ford Focus export programme. Ford spokesman Ben Pillay says the company has doubled Ford Focus exports to Australia to more than 2000 units a month. The company had to stop local production of Volvo to accommodate Focus production. General Motors SA (GMSA) intends making SA its main export base for the Hummer H3 vehicles, which the company is to start producing later this month. GMSA has a $3bn contract to assemble the third generation Hummer for export to Europe, Asia Pacific, the rest of Africa and the Middle East. Volkswagen SA (VWSA) recently announced plans to introduce bus and truck products to its range over the next two years. The company says the bus and truck division will provide a platform for planned truck exports to right-hand markets in the rest of Africa and south east Asia. The mooted trucks export initiative is in addition to VWSA's existing R25bn programme to export the Golf5's to countries such as Japan, Australia, New Zealand, Brunei, Singapore, Sri Lanka, Hong Kong, Indonesia and Malaysia. VWSA MD Andreas Tostmann says the company is capable of growing its presence in the light, medium and heavy commercial vehicle markets to further expand its export business. The Naamsa representative says the weakening rand is also expected to boost SA's vehicle exports for the remainder of the year and well into the new year. This should have a knock-on effect on component manufacturers' exports.

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AVIATION

SAA May Sell Off Equity Stake to Private Partner


In a surprise move, South African Airways (SAA) said October 18 it was considering selling an equity stake in a private offering next year after finalising a R3,2bn-R4bn re-capitalisation programme. This will be the second time the national airline makes a foray into the world of privatisation. In 1999 government sold a 20% stake of SAA, then under CE Coleman Andrews, to Swissair Group for R1,4bn, but bought it back two years later for R383m when Swissair went bankrupt. SAA CEO Khaya Ngqula said in an interview in Parliament that SAA wanted to bring in outside investors prepared to assess and take the risk of an investment in the state-owned company. "This is very important," Ngqula said, adding that market enthusiasm for SAA, especially among foreigners, was strong. SAA chief financial officer Gareth Griffiths explained that a minority equity partner would bring critical management and commercial disciplines into the organisation and set a new standard for shareholder discipline. "It would change the ball game completely," Griffiths said, not least in the sense that SAA would become self-funded and would not have to rely on government hand-outs. The sale of an equity stake would also bring in funds to pay off debt raised during the re-capitalisation exercise. "Government will not be putting new money into SAA. It will all be coming from the markets," Ngqula said. Ngqula said an equity sale was under discussion with the public enterprises department but would not happen before June next year. The decision to go ahead with it would depend on market conditions in the airline industry at the time and the level of the oil price. Ngqula stressed that government would remain the major shareholder and that SAA would definitely not seek a listing on the JSE, saying, "I would love to go on to the JSE but our shareholder is not ready for this yet". The need to raise R3,2bn- R4bn in capital related to SAA's need for cash to repay debt, buy two new wide-body aircraft and position the airline for future growth and expansion. The re-capitalisation, which will take place this financial year, would also help mitigate currency risks and allow the airline to repay dollar-denominated loan finance, Griffiths said in a briefing to the public enterprises committee on SAA's latest annual report. Ngqula said public enterprises had agreed with the fund-raising programme, which now simply awaited approval from national treasury. He hoped government would guarantee 50% of the capital raised. SAA's very high debt equity ratio of about 90:40 had to be brought down to about 60:40. In addition, the SAA board was also scheduled to approve the disposal of the airline's noncore assets at its next board meeting. SAA's capital and reserves were sharply reduced to R1,2bn from R2,7bn in the past financial year as it had to pay back R1,6bn to Transnet. Transnet sold SAA to government in March this year at the R2bn book value. 

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BLACK ECONOMIC EMPOWERMENT

AngloGold Ashanti Increases Empowerment Shareholding


Gold miner AngloGold Ashanti has increased its black empowerment shareholding to 26% by relinquishing the equivalent of 2,6% of its shares to employees and a black consortium. The value of 2,6% of AngloGold Ashanti was R2,1bn October 2, but it includes a new class of shares, some of which will only vest in the future, which makes it impossible to value them now. It introduces 6% black shareholding in AngloGold's South African production in addition to the 20% of "credits" it received for selling a number of gold assets to African Rainbow Minerals between 1998 and 2002. The deal means the miner has reached the minimum black shareholding required by the mining charter, which stipulates that companies should have at least 26% black equity by 2014. Under the Minerals and Petroleum Resources Development Act and associated mining charter, South African mining companies are required to have 15% black equity by 2009 and 26% by 2014 to convert mining rights granted under the old legal regime into "new order" rights. AngloGold Ashanti was the first South African gold miner to achieve conversion of all its "old order" rights to "new order" rights last year. AngloGold CE Bobby Godsell (pictured) said at a presentation yesterday that the company had made a commitment to the minerals and energy department to introduce an employee share scheme but that was not the primary reason for doing so. It was to make AngloGold a "thoroughly new South African company". Investec Securities analyst Leon Esterhuizen said it was a cost-effective deal for AngloGold Ashanti but it was a pity it had not been done earlier, before the recent weakening of the rand. South African miners benefit from the weakening of the rand against the dollar, as long as the gold price remains stable, as their costs are denominated in rand while they earn income in dollars. AngloGold Ashanti has signed deals with the main mining unions - the National Union of Mineworkers, Solidarity, the United Association of SA -- as well as black empowerment company Izingwe Holdings, which is headed by Sipho Pityana, a former director-general of labour and later of foreign affairs. AngloGold Ashanti's 30000 South African employees, 91,5% of whom fall within the definition of "historically disadvantaged South Africans" in the mining charter, will each be given 30 free AngloGold Ashanti ordinary shares and 90 "loan shares", which vest over a five-year period. These will be held in a trust, the Bokamoso Employee Share Ownership Plan. Both free and loan shares will have full voting rights and participation in the dividend. Another 1,4-million AngloGold Ashanti loan shares, or 0,5% of the company, will be issued to Izingwe Holdings, also with full voting and dividend rights. Izingwe and the unions are concluding a co-operation deal that will see Izingwe act as a channel of communication between the trust and AngloGold Ashanti's board. Izingwe is an empowerment investment company. Its other interests are in technology and financial services. It said the partnership with AngloGold Ashanti would be a springboard for jointly pursuing other opportunities. The deal should be implemented by year-end.

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ENERGY 

British Firm Shores Up South African Power Supply


British electricity company Independent Power Southern Africa (Ipsa) says it will spend $750m building two new power stations in Eastern Cape to help ease SA's rapidly developing energy crisis. It is expected that the entrance of private power producers into the domestic market will not only ensure that SA continues to enjoy low electricity prices but that it will also provide the country with security of power supply. Power utility Eskom, which supplies 95% of SA's electricity needs, said recently that its excess peaking capacity of 36000MW was projected to run out next year, and that an additional 2000MW would have to be generated each year over the next 20 years. Ipsa said October 19 its planned projects entailed the construction of a 1600MW combined cycle gas turbine at the Coega Industrial Development Zone in Port Elizabeth and a 400MW clean technology power station at Elitheni in East London. Speaking at the listing of Ipsa on the JSE's AltX market, CEO Peter Earl said the company had already signed preliminary agreements with government and would begin with the construction as soon as environmental impact assessment studies had been completed. The Coega project would be operational by the first quarter of 2008 while the Elitheni project would be up and running by 2009. Earl said the proposed projects would be in addition to the 73MW gas-fired plant it was building in Newcastle, KwaZulu-Natal. The first phase of the Newcastle project, which would produce 18MW of energy, would be operational in December. In terms of government's revised policy, Eskom will be responsible for the production of 70% of new generating capacity while the private sector will supply the remainder. Initially, government wanted the private sector to play a leading role in building new generating capacity. The minerals and energy department said all new power producers would sell electricity to Eskom for an initial period of 15 years. Eskom's short- and long-term power generating plans include building two new open-cycle gas turbines in Western Cape before next winter. They would produce 1022MW. Other projects are the construction of a 1332MW pumped storage station in the Drakensberg at a cost of R9bn and the installation of a new R6bn transmission line from Standerton to Cape Town. Also included is bringing back to service the Camden, Komati and Grootvlei power stations at a cost of R12bn. Ipsa said it was also in talks with OAO Sual Group over supplying electricity for an aluminium smelter on the country's southeast coast. Ipsa has assured the Moscow-based Sual that it could guarantee electricity supply should it build a smelter at the port of Coega, Earl said. "We've had discussions to give them comfort that there will be power. For that sort of investment, they need uninterruptible power," Earl said. Sual may build an aluminium smelter in SA should Alcan scrap a similar plan, according to Sual's billionaire owner, Viktor Vekselberg.

U.S. Backs SA's Pebble Bed Venture

South Africa's Pebble Bed Modular Reactor Company (PBMR) received a shot in the arm when it was announced the US Department of Energy (DOE) would pump $8-million into a partnership, involving PBMR shareholder Westinghouse, to carry out engineering studies and develop a pre-conceptual design for mini nuclear reactors in the US. The investment in development of what is believed will be the next-generation nuclear plant is a vote of confidence in the technology and the first revenue flow into the South African government-owned PBMR. "Should we meet the expectations [in the US] it could lead to a long-term involvement and substantial funding from the DOE," said Tom Ferreira, a spokesman for PBMR. Government holds 85% of PBMR, directly and indirectly, through Eskom and the Industrial Development Corporation. Westinghouse Electricity, a US company, holds the remaining stake. Interest in nuclear energy as a potential alternative power source is at its highest level globally since the 1980s, and Eskom has already said it is looking at development of a another nuclear plant in SA. This is in pre-feasibility stage, said Eskom CEO Thulani Gcabashe. Eskom already operates the Koeberg power station in the Western Cape. Alec Erwin, Minister of Public Enterprises, said at a High Temperature Reactor (HTR) conference in Johannesburg that the government planned to invest hundreds of millions of dollars in the pebble bed technology if the pilot plant planned for SA is successful. Government would back a plan for development of 20 to 30 pebble bed modular reactors in SA, with the first potentially being linked to the electricity grid by 2013 at the earliest. PBMR may look for more partners. Erwin said: "South Africa very obviously needs partners like Areva [a French company which is the world's largest maker of nuclear reactors] and Westinghouse. "We have been in discussions with Areva and other companies. The government is committed to putting significant funds into the development to forge a partnership with the major players." In addition to producing electricity, the next-generation nuclear plant can be designed to produce hydrogen -- a further alternative fuel source. At the same conference, Jeffery S Merrifield of the US Nuclear Energy Regulator said there could be a perception among some people in the US that hydrogen, which is highly volatile, should not be produced next to nuclear reactors. "They [the public] will think back to the Hindenberg [disaster] in 1937," said Merrifield. The Hindenburg was a German airship, powered by hydrogen, that exploded on docking in New Jersey. He said he recognised technology had moved on, but believed questions would be asked about the safety of having hydrogen and nuclear power produced side by side. Asked if government was confident the development of atomic plants in SA would be thoroughly monitored, Erwin said there was no danger of SA becoming swept up irresponsibly in the renewed international enthusiasm for nuclear power generation. "We benchmark against the US and Europe. We have detailed processes and experienced practitioners processing environmental and operating licences," he said.SA is not a stranger to nuclear technology and has expertise and experience, he said, and emphasised the importance of dispelling many of the myths surrounding nuclear power. At the conference, Erwin reiterated the government's backing for nuclear technology for peaceful purposes. "As South Africa's economy grows we need more energy and to reduce coal-fired power generation ... We are major producers of uranium and it makes sense to move towards nuclear technology," Erwin said. Coal-fired power plants have come in for much criticism in recent times because of their high carbon emission levels. But Gcabashe said: "We are a developing economy and we cannot ignore something we have in abundance." Coal-fired power stations generate about 90% of SA's electricity supply. If Eskom significantly cuts its power generation from coal plants SA could lose the competitive advantage it has through its low electricity prices. SA's electricity prices are the lowest in the world, but the big question is whether they will remain cheap enough to attract foreign investment given the country's distance from global markets. Gcabashe said electricity prices are 30% lower than the next cheapest producer in the world. Although prices will have to rise to help fund Eskom's R97-billion expansion, in which the company will add 47252 megawatts of capacity between 2005 and 2025, Gcabashe is confident SA will hold its competitive edge on electricity prices.

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FOOD AND DRINK

SABMiller Takes Colombian Bavaria Plans Offer to Ecuadorian Minorities


Global brewer SABMiller plans to make simultaneous tender offers for the remaining shares held by minorities in its three Ecuadorian subsidiaries. The group said it would offer about $88m, or $36,25 cash a share, to minority shareholders at Compania de Cervezas Nacionales, Cerveceria Andina and unlisted Ecuadorian subsidiary Agrilsa Agricola e Industrial. SABMiller planned to merge the operations of Compania de Cervezas Nacionales and Cerveceria Andina, Ecuador's largest and second-largest brewing businesses respectively, into one integrated business. SABMiller South America president Barry Smith said although the process depended on the outcome of the offers it would allow the group to move closer to integrating the two businesses in Ecuador into a single company. Both companies produce SABMiller's full portfolio of Ecuadorian beers, including Pilsner, the country's leading lager. SABMiller owns an effective economic interest of 92,06% in CCN, 72,34% in Andina and 92,19% in Agrilsa. Dow Jones reported October 16 that SABMiller increased its stake in Colombian subsidiary Bavaria. After a tender offer for shares, it bought an additional 0,21% in the company for $9,9m, bringing its total stake to 97,99%. The brewer had expressed its preference to delist Bavaria from the Colombian stock exchange once it held a large enough majority. SABMiller has South American brewing operations in Colombia, Peru, Ecuador and Panama, which continue to benefit from good economic growth in the region. Lager sales in the region rose 11% for the first half to September. The region is part of SABMiller's emerging-market portfolio, which includes eastern and central Europe and Asia.

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HIV/AIDS

Mbeki's New HIV/Aids Focus is Applauded


President Mbeki's move to repackage SA's fight against HIV/AIDS seems to be paying off. Mbeki has earned himself a breather from calls to sack his bungling health minister by placing Deputy President Phumzile-Mlambo Ngcuka in charge of managing the pandemic. Mbeki and his health minister Manto Tshabalala-Msimang have become objects of ridicule both here and abroad for their unorthodox and often denialist views on HIV/AIDS. In contrast Mlambo-Ngcuka received rapturous applause at a stakeholder conference October 27 in Johannesburg when she said that the bickering between role players had set the country back in its fight against the disease. Government's new anti-AIDS drive is also beginning to win international recognition. On Friday a report in the US-based Washington Post hailed what it called SA's "dramatic shift on AIDS". "The beetroot and all that lemon stuff is out the window. These guys are now serious about getting it right," an adviser involved in recasting government's policy told the influential daily. He was referring to Tshabalala-Msimang's much-ridiculed obsession with vegetables as a method to manage the disease. Organisers of this weekend's conference said the minister, who was discharged from hospital on Friday after suffering from a lung ailment, was not invited to the conference to ensure unity and no controversy. In September, after a United Nations AIDS conference where Stephen Lewis, the UN special envoy for AIDS in Africa, accused the South African government of expounding HIV/AIDS theories "more worthy of a lunatic fringe than a concerned and compassionate state". The attack, aided by internal pressure from labour and civic groups prompted Mbeki to announce a shake-up which sidelined Tshabalala-Msimang and established an inter-ministerial committee to oversee the implementation of the comprehensive plan against HIV/AIDS. The plan included reviving the South African National AIDS Council (Sanac), now headed by Mlambo-Ngcuka.

Civil Society Coalition Announces New HIV/Aids Action Plan

A coalition of South African civil society organisations on revealed their response to the South African government's calls for greater unity in the fight against HIV and AIDS October 3. The Treatment Action Campaign (TAC), a national AIDS lobby group, has joined forces with other civil society organisations, including the South African National NGO Coalition (SANGOCO), the South African Council of Churches, the AIDS Consortium and the Congress of South African Trade Unions (COSATU), to launch "an action plan to save lives." According to a coalition statement, the first phase will be a two-day conference on South Africa's HIV crisis to achieve "national consensus on targets and programmes for HIV prevention and treatment, care and support, as well as on the restructuring of the National AIDS Council (SANAC), and to present this consensus statement to the government." South African Deputy President Phumzile Mlambo-Ngcuka called for a "new spirit" between government and non-governmental organisations (NGOs) in the fight against HIV/AIDS at a COSATU conference in September, after widespread criticism that SANAC has been ineffective and unrepresentative. The government has been considering how to restructure its national AIDS body to include greater input from other sectors, and Mlambo-Ngcuka, chair of a new inter-ministerial committee on HIV/AIDS, described the involvement of NGOs in the government's efforts against AIDS as critical. Prominent AIDS activist Zachie Achmat, of the TAC, said the coalition's role was to help create clear targets for reducing the numbers of AIDS-linked deaths and preventing new infections. "We're ready to work with government, but we have to get on with the job if government is taking too long," he said. According to Zanele Twala, executive director of SANGOCO, "It's time that civil society organisations stand up and put their weight behind the struggle against this pandemic and make our voices heard. We need to collaborate and come up with a national action plan that is owned by all of us and supported by all of us." Referring to a long history of tensions between South Africa's health minister, Manto Tshabalala-Msimang, and AIDS activists, Hassen Lorgat, also of SANGOCO, emphasised that the coalition's goal was "to put a line under the squabbles" and focus on drawing up a comprehensive plan to deal with the pandemic. 

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FOREIGN AFFAIRS

New Framework to Guide UN Developments Operations in South Africa

Government and the United Nations Development Programme (UNDP) have signed a new framework to inform UN operations in the country for the next four years. The Deputy Minister of Foreign Affairs Sue van der Merwe and the UN Resident Co-ordinator Scholastica Sylvan Kimaryo signed the UN Development Assistance Framework (UNDAF) at the Diplomatic Guesthouse October 24. The UNDAF is based on a common understanding of how the strengths of the UN system in the country can best be harnessed to add value to the government's plan of action in pursuit of its objectives and priorities. It is thus hoped that the UNDAF will assist the government in achieving its main objective of improving the quality of life for all. The UNDAF supports amongst others first and second economy interventions around the Accelerated and Shared Growth Initiative for South Africa (AsgiSA), spatial development, local economic development and land reform. It also supports the optimisation of service delivery across all sectors; capacity development; strengthening local government and resource mobilisation. Expected outcomes post the period 2007-2010 include the achievement of a strong democracy; support to government and its partners to accelerate economic growth and development; the strengthening of government's efforts to promote justice, peace, safety and security. The UNDAF also seeks to achieve the intensification of poverty eradication interventions as well as strengthened South African and sub-regional institutions to consolidate the African agenda, promote global governance and South-South co-operation. The signing took place on the 61st commemoration of United Nations Day.
South Africa Grateful for UN Support for Refugee Programme
South Africa has expressed appreciation for the role played by the United Nations High Commission for Refugees (UNHCR) regarding the implementation of the country's refugee backlog project. "We are grateful for the support received from UNHCR ... in particular their assistance in the implementation of our backlog project," Home Affairs Minister Nosiviwe Mapisa-Nqakula said while addressing the 57th session of the UNHCR executive committee in Geneva, Switzerland, October 4. The UNHCR, a United Nations refugee agency, helped train new home affairs staff last year in preparation of the launch of the refugee backlog project, which took place in June this year. The UNHCR also monitored the processing of asylum applications, which the refugee backlog project aims to fast track. Temporary offices were set up in Cape Town, Durban, Port Elizabeth, Johannesburg and Pretoria to process applications received in the time between the promulgation of the Refugee Act of 1998 and July 2005. By April the backlog stood at just over 100 000, said the department. Ms Mapisa-Nqakula indicated that South Africa "notes with concern" that financial constraints and the adoption of strict immigration measures had limited the UNHCR's activities in Africa. "We call for greater spending in Africa, as befits the continuing need. For instance, Burundi has stabilized and after elections in the DRC, it is expected that there will be an even greater possibility for Congolese return," she said. The minister told the session that South Africa continued to integrate refugees and asylum seekers by giving then enabling documents to access employment, education and health benefits including treatment for HIV and AIDS. "South Africa is committed to the eradication of all forms of discrimination and racial hatred and we are involved in programmes to educate the public regarding rights of refugees," she said. The Office of the UNHCR was established in 1950 by the United Nations General Assembly. According to the agency's website, it is mandated to lead and co-ordinate international action to protect refugees and resolve refugee problems worldwide. The agency strives to ensure that everyone can exercise the right to seek asylum and find safe refuge in another state, with the option to return home voluntarily, integrate locally or to resettle in a third country. In more than five decades, the UNHCR has helped an estimated 50 million people restart their lives. It has staff of around 6 540 people in 116 countries worldwide, who continue to help 19.2 million people.

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FOREIGN TRADE

South-South Ties Boost Africa's Development


The World Bank says a recent, massive increase in African trade and investment by Asia's two emerging economic giants, China and India, holds great potential for growth and job creation in Africa, if significant asymmetries within the regions' relationships are resolved. A study, themed Africa's Silk Road: China and India's New Economic Frontier, released by the bank in September, recommended an array of trade and investment reforms within and between both regions to deepen the growing South-South ties and address imbalances that could prevent African economies benefiting from the increasingly important roles China and India play in the global economy. Based on new evidence on the operations of Chinese and Indian businesses in Africa, the study finds Asia now receives 27% of Africa's exports, triple the amount in 1990 - the level is almost on par with Africa's exports to the US and European Union (EU), Africa's traditional trading partners. Meanwhile, Asian exports to Africa are growing 18% a year, faster than to any other region in the world. China and India's foreign direct investments in Africa are more modest than trade flows, but they are also growing very rapidly, the study shows. "This new 'Silk Road' potentially presents to Sub-Saharan Africa -- home to 300-million of the globe's poorest people and the world's most formidable development challenge -- a significant and, to date, rare opportunity to hasten its international integration and growth," said Harry G Broadman, World Bank Africa Region Economic Advisor and author of the study. This new economic frontier extends beyond trade and investment in natural resources, according to new data presented in the study. China and India's commerce with Africa is opening up the way for the Sub-Saharan continent to become a processor of commodities and a competitive supplier of labour- intensive goods and services to Chinese and Indian firms and consumers -- a major departure from Africa's long established economic relations with the North. Moreover, a growing number of Chinese and Indian businesses active in Africa are operating on a global scale, working with world class-technologies, producing products and services according to the most demanding standards, and fostering the integration of African businesses into advanced markets. Still, there is a significant unevenness in the emerging commercial relationships between the two continents. African exports to Asia constitute only 1,6% of what Asians buy from the rest of the world, and China and India's African purchases total only 13% of Africa's total exports. Africa accounts for only 1,8% of the world's foreign direct investment flows, while 20% of the world's foreign direct investment goes to East Asia. "It is imperative that both sides of this promising South-South economic relationship address asymmetries and obstacles to its continued expansion through reforms," Broadman said. "This is not only in the best interests of Africa's economic development, but in China and India's own economic fortunes." The study details a series of reforms that should be undertaken by all the countries:

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FOREIGN ECONOMIC RELATIONS

South Africa Must Learn From China's Job And Skills Creation


South Africa must learn from China's experiences in skills development and employment creation, if it wished to make the most of the world's economy, Labour Minister Membathisi Mdladlana said Ocotber 9. Mr Mdladlana said he was impressed by China's economic progress and that if South Africa wished to be "a player" in the global economy, "we must use the experiences of China." The minister was speaking in Cape Town after signing a memorandum of understanding on job creation with Zhang Xiaojian, the Vice Minister of Labour and Social Security in the People's Republic of China (PRC). "I believe that South Africa can learn a lot in that process," the minister told BuaNews. Mr Mdladlana said the MoU on Co-operation in the Fields of Human Resource Development and Employment Creation would mean that "we rearrange ourselves" in South Africa regarding human resource development and skills development. In order to meet the Millennium Development Goal of halving unemployment by 2014, "we must make sure we develop the skills of our people fairly quickly" and for this, the MoU signed with China "makes business sense," the Labour Minister said. To meet this goal, South Africa needs to create more than the 500 000 jobs it has created over the past year, he said. "We want to halve unemployment by 2014 - that's our goal," said Mr Mdladlana. Mr Zhang said the MoU would result in "practical co-operation" that would benefit both countries. For its part, China is looking to create no less than 10 million jobs a year, said the Chinese vice minister for Labour and Social Security, adding that the foreign investment pouring into China had helped to solve "certain employment issues". This investment, however, depends on the skills and qualifications of the workers themselves, said Mr Zhang, saying this was why the Chinese government paid "a lot of attention to skills development and vocational training." He added that the Chinese government emphasised that Chinese companies must "run their businesses legally and with integrity and honesty." Mr Zhang said his ministry had studied the employment experiences of many countries and had combined these experiences with China's own policies to implement active employment policies. He added that his delegation also wished to take back to China, lessons learned in South Africa. Mr Zhang had brought officials with him who had particular experience in certain aspects of job creation, such opportunities in the tourism industry and in "practical agriculture technologies." South Africa's engagement with China through the MoU "will mainly be learning the experiences of the Chinese people - how they managed to participate in this tough global economy, to make themselves to be in the top five, as we speak today, being a developing country". The Chinese visitors and the Labour Department's top officials will visit several skills training projects in the Western Cape and Gauteng in between meetings where they are expected to exchange expertise and ideas on enhancing skills development.

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INTERNATIONAL ECONOMIC RELATIONS

Pact to Boost South Africa's Trade With South Korea


Business Unity SA (Busa) and the Korea International Trade Association (Kita) signed an agreement of co-operation for promotion of trade and business between SA and South Korea October 25. The move is likely to boost trade between the two countries. SA is currently concluding import protocols with South Korea to ease access to that market for local products such as beef, mutton, chicken, pork, ostrich, chicken, fresh flowers, fruit and vegetables. The SA-South Korea economic co-operation committee had its inaugural meeting in Johannesburg the same day. South Korea is SA's fourth-biggest trading partner in Asia, while SA is Korea's biggest trading partner in Africa. SA's imports from South Korea rose from $998m in 2004 to about $1,4bn last year while SA's exports to South Korea increased from $697m to $836m. SA's first-quarter exports to South Korea amounted to R13,1m, and this was expected to more than double in a year, says the CEO of Inveritas Global Holdings, Pieter Strydom. SA's exports to South Korea include bulk raw materials and semiprocessed minerals and metals. Korean manufactured exports to SA include automotive, fabric, apparel, plastic, wood and consumer electronic goods. Well-known Korean brands include Hyundai, Samsung, Daewoo and Ssangyong. Strydom said trade between the countries was complementary, with a range of products, minerals and semifinished products to sophisticated hi-tech electric and electronic products. "The success of the 2002 World Cup and of Korean companies such as Samsung, LG and Hyundai means that Korea is now better known in SA than before," Busa president and businessman Patrice Motsepe said. Kita is a trade promotion body representing more than 66000 companies in Korea. "The partnership between Busa and Kita is a very important step in building a sustainable and productive partnership between the two countries," Kita director Wang-Kyu Lee said yesterday. Motsepe said SA was eager to learn from Korea's experiences during the 2002 Soccer World Cup. Don-hoo Moon, who is a former general secretary of the 2002 Fifa World Cup organising committee, was also at the inaugural meeting. Moon is the general secretary of the World Taekwondo Federation, the international body governing the sport of taekwondo.

South Africa and Mexico Agree On Social Development

Social Development Minister Zola Skweyiya signed a co-operation agreement with his Mexican counterpart Ana Orozco, October 30. The bilateral agreement formalised co-operation between the two countries in areas such as the implementation and continuance of strategies to overcome poverty and inequality in the two countries. It would also ensure the achievement, monitoring, continuance and evaluation of programmes with the aim of eradicating extreme poverty. The agreement is further expected to look at the institutional organisation for the accomplishment of a strategy to reduce poverty and measure inequality. Departmental spokesperson Lakela Kaunda said the two countries would develop action plans based on their national priorities to implement the agreement. Dr Skweyiya had earlier attended the annual meeting of the Inter-American Conference on Social Security. The conference focused on among others, the impact of globalisation of economic activities on social security systems, globalisation and social security, preventive care for older adults and migration.

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LAND REDISTRIBUTION

Walking the Tightrope of Land Reform


South Africa is caught between a rock and a hard place. It must address the growing hunger for land on the part of black people and, at the same time, avoid going the route of Zimbabwe. Land reform in this neighbouring state, meant to address colonial injustice, has ended up undermining the economy. Zimbabwe's land reform has involved the seizure of property from thousands of white commercial farmers, starting in 2000. But South African officials have dismissed perceptions that the difficulties surrounding land reform - which aims to rectify the wrongs of apartheid - will scare off foreign investors. In September Lulu Xingwana, minister for agriculture and land affairs, warned that the government would start expropriating white-owned farms by February 2007. She gave six months for negotiations concerning the transfer of property, and said if commercial farmers resisted this, government would have no choice but to go ahead with expropriation. The government wants to complete restitution by 2008. White farmers also believe that a spate of murders on farms is aimed at driving them off their land. "An average of two farmers and their workers are killed every week. Some 2,400 murders of farmers (and) their black workers have taken place since 1996. A third of those murdered are black workers," Jordan said. Police say the murders are criminal in nature, and not directed at farmers. But Jordan disagrees: "We have experience that when there's a claim on a farm then the level of murders goes up. They kill and don't take anything from the farm. From our point of view, it's an attack directed at white farmers and their workers to force them off land." Where white and black farmers co-operate, there seem to be some success stories.

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MANUFACTURING

Manufacturing Production Increases


Manufacturing production increased 4.6 percent in the first eight months of 2006, compared to 3.2 percent during the same period last year. Statistics South Africa reported October 11 that higher production levels were reported by nine of the ten manufacturing divisions. "In addition, the estimated seasonally adjusted manufacturing production for the three months ended August 2006 increased by 2.2 percent compared with the previous three months, which is higher than the growth of 0.7 percent reported during the same period in 2005," Stats SA said. Higher production levels were also reported by nine of the ten manufacturing divisions for the three months ended August 2006, compared with the preceding three months after seasonal adjustment. "However, during this period, low production by the petroleum industry, due to maintenance of machinery, has limited the extent of growth in the manufacturing industry results." The manufacturing division with the largest contribution to the year on year increase between January to August 2005 and January to August 2006 was the motor vehicles, parts and accessories and transport equipment division, contributing 1.4 percentage points. This was followed by the 1.3 percentage points contribution made by the basic iron and steel, non-ferrous metal products, metal products and machinery division. The wood products, paper, publishing and printing division contributed 0.6 of a percentage point.

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MINERALS AND METALS

Lead, Nickel Take the Shine From Gold


Both the rand and the dollar gold prices are stagnating at around their current levels, but the demand for industrial resources continues at a brisk pace. Lead, for example has gained 66% since mid-June and nickel almost 200% in the past 12 months. The chart shows that over the past 18 months, the basic minerals index rose at much the same pace as the gold share index and is now outperforming it. About 77% of Anglo's profit comes from industrial commodities including base and ferrous metals and industrial minerals. Currently moving down from an overbought level, but with a count to R397, Anglo is worth considering in its next dip. ARM is heavily involved in nickel and ferrous metal and looking a little overbought, but with a count to R86, it's worth a look. Also moving down from an overbought position is BHP Billiton, whose last quarterly report tells of record production in aluminium and manganese ore, and has a count to R177. Heavily involved in coal, Metorex with a count to R16, is nudging at an overbought position and is likely to move sideways. Take care in Palamin as it is at its R51 count, is overbought and, while the longer-term outlook remains good, it may ease back in the short term. Mainly involved in iron ore, Kumba is easing back from an overbought position and might be watched for a buying opportunity. With the search on for alternative energy, uranium share SXR is of particular interest. SXR shot past its R70 count to a well-overbought level on news that workers at Rio Tinto's Rossing plant are on strike, and another competitor, Cameco, is suffering from flooding.

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MINING

Cabinet Approves Diamond, Minerals Bills


Cabinet has approved the second draft of the Mineral and Petroleum Resources Royalty Bill which "significantly" reduces royalty rates in the mining sector compared to an earlier draft of the bill. "The reduction of such rates better takes into account the lifecycle of many of the mining operations in South Africa," said a statement released by the National Treasury following a post-Cabinet briefing October 11. The second draft reduces royalty rates for refined platinum to 3 percent, while the royalty rate for refined gold decreases to 1.5 per cent. Government spokesman Themba Maseko said traditional communities who currently receive royalty payments from mining operators who mine on their land would continue, under the Mineral and Petroleum Resources and Development Act of 2002 (the MPRDA), to receive such royalties. This is regardless of whether these royalties are paid with respect to "old order" or "new order" mining rights. However, this raises concerns from mining companies at the potential payment of double royalties. According to Treasury, to address these concerns, "government will encourage communities and mining companies to enter into negotiations to, where appropriate, convert the financial interest of communities into equity stakes in the operating companies." Such talks would require that "role-players make some concessions in order to ensure lasting and sustainable arrangements." According to the department, the new Royalty Bill that has been approved for a second round of consultation prior to its tabling in Parliament next year, "attempts to reconcile the objectives of the MPRDA with the broader objectives of the mining sector." This includes the need to stimulate investment in the sector and to provide certainty for potential investors. Investors would "still get a decent return on the capital required to sink a mine," said department's director-general Lesetja Kganyago. In terms of the Diamond Export Levy Bill, also approved by Cabinet for public comment and subsequent tabling in Parliament, "the focus here is on encouraging beneficiation of the South African diamond", said Mr Kganyago. This is seen as important to the creation of employment and skills that are vital to the development of South Africa's economy. This Bill proposes a 5 percent export levy on rough diamonds, down from the 15 percent export levy as provided for in the Diamonds Act of 1986. On top of this, the Bill provides for "certain relief measures" that may offset the five percent levy "in full or in part", according to the Treasury, but these measures would apply only to producers and not to independent dealers, cutters or polishers. A ministerial exemption from the five percent levy may, however, be applied if a producer's activities are supportive of the local diamond beneficiation industry or if the producer is a small miner who has an annual turnover of less than R10 million and who has offered diamonds for sale at the Diamond Exchange and Export Centre but received no takers. These conditions preserve South Africa's "right of first refusal" regarding bidding on rough diamonds intended for export. Two sets of levy payers are provided for under this Bill, which is open for public comment until the end of this month, following which it will be tabled in Parliament in November. It is applicable to producers such as diamond miners including in-house dealers, and non-producers such as independent dealers, cutters and polishers. Producers must register with the South African Revenue Service (SARS) and pay export levies twice a year, while non-producers must pay the full levy when exporting diamonds. The five percent levy, says Treasury, is "low enough so as not to unduly encourage [diamond] smuggling." Local beneficiation of mineral resources is also seen as an important objective of the Mineral Resources Royalty Bill, with further reduction in royalty rates applied to beneficiated or refined minerals. The reduced rates for local beneficiation are significant: in the case of platinum group metals, including palladium, rhodium, iridium, ruthenium and osmium, the rates are halved, from 6 percent to 3 percent. However, metals in this group are regarded as refined only if processed to at least 99.9 percent purity. The 50 percent reduction in royalty rates also applies to chrome, manganese, silicon, vanadium, iron, cobalt, copper, nickel, lead, zinc, antimony and tin: from 4 percent to 2 percent. In the case of gold and silver, the royalties are also reduced by half, from 3 percent to 1.5 percent, if local beneficiation takes place, which in the case of gold would need to result in at least 99.5 percent purity, and in the case of silver, a process resulting in silver metal or silver nitrate.

Mining Production Increases

Total mining production for the three months ended August 2006, after seasonal adjustment, increased by 2.6 percent compared with the previous three months. The increase is higher than the -3.5 percent reported for the same period in 2005, said Statistics SA on key findings regarding mining production as at the end of August 2006. Furthermore, the actual total mining production for the three months ended August 2006 increased by 1.2 percent compared to the same period last year. The report said the 2.6 percent increase in the seasonally adjusted total mining production for the three months ended August 2006, compared with the previous three months was due to a 3.5 percent increase of 3.5 percent in the production of non-gold minerals. The major contributors in the total production of non-gold minerals were increases in the production of Platinum Group Metals (PGMs), which include platinum; iridium; osmiridium; palladium and rhodium. According to the report gold production increased by 0.6 percent for the period of August 2006 compared to August 2005. However, gold production decreased by 2.5 percent after seasonal adjustments after three months ended August 2006 compared with the previous three months. The seasonally adjusted value of mineral sales at current prices for the three months ended July 2006 reflected an increase of 16.1 percent compared with the previous three months. Stats SA attributed this to an increase of 31.2 percent (+R2 278.2 million) in the sales of gold and 12.8 percent (+R4 347.9 million) in the sales of non-gold minerals. Furthermore, the actual value of mineral sales at current prices for the three months ended July 2006 increased by 31.6 percent compared with the three months ended July 2005. Stats SA said total sales reached a high of R17.7 billion for the month of July 2006 and it is the second consecutive months that sales reached an excess of R17.0 billion in sales.

Chinese Take 30 Percent Stake in Ridge Mining

Chinese miner Zijin Mining will take a stake of up to 29,9% in London-listed platinum miner Ridge Mining in the first high-profile investment by the Chinese in SA's precious metals mining sector. Chinese investment in Africa's resources has been edging upwards steadily in the past couple of years. Chinese Premier Wen Jiabao visited SA and other countries in Africa in June and July with a delegation of 79 Chinese businessmen looking for investment opportunities in a range of industries, including mining. Ridge Mining is developing two platinum projects on the eastern limb of the Bushveld complex. At Blue Ridge, property financing is being secured and construction of the portal of the mine will begin this month. At the nearby Sheba's Ridge property, which is a joint venture with Anglo Platinum and the Industrial Development Corporation, a full feasibility study is under way. Ridge said Zijin would pay £8,2m to acquire 16-million shares at 45p a share and warrants to subscribe for up to 10-million additional shares at 70p a share. Zijin's investment will provide a platform for future collaboration and technical co-operation between the two companies to develop future projects. "The investment in Ridge Mining is an important step in our long-term strategic objective to increase our resources and production base overseas," Zijin chairman Chen Jinghe said. "It also represents a breakthrough for Zijin in the South African precious metals mining industry." Ridge Mining CE Terence Wilkinson said the firm had been looking for a "big brother" with finance and technical expertise to help develop the open-cast Sheba's Ridge project, in particular. Zijin has experience with open-cast gold mining and has been looking for metals and geographic diversification. It had approached Ridge Mining and the two partners spent time getting to know each other, Wilkinson said. Other Chinese investment in SA's resources sector includes a joint venture between Sinosteel and Limpopo Development Corporation in a ferrochrome plant, ASA Metals, and a substantial stake held in chromite miner and processor International Ferro Metals by Chinese state-owned steel producer Jisco. Elsewhere in Africa, Chinese firms have secured rights to explore for uranium in Niger. In Zimbabwe, Chinese firms are understood to have been granted a slew of mining rights in return for defence hardware and loans. The country has also made a substantial loan to the Angolan government in return for which it has received oil- drilling rights, and in Sudan it has provided defence equipment in return for oil-drilling concessions. Chinese investment in Zambian copper and coal mines has received some negative press. At the Chinese-owned Chambishi copper mine, workers rioted earlier this year because they said they were being underpaid and 46 people had been killed at the mine in an accident at an explosives facility. In June, Zambian authorities closed the Chinese-owned Collum Coal Mining because workers were being sent underground without protective equipment.

Minister Expresses Concern Over Conditions in SA Mines

Minerals and Energy Minister Buyelwa Sonjica has expressed concern at life-threatening conditions in the country's mines. This follows a tragic accident at the Tau Tona mine of the AngloGold Ashanti in Carltonville in the North West October 23. Seven workers were trapped by rocks after a tremor occurred at one of the mine's shafts. The Minister said gold mine had reached a plateau in terms of fatalities and were the worst performers in this regard. In addition, the mines had deteriorated by 18.5 percent from a fatality rate per million hours worked of 0.27 to 0.32 percent. The country's miners in 2003 reportedly set a target to improve their fatality and accident performance by 20 percent per year. "In the last few months, coal mines (0.11 percent) and other mines (0.18 percent) also show no sign of improvement," said Ms Sonjica. She said although the cause of the accident was not known yet, security measures in the mines should be reinforced. The mine's acting chief of inspector Jacques Erasmus said two of the seven miners had been rescued and admitted at Lesley William hospital in the area. "We are still to recover the five although it has been for a long time since the incident happened," said Mr Erasmus. He said other miners would receive trauma counselling, while they would be working around the clock monitoring the situation. Ms Sonjica has since wished the victims a speedy recovery and was expected to visit the mine this afternoon to get a briefing from mine management on the accident.

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