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SOUTH AFRICA

Books on South Africa

Update No: 066 - (04/07/07)

Battle for the Soul of Anc
Industrial action since June 1 by the South African public sector workforce, which had closed most of the country's schools and hospitals finally ended after four gruelling weeks June 28 when trade unions announced the decision to end the strike. A Congress of South African Trade Unions (Cosatu) statement said the majority of unions had agreed to sign an agreement based on the government's offer of a 7.5% pay rise initially made June 22. "Others, in the education sector, are not prepared to sign and will be engaging with the government further," the statement said. The biggest education union, the SA Democratic Teachers Union, said it was calling off its strike, but would continue negotiating with the government. 

The strike was termed as the biggest since the demise of apartheid by its organisers Cosatu, Many analysts, including ANC members, fear that the strike action was a show of strength ahead of the party's internal elections to be held later this year, when the ANC is expected to choose Mbeki's successor. This strike has not been about a fair wage, as Cosatu claims, nor about performance measures and containing inflation, as government claims. It is part of a battle for the soul of the ANC. The strikes are part of the hostilities between those who want former Deputy President Jacob Zuma as the next president of the ANC, and those who want Mbeki or one of his anointed in that office. Economists estimate that the cost to South Africa's economy could be as much as 3bn rand ($418m). Some newspapers worry about the effect the bitter industrial dispute will have on relations between the unions and the African National Congress (ANC) government. Others voice concern at the heavy financial losses incurred by workers over the course of the strike. 

The unions had hoped to humiliate the Mbeki government, if it had succeeded, would have put them in a commanding position at the ANC's leadership conference at the end of the year. Instead of a quick victory for the Cosatu-SACP alliance, neither side was really victorious. If anything, Mbeki has emerged stronger than before. The striking militants have miscalculated, with their confrontational approach. There has been growing public disquiet over the kind of South Africa that the coalition of anti-Mbeki forces within the tripartite alliance would bring. The breakdown of civil order that Cosatu is willing to countenance to win a national strike and the willingness of Zuma's supporters to disregard the rule of law to prevent him being tried. Unfortunately, whatever the rhetoric, nothing will improve until there is clarity on who will head the ANC and hence either be the next president of the country or, by proxy, will control the next president. The hostilities are far from over.

President Thabo Mbeki has opened the door to serving another term as leader of the African National Congress (ANC) after elections this year. This puts him in a strong position to influence the ANC's choice of candidate for national elections in 2009, when he is to stand down as president. He said it would be "disrespectful" to ignore the party leadership, if they asked him to stay on. The question of who should succeed Mr Mbeki still divides the ANC. The ANC candidate would be the overwhelming favourite to win national elections due in 2009. The ANC ended a key meeting June 30 by saying it would be possible for the party leader to be different from the presidential candidate but it would be preferable for them to be the same person. Analysts see this as a "compromise", enabling the party to put off the potentially divisive decision of choosing its candidate. The ANC is due to choose its leader in December, with deputy party president Jacob Zuma and politician-turned-tycoon Tokyo Sexwale seen as front-runners to succeed Mr Mbeki if he does not stand again. Politician-turned-businessman Cyril Ramaphosa is another potential strong candidate. 

Tokyo Sexwale has called on South Africans to fight their fears of expressing their political opinions in the run-up to the African National Congress (ANC) presidential election in December, and warned that division in the ANC was a direct threat to freedom in the country. Speaking June 7 Sexwale, who has begun to profile himself as a possible candidate to lead the party and, therefore, the country after President Mbeki, said that the more open to debate and discussion South Africa was, the better equipped it would be to create a better life for all. "Under a climate of fear, of less democracy, less sincere debates, less frank discussion, less than good ideas prevail and mediocrity wins the day," he said. "A free-thinking, more tolerant and open society is a prerequisite. Dissent can never to be regarded as disloyalty." Sexwale played down criticism by the ANC's left allies that as a successful businessman he was not sufficiently pro-poor, saying: "Wealth creation for all is my dream ... no one wants to be poor. A better quality of life presupposes sustained economic growth or better high economic growth rates.

President Mbeki opened a landmark policy conference of the ruling African National Congress (ANC) by defending his policies against criticism from the left that it is consumed by struggles for power and personal advantage. The ANC national policy conference, which opened June 27 debates behind closed doors a wide range of policy positions as the party prepares itself for elections in 2009. Mbeki addressed head-on recent attacks on the government's economic policies, saying that "it is not possible to solve problems that have been 350 years in the making in a mere 13 years of democratic rule." The country still suffers endemic poverty, underdevelopment and "unacceptably high levels of structural unemployment," he said, but the ANC government had placed the economy on a "relatively high" growth path and "immensely strengthened" its global competitiveness. 

Power outages are likely to hit the country again in July as three unions representing two-thirds of Eskom's employees announced June 18 they would embark on a strike unless the state-owned power utility met their 12% wage demand. However, the intended strike by the National Union of Mineworkers (NUM), the National Union of Metalworkers of South Africa (Numsa) and Solidarity, which together represent 20000 workers, is likely to be deemed illegal because Eskom's operations are specified as an essential service under the Labour Relations Act. Eskom's workers' right to strike needs to be formulated in terms of a minimum service agreement, which the unions suspended two years ago. The three unions have rejected Eskom's 6% wage increase offer after three rounds of negotiations failed. "There will be disruptions to the electricity supply and the blame should be with Eskom," Paris Mashego, chief negotiator for the NUM, said June 18. "We need to be clear on what constitutes essential services because Eskom is implying all its workers fall under essential service, which is not true." The state utility opened its offer at 3% and has since increased it to 6%. Unions have reduced their demands from 13% to 12%. 

Interest rates rise
South Africa's central bank increased interest rates June 7 for the first time in six months in an attempt to curb inflation. The governor of the South African Reserve Bank, Tito Mboweni, announced in a nationally-televised statement that the rate at which the bank lends money to commercial banks would rise from 9 to 9.5 percent starting June 8. The decision of the bank's monetary policy committee became almost inevitable after news that the consumer price index had risen 6.3 percent in the year to April, defeating the bank's objective of holding inflation to between three and six percent for the first time since August 2003. Mboweni said fuel and food prices had been the main forces driving up inflation. Petrol prices had increased by 15.5 percent and food prices by 8.6 percent in the year to April. Bank forecasts suggested that oil and food prices, as well as a continued high rate of household spending, continued to pose a threat to attempts to keep inflation in check.

North-South cooperation
South Africa has urged the leaders of the world's eight top industrialised nations, the G8, to scrap trade barriers in order to truly help the continent develop, rather than merely extending aid, writes Michael Appel. The G8 Summit in Heiligendamm, Germany, ended June 8 with the G8 countries Canada, France, Germany, Italy, Japan, the Russian Federation, the United Kingdom and the United States pledging US$60 billion to meet earlier commitments and support new development initiatives for the developing world. The heads of state of six African countries including South African President Thabo Mbeki took part in the G8 summit. "South Africa's participation at the G8 Summit in Heiligendamm comes within the context of our country's commitment to promote North - South Co-operation in support of the African Agenda," the Department of Foreign Affairs said. President Mbeki also took part in the G-8 + 5 leaders of the South (India, Brazil, South Africa, China and Mexico) with a view to advancing the developmental agenda of the South. 

Drop in Global Competitiveness
South Africa has slid down a high-profile scale of global competitiveness over the past two years, but is still ranked ahead of many other important emerging economies, including China, Russia and Brazil, a report from the World Economic Forum (WEF) showed June 13. SA is still the top performer in sub-Saharan Africa but slipped to 46th place among 128 countries this year, from 40th in 2005, with poor education, rigid labour laws and crime cited as the main constraints to its business environment. Tunisia, in 29th place, was ranked top in Africa, supported by efficient institutions, low levels of corruption and a strong security environment, according to the global competitiveness index compiled by the WEF, World Bank, and African Development Bank (ADB). But the continent as a whole performed poorly, with 19 countries from sub-Saharan Africa ranked among the 27 lowest on the index. "The key to the future of African economies is trade and investment, and therefore, the business climate," ADB president Donald Kaberuka said in a statement.

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AGRICULTURE

Tobacco Farmers Fear BAT Monopoly

An agreement between British American Tobacco SA (BAT SA), agricultural company Afgri and the Tobacco Institute of SA (Tisa) will create a single-channel market and establish BAT SA as a virtual monopoly in the local tobacco industry, Lowveld tobacco farmers claim. The agreement would see farmers lose their participation in leaf beneficiation if the farmer-owned threshing plant, SA Golden Leaf (SAGL), shuts down, putting farmers in a poor bargaining position in sales to dominant domestic buyer BAT SA. The shutdown will leave only Rustenburg's Limpopo Tobacco Processors (LTP) to supply BAT SA. SAGL acting CEO Richard Baird said that the restructuring would result in "an anti-competitive situation" and the only entity appearing to benefit would be BAT SA. He said the consolidation was unnecessary and that a new model that would benefit even the smallest farmers was being developed. The new claims come on top of charges of anti-competitive behaviour laid by SAGL with the Competition Commission last year, in which it named BAT SA. None of the parties has denied there was an agreement, but Afgri and BAT SA have rejected the farmers' allegations. Afgri director Louis Smit said Afgri "would not profiteer" from the arrangement. "(It) was done to save the farmers. Afgri will benefit only from finance and retail business." BAT SA buys 85% of SA's threshed Virginia. Falling tobacco prices and overcapacity at SA's plants, however, have cost about half, or 20000, farm jobs in flue-cured Virginia production. Tisa CEO Francois van der Merwe said the industry, including SAGL, had agreed to the arrangement. If the industry remained unconsolidated, BAT SA would buy abroad, he said. Van der Merwe was chairman of LTP until he was recruited by Afgri Tobacco as director. He is still CEO of Tisa, the objectives of which are to protect the interests of the tobacco industry and "not have any commercial role". Tisa has no farmers among its membership, which includes BAT SA, Afgri Tobacco and other prominent tobacco companies. BAT SA spokeswoman Anthea Abraham said the company rejected the allegations against it as "untrue and defamatory" and that it supported an efficient, competitive and sustainable local leaf-growing industry. "We confirm that a complaint against the industry has been lodged with the Competition Commission. The matter is currently under investigation and we have no further information in this regard at this time."

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BANKING

Foreign Investor Sizing Up South African Banks 

South African banks believe there could be a foreign bank investment in one of the big four local banks, an independent study on strategic and emerging issues in South African banking has revealed. These findings come at a time when the banking circles are awash with reports of an unnamed foreign bank that is on the prowl to acquire one of SA's big four lenders. The study, released June 19 by PricewaterhouseCoopers, showed that while most banks in SA believed that the big four banks should be open to foreign investment, some thought authorities would not approve of it. The report said the consensus was that, in addition to Absa, at least another of the big four banks should be permitted foreign ownership. An analyst concurred with the findings of the survey, saying it would be undesirable to have all four banks under foreign ownership. PricewaterhouseCoopers head of banking and capital markets Tom Winterboer said the survey was meant to raise awareness of strategic issues facing banks in SA, establish data on trends, encourage debate on capitalising on these developments, and improve performance. He said most of the banks surveyed predicted demands for increased transparency, similar to those overseas, on pricing and product comparisons. "A landmark development is the Competition Commission's inquiry into competition in retail banking and the national payment system. The consensus is that the inquiry will lead to greater transparency and itemised pricing together with more regulation, both external as well as self-regulation," Winterboer said. "A new priority, from a list of macro issues affecting banks' operations, is that banks are now placing the issue of crime, followed by recruitment of good personnel, at the top of their lists," he said. He said banks identified emigration and inhibiting immigration policies as constraints on the availability of quality staff. Another challenge was the National Credit Act, which came into effect at the beginning of the month. Banks said the most pronounced effect of this would be on compliance costs, legal costs, and lending and credit extension. Banks were faced with the implementation of Basel 2, which comes into effect in January. Big banks said they had made steady progress in complying, while smaller players were concerned about the significant resources to be devoted to the process. Winterboer said the changing regulatory environment was identified as one of the most important developments in the banking landscape and that new regulatory requirements were expected to proliferate in the financial services sector. The survey showed that foreign banks expected to continue gaining market share in the merchant and investment banking sectors, but were less confident about making progress in retail banking. "They have indicated that they may leave certain sectors of the banking market if the returns are not satisfactory," Winterboer said. Out of the six market sectors surveyed in terms of competitiveness, Winterboer said the home mortgage market had overtaken the corporate banking sector as the most competitive banking space. Foreign banks were intent on driving revenue growth and also indicated a far greater commitment to SA from their parent companies than a few years ago. However, SA's foreign exchange controls remained a concern. Local banks placed emphasis on client retention, capital and risk management, and banking the unbanked through the presence of more branches and ATMs. Standard Bank was rated by its peers as the first in several categories, including corporate banking, listings, foreign exchange trading, bonds and derivatives, money market, Internet banking and trade finance.

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BLACK ECONOMIC EMPOWERMENT 

German Companies Show the Way in BEE Deals

Siemens and T-Systems describe black empowerment as a business imperative and expect their partners to add value by boosting their ability to win new contracts. German companies are ahead of the game in the empowerment stakes for multinationals, with both T-Systems and Siemens striking equity deals while US rivals procrastinate over their options. Outsourcing specialist T-Systems has boosted its black ownership to 30% by selling 5% more of its shares. The subsidiary of Deutsche Telekom has revenue of R1bn in SA and was one of the first historically white players to blacken up, by selling 25,1% to African Renaissance Holdings seven years ago. Now Awari Investment Holdings has bought a 5% stake and has bought 8,4% more from African Renaissance. The move sees T-Systems match the degree of black ownership already boasted by Siemens Southern Africa, which bumped up its black equity to 30% in April by selling more shares to its existing investors, Linacre Investments and Business Venture Investments. Both Siemens and T-Systems describe black empowerment as a business imperative and expect their partners to add value by boosting their ability to win new contracts. Bringing in the clever, young black women who run Awari will give T-Systems a fresh perspective, says its CEO, Mardia van der Walt-Korsten. "We met all the usual big names that we all know. But these people are young and hungry and their presence will be a huge boost to the aggressive growth targets we have set." Stepping up the level of black ownership is essential to become more relevant in SA, she says. "This establishes us as a leader and gives us an edge because our multinational colleagues are not empowered from an equity point of view. A lot of our multinational competitors get away with doing good stuff but choose the path that is less beneficial because it's not so easy to get Germans or Americans to understand why you have to do this," she says. "We have been empowered for seven years and we wanted to stay ahead of the game." A third German player, SAP, seems likely to back down on previous plans to sell more shares in its local activities. SAP restructured to form a purely local entity, SAP SA, which is 10,7% held by Blitec, part of the Black IT Forum. MD Claas Kuehnemann recently said it was no longer certain that more shares would be sold, and that equity equivalents were being assessed instead. Equity equivalents will let multinationals score their points by investing 25% of the value of their local subsidiary in social development schemes or in supporting small black companies. But even SAP's 10,7% black ownership sees the German trio easily outstrip the half-hearted efforts of their US counterparts. Many of the US giants are either still debating selling equity or mulling over the equity equivalent get-out clause. Sun Microsystems may soon buck the trend by signing a deal with black investors, says Vito Bonafede, its director in sub- Saharan Africa. Sun first spoke of selling shares last October, when its US executives were asked for approval to sell 30% of the local subsidiary. Vice-president Crawford Beveridge said customers clearly expected black ownership from their IT suppliers and the alternative do-gooding schemes were insufficient. An equity deal is also expected from networking giant Cisco, which has restructured locally to create two new offshoots that will be 25% black owned. Other major US players such as Oracle, Microsoft, Novell, HP and Intel are staying remarkably quiet. Dali Mpofu, CEO of the SABC and a key player behind the hi-tech sector's empowerment charter, condemns the pace of transformation as "very sluggish". Drawing up the charter was an enormously lengthy and acrimonious task, and the end result has yet to be gazetted. A major derailment came when US players called in the American Chamber of Commerce to support their vehement opposition to selling equity at all. The "exhausting" equity debate had the welcome effect of galvanising some multinationals to say "to hell with it, we're going to do equity anyway," Mpofu says. Action by T-Systems and Siemens should put pressure on others to follow suit, he hopes. "The biggest catalyst in the private sector is first-mover advantage so the others feel left out. Peer pressure will play the biggest role in getting companies to act." The government expects companies to be 25% black owned, to earn 20% of the overall score. Another 10% is awarded for black management, where some players are focusing their efforts. Both Business Connexion and GijimaAST are now replacing post-retirement age white CEOs. Business Connexion's Peter Watt is making way for young, black Benjamin Mophatlane, the deputy CEO since 2004. GijimaAST CEO John Miller retires on June 30. While a successor has not been appointed yet, a white face would draw criticism as clients insist on buying IT services from black suppliers.

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ECONOMIC NEWS

Cosatu Calls for Economic Policy Turnaround

The Congress of South African Trade Unions (Cosatu) has called for a change in the government's economic policies, saying they do not deal with mass unemployment. Cosatu general secretary Zwelinzima Vavi told a conference on jobs and poverty June 18 that South Africa remained among the most inequitable countries in the world. "Unemployment is higher here than in virtually any other middle-income country. Hunger persists as an ongoing threat to millions of our people," he said. Economic policy has been at the centre of ideological tensions in the tripartite alliance. Vavi said the government's economic policy was more in tune with the needs of capital than those of the majority. He said the state continued to support capital-intensive industries that "cannot create employment", while neglecting sectors that could create opportunities and meet basic needs. Most jobs had been created only in the retail and construction industries. "Growth is based on rising consumption by the rich, plus high mineral prices and speculative investments from overseas. In contrast to our expectations before 1994, there is little evidence of broad-based growth based on improved conditions for the majority. Inequalities worsened in the late '90s and have only improved slightly with economic growth," said Vavi. 

New ANC Leader 'Will Affect Credit Rating'

South Africa is unlikely to receive an expected sovereign rating upgrade before the African National Congress chose a new leader in December, as investors wanted reassurance that the country's prudent economic policies would remain in place, Moody's Investor Service said June 14. The U.S. ratings agency revised its outlook on South Africa's rating for foreign currency debt to "positive" from "stable" early June, which means the country is likely to be considered for an upgrade in the next 12-18 months. This would encourage direct investment inflows and further reduce the price South Africa pays for its debt, which has fallen steadily since 1994. Moody's senior credit officer, Kristin Lindow, told a conference organised by the agency that South Africa's political transition was "finally on the radar screens" of the global investor community. Lindow told the conference that clarity on whether South Africa's economic policies would continue through the next administration was one of the factors that could help push its rating to the top "A" investment grade category. Nearly all of the factors which could lower South Africa's rating involved possible policy changes, such as tampering with the rand's floating exchange rate, populist spending which would boost public and foreign debt, or political instability which could threaten its solid economic framework. Lindow said big policy changes were unlikely regardless of who succeeded Mbeki, given the strength of SA's institutions and the success of its economic policy. Even if former deputy president Jacob Zuma were elected, his support for ANC economic policy in the past meant he was "not as scary a prospect for the presidency" as some assumed.

UK Announces Fund for African Business

The 17th World Economic Forum (WEF) on Africa kicked off June 13 with the leader of the House of Lords in the United Kingdom announcing one of the first donations to a new fund aimed at supporting businesses in Africa. Baroness Amos told reporters at WEF-Africa that Britain would be contributing US$20 million (approx R140 million) over three years to the Africa Enterprise Development Fund, set up to encourage entrepreneurship on the continent. In another development, a key report on economic competitiveness in Africa, produced jointly by the WEF, the World Bank and the African Development Bank, was released. The Africa Competitiveness Report 2007 identified improved access to finance as central to boosting economic activity on the continent, along with better infrastructure and stronger institutions. "Low access to financial services emerges as a major obstacle for African enterprises, but poor infrastructure, corruption and weak institutions also make African goods and services less competitive in the global marketplace," the report states. The report gave South Africa an overall international competitiveness ranking of 46 out of 128 countries. South Africa was one out of 29 African countries measured. The report outlined a number of steps that Africa's 53 countries can take to improve business conditions, stating that energy and transportation are among the main bottlenecks to productivity growth and competitiveness in Africa. "Firms lose as much as eight percent of sales due to power outages, and transportation delays can account for as much as three percent of lost sales," the report states. But the "critical constraint" to businesses in Africa - which reporters heard saw overall gross domestic product growth of 5.8 percent last year - is that of limited access to finance. "Further, improvements in the regulatory environment (such as better collateralisation, transparency and auditing) represent a necessary step for unleashing the potential of finance for competitiveness in Africa," the Africa Competitiveness report 2007 states. The African Enterprise Challenge Fund is one attempt to address increased access to finance on a continent that is already seeing rapid growth and where conference delegates are beginning to make comparisons - and detect differences - with the emerging economies of China and India. Li Ruogu, chairperson of the Export-Import Bank of the People's Republic of China and Malvinder Singh, head of Ranbaxy Laboratories of India both brought their experiences to bear on the question of similarities and differences between China and India and that of Africa. Mr Singh cited the large domestic market as benefiting India's growth once its economic reforms began, while Mr Li said that Africa must unite for its development. Mr Li said that good governance was not a precondition for development but rather a result of it. Also at the opening press conference, Tokyo Sexwale, chairperson of Mvelaphanda Holdings said that while there were certain similarities, "Africa must find its own way". Regional economies must be integrated to a point where the continent's approximately 800 million people could comprise a harmonious market. 

African Economic Growth 'Is a Political Task'

Economic growth was not an economic challenge but a political challenge of building consensus for processes that took a long time and required high levels of saving, Nobel laureate in economics Michael Spence told the World Economic Forum June 14. Spence, who chairs the Commission on Growth, an international panel that includes Finance Minister Trevor Manuel, said leadership and political skill were an important part of the growth process. Manuel, and Lesotho Finance Minister Timothy Thahane, emphasised the need for regional integration in Africa at the forum. Manuel called for Africa's leadership to think differently about the region and to consider redefining the content of sovereignty. He said if African countries did not have the skills to do all things, some things would have to be shared. Africa had 53 nation states, a number of which had fewer than 2-million people, making the small size of their markets a problem. He also said African countries needed to provide "leadership" and consistency in economic policies even if there were pressures for the government to spend more. But there was some debate on how far regional integration in Africa could go with regard to free movement of labour across borders. Manuel cited an unconfirmed estimate that there could be 3-million to 4-million Zimbabweans in SA, saying it was a natural part of the human condition that able-bodied people would migrate out of poverty-stricken areas. Spence said high-speed growth processes in the high-growth countries that were studied by the commission had involved people moving very rapidly across sectors and geographies. It could be argued that anything impeding the free movement was a problem. However, there was a serious "free rider" problem to the extent that in the early stages of growth accelerations, it might be better to open labour markets later. High growth often required sacrifices in high levels of savings or taxpayers' money to fund public sector investment. Therefore, the opening up of labour markets too early might lose the support of citizens for the growth process.

Industry Key to Economic Growth 

The African National Congress (ANC) has put industrial strategy at the heart of a government drive to push economic growth to 6% and halve unemployment by 2014. This is contained in the discussion documents debated at its policy conference. The document has identified the diversification of the country's industrial base as the key to SA's continued prosperity in the long term. But it also admitted that the trade balance showed the country still had not been successful in building capacity to produce the consumer and capital goods that the country needed. The ANC's stance is in line with the vision outlines in the government's latest policy drive, the Accelerated and Shared Growth Initiative of SA (Asgi-SA) and an accompanying national industrial policy framework. The industrial policy also comprises customised sector programmes for a number of strategic sectors seen as key areas for growth and job creation, such as automotive, agri-processing, chemicals, clothing and textiles, and biofuels. The ANC, for the first time in a policy document, acknowledged the threat of climate change and the country's responsibility regarding greenhouse gases. At the same time the projected acceleration of growth would require the country to double its electricity capacity in the next 25 years. In view of SA's environmental obligations, the discussion document envisaged --also in line with government policy - that SA would derive a significant portion of its energy from nuclear power. The document also envisaged the ramp-up of renewable energy production methods and the development of biofuels. It said the programme to expand coal-fired energy needed to take advantage of "clean plant" design.

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EMPLOYMENT

Jobs Shock to Embolden ANC's Left-Wing Allies

Job creation in South Africa's formal economy slowed sharply in the first quarter of the year, backing critics' argument that existing policies and a higher growth rate were failing to address unemployment. The new jobs figures are also likely to provide ample scope for left-wing allies of the African National Congress (ANC) to attack the party's business-friendly policies at its policy conference, starting today. Employment in SA's non-farm sector grew a meagre 0,2% after rising 1,3% in the fourth quarter last year, which analysts said could be blamed in part on seasonal factors. The net 17000 jobs created between January and March are a fraction of the quarterly estimate of the 139500 needed to meet the government's goals of halving poverty and the official jobless rate of more than 25% by 2014. "Job creation got off to a dismal start this year, and is certainly likely to add fuel to the fire in discussions regarding current economic policy," Standard Bank economist Danelee van Dyk said. SA's economy had grown by an average rate of nearly 5% over each of the past three years - its fastest in a quarter of a century - but employment growth had failed to meet the pace, she said after Stats SA released its quarterly employment figures June 26. Falling employment in the retail, hotel and restaurant sector, along with manufacturing and electricity, was offset by job growth in social and financial services, construction and mining. Analysts said they were dismayed that 11000 jobs had been shed by the manufacturing sector - which accounts for more than 16% of the economy - despite the fact the sector grew by a still robust 4,7% in the first quarter of this year, slowing from 8,3% in the previous quarter. Also worrying was the trend in retail and catering, which shed 33000 jobs - about half the amount created in the sector during the fourth quarter of last year - suggesting that many of those jobs had been temporary, low-grade positions which disappeared when year-end seasonal demand evaporated. "Progressive movements within the ANC alliance will use this data as ammunition to push for a more development-oriented democratic state and argue that capitalism and market forces are not appropriate in generating jobs," said Econometrix chief economist and director Azar Jammine. "People will gloss over the fact that no matter how much the government spends ... we won't get more jobs unless the educational system becomes more effective in generating skills. This is bad news for President Thabo Mbeki and the treasury," he said. Throwing more money at the problem would not solve it as SA already spent more on education than most other countries in the world, allocating about 18% of its budget, or 6% of gross domestic product, to education and training, Jammine said. The country's gaping skills shortage has been identified by the government as one of the main constraints to sustaining faster economic growth But SA's track record on jobs is not bad. Official data show that at least 3,2-million jobs have been created since 1995 -- with about half of those during the past three years, as the official jobless rate fell from a peak of 31,2% in 2003 to 25,5% last year. But out of 20,4-million economically active people last year, only 63% were employed, leading to an "expanded" jobless rate which includes discouraged work seekers of 37,3%, Standard Bank says. This compares with a lower expanded jobless rate of 30,5% in 1995. "The challenge to policy makers is to ensure that employment growth exceeds growth in the labour force, while also significantly integrating those that have become caught up in the backlog of years of unemployment," Van Dyk said.

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FOOD AND DRINK

SABMiller to Help Foster's With Brewing

Brewing giant SABMiller said June 26 it would take over brewing of two Foster's beers in the US, which would trim costs and allow it to invest in marketing the brand. The company said it had signed a 10 -year partnership agreement with Foster's to move brewing of Foster's Lager and Special Bitter brands, sold in the US, away from Molson Coors in Canada to Miller's breweries in Texas and Georgia in November 2007. Spokesman Nigel Fairbrass said the deal would allow the brewer's US subsidiary, Miller Brewing Company, to save on logistics costs. Previously, the company had not been able to invest in the brand due to margins being crimped by the cost of freighting the brand from Canada to the US, he said. The agreement was part of Miller's strategy to move its portfolio to brands with higher margins. During its annual results presentation for the year to March, SABMiller said Miller's profits were hampered by input costs. The company, which bought Miller five years ago, said it planned to increase market share and margins. Miller and Foster's had been sales and marketing partners in the US since 1993. The joint venture included Molson until 2001, when the Canadian brewer reduced its role to production of Foster's beer sold in the US.

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FOREIGN RELATIONS

Kabila Lauds South Africa's Contributions to DRC Peace

Democratic Republic of Congo President Joseph Kabila has warmly thanked President Thabo Mbeki and South Africa as a whole for its consistent support for peace and democracy. "The government of South Africa invested so much to a solution to a long crisis that affected my country for so long," Mr Kabila told South African MPs June 14 in an address to a joint sitting of the South African parliament. All this support has made South Africa "assured of our esteem", the DRC president said, in the first half of an address that was delivered in French and translated into English. President Kabila said he had come to sincerely thank South Africa for its consistent support of a peaceful and democratic outcome in the DRC, a country the size of western Europe which suffered through decades of dictatorship and civil war. It was in South Africa that the seeds of peace and democracy in the DRC were first planted, and where the inter-Congolese dialogue was first begun, he said. It was also South Africa that helped the DRC to build the transitional institutions that paved the way for democratic elections, along with South Africa's support for reform of the DRC armies and for the building of its public administration. Apart from its assistance, South Africa itself was a "source of inspiration for countries in crisis", President Kabila added, giving them hope of what can be "so beautifully achieved" in less than one generation. "As a citizen of Africa and of the world we are proud of South Africa and present our warm and sincere congratulations," he said. He added that the multinational and multicultural characteristics of South African society was also a source of inspiration, adding that the country symbolised the faith of African people in integration and the success of a vibrant private sector. Earlier, in a press conference at the presidential offices of Tuynhuys following bilateral talks with President Mbeki, he singled out South Africa's Department of Defence in particular for its support of the country's peace process, which included the difficult task of assimilating the various armed forces operating in the vast country. Now, the climate is ripe in the Democratic Republic of Congo for South African companies to examine investment opportunities there, Mr Kabila, told reporters June 14. He asserted that the country's legal system was now in a condition to guarantee the security of foreign investments. The business community would see a country very different from what it was in 2002, he said, adding that reforms under way would make the country even more attractive as they would lend themselves to a macro-economic situation conducive to investment. These changes would bring about a stability in the DRC that would last "a long time". Having emerged from the first democratic elections in over 40 years that were brought about with the assistance of the United Nations, with a major contribution made by South Africa the DRC president said that the country's laws on mining and investment made it a "very attractive" place for the private sector. President Mbeki said that further assistance by South Africa reconstruction of the DRC in various and the consolidation of bilateral relations would take place within the context of a bi-national commission that is scheduled to begin work in earnest in August. The DRC's election last year was the first in over 45 years, after the Mouvement National Congolais won the country's first free legislative elections in 1959, leading to the appointment as prime minister of the legendary anti-colonial leader, Patrice Lumumba. The election followed five years of fighting in the country that borders nine countries - causing the deaths of as many as four million people - and which ended in 2003. The DRC's newly-elected Parliament sat for the first time on February 13 this year.

South Africa Strengthens Ties With Lithuania

South Africa continues to consolidate its ties with European nations, with the latest interaction being talks between Deputy Foreign Minister Sue van der Merwe and her Lithuanian counterpart. The deputy minister will host Lithuania's Deputy Foreign Minister Oskaras Jusys in Cape Town for bilateral political and economic discussions. Minister Nkosazana Dlamini Zuma, signed a co-operation agreement June 11 with her Slovak Republic counterpart, Foreign Minister Jan Kubis in Bratislava to create a mechanism for regular interaction and consultation between the two countries. Deputy Minister Pahad hosted his Czech Republic counterpart in Cape Town, and President Thabo Mbeki hosted out-going British Prime Minister Tony Blair in Pretoria. The Lithuanian minister will be in South Africa between 13 June and 20 June. Lithuania has a historical link with South Africa through the Jewish community. It is estimated that 80 percent of South Africa's Jewish community are of Litvak extraction. Many prominent South Africans such as the late Sammy Marks and the late Joe Slovo were born in Lithuania. Activist Helen Suzman was also born in Lithuania. In September 2005 President Mbeki bestowed a prestigious national award on Lithuanian -born South African scientist, Aron Klug, for his exceptional contribution in the field of medicine. The success of the Lithuanian economy maintaining a stable average GDP growth rate of 7.8 percent during 2000 - 2006 is commendable. It is one of the highest growth rates in the EU. Economic forecasts have been that Lithuania's GDP will continue to grow by 7.4 percent in 2007. The unemployment rate in Lithuania fell to 5.6 percent in 2006, while the inflation rate was 3.8 that year. While in South Africa, Deputy Minister Jusys is expected to hold discussions with the Department of Trade and Industry, the Chairperson of the Portfolio Committee of Foreign Affairs, the South African Chamber of Commerce and prominent businessmen from Johannesburg, Cape Town and Pretoria. Deputy Minister Jusys will also visit Robben Island, the Holocaust Museum near Parliament, the Jewish Museum, Soweto and the Apartheid Museum

South Africa and Slovakia Sign Pact for Ministerial Co-Operation

South Africa and Slovakia have signed a co-operation agreement to boost interaction between the countries at ministerial level. Foreign Minister Nkosazana Dlamini Zuma signed the agreement with her Slovak counterpart Foreign Minister Jan Kubis in Bratislava June 11. "The Memorandum of Co-operation Agreement lays a good basis for regulating Ministerial co-operation between Slovakia and South Africa and creates a mechanism for regular interaction and consultation between the two countries," the Department of Foreign Affairs said. Both countries also agreed on the need to increase co-operation between the two in various fields such as human resources development and encourage the private sectors to explore areas of co-operation in fields such as automotive sector, textiles and services. Both South Africa and Slovakia serve in the United Nations Security Council as non - permanent members. Minister Dlamini Zuma also paid a courtesy call to the Deputy Speaker of the National Council, Milan Hort. Following World War 2, the erstwhile Czechoslovakia became a Communist nation within Soviet-ruled Eastern Europe. Soviet influence collapsed in 1989 and Czechoslovakia once more became free. The Slovaks and the Czechs agreed to separate peacefully on 1 January 1993. Slovakia joined both the North Atlantic Treaty Organisation and the European Union 2004. The Deputy Foreign Minister of the Czech Republic, Helena Bambasova, paid an official visit to South Africa, where she held discussions with her counterpart, Deputy Minister Aziz Pahad.

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HIV/AIDS

South Africa Well Placed to Deliver Aids Commitments - UNAIDS

Executive Director of the Joint United Nations Programme on HIV and Aids says South Africa has a better chance than any other country in the region to deliver on Aids. "South Africa has one of the world's largest anti-retroviral treatment programmes," said Dr Peter Piot addressing the 3rd South African Aids Conference in Durban June 5. By the end of 2006, more than 360,000 people were taking anti-retroviral therapy, he noted, describing this as remarkable progress in just two years. "The new expanded National Aids Council (SANAC) that brings together government, civil society, and business and the National Strategic Plan have set a good course for the next five years.
"We at UNAIDS are here to support you... for the sake of people in South Africa and Africa as a whole," he said. However, Dr Piot said up to 500 000 people were still being infected with HIV each year. "We have seen the emergence of deadly extreme drug-resistant TB strains in every province and more people are dying from Aids than ever before. "However, this conference takes place at a time of new energy and new hope. You have an ambitious and credible new five-year Aids plan," he said. The recently adopted national strategic plan to combat HIV, Aids and other sexually-transmitted diseases stretches from 2007 to 2011. It aims to achieve a 50 percent reduction of new infections by 2011 and provide an appropriate package of treatment, care and support services. The package of care provided for in the plan includes counselling and testing services as an entry point; healthy lifestyle interventions, including nutritional support; treatment of opportunistic infections; anti-retroviral therapy and monitoring and evaluation to assess progress and share research. To reduce infections it will be vital to tackle the gender inequalities that fuel the epidemic, said Dr Piot, adding that this would involve changing some deep-rooted traditions and practices. According to him, Aids continues spreading fastest in Eastern Europe and Central Asia. Worldwide, 12 000 people are newly infected every day, half of them women. At the same time, 8 000 die, making Aids the world's top cause of death for 15 to 59-year-olds and the fourth highest cause of death for people of all ages. "In many populations in East Africa, the Caribbean, and Cambodia, HIV infection levels are falling. In others, however, there are worrying signs that the gains of the nineties are being lost," he said. In Uganda, Thailand, and Western Europe, HIV infections are edging up again - due to a lethal combination of complacency among populations and their leaders. In addition, Dr Piot said Aids challenges were further complicated by the mixed messages circulating around the world. He said denialist statements such as that "UNAIDS overestimates the size of the epidemic," and "There's too much money for Aids" did not help. Furthermore, he noted that South Africa's health system had established some good models for HIV treatment and prevention. The conference will end with a declaration outlining ways to meet targets on HIV and Aids prevention and treatment. The declaration will deal with some contentious issues including proposals that healthcare workers actively propose HIV testing to all patients.

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INTEGRATION

African Integration Can Be Used to Speed Up Millenium Goals

Integrating the continent can be used as a means of speeding up Africa's achievement of the United Nations Millennium Development Goals (MDGs), a top UN official says. Speaking at the opening ceremony of the 11th session of the AU Executive Council in Accra June 28, Abdoulie Janneh, UN under-secretary general highlighted economic integration as vital for Africa's successful unification. The theme of the 9th AU Heads of State Summit is the Grand Debate on Africa's integration. "Using regional integration as a means of accelerating achievement of the MDGs is a sure way of guaranteeing the buy-in of the African people into this noble ideal," Mr Janneh told delegates. He said Africa needed to act as one on the area of trade in order to speed up integration. "At the end of the day, the clout and bargaining power that will enable favourable outcomes depend to a large extent on economic size as well as the offers being brought to the table (in WTO talks)." Africa would, however need to boost its infrastructure to make these goals possible. "Trade facilitation is closely tied to the need for affordable, efficient and sustainable physical infrastructure to support economic activities and the provision of social services," Mr Janneh explained. Also addressing the opening was outgoing AU Commission chair, Prof Alpha Konare who wished the Foreign ministers who sit on the Executive Council well in their deliberations ahead of the Heads of State summit. Keynote speaker at the opening, Ghana's Vice President Alhaji Aliu Mahama reminded the ministers of the historical significance of their meeting. "At no time in the history of this union has the issue of a union government for Africa become so crucial and I must add, so urgent," he said. "It is therefore not a sheer coincidence that the Assembly of Heads of State and Government decided to devote its 9th summit solely to the discussion of this important issue." The assembly charged the Executive Council with undertaking a brainstorming session on the issue in Durban last month. In May's "brainstorming session" the council discussed recommendations they will make to the 9th Ordinary Session of the AU Summit of Heads of State. The 11th session of the Executive Council will adopt, without discussion, the draft report of the 10th Extraordinary Session held in Durban. The draft report's adoption without discussion is in line with provisions of Rule 9(3) of the Rules of the Executive Council. Minister Nkosazana Dlamini Zuma, who was present with her delegation at Thursday's opening, will remain in Accra to support President Thabo Mbeki at the Heads of State and Government Summit. The AU leaders will discuss which of three possible options for a unified, integrated continent, they will adopt. This could either be a "Union of African States" a view led by South African President Thabo Mbeki; an "African Union Government" a suggestion put forward by former Nigerian President Olesegun Obasanjo or the "United States of Africa" model led by the Libyan President Colonel Muammar Gaddafi, who has been canvassing this view ahead of his arrival in Accra for the summit. The Heads of State summit will also consider the report of the New Economic Partnership for Africa's Development (NEPAD) Heads of State and Government Implementation Committee on the Integration of NEPAD into the Headquarters and Procedures of the AU. "The entire continent is anxiously awaiting the outcome of your deliberations," said Vice President Mahama. "The people of the continent count on your collective wisdom to provide them with the means to build a better future for themselves and their children. I am confident that you will not fail them and that together, we shall continue to work to build the kind of union we all dream about."

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MINERAL & METALS

Mineral Sales Up By 3.4 Percent

The seasonally adjusted value of mineral sales at current prices for the first quarter of 2007 increased by 3.4 percent, compared with the previous quarter, Statistics South Africa said June 7. "This increase of 3.4 percent could be attributed to increases of 5.2 percent (R503.6 million) in the sales of gold and 3.1 percent (R1 379.1 million) in the sales of non-gold minerals," Statistics South Africa said its latest report on the sector. Furthermore, the actual value of mineral sales at current prices for the first quarter of 2007 increased by 38.8 percent compared with the first quarter of 2006. "The increase of 38.8 percent is higher than the increase of 26.8 percent for the same period a year ago," said the report. The major contributors to the increase of 38.8 percent year on year in the actual value of mineral sales at current prices for the first quarter of 2007 were Platinum Group Metals (PGMs) (+16.7 percentage points or +R6 444.7 million), gold (+6.6 percentage points or +R2 559.3 million). Nickel (+4.7 percentage points or +R1 777.5 million), coal (+4.2 percentage points or +R1 613.5 million) and iron ore (+3.6 percentage points or +R1 377.4 million). Total sales reached R18.8 billion for the month of March 2007. The report also noted that the total mining production for the three months ended April 2007 increased by 1.2 percent compared with the three months ended April 2006. "The actual total mining production for April 2007 increased by 0.6 percent compared with April 2006," the report said. However the report said the total mining production for the three months ended April 2007, after seasonal adjustment, decreased by 2.2 percent compared with the previous three months. "This decrease of 2.2 percent was due to a decrease of 2.7 percent in the production of non-gold minerals and counteracted by an increase of 1.6 percent in the production of gold. "The major contributor to the seasonally adjusted decrease of 2,7 percent in the total production of non-gold minerals during the three months ended April 2007 compared with the previous three months was the decrease in the production of Platinum Group Metals (PGMs)". Platinum Group Metals include platinum; iridium; osmiridium; palladium; rhodium; ruthenium and osmium. Gold production, the report added, decreased by 8.2 percent for the period April 2007 compared with April 2006. However, gold production after seasonal adjustment increased by 3.6 percent for April 2007 when compared to March 2007.

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MINING

Mining Sector Profits Up 64 Percent

The prospect of growing riches in the mining sector was set to lure private equity predators, a PricewaterhouseCoopers (PwC) report said June 20, and companies such as SA's largest JSE-listed company, Anglo American, are right in the firing line. The report, 'Mine - Riding the wave', shows that 2006 was another spectacular year for the global mining industry with net profits rising by 64 percent. They are now 15 times higher than their 2002 level while return on equity reached 33 percent compared to 26 percent in 2005. It also finds that net cash inflow from operating activities was $76.7bn, an increase of 40 percent compared to 2005. Cash is being used to fund organic growth and spending on investment activities grew by 83 percent. The annual study is now in its fourth year and provides a comprehensive analysis of the financial performance and position of the global mining industry. It looks at 40 of the world's largest mining companies which represent over 80 percent of the global industry by market capitalisation, from across the globe and based in 14 different companies. It also discusses the current global trends affecting the sector. During 2006, the global mining industry witnessed some dramatic events. Takeover activity picked up from its rapid pace in 2005: consolidation and expansion through acquisition of new assets remains a corner stone of these cash-rich companies. A number of 'mega-deals' were sealed in 2006, with Brazilian mining company Companhia Vale do Rio Doce (CVRD) leading the way, moving abroad to purchase Inco. Hugh Cameron, Global Mining Leader, PricewaterhouseCoopers, said: "With phenomenal results such as these, we couldn't help asking ourselves whether this is as good as it gets. "Even with the high production volumes we witnessed last year, demand is still outstripping supply driving higher commodity prices. This is handsomely rewarding those that invested at times when prices were low, despite supply side challenges that are impacting input and development costs across the board. "Unprecedented demand, primarily driven by China, continues to increase. Supply is static and is struggling to catch demand, partially as a result of under investment in the 1990's. There remains confidence that fundamentals will lead to the continuation of high commodity prices. Hugh Cameron, Global Mining Leader, PricewaterhouseCoopers, added: "We don't believe that 2006 was as good as it will get for the industry. Although challenges remain with cost control and supply shortages, the industry has entered 2007 on a very high note and companies' fortunes will depend on how they ride the wave." The impact of hedge funds on the mining industry has been felt particularly dramatically in the last two years, through their involvement in metal trading activities and the volatility this creates in commodity prices. The report points to this trend continuing due to high cash flows and easily accessible funds. The most significant challenge is the impact hedge funds can have on metal prices during cycle changes. A number of significant derivative or physical positions may result in metal markets being destabilised. There are also growing indications of potential for private equity funds to share in the returns from the industry. The companies in the top 40 list have changed significantly even just in the past four years and this edition looks back at what has happened to those original top 40. One third of the companies are no longer featured on the list. A period of significant consolidation funded by commodity prices has lead to nine been acquired by one of those in the remaining 27. Not only have the company names changed but the sheer value of industry participants has also grown enormously. The 40th company in 2006 would have been 19th in 2003 based on its current market value. The lowest market capitalisation has increased by 2.9 times and that of the largest by 2.2 times. Individually the net profit of each of the top four in 2006 is higher than the aggregated net profit of the top 40 companies in 2002. 

De Beers May Be Asked to Explain '90s Exports

Diamond producer De Beers could be summoned by Parliament to answer questions about how it was able to export 20-million carats of unpolished local diamonds worth $822m duty free to London in the early 1990s, just before the African National Congress came to power. This is one of the options under consideration by Parliament's standing committee on public accounts. The other option is to seek legal advice on the prospects of litigation against the company. De Beers has rejected any suggestion that it acted improperly. The matter of De Beers' London stockpile was dealt with June 12 by a joint sitting of Parliament's public accounts and minerals and energy affairs committee. Minerals and energy director-general Sandile Nogxina told MPs that in terms of the previous Diamond Act, producers were allowed to export unpolished diamonds duty free, with the agreement of the Diamond Board, if they had first offered them to the local market for beneficiation. Nogxina said the department had not been able to lay its hands on any written agreement before 1998 other than a board resolution on December 3 1992 containing what appeared to be the terms and conditions of a new agreement with De Beers. This agreement stipulated that De Beers could export all unpolished diamonds free of export duty after assortment, valuation and verification. Nogxina said the department was constrained by a lack of information about the agreement and proposed that the committee summon De Beers to provide the written agreement. Diamond Board chairman Abe Chikane said De Beers had told the board that the only documentary proof of the agreement was the board resolutions. South African Revenue Services specialist tax adviser Katinka Smit did not think there was much prospect of success in prosecuting De Beers, not only because of proscription but also because of deficiencies in the act, which did not prescribe the format of the agreements, which could be oral. She said Finance Minister Trevor Manuel was advised in January last year that there was little prospect of a successful prosecution. Former MD Gary Ralfe has denied that De Beers improperly exported diamonds or obtained exemption from export duty.

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TELECOMMUNICATIONS

Telkom and Vodacom May Part

Telkom and Vodacom are sending out signals that their long and often fiery relationship is coming to an end, with Telkom looking likely to sell its 50% stake to Vodacom's other joint shareholder, Vodafone. Telkom and UK-based Vodafone are uneasy bedfellows, always circling for an opportunity to buy the other out. But neither has budged, suspending all three operators in a largely unworkable stalemate. Now Telkom is understood to be buckling, and could pocket R70bn for its stake. The question is what Telkom would do with that cash, and if that remains unresolved a potential deal may be scuppered. "It's a dysfunctional relationship," said an analyst. "A lot of money could go to shareholders." Another analyst said a sellout looked increasingly probable. "The question is what are they going to buy because they need a mobile strategy." Speculation about which investor would succumb first has entertained the market for years, but yesterday Telkom and Vodacom both hinted at definite changes as they announced their financial results. Acting CEO Reuben September said Telkom was reviewing its Vodacom investment. "Since the process of review isn't complete I'm not at liberty to share the details but we will come to the market once we have concluded." A Vodacom source said: "Things are moving quite quickly. The upside for Telkom is that it frees them to do mobile anywhere in Africa themselves and unlocks a lot of shareholder value." Telkom has a market cap of R90bn with its stake in Vodacom accounting for R60bn, giving Telkom the credit for just R30bn of its own value. "Telkom is clearly worth more than that so it would get a really good jump-start, but walking away does have its downside," the source said. The downside is that shedding Vodacom would slash its figures as Vodacom accounts for 37% of Telkom's revenue and 28% of net profit. But the massive cash injection could be used to build up fresh cellular operations in a more workable format. Telkom's growth depends on teaming up with a mobile operator to expand into Africa with a full range of voice, data and internet services. "For Telkom, a good mobile investment must translate into a good mobile partner for geographic expansion," said September. But Vodacom has proved a reluctant partner too often to pretend it is the ideal match. When Telkom bid for Nigeria's state-owned operator Nitel, Vodacom refused to support it and demanded a management fee for its services. Other options may be to buy one of the dozens of cellular operators active in Africa, or to buy a rival telecoms player in SA and grow its cellular skills. A third option - and one mentioned by September - is to work with existing mobile operators as it enters different countries. September said Telkom still viewed Vodacom as its preferred partner, "so to indicate that we will reach the end game with or without Vodacom would be absolutely premature. We want to look at all our options, and make sure we arrive at the best fit for Telkom." In May, Citigroup said it expected Vodafone to buy the rest of Vodacom for R73,4bn, but Vodafone CEO Arun Sarin declined to comment. The British operator is anxious to strengthen its stance in emerging markets, with analysts applauding that as essential to avoid a terminal decline as European markets reach saturation. Its recent acquisitions of a Turkish operator for $4,5bn and an India operator for $10,7bn raised its exposure "to the exciting growth opportunities in emerging markets", Sarin said. They also showed it is not afraid of major acquisitions, and gaining full control of Vodacom and its networks in four other countries would instantly offer major growth potential in Africa, the world's last untapped market. An analyst said June 13 that a deal to invest more in emerging markets would also see its debt ratio fall. Meanwhile, Vodacom itself is contemplating a multimillion rand acquisition of a technology company in SA. Vodacom CEO Alan Knott-Craig wants to acquire an internet service provider to flesh out its own internet activities. But the deal under consideration involved a group involved in far more than pure internet services, he said.

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TOURISM

Sun International in Share Buyback

Hotel and gambling group Sun International is set to buy back 16% of its own stock for more than R2,3bn, in a bid to optimise its capital structure. The company will pay R145,35 a share for the buyback. The leisure group said June 6 it had experienced "significant growth in the value of its operations, and as a result of strong cash flows and debt repayments and the level of gearing has reduced significantly". The share buyback would result in "the maximisation of returns to shareholders through a more optimal balance sheet structure", Sun International said. Institutional investor Allan Gray, which holds about 12,8% of Sun International, said it would vote in favour of the buyback. In addition, Allan Gray would recommend to certain of its clients, on behalf of which it manages about 26,3% of the issued ordinary share capital of Sun International, that they vote in favour of the scheme and the resolutions to be proposed at the general meeting. A meeting of shareholders will be held on June 29 to vote on the proposed plan. Sun International said that Dinokana Investments and the Sun International Employee Share Trust would not participate in the scheme. This would result in their effective shareholding in Sun International increasing, thus enhancing the group's overall black economic empowerment status. The scheme is subject to various conditions. In March, Sun International, which owns Sun City and the Table Bay Hotel in Cape Town, said it was set to buy 40% of Chilean entity San Francisco Investment, which holds a 15-year casino licence in Chile. Group CE David Coutts-Trotter said earlier this year that Sun International was interested in various offshore opportunities, including some in Moscow that were put on ice after a recent law restricting casino development there. The group would bid for a casino in Manchester, UK, while a decision on an opportunity in Lagos, Nigeria, was also likely this year. With Bloomberg

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ZIMBABWE

Mbeki Initiative 'Is Zimbabwe's Best Shot'

President Thabo Mbeki's initiative on Zimbabwe on behalf of the Southern African Development Community was the best chance in many years anyone had to find a solution to Zimbabwe's economic and political woes according to Francois Grignon. of the International Crisis Group on Zimbabwe. Speaking at the World Economic Forum on Africa held in Cape Town June 14. Grignon said that while many had hoped the initiative would create the momentum to put pressure on Zimbabwe's president, Robert Mugabe, momentum for a solution had to come from Zimbabweans themselves. Grignon said in a debate that, while it was too early to judge the effect of Mbeki's quiet diplomacy, it was necessary to create the platform on which the international community would be able to channel their contributions in the search for a solution. He said the responsibility of the international community was to facilitate change by Zimbabweans themselves. Zanu (PF) member Ibbo Mandaza said the key to the solution of Zimbabwe's problem lay in the succession battle -- and whether Mugabe continued with a fourth term. Arthur Mutumbura, leader of one faction of the Movement for Democratic Change (MDC), said that the major problem was the crisis around leadership and the "political illegitimacy" of Mugabe's government.

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