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Books on South Africa
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Update No: 065 - (07/06/07)
Now three candidates for ANC Presidency
The leadership race of the ANC delivered its third candidate mid-May. Mosima
Gabriel ("Tokyo") Sexwale followed the example set by the two
heavy-weights of the succession battle, Thabo Mbeki and Jacob Zuma, and humbly
declared that he would be available for the top job if branches of the ANC
extended the benevolence of a nomination to him. There is more potential for the
party to destroy the divisive Zuma-Mbeki dynamic if the race opens up to give
branches more and even better options than the ones available to them at
present. The candidacy of someone like Sexwale and, hopefully, that of Cyril
Ramaphosa and others, will take the ANC closer to the goal of party unity and
cohesion by forcing it to have a debate that is not limited to the strengths and
weaknesses of only Mbeki and Zuma. Potential candidates must bear in mind that
they may benefit from the manner in which the top two have mishandled the
succession battle by failing to provide leadership and wisdom at a time when the
ruling party is most in need of such qualities. The powerful National Union of
Mineworkers (NUM) was adamant May 24 that the new president of the African
National Congress (ANC) would have to be pro-poor, suggesting it will not
endorse politician-turned-businessman Tokyo Sexwale in his bid to succeed
President Mbeki as ANC president. The union stopped short of naming who should
fill the post. Speakers at the NUM's two-day conference in Pretoria, called for
a "review" of economic policy and linked the ANC's June policy
conference with the party's leadership race, which culminates in December.
Sexwale, the former Gauteng premier, recently said that if members of the party
requested him to stand for the presidency, he would do so. His willingness to
stand has opened up the race, which was largely perceived to be between Mbeki
and ANC deputy president Jacob Zuma. Others mentioned include businessman and
former NUM leader Cyril Ramaphosa, and ANC secretary-general Kgalema Motlanthe.
The ANC's presidential succession battle and the party's coming policy
conference were the subtext of the NUM's central committee meeting. Addressing
the meeting, NUM president Senzeni Zokwana said it was time union members became
involved in the succession debate through ANC structures in their communities.
"We have to reclaim the ANC from the black middle class and restore it to
the working masses," he said on the sidelines of the conference. Zokwana
also scoffed at suggestions that Cosatu had ditched its support for Zuma.
Presidential Aspirant Challenges Ruling ANC
A South African liberation fighter turned business tycoon has challenged the
opaque leadership selection processes of the ruling African National Congress
ahead of its choice of a new party leader later this year. Mosima Gabriel
("Tokyo") Sexwale declared in as public a fashion as is possible in
South Africa, on the evening television news, his availability for election as
the ANC's, and therefore South Africa's, next president. The ANC is scheduled to
hold leadership elections at its five-yearly conference in December.
Conventional wisdom is that an ANC member who discusses a candidacy in public
thereby rules himself or herself out of contention. In ANC tradition, leaders do
not, at least publicly, vie for office. Instead, they pronounce themselves loyal
and disciplined party members who await "deployment" to wherever the
party most needs them, while lobbying goes on behind the scenes. It was thus a
surprise when Sexwale began appearing on television to answer questions about
the possibility of standing for election in place of Thabo Mbeki, currently
president of both the party and the country. His success in upending party
orthodoxy became apparent when the SABC, South Africa's public broadcaster,
picked up on the news. In its political coverage, the SABC has become the kind
of stodgy state broadcaster which often places the president's activities at the
top of its bulletins, irrespective of news value and sometimes despite appalling
sound reproduction when camera crews fail to place a microphone on a podium.
Sexwale was not so crass as to tell the SABC he was running; he said merely that
he had been approached and that he would have to hear more on why party members
wanted him to stand. The interview went to the top of the news, followed by a
list of five other supposed candidates. Sexwale is one of South Africa's more
flamboyant public figures. He was recruited to the ANC underground by Winnie
Madikizela-Mandela in the early 1970s, went for military training in the former
Soviet Union and was infiltrated back into the country in the aftermath of the
Soweto youth uprising in June 1976. Although the ANC had sent between 800 and
1,000 recruits for military training abroad in the decade since the jailing of
Nelson Mandela, within South Africa "there wasn't a shot fired in
anger," in the words of South African Communist Party leader Joe Slovo.
Sexwale inflicted the first injuries on government forces when he threw a hand
grenade at police while entering South Africa from Swaziland. He was caught,
went on trial and was lucky to escape the death penalty. He was sentenced to 18
years' imprisonment and dispatched to join Nelson Mandela and other political
prisoners on Robben Island, off Cape Town. Released from prison in 1990, he rose
to prominence in the ANC, becoming chairman of the party in Gauteng, the
province which forms South Africa's economic heartland. After liberation in
1994, he became the first premier of Gauteng, then went into business. A
newspaper last year listed his investments as worth R978 million (US$143
million), but informal estimates place it at as much as R6 billion.
"Tokyo" Sexwale - his first name derives from his interest in karate
as a youth - has been as colourful a businessman as he was a politician. His
life includes a charming love story - his wife, Judy van Vuuren, was a white
paralegal whom he met when she was sent to Robben Island by her law firm to help
political prisoners. No matter how attractive a public figure he is, whether
Sexwale can pull the votes of the ANC's party congress in December is open to
question. The SABC's list of potential candidates, reflecting recent
journalistic speculation, included party heavyweights who have drawn more votes
than Sexwale at past party conferences. One name on the SABC's list of six was
Thabo Mbeki, reportedly favoured by his home province of the Eastern Cape for a
third term as party leader. Since South Africa's constitution bars him from
another term as head of state, re-electing him would involve nominating a
second, more junior ANC leader to be president of the country - the wisdom of
which is bound to be vigorously debated within the ANC. Mbeki's prospects would
also be adversely affected by the bitterness of the struggle in the past two
years around his party deputy, Jacob Zuma. In the normal course of events, Zuma
should have been the automatic choice to succeed Mbeki. Born in rural Zululand,
he was one of the ANC's first generation of liberation fighters and served for
10 years on Robben Island, went into exile and eventually became the movement's
intelligence chief. The ANC credits him with a leading role in combating the
internecine violence between ANC supporters and the followers of Chief
Mangosuthu Buthelezi in the province of kwaZulu-Natal in the 1990s. Zuma's
prospects were severely damaged, however, when his financial adviser was jailed
in 2005 on charges of corruption and fraud in a case in which he was named.
Mbeki fired him as deputy president of the country.
Health Workers on Strike
Public-sector workers in South Africa have gone on indefinite strike with
thousands holding marches through cities demanding a 12% pay rise. Some 700,000
workers across the country were called out on strike June 1st, in what analysts
say was one of the biggest strikes in the country's history. Police also fired
rubber bullets at striking health workers who were preventing patients entering
a Cape Town hospital. Efforts by the government to avert the strike failed after
the unions rejected a 6% offer. The government improved its offer to a 6.5%
rise, but the Congress of South African Trade Unions is still insisting on 12%.
Cosatu spokesman Patrick Craven said the government claimed South Africa's
economy was booming and tax receipts were rising, so it could afford a pay rise
of more than 6%. South Africa's inflation rate has risen to 5.5%. "The
African National Congress (ANC) seems to have lost touch with the people they
represented through the anti-apartheid years." Cosatu is officially part of
a governing alliance but the unions have become increasingly critical of the
government, which they accuse of not doing enough to relieve poverty. South
African police fired rubber bullets and stun grenades at striking nurses in the
port city of Durban. Union activists were reportedly trying to prevent nurses
from working. The police say the grenades are not harmful but unions say it was
a "brutal" attack. After the clashes, the unions boycotted scheduled
talks with the government. Earlier, the government warned striking nurses they
would be fired unless they return to work by June 4. The strike that began June
1 has crippled many hospitals and army medical staff have been brought in to
provide care. Some unions are on indefinite strike, but others only called for a
one-day strike. Health department chief Thamsanqa Mseleku accused some health
workers of "intimidating" their colleagues who wanted to go to work.
South Africa has seen many qualified health professionals leaving the country to
work abroad in recent years.
Outgoing British Prime Minister Tony Blair visited South Africa at the close of
his final, official visit to Africa, before leaving office. The Prime Minister
arrived in Johannesburg from Sierra Leone May 31. South Africa's Department of
Foreign Affairs sees Mr Blair's visit as significant, as it occurs on the eve of
the G8 Summit, to which President Thabo Mbeki has been invited as part of the
African group. Prime Minister Blair has consistently emphasised the importance
of Africa's development by designating the year 2005 as the Year of Africa.
"The British Government views South Africa as a major strategic partner in
Africa and South Africa expects that this relationship will be consolidated by
Prime Minister Blair's successor," the Department of Foreign Affairs said.
Mr Blair is to be succeeded by Gordon Brown, current Chancellor of the
Exchequer. Tony Blair used a keynote speech in South Africa to say there is a
"moral obligation" to use political action "to make the world
better". Mr Blair, who promised more training for African peacekeeping
forces and continued aid to the region, defended his interventionist foreign
policy. That policy, criticised after the Iraq war, had not managed to transform
Africa but had made it better, he said.
Blair still faces serious questions over a major arms deal with South Africa on
the last leg of his week-long Africa tour. One awkward question which may not be
on Mr Blair's agenda during his visit to South Africa will be his role in
helping a leading British arms supplier to win a multi-million dollar arms
contract. The deal, signed by BAE, was part of a much larger arms procurement
program, with contracts signed by a range of European companies. Some of these
contracts have become bogged down in controversy. And more recently it has also
been alleged that BAE itself paid what have been termed "commissions"
to ensure that it won the contract. While there is no suggestion that the prime
minister knew of or participated in any wrongdoing, his role in supporting the
BAE bid has never been fully explained. The deal was the largest South Africa
had ever concluded, re-arming the country after the end of the arms embargo that
had been in place during the apartheid years. It was worth $4.8bn. The entire
arms deal was questioned by critics when it was being drawn up. They argued that
South Africa, as a young democracy, had more pressing problems. These concerns
were swept aside by the ANC government. But soon other concerns arose. It has
been reported that the UK's Serious Fraud Office (SFO) has asked its South
African counterpart, the National Prosecuting Authority (NPA), to help it track
down more than $139m in "commissions", allegedly paid by BAE to eight
South African businesses and a political adviser.
New Democratic Alliance (DA) leader Helen Zille, at the helm of her party since
early May, has already locked horns with the ANC over the future of South
Africa's provinces. The ruling party lambasted Zille May 11, and said her recent
comments on the possible reduction of provinces as proposed by the ANC in its
draft policy proposals ahead of its policy conference in June amounted to
"little more than political grandstanding". "The ANC wants to
encourage a rational, measured and informed debate on how government at all
levels can better meet the needs of all our people," the ANC said May 11.
"It is unfortunate that the DA's new leader is not prepared to engage in
reasoned debate, resorting instead to dramatic flourishes of political
hyperbole." The DA has expressed concern at ANC proposals to cut the number
of provinces. The DA's James Selfe said recently the DA feared the ANC wanted to
do away with provinces. He argued for a federal approach. The ANC has floated
three options on the future of provinces. The first is to retain the current
system, the second to scrap the provincial system entirely and the third to
reduce the number of provinces. Given its stance on federalism, Democratic
Alliance (DA) MPs elected Sandra Botha of Free State as leader of the opposition
in Parliament May 24, in the hope that she will help new DA leader Helen Zille
broaden the party's support among blacks and the youth. Describing herself as a
team player who stands her ground, Botha indicated she would bring a new, less
combative style to the National Assembly. Botha beat Tertius Delport by 31 votes
to 25, with one spoilt paper. The fact that both are Afrikaans counted in their
favour as candidates as this was considered important to achieve diversity
within the party leadership. The vote was based less on ideological differences
and background than on personality and the image of the party. "There was a
yearning within the caucus for a completely new face untouched by the past who
could reach out to the DA's new constituency," said one DA MP. Political
researcher Jonathan Faull said Botha was probably elected not so much on her
appeal to the DA's targeted constituency as on being a better option than
Delport, a former apartheid cabinet minister who would have been a stick with
which the African National Congress could beat the DA.
South Africa's leading indicator of economic growth rose decisively in March,
suggesting there would be no loss of momentum this year despite the effects of
higher interest rates and rising fuel prices. Figures from the Reserve Bank
showed that the country's leading indicator, which points to business activity
six to 12 months ahead rose by an annual rate of 2.8% in March, from 1.1% in
February. This was seen as positive for South Africa's growth outlook as the
annual increase in the index has been steadily slowing since February last year,
when it leapt 6.5%. The February rise was the lowest since November 2005, when
the index fell 0.2%. "The growth trend may be losing momentum but it hasn't
turned, it's still upward," said an analyst at the Bank. South Africa's
economy has clocked up 33 consecutive quarters of growth, the longest in
history, and has expanded by an average 5% over each of the past three years,
the fastest pace in more than two decades. Consumer demand has been the main
engine and is expected to slow this year in response to the central bank's
decision to raise interest rates last year, curbing overall growth slightly.
South Africa aims to achieve a 6 percent annual economic growth by 2010, as one
of the key goals of the Accelerated and Shared Growth Initiative for SA (AsgiSA).
AsgiSA further aims to halve unemployment and poverty by 2014. Government has
been working towards these goals with concerted efforts across all industries
and government departments, since Deputy President Phumzile Mlambo-Ngcuka
launched the initiative last year.
Debate is swirling over the threat to the economy of the ballooning deficit on
the current account, widely seen as the main weakness in an otherwise robust
economy. The shortfall in what is considered the broadest measure of trade in
goods and services ballooned to 6.4% of gross domestic product (GDP) last year,
the widest gap since 1971, when it reached 7.5%. Deputy Finance Minister Jabu
Moleketi acknowledged that the deficit was unlikely to shrink soon, given the
government's R416bn infrastructure spending plans and preparations for the 2010
soccer World Cup. But he maintained that the trend was healthy because it
reflected imports of the capital goods needed to expand the economy's capacity,
which is being tested by robust demand and investment. That is true, but the
growing deficit also leaves the rand vulnerable to sudden swings in global
sentiment that could prompt aversion to asset classes seen as risky, such as
emerging markets. The Reserve Bank has repeatedly highlighted the issue, but
says there is no cause for alarm because the current account deficit is being
covered by strong capital inflows, amounting to about R100bn over each of the
past three years. Economists generally agree. The Bureau for Economic Research
said in its latest outlook that deficits of more than 7% of GDP were "not
uncommon" and a "significant" number of countries had run large
deficits for more than five years.
The Eighth Ordinary Session of the Pan African Parliament (PAP) later this year,
is to focus on Human Rights in Africa, as a result of recommendations from a
report on Justice and Human Rights. "Based on these recommendations, the
Committee resolved that the House should adopt the subject on Human Rights in
Africa as the main topic of discussion during the Eighth Ordinary Session of the
PAP later this year to enable the AU and all its relevant institutions such PAP
to address the human rights situation in Africa," the PAP said in a
statement. In its report, the committee resolved that conflicts and armed
disputes constitute a real threat to human rights, peace and security and
development efforts in Africa. It then called on the Parliament to pay special
attention and give priority to human rights in Africa, especially in Darfur, the
Great Lakes Region, Chad and Western Sahara. The report of the Committee also
resolved that the PAP has to assist in establishing the position of a Human
Rights Desk Officer, to perform functions such as compiling an annual list of
countries planning to hold elections. The Human Rights Desk Officer would also
need to develop a mechanism for early warning signs on conflict and violation of
human rights, and compile a list of member states that have ratified relevant
Protocols and Conventions. The report also pointed out that missions are to be
sent to countries that have human rights problems, and also proposed deploying
election observer missions to Mali and Kenya. However, PAP President Gertrude
Mongella warned the parliamentarians to show more commitment to being present at
committee meetings. Ms Mongella further warned those who were "too busy to
sit in Committees to make way for elections for other members who can have time
to take their place." The report itself was criticised for a lack of
detail, accompanied by complaints from other MPs about "its shallowness in
regard to the situation of human rights abuse on the continent."
Mbeki, Blair to Urge G8 to Reaffirm Development Commitments
President Mbeki and the outgoing British Prime Minister Tony Blair have
recommitted to ensure that leaders at June's G8 meeting in Germany, reaffirm
their commitments made at Gleneagles in 2005. The two met on June 1 to discuss
various issues such as the African agenda - including increasing aid, universal
education and HIV and AIDS treatment; climate change and the World Trade
Organisation (WTO) talks, amongst others. Speaking to reporters after the
meeting President Mbeki said Africa was going to feature on the agenda of the G8
and that the meeting would provide an opportunity for leaders to assess the
progress made since the Gleneagles meeting. "The next G8 meeting will
provide us with a chance to look at what has been done since Gleneagles and what
still needs to be done to achieve the set commitments. "During our meeting
we identified priority areas where there must be movement and indeed there has
already been movement - whether it is in aid, debt relief or the provision of
HIV and AIDS treatment. But we need to see further movement," he said. Mr
Mbeki commended Mr Blair for his efforts to strengthen relations with South
Africa and to put Africa on the agenda of the developed world including his
support for peace processes in Africa; funding for peacekeeping forces; support
for the Africa Peer Review Mechanism (APRM) and the provision of health and
education. "We have indeed benefited a great deal from your Premiership and
you will leave relations in great shape in all aspects - including politically
and economically. Mr Blair pledged to ensure that when he leaves office, Africa
and climate change remain firmly on the G8 agenda. He acknowledged that although
not all the commitments made by the G8 leaders in Gleneagles were achieved,
progress had been made. Since Gleneagles a lot has happened - massive amounts of
money have been made available for aid, debt relief, the provision of HIV and
AIDS treatment, education and development. "The G8 meeting provides us with
an opportunity to take another big step forward since Gleneagles, particularly
regarding Africa and climate change," he said. The Prime Minister
emphasised that a new global deal on the reduction of greenhouse gases
emissions, which must include biggest emitters United States (USA) and China was
needed. "Unless we have a comprehensive global deal on climate change,
which includes the US and China, we will not go anywhere regarding this
issue," he explained adding that the Kyoto Protocol did not include the two
biggest emitters of greenhouse gases. On Zimbabwe President Mbeki explained that
South Africa was involved in assisting the government and the opposition to
resolve their problems, as requested by leaders of the Southern African
Development Community (SADC). Mr Blair acknowledged President Mbeki's efforts to
resolve the political crisis in Zimbabwe and he emphasised that the solution
there must come from within Africa. "The only important thing is to improve
the lives of Zimbabweans but the solution should come from within Africa, and
that is why we are supporting President Mbeki on his role there," he said.
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AUTOMOBILES
Rolls-Royce Spins Off Turbine Benefits to South African Group
Newly established superalloy producer Avalloy is set to benefit from the 114,000
aircraft engines that UK company Rolls-Royce plans to build over the next 20
years to power surging demand for commercial and business jets. The superalloys,
known for corrosion resistance and ability to withstand high temperatures, are
used in a number of applications that include aircraft engines, nuclear
reactors, automotive engineering and oil drilling. Rolls Royce, a joint partner
in the new South Africa-based venture, says the engines, worth $600bn, will
power 51,000 new commercial planes expected to enter the market globally. Most
of the growth has been triggered by demand for non-stop long-haul flights,
particularly to and from Asia. Aircraft manufacturers Boeing and Airbus have
already placed engine orders for their new generation of planes, such as the 787
Dreamliner and the A380. Rolls Royce says there is further demand for military
aircraft engines worth $180bn, gas turbines worth $70bn in the energy industry,
and marine propulsion systems worth $180bn, over the next 20 years. Rolls
Royce's after-market services in all four sectors are also expected to generate
significant demand, forecast at a total of $900bn over the same period. Avalloy
CEO Gerry Robbertze says the company, in which Rolls Royce owns a 15% stake,
stands to benefit from the projected growth. Robbertze says SA's only superalloy
facility, in Pelindaba, west of Pretoria, will produce more than 3000 tons of
superalloys a year, with potential for further expansion. The plant will use
locally mined nickel, cobalt and chrome in the production of its alloys. Its
major suppliers include Anglo Platinum and Impala Platinum. "We are
confident that we can expand our role in this dynamic market by offering our
customers the highest quality southern African products." Robbertze says
Avalloy has already exported its products to markets in England, Italy and
Ireland. Some of its products are used locally, mostly by the automotive
industry. Avalloy is also in negotiations with the Eskom-led nuclear project,
the pebble bed modular reactor, about producing alloys for its reactor vessels.
The gas propelling the turbines of the reactor needs to reach temperatures of
900°C to start generating power. Rolls Royce says its investment in Avalloy
forms part of its commitment to SA's industrial participation program. The
program, led by the trade and industry department, aims to stimulate the economy
and generate employment, economic empowerment, and technology and skills
transfer through foreign direct investments. Rolls-Royce director of
international affairs Ralph Murphy says the production of superalloys in SA also
represents a major step forward for the country's mineral beneficiation drive.
Besides Rolls-Royce, Avalloy's other shareholders are Cape Town-based financial
services firm Abante Group (55%) and Homestead 1 Investment Trust (30%), a
holding trust consisting of Avalloy management, legal advisers and financial
management experts.
Chinese Threat 'Is Exaggerated'
The recent SA Automotive Conference showed that SA is in a strong position to
maintain its global role in manufacturing vehicles and components TOP
international automotive specialist, Prof Garel Rhys, director of the Centre for
Automotive Research at the University of Wales, came to SA recently to give an
overview of the shifting patterns of the world's vehicle manufacturing industry.
Speaking at this year's South African Automotive Conference, Rhys said:
"Lean production means maximum efficiency at any given scale, this means
minimise inputs and maximise outputs. Buying more materials, components,
services but reduce in-house production," says Rhys. Looking at labour
costs it was clearly illustrated that out of nine European countries taking part
in a 2004 analysis, Germany was paying E34 per person, whereas in Japan and
China the figure was less than E0.7 "The Japanese have an advantage over
the western market because of product cost and quality, short model cycles and
product variety," said Rhys. "Europeans have the advantage of
engineering excellence, brand values and long model lines." Statistics
released regarding the number of people per vehicle per country in 2006 showed
China's figure was about 170.2 people per vehicle; India's figure was about
206.2 people, and countries such as the UK, the US and Australia had less than
two per vehicle. According to research shared at the conference, technical
excellence is becoming a global phenomenon and is no longer enough in the
competitive market. Furthermore, indications showed that brand products have to
be more acceptable to the consumer. Global market trends reveal that the
"new" customer is becoming more knowledgeable about brands, resulting
in diminished brand loyalty. It was said that China has a total number of 123
motor vehicle producers. Out of that, two companies make about 500,000 vehicles
a year; eight companies make about 100,000 and 95 make about 10,000. Only 70
companies make less than 1,000 vehicles a year. "The conclusion of the
Chinese industry is that it is too fragmented with very uneconomic and
inefficient operations," says Rhys. "Though China is a threat, it
isn't as much of a threat as pessimists portray it." The research also
showed that changes are imminent, leaving greater opportunity for the Japanese
and Korean manufacturers, as they are in a position to identify global market
opportunities quicker and easier. Prof Rhys said that the recipe for success was
not only to focus on competition, even though it was important, but also to
build long-standing alliances in addition to exploiting complementary strengths.
"Companies should learn from one another by developing new management
disciplines such as managing multiple relationships and learning from
alliances," says Rhys. "The industry players should recognise that
extra benefits can be formed from strategic alliances. Rhys said that South
African manufacturers would have to increase their domestic and export sales.
"Component manufacturers should supply local makers to a great extent with
maximum penetration to the aftermarket. Increase unit volume is the key to
decrease unit cost, which benefits competitiveness," he said.
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BANKING AND FINANCE
Investec in R3.9bn Bid to Boost UK Business
Specialist banking group Investec would acquire struggling UK subprime mortgage
lender Kensington for £283m (R3.96bn) to expand its mortgage-backed securities
business in that market, CEO Stephen Koseff said May 30. Koseff said the offer
meant each Kensington shareholder would get 0.7 Investec shares and a special
dividend of 26p from Kensington, equivalent to 519.5p a share based on
Investec's share price in London on May 29. He said the offer would be
implemented through a scheme of arrangement. If it was approved, Kensington
would become part of Investec's capital markets division. He said the new shares
for Kensington shareholders would not qualify for the final dividend of 13p per
share that Investec proposed for the year to March. Koseff said the deal would
broaden Investec's revenue base and give Kensington the funds and access to
capital markets necessary for it to grow. The acquisition would be earnings
enhancing before synergies in the first full year after completion. Kensington
did not need a working capital injection in the short term, but it did in the
long-term to grow, he said. "The proposed acquisition of Kensington is in
line with our stated objectives, and reinforces our successful Capital Markets
business. We are confident that under our ownership, the Kensington franchise
will be reinvigorated and that our combined businesses will be well placed to
benefit from the growth of the non-standard mortgage market," Koseff said.
Kensington chairman Peter Birch said Investec would bring its
"entrepreneurial culture, robust risk management discipline and competitive
funding to boost Kensington's acceleration into new products, channels and
markets". Kensington said in a trading update yesterday that the first five
months to April had been challenging. It expected 2007 revenue to be
significantly below 2006's. Koseff said the deal would give Kensington access to
funds it needed to grow. It had struggled to raise money at the same cost as its
peers. Kensington issued a profit warning in March, and said CE John Maltby was
quitting. Increased competition in the subprime mortgage market would hit
profits in the coming years. Subprime lenders provide mortgages for people with
lower credit ratings and unusual employment situations, and tend to charge
higher interest. Earlier this month, problems at US subprime lender New Century
contributed to falls on global markets, the company said. Kensington said in
March that 9.8% of its borrowers were more than 90 days behind with payments at
the end of February against 9.1% in November. Koseff said Investec undertook an
extensive due diligence study of Kensington's mortgage book and operations, and
was confident of its prospects under Investec.
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HIV/AIDS
Businesses Must Seek Innovative New Ways to Fight HIV/Aids
The role of business in fighting HIV/Aids has been brought to the forefront of
global attention in the last few months with the release of the World Economic
Forum's (WEF) Global Review of Business Response to HIV/Aids 2005 - 2006. The
report, released by the WEF's Global Health Initiative in December, shows that
concern over the growing threat of HIV/Aids is rising in the global business
community. Nearly half (46%) of the business leaders surveyed in the report say
they expect HIV/Aids to affect their operations over the next five years. This
is an increase of 9 percentage points in 12 months since the last WEF report.
The challenge now facing companies throughout the world, the report indicated,
is to convert this concern into programmes that are strong enough to control the
impact of HIV/Aids on their business. "Business is becoming increasingly
aware of the positive impact it can make in tackling HIV/Aids, but the devil is
in the detail," said Francesca Boldrini, director of the WEF Global Health
Initiative. "To successfully scale up efforts against the HIV/Aids
pandemic, firms need to develop increasingly robust workplace programmes."
The report polls the views of almost 11,000 business leaders in 117 countries
and shows that: Concern is rising about the expected impact of HIV/Aids on
firms' operations over the next five years (46% compared to 37% last year); very
few firms have conducted a quantitative HIV/Aids risk assessment (9%); the
majority of firms where national HIV prevalence exceeds 1 in 5 have formal
HIV/Aids policies (58%); where prevalence drops below 1 in 5, very few firms
have a policy (20%) and these are likely to be informal; and policies addressing
the issues of discrimination in promotion, pay or benefits based on HIV status
are rare (18%).
That South African businesses are expecting the impact of HIV/Aids to hit hard
is left in no doubt in the study. In response to the question, "How serious
do you consider the future impact of HIV/Aids on your company in the next five
years?" 76% said they expected a serious impact, and 94% said it would make
some impact. Some 73% of companies reported that they already have a written
HIV/Aids policy, 91% said they have a prevention programme that provides
information about the risks of infection, 72% said they provide voluntary,
confidential, anonymous HIV testing, 72% said they provide free condoms, and 41%
reported they supply anti-retrovirals. In response to the question, "To
what extent do you believe your programmes will be sufficient to effectively
manage the impact of HIV/Aids on your business in the next five years?",
only 45% were "strongly confident" and a marginally higher 67% were
"confident". These low expectations are indicative that much work
remains to be done to ensure that the contribution made by business to fight
HIV/Aids is effective and delivers results. There remain great challenges in
dealing with HIV/ Aids in the workplace. Low attendance in HIV/Aids programmes
in particular is a major concern. This low participation is largely as a result
of stigma and an unsupportive environment. People fear what will be said if they
access these services, and as a result do not use them. There are a variety of
strategies to overcome these challenges, and a good starting point would be to
look closely at those programmes that have yielded positive results. Two
examples of businesses achieving this are Daimler Chrysler and Woolworths. Both
have made HIV/Aids a high priority and have implemented comprehensive treatment,
care and support services, and work continuously to create a non-discriminatory
environment in which voluntary counselling and HIV testing is promoted. In
addition, business cannot ignore the communities they operate in - and there is
room for programmes that support workers as well as the extended family in some
way. Daimler Chrysler, for example, has a model that has extensive community
involvement in partnership with families, health-care professionals, traditional
healers, government and non-governmental organisations. Business is also
challenged to make their messages and campaigns engaging and fresh. Having a
policy in place is one thing but making it a living policy in practice is
something that requires innovation. An example of innovation in delivering a
message is a recent Young Designers Emporium (YDE) "Let's Learn Safe
Sex" campaign in which YDE shop windows and in-store posters featured real,
funky scenarios where characters Dick and Jane only play it if they have a
condom. "Aids has never been an easy subject to communicate to an audience.
We were looking for an educational idea, but one which wouldn't come across as
patronising. Since our message to wear a condom is simple in nature, it made
sense to present it in a rudimentary way," said Sam Coleman, creative
director of YDE. UCT partnered YDE for this campaign as there was a synergy in
the audience both were addressing. The concerns around the effectiveness of
programs is one that business can not tackle alone. It is vital that South
Africa's universities and business schools in particular, become active agents
in workplace efforts, especially in providing an understanding of the latest
theories of workplace health promotion and behaviour change, medical
information, as well as labour law and policy updates. Businesses, however, need
to take ownership. There are a number of areas in which HIV/Aids affects
business, but essentially it impacts profitability and productivity (with an
increase in absenteeism, costs and staff turnover). This in turn has an impact
on the economic growth and stability of the country. For South Africa,
increasingly robust workplace strategies are therefore a critical priority.
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INTERNATIONAL ECONOMIC RELATIONS
India Seeks to Open Opportunities for South African Companies
A high-ranking Indian official says his government is looking at a mutually
rewarding, "sincere partnership" with South Africa and identified
business opportunities for South African companies on the sub-continent.
Secretary of State for External Affairs, Anand Sharma May 24 told Indian and
South African businesspeople in Cape Town, of India's large agricultural economy
and the lack of expertise there for processing food into products such as fruit
juice. This was just one example of an industry where South Africa is a world
leader, he said. Mr Sharma explained that while India probably produced more
fruit and vegetables than any other country, only 3 percent of this produce was
exported and as much as 40 percent of it was lost, post-harvest. Other areas
where the country of 1.1 billion people was experiencing great demand was in the
hospitality sector, which faced a shortage of hotel rooms - an area in which
South African firms could supply the demand. Mr Sharma, a seasoned
anti-apartheid activist during his younger days in India and who is married to a
South African, was in the country for a few days with a tightly packed schedule
that included talks with President Thabo Mbeki and several Cabinet ministers. In
Cape Town, he was speaking to a conference staged by the Confederation of Indian
Industry, whose members, such as the Tata group, have been making inroads into
the South African market across various sectors. This includes the area of
Information and Communications Technology (ICT), where India has developed a
solid international reputation as a leading and competitively priced force,
especially in software and ICT infrastructure. President Mbeki has on more than
one occasion pointed to India as a key source of assistance to South Africa in
the area of ICT, and large groups of South Africans are already being trained in
India in a number of fields including ICT. ICT trade is moving in both
directions. South African Deputy Minister of Communications Radhakrishna
Padayachie cited inroads being made into the Indian market by South African firm
Sahara Computers, while South African food retailer Shoprite is another firm
with a foothold on the Indian sub-continent. Already, trade between South Africa
and India - which began opening up its economy to foreign investors in the 1980s
and has boomed partially as a result of this liberalisation - is increasing at a
rate of 30 percent a year, Mr Sharma said. Speaking to BuaNews Thursday, Mr
Sharma said trade levels between the two countries were touching US$5.6 billion
with the balance of trade favouring South Africa by around US$1 billion. This
was excluding imports of gold from South Africa, which are high considering that
India is a major manufacturer - and exporter - of gold jewellery. The countries
are also partners in the trilateral IBSA forum, where they are joined by Brazil.
India is assisting South Africa in human resource development, capacity building
and skills training, Mr Sharma said earlier, adding that both countries were
looking for this cooperation to increase in a solid and trusted partnership.
"There is a political understanding [between the two countries] at the
highest level," Mr Sharma told the group of business leaders working in
South Africa, adding that the ground was prepared for more extensive business
links and that these opportunities should be seized. Both countries must
"move fast", he said, to catch up to the levels of economic
development such as that of their former colonial power, Britain. Ruchira Kamboj,
the Indian Consul-General in Cape Town, told the gathering of business leaders
that a recent report by international investment analysts Goldman Sachs
suggested that the economies of the world's developing countries could jointly
be greater than those of the leading G8 industrialised powers in four decades.
Mr Sharma said the two governments wanted to see bilateral trade trebling by
2010, or at least reaching US$10 billion, as called for by Indian Prime Minister
Manmohan Singh when he visited South Africa last October, and by Deputy
President Phumzile Mlambo-Ngcuka when she visited India prior to Mr Singh's
visit. Rajiv Kumar Bhatia, the Indian High Commissioner, said that between six
and eight business promotional events were being organised by the Indian High
Commission between March and November this year.
President Attends South Africa-Vietnam Business Forum
President Thabo Mbeki May 25 took part in the South Africa-Vietnam Business
Forum in Ho Chi Minh City, with a view to consolidating economic and trade
relations between the two nations. This was the last day of Mr Mbeki's historic
two day, state visit to Vietnam, which was the first ever such visit by a South
African head of state. President Mbeki was supported on the visit by Ministers
of Foreign Affairs Nkosazana Dlamini Zuma; Buyelwa Sonjica of Minerals and
Energy; Education's Naledi Pandor and Deputy Ministers of Defence Mluleki George
and Rob Davies of Trade and Industry. Also participating in the SA-Vietnam
Business Forum were 14 South African businesses and 150 Vietnamese companies,
within the industries of information technology, minerals and energy, financial
services, and travel and tourism. President Mbeki also held discussions with the
Chairman of the People's Committee of Ho Chi Minh City, Le Hoang Quan at the
Reunification Palace in Ho Chi Minh City. President Mbeki also paid a visit to
the War Remnants Museum. Earlier in the day, he had interacted with academics
and students from the Institute of International Relations during a lecture in
Hanoi. President Mbeki and Vietnamese counterpart Minh Triet, held bilateral
discussions May 24 on issues including - The status of bilateral political and
economic relations between both countries; The support of Vietnam for AsgiSA and
JIPSA in terms of skills development and the sharing of best practice; A
briefing on developments in Africa with regard to post-conflict reconstruction
in the Democratic Republic of Congo and Burundi, Sudan, Darfur, Somalia and Cote
d' Ivoire; Developments in the Middle East including the Iranian nuclear
conflict, Iraq and the Middle East Peace process; A briefing on developments in
Asia including Myanmar, East Timor and North Korea; The consolidation of
South-South co-operation through and within such fora as the NAM, the New Asia
Africa Strategic Partnership (NAASP) and other multilateral organisations; and
Global challenges including South Africa's mandate as the Non-Permanent Member
of the United Nations Security Council (UNSC). Trade between South Africa and
Vietnam totalled nearly a R1 billion in 2006. South African exports to Vietnam
totalled over R314 million, down from over R559 million in 2004 while imports
from Vietnam increased from over R225 million to more than R638 million.
Vietnam's exports to South Africa are mainly footwear and vegetable products,
mineral products, textiles and textile products, machinery and mechanical
appliances. South Africa's exports to Vietnam include base metals and articles
of base metals, wood and articles of wood, machinery and mechanical appliances,
prepared foodstuffs, products of chemical and allied industries, live animals
and animal products and wood pulp.
More Needs to Be Done to Promote Trade Between South Africa and Ghana
Although South Africa's bilateral political relations with Ghana were good, more
needed to be done towards promoting trade between the two countries. "We
need to expand our two-way trade and take measures to attract the trade
imbalances between the two countries and encourage the private sectors to invest
more in the economies of the two countries," said Foreign Affairs Minister
Nkosazana Dlamini Zuma May 11. She was speaking at the signing ceremony of the
South Africa-Ghana Permanent Joint Commission for Cooperation (JCC). The
establishment of the JCC takes place against the background of the conclusion of
the African Union Foreign Ministers Retreat and Executive Council held in
Durban, which discussed proposals for the political and economic integration of
the continent. The purpose of the JCC is to look at amongst other things the
status of bilateral political and economic relations between the two countries
and issues of political and economic integration. It also deals with the
cooperation between South Africa and Ghana in the UN Security Council.
"Additional areas of cooperation would include mining and energy,
agriculture, tourism, justice, defence, arts and culture, and science and
technology," added the minister. She said there was a lot of untapped
potential in the tourism sector in both countries. Minister Dlamini Zuma further
praised Ghana for its efforts in contributing to the development of the African
continent since it attained independence 50 years ago. "Ghana's freedom set
in motion irreversible movement that eventually led to the liberation of the
oppressed African and liberated us from apartheid. "Today it plays an
important role in the African continent and in global affairs a staunch
supporter of the AU and its institutions," she said. Ghana Foreign Affairs
Minister Nana Addo Dakwa Akufo-Addo said the JCC was evidence of both
governments' commitment to improve relations between themselves for the benefit
of its citizens. "The number of Ghana's company's operating in South Africa
as well as South Africa's economic interest in Ghana has increased
substantially, however the low level of formal trading activities of Ghana's
companies in South Africa has led to a trading imbalance favouring South
Africa," he said. Ghana represents the major export market for South
African goods in the region after Nigeria and while total trade volumes are
still relatively low in global terms, it is expected that these figures will
continue to grow. Trade between the two countries in recent years has grown
significantly. In 2003, South African exports to Ghana jumped to R1.61 billion,
up from R979 million from the previous year. In the same year South African
imports from Ghana stood at R52 million. South African exports in 2006 was over
R1 billion. By 2006 South Africa was Ghana's 14th largest foreign direct
investor.
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LAND REFORM
93 Percent of Land Claims Settled By March
The number of land claims settled by the Commission on Land Restitution
increased from 71,645 to 74,417 by the end of the financial year which ended in
March 2007. Delivering her budget speech in Parliament May 18, Land Affairs
Minister Lulu Xingwana said this meant that government had settled 93 percent of
the total 79,696 claims lodged. "We still have to settle an outstanding
5,279 rural claims. The remainder of the provinces has less than 200 each.
"Gauteng has only ten claims outstanding as most of their claims were urban
claims, all of which have been settled," the minister said. However, Ms
Xingwana said the challenge for government was to meet the targets pertaining to
land restitution by the end of 2008. Plans to speedily settle the outstanding
rural claims include shortening the project cycle; delegations to commissioners
for the finalisation of claims and eliminating protracted negotiations by
implementing expropriation. The minister said other strategies included
consulting with traditional authorities, working closely with government
departments and municipalities. She noted, however, that they would not be able
to settle other claims before 2008. Ms Xingwana said the reasons for this were
that the Land Claims Court adjudication process took a long time and that there
were conflicts among traditional leaders on issues such as jurisdiction, land
ownership and boundary disputes between communities. "There are disputes
with current landowners on issues such as land prices or validity of the claim;
and there are claimants that cannot be race. "We estimate that these
complex cases constitute about one third of the outstanding rural land
claims," she said. In 2006 there was outstanding progress in terms of
settlement of claims which marked a significant milestone in the work of the
commission, the minister said. The biggest Land Claim settled in South Africa
to-date is the Tenbosch properties with a total value of R1.1 billion involving
32 387 hectares of land. Most of the land is currently used for commercial
farming. Another significant land claim is the Simangaliso, formerly known as St
Lucia Wetland Park, a world heritage site. The settlement comprises of seven
land restitution claims by Maphelane, False Bay, Makhasa, Umnqobokazi, Jobe,
Myeni and Zikhali communities of 1,825 families on the 22,908 ha of land. Ms
Xingwana said government has committed R89 million towards the finalisation of
this claim. "These communities will now have an opportunity to utilise the
land for grazing, agriculture and participation in the economic activities like
tourism concessions development. "The commission has always been committed
to negotiated settlements. However, in some instances where negotiations drag on
indefinitely, then the strategy to shorten the process is implementation of
expropriation after a period of six months," she said.
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MINERALS AND METALS
China Eyes Regional Uranium
Interest in southern Africa's uranium deposits has quickened, with China
reported to be taking an interest in developing a South African and Namibian
uranium mining company, while resources giant Rio Tinto said it was looking at
ways to expand its Rossing uranium mine. According to a Rio Tinto presentation
on its energy strategy May 22, SA is the world's 10th-largest uranium supplier,
and Namibia the sixth largest. The biggest uranium producer is Cameco, followed
by Rio Tinto. Rio said secondary supplies of uranium -- mainly scrap from
nuclear disarmament -- were expected to decrease, while supply from mines would
increase, but supply was expected to be tight until 2012 or even beyond. The
spot price of uranium hit a new high of $120/pound during May. Shares in Uramin,
a uranium explorer headquartered in Johannesburg and listed on London's AIM,
jumped sharply May 21 on a report in the Wall Street Journal that the China
National Nuclear Corporation would hold talks with the company on closer
commercial ties. It was too early to say whether this would lead to an offer to
take over the company, a spokesman for the corporation said. China is seeking to
secure supplies of uranium as it plans to generate 4% of power from nuclear
power stations by 2020 compared with 2,3% now. This would not be the first
Chinese investment in SA. Chinese tycoon Larry Yung has taken a 1,13% stake in
Anglo American; Samancor Chrome and Sinosteel have a joint venture in a
ferrochrome mine and smelter; and Zijin Mining has bought a 29,9% stake in
platinum miner Ridge. In SA, Uramin is explorating at Ryst Kuil in the Karoo and
a feasibility study is under way at Trekkopje in west-central Namibia. The
company expects to produce its first uranium from Trekkopje late next year. It
also has two other key uranium projects elsewhere in Africa. Rio Tinto said it
was investigating further expansion potential at Rossing.
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NEWS
Slowdown Risk for African Economic Growth
A top-level United Nations (UN) report on the world economy released May 28 has
heaped glowing praise on Africa, saying it is the only region in the world where
growth is quickening rather than slowing. However, the UN report, World Economic
Situation and Prospects 2007, produced by the UN's department of economic and
social affairs, said growth in Africa overall still lagged behind other
developing countries. It said the continent remained vulnerable to a global
slowdown which would hit commodity prices, the region's economic mainstay. And
several African countries with an annual growth rate of less than 3% were very
unlikely to meet the UN's Millennium Development Goals of halving poverty by
2015, said the report. "Africa remains on the march to economic
prosperity," said the updated midyear report. "The economies of the
continent are expected to grow by 6% in 2007, at a slightly stronger pace than
in 2006, when an average growth of 5.6% was posted. Strong growth is expected to
continue into 2008." For once, sub-Saharan Africa was set to outperform the
rest of the continent, with growth quickening to 7.1% this year from 5.9% last
year . This compared with a global growth rate of 3.4% -- down from 4% last year
-- while developing economies were expected to grow 6.4% against 6.9% in 2006,
said the UN. Standard Chartered's London- based Africa economist Razia Khan said
the estimates were not surprising, given that African growth had traditionally
lagged behind that of other emerging markets. "Since 2001 the continent has
expanded faster than elsewhere ... but from a development perspective it still
has a long way to go, suggesting it should grow even faster." Khan believes
sub-Saharan economies will grow by an average 6%-6,5% this year, before slowing
a bit next year, reflecting reduced demand for commodities and high-risk assets.
"African economies are still very vulnerable to any slowdown of the global
economy because they are commodities-based ... but it would take quite a
prolonged downturn and sustai! ned decline in commodity prices for major impact
to be felt." The UN said political and social tension continued to restrain
the economies of a number of the poorest African countries, while strong growth
rates elsewhere were not being accompanied by a similar pace of job creation.
"SA is a case in point, where an impressive growth performance in recent
years has not translated into ... visible reductions in unemployment." SA's
economy has created an estimated 1.5-million new jobs over the past three years,
but the official jobless rate stands at just more than 25%, one of the highest
in the world. The UN said SA was not an isolated case, as most other developing
countries were battling to create jobs at the same pace as their economies were
expanding. Asian powerhouse China grew at an average annual rate of about 10%,
but had only managed to achieve employment growth of 1%, it said. Africa's
recent growth record signalled a major turnaround from previous decades of
economic stagnation, but risks to the region were mainly negative, said the UN
report. "Growth is highly concentrated in a narrow range of activities,
making many African economies extremely vulnerable to exogenous factors."
United Continent is Better Placed for Economic Growth
Delegates at a two-day African Renaissance Summit in Durban, have called for a
united Africa in order for the continent to attain growth and economic
liberation. They said peace, security, political stability and democratic
governance are key and necessary for the continent's development. "Africa
is on the move and democracy is gaining ground. Peace is important for the
re-birth of Africa. We must be united in order to attain growth and economic
emancipation," said the delegates at the summit Thursday. The summit is
part of the 9th annual African Renaissance Festival being held in at the Inkosi
Albert Luthuli Convention Centre in Durban from 22 to 26 May. Held under the
theme "Unpacking the African Century towards an African Identity
characterised by peace, democracy and development through partnerships" the
summit seeks to unpack the African identity in relation to globalisation and the
African Diaspora. KwaZulu-Natal Premier and Chairperson of the provincial
African Renaissance Trust, Sibusiso Ndebele said it was important for Africa to
unite politically and achieve economic growth. "We must work through the
African Union (AU) and structures such as NEPAD (New Partnership for Africa's
Development), the Pan African Parliament and the Southern African Development
Community to achieve the dream of an Africa that is united politically and
economically," he said. Preparations were underway for the so-called Great
Debate at the AU Summit in Accra, Ghana in June and July, were Heads of State
will discuss the pressing issue of integrating Africa, said Premier Ndebele.
"The African Renaissance demands that development paradigms be
fundamentally interwoven with African conceptions of reality. It must have
meaning to all the masses of our people, from Cape to Cairo, from Morocco to
Madagascar and the Diaspora. "It presents us an opportunity to focus on
growing the economies of Africans all over the world, enjoins us to improve the
quality of life for all our people at all levels economically, socially and
politic! ally," he added. "Let us deploy the latest science and
technology, medical advances, marine and aeronautical engineering, high end
agricultural production, arts and culture in finding long lasting solutions to
all our peoples needs." As part of the African Renaissance Festival, an
Africa Day Celebration will be held at the Durban City Hall on Friday.
Forty-four years ago, leaders of the African continent decided to establish the
Organisation of African Unity (OAU). Driven by a common aspiration towards de-colonisation,
liberation, equality, justice and progress, this inter-African organisation of
independent states was founded. The commemoration of Africa Day highlights South
Africa's contributing role and participation in the continent's agenda, from the
birth of the AU out of the OAU, NEPAD, the African Peer Review Mechanism,
Pan-African Parliament and the launch of the Peace and Security Council in Addis
Ababa, Ethiopia, on 25 May. Africa Day exemplifies the achievements made by
various leaders on the continent with regard to the founding of the new AU, in
establishing NEPAD and other continental developments, to address the challenges
and ensure that the 21st century truly becomes an African one.
Biofuel Making Staple Food More Expensive
The rush to produce biofuels, driven by the threat of global warming and higher
oil prices, is exerting price pressure on staple foods in South Africa,
according to a report by the Regional Hunger and Vulnerability Programme (RHVP),
a non-governmental organisation that highlights food security concerns. The
report, 'Biofuel production and the threat to South Africa's food security',
said the development of alternatives to fossil fuels, of which South Africa is
set to become one of the continent's leaders, will result "in a highly
unequal contest between the poor having to compete for the basics on which they
live, and the rich who want to burn it to run their cars." South Africa was
the first Southern African Development Community member to respond to the
organisation's call to make the region more self reliant in energy production,
and Cabinet released a draft strategy last year proposing the blending of
biofuel with their fossil fuel equivalents and the integration of the production
of the alternative fuels' into its economic strategy to achieve a six percent
growth rate. The economic plan, the Accelerated Shared Growth Initiative (AsgiSA),
intends to merge the formal and informal economies and envisages the biofuels
sector would create 55,000 new jobs in the rural areas. Although the
government's economic strategy does not specifically focus on the crops to be
used in biofuel production, it "mentions sugar and maize as two energy
crops that could be used to make ethanol," the RHVP report said, because of
recent surplus production of the crops. A recent report by the National
Agricultural Marketing Council said although food price inflation had dropped
from 9.45 percent to 7.88 percent in the year ending December 2006, staple food
prices, such as maize and sugar, rose 28 percent and 12.6 percent respectively.
This was a result, according to the RHVP report, of the "higher (energy)
cost of producing it and because the surpluses which have had the effect of
depressing the world price of grain have been r! emoved from the market to be
converted to motor fuel." The emphasis on biofuels production, with plans
afoot to build eight maize-to-ethanol production plants in the central province
of the Free State, has coincided with the worst drought in 40 years. Initial
predictions by analysts are that the 2007 maize harvest will be seven million
tonnes, one million tonnes below South Africa's required annual consumption
needs. South African maize prices in recent years have wallowed around R600
(US$85) a tonne, but in March this year its price had risen to R2,000 (US$282) a
tonne, still R500 (US$70) less than the world price of R2,500 (US$352), but it
is expected that the local price will achieve parity with international prices
soon, the report said. SA needs to look for biofuels technologies that can be
grown on marginal land, such as rough grass, perhaps Jatropha Economist and
advisor to the British government, Nicholas Stern said on a recent visit to
South Africa that "Biofuels if narrowed down to sugar and maize (in South
Africa) will create problems, there is an opportunity cost to using good arable
to make biofuels ... SA needs to look for biofuels technologies that can be
grown on marginal land, such as rough grasslands, perhaps Jatropha."
Jatropha is a fast growing perennial plant that can grow in poor soil in
extremely arid conditions without any need for irrigation and begins producing
oil that can be used for biofuels in its second year of growth. It also absorbs
large amounts of carbon dioxide from the atmosphere and can therefore earn
carbon credits. Richard Lee, the World Food Programme regional spokesman, said
the combination of increasing demand for food from increasingly wealthy Asian
countries and the demand for biofuel, meant the world was "moving into a
period without (crop) surplus." The maize price was rising and would mean
that it "will cost us and the donors more to put food on peoples
plates," Lee said, but it was "still a little bit early to see what
the effects will be." The RHVP report warned that the production of
biofuels in South Africa "has the potential to be either a bane or a
blessing to the poor," and made some recommendations that would ensure it
was beneficial for South Africa. Firstly it proposed tax breaks should not be
given to ethanol produced from maize, as "almost as much fossil energy is
used to grow the crops as is delivered by the biofuels themselves." To
subsidise biofuels from maize would strengthen "the position of the richer
person who wishes to burn food in his or her vehicle against the poorer person
who wants to eat it," and if subsidies were to be provided it should be for
crops such as Jatropha. The report also recommended that "every effort
should be made to ensure that the bulk of South Africa's biofuel production is
carried out by the small farming sector," and cited Honduras as an example,
where "small farmers are being enabled to plant Jatropha by being given
loans which can be repaid by supplying a certain weight of the trees
fruit."
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PETROCHEMICALS
Qatar Hiccup Puts Sasol Investors On Their Guard
In Sasol's worst single day since the national treasury mooted the prospect of a
windfall tax a year ago, the company's shares plummeted 5,9% on the JSE May 22,
wiping R9.5bn off its total market value. The inspiration for the bloodletting
was a carefully worded warning from Sasol that suggested all was not quite what
it should have been in its landmark gas-to-liquids plant in Qatar. This came
after Sasol warned that its expected output from its Oryx gas-to-liquids plant
in Qatar was "lower than expected" during the first quarter. This is
another disappointment in Qatar, following the original delays in getting
production going at the plant last year. Despite the roaring oil price -- which
touched $70 a barrel May 21 -- Sasol's shares fell from R276.10 to R261 on the
JSE. This means that the recent upward march of Sasol's share price, from about
R220 in March to the R276 level, has been halted, and it suggests a note of
caution for investors. As you would expect, Sasol sought to limit the damage,
explaining that these were run-of-the-mill "start-up operational
challenges, most of these limited to individual pieces of equipment". But
Sasol said it was looking to "eliminate" or remedy the biggest problem
"over the coming months" -- and the question is, how much larger are
these problems than initially expected? For some time, cynics have been
questioning whether the Sasol story of gas-to-liquids and coal-to-liquid has
been over-hyped, and whether it is all a lot more difficult than initially
thought. For the cynics, yesterday's announcement will come as some sort of
vindication, and keep alive the questions over the sustainability of Sasol's
long-term plans. Whether this hiccup is any indicator of future trends remains
to be seen, but it is notable that while not a unanimous recommendation, Sasol
is still rated as a "buy" from most of the analysts who cover the
stock. But what is certain is that after this warning, investors will have their
eyes keenly peeled for any further signs that the Sasol story isn't quite as
sweet as they had initially believed.
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RETAIL
Woolworths R2.3bn Staff Equity Plan
Woolworths Holdings said May 21 it could distribute R2.3bn to employees if its
share price continued to grow at 20% a year, as it had for the past eight years.
This comes after the group announced a broad-based black economic empowerment
transaction that will benefit Woolworths' 17000 employees, of whom 90% are black
and 85% are women. "I am very pleased to announce this broad-based black
empowerment transaction, which will give all our employees an equity interest in
the company," said CEO Simon Susman. The board undertook an extensive
process, holding workshops with employees and discussions with stakeholders. The
company believes that the black economic empowerment transaction will align the
objectives of ordinary shareholders with those of eligible Woolworths employees
and stimulate company growth. "Bringing all of them (employees) into the
financial benefits of this growth is an important step," said Susman.
Woolworths Holdings will create a new-class preference share with a par value of
0.15c each called "Esos shares" and will issue up to a maximum of 89.4
million shares to the Woolworths' Employee Share Ownership (Esos) Trust Deed.
The trust will own the shares for eight years after which they will be
distributed to eligible employees. Woolworths pays dividends twice a year. At
the end of eight years the Esos shares will be converted into Woolworths
ordinary shares, on a one-for-one basis, which the beneficiaries will be
entitled to hold or realise, subject to the Woolworths share price achieving a
10% annual compound rate of growth over the period. Only employees working for
the group as at May 1 this year, excluding white managers and white executives,
and who are still employed at the initial vesting date, will be eligible.
Beneficiaries will be entitled to shares at the end of the scheme, subject to
the beneficiary remaining an employee for a minimum of three years and one day
after the date on which the right to the Esos shares vests in the beneficiary.
Shares forfeited by beneficiaries who leave Woolworths after the service period
but before the end of the scheme will be applied into an education trust created
by Woolworths Holdings for employees and their dependants. The group has
estimated the cost of the transaction to the company at about R292m, which
represents about 1,40% of its market capitalisation. Participants could expect a
cumulative dividend payout of about R50,000 over the eight years and will
receive a capital payout of R200,000 if they are still employed and if a 20%
growth rate is maintained.
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TELECOMMUNICATIONS
Minister Adds Four Years to Telkom's Monopoly
Communications Minister Ivy Matsepe-Casaburri has effectively handed Telkom
another four years of monopoly in the landline telephony market, drawing
criticism from analysts who say any further delays will hamper the government's
drive to reduce the costs of doing business in SA. Matsepe-Casaburri told
Parliament May 24 she was giving Telkom until November 1 2011 to un bundle the
so-called "local loop", which links the national telecommunications
network to individual homes and businesses. Although the minister said "the
unbundling process in SA should be urgently implemented," the reality is
that Telkom will have at least another four-and-a-half years to further entrench
its market dominance. Telkom, 38%-owned by the government, has long resisted
unbundling the local loop, arguing it was part of its infrastructure. Critics
have complained about the lack of movement on unbundling and the resulting slow
rate of rollout of fixed line telephone lines and broadband DSL accessibility.
Matsepe-Casaburri is due to receive today the report and recommendations of the
local loop unbundling committee, which proposes a way forward for the unbundling
process. Analysts said the four-year completion target would give Telkom
sufficient time to "establish its client base", limiting the potential
for rival, second network operator Neotel, to take advantage of the unbundling.
"It's positive for Telkom. It prevents Neotel from entering the retail area
aggressively," said an analyst who did not want to be named. Neotel has
said it would start rolling out in residential areas regardless of local loop
unbundling, through wireless technology. However, the analyst said the decision
would still give Telkom plenty of time to wrap up its customer base in the
market. Irnest Kaplan, MD of Kaplan Equity Analysts, said it was mildly positive
for consumers that the decision has finally been announced. Telkom would have
been expecting the move and from Neotel's perspective it depended on what plans
it had in terms of local loop. "Unbundling the local loop, is key to
competition," said another analyst. "It will just provide Telkom with
more monopolistic advantages," he said. Together with the creation of
state-owned broadband infrastructure company Infraco, which would provide
low-cost, long-distance telecommunications transmission between cities, the
unbundling of the local loop will contribute significantly to a lowering of
telecommunications costs. But as long as Telkom has a monopoly of the "last
mile" it will not be possible to bring down the costs of
telecommunications. Dave Gayle, director of business development at Storm, an
internet service provider, said that the local loop could previously not be
unbundled before other regulations opening up the sphere had been enacted.
However, with other available or developing regulations being looked at by the
regulator, local loop unbundling was becoming less pertinent for competition.
Neotel would be piggybacking on Telkom's network while it rolled out its own
network and would have the option of leasing the local loop at commercial rates
from Telkom. A Neotel spokesman said the announcement did not affect its
strategy as it continued to build its infrastructure network as planned.
"However, the quicker local loop unbundling happens, the better for all
South Africans." It has been speculated that unbundling the local loop may
see that aspect of the network being housed in a separate entity and made
available to other companies. The communications department said: "The
unbundling of the local loop has been identified as crucial towards increasing
innovation, increasing the quality and quantity of services, lowering the prices
paid by the customers and increasing the number of available business
opportunities". Matsepe-Casaburri said she recognised an urgent need for
all operators to be licensed to have access to the local loop.
Telkom Charges are Third Highest in the World
Fixed-line costs in SA are the third highest in the world despite substantial
tariff reductions by Telkom last year, says a study released May 16. Research by
US-based cost-management consulting firm NUS Consulting Group found that "Telkom's
charges continue to disadvantage South African organisations in their efforts to
compete in the world's major markets". Telkom's tariffs remained high
despite its 10% reduction for long-distance national calls and 30% discount on
calls to the US. Stephan Dolk, NUS director in SA, said Telkom should be
commended for the price cuts made despite the continuing lack of effective
competition. "However, their prices simply do not compete with the tariffs
charged by telecommunications operators in many other countries, where charges
for many call categories have dropped sharply in recent years as a result of
fierce competition," said Dolk. He said Telkom's tariffs were likely to
remain high over the next year as its competitor, Neotel, tried to establish
itself in the market. However, Telkom contested May 16 that its prices were
competitive. It said it was "committed to the process of consistently
adjusting its pricing model in order to make telecommunications more affordable
and accessible to business as well as the broader South African public".
"Furthermore, product innovations in the form of bundled packages ... have
substantially increased the value that residential and business customers derive
and have made considerable savings possible over and above Telkom's price
reductions," said spokeswoman Lulu Letlape. NUS said the survey was
conducted in 14 of the most important telecommunications markets. These were
Australia, Belgium, Canada, Denmark, Finland, France, Germany, Italy, the
Netherlands, SA, Spain, Sweden, the UK and the US. It found that most fixed-line
operators were decreasing their call charges due to competition from cellphones
and voice over internet protocol services. According to the study, Belgium has
the highest local call costs in the world, charging $0.18 for a standard
three-minute call during peak hours. The Netherlands ranked second, charging
marginally higher than $0.14, and SA was third, at $0.14. The UK had the highest
cell-phone call costs at $0.75 for three minutes.
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