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SOUTH AFRICA


  
  

 

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

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Update No: 070 - (02/11/07)

SEPARATION OF POWERS OBVIOUSLY NOT WORKING
President Thabo Mbeki was accused of obstructing justice by blocking the prosecution of South Africa’s police chief and head of Interpol, Jackie Selebi, over allegedly being linked to organised crime and undermining a murder investigation. The opposition Democratic Alliance said the issue was a ‘fully fledged constitutional crisis’ after it was revealed that warrants for Mr Selebi’s arrest were quashed days after Mr Mbeki removed the director of public prosecutions, Vusi Pikoi, from office. Mr Mbeki’s office denied there was any attempt to protect Mr Selebi.

COSATU Concern over NPA-Pikoli Situation
The Congress of South African Trade Unions (Cosatu) has supported the Johannesburg Bar Council in its concern about the suspension of National Prosecuting Authority (NPA) boss Vusi Pikoli, saying it appeared to point to interference with constitutional safeguards. Opposition political parties and civil society have called for an inquiry into Pikoli's suspension to be held in public because of these concerns. Pikoli was recently suspended after the NPA issued a warrant for police chief Jackie Selebi's arrest. The council said October 22 that the issues around the suspension of Pikoli did not stand in isolation, as it was "common knowledge" that many government departments refused to comply with court judgements. It said it was "disquieting" that, according to media reports, acting NPA boss Mokotedi Mpshe decided to approach a different magistrate from the one who had issued the warrant to have it cancelled, and did so after hours. "What is even more alarming is that he reportedly claimed that he 'doesn't know anything about the warrant'," it said. On October 2 Mpshe said President Thabo Mbeki instructed him to look into the Selebi matter. But a week later he told a TV station that Mbeki had not mentioned Selebi's name to him. Cosatu spokesman Patrick Craven said that one of Mpshe's statements had to be incorrect. "The Bar Council is right to be disquieted about Mpshe ... if these allegations are true, then we face a major constitutional crisis in the country," he said. Craven said the union federation was in support of the council's call on the government to demonstrate, "clearly and unambiguously", that the independence of the judiciary was being respected and protected, and that the NPA could act independently. There have been numerous accusations that the state security agencies are being used to settle political scores.

Scorpions 'Can Nail Selebi'
Senior members of the Scorpions are confident that they can nail the national police commissioner, Jackie Selebi, on charges of corruption, fraud, defeating the ends of justice and racketeering, but only if the case comes before court. "We have a case, a magistrate looked at the evidence, agreed and issued a warrant," sources assisting in the Scorpions investigation into the country's top cop said October 12. It is believed that despite the matter being under review, investigators are tying up loose ends in case the go-ahead is given for Selebi to be arrested. Although it looks increasingly unlikely that Selebi will appear in court, the National Prosecuting Authority (NPA) admitted that the Scorpions had obtained a warrant of arrest for Selebi, as well as a warrant to search his home and office. The NPA said that the Scorpions had obtained a warrant of arrest for Selebi's early September from Randburg magistrate Cheryl Loots. A search warrant was obtained a few days later from the deputy judge-president of the Witwatersrand Local Division of the High Court in Johannesburg. "The decision to obtain these warrants was carefully considered and supported by the senior management of the NPA, including the (suspended) national director of public prosecutions Vusi Pikoli," the NPA said. However, upon his appointment as acting national director of public prosecutions, Mokotedi Mpshe decided to "conduct a review of the matter". He briefed both the justice department's director-general and officials from the presidency about his initial assessment. Mpshe "decided that it would be prudent to make an application for the cancellation of the arrest and search warrants, pending the outcome of his reconsideration of the decision", the NPA said. Mpshe approached the Randburg Magistrate's Court, and the magistrate agreed to the cancellation of the arrest warrant. He also approached the deputy judge-president, who said that he was not prepared to retract the search warrant. This comes after days of speculation in the media that Pikoli's suspension was linked to Selebi. It is alleged that Mbeki suspended Pikoli because the NPA chief had not informed him that a warrant for Selebi's arrest had been secured. Sources say they are "confident" justice will proceed but noted that Mpshe, appointed by Mbeki as the acting NPA head, is the "biggest impediment" to the case. Mpshe has, on the instruction of Mbeki, undertaken a review of the Selebi dossier. Investigators within his fold have allegedly raised concern over Mpshe's ability to withstand political pressure. Senior investigators not linked to the Selebi investigation have pointed to other high-profile cases in which Mpshe has been involved. These included the rape charges against former foreign minister Pik Botha's grandsons, as well as the assault charges against former public protector Selby Baqwa. In both instances the charges were withdrawn. Indications are that the acting NPA chief has already succumbed to political pressure in the Selebi investigation, following the cancellation of Selebi's arrest warrant after a meeting with Justice Minister Brigitte Mabandla and officials from the Presidency. This is contrary to the government's categoric denial that Mbeki was protecting Selebi by suspending Pikoli. The government's official reason for Pikoli's suspension was an "irretrievable breakdown" in the relationship between him and Mabandla, his political head. But the government has given no actual examples of incidents that led to the breakdown, citing various "incidents" without giving any further detail. It is also believed that Glenn Agliotti, an alleged drug kingpin and accused in the ongoing murder case of mining magnate Brett Kebble, has been offered a plea bargain by the NPA. Selebi stands accused of having links to Agliotti's alleged underworld connections. Agliotti's lawyers refused to confirm or deny the claim about the plea bargain, saying "it was too hot to talk about".

Tutu Surprised by Pikoli, Selebi Saga
Archbishop Desmond Tutu says the suspension of prosecutions boss Vusi Pikoli and the unfolding events around police chief Jackie Selebi have left him bewildered and surprised. "I must say I don't know all the details of this matter. I can only say that I am very surprised and bewildered by what is happening," he said in Cape Town October 8. Tutu said it was also "just weird" if it were true that a warrant had been issued for Selebi's arrest. The outspoken cleric believed that the unfolding saga did not exactly inspire confidence and a feeling of safety within the minds of South Africans. Meanwhile, the Democratic Alliance - which has warned that the country faces a crisis - has written to National Assembly Speaker Baleka Mbete to set up an ad hoc committee. DA parliamentary leader Sandra Botha sent a letter requesting that the committee investigate whether the director-general in the Presidency, Frank Chikane, had purposefully misled opposition party leaders when he briefed them earlier on why President Thabo Mbeki had suspended Pikoli. "Dr Chikane was briefing the democratically elected public representatives of the people of South Africa. If they were deliberately misled, the speaker has a duty to stand up for them," she said. Botha said she believed that Chikane had failed to take opposition parties into his confidence.
The African Christian Democratic Party on Monday also said it was time "the Presidency put an end to the nonsense" and brought everyone on board with the facts. "President Mbeki must be aware that the circumstances are creating an ominous picture," ACDP MP and whip Cheryllyn Dudley said.

EU – AU SUMMIT 
The second European Union-Africa summit set to take place in Lisbon in December will go on despite speculation surrounding Zimbabwean President Robert Mugabe's attendance. Foreign Affairs Deputy Minister Aziz Pahad said October 25, that despite British Prime Minister Gordon Brown's indication that he would not attend the two-day summit if Mr Mugabe was there, the summit would still take place. "We are confident that this summit will go ahead," he said. Mr Pahad emphasised that it was important to have a meeting at Heads of States level and that nobody will be able to choose who forms part of the AU delegation. "We don't think that a boycott at this critical juncture is helpful," said Mr Pahad. Pahad said that Zimbabwe could be brought forward as a topic for discussion at the summit. No other head of state, apart from Mr Brown, has indicated that they are unwilling to attend the summit and Mr Pahad said that many leaders of African countries were eager to be involved in the meeting which they had waited a long time for. 

SA’s SPECTACULAR POPULATION GROWTH
The size of the South African population has shot up by nearly 4-million since 2001 and now stands at 48,5-million, a major survey undertaken by Statistics SA has shown. The results of the Community Survey, or mini-census, were released in Parliament October 24. They provide data about the age, education and geographical distribution of the population, and measure the progress made in delivering services such as sanitation, refuse removal, education, electricity, housing and water. Statistician-general Pali Lehohla said the population had risen 8,2% since 2001, when it stood at 44,8-million. The preliminary estimate of life expectancy in South Africa was 54 years for women and 51 years for men. The survey also showed that the age structure of the population was changing, with the percentage share of the population aged below 14 years gradually decreasing and those above 65 years increasing. South Africans as a whole are becoming more educated, the survey showed. The percentage of the population aged 20 years and older with no schooling declined from 17,9% in 2001 to 10,3% in 2007 and 28% of this category had completed at least secondary education. Cellphone ownership rocketed from 32,3% of the population in 2001 to 72,9% this year. With regard to services, 60% of households have access to a flush toilet, 88,6% (2001: 84,5%) enjoy access to piped water and 80% of households use electricity for lighting, compared with 57,6% in 1996. 

SA’s POLITICIANS & PERSONALITIES
INKATHA Freedom Party (IFP) leader Mangosuthu Buthelezi announced October 14 that he would not be available for re-election in 2009. Delivering his keynote address during the party's conference in Ulundi, Buthelezi unexpectedly told delegates that he would step down in 2009. Earlier, Buthelezi had said he would lead the party even after 2009 if IFP members still wanted him to. However, he appeared to change tack, saying he had taken the decision after reports which painted him as someone who was holding onto power. "Based on the reports, I will not be available. I hope that this will put the matter to rest." Buthelezi will, however, lead the party during the 2009 general elections, which will take place early in the year. 

Veteran African National Congress (ANC) MP Kader Asmal became the most senior ANC politician yet to break ranks on government's quiet diplomacy policy towards Zimbabwe when he made a speech that harshly criticised Pre-sident Robert Mugabe's regime. Speaking at the launch in Cape Town October 4, of the book “Through the Darkness - A Life in Zimbabwe”, by Judith Todd, Asmal said he was speaking out now because some of Mugabe's actions had become like those of Cambodia's Pol Pot. Todd is the daughter of former Southern Rhodesia prime minister Garfield Todd, an opponent of white minority rule under Ian Smith. While Asmal said South Africa should hope that the mediation efforts of President Thabo Mbeki would bear fruit, he took the unusual position of saying if mediation failed then the United Nations should become involved. 

Fans across the world mourned the death of South African reggae star, Lucky Dube. The singer was shot dead on October 18 in Johannesburg in what police called a botched car-jacking attempt, whilst dropping his teenage son and daughter. Local radio stations were flooded with tearful callers expressing outrage at the murder and renewing demands that the authorities act to curtail crime. South Africa's president paid tribute to him and called on people to "confront this terrible scourge of crime". Alongside Bob Marley, Lucky Dube was thought of as one of the great reggae artists. He was also one of the apartheid regime's most outspoken critics. The killing of the 43-year-old singer has shocked South Africans who are already accustomed to one of the highest murder rates in the world. Lucky Dube’s death has highlighted safety concerns and intensified the debate on violent crime in South Africa internationally, in advance of South Africa’s hosting of the World Cup in 2010. Dube sold millions of albums around the world in a career that spanned two decades. He was one of South Africa's most loved and respected stars who often spoke out against crime. South Africa's crime wave cost an estimated 20,000 lives in the past year. 

MONEY AND METALS
Gold has hit a 28-year high, with the precious metal's appeal polished by a weak dollar, record-high oil prices and geopolitical tension. At the same time, supply worries swept platinum to a record peak. The oil price responded with the cost of a barrel of Brent crude encroaching on $100, while precious metals were swept along by buoyant sentiment in gold and platinum, with silver reaching its highest price since the end of April. Bullion has gathered momentum as the US currency's recent falls to successive record lows against the euro made the dollar-priced metal cheaper for holders of other currencies, and raised its profile as a portfolio diversification tool. 

Reserve Bank governor Tito Mboweni said October 9 that African leaders risked reducing themselves to "a laughing stock" if they pressed ahead with plans for an African central bank (ACB) and a common currency for the continent - against the advice of technocrats. He warned that the idea was bound to flounder like other failed grand African plans. Mboweni was speaking about a mooted common economic and monetary union for Africa at a three-day international banking conference in Sun City. He said African central bank chiefs had proposed the need to achieve macroeconomic convergence on the continent before a continental central bank and common currency could be considered, but this had been ignored by the political leadership of the African Union (AU). Important changes needed to take place in the structure of most African economies before monetary integration could happen. These included increasing economic integration, especially trade, improved transport networks, diversification of the economies and increased access to developed markets.

Mboweni Talks Tough On Rates Pain And Gain
Reserve Bank governor Tito Mboweni October 16, defended the Bank's decision to hike interest rates, saying it would have been "irresponsible" not to have done so - and he signalled that rates may be hiked again. "If people don't feel the pinch in their pockets they won't respond appropriately... (and we) might have to tighten monetary policy," he said. There has been growing evidence of a slowdown in consumer demand, the economy's main growth engine, since interest rates began to rise last year. But the Bank has focused on its latest forecasts for inflation, which is expected to stay above its 3%-6% official target range until the second half of next year, after breaching it five months in a row. Markets have not fully priced in the last half percentage point hike in the repo rate, which was criticised by trade unions and some analysts as harmful to growth and employment. Mboweni dismissed those suggestions, saying the Bank's job was to reduce inflation in a "responsible" manner, which would also boost investment and jobs. "We focus on what would be good for the country - this adjustment in the repo rate was good for the economy," Mboweni told Johannesburg's prestigious Rand Club. The Bank governor acknowledged that the main culprits behind surging inflation were the rising costs of food and fuel, both global trends, which would not respond to higher interest rates. But he said even when these were excluded, inflation was "still trending upwards and very strongly so," with "second-round effects taking root" - a reference to higher wages and service costs. "In that case, our job is to tighten (raise rates)... if we don't do that we would be irresponsible and be seen as weak, suffering from political pressure," he said. Mboweni said the Bank did not operate in a vacuum and was "not oblivious" to the need for jobs, growth and prosperity to fight widespread poverty. "It sounds orthodox but the lower the inflation rate the better off the working class is," he said. Prime lending rates set by banks have now climbed 3,5 percentage points to 13,5% since June last year, reversing much of a cumulative 6,5 percentage point cut between 2003 and 2005. 

Gold Price Helps Push Foreign Reserves Past $30bn
South Africa's gross gold and foreign exchange reserves rose 2,3% in September, breaking the key $30bn barrier for the first time on the back of a leap in gold prices, which scaled a record peak in September. Gross reserves climbed to $30,5bn from $29,8bn in August, spurred also by a faster pace of foreign exchange accumulation prompted by the rand's rally to a two-month peak at R6,84 to the dollar during the month. "The fact that gross reserves managed to break through the $30bn level is a welcome development and reiterates the continued strong reserve accumulation by the Bank," said Efficient Research economist Fanie Joubert. But he pointed out that strong demand for imports was making it difficult for the Bank to improve significantly its import cover ratio for reserves. These nudged up to 16,9 weeks in September from 16,5 weeks in August. "We expect the Bank will not see the gross reserve record as room for breathing space, but will continue to accumulate reserves at a brisk pace - especially during periods when the rand is strong," he said. SA's gross reserves have nearly quadrupled in the past four years, gathering pace after the Bank eliminated a loss-making forward book early in 2004. But they still lag other emerging markets in terms of key ratios. T he Bank has said it will continue to build its reserves as market conditions permit, without affecting the value of the rand. Net gold and foreign exchange reserves, also known as the Bank's international liquidity position, surged more than 3% to $28,421bn last month, also reflecting the prepayment of $250m in a dual currency syndicated loan. That was its second-strongest monthly increase in the year to date, after a $1bn rise in July. Foreign exchange reserves rose by $419m compared to $479m and $984m during August and July respectively. "The strong rand neutralised some of the increase in reserves as it dipped to well below R7,00 against the dollar during September," Joubert said. Absa Capital economist Monale Ratsoma said he expected the Bank to maintain a more rapid pace of reserve accumulation this month, given continued strength in the rand so far. Although the increase in reserves was positive, particularly given SA's gaping current account deficit, it would help curb strength in the rand, Ratsoma said. "As a result, the rand has lagged the performance of other emerging market currencies. However, given the weak dollar, we expect the rand to remain well supported with limited gains," said Ratsoma.

Mbeki's ANC Re-Election Bid Worries Investors
President Mbeki's determination to make himself available for a third term as African National Congress (ANC) leader worries international investors, who might interpret it as a reluctance to relinquish political power, according to top US ratings agency Moody's. International investors would prefer to see a new ANC head elected at the ruling party's national conference in Polokwane in December, Kristin Lindow, a chief credit officer and vice-president at Moody's sovereign risk unit, said October 23. Though the ANC at its policy conference earlier this year said it would not oppose Mbeki for a third term, the party indicated it would prefer a new leader. However, Mbeki, who cannot stand as national president for a third term, said shortly after the policy conference he would be available for a third ANC term. His insistence is seen as an attempt to halt ANC deputy president Jacob Zuma's march to power. Earlier this year, Moody's revised its outlook on SA's Baa1 mid-investment grade rating for foreign currency debt to "positive" from "stable", meaning SA could be considered for an upgrade in the next 12-18 months. But Lindow said a rating review was unlikely to happen ahead of the ANC conference amid jitters over how the party's hotly contested leadership issue would be resolved ahead of elections in 2009. "I don't expect that (a rating review) to happen before December ... one of the main question marks is how the political situation settles down," she said. If Mbeki carried on as the party's head, "the uncertainty about the eventual ANC (presidential) candidate will carry on for months - and markets don't like that," she said. Historically, the elected head of the ANC becomes the party's presidential candidate, but this is not stated policy. Mbeki has said he will abide by the country's constitution, which says a president can rule for only two terms. "The idea is that when in any emerging market there is a sign that an existing head of state wants to retain his powers, there tend to be question marks about what that could lead to," Lindow said. "Politics in SA have been quite brutal recently, with people losing their jobs." Lindow was referring to the dismissal of Nozizwe Madlala-Routledge, the deputy health minister, and the suspension of prosecutions chief Vusi Pikoli earlier in October. Lindow said investors would be worried if Zuma was elected leader of the country because of perceptions he would pursue more populist economic policies, but those concerns could be unjustified. "It's ridiculous to be so scared of him; we don't know what he will do until he gets the job," she said. 

South Africa is 43rd in World Press Freedom Index
South Africa has been ranked 43rd in the Worldwide Press Freedom Index published by Reporters Sans Frontieres (RSF), performing slightly better than the so-called world's top guardian of freedoms and rights, the United States, which is ranked a distant 48th. However, no African country is listed among the top 20 and the continent will continue to live up to its 'dark reputation', as Eritrea is ranked 169th - the last place in the index measuring the levels of press freedom in 169 countries throughout the world. "There is nothing surprising about this," the Paris-based media watchdog said on its website. "Even if we are not aware of all press freedom violations in North Korea and Turkmenistan, which are second and third from last, Eritrea deserves to be at the bottom. "The privately-owned press has been banished by the authoritarian President Issaias Afeworki and the few journalists who dare to criticise the regime are thrown in prison. We know that four of them have died in detention and we have every reason to fear that others will suffer the same fate," RSF lamented. It has been a stressful year for SA independent media, with the government and its allies firing salvo after salvo at editors and journalists for 'going too far' and becoming 'law unto themselves', prompting fears that the country's hard-fought press freedom was on the verge of collapsing. The top three African countries in this press freedom index are Mauritius (25th), Namibia (26th) and Ghana (29th). Founded in 1985, RSF (Reporters without Borders) fights for press freedom on a daily basis, and gives financial aid each year to 100 or so journalists or media outlets in difficulty (to pay for lawyers, medical care and equipment, as well to the families of imprisoned families).

World's $88bn IPO Party Passes Country By
While initial public offerings (IPOs) worldwide surged in the second quarter of the year, with $88bn raised in 531 public offerings, IPO activity raised a paltry $144m in South Africa as private equity groups continued to take out listed companies, says an inaugural Ernest & Young global IPO report. The report, which was released October 22, showed the number of listings globally up 40% on the first quarter, and 16% on the second quarter of last year. Capital raised rose 144% on the previous quarter and 42% on the same quarter of last year. Much of this activity was driven by emerging market champions Brazil, Russia, India and China, which together raised $35bn in 90 IPOs and accounted for four of the five largest IPOs in the second quarter. Stef Greeff, associate director for transaction advisory services at Ernst & Young SA, said there were 12 IPOs in SA in the first half of this year, raising $331m. Half of these took place in the first quarter and the balance in the second quarter of the year, while capital raised in the second was $44m, down from $188m in the first quarter Greeff said four of the IPOs in the second quarter were on the alternative exchange market of the JSE, the AltX, and the other two on the main board of the bourse, which is headed by Russell Loubser. 

Human Rights Commission Hosts Poverty Conference
The South African Human Rights Commission (SAHRC) is co-hosting the National Poverty Conference on "Fighting Poverty from the Grassroots" in collaboration with the National Development Agency (NDA) and the United Nations Development Programme (UNDP). The United Nations designated October 16 as World Food Day, October 17 as World Poverty Eradication Day and October 18 as World Rural Women's Day. Poverty alleviation is one of the strategic focus areas for the Commission and this is demonstrated by some of the programmes and activities within the Commission. For example, the Research and Documentation programme monitors the implementation of economic and social rights as a way of contributing towards the reduction of poverty in the country. On the other hand, the Education and Training Programme conducts human rights awareness programmes in rural communities, especially in previously disadvantaged communities to encourage people to access their rights. In addition, the Legal Services Programme receives complaints of alleged human rights violations, many of which deal with issues such as equality and access to services. To that effect, the theme and objectives of the Conference fall within the mandate of the Commission to promote, protect and monitor the observance of human rights in South Africa. The National Poverty Conference will provide an opportunity for the Commission to advance this mandate. This is more so that the Commission is well situated to depict human rights violations, which are most prevalent in poverty-ridden communities. The Commission also fully supports one of the main objectives of the conference - to develop a plan of action, which will inform national anti-poverty policy and strategies. The plan will be implemented by various stakeholders in government and non-governmental sector such as business and civil society. Through the Accelerated and Shared Growth Initiative of South Africa (AsgiSA), government aims to halve poverty and unemployment by 2014, and achieve an annual economic growth rate of 6 percent by 2010. South Africa is also a signatory of the United Nations Millennium Development Goals (MGDs), which target social issues such as health, education and poverty.

Business Cashing in On Zimbabwe Crisis
A report by a regional human rights body based in Johannesburg has cast doubt on the role South Africa is playing in the turmoil in Zimbabwe. The Solidarity Peace Trust said in its findings that South African companies are cashing in on the country's economic turmoil by boosting investments and expanding their operations in spite of deepening hardships in the country. Brian Raftopolous, director of research and advocacy for SPT was critical of some South African companies, which he accused of cashing in on the economic crisis, saying that such companies need to stop putting profits before ethics, and start playing a greater role in resolving the country's problems. Solomon Chikohwero, a critic of President Thabo Mbeki's mediation role in the SADC led talks said the crisis in Zimbabwe would have long been resolved if the South African head of state had been an honest negotiator. 'I have always told anyone who cares to listen that Mbeki would rather leave things as they are because the economy in South Africa is making huge profits from the turmoil in Zimbabwe. At least people now know why they have stuck to their quiet diplomacy for so long,' Chikohwero said. Chikohwero added that Robert Mugabe is fully aware of Mbeki's predicament and has used it to his ruling party's advantage. He explained that whenever pressure is put on Mbeki to denounce the regime in Zimbabwe, Mugabe has always fought back by threatening to take over or expel South African companies based in the country. The South African based Chikohwero, a pro-democracy activist said that while he fully agrees with the Solidarity Peace trust report, his recommendation would be to relieve Mbeki from his role and appoint a neutral negotiator, who is not based in the SADC region. 'SADC cannot expect Mbeki to bring miracles to Zimbabwe when he is an interested figure. Obviously there is a conflict of interest in his role as the facilitator and chief mediator when companies from his country are making huge profits from Zimbabwe's deepening economic crisis,' Chikohwero said.

South Africa in Line to Become Strategic Partner With EU
South Africa's growing role on the international political and diplomatic scene was set to earn the country the status of strategic partner to the European Union (EU), Portuguese Foreign Minister Luis Amado said October 11 at the close of the EU Troika-SA meeting in Pretoria. The EU has had a "strategic high level partnership" with the U S, Russia, China, Brazil and India, but not with a country representing Africa. But this is going to change. "SA is playing an important role in a new and quite dynamic international system ... with a more demanding multilateral approach," Amado said. Considering the values, principles and the way the EU identified its co-operation, "SA certainly (fits) the bill," he said. Having strategic partner status would come with many non-negligible advantages for SA, according to diplomatic sources. Any discussions during EU-SA summits would take place in an equal partnership, allowing SA and the EU to advance their common international agenda on a variety of international issues. These could range from trade to peacekeeping operations and financial aid projects. EU Commissioner Louis Michel said: "We want to change the nature of the relationship (with SA) to becom e a really true partnership ... (a) relationship between political partners. "Today already, in our interactions, we felt that the nature was different, more frank and open. And we have tackled many global challenges, which we have to both deal with. This is very important." Moreover, the partnership would guarantee better access for South African products on EU markets. The EU Troika-SA meeting ended with the signing of the joint Country Strategy Paper for SA, which defines the reduction of poverty and inequality as the overriding objective of the development co-operation between SA and the EU. The strategy paper will see the EU disburse €985m (about R10bn) in budget support in favour of SA for the 2007- 13 period. Most of this package will be allocated to infrastructure, education and skills development projects planned by provincial governments. Michel said: "To be honest, this new programme is not business as usual. For the first time, it is a seven-year programme with the full span of the European Community's financial perspective. SA and the EU also agreed on extending financing support from the European Investment Bank, which for that period will amount to another €980m.

Economic Policy Will Not Change - ANC
The African National Congress (ANC) head of the presidency, Smuts Ngonyama, moved to allay fears about radical changes in economic policy, saying there would be no nasty surprises for business at the party's elective conference in December. He told a French South African Chamber of Commerce and Industry luncheon in Johannesburg October 11 that the ANC was in support of a developmental state which would build a conducive environment for economic growth. In the run-up to the ANC's December meeting, various fears had been expressed in the business community about a drastic shift in economic policy towards the left. The ANC's alliance partners, the Congress of South African Trade Unions (Cosatu) and the South African Communist Party (SACP), had proposed a number of changes, including the nationalising of strategic corporates. The SACP, Cosatu and some members of the ANC do not regard the ruling party's economic policies as sufficiently pro-poor. Various ANC leaders, including deputy president Jacob Zuma, had spent the past couple of months trying to put business' fears to rest. Ngonyama said the ANC understood consistency in economic policy was important so that investors would not be frightened away. "As we lead up to Limpopo, don't expect any surprises. We like to be consistent in economic policy." Ngonyama said the economy would not thrive if the state was not modelled to ensure delivery was sufficient on all levels. The vast majority of the country was still poor and the ANC needed national consensus, especially from business, to help with the social upliftment of South Africans. He listed poverty, a skilled labour force, education, infrastructure, investment and distorted spatial development as key areas of focus for the party. Ngonyama's address was in line with the ANC's policy conference in June where delegates called for a more interventionist state, but stressed that business and investment had a major role to play in SA.

Continent Invests R460bn in NEPAD Projects
Africa has invested R460bn in priority areas of the New Partnership for Africa's Development (Nepad), more than half of which came from contributions from African governments, Nepad secretariat CEO Firmino Mucavele says. The money was invested last year by governments and the private sector in key sectors that include infrastructure, agriculture, health, education and human resources. Contributions are R295bn short of Nepad's R754bn required budget, but that was a smaller gap than last year, Mucavele told Business Day at the Nepad projects conference in Johannesburg. He said pledges also exceeded the present gap. "The gap we have is less than the pledges that have been put down. This means that we will move a little bit faster in terms of economic growth and social programmes." With President Thabo Mbeki as one of its proponents, Nepad was adopted in 2001 as an initiative of the then Organisation for African Unity to spearhead Africa's economic and social renewal. Mucavele dismissed suggestions that excitement over Nepad was waning since its launch as a vehicle for African renaissance. "In terms of general support we are better off than we were five years ago," he said. But Ross Herbert, of the South African Institute for International Affairs, said a major shortcoming of Nepad was that it had been unable to articulate a clear vision of what it was supposed to be. Nepad is variously described as a programme, framework and a philosophy. "It needs to be smaller and more focused on delivering real value services to member states," Herbert said. Nepad operates on various fronts, negotiating intercontinental projects, promoting regional integration, as well as pursuing peace, security and good governance. Internationally, it operates as a mechanism for Africa to negotiate a better deal on the world stage. Engaging with emerging economies such as China, India and Brazil forms part of its latest thrust. Herbert said Nepad had been more successful in lobbying the west on debt than on continental work. "I still think there is a lot of promise for Nepad, but there is need for greater candidness to deal with the impediments to implementation," he said. Constraints often included political and nationalist sentiments. Apart from some structural weaknesses, African heads of state -- who are the overall authority on Nepad -- had not held the secretariat to account where progress was slow, Herbert said. But a World Bank official involved with Nepad said it had suffered from "too high expectations". "You cannot expect Nepad to deliver to everybody's satisfaction in six years," she said. She conceded, however, that a significant weakness of Nepad was aligning its goals with other initiatives. "If you put all development under the Nepad umbrella you cannot measure progress, and that is when people will start to question." Trade and Industry Minister Mandisi Mpahlwa urged taking a long-term view. "The critical challenge is to stay the course," he said. "We must know that we are in it for the long haul."

SADC Could Miss Golden Opportunity
The Southern African Development Community's (SADC's) deeply protectionist stance in economic partnership agreement negotiations with the European Union (EU) may see the region miss out on an opportunity to use the agreement to advance regional integration and development. SA, which is leading the SADC in the negotiations, has its focus fixed on market access, but trade specialists at the recent annual conference of the Trade Law Centre of Southern Africa (Tralac) have pointed out that the trading system is about much more than the trade in goods. The SADC region needed to address fundamental issues that constrain trade, such as supply side management and governance issues, to ensure the kind of trade deals it negotiated would facilitate development. If the economic partnership agreement was to accept the development challenge, then it needed to go beyond market access, and asymmetry of trade should be included on the negotiating agenda, said Tralac associate Colin McCarthy. The economic partnership agreement talks also appear to be held back by a lack of coherence in the region. SADC countries are committed to regional integration, but what the negotiations have highlighted is a region fraught with conflicting interests, where commitment to integration hardly goes beyond political lip service. These contradictory interests are complicating matters at the negotiating table. An update at the conference on the status of the negotiations between the SADC and the EU gave reason for scepticism. While the economic partnership agreements need to be sealed by year-end, with basic agreements in place by the middle of next month, the region has made little progress towards that. Titus Nxumalo, of the SADC's economic partnership agreement unit said fringe issues such as sanitary and phytosanitary issues and technical barriers to trade had almost been wrapped up but much needed to be done on market access; trade-related issues and services; and development co-operation and finance.
Angola, Mozambique and Tanzania were yet to make a formal offer on market access, while on the Southern African Customs Union offer parties still needed to thrash out final positions on sensitive products in the Botswana, Lesotho, Namibia and Swaziland grouping. On trade- related issues and services the views were still very divergent. And while there had been no formal engagement yet on legal issues, Nxumalo pointed out that divergent views on these issues -- crucial to the conclusion of the agreement - were now starting to show. The European Commission, for instance, wanted to conclude the economic partnership agreement as a region-to-region deal between two parties. The SADC has argued that it was not a legal entity, so no single agreement could be concluded. The picture painted at the Tralac conference was bleak, and prospects of meeting the year-end deadline appeared dim. What shone through, however, was not so much the differences between the EU and SADC, but the apparent lack of coherence within the region. According to Tralac executive director Trudi Hartzenberg, the economic partnership agreement can assist the SADC to address the challenges of regional integration. However, while there was political commitment to regional integration, this was not echoed in policy development. "If we are going to make a deep commitment to regional integration, we will have to go beyond political allegiances and incorporate checks and balances. "Unfortunately deadlines pass and liberalisation does not take place ," she said. In the current global trading regime, preference margins are being eroded and that raises issues about competition, says Tralac executive director, Trudi Hartzenberg. "The notion of integration and cooperation is in a sense geared to address this issue of competition - not only in regional markets, but in global markets too - and I think sometimes we forget that," she says.

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AVIATION

SAA Gains Another Victory Over Unions


Efforts by South African Airways (SAA) to retrench some of its employees, including pilots and senior managers, received a boost October 5 when the Labour Court dismissed with costs an urgent application brought by the airline's powerful pilots' union. This was the second time in three months that the national carrier had won a court battle against trade unions that are opposed to the retrenchment of their members or the alteration of their conditions of employment. In July, the Labour Court rejected an urgent application by the South African Airways Management Association (Saama) to stop the airline from retrenching 30% of its senior management team. Saama claimed that SAA wanted to dismiss the managers "without complying with fair procedure". The application was rejected with costs. The Labour Court dismissed with costs an urgent application brought by the SAA Pilots' Association (Saapa ) over the closing date of the voluntary severance packages that SAA had offered to its staff. The pilots's union, which represents more than 800 members, had applied for an indefinite postponement of the voluntary severance packages offer until a dispute it had declared against SAA was heard by the Commission for Conciliation, Mediation and Arbitration. The closing date for employees who wanted to take the voluntary severance packages was October 5. SAA said the dispute related to the "Over 50s contract" which allows senior pilots to retire from the airline and take out their pension. The contract allows pilots to come back as SAA employees whose terms and conditions of employment are not affected by their retirement status. But Saapa sought to allow its members to apply for retirement under the contract and still qualify for voluntary severance packages on the basis of the period of service starting from when they were first employed, SAA said.

Australian Airline to Extend Co-op With SAA

Australian airline Qantas Airways Ltd has applied to extend its code-sharing agreement with South Africa Airways on flights from Australia to the African nation. Qantas, which has had code-sharing arrangements with SAA since 2000, is seeking authorisation for a three-year agreement from Australia's International Air Services Commission (IASC). In its letter to the IASC, Qantas said it hopes to expand its operations on the South African route, including a daily service from Sydney to Johannesburg, by 2009. It will be a 40 percent increase in capacity on the route, which currently sees five flights a week. The number of flights is dictated by the Australia-South Africa air service arrangements, which limit both sides to five flights a week. Pending an extension of the code sharing, Qantas said, it is also seeking a larger allocation of seats once SAA's planned upgrade of its air fleet takes place in mid-2008. Economic relations with Australia are excellent, with Australia being South Africa's third largest partner in the Asia-Pacific region, after Japan and China. In turn, South Africa is Australia's biggest trading partner on the African continent. 50 percent of Australian exports to Africa are earmarked for South Africa. Access to the Australian market is simplified since the regulatory institutions are on a par with those in South Africa, namely similar legal and accounting systems, similar banking and business culture, areas of historical commonality, excellent sporting ties with English the official language. Similarities in sectors such as the wine industry, mining technology and equipment and automotive components, to name but a few give, rise to numerous joint venture/bilateral trade opportunities. South Africa is Australia's 19th largest trading partner and is by far Australia's largest and most dynamic market in Africa. In 2004, two-way merchandise trade was valued at approximately $A2,8 billion. Australian exports to South Africa were mainly coal, crude petroleum and nickel and South African exports to Australia were notably passenger motor vehicles (mostly BMW 3 Series vehicles) worth $A554 million as well as furniture, pig iron, paper and textile products. Two-way investment flows between Australia and South Africa has expanded since the collapse of apartheid. South Africa dominates stocks of African investment into Australia (currently the 17th largest foreign investor up from 23rd in 1993 - 1994). Australian investment in South Africa has also increased mainly in mining, mining equipment, agriculture, agribusiness and infrastructure and services and trade and dominates Australian investment into Africa. Australia is a big investor in South Africa and the merger in the 1990s Australian BHP Billiton and South African Gencor, created the largest mining company in the world. However, South African investment in Australia still exceeds Australian investment in South Africa by about two to one. Australia is continuing to support post-apartheid transformation with an increased emphasis on governance (particularly in macro-economic and financial management, legal and judicial systems and broader public sector reform processes), health (particularly HIV and AIDS), education and food security.

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BANKING

More Politics Than Business in ICBC's R37bn Standard Bank Deal


In the biggest foreign direct investment in post-apartheid SA to date, Standard Bank Group said October 25 it was selling a 20% stake to state-controlled Industrial and Commercial Bank of China (ICBC) for R36,7bn. Analysts said the deal would give Standard Bank access to the world’s fastest-growing major economy; for the Chinese bank, Standard Bank would give it the chance to enlarge its footprint in Africa, a region of increasing importance to the resource- and trade-hungry Chinese economy. ICBC’s R37bn investment in Standard Bank sets the two banks up in an interesting relationship - in the Chinese sense. In some ways the deal is very large but very ordinary, a simple purchase of shares. But from the perspective of the industrial logic of the deal, it's a bit unusual, because at the macro level it's a deeply and earnestly political deal. The way to see this clearly is to compare it with Barclays' decision to buy 51% of Absa. That was, first and foremost, a business deal. Its character was most obviously demonstrated by the fact that looming large in the minds of Barclays' management was control. Hence the 51%, against 50% or less. In general, management of subsidiaries seldom works well by negotiation. It's hard to drive through synergies and you tend to run into all kinds of problems with confusion of focus and direction. From a business point of view, it makes more sense to hold at least a majority in your subsidiaries, because then at the minimum roles are clear, hierarchies specific and areas of operation can be demarcated precisely. Companies owned by several different blocs, on the other hand, can work well. But they are at the very least in danger of boardroom blow-outs as the different blocs vie and push to get what they want out of their units. Sometimes it is growth, sometimes dividends, sometimes stripping out costs. The key aspect of ICBC's purchase is not the large amount involved -- 20%. For South Africans, it's a substantial chunk of change. It's also a landmark for foreign investment by a Chinese company. But for the largest bank in the world by market cap, you can't help wondering why stop at 20%; why not go the whole hog? It seems very politic, almost respectful and cautious. Chinese banks are trading at enormous multiples, and price:earnings ratios of 40 are common. SA's banks are, by comparison, cheap. If there was a time for the Chinese banks to expand aggressively, it's now. In that context, a 20% stake constitutes caution. The overall result of the investment is that the group remains in South African hands, and that does not seem accidental. What looms large in the minds of ICBC; is not control but an avenue into African resource markets. Neither is it an accident that this strategy dovetails neatly with the Chinese government's push into Africa. As a nation, China has put its faith in manufactured goods, and African natural resources are consequently a critical component of that push, just as access to developed markets is critical for the Chinese if they want to sell their goods. Control is not the issue; access is the issue. The announcement was paired with applications to the Reserve Bank to keep some, or perhaps all, of the money off-shore, which will presumably help in paying for the Nigerian and Argentinian banks in their sights. Longer term, you have to wonder where this will end up. But because the deal is essentially a mandate to expand, it asks serious questions of the other South African banks. Who knows how many other foreign takeovers of local banks the finance ministry will tolerate, but it can't be many. No country wants its banks largely controlled outside its jurisdiction.

Nedbank to Absorb Old Mutual Bank

Old Mutual Bank (OMB), a unit of Old Mutual SA, would be integrated into the Nedbank group and its CEO re-deployed after Nedbank said October 25 it had lifted its stake in the company to 100%. The four-year-old bank was managed as a joint venture between Old Mutual and Nedbank, SA's fourth-largest retail bank, focusing on assurefinance and providing Old Mutual clients with banking products and services such as home loans, vehicle finance, credit cards, transaction accounts, investments and savings deposits. Nedbank Retail Banking Services MD Clive van Horen said the group acquired Old Mutual's 50% stake in the bank for R140m to eliminate brand confusion as Nedbank was Old Mutual SA's core banking offering. Old Mutual owns just more than 50% of Nedbank. OMB's integration into Nedbank was expected to be completed next June. "Japie van Niekerk, who heads OMB, would continue to be accountable for Old Mutual Bank until the integration process has progressed sufficiently, whereafter he is likely to be redeployed within the wider Old Mutual or Nedbank Group," he said. Van Horen said the integration of the two banks would cut costs about R60m and this would not result in job losses. "The integration will enable the group to realise significant cost savings due to the elimination of overlapping branches and infrastructure, enlarge its branch footprint under the Nedbank brand and build on success that Old Mutual Bank enjoyed as a result of the support of Old Mutual SA's intermediary sales channel." Although OMB enjoyed success in selling banking products to Old Mutual clients through Old Mutual intermediaries, OMB was constrained by its small branch network of 46 branches. By integrating OMB into Nedbank, intermediaries would be able to sell banking products to their clients with the support of a branch network almost 10 times larger than OMB's, Van Horen said. At September 30, OMB had client advances of R10bn and client deposits of R10bn and, combined with Nedbank Retail's balances, advances totalled R127bn and deposits stood at R80bn. Old Mutual SA is piloting a "GreenZone" concept where Old Mutual, Nedbank and Mutual & Federal would service clients in a common branch area initially in 20 sites across SA. The integration of OMB would also create an opportunity to increase the size of the GreenZone pilot. The first GreenZone was opened in Johannesburg's Rosebank Mall in August this year. 

Capitec Reported to Be in Indian Bank's Sights

Hard on the heels of Standard Bank's R36,7bn deal with Industrial and Commercial Bank of China (ICBC), India's largest bank, State Bank of India (SBI), was reported to be planning a move on mass-market lender Capitec Bank October 28. The mooted deal, for an undisclosed amount, was said to be intended to help SBI tap SA's lucrative retail banking market and bolster its profitability. The Economic Times of India reported that the Indian bank had hired KPMG to advise on the acquisition. The paper did not name its sources. The report took Capitec CEO Riaan Stassen by surprise, and he said he was not in discussion with any foreign bank. Global banks such as HSBC, Standard Chartered, Deutsche and Citibank have also been expanding their operations in SA. Not to be outdone, Chinese and Indian companies have in recent months been pursuing major investments in Africa aggressively, and they view SA as a launching pad into the rest of the resources-rich continent. SBI's reported bid follows ICBC's R36,7bn offer to acquire a 20% stake in SA's largest bank by assets, Standard Bank, in what will be the largest foreign direct investment in post-apartheid SA. "I will not rule out the Indians from acquiring one of our small to medium banks," a Cape Town- based analyst said yesterday. "It is certainly the season for the Chinese and Indians." SA's top five banks -- Absa, First National Bank, Nedbank, Standard Bank and Investec -- control more than 90% of the banking market in the country, leaving all other banks to scramble for the rest of the market. 

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BLACK ECONOMIC EMPOWERMENT

Women to Get a 20 Percent Stake in Sasol's Mines


Petrochemicals group Sasol is keeping up its spurt of empowerment deals, October 11 unveiling an equity deal at operating level, this time transferring 20% of its mining division to an empowerment company controlled by women. This transaction brings all Sasol divisions operating under sector charters in full compliance with the equity requirements of the charters. It is sure to score Sasol major political points with the government after longstanding tension over the state-created monopoly's perceived transformation slackness. Asked yesterday about its relations with the government, Benny Mokaba, Sasol executive director responsible for the group's South African energy businesses, said interactions between the company and the government had been a "breath of fresh air" of late. "It's a different relationship. We had to get our ducks in a row.... It is good business to have a good relationship with your government." Valued at R1,9bn, the mining deal will see newly created mining company Ixia Coal acquire 20% of Sasol Mining. Ixia Coal is a joint venture between Women Investment Portfolio Holdings (Wiphold) and Mining Women Investments, a new company representing the interests of women drawn from the areas where Sasol Mining operates. Apart from the investment in Sasol, the intention is for the company to develop operational capacity over time with the help of Sasol Mining, enabling it to operate its own coal mines. Sasol Mining MD Hermann Wenhold said Ixia would offer opportunities as a growth vehicle for Sasol Mining in future. The transaction, concluded at fair value, will be financed through equity (R59m) and a combination of debt and facilitation from Sasol. Group chief financial officer Christine Ramon said Sasol estimated that about 40% of the transaction would be funded through external debt, although this had not been finalised. The costs of the transaction, which would be facilitated by the group, have not been disclosed, but would be commensurate with those of other empowerment deals, she said. And like other Sasol empowerment deals, the deal has a 10-year lock-in period. Sasol Mining was converting its mining rights as required by law, and the empowerment transaction was expected to be finalised next year, once the conversion of Sasol Mining's mining rights was completed and it had the necessary regulatory approvals, Ramon said. The new deal follows hot on the heels of Sasol's R20bn deal at group level - punted as the biggest empowerment deal in the country to date. Sasol deals at operational level include the Tshwarisano deal, for the transfer of 25% of its liquid fuels business to black shareholders in a R1,45bn deal, and bringing it in compliance with the charter for the petroleum and liquid fuels industry. With its upstream business, Sasol has already cut a coal export deal with Eyesizwe Coal, which along with yesterday's Ixia deal brings black ownership of its mining business to 26%, well in excess of equity requirements in the mining charter. Sasol has also concluded a smaller deal, empowering its gas supply business, Mokaba said. Along with the empowerment deal at holding level, the total value of Sasol's equity deals tops R24bn.

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FOOD AND DRINK

SABMiller Volumes Rise


Brewer SABMiller said October 15 that it grew volumes 11% in the six months to September, though revenue growth had been hampered by higher input costs and increased investment. Warwick Lucas, an analyst at Imara SP Reid, said the trading update should underpin market expectations of share price growth and should buoy the share price. SABMiller said "financial performance for the six months" remained in line with expectations. Christopher Gilmour, an analyst with Absa Asset Management Private Clients, said that 11% organic growth was above the global averages being indicated by other brewers, and SABMiller's volume growth had been driven by China. SABMiller said its joint venture in China saw volumes increase 22%, which bolstered Africa and Asia's regional growth 20%. Lucas said China was providing the firm with good volume growth, though margins were thin. In Europe, the company reported lager volume growth of 12%. "Sales in the first two months of the half year were strong, assisted by warm weather, but volumes moderated in later months." SABMiller said Poland had seen growth of 13%, while volumes in Russia improved 18% and Romania boosted volumes 37%. Gilmour said volume growth in Russia was "impressive", though the group was a small player in the market. He said the company was gaining market share in Poland, an important market, as its change to its portfolio mix aided sales. SABMiller said volumes rose 8% in Latin America, though growth had been moderating recently. In Africa, excluding Zimbabwe, lager volumes grew 6% on an organic basis. Volumes were up 2% in SA with strong mainstream growth. However, volumes were affected by recent packaging shortages and "reduced flexibility during new brand and pack introductions". In the US, where SABMiller recently announced a joint venture with Molson Coors, the brewer reported that sales to retailers had increased 5,9% over the previous period and had improved 1,4% on an organic basis, excluding Sparks and Steel Reserve, which the company acquired in August last year. Miller Lite grew sales to retailers 2,1%. "Miller's strategy to grow Miller Lite and to migrate its brand portfolio to higher margin segments has contributed to an increase of 3,9% in domestic net revenue per barrel," SABMiller said. Its new-style light beer was trading above expectations and its international premium beer, Peroni Nastro Azzurro, and craft beer were growing at double digits. Gilmour said the results reflected "SABMiller's ability to go into existing markets and take existing brands and make them grow".

Will SABMiller Cheer Up Scottish and Newcastle Shareholders?

What are the chances of SABMiller intervening as a white knight in the Carlsberg/Heineken joint bid for Scottish & Newcastle? The market clearly thinks that someone will, since - although the implied bid price is not yet explicit - the share price is above the indicated price of the hostile bid. At first blush, you would have to say the chance of another bid, particularly from SABMiller, is not high. But then how do you explain the market's suggestion that a higher bid is likely? One possible reason is the expectation that the Danes and the Dutch will increase theirs. But if another brewer were to come in, who would it be and also why? InBev is probably ruled out because the businesses don't overlap very well, and there would be some steep competition regulatory issues to overcome. Anheuser-Busch is a distinct possibility because of its small international footprint. The decision of SABMiller and Coors to join forces in the US, Anheuser's prime market, also puts new pressure on the US giant. SABMiller is also a possibility. There is a feeling SABMiller should have some presence in the UK, where it has its primary listing. It does not seem like a particularly compelling business argument, but SABMiller's brand profile could conceivably be filled out by Scottish & Newcastle's solid and popular brand set. The company also has the profile of being an aggressive acquirer, and there may never be another opportunity to incorporate such a full set of European brands. Yet, instinctively, so much speaks against the possibility of SABMiller entering the fray. A lot of the oomph behind the SABMiller share price comes from its predominant emerging market profile, which is, of course, burning hot at the moment. The beer market in the UK, and most of old Europe for that matter is pretty stagnant, so the inclusion of Scottish & Newcastle would diminish the stock's attractiveness to investors. The other problem is price. One informed source puts it this way: "the spivs are in". Scottish & Newcastle has been the subject of takeover speculation for such a long time, which tended to pump up its share price. Large numbers of its shareholders only hold the stock on the basis that either this deal or some other deal will be done. But ironically, their presence makes a deal unlikely, since it pushes the price above what even aggressive acquirers are prepared to pay. Also, the Texas auction process Carlsberg and Heineken used to reach agreement between themselves practically guarantees one or both will overpay. A white knight may have to outbid the overpriced price. That's never fun. Beer sometimes has a slightly political afterburn. Politicians often are quite happy to see their country's IT companies, for example, being bought by foreigners, but get twitchy about their beer companies. SABMiller can claim some British lineage by virtue of its London listing. Yet the UK lager market has always been a European affair, and Belgian brand Stella Artois is in fact the largest-selling lager brand. On balance, the odds seem to be stacked heavily against an SABMiller intervention, but stranger things have happened. Best keep tuned.

SABMiller Teams Up With Coors in U.S. Beer Market

SABMiller and Molson Coors October 9 announced a multibillion-dollar joint venture that will combine their operations in the US and boost their competitive position against number one US beer player Anheuser-Busch. The deal will see their combined market share jump to about 30% and lead to cost savings of $500m a year. SABMiller, which has battled with rising costs and profitability at US subsidiary Miller, is expected to benefit through Coors' wide distribution network. SABMiller CE Graham Mackay said the companies had complementary assets, operations and geographic footprint. Dirk Kotze, an analyst with Coronation Fund Managers, said the venture would accelerate SABMiller's efforts to turn its US operations around. The company recently indicated that it was already making strides in reaching its American dream, and the venture would grow market share and expand its points of reach. Kotze said Coors and Miller had complementary brands and the venture would increase the total geographic footprint of the new company. The brewers would also benefit from other cost savings, such as bigger volumes per drop size, and it would be able to rationalise some operations, said Kotze. Miller reported volume improvements last month and said it expected to save $120m between the 2008 and 2010 financial years. Miller said margins for this financial year should improve more than 50 basis points. Warwick Lucas, an analyst with Imara SP Reid, said the deal was beneficial as the US market was mature and the companies would be able to grow through improved distribution and reduced costs. The profitable US market was dominated by Anheuser-Busch, which had about 50% market share, he said. Chris Gilmour, an analyst with Absa Asset Management Private Clients, said Miller had about 18% of the US market, while Coors had about 11%. The US beer market is the biggest profit pool in the world, although China leads in volume, said Gilmour. The deal also made it possible for the company to expand its geographic reach into areas such as the Caribbean, he said. South African Breweries (SAB) bought US brewer Miller for $5,6bn five years ago, making it the world's second-largest brewer. At the time, Miller had been losing market share in the US, and concerns were raised about SAB's ability to absorb a company as big as itself. However, the proposed joint venture was expected to make the brewers "significantly more competitive" in the US market, said SABMiller head of media relations Nigel Fairbrass. The companies said the joint venture would result in yearly savings of $500m from the third year after once-off costs of $450m. It would also provide both companies with an expanded distribution network as well as greater economies of scale. The proposed joint venture, which aims to combines SABMiller's US operations and Molson Coors' US and Puerto Rican operations, would be called MillerCoors and was expected to have combined annual turnover of $6,6bn and sell 81-million hectolitres a year. Lucas said, however, the deal would still be subject to scrutiny by the US competition authorities and while he would be surprised if it was allowed to proceed, no antitrust action had ever been taken against Anheuser-Busch, despite its dominance. He said it was feasible the deal would be allowed to proceed. Kotze said the two brewers may be able to argue that the venture would increase competition as it would present a challenge to the dominant player. Molson Coors vice-chairman Pete Coors said the deal had been driven by a changing US alcoholic beverage industry.

SABMiller Aims to Tap Growing Beer Market in Peru

SABMiller says beer consumption in Peru, its second-biggest market in the region, could grow as its rivals fight for the economy segment, encouraging drinkers to move to beer from informal spirits. Robert Priday, president of Backus & Johnston, the Peruvian operation SABMiller gained when it bought Bavaria Group in 2005, said growing beer-market affordability and a fall in informal alcohol consumption should contribute to consumption improving to 45l a person a year, from the 36,1l seen by year-end. Peru, with a population of 28-million, was recording economic growth of more than 7% a year. Priday said the population of legal drinkers would increase 11% between 2008 and 2013. The largest population group was between 10 and 15 years old. AmBev, which entered the country just before SABMiller's acquisition, had been dropping beer prices in the economy segment of the market, said Priday. Also, a Peruvian soft drinks firm, the Ajeper Group, had recently entered the beer market and was vying in the sector with its Franca beer brand. This should have the effect of closing the gap between beer and consumption of informal alcohol. Priday said that while Peruvians were beer-lovers, there was a "massive" informal market, with spirits being brewed from ethanol and sugar. Beer made up almost 49% of the alcohol market, informal spirits comprised about 38%, with the balance being formal spirits. Priday said Backus had strat-egies in place to maintain its stake at 85% of the market, although he hinted this percentage of market share would be higher. He said the company already had a well-developed footprint, a full brand portfolio and econo-mies of scale that would give it a competitive advantage. Backus had rebranded and relaunched its portfolio since October last year in a bid to differentiate its products and create niche markets for each. Another brand was due to be launched within a few weeks, said Priday. It was also aiming to grow on-premise consumption, which had mostly disappeared from Peruvian culture as a result of terrorism, forcing Peruvians to socialise at home. The firm also had a 10-year capacity expansion plan to allow it to leverage output in future, said Priday. Backus was targeting market growth of 40% in five years.

SABMiller Targets 'Sober' Colombia

Brewer SABMiller aimed to grow beer consumption in Colombia in a bid to drive up the image of the brew against other alcoholic beverages to grow volumes. SABMiller bought a controlling stake in the Bavaria Group in 2005, valuing it at $7,8bn. Karl Lippert, president of its Colombia-based subsidiary, Bavaria, said Colombia was a relatively sober country. Out of total alcohol sales, Bavaria had about 63% of the market. Lippert said there was upside to the growth, and the brewer aimed to reach about 68% market share of all alcohol. The company had about 98% of the local beer market. Imported brands accounted for 0,5% of the market and contraband from Venezuela less than 1%. Bavaria aimed to grow beer consumption to 60l a person a year in five years from 45,4l. It also aimed to boost its premium segment from 2% to between 15% and 17% of its portfolio by 2012. The country, previously infamous for its illegal drug trade, was growing faster than the average for countries in the Latin American region with gross domestic product growth at 6,8% last year. Private expenditure was increasing and more people were being employed, though there was still a large poverty gap, Lippert said. Bavaria aimed to target its brands at specific consumer groups, particularly bolstering its sales of beer to women and pushing up home consumption. The fragmented spirits industry, against which the brewer was pitching its premium brands, was not very competitive, Lippert said. Aguardiente, or firewater, had 11,4% of the market, but was losing share. Rum had 11,7% of the alcohol market. Bavaria sales in Colombia were the 15th largest globally in terms of volumes and 13th largest in terms of profit. Lippert said volume was expected to grow between 6% and 8% in the medium term. Bavaria also expected to bolster margins by between 60 to 100 basis points and grow pricing between 3,5% and 5,5%. The brewer aimed to produce 26,3-million hectolitres by the end of the 2008 financial year, an additional 5-million hectolitres. Lippert said Bavaria's biggest challenge was keeping up with demand . Bavaria's new $200m brewery in Valle had received favourable tax breaks that exceeded the cost of the brewery. It was re-branding each of its beers with the aim of having 10 national brands. It had also streamlined its distribution network and was investing in refreshing the look of its brands. SABMiller, which held 98,6% in Bavaria, aimed to increase its holding before it was de-listed at the end of the month.

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MINERALS AND METALS

BHP Billiton Signs Congo Smelter Deal


GLOBAL resources group BHP Billiton had signed an agreement with the Democratic Republic of Congo to investigate building an aluminium smelter in the country at a cost of about $3bn, it said October 22. The group had also agreed to pay for a pre-feasibility study into building a third hydropower station at Inga on the Congo River, which will help supply electricity for the smelter. BHP Billiton SA said the proposed smelter would produce about 800000 tons of aluminium a year in its first phase and require 2000MW of electricity. But sources in the regional electricity industry said that the deal was curious because there were already existing agreements in place with other parties and it raised questions about the Congo government's transparency. The Congo government had already signed an agreement with Western Power Corridor Company, which was established by the power utilities of the Congo, SA, Namibia, Angola and Botswana, in order to study the viability of building a 3500MW hydropower station at Inga 3, which would supply the five countries with power, as well as a transmission line. Other global resources companies were also known to be interested in building aluminium smelters in the Congo and might question the exclusive agreement with Billiton. The World Bank last year called for interested parties to undertake a study into Inga III. BHP Billiton communications head Bronwyn Wilkinson could not be reached for comment. There is a public-private partnership under way that includes Toronto Stock Exchange-listed Mag Industries and SA's Industrial Development Corporation to rehabilitate the Congo's Inga I and II hydropower plants, which were built in the late 1960s and have a total capacity of about 1700MW. In the long term there have been discussions about building a massive power station on the Congo River, Grande Inga, which could generate 39000MW of electricity to supply southern Africa's growing needs. Billiton said that the group's Mozal project in Mozambique had demonstrated the benefits that an aluminium smelter could bring to the country. BHP Billiton Southern Africa chairman Vincent Maphai said that the development of the Inga III hydropower project and the smelter would be demanding. However, the group was prepared to work with the Congo's government to ensure the success of both projects, he said.

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MINING

Aquarius Fails to Make the Most of Platinum Boom


Aquarius Platinum's net profit grew a modest 7% to $49,5m in the September quarter over the corresponding quarter last year as operating cost increases and industrial action eroded some of the benefits of higher platinum prices. But compared with the June 2007 quarter, the miner's net profit fell 8% because of an $8m revaluation of its Zimbabwean tax liability, which inflated June's profits. Headline earnings for the September quarter were US58,2c (US54,4c) per share. Aquarius said it would propose a three-for-one share split at its November annual general meeting to improve the liquidity and affordability of its shares. Aquarius's attributable production rose 9% to 140357oz in September compared with the June quarter and revenue grew 27,5% to $201,9m. The price Aquarius received for the basket of metals it mines rose to record levels of $1438/oz, although the continued strengthening of the rand was affecting profitability. Unprotected strikes at contractors Murray & Roberts Cementation over pay reduced output from the Kroondal and Marikana mines. At Kroondal, 148983 tons of production were lost and at Marikana 25900 tons were lost. There was also some labour disruption at the Everest mine caused by a change of ownership of Shaft Sinkers Mining from Shaft Sinkers to JIC Mining. Despite the disruption, the mine increased production 19% to a record 48841oz of platinum group metals.

Mbeki Tells Sonjica to Investigate All Mines

President Mbeki has asked Minerals and Energy Minister Buyelwa Sonjica to commission an audit into safety at all SA's mines after the accident at Harmony Gold Mining's Elandsrand mine, Sonjica said October 5. At a press conference during the fifth biennial Mine Health and Safety Council Summit, she said the department would amend the Mine Health and Safety Act of 1996 to lay down minimum standards of safety. The act had followed the outcomes-based model in place in other developed countries because it was impossible to lay down a single standard for an industry as diverse as mining, but it was possible to have minimum standards. Sonjica highlighted the need for a minimum standard on maintenance of infrastructure, which she suggested had been one of the problems at Elandsrand. She and council chairman Thabo Gazi also noted the lack of capacity within the council as a result of high staff turnover. The council needed engineers and doctors but it was constrained by the remuneration that could be offered in the public service, Gazi said. At his last check, the council was short of about 50 inspectors out of a staff complement of 330. Gazi told the summit there had been no improvement in SA's fatality rates since 2004-05, yet the goal set out in the 2003 summit had been to reduce deaths by 20% a year to zero by 2013. In fact, there had been a regression of 5% in SA's fatality rates in the past few years. Injury rates had been stable, but 4000 people were still being injured in the industry every year. If the gold industry were to achieve its original goals, fatality rates would have to fall 30% a year instead of 20%, he said. Sonjica said her main concerns were that there were still different interpretations of what constituted a risk assessment and these were sometimes done with pre-determined outcomes. For example, if costly control measures would be required, risk assessments were tailored to show this was unnecessary. "I don't believe we should be working on the premise that mining is risky," she said. "It immediately brings laxity to our pursuit of mine safety. We should say we are making sure we reduce the risk in the process, not take a defeatist approach."

State, De Beers to Buy 10 Percent of Country Diamonds

The State Diamond Trader and diamond mining giant De Beers, signed a deal October 8 to allow the new trader to acquire 10 percent of all diamonds mined in South Africa. In what Minerals and Energy Minister Buyelwa Sonjica described as "a big leap towards transformation" these diamonds would be sold on to emerging crafts-people in the diamond industry. The crafters will cut and polish the gems, at a profit, before they are placed on the market. The intention, said Ms Sonjica, is to boost downstream industry in South Africa to a point where a considerable amount of value-addition to the country's minerals can happen locally. The aim is also part of ongoing efforts aimed at transforming South Africa's economy to the point where more South Africans - previously excluded from such economic activity by colonialism and apartheid - can participate actively in the economy. The State Diamond Trader was established on 3 September this year and by January next year, said its Chief Executive Officer, Abby Chikane, "we will be able to supply our clients with rough diamonds for beneficiation." Mr Chikane added that De Beers would also be providing it with technical expertise and intellectual property as the State Diamond Trader begins its work in earnest from November. Ms Sonjica said that government was happy that it had reached a point with the signing of the where citizens who were not previously able to participate in the industry could now do so. "This [the service and licence agreement with De Beers] is going to make beneficiation a reality in South Africa," said the Minerals and Energy Minister, adding that the government was looking at beneficiating "all our minerals". The 10 percent quota assigned for sale to the State Diamond Trader is "not the end, just the start" said Ms Sonjica, adding that government was being careful to not be "too drastic" in its aim of ensuring that value is added to South Africa's minerals before they are exported. However, the idea of buying 10 percent of diamonds for local beneficiation by emerging cutters and polishers "will expand to other minerals", she added. In the meantime, there is a parallel focus on intensive training of local diamond cutters and polishers, she said, adding that government was looking at "as many people as possible" to add value to the country's minerals. She conceded that South Africa currently does not necessarily have the requisite skills for value-addition to diamonds as "we would have wanted". A group of youngsters is being sent to China to learn cutting and polishing skills, and the government is also in talks with Senegal to examine the possibility of South Africans being trained there as well. She added that government was not looking at subsidies for emerging beneficiators but rather at incentivising the process to encourage more people to participate. She added, however, that the incentives being considered would "not necessarily be monetary". Government is also working with the Industrial Development Corporation to look at the question of access to finance as well as training, reporters were told. Mr Chikane said that the service and licence agreement with De Beers provides a "security of supply" that would allow for a quantifiable amount of the stones to be sold to the clients of the State Diamond Trader. He added that the trader would be buying diamonds at a market-related price and subsequent pricing of the polished product would "definitely not" be above the market rate. The SDT would itself be run on a cost-recovery basis, with the intention of passing profit margins on to its clients, Mr Chikane said. In terms of the value of the agreement, 10 percent of South Africa's $1.4 billion annual production of diamonds would amount to about $140 million. All diamonds purchased by the state diamond trader would have to comply with the Kimberley Process Certificate Scheme - which seeks to keep illicitly-mined and conflict diamonds off the market. Speaking on behalf of De Beers, a non-executive director with the mining giant, Barend Petersen, said that the diamond mining giant is "fully supportive" of government's objectives. Mr Petersen called the signing on Monday of the service and licence agreement "a great day" in the history of the diamond business in South Africa.

Gold Fields to Sell Choco Mine in Venezuela

Global gold producer Gold Fields is selling its Choco 10 gold mine in Venezuela only 18 months after a hard-fought battle to acquire it. It said October 12 that it would sell all its Venezuelan assets to Russian-owned junior miner Rusoro Mining for $532m, of which $150m would be cash, $30m convertible debt and the rest Rusoro shares. This will give Gold Fields a 38% stake in Rusoro. The final value of the deal depends on Rusoro's share price. Gold Fields bought the Choco 10 property for $381m from Bolivar Gold with effect from March 1 last year after raising its initial offer because of resistance from a major shareholder. To date it has spent $420m on the property, including capital expenditure, so it will realise a 25% return on the investment.
The announcement came only a day after Gold Fields announced it would sell its stake in the Essakane property in Burkina Faso, where a mine producing 292000oz of gold a year will be built to partner Orezone Resources. The price paid will be about $200m, giving Gold Fields a fourfold return on investment. Gold Fields chief financial officer Nick Holland said the $380m profits from the two deals could be used to reduce group debt, now about $1bn. About 20% of this debt was subject to SA's recent interest-rate hikes but he said there was still "comfortable head room". The group was under no pressure to realise cash. Another option was to use the profits towards funding the group's capital expenditure programme. It plans to spend $1bn this financial year and $800m next year on expanding gold production, mainly at Cerro Corona in Peru but also in SA. The third option was to use the funds to acquire new projects, Holland said. Gold Fields' exit from the two properties raises doubts about its target of adding 1,5-million international gold ounces by 2009. After these sales, Gold Fields would have to acquire 900000oz to meet the target, CE Ian Cockerill said. But he said the deals were consistent with the group's strategic direction and strategy for international growth. Growth was not only based on the number of ounces of gold produced, it was about improving the value of Gold Fields' shares. Value could be created only by operating a few large, high-quality, long-life assets across the globe where risk and reward were in its favour. "Our growth strategy is not about production growth at any cost. We will not add ounces just to reach a target. Each ounce must add value," he said. When the Choco 10 deal was done, Cockerill was positive about the political outlook in Venezuela, but in February he said that while Gold Fields would not hold back on developing Choco 10, it was not planning to spend more money in Venezuela. The remarks were made after Venezuelan President Hugo Chavez announced a 51% indigenisation plan for the country's mining industry. In the past year, Choco 10's gold production of 54600oz was also below expectations because of technical difficulties, industrial action and a lack of water for processing. Cockerill said October 12 that the risk-reward balance in Venezuela had shifted more towards risk than reward. Rusoro Mining had special relationships in Venezuela, and Gold Fields would maintain its exposure to any upside in the project through its stake in Rusoro.

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INTERNATIONAL ECONOMIC RELATIONS

IBSA Summit a "Political Endorsement" for Future Plans


India, Brazil and South Africa have committed to increasing trade amongst themselves to US$ 15 billion by 2010. In addition, the leaders of the three countries have urged business and industry players to be more ambitious and to exceed that target. A slew of co-operation agreements emerged from the second IBSA (India, Brazil and South Africa) summit in Pretoria, South Africa. South African President Thabo Mbeki, Brazil's Luiz Inácio da Silva and Indian Prime Minister Manmohan Singh were on hand in the South African capital October 17 to initial the accords, which cover a broad range of issues: wind resources, health and medicines, culture, public administration, higher education, and customs and tax administration. Certain analysts were critical of the summit's achievements, saying it failed to make real headway with matters central to trade between the three regional powers - such as tariffs. However, Tom Wheeler, a fellow at the Johannesburg-based South African Institute of International Affairs, said it was still early days for the trilateral grouping - and that the summit was a "political endorsement" of future co-operation plans. Greg Mills - head of the Brenthurst Foundation, a policy research institute based in Johannesburg - further noted that boosting commerce and investment in the IBSA bloc was a daunting task, not least because South Africa and Brazil had economies with similar trade profiles. Established in 2003, IBSA aims to promote South-South links, mainly through trade and investment. It operates by way of regular, high level gatherings and bi-annual summits. The next IBSA summit will take place in India, in 2008. The 52-point declaration issued by the three governments Wednesday indicates their intention to double intra-IBSA trade to 15 billion dollars by 2010. The group re-affirmed its goal of achieving a free trade agreement between India, the MERCOSUR bloc of South America and the Southern African Customs Union, while noting that "significant progress" in this regard was made in negotiations earlier this month. Observing that the Doha round of global trade negotiations was entering a "crucial stage", the summit also called for the removal of barriers in world-wide agricultural trade that undermine production in developing nations. (The round takes its name from the Qatari capital where it was initiated in 2001.) Other issues dealt with by the summit include human rights, counter terrorism and the elimination of nuclear weapons, which India possesses. Delegates noted the lack of progress in nuclear non-proliferation. "Considering that India has signed on, this is an important statement," Wheeler said. But, "I suppose it's on condition that others (nuclear powers) do the same." Brazil and South Africa are putting greater emphasis on nuclear enrichment for increased commercial use. The countries identified defence as an area for future co-operation, South Africa revealing that in May next year the three nations' navies would participate in joint exercises. Two additional IBSA working groups, on human settlement development and environment and climate change, were established. Endorsing multilateralism, IBSA nonetheless called for reform of the United Nations, especially an expansion of the Security Council to ensure that it "reflects contemporary realities". Demands for change at the U.N. have gained currency in recent years. India, Brazil and South Africa all aspire to have permanent seats on the council. Mills warned that the IBSA states should take care not to "appear like an exclusive club", and should reach out to other countries in the group of emerging states. These include China, Mexico, Pakistan and Indonesia. China and Mexico, along with Nigeria, Egypt and Saudi Arabia, were among the states Mbeki invited to take part in a proposed G8 of the South several years ago - a grouping that has not proved successful. The G8 comprises the world's eight leading industrialised nations, all in the North. Mbeki, da Silva and Singh also urged resolution of the crises in Sudan, Zimbabwe, Afghanistan and the Middle East.

India Paints an Attractive Model SA Could Emulate for Growth

South Africa is fond of turning to China when it looks for economic inspiration, but valuable lessons are on offer from another Asian powerhouse, India. Indian engineering companies showcased their goods and expertise at the Indian Engineering Exhibitions show October 23. At the launch of the event, Rantideb Maitra, executive director of India's Engineering Export Promotion Council, painted a picture that could well be a model SA may wish to emulate. India's ability to maintain a growth rate of 8,5% over the past three years is widely hailed. Still, it is not quite as exuberant as the double-digit growth China has managed over the same period. But Maitra points out an important distinguishing factor between the two economies vying for dominance in the world economy. While the success of the Chinese economy is largely based on the unprecedented volume of goods that leaves that country's shores, India's growth is not export-driven; it is underpinned by robust domestic demand. India's strong domestic demand vitally shields it from volatility in the global market. The reliance on a robust domestic demand base means the Indian economy will not be as much affected by an anticipated downturn in the US economy as China would, Maitra says. But India has other strengths which underpin the sustainability of its growth. Like SA, India, is facing an acute skills shortage. That country is, however, aggressively tackling the problem by investing in the education and expansion of its workforce. The endeavour, Maitra believes, would ensure that India will remain strong in manufacturing. Education data lend credence to Maitra's views. India annually produces 500 doctorates, 300000 nonengineering postgraduates and 410000 other graduates. Of the latter, 200000 graduate as engineers. Even with a population of 1,3-billion people, the figure is impressive, translating into two engineers for 13000 of the population, compared with the five engineers SA produces for every 400000 people annually. These Indian graduates feed into a sector abuzz with activity. India's engineering sector employs 7-million skilled and semi skilled employees, working for 40000 firms.

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PETROCHEMICALS

PetroSA Makes Plans for New Oil And Gas Facilities


PetroSA, the state-owned oil company, has announced plans to invest about R50bn over the next six years in building a new crude oil refinery and a liquified natural gas receiving terminal. If both projects are located in Coega, Eastern Cape, as is envisaged, they will represent a major boost for the economy. A state-owned refinery will secure SA's oil supplies and make a favourable contribution to the country's balance of payments. CEO of PetroSA Sipho Mkhize told Parliament's minerals and energy committee October 24 that partners would be sought for a R39bn oil refinery which was expected to come on stream in 2014-15 with a capacity to produce about 200000 barrels of refined oil a day. He said Minerals and Energy Minister Buyelwa Sonjica was awaiting the outcome of the feasibility studies -- likely to be concluded in 2009 -- before giving the project the green light. PetroSA would be looking for an equity investor or a co- investor to either supply crude oil feedstock or take off some of the production. At a media briefing , Mkhize said that Sasol could participate if it wanted to. PetroSA, which produced a net profit of R2,8bn in the year to end-March, has a cash pile of R10,7bn of its own that it can use for the project and is in negotiations with its holding company, the Central Energy Fund (CEF), about getting a dividend "holiday" over the next few years so it can accumulate more funds. Through the CEF, PetroSA has paid the government about R1,2bn in dividends in the past two years. The planned refinery will contribute to greater security of energy supply for SA, which is forecast to need about 280000 more barrels a day by 2020. The refinery project, dubbed Project Mthombo, is a direct response to the government's energy security master plan, which recommended that PetroSA procure about 30% of all crude oil consumed in SA. "Based on the current rate of demand growth, the demand for fuel in SA will justify a new crude oil refinery within the next five to seven years. Once the technical specifications and commercial aspects of the project have been clarified, the final investment decision will be made around 2010-11," Mkhize said. Coega was chosen as a tentative site over Saldanha Bay, Richards Bay and Newcastle. Mkhize estimated the project would generate about 1000 direct jobs, about 5000 indirect jobs during operations and about 10000 jobs during construction. The South African Petroleum Industry Association welcomed the announcement, saying any effort to help address the shortfall of petrol supply in SA was crucial. Executive director Connel Ngcukana said the shortfall in liquid fuel by the time the refinery came on stream in 2014 was expected to exceed 7-billion litres. This meant SA's increased importation of the refined product would be at a huge cost to the fiscus and have implications for the country's balance of payments. Ngcukana questioned the location of the refinery, noting that the primary demand for liquid fuel was inland and that a refinery on the south coast presented problems in getting the product to its primary market. " The decision could be linked to the need to provide jobs in the area and the large automotive industry in the region, but the planned volumes are too big and the demand is really inland," Ngcukana said.

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