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SOUTH AFRICA


  
   

 

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Key Economic Data 
 
  2002 2001 2000 Ranking(2002)
GDP
Millions of US $ 104,235 113,300 127,900 35
         
GNI per capita
 US $ 2,600 2,820 3,060 94
Ranking is given out of 208 nations - (data from the World Bank)

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Area (sq.km)
1,219,912

Population
43,586,097

Capital
Pretoria

Currency
rand

President
Thabo Mbeki


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Background:
The Union of South Africa that followed the Boer War (1899-1902) operated under a policy of apartheid - the separate development of the races. The 1990's brought an end to apartheid politically and ushered in black majority rule. Southern Africa as a whole is a very different place than it was two decades ago. Old single-party dictatorships and white minority government have given way to nascent democratic governments with varying degrees of success and maturity. On 10 May 1994, Nelson Mandela took office as the first president of the 'new' South Africa'. His inauguration marked the end of a long struggle to achieve a non-racial political regime and the beginning of an equally difficult and protracted process of state and nation building that is intended to lead eventually to the realisation of a stable democracy. 
The 1990's can be viewed as a success. The diminution of political violence, the relatively peaceful transfer of power, the continuation of the transformation process, albeit painfully slow, can be regarded with pride and promise. The retirement of Mandela as president in 1999 saw the second round of successful majority-rule elections. The succession process was amazingly smooth. Thabo Mbeki was officially named to ANC's candidate for president back in 1997. Mbeki may lack Mandela's charisma, and his capacity for fairness and sensitivity, but his style is different and more efficient and businesslike. Mbeki will remain unchallenged as president in 2002, but the ANC remains deeply divided.
South Africa is the most developed country in southern Africa, and the regional leader economically and politically. But South Africa (and every other country in the region) has its own problems. The political transition from a race-based polity to one based on majority rule is almost complete, yet subject to tensions. Changes have occurred with relatively little violence. Aside from the former Soviet-bloc countries, no nation has experienced greater change than South Africa over the past decade. The non-racial democracy is still in its infancy and still requires nurture and development. 
South Africa has the most sophisticated economy in black Africa. Unlike other African countries its manufacturing sector is relatively advanced. It is the largest sector of the economy, contributing about a quarter of the GDP. Agriculture is also relatively diversified, producing wine, citrus products and wool for export and maize for internal consumption. Agriculture accounts for about 4 percent of the GDP. The population is growing fast at 2.6% pa. In 1999 it totalled 45 million - 76% African, 13% white, 8.5% coloured, and 2.5% Asian. The GNP per head is over $3000 (compared to $300 in Nigeria) but this figure masks inequitable distribution of wealth between the races.
In Southern Africa as a whole, South Africa accounts for less than one-third of the population but for more than 75 percent of the GDP. Its economy is 3.4 times larger than the combined economies of the other members of the Southern African Development Community - SADC (Angola, Botswana, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Swaziland, Tanzania, Zambia, Zimbabwe). This suggests that South Africa occupies a position in Africa similar to the United States within the global economy. While the United States accounts for 26 percent of global GDP, South Africa accounts for about 44 percent of Africa's GDP. South Africa's economic outreach into and beyond the region grew substantially after the ending of apartheid, and shows every sign of continuing to do so. Many of South Africa's largest conglomerates, banks, and financial institutions have found openings for investment in some twenty countries in Africa. The countries of greatest immediate interest are Angola because of its oil and mineral resources, and the Democratic Republic of the Congo with its huge potential for mining development. 

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Update No: 31 - (29/07/04)

Bank chief and Finance Minister at odds
Moody's international ratings agency said July 14 that economic growth could rise 3.5% this year, but an early rate hike could dampen the growth outlook. Agency vice-president Kristen Lindow said that gross domestic product (GDP) figures due to be released in August would probably show accelerated growth for the last quarter. GDP grew 3.1% in the first quarter on a seasonally adjusted annualised basis after manufacturing emerged from its recession. Moody's 3.5% growth forecast for the year is far more bullish than the 2.5% market consensus and even more positive than government's 2.9% growth forecast. Debate on the merits of a strong or weak rand have intensified with both the Finance Minister and Reserve Bank governor speaking out on either side of the issue. Opinion is largely decided by what business you are involved in. That the strong rand has hit South Africa's export-driven mining and resources companies is clear but there are many other industries under pressure. Sources across a range of industries say their exports have either dropped significantly or are still taking place due to contractual obligations, but at sharply lower margins or, in some cases, at a loss. Reserve Bank governor Tito Mboweni mounted a defence of the strong rand July 22, saying that while it was painful, it was beneficial to the economy in forcing companies to become more efficient. Mboweni has called for more balance in the debate about the strong rand, reiterating his views that the currency's gains were good for low inflation and the trade sector. Mboweni, whose contract as governor was renewed July 23 for a further five years, has come under attack for his perceived support for a strong rand in the face of falling export revenues and job losses in mining and manufacturing. Mboweni says his next five years in office will see no major changes to monetary policy, which will result in the central bank sticking to its inflation target of between 3-6 percent His remarks came just a day after Finance Minister Trevor Manuel warned July 21 that the economy could not afford the job losses caused by the rampant rand, and said government was giving the matter serious attention, with discussions taking place at presidential level. Manuel's concerns appear to put the two men at odds over policy. Mboweni said the Bank's strict monetary policy was not directly causing the rand's strength. Manuel's comments are the first official concern expressed about the rand's strength since it surged through R6 to the dollar. The import-export industry is experiencing both positive and negative effects as a large portion of its businesses are conducted in United States (US) Dollars. "A negative impact of the strengthening Rand is that it leads to declining Rand revenue, as our Dollar based revenue is significantly less when converted into local currency. Also while our imports should increase, our exports decrease because our international clients have less buying power," explained Rohde and Liesenfeld Johannesburg Executive Airfreights Manager Craig Crozet. There was also sharp decline in the contribution made by mining to the South African economy last year, according to a new report by the Minerals Bureau, the statistical arm of the minerals and energy department. The bulletin, which was published mid July, reports that last year mining contributed R78.5bn to gross domestic product, or 7.1%, compared to 7.7% in 2002. Goldman Sachs reports that lifting the remaining foreign exchange (forex) controls within two years, rather than more gradually, as government prefers, would be most beneficial for economic growth, in a new study by the investment bank. Carlos Teixeira, one of the authors of the report, said July 15 that economic conditions were currently favourable for a complete removal of existing controls, which restrict South African residents and companies from investing abroad. Removing the remaining forex controls over a two-year period could boost trend growth in gross domestic product (GDP) by one percentage point and double net foreign direct investment inflows. 
South Africa's controversial chief prosecutor has handed in his resignation, after leading a tough anti-corruption drive. Bulelani Ngcuka has been at the centre of a political storm for the past year after implicating Vice-President Jacob Zuma in a corruption scandal. But Mr Ngcuka's spokesman denied reports that he had come under government pressure to stand down. 

Black Empowerment - fears raised in IMF report
The International Monetary Fund (IMF) has raised concerns about the effect that private sector funding of black economic empowerment will have on foreign investor confidence. The body also questioned the absence of any built-in measures to safeguard against the concentration of assets in a few hands. This adds to a chorus of criticism that the programme benefits only a few individuals with links to the ruling African National Congress. According to BusinessMap, about R40bn in assets changed hands last year with most of the big deals involving the likes of Tokyo Sexwale's Mvelaphanda Resources and Patrice Motsepe's African Rainbow Minerals. Revelations about the IMF's concerns come in the wake of criticism by both the Congress of South African Trade Unions and the South African Communist Party of the manner in which wealth is being concentrated in a few hands rather than having broader benefits. Finance Minister Trevor Manuel relayed the IMF's concerns originally raised in its 2003 country report on SA when replying July 22 to a parliamentary question by Democratic Alliance finance spokeswoman Raenette Taljaard. The finance ministry's statement on the 2003 IMF report posted on the department's website on June 11 did not touch on these concerns, but merely noted that the "the fund expressed support for government's approach to (empowerment) and suggested continued focus on its financing aspects". Publication of the report received by government in September last year was delayed for several months until after the April election so it could be dealt with by the new cabinet. Each year the IMF undertakes an assessment of the country's macro-economic policies and produces a report on its findings. Manuel said that while "the IMF supports broad-based (empowerment) to address racial disparities in income and wealth, it did note that uncertainties surrounding the funding of asset transfers could deter foreign investment. The IMF also observed that the initiative did not include safeguards against the concentration of assets in a few hands." Manuel said that in the course of discussions with the IMF on the issue, government had emphasised that the bulk of funding for empowerment deals would come from the private sector. However, "it was noted that R10bn has been set aside (by the South African government) to finance medium-sized transactions where ownership is broadened and value is added". Taljaard said IMF officials had raised their concerns about the programme during a meeting with Parliament's standing committee on finance, after the April general election. She said they were concerned about the capacity of the private sector to fund the programme on its balance sheet and still remain profitable, concerns which were likely to be expressed once again in the IMF's 2004 report. Taljaard said the officials were also "very upset" about the concentration of wealth in a few hands. She expected that they would be even more so after the transfer of assets in the financial services sector in compliance with the sector's charter. Last week, a consortium led by businessmen Cyril Ramaphosa and Saki Macozoma bought a stake both in Standard Bank and Liberty Life's local operations.

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AUTOMOBILES 

Volkswagen SA in R25bn export deal

Volkswagen SA has started exporting its Golf 5 model in a five-year R25bn contract that will see 2300 units a month exported to the Asia Pacific region, with Japan and Australia the key customers. Buoyed by the successes of government's export drive under the Motor Industry Development Programme (MIDP), VWSA and other vehicle manufacturers have boosted their export sales to get rebates on the import of components and models not assembled in SA. "This project will generate turnover of R320m a month, R4bn a year, and approximately R25bn over the life cycle of the vehicle," VWSA MD Andreas Tostmann said June 30. VWSA is the first plant outside Europe to manufacture the new Golfs. Tostmann said he was confident that VWSA would make inroads in the Japanese market, one of the most demanding markets in the world. He said VWSA intended to constitute 24% of the imported vehicles in Japan. Economist Tony Twine said the switch from the European market to Asian Pacific was based on "sound strategy" because the UK was the only European right-hand market of any significant size. New Zealand, Singapore, Malaysia, Indonesia, Brunei, Hong Kong and Sri Lanka where the Golf 5s will be exported are mostly right hand markets. Moreover, these areas have "recognisable high economic growth potential". Tostmann said VWSA had invested more than R750m in facilities to produce the new Golfs for both the local and export markets. "We have installed state of-the-art technology in our Uitenhage plant to build this new generation Golf," he said. VWSA has also implemented a skills training at operator level for the production of the vehicles. He said the company had also employed 900 workers on the new Golf line. On the effect of the rand on exports, Tostmann said: "The rand will always have an effect on export programmes. "But the most important thing is not the strength or the weakness of the rand, but a stable currency. The strong rand has had an impact on our exports but we can handle it," he said. The Golf 5 export programme follows a TDI engine export programme, which was announced earlier this year. According to VWSA, the engine export programme will generate about R12bn in revenue over the next six years.

New Mahindra vehicles

Indian motor group Mahindra & Mahindra will launch two of its 4x4 sport utility vehicle brands in South Africa in August. They are the Mahindra Bolero diesel "workhorse" and the Scorpio. The Scorpio's petrol engine is Renault-based, while the Bolero has a "Peugeot pedigree" power plant. Mahindra & Mahindra is the second Indian company after the diversified Tata group to enter the SA vehicle market. Vice-chairman and MD Anand Mahindra says the company plans to open seven dealers in the next 12 months. The first two will be in Cape Town and Durban, with three coming in Gauteng. Details of alliances with South African interests have not yet been revealed, but the involvement of a black economic empowerment partner is a possibility. Mahindra & Mahindra will own the majority stake. The investment for distribution, after-sales service and spare parts is "not insubstantial," says Mahindra. It says it may establish a manufacturing plant in South Africa.

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AVIATION 

SAA won't have to end partnerships

South African Airways (SAA) will not have to end its partnerships with other airlines as part of conditions for its Star Alliance membership, it emerged July 15. This should go a long way towards dispelling market fears that SAA was planning to ditch its longtime code-sharing partners such as British Airways, Cathay Pacific, Qantas and Air France. SAA did not belong to any alliance before its membership was accepted by the Frankfurt-based Star Alliance. Star Alliance is the largest global airline network. It provides daily flight connections to 755 airports in 132 countries. Subject to Competition Commission approval, the national carrier will become the first African airline to join the 15-member group. SAA and TAP Air Portugal are expected to become full members by the end of next year. Network alliances are important to airlines as they help to increase passenger loads and revenue through code-sharing agreements and joint-venture operations. The partnerships also increase the airlines' buying power and ensure cost saving through joint purchasing of parts and software. Customers also stand to benefit from seamless connections and frequent flyer rewards, which can be earned from or redeemed through any of the member airlines. Chris Klick, Star Alliance's vice president for corporate affairs, said yesterday that although the organisation would prefer collaboration among member airlines, it would not demand that new alliance members relinquish deals with other airlines. "We are striving for a win-win situation. A decision to join (or relinquish certain partnerships) should not hurt the bottom line," said Klick. Star Alliance's six-member team was in SA to start the process of integrating SAA into the alliance, Klick said. The integration would include harmonising the ticket booking systems and frequent flyer programmes. SAA spokesman Onkgopotse Tabane said the airline would communicate with its current code-sharing partners about which ones it was planning to cut ties with. He said a decision would be made in the next 18 months. In the interim, SAA would consult its non-aviation partners such as tourism authorities about which new routes to add or cancel, Tabane said. He said that SAA was confident that the Competition Commission would approve its membership of the Star Alliance. Competition Commission spokeswoman Zodwa Ntuli said it had yet to receive SAA's application. "Nothing has been forwarded by SAA to us. Perhaps they are still going to send their application, but at the moment we do not have it on our register."

SAA's Nigerian Airline bid still on

South African Airways (SAA) was still in the race to acquire 30% of Nigeria's new national airline, Nigerian Eagle, Public Enterprises Minister, Alec Erwin, said July 22. The minister threw cold water on reports that talks between SAA and the Nigerian government had collapsed, and that the estimated 30m tender had been reopened for fresh bids. He said negotiations between SAA and Nigeria were still on track and there would be further discussions between the two parties in the run-up to the finalisation of the tender process. "SAA is still part of the bidding process and its bid will be evaluated with other airlines' bids," he said. Air France and Virgin Atlantic are also bidding for the stake in the new airline, expected to be launched possibly in October this year. Nigerian government officials were quoted earlier this week as saying negotiations with SAA had deadlocked after Nigeria requested a 10% stake in SAA when the national carrier was privatised. Acquiring a stake in the new airline would bring SAA closer to realising its vision of creating three strong regional hubs in southern, eastern and western Africa. SAA, which has southern Africa as its home ground, already has a hub in east Africa through its 49% stake in Air Tanzania. Erwin's comments that SAA's bid would be evaluated "with other airline bids", suggests that SAA's appointment as Nigeria's new airline strategic equity partner has been nullified. In January the Nigerian aviation ministry declared SAA the bid winner after the parastatal was found to be the only suitor to have expressed interest in the new airline. In February, Sapa-AFP reported that Nigerian President Olusegun Obasanjo had defended his government's choice of SAA as core investor for the new airline amid criticism from private airline operators. The airlines argued that SAA, which had temporarily dipped into technical insolvency, was not suitable. But Obasanjo said SAA, with annual traffic volume of 6.35-million passengers and operating revenue of more than $2m, "is Africa's number one airline." The SAA deal with Nigeria is politically fraught whether it succeeds or not. Success will lead to further accusations of South African dominance of the Nigerian economy and failure may sour relations between the two governments. The lesson is surely that governments should not be running airlines. It is too easy for political considerations to defeat commercial considerations, and the political fallout can have implications well beyond the countries involved particularly when they are two continental titans leading the cause of African unity.

SAA sued for R275m over Sun Air's demise

South African Airways (SAA) confirmed July 18 that it was facing two lawsuits amounting to R275m, following allegations that the airline had conspired to take control of the now defunct rival Sun Air and then deliberately put it out of business. The takeover, from which SAA allegedly benefited by about R125m, was apparently intended to prevent Virgin Atlantic from acquiring Sun Air and entering in to competition with SAA on the same routes. SAA spokesman Onkgopotse Tabane said that it would oppose the merits of the two cases in court. "Our attorneys, together with our executive management, are currently preparing for the cases," he said. The first case, which involves outgoing SAA CEO André Viljoen and his predecessor Coleman Andrews, is scheduled for trial on August 10. The liquidators of Sun Air are allegedly suing the two for R79m, an amount the liquidators claim they could have gained from the sale of the Sun Air assets had SAA not blocked the move. The Sunday Times reported that businessman Robert Watson, who had a 35.75% stake in Sun Air, was claiming R178m in damages from SAA in a case that will be heard on November 19. Tabane declined to say if the lawsuits had led to Viljoen's sudden resignation.

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FOREIGN TRADE

Thailand and South Africa

Thailand has identified SA as a gateway to markets in the southern African region and the rest of the continent, says Adisai Dhummakupt, the commercial minister in Thailand's embassy in SA. Among other things, this is expected to boost trade between SA and Thailand, which amounted to $651m last year, 15% up from the previous year's $566m. "Not only is SA Thailand's most important trade partner on the African continent, with its first world infrastructure, it is also viewed as a gateway to the entire southern African region," Dhummakupt said July 21. The remarks were made at the launch of the 4th Annual Thailand Exhibition in Sandton, due to take place from August 17-19. Dhummakupt said that in the past two months, the Thai government had conducted investment and trade opportunity seminars for companies interested in investing and trading in SA. In addition to that, he said, the Thailand Export Promotion Department had recently undertaken a research project to study SA's suitability as the gateway to penetrate southern Africa. "This research project will be completed shortly and will give Thai companies the necessary information and guidelines with regards to the South African and southern African markets." In 2001, former trade and industry minister Alec Erwin and Thai Commerce Minister Adisai Bodhamarik signed a bilateral trade agreement. The main purpose of the agreement was to create a base for further trade between the two countries. The agreement provided for a joint trade committee which would from time to time, review the trade agreement. The committee, comprising representatives of the two countries, met for the first time in December last year. Its next meeting is in Bangkok next month. Next month the embassy will host its annual Thailand Exhibition to promotes Thai products and services in SA. These will include automotive parts, construction material and hardware, electrical appliances, food and beverage products, furniture, household appliances and leather products. Dhummakupt said the exhibition, in its fourth year, had contributed to last year's 13% growth in Thai exports to SA. These amounted to $377m, "despite the weakness of the rand", he said. Thailand's exports to SA include rice, skins and hides, machinery, vehicles and electrical machinery. Last year also saw an increase in SA's exports to Thailand, to 273m from 232m in 2002. SA exported mainly iron and steel, aluminium, precious stones and metals, wood pulp, copper and copper articles. "We are looking forward to a substantial increase in exports to SA during 2004," he said.

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FREE TRADE ZONE

Deadlock set delays US-SACU trade pact

Government confirmed July 21 that free trade talks between the Southern African Customs Union (Sacu) and the US had stalled. Trade and industry director general Alistair Ruiters met US officials in an attempt to resolve the impasse. A logjam at this late stage is likely to jeopardise aims to conclude the trade talks by December. The US round is important for business, as it could lock in the substantial, but temporary benefits Sacu exporters enjoy under the African Growth and Opportunity Act. Sharma said that, after more than a year of negotiations, the two parties' positions were still far apart. He suggested that the US's demands far exceeded what Sacu could offer. Demands included changes to South African legislation to open the domestic market to US companies. Sharma suggested the US was not living up to its initial political promises of recognising Sacu as a far less developed region than the US. "To bridge the gap, the US as the far more developed partner would have to translate into reality its stated political commitment to asymmetry and special and differential treatment," he said. Sharma was not optimistic that the December deadline would be met. The US formed an important part of South Africa's trade agenda, which was aimed at providing domestic companies with preferential market access in all major markets. A conclusion to US talks was also important because it would free up Sacu's limited resources to commence talks with other mooted free trade partners such as India and China. Meanwhile, business leaders warned that negotiations should focus on reaching a good deal, rather than on deadlines. "There are significant issues that have to be thrashed out," said South African Chamber of Business boss James Lennox. He said the chamber regarded the December deadline as "too optimistic."

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HIV/AIDS

International Aids Conference: Mandela appeals for cash

Nelson Mandela made an impassioned plea for cash July 17 and cooperation to fight Aids virus after a week of discord at the world's biggest Aids conference over Washington's go-it-alone approach. "History will surely judge us harshly if we do not respond with all the energy and resources that we can bring to bear in the fight against Aids," said the frail former South African president. Wrapping up the week long 15th International Aids Conference in Bangkok, Mandela urged the world's rich countries to make good on financial promises to the Global Fund to Fight Aids, Malaria and Tuberculosis, launched in 2002. "We need to build the public-private partnership that is the vision of the Global Fund. We challenge everyone to help fund the fund now," said the Nobel Peace laureate and one of the world's leading Aids campaigners. "Allow me to enjoy my retirement by showing you can rise to the challenge." The Global Fund, the brainchild of United Nations Secretary General Kofi Annan to present a global, unified force against HIV and Aids, needs more than $3 billion for 2005. Washington has ruled out raising its contribution to the fund beyond $200 million already committed for next year, saying it is already spending more to combat Aids than the rest of the world put together. Launching his charity, 46664 Global Campaign Mandela said strong leadership was required to turn the tide of the HIV/Aids epidemic. "Today, let us renew our commitment to work together to find new ways of reaching out with compassion to the millions of men, women and children who are the tragic victims of the physical and social devastation caused by HIV/AIDS."

Additional $30m from emergency plan for AIDS relief

South Africa has received approximately $30 million in additional U.S. government assistance to combat the HIV/AIDS pandemic. This new injection of funding completes South Africa's $70 million allocation for 2004 under the President's Emergency Plan for AIDS Relief (PEPFAR). The President's Emergency Plan represents the United States of America's unprecedented five year, $15 billion dollar commitment to fight global HIV/AIDS. On June 25, during the announcement of the release of an additional $500 million for PEPFAR, Global AIDS Coordinator Randall Tobias said, "Swift action under President Bush's Emergency Plan for AIDS Relief is bringing new hope to those fighting this disease. The United States' unprecedented commitment has already begun to show results." In South Africa the President's Emergency Plan will go to supporting the South African government's comprehensive plan to provide antiretroviral treatment for more than 53,000 people, as well as prevention, palliative care, and support to orphans and vulnerable children. The President's Emergency Plan embraces a comprehensive approach to fighting AIDS through a balance of treatment, prevention and care programs that work in concert to increase the effectiveness of each. Substantial resources are also dedicated to overcoming infrastructure and human capacity constraints to fighting HIV/AIDS in resource poor settings. Partners receiving funds from the Emergency Plan have been strategically selected based, in part, on their ability to sustain projects and develop infrastructure while providing prevention, treatment and care. The fifteen focus countries of the Emergency Plan for AIDS Relief are Botswana, Cote d'Ivoire, Ethiopia, Guyana, Haiti, Kenya, Mozambique, Namibia, Nigeria, Rwanda, South Africa, Tanzania, Uganda, Vietnam and Zambia.

UN criticises South Africa

South Africa's ranking in an international report on the world's best countries to live in has dropped because of the effect of AIDS on the country's achievements, says the United Nations Human Development Programme (UNDP). The UNDP Human Development Index, published every five years and released July 15, ranks SA 119 out of 177 countries. In 2002, SA ranked 107th. SA is behind Mauritius, Tunisia and Cape Verde, which are at 64, 92 and 105 respectively. Egypt was ranked at 120, Ghana at 131, and Nigeria at 151. The last 19 countries on the index are African, with Sierra Leone in last place. The UNDP measured the achievements of each country on life expectancy at birth; enrolment ratios for primary, secondary and tertiary education; and gross domestic product (GDP) per capita and purchasing power parity. For SA, the UNDP anticipated a "serious and prolonged" effect of HIV/AIDS, and this affected the rating. The report said AIDS reduced the average life expectancy in many countries in sub-Saharan Africa to 40 years or less, making it the biggest factor in the decline of human development in the region. The average life expectancy in Norway ranked first was 79 years. UNDP administrator Mark Malloch Brown said the crisis has crippled states at all levels. "AIDS attacks people in their most productive years ... it tears apart the foundations of everything from public administration and healthcare to family structures." He said that since 1990, at least 20 countries in sub-Saharan Africa had reversed course and consistently declined in ranking. SA's affirmative action policy received special mention in the report, titled Cultural Liberty in Today's Diverse World. Brown said if poverty were to be eradicated, the world had to successfully confront the challenge of building inclusive, culturally diverse societies. SA's lacklustre response to the HIV/AIDS pandemic has drawn a blistering attack from United Nations (UN) Secretary-General Kofi Annan's special envoy on HIV/AIDS in Africa, Stephen Lewis, who accused government of dragging its feet on treatment. Lewis told the 15th World AIDS conference in Thailand that it was ironic that SA, with all its resources, was not leading the way for its African neighbours. About 5.3-million South Africans are infected with HIV; but only 6,000 out of about 400,000 in need of antiretroviral medicines are receiving them. "You can't imagine how the impoverished countries in Africa are moving heaven and earth to implement treatment," the UN special envoy said. "They don't have anywhere near the money or infrastructure of SA, but they are determined to respond to a pandemic that is decimating their populations." Lewis' remarks followed Treatment Action Campaign chairman Zackie Achmat's impassioned plea to government to end the confusion over the anti-AIDS drug nevirapine. 

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MINERALS & METALS 

Anglogold in £17.6m Russian mine deal

Anglogold Ashanti, the world's second-biggest gold producer, is to make its first move into Russia, announcing July 1 that it had agreed to buy a 29.9% stake in Trans-Siberian Gold through an equity investment of £17.6m. Explaining the reasons behind the venture, the company said Russia had a large number of gold deposits and an established mining and resource industry. Russia is ranked fourth in the world in gold ore reserves and fifth by annual gold production. AngloGold Ashanti president Sam Jonah described the venture as a "modest first move" and said the company was "relatively sure" it would not be its last. Trans-Siberian Gold is the UK-based holding company for the Trans-Siberian Gold group's Russian gold business, operated through four subsidiaries. The group has three existing gold projects, Asacha and Rodnikovoe, both in Kamchatka, and Veduga, in the Krasnoyarsk region of Russia. AngloGold Ashanti's investment in Trans-Siberian Gold will be used to help bring the most advanced of these, the Asacha and Veduga projects, into production as well as to fund Trans-Siberian Gold's ongoing exploration and corporate development initiatives. AngloGold Ashanti and Trans-Siberian Gold have also agreed to form a broader partnership in which AngloGold Ashanti will have an option to exercise an earn-in right to acquire a 51% direct interest in any of Trans-Siberian Gold's new mining or exploration projects. Leon Esterhuizen, precious metals analyst at Investec Securities, said the acquisition was a good move. "It's early days, it's a small acquisition with promising upside and we'd expect more of the same over the medium term," said Esterhuizen. AngloGold Ashanti will pay £17.6m for two tranches of 6.13-million ordinary shares. The first tranche will be issued at a price of 136.95p a share and is expected to take place towards this end of this month. The second will be issued at 149.40p and this is expected to take place at the end of this year. Its first step into Russia follows rival Harmony Gold's decision to pull out of the country last year. In October Harmony Gold sold its 31.7% stake in Highland Gold to Barrick Gold and a group of investors for R830m, realising a profit of R530m.

De Beers dispute settled

The settlement of the more than five-decade-old legal dispute between De Beers and the US justice department mid July was, by all accounts, a watershed. It marks the extension of the South African frontier into the largest diamond market in the world. It is a significant stride in the company's strategic intent of complying in all the jurisdictions in which it operates. A company as myopic and passionate about diamonds as De Beers could not ignore the US forever. Diamonds are a luxury product with huge sentimental value and no material value. Their consumption is largely a function of disposable income and people's propensity to show their love and commitment to each other. In basic terms, De Beers' strategy is to continuously maximise its share of the disposable income that consumers, especially in rich countries like the US, spend on luxury commodities. Its "supplier of choice" strategy aims to close the "opportunity gap" between total global spend on luxury goods and the amount spent on diamonds as a luxury product. Therein lies the strategic importance of the US as a vital market. The US is the richest country in the world with the largest stock of national disposable income underpinned by its massive gross domestic product. The US market accounted for $28,7bn worth of diamond sales last year, out of a total of $55bn in diamond jewellery sales last year. The business case for being legally compliant in the US is thus as compelling as it is self-evident. It is both the end and the beginning of a chapter for the global diamond titan. Few firms have the influence and respect De Beers does in its industry. Its name is almost synonymous with the product it mines and sells diamonds. The greatest irony, which lasted for more than 50 years until last week's settlement, has been that the company was persona non grata in what is by all accounts the most important market for its product. And it is remarkable that De Beers continued to retain the affection of US consumers while the US justice department maintained its charges against it. The success of De Beers provides vital business and leadership lessons for generations. Nicky Oppenheimer (an Oxford man educated at Harrow) and Gary Ralfe (a Cambridge man educated at Michael House) have led De Beers through what is, by all accounts, a case study in corporate and industry transformation. So it is unsurprising the firm's transformation is used as one of the case studies at Templeton College, Oxford, where Oppenheimer and Ralfe took their executive team for tutorials and strategic thinking and planning a few years ago. So what does De Beers' return to the US tell us? It is good for Africa and, importantly, for the New Partnership for Africa's Development (Nepad). De Beers has 20 mines in production in Africa and they employ 24000 people, mostly Africans. Africa is thus a key strategic focus and priority. For example, its exploration expenditure in Africa increased from $25m in 2002 to $38m last year. Capital spending in Africa climbed from $255m to 320m in the same period, resulting in a more than $3bn a year contribution to continental foreign exchange earnings. Meanwhile, Nicky Oppenheimer argues his company is "a natural partner and supporter of Nepad". The firm played a crucial role in the fight against conflict diamonds. Although in statistical terms the proportion of diamonds used to fund conflict was widely perceived to be less than 4%, Oppenheimer and Ralfe are well known for having rallied the global diamond trade by arguing "even if it is 1%, it is 1% too many". De Beers played a vital role in the South African-led Kimberley Process under Abbey Chikane, which brought together diamond trade members and more than 50 governments and a plethora of nongovernmental organisations. The firm's role in the fight against conflict diamonds won hearts and minds in Washington and other western capitals, especially after September 11 2001 when the global war on terror was being fought on all fronts. At the annual World Economic Forum a few years ago, United Nations Secretary-General Kofi Annan showered praise on De Beers for its exemplary role and leadership in the fight against conflict diamonds. In Angola, De Beers also teamed up with the World Health Organisation in the late 1990s, in a bold bid to eradicate polio in that country. The return of SA's global diamond titan to the US is thus a crucial milestone in Africa's journey to assert itself in the mainstream spheres of the global economy. Above all, it is a tribute to the intellectual capital underpinning the success of De Beers for generations.

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ZIMBABWE

Mbeki cements ties with Zanu-PF

Top ANC officials led by President Thabo Mbeki recently held a top-secret meeting with leading members of Zimbabwe President Robert Mugabe's ruling Zanu-PF to forge closer political ties. The June meeting was confirmed yesterday by ANC secretary-general Kgalema Motlanthe and Zanu-PF's chairman, John Nkomo. The meeting took place at the ANC's headquarters in central Johannesburg on the eve of the African Union summit, where an official report critical of Zimbabwe's human-rights abuses was circulated for the first time and as Mbeki's self-imposed June deadline for resolving the Zimbabwean crisis loomed. Besides Mbeki, other ANC officials who attended the meeting include Motlanthe, ANC deputy president Jacob Zuma, treasurer-general Mendi Msimang and chairman Mosiuoa Lekota. The Zanu-PF delegation was led by Nkomo. A Zanu-PF politburo member told the Sunday Times that his party had asked the ANC to help it secure a convincing majority in Zimbabwe's parliamentary elections due early next year. The ANC endorsed Mugabe's hotly disputed re-election in 2002 and Zanu-PF's controversial 2000 victory. Zanu-PF officials said the party now wanted the ANC to go further than "just mere endorsement" of elections and help it win at the polls. They said the ANC had agreed in principle to deploy between four and six election strategists to Zimbabwe ahead of the election to help Zanu-PF prepare a winning campaign. Senior members of the Zanu-PF executive were briefed about the meeting by Nkomo. Nkomo, widely regarded as a possible successor to Mugabe, said Zanu-PF and the ANC had "close ties and shared vision in the region". He said the ANC had done better than expected by winning 70% of the vote in South Africa. He added that Zanu-PF had also come to congratulate the South Africans on winning the rights to host the 2010 World Cup. Mugabe attended Mbeki's inauguration in Pretoria on April 27 and was wildly cheered by the crowds at the ceremony. Already the oldest leader in Africa, Mugabe, 84, has said he will retire when his term ends in 2008. "Mugabe is desperate to win the election because if his party loses he will have to resign or rule for three years with an opposition-dominated and effectively hostile parliament," a South African government official told the Sunday Times. Zimbabwe's opposition Movement for Democratic Change, often attacked by Mugabe as a "British-sponsored puppet party", has accused the ANC of colluding with Zanu-PF in the stop-start inter-party talks intended to resolve the country's deep political and economic crisis. Motlanthe said the ANC had sent a 10-member delegation to the 2000 election in Zimbabwe and would probably send a similar or larger delegation to next year's election to "gather first-hand information."

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