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SOUTH AFRICA


  
  

 

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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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Area (sq.km)
1,219,912

Population
43,586,097

Capital
Pretoria

Currency
rand

President
Thabo Mbeki

 

Update No: 040 - (03/05/05)

South Africa accused of Bias - and worse
To say Zimbabwe's election results "reflect the free will of the people" of Zimbabwe, as the South African government's observer mission has done, is to make the rather unfortunate but obvious point that Zanu (PF) was always going to win the election. Zimbabwe's opposition Movement for Democratic Change (MDC) has severed ties with the South African government and the African National Congress (ANC), effectively ending hopes for a resolution of the country's political crisis through President Thabo Mbeki's policy of quiet diplomacy. The decision was taken at a heated MDC national executive meeting following the disputed parliamentary elections in Zimbabwe. The national executive of the party decided "no longer to regard SA as a conciliator in Zimbabwe", said MDC secretary general Welshman Ncube. Instead, the party would be pinning its hope on the Southern African Development Community (SADC) and SADC's current chairman, Mauritian Prime Minister Paul Berenger. According to senior MDC leaders, the resolution of the executive was relayed to Jerry Ndou, South Africa's high commissioner in Zimbabwe, and to ANC secretary-general Kgalema Motlanthe. South Africa's cabinet had described the Zimbabwean election as a "credible expression of the will" of Zimbabwe's electorate. Ncube said this showed South Africa's bias towards Zanu (PF). "They've legitimised the election result, so how can they mediate?" South Africa has pledged to assist Zimbabwe to regain its position as one of the leading economies in Africa and described the country as a critical player to the rebirth of the continent. This was said by South African Deputy Foreign Affairs Minister Ms Sue van der Merwe at a function held at the Zimbabwean Embassy in Pretoria on April 18 to celebrate Zimbabwe's Silver Jubilee. Ms Merwe said Zimbabwe, as a founder member of the African Union and like all other countries in the sub-Saharan region, had to respond to the massive challenges of working towards the common goals of a better life for all.

Zimbabwe Election Bad For Africa
In the wake of the election, some African leaders will feel they no longer have any obligation to increase democratic space. Africa passed through a major historic and developmental threshold, replete with huge dangers for the continent as a whole, following Zimbabwe's recent parliamentary election. It has become increasingly clear that yet again Zimbabwe president Robert Mugabe managed to rig massively, with huge cunning and ruthlessness, the outcome of an election that has given him a two-thirds majority - which, in turn, permits him to change the constitution in any way he wishes. He won 78 of the 120 directly elected seats - and appointed another 30 directly - in spite of having engineered an economy that is shrinking faster than any other on earth, accompanied by the world's top inflation rate, which for a while topped 600 per cent. Were it in anyway credible, it could be described as something of a miracle that he managed to secure a democratic landslide despite having given his people eighty per cent unemployment; food shortages that are causing deaths by starvation; and a collapsed health service that has seen life expectancy fall to 33 from 58 at independence and which is unable to help a population so widely infected with HIV that 500 Zimbabweans die each day of AIDS. The fraudulent poll spells more disaster for ordinary Zimbabweans while enhancing the riches of the avaricious military men, corrupt civil servants and bent judges Mugabe has gathered into his inner circle. However, analysts, journalists and a wide range of other people who care about Africa know that Zimbabwe's election was less a test of Mugabe's credibility and reputation - which are already beyond repair - than the standing of other leaders on the continent, and most particularly that of Thabo Mbeki. Mbeki, president of Zimbabwe's powerful neighbour, South Africa, stunned the international community when a few days before the March 31 poll in Zimbabwe he proclaimed from the steps of parliament in Cape Town, "I have no reason to think that anybody in Zimbabwe will act in any way that will militate against the elections being free and fair." That paved the way for Mbeki's labour minister, Membathisi Mdladlana, leader of the official South African government election observer mission, to declare the poll, which had yet to take place, free and fair within 30 minutes of his arrival in Zimbabwe. What is extraordinary and puzzling about Mbeki's stand, apart from the long-term damage it will cause South Africa, now shorn of its historic romantic gloss following the departure from the political scene of Nelson Mandela, is that he and other heads of state of the 14-member Southern African Development Community (SADC), southern Africa's most important regional grouping, spent a huge amount of energy seven months ago drafting guidelines for free and fair elections at a summit in Mauritius. In the end, however, South Africa and the SADC are already paying the price in terms of lost credibility in the developed world, where they should have important roles to play in negotiating a better deal for the struggling nations of Africa and particularly for the legions of the poor. The immediate obvious damage, following the rigged election, will be the collapse of enthusiasm for helping Africa at the G8 summit in Scotland in July and for British prime minister Tony Blair's Commission for Africa. Few of these powerful governments will dare ask their electorates to take seriously all Mbeki's rhetoric about an African renaissance. Far from having moved forward, Africa seems to have moved back a decade after Mugabe's victory. A clutch of African leaders will read the signs and feel they no longer have any obligation to increase democratic space.

Problems of the Rand
Reserve Bank governor Tito Mboweni stunned the markets with an interest rate cut April 14, in a move economists said suggested a "change of heart" in the Bank's view on the rand exchange rate. Defying the expectations of economists and the financial markets, Mboweni said the Bank's monetary policy committee had decided to drop the repo rate to 7% - a cut of half a percentage point. Announcing the decision, Mboweni dismissed suggestions that it implied a shift away from the Bank's inflation-targeting policy towards targeting the rand or economic growth. The last cut was in August last year, when the leaders of unions representing miners and textile workers led a protest to the Bank's Pretoria offices to demand a cut in interest rates to weaken the currency. Economists had ruled out a cut but Bank governor Tito Mboweni emerged from the monetary policy committee meeting the next day and announced a 50 basis-point reduction. April's shock cut, of the same size, came just weeks after the Congress of South African Trade Unions (Cosatu) threatened national protest action unless something was done to weaken the rand, which it blames for mounting job losses. It would probably be overly conspiratorial to suggest that anything as obtuse as direct political pressure is at play, but it is hard to ignore the similarities. The truth is probably somewhere in between the Bank bowing to demands for more direct economic intervention and its adherence in the past to a blinkered approach to inflation targeting. Mboweni admitted as much, when he said: "Central banks throughout the world have to take cognisance of overall developments in the economy, otherwise they miss the boat." With inflation expected to be on a higher trend by year-end, the next move in interest rates could be upwards, analysts say. "The Bank cannot continue to cut rates with the apparent aim of weakening the rand, because, firstly, there are no guarantees the ploy will be successful, and, secondly, more cuts will only increase consumer debt levels and help drive inflation higher," says NKC economist Hugo Pienaar. The rand has played havoc with the production side of the economy, and has threatened to derail the upward trajectory in gross domestic product (GDP) growth. The contribution of the manufacturing sector to GDP has slid from 22% three years ago, to 16%. The rate cut was welcomed by the mining industry and Cosatu, which sees it as a sign that the Bank heeded its calls for a weaker rand. 
Trade unionists have warned that the unified front presented by the tripartite alliance partners at their summit late April will fracture unless the African National Congress-led government moves to implement the resolutions adopted at the meeting. The resolutions, which include an unprecedented commitment by the ANC to promote a competitive value for the rand, suggest greater concord between the alliance partners on economic policy than has existed for a decade. The alliance's core message was that the South African Reserve Bank would be challenged to widen the inflation target parameters. This goes against the grain of government monetary policy of low inflation targeting to achieve price and wage stability. Although Cosatu and the South African Communist Party have consistently called for a weaker rand -- Cosatu is mobilising members to strike over job cuts and the currency -- the ANC has, until now, been silent on the exchange rate. Politicians have been sensitive to perceptions of interference with central bank independence. "For the first time the alliance is signalling that you can't have complete independence of the Reserve Bank. It has to act in the national interest," said Tony Ehrenreich, Cosatu's Western Cape secretary.
Economic growth in sub-Saharan Africa reached an eight-year high of 5% last year, according to a report by the International Monetary Fund. Inflation meanwhile fell to its lowest rate in 25 years. The IMF said about 20 countries in the region had achieved growth of more than 5%, with inflation of less than 10%. It warned though that African economies are still not growing fast enough to reach poverty reduction targets and that many are not business friendly. The report says that oil-producing countries such as Angola and Gabon benefited from high oil prices.
Official unemployment figures dropped to 26,25%, yet this is nothing to be proud of. Even less so is the expanded unemployment rate of 41%, which includes those who are not actively looking for work. The latest unemployment figures from Statistics SA show many of the usual worrying patterns. Black women, for example, are seven times more likely to be unemployed than white men; young people are far more likely to be unemployed than those who are middle-aged. Even so, the latest data on South Africa's workforce show much that is positive. In absolute terms, unemployment remains high. But it now seems to be quite firmly on the decline, with both official and expanded unemployment rates falling between March and September last year.

A Mediation that succeeded
Foreign affairs deputy minister Aziz Pahad visited New York April 25 to brief the United Nations Security Council on the South African brokered peace process in the war-ravaged Ivory Coast. Mr Pahad's briefing will focus on mediation by President Mbeki that culminated in the signing of a peace deal by the warring parties in Pretoria. The Tshwane Agreement saw rebel forces and government committing to holding elections in October, to disarm and dismantle the militia throughout the country, and also to start the process of disarming, demobilisation and reintegration of national armed forces with members of New Forces. Conflict erupted in the world leading cocoa-producing nation two years ago when rebels staged an uprising against President Laurent Gbagbo, accusing him of dividing the population by marginalising certain sectors.
South Africa agrees with almost all of the recommendations to reform the United Nations that will be presented to the General Assembly of the world body for evaluation in September. However, government has certain reservations on some of the proposals in UN Secretary-General Kofi Annan's report. "As an African country we shall pursue Africa's goal to be fully represented in all decision-making organs of the UN, particularly the Security Council," Foreign Affairs Minister Nkosazana Dlamini Zuma said April 15. To this end, South Africa wants to ensure that Africa will have no less than two permanent seats - carrying the power of veto (although Africa is opposed, in principle, to the veto) - on the Security Council, she said. Africa also requires five non-permanent seats on the Security Council, which currently has five permanent members: Britain, the United States, France, Russia and China. The decision on which African countries should sit on the Council should be taken by the African Union, the minister added. "The Common African Position ... can and must be accommodated within the ongoing debate and negotiations occurring at the United Nations." Few outside observers would give any chance of Africa totalling seven UNSC members and little chance that any will be awarded a veto.

Economic Growth Rate 
South Africa could achieve a growth rate of 6% or higher by 2010, local economists say, and a moderately weaker rand on the back of the lower interest environment could help ensure this happens. The economy grew at 4% in the fourth quarter of last year, dragged down from its stellar performance of 5,7% in the third quarter by the strong rand, which hampered the production side of the economy. Growth in gross domestic product (GDP) last year averaged 3,7%. Finance Minister Trevor Manuel said earlier this year that Africa was aiming at a 7% growth rate by 2010, which is also SA's aim. "With 2010 (SA hosting the Soccer World Cup) around the corner, achieving these growth rates will not take as long as has been thought," says Brait economist Colen Garrow. "Levels of investment spending by government and public enterprises are already starting to pick up, and we shouldn't underestimate their impact." Over the next five years the public enterprises department, mainly Transnet and Eskom, will invest about R165bn in infrastructure. Last week's surprise interest rate cut is expected to have a positive effect on GDP, economists say. "A weaker rand will bring some currency relief to the production side of the economy," says Garrow. Garrow says that ideally the rand should be at levels near R7 against the dollar, and be less volatile. "Market stability will ensure we attract more foreign direct investment," he says. Unemployment remains a major problem in SA, and government is often criticised for not growing the economy fast enough to create more employment. The main reason for unemployment, economists say, is SA's high level of unskilled labour. "You can only move GDP higher if you have the skills base to support it," says Garrow. According to figures from Statistics SA, the country's expanded rate of unemployment is currently 41%. This includes discouraged work-seekers who have made no effort to seek employment. Eskom treasury economist Mandla Maleka says that between 2000 and last year SA created employment for skilled workers, suggesting that the economy was growing at rates that generate employment. He says while it is feasible to attain growth rates of around 6%, the limiting factor will be the low skills base. Over the last decade SA had an average growth rate of about 3%. But since SA has an open economy, various external factors could hamper growth prospects. An unprecedented rise in oil prices could be negative for SA's inflation outlook, and could force the Reserve Bank to hike interest rates, thus stalling growth. The Bank has often cited high oil prices as one of its reasons for not cutting interest rates in the past, despite the benign inflation outlook. Oil prices reached record highs of more than $58 a barrel recently after a US investment bank forecast that prices could go as high as $100 a barrel.

Employment - SA Can Create 10000 Jobs a Month 
The South African economy created about 345,000 jobs in the past three years, new research has found. Unemployment remains a huge concern, however, and the mining and manufacturing sectors in particular are expected to continue to suffer as a result of the strong local currency. This is according to a report released April 28 by T-Sec chief economist Mike Schussler, which showed that the economy was able to create about 10,000 jobs a month in the formal non-farm sector. The study found that although the long-term decline in employment had been turned around, SA still needed to work harder to curb unemployment. "There has been a big improvement in the creation of jobs, but we may struggle to achieve such good growth this year because of retrenchments in various sectors of the economy due to the (strength of the) rand," he said. Last year the formal economy added 2,7% more employees, the report showed. The construction sector showed the highest levels of increase, largely on the back of the property boom. The mining sector is expected to have a hard time this year, as about 5% of jobs are expected to be lost as the strong South African currency continues to hamper the production side of the economy. The manufacturing sector had an overall employment increase of only 1,8%. The motoring industry did, however, add about 4% to its manufacturing workforce. Schussler forecast that the construction, retail and services sectors were likely to create more employment this year than manufacturing and mining. Medium-sized businesses increased employment levels at 6% last year, followed by small and large firms, which both increased employment at a rate of 2,5%. The report also showed salaries increased only 5,4% last year, compared with 8% in 2003. Schussler said that the decline in salary increases was one of the factors influencing the inflation trend in SA. CPIX (consumer inflation excluding mortgage costs) grew at 3,6% year on year in March, from a record low of 3,1% in February. The latest Bureau of Economic Research's inflation expectations survey shows inflation is forecast to remain within the Reserve Bank's target band of 3%-6% for the next three years, although it is expected to peak at about 5% by year-end. The utility sector had the biggest increase in wages at 10%, followed by mining, at 8%. The survey showed that the type of company an employee worked for was important in determining earnings.

Fraud and Corruption Trial Grips South Africa 
South Africans are eagerly awaiting the outcome of the fraud and corruption trial of Shabir Shaik, the financial adviser to Deputy President Jacob Zuma, which has lasted more than six months. Allegations aired in court have been closely followed, since they involve not only Mr Shaik, but, by implication, the deputy president himself. The trial in the Durban High Court is drawing to a close with the prosecution and defence presenting their final arguments. Mr Shaik, a Durban-based businessman, denies the charges of corruption and fraud. One charge concerns what the prosecution calls a "generally corrupt" relationship between Mr Shaik and Mr Zuma. A further charge concerns allegations that Mr Shaik solicited a bribe of R500,000 ($90,000) from French arms company Thomson CSF on behalf of the deputy president, in order to facilitate the company's dealings in South Africa. The fraud charge involves the financial management of Mr Shaik's Nkobi group of companies. Mr Shaik's colourful personality has doubtless contributed to the media fascination with the trial, which began in October 2004. On one occasion while testifying he reportedly did a passable impersonation of Nelson Mandela's voice. But quite aside from these antics, the two corruption charges have gripped the attention of the South African public since they involve accusations that cast a shadow over the highest levels of government - particularly since Mr Zuma is seen as a likely successor to President Thabo Mbeki. The Shaik trial stems from an investigation headed by the then chief prosecutor, Bulelani Ngcuka. In 2003, as the investigation drew to a close, Mr Ngcuka said that while there was evidence against Mr Zuma, he would not press charges against him since he was not sure that there was "a winnable case". Mr Zuma angrily condemned his "trial by media" and said he had been denied the chance to clear his name in court. At one point in the current trial, there was speculation that Mr Zuma might be called upon to testify in Mr Shaik's defence. One commentator argued that only the deputy president would be able to confirm Mr Shaik's version of events, which had been contradicted on certain crucial points by the evidence of some other witnesses. But in the end, Mr Zuma was not called to the witness stand. Although - as Mr Zuma's supporters are quick to point out - the deputy president himself is not on trial, if Mr Shaik were to be convicted on either or both of the corruption charges, then Mr Zuma would be faced with some awkward questions. High-level corruption in South Africa is nothing new, but a freer press since 1994 has made graft more visible than it ever was under apartheid. At the same time, Mr Zuma retains strong support among key sectors of the governing ANC, and his supporters have reacted angrily to suggestions that the case being brought against Mr Shaik reflects badly on the deputy president. If Mr Shaik is cleared, the government will breathe a huge sigh of relief. But if he is found guilty, then history could judge the Shaik trial as a defining moment in South Africa's young democracy: Is South Africa to be a place where high officials can keep their reputation intact, regardless of association with sleaze? 

HIV/AIDS

South Africa's Broken Promises
A year after the ruling ANC party's third election victory, opposition politicians and HIV pressure groups say the South African government has failed to keep its pledges over HIV/Aids. More than five million South Africans are HIV positive. For several years after the virus become widespread the South African government's policy was not to make anti-retroviral drugs (ARVs) available to all the people who were HIV positive. The government was not convinced that ARVs were a cost-effective way of treating HIV. That position changed in November of 2003 when the cabinet voted to provide ARVs across the board. But critics of the government say the progress since then has been too slow. "They keep on moving the goalposts over the number of people receiving anti-retroviral drugs," says Diane Kohler Barnard , the health spokesperson for the main South African opposition party, the Democratic Alliance. "They said 50,000 people would be on ARVs a year ago and they are still way short of that. There seems to be inefficiency and a lack of will to meet the targets." In February last year President Thabo Mbeki said he would make anti-retroviral drugs available in at least one hospital or clinic in each of the country's 53 districts. The health ministry says that it has achieved that target, 122 centres are now dispensing ARVs. Almost 40,000 people are now receiving the drugs. "In rural areas, uptake is not as fast as we would like because it's hard to get our message across to everyone," says Sibani Mgnadi, the spokesperson for the health ministry. "Uptake is faster in the more developed provinces like Gauteng where it's easier to recruit health workers and where we've got more laboratories to check who qualifies for the drugs". Anti-retroviral drugs have been shown to lengthen the lives of people who have contracted HIV. But in South Africa there's still a heated debate about how effective they are. Nelson Mandela has campaigned for more action to fight Aids. The government employs what it calls a broad strategy to deal with the problem. That includes providing ARVs whilst also making multi-vitamin supplements available to more than a 150,000 people with HIV. "We'd prefer people to use a number of different strategies to fight the virus," says Sibani Mgnadi. "It's not government policy to stress the supremacy of one treatment over another in combating the virus". It is statements like that which have angered the government's critics. "It's a dangerous and damaging policy," says Zackie Achmat, chairperson of the Treatment Action Campaign which has lobbied the government to provide ARVs for a number of years. "It's allowed organizations to come in and make what we consider to be unsubstantiated claims about the effectiveness of vitamin supplements in HIV treatment." Over recent months a company that sells vitamin supplements based in Holland, called the Matthias Rath Foundation, has taken out adverts in South African newspapers and put posters up near HIV treatment centres stressing what it says are the dangerous side effects of ARVs. There is evidence that some people are stopping their treatment as a result. The impact is being felt in places like the impoverished township of Guguletu near Cape Town where one in every seven people is HIV positive. "Our clients are very confused," HIV counsellor Flora Tabela told me as she packed ARVs into a bag before setting out on her daily round. "I have a client who has already stopped taking the drugs, and another client says her partner is telling her to stop ARVs because Dr Rath has come up with something better. I'm worried because people will die as a result." The Matthias Rath Foundation says that far from spreading confusion it is trying to give people living with HIV /Aids enough information to be able to decide what type of treatment to request. "There are other options in delaying this disease," says Ralf Langner the foundation's spokesperson. "Anti-retroviral drugs have been shown to have side effects, and doctors seem to ignore it, one has to ask whether they're reading the research or just accepting the spin of the pharmaceutical companies". There are conflicting reports about how effective vitamins are at treating people with HIV. At a recent World Health Organization conference in Durban looking at nutrition and HIV, there was much evidence put forward to suggest a healthy balanced diet can make anti-retroviral drugs more effective, but the jury is still out on whether vitamin supplements can permanently put off the onset of Aids. South Africa's Health Minister Manto Tshabalala-Msimang has famously urged people to eat lots of garlic and beetroot to fight the effects of Aids. At the moment the South African health ministry says that there is no evidence that the Matthias Rath Foundation is acting irresponsibly in South Africa. There are no reliable figures for the number of people who have stopped taking anti-retroviral drugs as a result of the foundation's campaigns, but they are sowing major doubts in peoples' minds and that is a worrying trend for many health workers who have worked to get ARVs to the people of South Africa. Opposition politicians are calling on the government to make unequivocal statements about ARV and vitamin treatments. "President Mbeki and his health team need to stop dabbling with HIV dissidents," says Diane Kohler Barnard from the Democratic Alliance. "Once and for all the government needs to face up to the scale of the pandemic." 

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AUTOMOBILES

BMW Joins Private Sector Battle Against Aids

South African employees of the German car manufacturer, BMW, as well as the general public, will benefit from an HIV/AIDS clinic opened by the company April 21 in the capital, Pretoria. The facility has the capacity to serve between 4,000 and 5,000 patients a month and is conveniently situated near a township where at least 17 percent of BMW's 3,000 employees live. It will also offer AIDS education and counselling. Local group managing director Wolfgang Stadler told the German news agency, DPA: "In this country one can't expect government to do everything alone. Many private initiatives bring the topic to the fore." An estimated 5.3 million South Africans are living with HIV/AIDS, putting companies under increasing pressure to help keep workers free from HIV infection and provide treatment for those living with the virus.

Control Expands into Europe

A dominant player in the South African vehicle components scene, auto electronics maker Control Instruments, is spreading its wings and setting up an international office. Its intention is to be closer to the headquarters of the various vehicle manufacturers in Europe. Industry experts have come out in support of Control's decision, saying setting up an office in Europe will give the company an opportunity to foster relations with various vehicle manufacturers' decision-makers. Control has appointed executive director Rod Forrester to set up a sales, engineering support and logistics business in Europe. The decision to set up the office was taken as a result of rapid and ongoing integration of South African vehicle manufacturers in the global supply chain and manufacturing operations of their respective parent companies. Control designs and supplies electronic products to the major vehicle manufacturers in SA, including Toyota, BMW, DaimlerChrysler, Nissan and Volkswagen. Forrester says that for the company to properly benefit from the contracts of these big manufacturers, it has to be closer to their design and engineering centres. Decision makers in major car manufacturers are likely to entrust the design and supply of components for new models to companies that they know and trust. "We are well known in SA and would like to establish ourselves internationally," Forrester says. The European office is likely to be fully operational by July 31 this year. Forrester already spends two weeks a month in Europe doing preparatory work. National Association of Automotive Components and Allied Manufactures of SA executive director Clive Williams supports Control's decision.

Toyota Export Plan 

Toyota SA's latest export programme, which will see more than 60,000 bakkies and sport utility vehicles a year going to Europe from 2007, would generate revenue of R120bn over the next six to seven years, the company said April 25. This was arguably the biggest project of its kind yet undertaken by a South African car maker, said Toyota SA president Johan van Zyl after the first vehicles rolled off the Durban assembly line. The programme underlines the massive export contribution that the vehicle industry - which accounts for almost 7% of the country's gross domestic product - makes to SA's economy. It follows on the heels of General Motors SA securing a contract worth R18bn to export Hummers. Toyota's latest export programme has led to investments worth R2,4bn at the car maker and its suppliers' plants and has generated 900 new jobs at Toyota's Durban plant. Toyota, which is the largest car supplier in SA, announced its latest export plan last year, but has since expanded it in response to better- than-expected demand. The car maker will be the sole producer in the global Toyota group of Hilux bakkies and a yet-to-be-announced sport utility vehicle for supply to Europe and Africa. Each vehicle in the new export programme would have 70% local content - some 1600 components are to be sourced from 78 suppliers in SA, said the company. The project reaffirms Toyota's confidence in manufacturing in SA. The Japanese company set Toyota in SA on a rapid growth path through exports shortly after it took control of the domestic operation three years ago. Toyota is in the process of doubling production to 200000 vehicles a year, a move largely made possible through the current construction of a R1bn paint-shop. The company aims to export half of its total production. Exports to more than 70 countries are planned for the future, the car manufacturer said. Van Zyl said this was the first project that truly integrated the South African facility in the Japanese parent company's global production base.

South Africa 7th-Best for Auto, Aerospace Investment

Global car makers and aerospace companies view SA as one of the most attractive destinations worldwide for foreign direct investment, according to a recent survey by global management consulting firm AT Kearney. SA was ranked as the seventh most attractive destination globally for investment in the transportation equipment sector in AT Kearney's 2004 annual foreign direct investment confidence index. This was based partly on government assistance in the form of the Motor Industry Development Programme, which has helped global car makers operating in SA grow car exports nine-fold over the past decade, the survey said. Foreign confidence in the domestic car-making industry is shown by planned capital investments worth about R6bn this year. Government is also contemplating assistance for the aerospace industry similar to that which it gives car makers. Trade and Industry Minister Alec Erwin said as early as 2002 that the aerospace industry would get the same kind of state support that benefited the motor industry. However, SA as a whole has been largely unable to boost foreign corporate investment, which is a more stable form of financing and could help tackle the country's unemployment problems, according to the survey. Foreign direct investment in the country totalled only $762m in 2003, far behind China's $53,5bn, Mexico's $10bn and even Chile's $3bn, said the survey. AT Kearney expects foreign direct investment in SA to have risen to $2bn in 2004, however, citing renewed investor interest in the country, led by British, Swiss, Italian, French and Australian investors. SA had also moved up to the "early 30s" on the list of countries executives were most likely to invest in, said AT Kearney's local principal Sven de Kock yesterday. De Kock did not have more details about SA's position. China was ranked first, followed by the US and India. The survey said that, for the first time since 2000, the majority of executives surveyed were more optimistic about the global economy. "Corporate investors expressed an increased willingness to make overseas investments compared to 2003," it said.

Aerospace in SA Looks to State for Wings

A draft strategy to boost SA's aerospace sector in the way that the Motor Industry Development Programme (MIDP) bolstered the country's car-making sector has been submitted to the trade and industry minister for approval. Trade and industry department deputy director-general Lionel October says the minister will be "looking at the strategy in the next month or so" Government targeted the aerospace industry for accelerated development some time ago - based on its growth potential and in line with its aim of increasing value-added manufacturing and exports. The new plan would not be a replica of the 10-year-old MIDP. The programme saved the vehicle industry from collapse and turned it into a large contributor to SA's gross domestic product. But the MIDP goes against the grain of World Trade Organisation rules and was recently challenged by Australia. The trade and industry department could not yet disclose details of the new aerospace industry plan, called the Aerospace Industry Support Initiative, but it will aim to achieve improved co-operation and organisation in the industry, says Francois Denner, chief director of strategic competitiveness at the department. He says several strategies had been developed to bolster the aerospace industry since 2000. But the new initiative, developed together with the six largest aerospace companies in SA, is aimed at linking all previous initiatives to provide a comprehensive implementation plan, Denner says. It also proposes the formation of an organisation to lubricate the engagement between industry and government, similar to the Motor Industry Development Council, which has proved to be a highly effective interface between government, industry and labour. A key component of the new initiative would be to use government's controversial plan to buy 14 new aircraft from Airbus Military to fast-track local component suppliers' integration into global supply chains, says Denner. The aim is for the deal, which is still being negotiated, to incorporate guaranteed contracts for local suppliers to provide components for the lifetime of the Airbus A400M, which is not yet in production "If there is one programme that will change the face of the industry, it will be SA taking part in the Airbus Military project, but it won't be the only programme," Denner says. It would enable local suppliers to leapfrog the average 10-year period it took to become a first-tier supplier, he says. SA was looking to secure about 5% of the design and manufacture of all components for the Airbus A400M. Denner says the trade and industry department has targeted the aerospace industry for accelerated development to illustrate SA's hi-tech capabilities on a significant scale. Job creation is not the main driver as other sectors have higher job creation potential, he says.

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AVIATION

BA Increasing Local Fleet

British Airways (BA), which is operated by domestic group Comair in southern Africa, is buying four new aircraft at a cost of R220m to keep pace with growing numbers of air travellers in the region. Comair, which also owns low-fare airline kulula.com, said April 22 that it carried 1-million passengers annually about four years ago. The group expected to carry 2,5-million this year. Gidon Novick of Comair said the rate of growth in the market had consistently exceeded the group's projections over the past two years. Demand for air travel - in both the mainstream and low-cost carrier categories - was especially strong last year as lower interest rates fuelled consumer spending, but volatile oil prices threatened to dampen the high rate of growth. BA announced that it had increased its fuel levy $5 to $20 "as a result of the current instability of the oil price". This follows similar levy increases by South African Airways and Nationwide earlier this month. BA said, however, that it had not passed on the full 40% year-on-year increase in the oil price to its customers. The airline's sales and marketing manager, Stuart Cochrane, said the company had recovered only 70% of the increase to date. This would have a negative effect on the airline's margins. But the strong rand, meanwhile, had helped to lower the cost of BA's fleet expansion.

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BANKING

Barclays, Absa in Tug-of-War Over Price

Wrangling between Barclays and Absa shareholders over the price of the UK bank's R32bn offer for the South African bank has quickly intensified, with sources close to Barclays warning that the British bank has little room for manoeuvre. "This is a deal Barclays wants to do, not a deal it has to do," a source close to Barclays warned. This follows some disappointment among Absa shareholders at Barclays' offer of R79 a share, representing a 6% premium on Absa's closing price last Friday. However, the source has pointed out that Absa was trading at R45 when the banks started negotiating. This increased to R60,50 ahead of the first cautionary on September 23. Barclays, which is planning a partial offer for 60% of Absa, said on April 25 it would consider input from some of Absa's larger shareholders, mostly institutional investors. However, a source close to the process said it did not have much room to manoeuvre on price. The source said there was clearly a point beyond which Barclays could not go without flouting its policy of capital discipline and economic management. Barclays said it had been talking to Absa's larger shareholders about the possibility of a partial offer to acquire 60% of Absa shares at a price of R79, plus a final dividend for the year of about R1,80. Although a formal offer was expected April 25, it is believed that agreement could not be reached on price, leading to a cautionary announcement from the two banks. One analyst said an extra R4-R5 a share could swing the deal. "Obviously the R79 is not going to work so either they will have to up the price or walk away," he said. Absa shares have risen by a quarter since Barclays said last September it was in talks about a majority stake. Two months later, Absa said it was close to striking a deal with Barclays. If Barclays, the UK's third largest bank, buys a stake in Absa it will be one of the largest foreign investments in South Africa in recent years. Barclays was forced to leave South Africa in 1986 after pressure from students and charity organisations protesting at the extent of its business in what was then an apartheid regime.

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BLACK ECONOMIC EMPOWERMENT

Merrill Hails Imperial's BEE Deal

Global investment house Merrill Lynch has endorsed transport and logistics group Imperial's R1,4bn empowerment deal, which saw Lereko Mobility take a 7,25% holding in Imperial earlier in March. Merrill Lynch said in a report that according to its calculations, Imperial shareholders' forward earnings will not be diluted as a result of the deal. The deal is positive for Imperial as it enhances the group's black economic empowerment credibility at no cost to its income statement, the investment house said. Lereko Mobility, formed in July last year, consists of Lereko Consortium, which holds 51% of the empowerment stake, with Imperial holding the remaining 49%. Lereko Consortium is made up of Lereko Investments as well as community and women's groups. This deal follows the R1,3bn empowerment deal done with Ukhamba Holdings, which took a 10,1% holding in Imperial in December 2003. Imperial holds 49,9% of Ukhamba while historically disadvantaged staff owned the remaining 50,1%. Merrill Lynch said Imperial's empowerment holding effectively stands at 8,3%. It said the objectives of the empowerment partners were largely in line with each other. Lereko Mobility wants a strong share price in 2010 and in 2015 when it has to settle its debts, whereas Ukhamba needs strong earnings growth and a "depressed" share price to maximise its share conversion between 2005 and 2011. The latest deal sees Imperial issuing 14,5-million new preferred ordinary shares to Lereko Mobility. At the same time Imperial will buy back 14,5-million ordinary shares at R96,85 each from its shareholders, which it will cancel. Lereko Mobility will pay R2m for its stake and will finance the rest by issuing debentures to Imperial shareholders for a total consideration of R458m, at R31,52 a debenture.

Old Mutual Sells R7,2bn Stake in Huge BEE Deal

Old Mutual lifted the wraps on its long-awaited black empowerment deal April 19, announcing the sale of a 12,75% stake in its South African banking and insurance operations for R7,2bn. Customers, staff and black insurance brokers are set to be the biggest beneficiaries of the London-listed financial services group's move. The transaction is the second-largest in the financial services sector to date, following First-Rand's R7,9bn deal in February. Old Mutual said it would fund the transaction with its own internal resources. As expected, empowerment groups Wiphold and Brimstone, with whom Old Mutual has long-standing relationships, have also been included in the deal. They lead consortiums that include women and youth empowerment groups Sphere and Mtha, which represent black legal and medical professionals. The Congress of South African Trade Unions (Cosatu), believed to have been negotiating to be part of the deal, was not included. CEO Jim Sutcliffe said in Johannesburg that discussions with Cosatu were part of a broader process of stakeholder consultations. Through education trusts, trade unions get about 1% of Old Mutual SA (Omsa). The deal has been structured into three separate transactions with Old Mutual plc's South African subsidiaries: Omsa, Nedcor and Mutual & Federal. "I believe the transaction that we have announced today secures the future of our South African businesses for all our stakeholders," Sutcliffe said. "Our stated strategy is to build a powerful international business off our South African base. It is only possible to do this if we are first strong at home." Sutcliffe said employees were the key drivers of shareholder value. All the company's South African employees would have an interest in the group once the transaction was completed. Tens of thousands of individual and corporate customers at Nedcor are expected to own shares. They are being offered a free share in the bank for every three they buy, and will be allowed to pay in instalments. Unlike other empowerment deals, where trusts were the main beneficiaries, these customers will be active investors in Nedcor.

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FOREIGN RELATIONS

Putin's Man in Africa - 'Odd Choice'

The recent appointment of a Russian expert on Asian affairs as President Vladimir Putin's emissary to Africa has puzzled African diplomats. The Kremlin has told Business Day that Nodari Simonia, 73, holds the official title of "special representative of the President of the Russian Federation on connections with the leaders of African countries". A foreign ministry source said Simonia was currently in charge of pre-paring government initiatives towards Africa, when Russia takes over the year long chairmanship of the Group of Eight in July. Britain hold the chairmanship and has pursued a number of special Africa initiatives relating to regional development, debt relief, trade, and the reduction of poverty. Simonia told Business Day through a spokesman that he was "too busy" to answer questions about Russia's policy on Africa. The spokesman would not say whether Simonia had ever been to Africa. A resume, posted on the institute's website, indicates that Simonia has specialised in oriental affairs, and speaks English, Chinese and Indonesian. Among dozens of publications he lists on China, Japan, Korea, and southeast Asia, there is not one reference to Africa. His academic visits abroad have been mostly to the US. Moscow sources told Business Day that Simonia's appointment signalled that a rival think-tank, the Institute for African Studies, lacked high-level influence, despite the fact that experts there had been hired by Russian corporations to help them lobby African governments. "Simonia is Primakov's man," one source said, referring to former intelligence chief, foreign minister, and Prime Minister Yevgeny Primakov, who now heads the Russian Chamber of Commerce. "Using Simonia is another way of using Primakov," the source said.

U.S. Envoy to SA Tipped for Top Africa Post

US Ambassador to SA Jendayi Frazer, who is close to US President George Bush and Secretary of State Condoleezza Rice, looks set to leave her post after less than a year to take up the top Africa job in Washington. According to the Washington- based news site allAfrica.com, the top Africa policy maker in the US state department, Constance Berry Newman, has resigned. Newman will not leave immediately, but allAfrica said several sources in the US government had indicated she felt she could not be effective without the type of close working relationship with the secretary of state that she had when Colin Powell was in office. It is not clear whether Frazer will be in place in time for the Group of Eight meeting in Scotland in May, at which UK Prime Minister Tony Blair's Commission for Africa proposals will be discussed. Frazer's appointment last year as ambassador to SA signalled that the US was placing a new emphasis on relations with Pretoria. Following that indication of SA's importance to the US, all eyes will be on Frazer's successor, to see whether SA has retained that position. Frazer served under Rice in the White House on the US's top foreign policymaking body, the National Security Council. She was also a student of Rice's at Stanford University. Frazer, her mother and her sister sat behind Rice when she appeared before a senate committee for her confirmation as US secretary of state. "To me, it was a sign that Jendayi might again be playing a bigger role in US policy towards Africa," Melvin Foote, who heads the Constituency for Africa, a Washington-based advocacy group, told allAfrica.com. US embassy spokeswoman Judy Moon would not comment on the allAfrica report, calling it speculation. Moon said the ambassador "is hard at work in Pretoria" and that appointments were being made for her "well into the future". In recent months, Frazer has become increasingly outspoken against SA's policy of "quiet diplomacy" towards Zimbabwe. Rice said earlier this year that Zimbabwe was one of six "outposts of tyranny".

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INTERNATIONAL ECONOMIC RELATIONS

Chinese Trade Links

As they embark on a process to broaden relations with the People's Republic of China, South African politicians and officials would do well to consider the advice of China's reformist leader, Deng Xiaoping: "Seek truth from facts." China's attraction as an ideological and strategic counterweight to the dominance of the West has led to a desire to cosy up to the Asian dragon. But the reality of Chinese engagement in Africa -- and in South Africa itself -- should give us pause, especially in the rush to conclude a free-trade agreement with the economic giant. China's foreign policy has generally been characterised by an approach of unsentimental and aggressive self-interest and we would be fooling ourselves if we did not adopt the same approach. The facts of the South African trade relationship with China since diplomatic ties were resumed show a massive trade deficit currently in the region of R10-billion. And that trade imbalance has grown rather than shrunk over the period as imports of high value manufactured goods from China outstrip Chinese demand for South African raw materials. The flood of cheap Chinese imports has been a significant threat to local manufacturers, particularly in the clothing and textile industry, which has seen a jobs bloodbath, driven by the strong rand and Chinese imports. In a speech last year Congress of South African Trade Unions general secretary Zwelenzima Vavi noted that clothing imports from China grew from 50% of all clothes brought in during 2001 to 75% in the first three months of 2004. In the light of the demonstrable impact on the South African market, it is sobering, at best that the official Chinese position is that South Africa needs no protection from Chinese imports and that an "asymmetrical" trade deal is unacceptable. It may be a generalisation, but the record of Chinese adherence to minimum labour standards in local South African businesses has also left much to be desired. The character of some Chinese initiatives in the rest of Africa is no less instructive. In its bid for raw materials, in particular access to oil supplies, Beijing has not been shy about propping up the Sudanese military regime and offering the notoriously corrupt Luanda administration a $2-billion line of credit in return for a slice of Angola's oil riches. This is not to say that we should not engage China, but to argue that the sense of starry-eyed ideological solidarity that surrounds some of our attitudes to Beijing represents a serious trap. South Africa is not the only strategic Third World partner available to China; Latin America, where the Chinese have also sought to expand their influence, has adopted a tougher stance, particularly in relation to trade, which we could do well to emulate. Neither should it be forgotten that China has its own problems. The country's political system has not kept up with the furious pace of economic modernisation. Our leaders may look wistfully at the level of party control and social compliance China is able to bring to bear, but deep social inequalities, endemic corruption and real human rights limitations carry their own risks.
SA Groups in Race for Singapore Casinos 
Two SA casino groups have confirmed they have moved into the next round in their bids to secure lucrative contracts to develop casino, hotel and entertainment resorts on two sites identified by Singapore's government. The Singapore government has decided to license two resorts - which together will cost about $3bn - in a bid to recover the country's regional market share in tourism. The two sites that have been identified are Sentosa Island and Marina Bayfront. Peermont Global, which owns resorts such as Caesars Gauteng, confirmed in a notice to shareholders on April 22 that it had qualified to participate in the request for proposals phase of the integrated resort project in Singapore, while Sun International CEO Peter Bacon said Sun International had also been invited to participate in the next round. The guidelines for the company's proposals are expected to be issued before June 30. Nineteen proposals were submitted to Singapore's government by the end of February and Peermont Global CEO Ernie Joubert said he understood this represented about 13 participants, some of whom had submitted more than one proposal. Peermont is assembling a consortium to propose a development on Marina Bayfront and making good progress, he said. This would be a very large resort, Joubert said, and Peermont envisaged it would become the group's flagship. Bacon would not give further details at this stage about the group's partnerships, but he said Sun International was considering a development on Sentosa Island. Joubert said Peermont envisaged that its South African investors would initially have a 5%-10% equity interest in the Singaporean subsidiary company.

EU-SA Trade Deal Has Paid Off 

The free-trade deal between SA and the European Union (EU) boosted traffic between the two regions, contrary to what some believed, outgoing delegation of the European Commission head ambassador Michael Lake said early April. The ambassador, who left SA for Brussels after a four-year term in SA will be replaced by Lodewijk Brit of Holland. Speaking at a farewell function, Lake said he believed that without the deal EU exporters would have looked to markets closer to home. That would have left South African exporters with only one or two traditional markets in the EU. He said he believed the deal, known as the Trade and Development Co-operation Agreement, helped to open markets for exporters in both regions and made it easier for investors to enter or expand in each other's markets. The agreement was implemented in 2000. He said, however, that whether or not the agreement had stimulated trade between the two regions could not be proved. Total trade in 2003 was estimated at close to 27,6bn, effectively double the 1994 figure, according to the European Commission in SA. A five-year review of the free trade agreement is currently under way. Lake said when he arrived in SA four years ago that the scars from free-trade negotiations - which he described as a painful process - were barely healed. Now the European Commission in SA's relationship with the trade and industry department was one of "mutually weary respect". Lake said politically there had been "a bit of a standoff" between SA and the EU four years ago. Relations had improved significantly since then, however, culminating in President Thabo Mbeki's visit to the EU at the end of last year. Lake said SA was recognised as a reliable partner now, despite differences over issues such as Zimbabwe. The EU's investors saw opportunity in SA, but their confidence in the market was still somewhat dampened by concerns, mainly over security and HIV/Aids.

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MINING

Decline in SA's Gold Output 'Hard to Reverse'

Last year saw the sharpest fall in global gold output since 1943, with SA, Indonesia and Australia being worst affected, according to a new survey by London-based consultancy GFMS. The survey said that the decline in SA's output would be difficult to reverse. "Mine suspensions and shaft closures featured heavily (in SA) last year, principally as a consequence of the rand-dollar exchange rate," GFMS said. Meanwhile, South African mines faced a 15% jump in cash costs in dollar terms, due to the strong rand as well as hefty price rises for fuel, water and energy. The report said global prospects for this year "appear to be somewhat brighter" with a projected 4% rise in gold output. The GFMS survey was upbeat on the prospects for the gold price, saying there was "considerable scope over the next year for an event-driven spike in the gold price towards the $500 (an ounce) mark." It said a new wave of investment demand in the second half of this year "will drive gold prices to well above last year's high of $454/oz". "Political tensions, having arguably declined somewhat this year to date, are set to grow in the second half, perhaps significantly so," the report said. "In particular, the situation in the Middle East remains highly volatile, especially against the backdrop of record nominal oil prices," it said. It also said global jewellery fabrication rose 5% last year, a rise which was "particularly noteworthy given that dollar gold prices rose almost 13% last year".

Harmony's Grab for Rival Nearly At End 

An array of legal activities will take place early May as Harmony's hostile bid for Gold Fields enters the home stretch. Harmony expects to hear from the Labour Court whether the National Union of Mineworkers (NUM) has won its attempt to delay the retrenchment of 4900 workers at unprofitable shafts in Free State. The most elaborate legal hearing will be at the Competition Commission, which begins a hearing into the proposed takeover on May 2. Fearing that the legal tussles will be protracted, the tribunal has said it is prepared to continue into the following weekend, if necessary. Harmony's deadline for the bid is May 20. It wants some breathing space after the tribunal's ruling, as approval by the competition authorities would be the last condition attached to the offer. It is expected that, in the end, the tribunal will approve the offer, but analysts and investors want to see what conditions, if any, are attached to the approval. The commission has recommended there should be a ceiling on retrenchments after the merger, and that the jobs of ordinary mineworkers should not be affected. Also on May 2, there will be a hearing involving Gold Fields, which is planning to take the Securities Regulation Panel (SRP) - the stock market regulator - to the high court, alleging that bias was shown in favour of Harmony. Gold Fields alleges the SRP should not have approved the two-step structure of the Harmony bid, nor should it have allowed an extension of the period for the bid to allow time for the competition authorities to complete their hearings. Because of the time it is taking for this case to come to court, Gold Fields will seek an urgent interdict which could halt the implementation of the Harmony offer until the case against the SRP has been decided. The case is being brought not just against the SRP, but also against two of its top officials. In yet another challenge for Harmony's legal team, an appeal hearing is being held against a recent ruling in support of a government order that Harmony and other neighbours of DRDGOLD's liquidated mines near Klerksdorp should help fund the costs - about R85m a year - of pumping at the two mines. Harmony has warned that such a financial burden could threaten the viability of its own mine. CE Bernard Swanepoel has said that the government order had set a dangerous precedent. 

Platinum Cutbacks to Slow Global Output

London-based metals consultancy GFMS has warned that global platinum production growth is expected to slow down in 2007, partly because of new projects in SA being delayed or cancelled. The strong rand has rendered a number of platinum projects unviable, although some new mines and expansions are in the pipeline and will come on stream in the coming years. "Operating margins in SA halved last year, despite platinum's average US dollar price in 2004 having set a record high and better palladium and rhodium prices," GFMS said, highlighting the effect of the strong rand. "Consequently, a number of SA's proposed expansions have either been delayed until further notice or shelved completely." GFMS said that in the short term, growth in production of platinum and palladium was forecast to continue. "However, this is likely to slow from 2007 once the core expansions in SA have entered production." A local platinum analyst agreed with the forecast, but emphasised that while growth may slow down, there will still be growth in platinum production in SA. "We may be talking of a slowdown from current growth levels of 8% to 3% or 4%," he said. "Projects are being delayed." GFMS said global production of platinum last year reached 6,3-million ounces, an increase of 4,6% over 2003. "This was largely the result of higher output from the world's largest producer, SA, while a recovery in Canada's volume assisted the rise." During the same period, palladium showed stronger growth with 6,5-million ounces of supply, up 5,9% on 2003." "SA was again the key, and its gains in 2004 boosted its share of global palladium production to 38%, although Russia remained the world's largest producer of palladium with an estimated 43% of global mining output."

BHP Billiton to Gear Up to Meet Eskom Demand

BHP Billiton, the world's largest resources group, is planning a multibillion-rand investment in its South African coal operations to replace output from two ageing mines and to prepare to bid for extra demand from its main customer, Eskom. The plans underpin the company's commitment to SA, and demonstrate an optimism that future demand for coal will remain robust. Recently appointed head of BHP Billiton's energy coal division, Mahomed Seedat, said April 3 that the investment could lead to 49-million tons a year of new coal production from BHP Billiton's coal deposits in Mpumalanga. The two mines are in the company's Ingwe coal subsidiary and are due to reach the end of their lives in 2008, and there is a need to replace production and to bring additional production on stream if Ingwe hopes to win new Eskom business. One of the earliest projects that is expected to win board approval is the R2bn expansion of the Klipspruit mine, which will boost output from 1,5-million tons a year to 6-million tons. The mine is situated next to Anglo Coal's operations, and Seedat said there could be synergies in working with Anglo - although he said there was no agreement yet on this. He said that the Klipspruit expansion could proceed with or without a deal with Anglo Coal. One way savings could be realised would be through the sharing of infrastructure, Seedat said. Ingwe had foregone its share of the latest expansion of capacity through the coal terminal at Richards Bay to make room for smaller empowerment players, he said. However with Eskom planning to invest R106bn in new capacity, "we see opportunities to participate in that, and will compete against other producers". Given upward pressures on costs, efforts were under way to improve efficiencies in coal operations, Seedat said. There was a fall in Ingwe's exports in the second half of last year, partly due to a shutdown of production following a fatality. Seedat defended the decision to halt production, saying that fatality-free operations remained an imperative. The energy coal division is one of seven business units within the group, and accounts for just more than 10% of turnover at $1,6bn for the six months to December. The Ingwe operations in SA are the largest, and account for 54% of marketable reserves. BHP Billiton's other energy coal operations are in Australia, Colombia and New Mexico. The company said the factors which could have a negative effect on the competitiveness of its coal included price volatility and high freight rates. There is also a threat of substitution by gas.

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TELECOMMUNICATIONS

Africa's Mobile Sector Growing Fast

The number of mobile subscribers in the Southern African Development Community (SADC) and East African Community (EAC) regions will grow to 55 million by 2009, says African ICT analyst firm BMI-TechKnowledge. There are currently around 30 million mobile users in the regions. Brian Neilson, research director at BMI-T, says although SA has the most subscribers, it is expected that in future, an equal amount of new investment in telecoms infrastructure will come from other southern African countries. Neilson says SA alone has about 22 million mobile subscribers. By 2009, this could increase to around 30 million to 35 million subscribers, if one counts gross subscriber numbers. He says the EAC region, which includes Kenya, Uganda and Tanzania, has a relatively untapped telecommunications market, giving it the next largest mobile sector growth potential after SA. "With the mobile sector showing a massive growth rate, consulting companies, equipment vendors and operators have begun to seek new ways to grow the telecoms sector in the SADC/EAC regions. "Through a range of commercial and technology solutions, backbone projects, especially wireless communication, operators and vendors alike have been driven to seek new ways to address telecoms needs in the SADC/EAC regions." Neilson adds that fixed-line and Internet connectivity uptake has been disappointing, but fixed wireless access technology has the potential of re-igniting the fixed-line market in the region. He concludes that with the second national operator coming into play in SA, there could be an even greater emphasis on rolling out fixed wireless infrastructure.

Nokia Commits to Africa

Handset manufacturer Nokia says it remains committed to the African continent because it views it as one of the most critical, exciting and promising emerging markets, together with Asia and Latin America. Speaking in Sandton March 30, Mika Niemi, Nokia's senior marketing manager of customer and market operations Africa, said that although he could not give exact figures, the company expects Africa to substantially contribute to the company's earnings. "Whereas SA is in its second phase of cellular phone adoption, which is the replacement stage, most of the rest of the continent is in the initial adoption stages and is experiencing the handsets for the first time," he said. Niemi added that although the continent is somewhat segmented, having both advanced users and first time users, Nokia is in a position to satisfy consumers' needs with products that range from youth-targeted handsets to more business-oriented smart devices. "Nokia also recognises that handsets are no longer just a communication tool, but also an important part of an individual's lifestyle." The company has identified aspects of African lifestyles, such as the love of music and fashion, added with the need to personalise aspects of individual handsets and has a number of marketing initiatives under way for specific consumer segments. "In the future, music will be a key feature for Nokia's mobile phones and consumption of music is huge among our target audience. This can already be seen through ringtones, video clips and a host of exciting musical technologies," he explained. Niemi concluded that Nokia views Africa as a dynamic and fast-growing continent and its marketing initiatives, such as Face of Africa and another with MTV Base, have been implemented to nurture the continent's natural talent, passion and energy for both fashion and music.

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