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SOUTH AFRICA


  
  

 

In-depth Business Intelligence

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: 051 - (30/03/06)

Dem.Alliance take Capetown City Hall
Clever political strategies and tactics, and two weeks of late-night meetings helped the Democratic Alliance (DA) outmanoeuvre the ANC to gain political control of the City of Cape Town. Helen Zille was appointed the city's executive mayor during the council election March 15. She beat former mayor Nomaindia Mfeketo by three votes after garnering 106. As the mayoral chain was placed around her neck, an ecstatic Zille said the outcome proved South Africa was a maturing democracy. "I am so honoured that so many people put their trust in me and I am honoured to accept the position." Early voting patterns had suggested the DA, with 90 seats, had won the support of the ACDP, with seven seats, the Africa Muslim Party, 3, the UDM, 2, and one each from the FF Plus, United Independent Front and the Universal Party. The battle for control had been on a knife-edge, with alliances seeming to shift day by day and hour by hour. The ANC had remained confident their party would continue running the city in coalition with the ID and the AMP. The question now is how long the alliance with the smaller parties can last. The pact is based on a similar 1999 co-operation agreement between the then National Party and the Democratic Party. The parties will establish a leadership committee, committing themselves to achieving consensus on the council's administration and to retaining the right to disagree or criticise the majority viewpoint. 
The ANC still managed an overwhelming victory nation-wide in the local government elections. Some see this as a blow to democracy with a one-party dominant state more entrenched than ever. Only 48% of the fewer than 10 million voters voted and, of those, 67% voted for the ANC. While political commentators interpreted the vote as one of confidence: that the electorate was expressing ethnic identification with and loyalty to the ANC, they failed to see what was really going on and why. The ANC won the elections only partly for its popularity. Its manipulation of pre-election conditions is also part of its success. The ANC gets the biggest chunk of the election budget proportional to its vote. Government uses state resources to boost its campaign while municipal trucks remove opposition posters. With 20 million poor and 30% unemployed, and 6 million infected with HIV/AIDS, it seems people take what they can get from a party that commands the nation's resources. 
The DA'S tactical victory in the battle for Cape Town has of course rubbed salt in the ANC;s wounds. It became clear March 15 that the ANC had lost out in every attempt to make alliances that would have given it the city, as the DA and its allies secured the key positions of speaker, mayor and deputy mayor. Now the ANC needs to take stock of what went wrong in Cape Town, as the support the ruling party enjoys in the rest of the country keeps eluding it there. If the ANC wanted to be honest, for starters it would no look further than its provincial leadership. If the party had not been afflicted by internal divisions in the province, filtering down to the rank and file it would have outperformed all other election contestants. Divisions filter down to lower structures as members seek to sideline those they perceive to be outside their camp or failing to support particular leaders. As a result, the ANC had to relearn one of the oldest lessons: a divided people will always be defeated. The fight against apartheid succeeded because the liberation movement managed to unite people against the system. This is not the case in post-apartheid Cape Town, where divisions among whites, the coloured majority and ethnic Africans are as clear as those in the ANC's provincial leadership. The party showed amazing arrogance as it sidelined smaller, established parties in favour of the relative new comer, the ID, which has 23 seats and underestimated the significance of the ACDP, which had secured enough votes to qualify for seven seats on the council.
There are divisions over whether the DA's victory is good or bad for Cape Town. Many people argue that the change is important because the ANC already governs 270 of the 284 municipalities, which including five of the six metros, and controls all provincial legislatures in addition to its national two-thirds majority. This school of thought tends to believe that a DA-led Cape Town is good for democracy, because it represents the large majority of opposition voters who did not want to be ruled by the ANC. But there is a silent majority that is probably perturbed by the latest developments. Those trapped in the grinding poverty of Cape Town's under-developed townships are anxious to know what will happen to them, since the history of this country reflects that when whites are in charge, blacks tend to get short-changed. The alliance that underpins the DA-led government in the Cape metro is likely to be fragile and prone to attack. 

Inkatha Leadership
Embattled Inkatha president Mangosuthu Buthelezi said he would step down from his position should party members tell him to do so in the wake of the IFP's dismal showing in the municipal elections. At a press conference in Durban March 6, Buthelezi said the party conference would be held early in order to "resolve the leadership question". "I am calling an early conference to resolve the leadership question in a democratic fashion, so that our party conference in July will be able to focus solely on mapping the way forward towards an IFP victory in the 2009 general election," he said. The conference would be held on April 8. 

Security Guards - The biggest growth industry
Thousands of security guards paraded through Cape Town in support of demands for higher wages. The national strike by Satawu members, who say they will be joined by 12 affiliated unions if a settlement is not reached, is an attempt to force security firms to accede to pay demands. The unions want an 11% increase across the board, with an additional 4% increase for the lowest-paid workers, and four months paid maternity leave. The unions believe employers are failing to deal seriously with the demands by offering a 6% increase and a 0.6% additional increase. Some of the issues at stake include nightshift allowances, which workers want increased from R2 to R3.50 an hour, a cleaning allowance (for their uniforms) from R8 to R15, an increase in the company's provident fund contribution from 6.5% to 7% and a meal break for all security workers. There are about 280000 registered private security guards in South Africa, outnumbering the country's police by more than two to one and nearly 5000 registered security companies. They are employed for the purpose of armed response, guarding and escort services. The industry has experienced a boom since the fall of apartheid, when levels of violent crime, previously confined mostly to the country's townships, shot up in the former white suburbs. The huge demand for greater security has yet to translate into better living conditions for those doing the guarding. There is growing resentment among those employed to guard the lives, belongings and businesses of others in a crime-infested society with little faith left in its police service.

Black middle Class Drives South African Boom 
South Africa's black middle class is driving the post-apartheid consumer boom in the country, a report has said. The group is responsible for almost a quarter of the 600bn rand (US$96m) spent yearly by consumers, the University of Cape Town's Black Diamond study said. Government measures to bring the sector into the mainstream economy have helped its growth, the report added. The black middle class, making up two million of the 45 million population is expected to grow by 50% a year. The black middle class is defined as people who earn at least 154,000 rand a year, and the sector has surged by 368% between 1998 and 2004. The group accounts for 23% of total consumer power in this country, which has been achieved in a very, very short period and continues to grow very rapidly indeed. The buying power of the black population had taken off with the end of apartheid in 1994 which had "enormous and immediate effects - access to jobs, finance, credit, homes, education," the report said. Before the election of Nelson Mandela as president at that time "black society was a single, monolithic, classless society with limited, menial jobs, no home ownership and under-educated". Now companies are hoping to cash in on the boom by moving into townships once devoid of any big names. They are hoping to take advantage of the fact that three-quarters of the black middle class population live in formal homes in such areas. Fashion retailer Edgars Consolidated Stores and grocery supermarket Shoprite have already opened a number of outlets in townships, including Soweto. Woolworths has also said it is hoping to open 10 township stores.

UN Chief praises South Africa's leading role 
United Nations Secretary-General Kofi Annan leaves office this year after 10 years at the helm and in his final months is battling to implement his plans to reform the UN to make it more managerially efficient, the security council more representative and to establish a human rights council. Annan lavished praise on South Africa March 14, lauding its rising reputation for tolerance, mutual respect for others and its determined approach to conflict resolution in Africa and the world as a whole. Addressing parliament after meeting earlier with President Mbeki while on an official three-day visit, Mr Annan said South Africa was "pointing the way" for Africa, where "a new approach" was required for development. South Africa was the first UN member-state that Mr Annan visited after his inauguration as UN secretary-general in 1997. Mr Annan said South Africa was pointing the way by what it was doing at home, in its sub-regional neighbourhood, in its leading role in Africa and in the wider world as a whole. South Africa "reminds us all of the remarkable African capacity for forgiveness and reconciliation, despite the pain of racial discrimination and oppression", he said. On top of this, the "robust economy, stable democracy, support for the rule of law and perhaps most importantly the fully inclusive constitution have made South Africa a beacon of tolerance, peaceful co-existence, and mutual respect between people of different races, languages and traditions. In terms of pointing the way through its "leading role" in Africa as a whole, Mr Annan cited South Africa's role as the biggest foreign investor in the rest of sub-Saharan Africa and its leading role in forming the New Partnership for Africa's Development. He also noted South Africa's lead role in transforming the Organisation of African Unity into the African Union and the establishment of the AU's peer review mechanism. Wrapping up his visit March 15, he conferred with former President Nelson Mandela in Johannesburg and toured Soweto, where he laid a wreath at a memorial for one of the first victims of the uprising in that township 30 years ago. Mr. Annan later arrived in Madagascar on the second leg of a visit that will also take him to the Republic of Congo and the Democratic Republic of the Congo (DRC).

Legal Association Critical of South Africa's Prosecution Policy
The International Bar Association (IBA) has expressed deep concern regarding amendments to South Africa's prosecutions policy, which grants the government new powers to give immunity to criminals and thereby undermine the human rights of victims. A clear example of the possible detrimental effect of the new policy is the power it gives to the National Director of Public Prosecutions (NDPP) to decline to prosecute murder even though in South African law there is no statute of limitations or prescription on the crime of murder. Dr Phillip Tahmindjis, IBA Programme Lawyer, says, "The 1996 South African Constitution retained provisions relating to amnesty, but only for the purposes of the Truth and Reconciliation Commission, with a limited period of amnesty being granted to perpetrators who came forward prior to 11 May 2004. These criteria have been replicated for the purposes of the National Director of Public Prosecutions exercising his or her discretion over all cases in future. To use these criteria to prioritise cases would be legitimate. But to use them to assist in exercising discretion not to prosecute can amount to an impunity for crime. This is a breach of the human rights of the victims." Furthermore, the IBA's Executive Director, Mark Ellis, says, "This is neither appropriate nor effective policy in today's South Africa. The human rights of victims should be of paramount importance and people should not be allowed to escape prosecution simply because a policy is arbitrarily applied to the decision as to whether or not an individual should be prosecuted." Mr Ellis, has written directly to South Africa?s Minister of Justice, Ms B S Mabandla, outlining the IBA's concerns.

No arrests in US$16m Cash Heist
Police in South Africa suspect that the theft of a reported US$16m from a plane at Johannesburg's airport March 26 may have been an inside job. The cash had been flown in from the UK and was being transported to Tanzania and one other African country. A police spokesman said they had made no arrests and had no firm leads in the airport's biggest robbery. A gang armed with AK-47s managed to access the plane inside a supposedly top security section of the airport. South African Airways, which owns the Boeing 747 plane, said it was seeking a meeting with the airport authorities to discuss security arrangements. 

Political Influences in Zuma Trial?
Jacob Zuma's defence team suggested in the Johannesburg High Court March 8 that political influences had played a role in a 31-year-old woman's decision to lay a rape charge against Zuma. The team asked her for reasons why she called Intelligence Minister Ronnie Kasrils before reporting the case to police. Zuma's advocate, Kemp Kemp, asked the complainant whether she was aware, after the alleged rape in November last year, that National Intelligence Agency boss Billy Masetlha had been suspended from his position because of misconduct relating to the surveillance of a businessman. She said she knew about the suspension but did not know the details. She also said she did not know if Kasrils was in Zuma's camp. Kemp was referring to the succession battle in the ruling African National Congress that had split the organisation into pro- and anti-Zuma factions. Zuma's backers believe his legal troubles, including the rape trial, are part of a political plot to dent his chances of succeeding President Mbeki in 2009. The complainant had said she regarded Zuma as a father figure following the relationship Zuma had had with her father, who died in 1985. The cabinet also expressed concern at the behaviour of certain members of the public pertaining to court hearings on sexual violence. In a statement the cabinet called on those wishing "to express their solidarity in the Johannesburg rape trial of the former deputy president to ensure nothing is done which undermines the rule of law".

Current Account Deficit at 22 Year High 
Economists have voiced concern over the state of SA's balance of payments as the deficit on the current account soared to its worst level in 22 years. The Reserve Bank said in its first Quarterly Bulletin of the year that the deficit on the current account, which measures the difference in value between the import and export of goods and services, rose to 4,2% of gross domestic product (GDP) last year, from 3,4% in 2004. In the fourth quarter, the deficit rose to a record R71,6bn (4,5% of GDP), from R68,4bn (4,4% of GDP) in the third quarter. The steadily growing deficit suggests that the rand will weaken to restore balance between exports and imports, as currencies tend to do when current account deficits breach the benchmark of 3% of GDP. This could have severe implications for inflation, as the strong rand has helped keep inflation in check by keeping the prices of imported goods down. It could also mean higher interest rates, if the Bank's monetary policy committee sees the need to damp demand and combat higher inflation by tightening monetary policy. 

South Africa Asks for Single SADC-EU Trade Deal 
South Africa, together with its counterparts in the Southern African Development Community (SADC), has asked the European Union (EU) commission for a single trade deal to govern all trade between the two regions. SA's chief trade negotiator, Xavier Carim, said the economic partnership negotiations, together with the current review of the SA-EU free trade deal, presented an important opportunity to align SA's EU trade with that of other SADC countries. The EU has started talks with various SADC countries towards establishing "economic partnership agreements" with them. A single agreement covering all SADC countries might require amending SA's own free-trade deal with the EU that has been in place for five years, Carim said. The SADC proposal to push economic partnership negotiations towards achieving one trade deal would also ensure that integration in the region was not compromised, said Carim. The lack of economic integration between countries in the development community has long been a concern to the South African government and other community members. Incorporating SA's partners in the Southern African Customs Union into its EU free-trade deal could be done almost immediately, said Carim. Achieving a single EU deal with other SADC countries could, however, be complex and would take more time, he said. Carim said he expected an official response from the commission to the SADC proposal in the next month or so.

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AUTOMOBILES

South Africa: Brace for 17% Surge This Year 

WesBank's prediction for vehicle sales, made at the company-sponsored 2006 South African Guild of Motoring Journalists Car of the Year Banquet, sees total vehicle sales increasing significantly to 725000 this year, up 17% against actual sales last year of 618011. This is against a backdrop of strong vehicle growth of 26,05% in 2004 and 28,5% last year. The bank also forecast that vehicle sales would reach 1-million units in 2010. Over the last few years, WesBank has been more bullish than some in terms of total vehicle sales predictions and in view of the rapid growth of the last few years has been one of the most accurate, too. Most industry analysts failed to forecast the immense growth in the last two years, their appraisals on the market being, understandably, pessimistic. The continued strong growth can be attributed to the sustained growth of the South African economy and the continued commitment made by government and the industry to the sector. The second factor supporting growth is SA's open market, allowing for a range of new entrants. For the first time, derivatives now exceed 1000 models and this continues to increase. According to WesBank CEO Ronnie Watson: "The motor industry now contributes 7,4% to SA's gross domestic product. For this reason, the motor industry is the third largest and most expanding sector in the South African economy, indicating the underlying transformation and normalisation of the economy." SA's economy has grown well above global averages over the last 10 years and indications are that the country is well on its way to reaching the 6% growth mark that should result in much needed job creation. The export market continued to strengthen despite the strong rand and with an average of more than 10000 units each month. Over the coming year, WesBank see three main factors driving the domestic market. The growth of the black middle class has seen nearly 4-million people entering the middle-class market since 1994 and although this shows a significant societal change it still only represents 10% of the population -- so there is significantly more growth potential. The importance of women to the vehicle industry is another factor not to be underestimated. Women now account for a significant and consistently rising share of the market. The third growth area is the youth market. Coming off a low base in 2001, this sector wields a growing influence representing nearly 66% of the population, all younger than 35.

Renault budget Model Could be Manufactured in South Africa 

There are significant prospects French car maker Renault will manufacture Europe's cheapest car, the Logan, in SA, a move that could improve vehicle affordability and boost the country's vehicle production base. SA's perceived vehicle affordability problem has been investigated by the trade and industry department and by the Competition Commission, but this has not resulted in prices being cut. Renault SA's MD, Roland Bouchara, said March 10 that the country was now definitely being considered as one of the future host countries for assembly of the Loga. "There is a real chance that it could be made in SA, although we cannot say at this stage that there is a good chance," said Bouchara in an interview. The Logan would be made available in SA regardless of whether or not it would be assembled here, said Bouchara. This means that the vehicle could also be imported. The Logan was developed initially for the Romanian market, where there is demand for a low-cost sedan, but it has also sparked substantial demand in Europe. More than 30000 Logans have been ordered since its launch in September 2004. The car is being assembled in Romania and Russia, with production starting last month in Morocco. India will start making right-hand drive Logans next year. Doris Roberts, spokeswoman of Renault SA, which is SA's largest car importer, said the group would have to assess whether there was sufficient global demand for right-hand drive Logans to justify production in SA in addition to India. It was possible, however, that some of the Logan family of cars could be made in India and others in SA, she said. The company has doubled sales of Logans over the past two years, selling 19500 last year. Bouchara said that if the Logan became available in SA, the company could double sales again in the next three years. Renault was now just behind BMW with a 5% share of the market, Bouchara said. It hoped to double its market share by 2009. Aggressive expansion of its dealership network from 40 three years ago to nearly 70 this year supported growth in sales. Renault SA, which is 49% owned by the listed Imperial group, will launch a campaign to "rectify" the perception that its vehicle parts are more expensive that those of local car manufacturers. A Malcolm Kinsey report comparing the cost of Renault's parts, including labour, shows that Renault was among the top three most affordable, said Bouchara. He said Renault had not increased the prices of any of its vehicles in the past three years.

General Motors Keen to Bring Cadillac to SA

General Motors SA (GMSA) was considering distributing Cadillac models in SA as part of its plan to bring new models to SA, the company said March 28. The company's plans to launch the Hummer H3 are already at an advanced stage. GMSA is extending the capacity of its Struandale, Port Elizabeth, plant to accommodate the Hummer, to be launched in SA later this year. GMSA's workforce will increase by 500 as a result. "Because we already distribute Saab and will soon assemble the Hummer H3, it makes sense to bring the Cadillac as well," MD Robert Socia said. He would not say when the company would start selling the car. "At the moment there is no decision on the matter," he said. There is growing demand for the Hummer and Socia said the company had about two months' worth of orders for manufactured vehicles. The expansion of General Motors' (GM's) brands in the local market takes place at a time when the industry is benefiting from low interest rates and from the motor industry development programme. The government initiative encourages the export of vehicles and components by giving manufacturers import rebates. GM vice-chairman Robert Lutz said that the group expected growth in the local vehicle industry to continue. The company regarded SA as an emerging market, alongside countries such as India and China. GM planned to make SA the main export base for the Hummer H3 to right-hand-drive markets and is well positioned to grow its market share, Lutz said. GMSA's market share in SA increased from 2004's 10,8% to 13,6% last year. GM vice-president Maureen Kempston-Darkes said that the company expected total sales of 1-million units a year in SA by 2010, "if growth continues."

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AVIATION

SA Airlink Fights EU Safety Blacklisting 

SA Airlink, a franchise of South African Airways, is to appeal against a European Union (EU) decision to blacklist its partner airline Swaziland Airlink, arguing that it falls under SA's Civil Aviation Authority (CAA), which it says is well-respected overseas. There is concern about the effect the list could have on tourism, a huge money-spinner for Africa and Swaziland in particular. SA Airlink CEO Rodger Foster said March 24 that Swaziland Airlink, of which his company owns 40% with the remainder belonging to the Swazi government, was banned only because it was registered in Swaziland and the EU had concerns about the effectiveness of that country's safety oversight body. Swaziland Airlink is managed by SA Airlink, and uses only South African-registered aircraft and South African-licensed pilots. SA Airlink is about to become the second airline in SA to receive operation safety audit accreditation from the International Air Transport Association. According to the EU, airlines that have been banned have the right to express their point of view, which they submit in writing and which is then added to their file for consideration, and can ask to be heard by the European Commission or attend a hearing in front of the EU's aviation safety committee. The ban prevents airlines from landing at any airport in the EU. Announcing the ban, EU transport commissioner Jacques Barrot said travel agencies that continued to book on blacklisted airlines ran the risk of legal action by consumers if anything should happen while flying with that airline. Several plane crashes last year prompted the EU to consider establishing a uniform approach to evaluating air safety. The list is to be updated every three months and is based on deficiencies found during checks at European airports such as the "use of poorly maintained or antiquated aircraft, the inability of aircraft to rectify shortcomings identified during inspections or inability of (the aviation safety) authority responsible for overseeing an airline to perform its task properly". Gilbert Twala, who heads the accidents investigations unit of the CAA, said that the majority of the blacklisted airlines did not fly to SA, but said the authority had taken note of the list and would conduct its own inspections. "Some of these airlines already have operational restrictions and have to apply for permission to land here anyway," he said.

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BLACK ECONOMIC EMPOWERMENT

Kumba Stake Sale Rated Top Empowerment Deal 

Think-tank BusinessMap named Kumba Resource's sale of 58% of itself to the Eyesizwe consortium for R9,2bn as the "empowerment deal of the year" March 16. Wiphold CEO Gloria Serobe was named "empowerment leader of the year", while the Industrial Development Corporation got the award for the best financier of empowerment deals at a function in Sandton. Although there were 350 big deals worth more than R55bn last year, there is concern that the number of large empowerment deals may be dropping. Big deals to the value of R62bn were concluded in 2004. BusinessMap said the figure of 7% of shares in JSE-listed companies that were in black hands was still well off the 25% target set by the trade and industry department. The company had found that at a superficial level, about 10% of the JSE was in black hands, but, because of different ownership structures used, on a see-through basis, only 7% was actually controlled by blacks, said research director Colin Reddy. Reddy conceded that the calculations were "perhaps too rough", and needed to be more dynamic. However, he said there was "still some place for deals with companies such as Sasol and Sappi, so hopefully the level can still improve this year".

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ENERGY

Electricity Crisis Harms Cape's Economy 

The electricity crisis in Cape Town has caused "immeasurable damage" to the economy and severely dented investor and citizen confidence, Andrew Boraine, CE of Cape Town Partnership, told a business forum meeting March 9. The head of the non-profit company created to upgrade the city centre said it was no longer "business as usual" for the city. "The issue is not just about the electricity distribution system," he said. "The backbone of Cape Town's economy is infrastructure." Cape Town's infrastructure was in crisis compared with its international competitors and there was an urgent need for targeted investment that would have a big impact on economic growth, he said. "These include road, rail and airport capacity, the port, basic services infrastructure, information and communications technology, and business infrastructure." Boraine said it was desirable to double the residential population in the city in the next 10 years from its present 50000. This could be achieved by boosting the number of people living in residential areas and on future projects such as the planned District Six development, he said. Development projects for the 2010 World Cup could leave lasting benefits for the city, Boraine said. The province has said proposals for the construction of a stadium at Green Point include a transport system that is 80% state-owned and 20% privately owned. "This presents an opportunity to improve public transport to the central business district, including a possible rail link from Cape Town International Airport, implementing an inner city public transport system and upgrading pedestrian links and public spaces," he said. Boraine said that the city was making good progress in black economic empowerment, with significant changes to the property ownership structure in the city in the past five years. At least 40% of all major buildings were now owned by empowerment groupings and black-owned companies had participated in more than R2bn worth of property developments since 2003, he said.

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FOOD & DRINK

SABMiller in Emerging Markets Acquisition

Global brewer SABMiller has completed its acquisition of 48,4% of Slovakian brewer Topvar after approval from the Slovakian antimonopoly office. Controlling shareholders will sell further shares to enable SABMiller to increase its interest in Topvar to at least 67% by the end of September. Earlier this week, the company's share price increased on market speculation that SABMiller might be in line to buy Australian-based Foster's portfolio of breweries in emerging markets. Foster's has indicated that it is considering outsourcing production while retaining ownership of its brands in the emerging markets of China, Vietnam and India. SABMiller already owns breweries in these markets and brews Foster's beer under licence in the US. SABMiller and Scottish & Newcastle, which produces Kronenbourg beer and Newcastle Brown Ale, have emerged as market favourites for the acquisition. SABMiller made an offer for 100% of the investment shares of Peru's largest brewer, Backus, for a total of about $400m. Backus became an indirect subsidiary of SABMiller in October last year when the company acquired a controlling interest in Colombia's Bavaria group, the second-largest brewer in South America. SABMiller said at the time of the acquisition that its strategy would be to buy out other shareholders in Bavaria's various operations around the region. SABMiller CE Graham Mackay told analysts at the Consumer Analyst Group of New York's annual conference in February that the company's opportunities for growth in emerging markets were "far greater" than anywhere else in the world, and that SABMiller's broad exposure to these growth areas would benefit the group. Mackay said emerging market consumers were moving to beer as an aspirational, mainstream alternative to cheap spirits, increasing the beverage's share of total alcohol across the emerging market landscape and increased per capita consumption of beer.

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INSURANCE

Old Mutual Now in Full Control of Skandia 

A last-minute rush ahead of the final closing of Old Mutual's offer for Skandia on March 14 pushed the group's stake in the Swedish savings group eight percentage points higher. Old Mutual said it had received acceptances for its R38bn offer from Skandia shareholders holding 98,09% of the group's shares and votes on a fully diluted basis. It had 90,02% of Skandia. Old Mutual said that with its holding of Skandia above 90% it intended to initiate a compulsory purchase process under Sweden's Insurance Business Act to buy the outstanding shares. It would start the process as soon as it could under Swedish law, which was likely to be in June. "I am delighted that we have reached our goal. We have acquired a great company and are working with our new colleagues as we get ourselves in shape to take advantage of the many opportunities that lie ahead," CEO Jim Sutcliffe said. The acquisition gives Old Mutual a strong footprint in Sweden and the UK, complementing its businesses in SA and the US. In total, it will have businesses in 46 countries in all continents. The deal makes Old Mutual about the seventh-largest life assurer in Europe with a market capitalisation of more than £10bn. Last month, former finance director Julian Roberts, who has taken up the post of Skandia CEO, said about half Old Mutual's shareholder base is now in the UK, with 35% in SA and about 15% in the US. He said there had been growing investor interest in Old Mutual from UK fund managers who were either underweight or did not own Old Mutual stock.

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INTERNATIONAL ECONOMIC RELATIONS

South Africa and India Meet to Strengthen Relations 

Deputy Foreign Minister Aziz Pahad hosted the Indian Minister of State for External Affairs Anand Sharma in Pretoria March 24, for bilateral political and economic talks. The meeting between the two was held within the context of South Africa's priority to promote South-South co-operation for increased market access, trade and investment. In the same light, South Africa, India and Brazil constitute the India-Brazil-South Africa (IBSA) Forum, a historic partnership of countries of the south that aims to achieve the afore-mentioned objectives. This in the interest of eradicating poverty and underdevelopment while creating a better life for all people of the South, the department added. "Issues on the meeting's agenda are expected to include among others, the status of bilateral political and economic discussions between both countries that are governed through the Joint Ministerial Commission and the South Africa - India CEO's Business Forum," the department explained. The CEOs Business Forum was launched in October 2004 after Indian President A.P.J. Abdul Kalam's state visit to South Africa and constitutes several Indian and South African businesses. It aims to assist in stimulating trade and investment between the two countries. Meanwhile, trade between South Africa and India continues to grow with total bilateral trade approaching a level of R14.5 billion in 2005. Of that amount, exports to India constituted R7.5 billion while imports from India stood at R7.02 billion and India currently ranks as South Africa's 13th most important export and import market. The main Indian products South Africa imports are motor-cars and vehicles for the transport of goods; rice, medicaments, cotton, yarn, finished leather goods, machinery and instruments, handmade yarn fabrics, spices, handicrafts and handmade carpets. On the other hand, the products India imports from South Africa are chemicals, gold, silver, coal and briquettes, iron and steel, inorganic and organic fertilisers, pulp and waste paper and precious and semi-precious stones. Also, the sheer size of the Indian economy, which is the 14th largest manufacturing economy in the world, gives it an influential position in the global market in which South Africa has a key interest, the foreign affairs department explained. "Since South Africa and India have similar developmental challenges, their collective capacity in bargaining and voicing concerns that affect their economies in international forums is made highly effective. As a key emerging regional economy, India provides a platform for the re-integration of the South African economy with that of South Asia," it said. South Africa and India also signed a merchant-maritime pact that will see increased cargo shipping movement and boost trade between the two countries, which already stands at R14,07bn. Transport Minister Jeff Radebe and Indian counterpart TR Baalu signed the agreement at Parliament March 23. 

Economic Relations With Arab Nations 

Trade and Industry Minister Mandisi Mpahlwa has called for business people in South Africa and Qatar to forge closer working relations and to explore investment opportunities in both countries. Mr Mpahlwa was addressing a trade and investment seminar in Qatar during his visit there. At the seminar, a Memorandum of Understanding (MOU) between the Chambers of Commerce South Africa (Chamsa) and the Qatar Chamber of Commerce and Industry was signed regarding the minister's call. Also, Mr Mpahlwa held bilateral talks with the Qatari Minister of Economy and Commerce, Mohamed bin Ahmed bin Jassem Al Thani, in this regard. He returned March 16 from a week-long visit to the Gulf States of Saudi Arabia, Qatar and Oman. In Saudi Arabia he attended the second session of the South Africa-Saudi Joint Economic Commission. Mr Mpahlwa and his Saudi counterpart, Hashim Yamani, issued a joint communiqué at the end of the sitting of the commission. South Africa and Saudi Arabia have identified numerous areas of co-operation in a bid to strengthen trade and investment between the two countries. In this regard, the two countries would establish sub-committees in areas of economic co-operation, as well as technical, social and cultural co-operation. The sub-committee on economic co-operation is expected to increase trade exchange, with Saudi Arabia willing to increase the exports on other products besides oil to South Africa. In this regard, Saudi Arabia expressed its readiness to export various petrochemical products to the country while South Africa would increase exports in mining, electro-technical, financial services, agricultural equipment, agro-processed products and automotive components, among others. In the Sultanate State of Oman, Mr Mpahlwa held bilateral talks with ministers of oil and gas, commerce and industry, transport and telecommunications, defence affairs and foreign affairs. The minister was accompanied by a South African delegation comprising representatives from the departments of education, defence, environmental affairs and tourism, and minerals and energy, as well as Chamsa. The Deputy Minister of Foreign Affairs, Aziz Pahad, and the Deputy Minister of Defence, Mluleki George, also accompanied him.

Mozambique Relations Remain Strong

South Africa has become Mozambique's leading investment partner. Economic adviser to Mozambique's ministry of industry and commerce, Sergio Carlos Macamo, told delegates at the PriceWaterhouseCoopers South Africa/Mozambique investment seminar in Nelspruit March 14 that Mozambique was exporting 50 percent of its products to South Africa. Likewise, Mozambique was also importing 50 percent of its products from its neighbour. "We're exporting and importing more from South Africa," Mr Macamo said. The partnership between the two countries stem from the R25 billion Maputo Development Corridor that was initiated in 1996 and has already resulted in the massive upgrading of transport infrastructure between the two countries. The N4 toll road links Gauteng to Maputo harbour, which is closer to Gauteng than the Durban port. Mr Macamo said Mozambique was offering attractive investment packages and had preferential access to European and US markets. "We have also made it easy for private businesses to invest in our country through simplifying industrial and commercial licensing," he added. Mozambican companies, he said, were looking for partners in glass, textile and rubber ventures. Mr Macamo said there were also vast opportunities for South African investors in mega projects such as coal mining, bio-diesel manufacturing, aluminium and the refurbishment of railway lines. Chief executive officer of the South Africa/Mozambique chamber of commerce, David Robbetze, said the risk of investing in Mozambique was small. Mr Robbetze said Mozambique was politically stable, had a positive relationship with South Africa and was a "sweetheart" internationally. Mr Robbetze acknowledged that land ownership and transport were limited, and skilled labour was short. According to the head of the linkages division of Mozambique's Investment Promotion Centre, Antonio Macamo, the country's economy had been growing at 8.2 percent since 1998. "Our infrastructure is under massive improvement, and there is ample availability of natural resources such as coal, land and natural gas," Mr Macamo said.

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MINING

Anglo American Plan for $2bn in Share Buybacks 

South Africa's largest company, Anglo American, surprised the market by doubling its share buyback programme, which means that it will now spend $2bn on buying back its own shares. With fewer shares in issue, headline earnings a share will increase, a silver lining for investors despite the fact that Anglo American is struggling to keep pace with rivals BHP Billiton and Rio Tinto. As a result of the announcement, Anglo's market value of R335bn climbed more than R5,5bn as the stock gained 1,7% on the JSE and 3,6% on the London Stock Exchange (LSE). Anglo American said the repurchase would increase its earnings a share and contribute to efficient capital management. Analysts said this was also the first noticeable statement that the group was likely to be swimming in cash in the next few months, as it aims to contain costs and move away from gold. Under the restructuring plan, Anglo plans to sell or list paper maker Mondi on the LSE, reduce its current 51% stake in AngloGold Ashanti, sell Highveld Steel & Vanadium and revert to its core business of mining. This is likely to leave Anglo with far more cash than it needs, leading to the odds of more buybacks and special dividends, following this $2bn buyback and another $500m special dividend. The programme will also help underpin Anglo American's share price in the next few months, as the number of shares being bought back amounts to nearly 4% of its issued shares. Old Mutual Asset Managers resource analyst Anwaar Wagner said the restructuring gave Anglo American many options. "These will include either reducing debt further, increasing dividends, buying back more shares, approving new projects or pursuing acquisitions," Wagner said. But some have said the restructuring will take longer than initially thought. One analyst, said the process would take longer than the market was happy with. "People were expecting fireworks and the process to be wrapped up within six months," said the analyst. "But the Highveld Steel & Vanadium sale, for example, has gone slower than people expected, especially the overseas investors." Besides selling various operations and improving its capital management, Anglo still faces a battle to keep pace with BHP Billiton and Rio Tinto. Although Anglo American recently announced a 38% increase in earnings for the six months to December, BHP Billiton said its most recent half-year earnings had grown 48% while Rio Tinto's profits climbed 78%. Last week, investment bank Morgan Stanley said the asset sale would leave Anglo American "disappointingly unchanged" as the company appeared to have no clear strategy on where to invest the proceeds from the sale of Highveld Steel & Vanadium, the listing of Mondi and the sale of AngloGold stock. But Anglo American has a pipeline of projects worth $6,7bn: coal, ferrous metals, diamonds, gold and platinum.

Mining Giants to Oppose Zimbabwe's Mine-Grab Bid 

Major South African mining groups with operations in Zimbabwe are expected to raise strong opposition to the Zimbabwean government's plans to take a majority stake in mining operations, almost half of which it would not pay for. The value of Zimbabwe's mining sector is estimated to be at least US$20bn. The country has the second-largest resources of platinum in the world after SA. Analysts say the plan, reminiscent of Zimbabwe's chaotic land seizures, would destroy mining, one of the last few remaining working sectors of the economy. They warned the move could inflict further irreparable damage to the mining sector, which was already reeling from the effects of the prevailing economic crisis. Independent consultant John Robertson said the new legislation amounted to "economic sabotage" against an already collapsing economy. He said it would keep new investors at bay and hurt those already in, while reducing prospects of economic recovery. According to media reports in Zimbabwe and local sources, Zimbabwean Minister of Mines Amos Midzi told the Zimbabwe Chamber of Mines that the cabinet had approved draft proposals to require mining companies to surrender 51% of their assets to the government and/or indigenous groups, depending on the commodity. The government would pay only for 26% and the remainder would be a "free carry". Midzi said alternative foreign investors had been identified to take up the equities in current mines if external shareholders did not co-operate. Implats finance director David Brown said these were draft proposals, not final legislation. "We believe the proposal is not in the best interest of developing a platinum industry in Zimbabwe, and we believe the percentage figures and ownership methodology are not consistent with previous discussions," he said. Asked whether the Zimbabwe government's latest proposals would cause Zimplats to freeze a previously reported $2bn expansion programme, Brown said it would be premature to discuss such a move because Implats did not believe the outcome would necessarily follow the proposals. Aquarius Platinum CEO Stuart Murray said the group's joint-venture, Mimosa platinum mine, was in the midst of a $14m expansion programme, and Aquarius had no intention of halting that expansion. Metallon Group head of corporate affairs Nonkqubela Maliza said Metallon did not believe the proposals would go through in their current form. If they did, it would be disastrous for Zimbabwe's economy. However, Metallon Gold had already allocated 30% of its assets for indigenous partners, and was in negotiations with potential partners, Maliza said. Metallon Gold owns five mines in Zimbabwe and two exploration projects. It is the country's biggest gold miner. Webber Wentzel Bowens senior associate Kevin Williams said the Zimbabwean government's proposed requirement of a free-carry was fairly common in other countries, including Mali, Namibia, Botswana and the Democratic Republic of Congo. However, it was not in line with World Bank recommendations.

Metallon Ordered to Pay $7,4m by Zimbabwe

South African mining conglomerate Metallon Corporation has been ordered by the Zimbabwe High Court to pay $7,4m to a Zimbabwean company for breach of contract. Mettallon, owned by tycoon Mzi Khumalo, was ordered by Judge Yunus Omerjee to pay Stanmaker Mining the amount, which is almost half what Khumalo paid for five leading goldproducing mines. Khumalo bought Independence Gold, comprising the How, Shamva, Arcturus, Mazowe and Redwing mines from Lonmin for $15,5m. However, the deal almost collapsed after Metallon delayed paying the amount, despite paying $1m to secure the company's gold claims. Metallon had also agreed with Stanmaker to form a joint venture to acquire the Independence Gold shares from UK company Cableair, a wholly owned subsidiary of Lonmin. But Metallon started negotiating with Lonmin without Stanmaker's consent. Stanmaker wanted Metallon to pay $12m, but Omerjee reduced the claim to $7,4m. The $12m represented 40% of the $30m that the parties had agreed to pay for the Cableair shares. "On the breach of agreement, the plaintiff is awarded damages of $7,4m with interest thereon from October 28 2002 to date of payment at rates prevailing, from time to time in the US," Omerjee said. "The rate of interest applicable cannot be that prevailing in Zimbabwe but that applicable in the country where the currency is the home currency." Omerjee also said Khumalo had acted in bad faith by dropping Stanmaker as its empowerment partner. Metallon later entered into agreement with Manyame Consortium as its empowerment partner, but that partnership also collapsed. Metallon lawyer Cedric Pukrin had argued that his client was not in breach of contract because there was only an "agreement to agree", which was not legally binding.

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PETROCHEMICALS

Sasol Investments

There is nothing extra-ordinary about the looming negotiations between petrochemicals group Sasol and Indonesia's PT Bumi over a proposed $3bn plant. That there was a marginal movement in the company's share price is itself telling. While Sasol has not commented on the matter, such a move was expected, considering the company's other coal-to-liquid projects. These include plants being built in Nigeria and Qatar, while feasibility studies are under way in China and the US. Progress is advanced. The Qatar project is expected to be operational in the second quarter of this year, while activities are well under way in Nigeria. The mooted investment in Indonesia is, therefore, neither the first nor the last such investment in the coal-to-fuel area for Sasol. Many more are on the way, with Sasol spokesman Johann van Rheede saying the company had received interest "from all over the world". One thing is for sure, Sasol is not short of suitors. With international crude oil prices at record levels, it makes sense for companies to convert coal into liquid. Because Sasol has the technology, it has attracted attention from various companies who want to keep their own costs down. With Brent crude at more than $62 a barrel, coal looks the better investment. That is exactly the reason for PT Bumi's enthusiasm to join hands with Sasol in the mooted project -- turning coal into diesel is more profitable. This has presented Sasol with a perfect opportunity to realise its expansion ambitions outside SA. The coal-to-liquid operations are an important part of that. As a matter of fact, growing the coal-to-liquids and gas-to-liquids business is one of Sasol's primary growth drivers. The others are developing the integrated chemicals portfolio and exploiting upstream hydrocarbon opportunities.
Sasol, and Eyesizwe Coal have established a joint coal mining export business worth R1,4bn in what Sasol said was the first step in an empowerment strategy for its mining division. The new venture, called Igoda Coal, will be one of SA's largest empowered coal export firms, according to Sasol. Sasol Mining, a wholly owned subsidiary of Sasol, will own 65% of Igoda with Eyesizwe owning the balance. The companies will provide R46m and R25m equity respectively. The move is in line with requirements stipulated in the mining charter. Sasol Mining, which has no black equity ownership, said it would expedite plans to achieve "about 20%" empowerment shareholding by 2009 and full compliance with the charter's target of 26% by 2014. Sasol expects to make further announcements in this regard this year. "One of the first announcements will be at Sasol Mining equity level," it said. Eyesizwe CE Sipho Nkosi said in a Sasol statement that the new venture was another affirmation of Sasol's commitment to empowerment. Sasol has been criticised for lack of transformation in the past. CE Pat Davies said the announcements signalled that Sasol was "creating sustainable empowerment ventures". Sasol said that it did not foresee any conflicts of interest with regards to Eyesizwe's imminent merger with Kumba Resources. Sasol group communications manager Marina Bidoli said there might be future synergies, but that these could be explored only once the Kumba deal was finalised. Igoda would mine, beneficiate, market and supply utility coal for the international export market, said Sasol. It would produce a minimum export production of 3,6-million tons a year, the petrochemical firm said. It would comprise the full value chain of Sasol's coal export mining business. These included the Twistdraai Colliery and beneficiation plant at Secunda, the marketing and logistics components of its coal export business, as well as Sasol Mining's 5% shareholding in Richards Bay Coal Terminal. Sasol said that as a result of the deal the black economic empowerment ownership component in Sasol Mining now comprised an estimated 8%. It said that the 8% was calculated on the tonnage of coal produced. "The calculation works out as an effective 8% ownership in Sasol Mining". Sasol said Sasol Mining's intention was to create a "new, sustainable black economic empowerment entity, which will be involved in selected mining operations".

Ferrostaal R1.7bn Cape Oil Projects 

German-based industrial giant MAN Ferrostaal has unveiled a major investment in SA with the establishment of two facilities in Western Cape worth R1,7bn to service the growing offshore oil and gas industry. The two projects, an offshore fabrication yard at Saldanha Bay and a service and refurbishing hub at the port of Cape Town, will go some way towards fulfilling the company's 3bn euro offset agreements with government, as part of its participation in the arms deal. MAN Ferrostaal chairman Matthias Mitscherlich announced the developments at the Oil Africa 2006 conference, saying the direct investment in both locations amounted to R220m. The balance of R1,5bn would be "indirect" investment that would see operational equipment, at present under-utilised or at risk of being scrapped, relocated from other parts of the country and being put to full use at the new locations. The projects would inject much-needed impetus into the Western Cape economy and were expected to create at least 720 new jobs in Saldanha and another 700 in Cape Town, with indirect job opportunities for between 12000 and 14000 people, Mitscherlich said. He said the projects were directly aligned to government's Accelerated and Shared Growth Initiative for SA. He also said that much-needed skills development in terms of the offset programme would be offered, as would skills transfer from the MAN group, which had 30 years' experience in the oil and gas industry. "In addition we have the cream of South African industry who are involved in the project," said Mitscherlich. These include Grinaker LTA, DCD Dorbyl Heavy Engineering, DCD Dorbyl Marine, SA Five Engineering and Globe Engineering Works. Mitscherlich said he was confident the project would be completed in 10 months. Brian Blackbeard, of Atlantis Marine Projects, MAN Ferrostaal's South African partner, said that at present SA had only 6% of the potential market in the offshore oil and gas industry, due to lack of infrastructure and co-ordination of logistics. With the new facilities local companies could now ramp up capacity and, through more aggressive marketing, increase their stake in this sector. Blackbeard said the fact that new oil fields were springing up in west Africa meant increasing demand for new platforms and maintenance of existing ones. He said the facility would immediately be able to offer business as existing yards worldwide did not have spare capacity. "The advantage of the two projects is that they offer new capacity on African soil, geographically the closest facility compared with Asian, European, Mexican and European facilities." Blackbeard said the potential turnover for the first phase at Saldanha, starting next year, was R500m, with a projected turnover in Cape Town of R340m. After completion of an environmental assessment for the second phase of the project, the R500m turnover could double. Blackbeard said the Saldanha unit would be using 1000 tons of marine-grade steel a year and, as a domestic user, would be charged a price lower than the international unit price. Tasneem Essop, Western Cape MEC for environment, planning and economic development, said Western Cape had been waiting for a "long time" for this project to get off the ground and "it bodes well for the province to establish the oil and gas sector as a critical growth sector".

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TELECOMMUNICATIONS

Virgin Mobile Seeks 10% Market Share 

Fourth cellular network operator Virgin Mobile planned to win a 10% share of the market within five years by creaming off the most lucrative clients who were discontented with the existing players, its CEO said March 16. The operator would launch in June or July, targeting well-heeled consumers who wanted better service than they got, said CEO Sajeed Sacranie. Virgin Mobile will sell pre-paid and contract cellular services by opening 12 dedicated retail stores in upmarket shopping malls. Discussions are under way to sell its packages through some retail outlets but not in the mass market chains favoured by Vodacom, Cell C and MTN. Virgin Mobile does not expect a huge migration of discontented customers from the existing networks but it expects to win a material share. By targeting only top-tier consumers it would not rival even the smallest existing player, Cell C, in size "but we expect 10% of the market within five years", Sacranie said. There are about 30-million cellphone users in SA, with Vodacom claiming to have 18-million, MTN 9-million and Cell C 3,2-million. Analysts expect the market to reach 40-million in the next few years. "There is not going to be an avalanche of people saying 'here's Virgin, let's all go'," said Sacranie. He said this was because the other networks were doing their jobs "reasonably well". The new company is a 50-50 joint venture with Cell C and will operate over the Cell C network. That has allowed the creation a fourth player without a new licence, no fourth licence is available in SA and without building new infrastructure. That vastly mitigates the financial risk, as Virgin Mobile can debut for less than R700m using network facilities that have cost Cell C upwards of R10bn. The deal gives Cell C a chance to earn 50% of the profits from users who have shunned its cheap and cheerful image. The newcomer has no intention of sparking a price war, and analysts have speculated that Virgin may even charge a premium to capitalise on its brand. Sacranie said they would take the middle ground by offering easy to understand packages at competitive prices. Virgin Mobile's trump card may be the ability to offer customers a range of deals and discounts with its sister companies, the Virgin Active gyms, Virgin Atlantic airline and Virgin Money financial services to be launched in SA later this year. Sacranie would not say exactly how many customers it expects to win, nor how much it expects its users to spend each month. Cell C's average revenue a user is the industry's lowest at R120 a month, with Vodacom reaping R147 and MTN enjoying the highest at R168. The tie-up with Cell C has been under discussion for more than a year, but Sacranie said the lengthy process was not caused by any concern about the network's quality or capacity. "Cell C has been upgrading its network and it's been implicit in the deal that they met certain minimum standards. They have delivered the desired level of service," he said.

Telkom Offers R2,4bn for Business Connexion 

Telkom has mounted a fresh bid to take over information technology company Business Connexion, raising its initial offer to R2,4bn, and gaining the support of five key Business Connexion shareholders. The offer has raised eyebrows in the fiercely competitive telecommunications sector, with key players arguing that it could further enhance monopoly operator Telkom's stranglehold on the industry. News March 22 that Telkom had raised a previously rejected bid to a more generous R9 a share saw Business Connexion's share soaring 91c to hit R8,95 before closing at R8,80. Telkom's offer of R9 plus a dividend of 25c a share is worth R2,43bn. Telkom has long had its eye on the information technology group, but Business Connexion's board snubbed a formal bid last year as too low to be worth presenting to its shareholders. This time Telkom is taking no chances, by wooing the shareholders before approaching the board. Five key investors holding more than 50% of the 262-million shares have given "a combination of written and in-principle support â-oe to proceed with the potential offer". Telkom said it would not be goaded into raising its bid again, and if this offer was rejected it would walk away. The amount Telkom previously bid was never made public, and Business Connexion's financial director, Alan Farthing, declined to say how much more substantial the R9 offer was. Asked whether investors were likely to accept this bid, Farthing said "according to Telkom, they have already five shareholders with more than 50%". Even if investors accept the deal, it may be scuppered by opposition from the industry. Internet Solutions, a wholly owned subsidiary of Dimension Data, has said it will approach the Competition Commission with an objection if Telkom attempts to buy any IT player. Internet Solutions CEO Angus MacRobert said Telkom already dominated the market for telecommunications infrastructure and should not be allowed to absorb any player that would let it dominate the market for IT services as well. Far from being allowed to increase its stranglehold, Telkom should have its wholesale, retail and internet divisions torn apart by the Competition Commission, MacRobert said. While the deal would be a major shakeup for the IT industry, it was small in terms of Telkom and its market capitalisation, one analyst said. 

MTN Calms Fears Over Iran Venture 

Cellular giant MTN has gone a long way to quell concerns about the potential risk of its investment in Iran, telling analysts the Islamic nation could quickly become its third-largest market. MTN has invested E450m in Irancell after winning a 49% stake in the second network operator, and promised spectacular growth to put more fizz into its figures. MTN is making so much money it declared a dividend of 65c a share, despite facing a massive network roll-out in Iran, building up four newly acquired networks in African countries, and potentially bidding for a licence in Egypt. CEO Phuthuma Nhleko pulled off a successful balancing act March 23 by pleasing investors with the dividend and reassuring analysts of growth. The newly changed year end makes comparisons difficult, but for the last full year to March 2005 it earned R28,9bn. Figures for the nine months to December showed revenue of R27,2bn. Net profit for the nine months hit R6,7bn thanks to a healthy profit margin of 41,3%, pushing headline earnings a share to 359,8c. Despite speculation MTN may hang on to its cash to expand new activities in Zambia, Congo Brazzaville, Cote d'Ivoire and Botswana, Nhleko said the 65c dividend still left enough cash to fund its current growth and more to come. The heavy investments pushed MTN from holding R3,2bn in cash into net debt of R1bn. Nhleko expects peak funding in Iran to hit $1,5bn, and to arrange funding so MTN will not need to invest any more money itself. The roll-out would cost more than that, but much of the funding would come from cash generated once the network launched in August. The Iranian government has set MTN a tough target of quickly covering 50% of the population, and political and economic uncertainties add an element of risk. MTN had the ability to overcome the challenges and make a success of the venture, said one analyst. "There is some potential for disappointment and surprises, but you have to back them because they've done it before," he said. Similar concerns were raised when MTN first invested in Nigeria, now the star of its show. Its Nigerian network turned revenue of R9bn into an after-tax profit of R2,8bn in the last nine months, and almost doubled its subscribers to 8,3-million. All its networks, with the exception of SA, have an ebitda margin of more than 45%. The margin of 32% in SA was dented by a long distribution chain with intermediaries taking a cut of profits, said Nhleko. The local network added 2,2-million users, but average revenue a user fell from R184 to R164 a month. That was "quite acceptable," he said, and would decline as MTN went deep.

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