FREE GEOPOLITICAL NEWSLETTER

Albania  

For current reports go to EASY FINDER

SOUTH AFRICA


  
  

 

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

Books on South Africa

REPUBLICAN REFERENCE

Area (sq.km)
1,219,912

Population
43,586,097

Capital
Pretoria

Currency
rand

President
Thabo Mbeki


Update No: 055 - (28/07/06)

COLLAPSE OF WTO NEGOTIATIONS
World trade talks collapsed July 24 after nearly five years of halting progress towards a global pact worth billions of dollars in benefits to developing countries such as South Africa. Officials and diplomats said resuming them could take years. Trade negotiators failed to reach agreement and World Trade Organisation (WTO) director-general Pascal Lamy recommended that the organisation's 149 members suspend talks. Developing countries had hoped to reap US$86bn in proposals and the Congress of South African Trade Unions said the suspension of talks was an opportunity developing nations should seize to negotiate a better deal. 
President Thabo Mbeki presented concrete proposals on how the Group of Eight (G-8) industrialised nations could accelerate aid to Africa. Mbeki attended the G-8 summit in St Petersburg, Russia, which, among other things, assessed the progress made on commitments made at last year's summit of leaders at Gleneagles, Scotland. The G-8 leaders committed themselves to doubling aid by 2010, cancelling the debt of some of the poorest countries, supporting fair trade and providing universal access to HIV/AIDS treatment. The head of the South African Institute of International Affairs' New Partnership for Africa's Development (Nepad) and governance unit, Ross Herbert, said the G-8 leaders could claim they had taken several steps to meet their Gleneagles commitments, such as writing off debt and increasing aid. No progress had been made, however, on trade concessions and opening the markets of developed nations to the agricultural products of Africa and the rest of the developed world.

Missed Chances After WTO Talks Collapse
Officials and diplomats claim that resuming collapsed trade talks could take years. World Trade Organisation (WTO) director-general Pascal Lamy has not suggested a time or date at which talks could resume. This came after talks among the Group of Six - Australia, Brazil, the European Union (EU), India, Japan and the US - broke down. Gaps in the positions of key players remained too wide, said Lamy. South Africa's chief trade negotiator Xavier Carim said the development was a "serious setback". Unless urgent action was taken to revive the round there would be a "huge opportunity cost". There was a lot on the table for developing countries, he said. The World Bank has estimated that $287bn could be gained from global trade liberalisation, which would lift 66-million people out of poverty. Developing countries would reap $86bn of the total gains. Francois Charlot, an adviser with Mali's agriculture ministry, said: "Everybody will lose out and there are those who will lose out more, including Africa." The Congress of South African Trade Unions said the suspension of talks was an opportunity developing nations should seize to negotiate a better deal. Spokesman Patrick Craven said the union did not welcome the collapse, but that a bad deal such as the one that was being tabled would have been worse. South African commentators and other developing countries lay the blame at the feet of the US and EU, which they said had made insufficient moves to lower farm subsidies and import tariffs on farm products. Craven said the main blame had to lie with the US and EU for putting their own "selfish, short-term" interest first. Carim said: "It's not useful to enter into a blame game but the core issues from the beginning have been US domestic support and EU market access offers." The US and EU were also blaming each other. EU trade commissioner Peter Mandelson said: "The US was unwilling to accept or, indeed, to acknowledge the flexibility shown by others. Surely the richest and strongest country in the world, with the highest standards of living, can afford to give as well as take?" US trade representative Susan Schwab said: "Unfortunately, as we went through the layers of loopholes ... we discovered that a couple of our trading partners were more interested in loopholes than they were in market access." Business Unity SA CEO Jerry Vilakazi said the local organised business was disappointed "but not surprised" with Lamy's statement. "The signs have always been there," Vilakazi said. He said the suspension of the talks would give developing countries an opportunity to trade among themselves. Trade adviser to developing countries Hilton Zunckel said there had been signs for some time that the talks were foundering. He said the collapse of the talks would see WTO members focus on bilateral and regional trade agreements. Peter Draper, research fellow at the South African Institute of International Affairs, said: "The question is whether it is brinkmanship underpinned by major powers' negotiating tactics that has led to the breakdown or genuine irreconcilable differences… If it is the former, then the question will be for how long the negotiations will be suspended."

HIV/AIDS and the SA economy
Computer software billionaire Bill Gates met with South African President Mbeki July 12 in Pretoria, to discuss issues relating to HIV/AIDS. Mbeki, who has drawn criticism for his response to the pandemic, admitted that health was one of the "principle challenges" facing South Africa and the continent as a whole, and said he wanted to discuss how Gates could help. Gates described the country's progress in rolling out anti-AIDS drugs as "disappointingly slow." He was quoted as saying, "Everyone would like to see more patients on treatment ... in this country a lot of the credit for progress goes to the activists." Gates said he was willing to share whatever ideas the Bill and Melinda Gates Foundation, a philanthropic organisation, might have on improved HIV prevention, treatment and care.
HIV/AIDS is expected to have a negative impact on South Africa's economic growth in coming years, but the effects will not be nearly as severe as previous predictions, according to a new study by the local Bureau for Economic Research (BER). An earlier World Bank report suggested that the nation's economy would be pushed to "the brink of collapse," but the BER was confident that growth would only slow to an annual average rate of 4 per cent between 2000 and 2010, from a projected 4.4 per cent in the absence of AIDS.
However, BER researchers warned that the economy would be a lot worse off without proper prevention, treatment and care programmes in place. "Without treatment, AIDS would reduce the expected size of the economy in 2020 by about 8.8 per cent. But a large-scale treatment programme would cut the impact by 17 per cent between 2000 and 2020," the BER said. In November 2003, the South African Cabinet approved the 'The Operational Plan for HIV/AIDS Care, Management and Treatment', considered one of the largest and most ambitious treatment programmes in the world.

Zimbabwe Immigrants Overwhelm SA
South Africa deported more than 51000 illegal Zimbabwean immigrants between January and June this year as floods of people fled economic collapse. The Department of Home Affairs says it is now deporting 265 Zimbabweans a day. Last year, 97433 Zimbabweans were deported compared with 72112 in 2004. The government is considering building a second detention centre in Limpopo to cope with the dramatic increase in illegal immigration from Zimbabwe. The exact number of Zimbabweans in South Africa illegally is not known but analysts and government officials have estimated it at between three and five million. The latest figures come as South African health services struggle to cope with thousands of foreign patients who have not been budgeted for. Phuti Seloba, the Limpopo health spokesman, said July 22 that more than 800 patients, most of them illegal immigrants, had been treated over the past three months at Musina Hospital near Beit Bridge, in the northern region of Limpopo province. More than 200 patients were admitted at the hospital. Of them, 19 died but only eight of the dead were claimed by their relatives, forcing the department to conduct pauper's funerals for those unclaimed. Seloba said the department could not deny the immigrants healthcare. Zimbabwean police stationed near the Beit Bridge border with South Africa claim they have recorded a 29% increase in deportees in January this year compared with the previous year. The Matebeland South police spokesman, Assistant Inspector Trust Ndlovu, said police had recorded more than 35000 Zimbabwean deportees between January and May. In May, the cash-strapped Zimbabwean police handed over the job of dealing with deportees to the International Organisation for Migration (IOM), an intergovernmental organisation operating in 100 countries. The IOM has since established a support centre for the deportees near Beit Bridge. At the centre they are offered food, shelter and transport to their homes. Nick van der Vyver, head of the IOM at Beit Bridge, said his organisation received a total of 16394 deportees in a period of six weeks. The Department of Home Affairs has taken a financial knock from the influx of illegal immigrants. The government spent a total of R218-million on immigration control last year -- more than double the amount the department spent in 2004. The increase in expenditure is "largely as a result of tightening control at Lindela [detention centre], an increase in the number of deportations and refugee control," according to the department. The notorious Lindela detention centre outside Krugersdorp, west of Johannesburg, which keeps foreigners due for deportation, is struggling to cope with the numbers of illegal immigrants. The cost of detaining illegal immigrants has gone from R21.95 a day per detainee in 2001 to R75 a day today. The department also confirmed it was considering plans to build another detention centre near Beit Bridge to deal with the influx. The proposed detention centre has already been discussed with the Zimbabwean government, but department spokesman Nkosana Sibuyi said a final decision had not been made. Home Affairs officials are also negotiating with Zimbabwe to allow the deportation trains to enter the country. At the moment, Zimbabwean deportees are offloaded at Beit Bridge. On being deported, most of the deportees quickly find their way back into South Africa through makeshift entry points along the crocodile-infested Limpopo River. Immigration analysts say the increase in the deportation of Zimbabweans shows that the influx of illegal immigrants from that country is on the rise as the economic meltdown continues unabated. Van der Vyver said 92% of those deported from South Africa were men. He said that in one week at the beginning of July his organisation had received 35 Zimbabwean children who had apparently been abandoned by their parents at the border. The children had been referred to social services in Zimbabwe. Dr Sally Peberdy, project manager of the Southern African Migration Project at Wits University, said the deportations showed that there was an increase in the number of Zimbabweans in South Africa illegally. "The other thing that the figures possibly indicate is that there are new people [from Zimbabwe] coming that never came before. They are easy to find and they are not good at evading arrest," she said. Professor Mike Hough, head of the Institute for Strategic Studies at the University of Pretoria, said more Zimbabweans were flocking to South Africa than those being deported. He said the Department of Home Affairs did not have a plan to curb the influx. "An increasing number of illegal Zimbabwean immigrants are living in informal settlements and it has become easier for them to evade arrest," he said.

Eskom Will Double in Size Over Next 20 Years
For all its financial muscle and monopoly power, Eskom faces unprecedented challenges as the electricity utility embarks on the biggest power station construction and refurbishment programme SA has ever seen. "I don't think anyone has quite grasped yet how gigantic this build programme is (and the kind of) opportunities it presents for this country, particularly our manufacturing economy," says Public Enterprises Minister Alec Erwin. Eskom estimates SA will need about 47000MW of additional capacity by 2025, more than double its current installed capacity of 42000MW. That is about 2000MW more each year. This means a second Eskom plant will be built over the coming two decades. While the majority of the new power stations will be coal-based due to SA's rich coal resources, Eskom is also looking at gas, nuclear and renewable energies. The private sector has been given a look-in, and will deliver a portion of SA's power needs. Eskom has divided up the construction programme into stages, having committed R97bn for the first five years to build new power stations, refurbish existing plants and expand the transmission line. Government is keen to ensure that a significant portion of the materials and skills needed to meet the needs of Eskom, as well as those of other state enterprises, comes from SA. It is developing a procurement policy, called the Competitive South African Supplier Development Programme, which will use the multibillion-rand state utility investment programme to boost local sectors. The focus is on developing a procurement policy that will not result in big price premiums, but give preference to local industry. "The intention is to revive certain industries in SA," says Erwin. Eskom's investment programme is the largest such initiative currently under way. Eskom CEO Thulani Gcabashe said mid-July that despite it being a tough year, the group's financial performance in 2005-06 had provided a solid platform to fund the R97bn investment programme. "The year was characterised by a significant number of challenges, particularly in the generation and transmission of electricity to the Cape. Valuable lessons have been learned," he said. The 2005-06 results show that money will not be a problem when funding the investment strategy. Eskom's results may show profit on a downward trend and electricity sales largely stagnant, but its balance sheet is strong. Gcabashe points to a return on assets of 9,2%, almost R12bn in cash flow from operations and a debt-equity ratio of 0,18 as proof of a strong balance sheet, and its ability to fund the investment programme. Its initial fundraising programme was well received, and future funding will be done on a 50:50 basis, says chief financial officer Bongani Nqwababa, made up of cash flows, local borrowings and offshore borrowings. "It's easy to remember that way," he says. The challenges lie in ensuring the capital expenditure programme takes off. Gcabashe says they include finding sufficient skilled people to build the new power stations and ensuring materials can be sourced timeously. Suitable land will have to be bought and environmental impact assessments undertaken. On top of all of this, many of Eskom's existing power stations are nearing the middle of their life spans and need major maintenance work. It's a big job, but Gcabashe remains upbeat: "We have both the experience and commitment to meet these challenges and play our part in the ongoing development of SA."

« TopAUTOMOBILES

Car Import Boom Leaves Poor Wanting


In the past two years, SA has been a bit like the family where the patriarch mortgaged the house to buy a two-seater convertible. Even those who can't come along for the ride may end up paying for it. Developments in the motor industry are a telling illustration. As soaring mineral prices combine with an influx of short-run investments to push up the rand, the floodgates have opened on imports. Meanwhile, the economy has become more vulnerable to a fall in world commodity prices, which are notoriously unstable. The motor industry is often presented as an economic success story because of its export growth. In the 10 years to 2005, SA's foreign sales of transport equipment rose tenfold in nominal terms, to just more than R30bn. Their share in total exports climbed from 3% in 1995 to 10%. Until 2003, the only problem with this picture was the limited effect on employment. The motor industry employs about 100000 people. Despite major capital formation and government support, that number has not grown much in the past 10 years. Jobs in components production rose about as fast as the formal sector as a whole, and assembly plants downsized. The past two years have raised additional concerns, even though motor exports remain relatively robust. In particular, fully imported cars have flooded the local market, reducing the scope for local products while bulking up the trade deficit. The driving force behind this trend has been the rand's high level in the context of harsh income inequalities. Imports of fully assembled new cars doubled in value between 2003 and last year alone. In contrast, imports of components for local assembly plants increased only 25%. As a result, where fully assembled vehicles made up just 30% of motor imports in 2003, by last year they had risen to 43%. The influx of imported cars aggravated the soaring trade deficit. Between 2002 and 2005, total imports increased 13% a year in rand terms -- but imports of cars soared 50% a year, rising from 3% to 7% of total imports. Some economists argue that this is all to the good, as it brings cheap cars to the people. But how many South Africans can afford to buy their own car, even one of the relatively cheap new imports? The black middle class remains more a fable for media pundits than a reality, as income inequality in SA remains among the worst in the world. Growth in the past three years has helped only slightly. In September last year, half of all employed Africans earned less than R1500 a month -- not much more than the payment for even a small new car. If we factor in unemployment, incomes look even worse. In September 2004, two-thirds of households spent less than R800 a month in total. They could hardly add a car to their bills. In short, the consumer benefits of the import boom have gone mostly to the prosperous. Luxuries may be defined as goods and services that most of the population can never afford. A car is almost a necessity in some richer countries and in SA's leafy suburbs. But for most South Africans it lies beyond their wildest dreams. Meanwhile, the import boom hurts the poor directly and through opportunity costs. It displaces local production, making it harder to address the unemployment crisis. In contrast, if the rise in imports came from a surge in capital goods and equipment, it might fuel long-term growth in the economy and ultimately employment. And how does SA pay for the new imports of consumer goods? The way it has for the past 100 years: through the sale of minerals. Last year, minerals comprised 56% of SA's total exports, up from a low of 42% in 2000. But we cannot expect high mineral prices to last forever. In the past, when commodity booms like this one swept over SA, they brought prosperity mostly to the rich. When mineral prices fell, they left behind junkyards full of imported toys, a weakened industrial base, and soaring joblessness. We need creative ways to leverage a more sustainable outcome from today's high mineral prices.

« Top

BLACK ECONOMIC EMPOWEREMENT 

Empowerment May Take a Back Seat in Chase for Growth

Government has long been coy about measuring the impact of black economic empowerment (BEE) on the growth of the economy. The consumer boom, it is generally agreed, has been fired largely by middle-class black spending. But the latter are not necessarily made richer by BEE. Low interest rates and a strong rand would also rate as key factors in the boom. Under pressure, though, government may have just given us an inkling of how it measures BEE as a growth driver, with a key cabinet minister saying that SA cannot afford to have its R340bn capital expenditure projects held back by empowerment initiatives. Addressing businessmen, Public Enterprise Minister Alec Erwin said that while government valued BEE, the programme could not stand in the way of government's massive infrastructure development programme. The government wants to spend between R320bn and R340bn over the next five years in a programme to upgrade and develop, among others, transport and power infrastructure. "Everything is a race at the moment," Erwin told a meeting with the business umbrella body Business South Africa (Busa) July 15. "Yes, we must ensure there is BEE and women empowerment, but none of these can delay the roll-out of these projects. We cannot afford that luxury." "It is pointless having a BEE economy that is growing at 1%. We've got to hit the growth rate," the minister added. While BEE remained a key requirement for tender applications, government could not wait for BEE entities to be rolled out, Erwin said. "A week's delay is a week too long." Erwin's comments are likely to rile some colleagues in the ruling African National Congress (ANC) and unionists in the tripartite alliance. The SACP and the Congress of South African Trade Unions (Cosatu) are the arch critics of government's BEE programme. They both argue that the government lacks sincerity and is only paying lip-service to empowerment. The black middle-class which, until now has been the main beneficiary of the programme, may also balk at the comments. Such statements from the government, critics argue, could stall the very process it is championing. "Its like signing a blank cheque for established business to go it alone without us," says a leading black businessman who declined to be named. "The minister's statement is tantamount to admitting the initiative is not working. And if it is not working, then who is to blame," the businessman asks. Busa CE Jerry Vilakazi says he hopes that the infrastructure will not be rushed at the expense of transformation. "If that is what he meant, we would urge him to reconsider because if government does not take the lead with preferential procurement, the process could not work," says Vilakazi. "He (Erwin) did say, however, that BEE remains a major criteria. My sense is he was urging companies not to wait to become compliant," Vilakazi says. Although capital investment in the economy over the past few decades has tapered off to a trickle, a number of state-owned enterprises will now embark on several large-scale projects almost simultaneously. These will move government from a low procurement environment to one in which it will be spending roughly R100m a week, creating a massive demand on the private sector to supply to these projects, Erwin says. Erwin's frustrations also reveal a surfacing of the conflict between government's desire to level the wealth gap and the imperative of meeting certain targets to keep the country and economy working. Government has missed many targets in its delivery programme, resulting in civil strife in some local authorities. The minister also had stern words for the private sector, warning that local businesses would not get preferential treatment from government in tendering processes. In the past, local businesses benefited from tender and price premiums. This approach would not be repeated. "There will be no special allowances, no special protection from government ... there will be no government underwriting of these investments. We'll be giving a lot of information and have a lot of discussions and facilitate." Businesses would, however, have to supply on an internationally competitive basis because the programme was large and would establish the ideal platform to create major export opportunities in the future, Erwin added. The challenge will be to manage all these programmes at the same time. With key equipment and skills already in short supply, government and state-owned enterprises needed to work much more closely with business to ensure the private sector could supply the needs of government, the minister said. He reiterated that business would have to be competitive to take advantage of the opportunities. Government departments were working in close co-ordination with one another to fill gaps and align processes. Regular meetings were also held with state enterprises like Transnet to identify possible synergies and duplications. Erwin said government was monitoring the macroeconomic dimensions of the projects and their effect on the balance of payments, the import balance and capital markets, and also assessing the impact of the projects on supply chains. He said government would look at speeding up processes like licensing and the issuing of environmental and water permits for priority projects. There were mechanisms to speed up processes, he said, adding that his department was dealing closely with the department of environmental affairs and was consulting with international experts about best practice abroad.

« Top

FOOD AND DRINK

SABMiller Expansion in China to Open Way for Snow Brand

SABMiller is to extend its reach in China with the purchase of a 100% equity interest in the Zhejiang Yinyan Brewery and the brewing-related assets of the Anhui Huaibei Xiangwang Brewery through its Chinese associate, China Resources Snow Breweries. The two were acquired for a consideration of $42,3m and $10,1m, respectively. However, incorporating Yinyan Brewery's net debt of $6m and CR Snow's intention to invest an additional $1,8m in the business, the total investment cost in Yinyan Brewery is expected to be $50,2m. Following a further investment of $7,4m at the Xiangwang Brewery, the total investment cost will be about $17,4m. The Yinyan Brewery is situated in Zhejiang province on the east coast of China and is close to a number cities such as Shanghai and Hangzhou. The group said it planned to upgrade Yinyan's brewing capacity to 2,4-million hectolitres from the current 1,8-million hectolitres. SABMiller said its national beer brand, Snow, would be produced as soon as it was practical and once the acquisition had been completed. The brewery was well positioned to further extend the footprint of Snow, the group said. In May, CR Snow announced it would invest $35,3m in building a new brewery in Harbin City, in Heilongjiang province in the country's northeast, to extend the reach of the brand. The facility is expected to be completed in 18 months. The premium-label beer was launched as a national brand in China last year. Total sales volumes increased 47% last year to 15,8-million hectolitres. Snow has a 13% share in the world's largest beer market. MD of SABMiller Africa and Asia, André Parker, said the acquisitions would reinforce CR Snow's market position in the region and provide a larger platform to expand Snow in these strong growth areas. The Chinese beer market has traditionally been fragmented and dominated by numerous local brands. But SABMiller's effort to create a national footprint for Snow has seen it go head to head with Tsingtao Brewery. SABMiller's main competitor in the US, Anheuser-Busch, holds a 27% interest in Tsingtao, which has a 15%-16% share of the Chinese market. Snow grew 52% to 17,3-million hectolitres for the year ended March, making it the number one brand in China by volume.

Sugar Producer Illovo Approves ABF Takeover

Shareholders of Africa's biggest sugar producer Illovo unanimously approved a takeover bid by Associated British Foods (ABF), which offered £317m, or R3,8bn, to buy a 51% controlling stake in the group in May. The company said 99,6% of Illovo's shareholders had backed ABF's bid for control of the company at Illovo's annual general meeting July 12 and agreed to waive the condition that the company must offer to buy all shares on the same terms according to stock exchange rules. Illovo chairman Robbie Williams will retain his position after the acquisition has been implemented, while ABF will appoint three non-executive directors to the Illovo board. The acquisition will give it access to low-cost production in African countries including Malawi and Mozambique, which will be able to export sugar duty-free to the European Union in 2009. Illovo has operations in Zambia, Swaziland and Tanzania. Williams said sugar production was forecast to increase marginally to 1,875-million tons for the season, while cane production was expected to be 2% higher than last year at 5,5-million tons. Illovo reported headline earnings a share growth of 127% to 104,2c for the year ending March. Williams said the performance was largely due to increased sugar production, improved domestic sales, an increase in sugar prices, cost savings and lower financing costs. He said that while the world sugar price was strong, it remained volatile, like that of many other commodities. The rand-dollar exchange rate is more favourable for the company than in the previous year, he said.

SABMiller Has Mixed Political Motives

SABMiller might be clear in its global ambitions to merge the Statue of Liberty with Table Mountain, but it is far more confused when it comes to sponsoring politics. There appears to be no consistent game plan on exactly which political parties benefit. SABMiller, which is now the second-largest brewer in the world after Anheuser-Busch, released its annual report learly July, which saw it proudly bleat that "political donations are only made by exception". Yet the brewer still found its way to siphon a bucketload of cash into the Americas -- a process it says it undertook "after careful consideration". Its US subsidiary, Miller, "made contributions to individual candidates for political office and to party committees in the USA" -- about R2,3m in all. In central America, it donated about R1,8m to "a number of registered political parties". The reason? To "support the democratic process", it said. Notably, its new Colombian subsidiary, Bavaria, donated about R14m "to a number of candidates and parties who expressed support for the multiparty democratic process". But how strong exactly is SABMiller's philosophy of supporting democracy? For example, the brewer did not donate any money to SA's political parties last year -- during a time in which there was a local government election. Yet, for the latest South African national election, it donated R5m to political parties because of a "strong belief that a strong democracy requires healthy political parties, particularly in a newly established democracy". An admission in last year's annual report about its US donations -- strangely absent from this year's report -- provides greater clarity. Last year, SABMiller said its US donations of more than R7m were made to "campaigns and running costs of individual elected officials and candidates who indicated their support for the beer industry". Of course, SABMiller has a lot more to lose by not joining the US lobbying bandwagon. Not only is there an entrenched system of donations (see: Jack Abramoff, lobbyist and Republic Party stooge recently convicted for fraud), but its Miller brand has also suffered a series of alarmingly xenophobic attacks from rivals about its South African heritage. But, given the scandals that are linked to donations (the sort that thrust a Kebble arrow into the African National Congress Youth League's credibility), it is only a matter of time before companies that seek political favour in exchange for donations are compromised.

« Top

FOREIGN AFFAIRS

Japan Asks South Africa to 'Talk to' North Korea

South Africa IS being asked to do its bit in helping resolve the growing international crisis over North Korea's missile tests with Japanese representatives meeting in Pretoria for talks with Deputy Foreign Affairs Minister Aziz Pahad. Japan called on SA to discuss the issue with North Korea because of Pretoria's good relations with Pyongyang. Speaking at the opening of a SA-Japanese partnership forum meeting in Pretoria July 10, Japan's Deputy Foreign Minister, Yasuhisa Shiozaki, said SA's diplomatic ties with North Korea placed it in a good position to discuss the missile crisis. North Korea's Deputy Foreign Minister, Kim Hyong Jun, is to visit SA next week for talks expected to cover nuclear nonproliferation and disarmament. North Korea drew international condemnation July 5 after it test-fired seven missiles into the Sea of Japan. Analysts are unsure, however, whether SA could make a meaningful contribution South African Institute of International Affairs analyst Kurt Shillinger said that while SA "likes to play a role as a constructive peace broker, I don't see it coming up with any breakthroughs". But Shillinger conceded that "SA is in a position to reach more isolated regimes than other players, firstly because it is a non-aligned nation, and secondly because it carries stature among southern states". However, earlier this year SA angered its western allies by abstaining from a key vote by the International Atomic Energy Agency on whether Iran should be referred to the UN Security Council over its nuclear plans. While North Korea might see this as an indication that SA might have some sympathy with its missile programme, Shillinger said the stance on Iran "has done SA some harm when it comes to how this country is perceived by the international community".

Cosatu wants South Africa to Cut Ties With Israel

An alliance of nongovernmental bodies, including the Congress of South African Trade Unions (Cosatu), has called on government to end diplomatic relations with Israel in an attempt to force a tougher stance on the Jewish state. They are also asking government to recall its ambassador from Tel Aviv and ensure that no South African serves in any capacity in the Israeli security forces. The organisations told reporters in Johannesburg July 10 that they also wanted South Africans to boycott Israeli products and support sanctions against the Israeli "apartheid state" until it ended the occupation of Palestinian territory. "We call on workers not to buy Israeli goods in supermarkets. That money will go back and make sure they (Israel) buy more weapons (to attack Palestinians)," said Cosatu president Willie Madisha. The calls follow the latest attack on Palestine, which has seen Israeli bombings in Gaza, including on a university, in retaliation for a Palestinian resistance operation aimed at a military target and the capture of the an Israeli soldier. Palestine Solidarity Committee spokesman Salim Vally told reporters that the committee planned to organise a national day of action in SA in solidarity with Palestinians. "We are fully behind calls made on actions to be taken," said South African Council of Churches general secretary Eddie Makue. Deputy Foreign Minister Aziz Pahad said the recent attacks and kidnapping of a soldier had created a situation of grave danger and concern. Government wants the soldier returned.

« Top

MINERALS AND METALS

Anglogold Enters Joint Venture in Colombia

Anglogold Ashanti has entered into another joint venture agreement to explore properties in Colombia with major Chilean copper producer Antofagasta. The agreement is in line with AngloGold's policy in Colombia of exploring certain properties on its own and bringing in partners on others where it expects to find base metals as well as gold. The global gold producer said July 14 it had signed heads of agreement with Antofagasta, which is listed on the London Stock Exchange, to explore an area of southern Colombia for gold and copper deposits. AngloGold will put all of its applications and contracts into the joint venture and Antofagasta will have to spend $1,3m (R9,7m) within the first 12 months on exploration. If Antofagasta spends another $6,7m on exploration in the next four years, it can earn up to 50% of the venture. Once the properties are 50-50 owned, a joint committee will decide which areas are copper-dominant and which are gold-dominant. Each of the parties can fund a bankable feasibility study into the properties and increase interests up to 20%. Antofagasta is one of the world's largest producers, with three mines in Chile producing about 467000 tons of copper last year. It also explores for copper, mainly in Chile and Peru. Turnover last year was $2,4bn, slightly less than AngloGold's $2,7bn. AngloGold announced in June that it had formed a joint venture with Toronto-listed Bema Gold to explore a selected group of AngloGold properties in northern Colombia. The new joint venture company is expected to be listed in two years.

« Top

PETROCHEMICALS

PetroSA Hopes to Treble Income With Fuel From Gas

PetroSA said July 12 that its gas commercialisation plans could see the state agency increasing revenues and profits threefold over the next five years. PetroSA is following in the footsteps of its much larger counterpart, Sasol, by setting up partnerships in other parts of the world with a view to establishing commercial gas-to-liquids plants for the production of fuel that is seen as a cheaper and cleaner alternative to oil. Apart from the financial upside for the state-owned enterprise, the expansion and commercialisation of its gas-to-liquids operations holds huge promise for the country's balance of payments. SA currently spends about 15% of its total import bill on oil. If PetroSA increased its production it could constitute a considerable saving in foreign exchange outflows, said chief financial officer Nkosemnthu Nika. The gas-to-liquids expansion plans are in line with government policy to diversify its energy sources. Indications are the start-up of the first large-scale gas-to-liquids plant could be as early as 2010. The commercialisation plans kicked off with a technology development programme in 2001. The initiative is related to low-temperature technology, which is a joint venture between PetroSA, Statoil and Swiss company Lurgi. A semi-commercial plant was built in Mossel Bay, which proved successful. This will form the basis of future applications of the technology in large-scale gas-to-liquids projects. PetroSA is pursuing an aggressive growth strategy to remain sustainable. Its aim is to increase production output to 65 000 barrels a day by 2010. Current operations have gas feed-stocks that will last only until 2008. The company has, however, undertaken the South Coast gas development project at a cost of $448,5m, which would secure feedstock until 2013. The project was on schedule, with May as the target for the first gas to reach the refinery, CE Sipho Mkhize said. PetroSA is pursuing a number of foreign opportunities for commercial gas-to-liquids developments. Of these, undertakings in Algeria and Egypt were the most advanced, with an announcement on a $4bn plant in Algeria expected between September and November, said the GM of the company's gas-to-liquids refinery, Robert Nohamba. PetroSA would have a 25% stake in the project. "PetroSA is on the brink of a breakthrough. If we can clinch this it could have a huge potential upside for the country," he said. In Egypt, prefeasibility studies on a prospective gas-to-liquids plant would commence next year, Nohamba said. Apart from prospects in Algeria and Egypt, PetroSA is exploring opportunities with countries in the Middle East, South America and Australia. It already has a stake in a proposed fuel-grade methanol project in Qatar, in line with the objective to commercialise its gas-to-liquids know-how. In the company's corporate strategic plan, it is envisaged that the realisation of its gas commercialisation plans would see PetroSA trebling revenues to about R20bn over the next five years, from the current R6,5bn. Sasol's groundbreaking gas-to-liquids plant in Qatar would be the first large-scale plant to produce liquid fuel from gas when production starts in August. Until then PetroSA still rules the roost with its Mossel Bay plant, once regarded as a white elephant, but which remains the largest of only three gas-to-liquids plants in the world.

Sasol Outlines Plans for Global Expansion

Sasol plans to increase its spending to meet its growing list of international projects, saying July 11 that it could be pumping up to R20bn a year into these projects in four years' time. In July, Sasol confirmed a second-phase feasibility study that is expected to see it build two plants in China at a cost of $10bn, while the Indian government said Sasol had held talks in that country on another $6bn investment. In a newsletter, in which deputy CEO Trevor Munday said Sasol had "entered a significant new era", Sasol said it would spend R13bn this year. In an important signal for investors, Sasol noted "it is possible that capital expenditure could approach R20bn a year towards the end of the current decade". But it said it could not nail down specific spending figures because it was still uncertain exactly how it would proceed in certain countries. These include Qatar, where it is looking at expanding its gas-to-liquids plant; Australia, where it is considering setting up a similar plant; and the two plants in China. It has projects in the works in a number of other countries, including Nigeria and Iran. Sasol's gearing -- a figure that shows its debt as a percentage of its total shareholders equity -- is currently 29%, which suggests it still has some space to manoeuvre. Not only has this dropped from 42% at the end of 2004, but Sasol's board has also given it permission to raise the figure to between 30% and 50%, which means the group can take on more debt to fund expansion. Sasol also confirmed that it had received bids that would allow it to sell a core part of its chemical operation, Sasol Olefins and Surfactants (O&S) -- a division that makes most of its money selling detergents, soaps and cleaning products. In its update, Sasol confirmed that "bids were received in June 2006 and follow-up discussions and negotiations with short-listed bidders are to be held during July and August". This is a major retreat for Sasol, which bought the O&S business in 2001 for R8,3bn -- its largest acquisition up to that stage. But because S&E uses oil as the raw material from which to produce its products, the rocketing oil prices put the division under pressure. Sasol said that while it planned to hang on to certain parts of the S&O business, including the German assets of Sasol Solvents, it planned to "sell the bulk of the global Sasol S&O business, most of which is concentrated in Germany, Italy and the US". Palomar Equity Research analyst David Allen said the sale of the S&O business was a smart move, which was likely to give it up billions of rand, which it can use for its capital expenditure programme. "That business was not a terribly good buy anyway in 2001, with an overcapacity (in the market) and not great pricing," he said. Many analysts expect Sasol to get a similar price for S&O sale that it paid four years ago, about R8bn -- not a particularly bad result given the poor market for those products and that Sasol will keep certain parts of the business. Allen said that while the market watched Sasol's debts closely, it had always been able to keep the figure low through partnering with other companies around the world. "Its strong relationship with Chevron, for example, has given Sasol more (financial) flexibility in how it structures deals," he said. Another analyst said the R20bn spending level was quite a conservative estimate, and the actual spending in 2010 could exceed that.

India Looks to Sasol for $6 Billion Coal-to-Fuel Plant

Petrochemicals company Sasol has joined a growing list of South African companies looking to put down roots in India, as it considers a deal that could see it spend billions of rand to build a fuel plant in the country, according to India's government. With oil prices at record highs, Sasol's technology to produce fuel from coal has attracted intense international interest -- underlined July 10 when Indian Finance Minister Palaniappan Chidambaram lauded the possibility of Sasol's investment in the country. If Sasol decides to proceed, this would put it in an enviable position in the two fastest- growing economies in the world. Other South African companies have also recently moved into India. Retailer Shoprite opened its first outlet in Mumbai in 2004, Naspers has opened an office in India and the Airports Company SA and Bidvest teamed up to land a 30-year concession in February to run Mumbai's airport. Chidambaran told news agency the Press Trust of India July 10 that the Sasol investment was a very exciting opportunity that was "likely to run into $6bn". He said Sasol would begin with an initial $1bn investment. He was speaking after a meeting with the country's Investment Commission, which had had discussions with Sasol. This R42bn would be roughly the amount Sasol would need to invest to build a typical coal-to-liquids plant that would pump out 80000 barrels of oil a day. But Sasol was cagey about the Indian discussions, saying only that it had done "a preliminary evaluation and (is) engaging in discussions with various interested parties". Discussions are still at an early stage, with no immediate plans for any feasibility study, so it is still possible that Sasol may opt not to proceed -- although the Indian government's public statements would suggest there was some meeting of minds. Chidambaram said that India would consider creating "a fulltime job for an officer to handle the (Sasol) investment and see it through". He also praised Sasol's coal-to-liquids fuel technology and said India would "have to give (Sasol) identified coal blocks" to allow it to begin doing business. India has among the largest global coal reserves, according to the World Energy Council, with more than 200- billion tons -- 7% of the world total. Sasol's stock climbed only 0,4% July 10 after the news but this was still a good performance as the oil price fell, which normally knocks Sasol's stock. An analyst from a South African brokerage, who did not want to be named, said that while Sasol had become the flavour of the month amid sky-high oil prices, any investment in India would be "too far in the future to have any real impact on Sasol's investment case". "You're talking about 10 years before you see anything in India because it takes four to five years to simply build a plant, let alone other planning," he said. Corrupt US energy group Enron landed a lucrative $2,9bn deal to provide electricity to India's Maharashtra state but the deal collapsed in 2001 when the state was unable to pay for the power, which was being sold at four times the going rate. Enron, General Electric and other companies lost millions.

« Top

TELECOMMUNICATIONS

MTN Pays $3,6 Billion to Investcom for International Assets

MTN has paid out $3,6bn in the first tranche of its $5,5bn acquisition of Beirut-based Investcom, in a move it describes as one of the largest payments made by a South African company for international assets. Investors holding 99,5% of Investcom have accepted MTN's buy-out bid, mostly opting for a combination of cash plus shares. MTN has issued just more than 183-million new shares on the JSE to fulfil the share portion of its payment. On July 5 the network operator raised R6,3bn in a local bond issue to help fund the acquisition, and has raised the rest of the cash portion through bank loans. CEO Phuthuma Nhleko said the integration of Investcom into MTN had already begun. Most of Investcom's managers are joining MTN, which will shore up its own management capabilities. That will also let MTN benefit from Investcom's experience in the Middle East, which is new territory for MTN. Investcom's experience will help MTN with the new network it is building in Iran, where it holds 49% in the second network operator, Irancell. The Iranian deal was struck before MTN announced the Investcom deal, but Nhleko has previously said that the Middle Eastern experience it is now acquiring could be applied to help it understand the regulatory, political and economic conditions in Iran. "One of the qualities Investcom will bring to the group is additional experienced management and a great depth of knowledge in terms of the new markets we are developing," Nhleko said July 17. "This acquisition enhances MTN's growth prospects, securing a number of important new markets for us. "When we announced this transaction in May, we described it as a well-considered partnership that would entrench our leadership in telecommunications in Africa and the Middle East, and optimise value for our shareholders. "I am more convinced than ever that this is the case," he said. With Investcom's operations now on board, MTN is active in 21 countries in Africa and the Middle East, and has a subscriber base of 28-million

« Top

« Back

 


 
Published by 
Newnations (a not-for-profit company)
PO Box 12 Monmouth 
United Kingdom NP25 3UW 
Fax: UK +44 (0)1600 890774
enquiries@newnations.com