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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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REPUBLICAN REFERENCE

Area (sq.km)
1,219,912

Population
43,586,097

Capital
Pretoria

Currency
rand

President
Thabo Mbeki


Update No: 049 - (30/01/06)

The trials of Jacob Zuma
President Thabo Mbeki started the political year delivering his January 8 statement marking the 94th anniversary of the African National Congress (ANC). The occasion was also be used to launch the party's manifesto for this year's municipal elections. In February the president will give his state of the nation address to a joint sitting of Parliament. Contrary to his political style, Mbeki will have to acknowledge the paralysis brought to his government last year by the dismissal of former deputy president Jacob Zuma. 2006 will be a year with issues requiring his attention at government and party level. Government has to be at the forefront of efforts to end poverty, reduce unemployment, fight crime and corruption, improve service delivery and find a strategy to rescue local government from near collapse. Most of these challenges will rest on the performance of the economy. Government has said it needs growth of more than 6% a year to meet its goals of halving unemployment and poverty by 2014. While statistical indications are that South Africa's economy is on its way to achieving this target, it is far from clear that 6% growth will solve South Africa's problems.

The politics of 2006 will be dominated by events that had their origins in 2005. Much of what started last year will also only be resolved in 2007. Last year's political calendar was marked by the political downfall of former deputy president Jacob Zuma. Once a presidential hopeful, he now finds himself increasingly isolated inside and outside the ANC. For Zuma, 2006 will be the year he goes into battle to stay alive politically, fending off rape and corruption charges. Given Zuma's refusal to quit the succession race, despite facing two criminal trials, this year will determine whether the ANC's succession question will be partly resolved in a court of law. That he had to be forced to resign from all leadership structures of the ANC only after he was charged with rape is the mark of a desperate politician holding on to his bid for ultimate power in the ruling party. In July Zuma will return to court to face corruption charges. Depending on how the trial proceeds, Mbeki could be called as a witness by Zuma's defence team. 

Parliament to Roll Out Red Carpet for Zuma
Former deputy president Jacob Zuma will be one of the key dignitaries invited to attend President Thabo Mbeki's state of the nation address in Parliament February 3. Zuma will join about 650 diplomats, business people, trade unionists, traditional and religious leaders and other personalities when Mbeki reviews progress and states his vision for the year ahead. Zuma, as a former deputy president, is invited just as former deputy president FW de Klerk is. Other key dignitaries include former president Nelson Mandela and Archbishop Desmond Tutu. But Democratic Alliance chief whip Douglas Gibson said treating Zuma as an honoured guest was a further indication of the tolerance shown by the ANC towards corruption. Rape Crisis has slammed parliament's invitation to former deputy president Jacob Zuma to attend as a VIP guest and has also taken issue with the National Press Club for making the embattled politician its newsmaker of the year. Zuma, who remains the ANC's deputy president in name only, pending a rape trial, also faces a corruption trial this year. Zuma will appear in the Johannesburg High Court on February 13 on a charge of rape, 10 days after President Thabo Mbeki's address in parliament. The Cape Town Rape Crisis organisation said it was "shocked and frustrated at the lack of political will and complete disregard for survivors' rights that the government had demonstrated in its response to the rape charges" against the former deputy president. Whether Zuma was found guilty of the rape or not was not the point, it said. "The point is that there are allegations and enough evidence has been gathered to continue with a trial," a statement said "The invitation reinforced the perception that if you are a parliamentarian, a government official, a prominent person or you have lots of money, there will be no serious consequences to a charge of rape and that it would lead rape survivors to believe that if and when they speak out, they will not be taken seriously and supported."

Chairing the G-77
South Africa became the chair of the Group of 77 (G-77), the largest coalition of developing nations, which promotes the socio-economic interest of poor nations. Foreign Affairs Minister Nkosazana Dlamini Zuma attended a ceremony at the United Nations headquarters in New York January 12. The G-77 provides the means for the countries of the South to articulate and promote its collective economic interests. It also promotes economic and technical co-operation among developing countries themselves. Foreign Affairs spokesperson Ronnie Mamoepa said it would be South Africa's high priority to maintain the effectiveness of the G77. "South Africa will during its tenure as Chair of the G-77 be committed to enhancing the position of the Group as a constructive and responsible partner in promoting North-South relations in support of the development agenda of the South," said Mr Mamoepa. Priority issues of the G-77 are to ensure that the development challenges of Africa and other vulnerable groups of countries are addressed and the achievement of the Millennium Development Goals (MDGs) to halve poverty and underdevelopment by 2015. It has to ensure that resolutions from all major UN conferences and summits are implemented.

More Jobs
At least 658000 new jobs were created by September last year although the unemployment rate remained virtually unchanged at 26.7 percent compared to the same month in 2004, Statistics South Africa reported January 24. Releasing the Labour Force Survey, Acting Deputy Director-General for Population and Social Statistics Liz Gavin said although the figure remained virtually unchanged for that period, at least 658000 new jobs were created. Dr Gavin said there had been major changes especially in the construction sector, which had created a number of jobs. "After several years of decline, employment has generally been on an upward trend in recent years. Over the period September 2004 to September 2005, as many as 658000 additional jobs were recorded. In the year to September 2005, agricultural employment continued a downward trend but this was offset by employment gains in trade (which increased by 482000 jobs), finance (up by 148000) and construction (up by 111000). Over a longer period, from September 2001 to September 2005, job gains in the labour market were over 1 million (1120000), of which 960000 were in the non-agricultural formal sector. 

Exporters missing out the EU
A lack of awareness about South Africa's free trade deal with the European Union (EU) means South African exporters are missing out on opportunities in that market, according to a new survey. A foreign direct investment survey released January 17 by BusinessMap and the London School of Economics said government should market the agreement, signed in late 2000, to local businesses. The survey explored the link between foreign direct investment and the free trade deal, but the result was inconclusive. Net investment in South Africa announced by EU companies had risen from an annual average of 0,4% of gross domestic product in 1994-97 to 1,1% in the period between 1998 and 2005, but this was not necessarily a result of the treaty, it said. The foreign investment response to the trade deal seemed likely to evolve over time, however, said BusinessMap. EU companies are a key source of new foreign investment for South Africa. The survey shows that EU investment in South Africa has risen since the late 1990s, partly due to new investment by former South African multinationals now domiciled in the UK. Deeper analysis of the deal is expected as part of a review under way by the EU and government.

NPA to Prosecute Apartheid-Era Criminals
Perpetrators of up to 20 criminal cases during the apartheid era could soon be prosecuted, South Africa officials say. The head of the National Prosecuting Authority (NPA), Vusi Pikoli, told the media January 24 that new amendments to the Prosecution Policy had armed prosecutors with enough to go after perpetrators of gross human rights violation during the apartheid-era. He would not identify those targeted in the cases, which date from before the end of white-minority rule in 1994. They focus on those denied amnesty or those who failed to appear before the Truth and Reconciliation Commission. Mr Pikoli told a news conference that the authorities were currently prepared to prosecute in five of the cases, while 15 others required further investigation. According to the new amended Prosecution Policy, the crimes must have been committed on or before 11 May 1994. "We are dealing with conflict of the past. There were two forces pitted against each other, the apartheid forces with all their sympathisers and supporters and forces of liberation movements. This is what we are going to address," said Mr Pikoli. The TRC was established after the country's democratic dispensation in 1994 for victims of gross human rights violations and their perpetrators to apply for amnesty for the sake of national reconciliation. The TRC heard the testimony of some 21,000 victims and perpetrators during its eight years of hearings. Some 1,200 perpetrators were granted amnesty and 5,500 other applications were rejected. A number of key figures, including the former South African president, PW Botha, refused to appear before the commission, prompting the families of victims and others to put pressure on the government to pursue the cases. Archbishop Desmond Tutu said that South Africa should have prosecuted all perpetrators of apartheid-era atrocities who did not seek amnesty when he was interviewed to mark the 10th anniversary of the foundation of the TRC.

South African Bid to Defuse Iran Nuclear Crisis
South Africa has called for restraint from both sides in the growing crisis over Iran's controversial nuclear energy programme and has agreed to try to help them resolve the impasse. After a meeting between Deputy Foreign Minister Aziz Pahad and Iran's acting foreign minister, Mehdi Mostafavi, in Pretoria January 18, the Department of Foreign Affairs urged further dialogue with Iran. This implicitly opposed the plans which the European Union and the US are making to refer Iran to the UN Security Council for possible sanctions. They believe Iran is planning to produce nuclear weapons. Iran says it only wants to produce nuclear energy for peaceful uses. But the South African statement also contained an implicit call on Iran to avoid repeating actions which raised the temperature of the crisis. "We appeal to all parties involved to refrain from any action that could further increase tension and confrontation." The decision on whether to report Iran to the Security Council is expected to be made on February 2 and 3 by the IAEA's 35-nation board of governors at a meeting in Vienna. Mostafavi came to Pretoria to consult South Africa because it is an influential member of the board. He told reporters that he believed "consultation between our two countries will help restore peace and stability". SA denies it has proposed a resolution to end the standoff. However, what has become known as the "South African proposal" involves SA selling Iran uranium-derived yellow cake, which would then be processed into the feedstock gas for enrichment by Iran. This would then be stored by SA, to prevent the enrichment of weapons-grade material. The US opposes any enrichment activity by Iran. SA has also backed a Moscow proposal to allow Tehran to conduct its enrichment activities in Russia. SA maintains that countries that do not possess nuclear weapons have the right to enrich their own uranium in accordance with the Nuclear Non-Proliferation Treaty.

Unrest Over Refugees in South Africa
Violent clashes between foreigners and South Africans who resent the presence of immigrants from the rest of the continent have so far been attributed to xenophobia on the part of the locals but it may be time for African leaders to take responsibility by acknowledging that these hostilities are symptomatic of something more serious. The latest confrontations, which occurred at a squatter camp near Pretoria resulted in the death of five Zimbabweans. The violence erupted as the foreigners, who included Mozambicans, returned to the area after having fled an earlier outbreak of hostilities. South Africa has been inundated with a flood of immigrants from the rest of Africa since the advent of a new democratic dispensation following the abolition of apartheid about 10 years ago. The new arrivals head for the continent's economic powerhouse to escape grinding poverty, unemployment, persecution and untenable political situations in some of their own countries. There is nothing remotely "quietly diplomatic" about the increasingly tough stance South Africa is taking against desperate Zimbabweans forced to seek economic sustenance in his country. They are regularly deported and allegedly routinely harassed by South African law enforcers. Last month, a planeload of Zimbabweans were forcibly flown to Harare. This would seem to imply that Mbeki's government is prepared to get tough with the victims of the economic and political crisis in this country while continuing to appease the political leadership responsible for the situation. What is happening now is not normal immigration but a stampede from countries that have failed their own people. Searching questions must now be asked about what needs to change in those countries to make it worthwhile for their nationals to remain at home. The only hope for reversing the rot in misgoverned and impoverished African countries is to insist on the observance of the NEPAD principles.

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AUTOMOBILES

SA Vehicle Sector Record-Beating 2005

CASH-flush South Africans bought more new vehicles last year than in any previous year, underscoring the healthy state of the industry and record-high consumer confidence. New vehicle sales including cars, trucks and buses -- are estimated to have raked in R125bn last year compared with about R96bn in the year before. Domestic vehicle sales figures for 2005, released January 10, show a 28,5% jump to almost 617500 units, far exceeding the most optimistic expectations of the industry and economists. This is almost double the number of new vehicles sold five years ago, beating the previous record of 482000 units in 2004. SA was probably the best- performing market internationally, the National Association of Automobile Manufacturers of SA (Naamsa) said after releasing the figures. The figures include total sales by Naamsa and non-Naamsa members, which account for 8% of SA's market. Lower interest rates are widely credited as the single-biggest stimulus behind booming car sales, making vehicles more affordable to more people, especially black South Africans. "The emerging market was a major factor," Naamsa head Nico Vermeulen said. McCarthy chairman Brand Pretorius said his company's sales to black customers had increased substantially. He estimated that McCarthy sold one of every four or five new cars, and one out of every three used cars, to black customers. Pretorius said these figures correlated with those of WesBank, SA's largest car financier. The finance house said that the emerging market, along with women buyers and the youth, were a "major contributor" to the record growth. The record performance will boost the fortunes of the vehicle industry which, if the after-sales market is included, contributes about 7,4% to gross domestic product. The industry smashed not only domestic sales records, but also set new production and export records. Employment figures were at a seven-year high and climbing. Car makers operating in SA pushed production to a record 530000 units as they squeezed plants to stay ahead of demand. But it was importers that gained most ground. Associated Motor Holdings, the largest car importer in SA, is expected to report a sales increase of up to 70% last year from 2004. Export figures have not been collated but Naamsa estimates that close to 145000 vehicles would have been exported from the country last year, substantially higher than the 110507 units exported in 2004. The increase in exports follows the introduction of new export programmes by Toyota and Ford, among others. The new programmes disguise the negative effect that the rand's gains has had on exports, however. The automotive industry has emerged largely unscathed from last year's Competition Commission investigation of allegations of, among others, excessive car pricing and industry collusion. Pretorius said, however, that consumers had become far more demanding and discriminating. "Trading has become intensely competitive," he said. Pretorius said vehicles had become more affordable thanks to lower interest rates and virtually stable car prices over the past two years, among other factors. It now took an average South African household in the living standard measure 10 category about 37 weeks' earnings to buy a car, from 71 weeks three years ago, he said. This was still far more than the average 26 weeks it took a US household to buy a car. The US is arguably the cheapest country in the world in which to buy a car. The industry is bullish about growth prospects but expects the growth rate to come off the past two years' record pace.

Empowerment Company Beats Competition to VW Contract

An empowerment company has beaten off international and local competition to secure a contract worth up to R5m a year initially to make Volkswagen trucks and buses in SA. The German multinational's South African arm announced last year that it would start producing these vehicles in addition to passenger cars in SA. Mzantsi Truck & Bus, which won the contract, is owned by 53 previously disadvantaged employees at Volkswagen. Most or all of the shareholders had been working for Volkswagen for more than 12 years, Volkswagen spokesman Songezo Zibi said January 16. Mzantsi was among nine bidders, including Volkswagen's global logistics partner, Schnellecke of Germany, hoping to win the contract. The award was part of Volkswagen's empowerment strategy. Mzantsi is wholly owned by Abakhuseli Savings Club, one of several stokvel groups operating at Volkwagen's Uitenhage car manufacturing plant. Abakhuseli, which made a tidy profit on its Telkom shares last year, will provide the working capital for Mzantsi. Volkswagen will invest about R300m in the development of the assembly plant and dealership network. Zibi said Volkswagen would pay Mzantsi a monthly fee in terms of the production contract. In the initial stages, the contract would be worth between R3m and R5m, depending on the volume produced, Zibi said. Bus production will start in the third quarter of this year, followed by truck production next year. The plant at Volkswagen's Uitenhage plant was "well advanced", but equipment had yet to be installed, said Zibi. The company is aiming to sell 200 buses and 800 trucks a year in SA within its first year, giving it a market share of 20% and 10% respectively. The local market for these vehicles has grown in leaps and bounds over the past few years. Last year, truck and bus sales grew almost 32% over those recorded in 2004. Zibi said that, to his knowledge, the award of the contract to a company outside the car maker was a first in the automotive industry in SA. All of the 53 Mzantsi shareholders will retain their employment at the car company, with the exception of Vusi Mancapa, who has been appointed production manager of the new company.

Fiat Auto SA Merges With Brazilian Counterpart 

Struggling car maker Fiat Auto SA, probably the only car maker in SA to have lost sales and market share in last year's booming market, has been taken under the wing of its bigger brother in Brazil. Fiat Auto SA said January 12 that it had merged with Fiat Auto Brazil, whose output alone is almost equal to SA's entire vehicle production. The company said the rationale for the move was to capitalise on synergies and opportunities but Fiat Auto SA appears to be in poor shape and the future of its assembly activities in SA hangs in the balance as an assembly deal with Nissan expires in 2008. Fiat's sales in SA dropped 200 units to 7800 last year and its market share declined from 2,6% to 2,1% after it ran into vehicle and parts supply problems. The company could not afford to import sufficient numbers of vehicles and a new parts ordering system had resulted in delays in getting parts to customers. Fiat Auto SA MD Giorgio Gorelli said there were also supply constraints at the company's local vehicle assembly facilities but he would not elaborate. Gorelli would not say whether Fiat Auto SA was profitable. The firm did not usually comment on its financial position, he said. Gorelli said Fiat's "stable" sales and the "marginal" loss in market share last year stemmed from the firm's restructuring of its dealership network to enhance the number of units sold at each. He said the number of dealerships had been reduced from 100 to 35 and revenue was now R25m at each dealership compared with R5m before. Sales were deliberately kept "stable" while executing the dealership restructuring strategy and the company was now in a position to grow, he said. Gorelli said the local operation would be able to learn from its sister operation in Brazil, which had a 25% share of the total vehicle market in that country. He has not ruled out the possibility that the company may import vehicles from Brazil instead of assembling them in SA. Fiat cars are presently assembled at Nissan's Pretoria plant. The agreement with Nissan expires in July 2008 and Nissan has declined to renew it. The Brazilian plant now produces only left-hand-drive vehicles but assembled right-hand-drive units in the past. "The goal is to try to find a way to keep assembly facilities in SA," said Gorelli. The potential loss of Fiat's local assembly business would deal a blow to the domestic car industry's ambitions to double output to about a million units over the next few years. The industry notched up a record production figure of 530000 units last year and hopes to increase this to 610000 this year. Quicker parts sourcing was expected to be among the benefits resulting from the merger. Gorelli said that the South African operation's parts supply lead time would be reduced by the merger, as Italy would be cut out of the supply chain from Brazil to SA.

Tata Aims to Double Sales

Tata, the Indian car maker that has taken the South African market by storm, hopes this year to double last year's sales in the country, to about 22000 vehicles. The car maker, which launched its passenger cars and bakkies in SA at the end of 2004, sold 11000 units last year. That far exceeded Tata's and local distributor Imperial Group's most optimistic expectations. "We sold about double the number we hoped to sell initially," said Phonnie Cilliers, chief operating officer of Accordian Investment, which is owned by Tata and Imperial subsidiary Associated Motor Holdings. Cilliers estimates that Tata could sell between 18000 and 20 000 units this year. The Tata marque was the star performer in the Associated Motor Holdings stable last year, accounting for a large part of an estimated 60%-70% increase in Associated Motor Holdings' total vehicle sales. The group is the largest importer of cars in SA, representing Renault, Hyundai and Kia, among other marques. Tata's hopes to double sales should be helped by the planned introduction of about five new models over the next year. The new offerings may include a 4x4 and a half-ton bakkie, said Cilliers. A key market for Tata is the hatchback category of cars, where it has already notched up a 4% market share. The company is aiming to gain a 10% share of this category. Tata's share of the total South African market is between 2,2% and 2,4%, and is growing. The marque's performance over the past year has been helped by booming consumer demand for new vehicles. South Africans bought more cars last year than in any other. Total sales of new vehicles came to 617500 for the year, up 28,5% from 2004, which was also a record year. Based partly on its success in the local market, Tata has expanded to neighbouring countries, opening dealerships in Botswana, Lesotho and Namibia. The company has about 45 dealerships in southern Africa, and it aims to have increased the number to 65 by the end of the year. The car maker's unexpectedly strong growth in SA resulted in shortages of vehicle parts last year, but Cilliers said the bulk of parts supply problems had been resolved. Tata and Imperial recently opened a new warehouse and headquarters in Johannesburg that was developed at a cost of almost R20m. Cilliers said the company was localising as much of the vehicle parts sourcing as possible. Several key parts, such as radiators, were already being sourced in SA.

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AVIATION

Price War Benefits Consumers

The price war that played itself out between national carrier South African Airways (SAA) and the country's low-cost carriers during December is likely to cut profits for the airline, if its previous performance is anything to go by. Although intermittent low ticket prices allowed SAA to compete with low-cost carriers kulula.com and 1time, SAA has admitted that discounting is hurting its bottom line. The airline says in its 2004-05 annual report that although its international routes are doing well, it continues to face tough competition from low cost-carriers. "To remain competitive, SAA has offered competitive prices. This led to a decrease in the average yield (adjusted to foreign exchange rate impact) of 1,8%, said SAA's chief financial officer, Tryphosa Ramano. SAA said its domestic revenue remained flat in 2005, despite an increase in domestic passengers from 3,7-million to 3,9-million. Moreover, SAA's parent company, Transnet, said last year that its interim results for the six months ended September were "dampened" by SAA's operating loss of R240m. The loss was attributed to tough competition, high fuel prices and labour strikes. The advent of no-frills airlines in the domestic market, as in many parts of the world, has been welcomed by customers peeved about the high airfares charged by full service carriers. Low-cost carriers in SA have not only drawn customers away from SAA, Nationwide and British Airways (BA), which is operated by Comair in SA, but their entry has also encouraged more people to fly. Analysts say the arrival of SA's two no-frills airlines has increased the size of the domestic travel market 30% in the past three years. Kulula.com says it enjoys between 20% and 36% of domestic market share, while 1time says it has 10%. SAA's market share is estimated at 50%, a fall from the 69% the Competition Commission found the airline enjoyed in 2001. SAA's dominance has been to the detriment of passengers and rivals in the past. Last year the Competition Tribunal fined SAA R45m for anti-competitive behaviour. The tribunal said it had found conclusive evidence that SAA had abused its dominant position by offering incentive schemes to travel agents "to sell more SAA tickets and fewer of its rivals' tickets". Such practices are in breach of the Competition Act. The changes affecting SAA are not unique: the growth of budget carriers is causing headaches for many full-service airlines across the globe. Wolfgang Kurth, CEO of low-cost carrier Hapag-Lloyd Express, said recently that budget airlines in Europe had "cannibalised" between 30% and 40% of the customers from full-service carriers such as BA and Lufthansa. He predicted that low-cost carriers would win 25% of the European market by 2010. In a bid to compete directly with the low-cost operators, SAA says it will consider launching its own no-frills carrier. SAA CEO Khaya Ngqula said about 20% of the domestic market prefer to fly without the frills. "The other option for us is to sit back, do nothing and hope for the best. And the best might never come ... meaning we will just disappear as an airline," Ngqula said last November. 

African Civil Aviation Commission crackdown on Dangerous Operators

African countries and airlines running unsafe planes face a crackdown from the African Civil Aviation Commission. AFCAC president Tshepo Pheege said it would name and shame airlines operating what he called "flying coffins". Nearly 400 people died last year in air accidents in Africa, which has a crash rate six times the world average. At the same time, Nigeria has grounded a third domestic airline. Nigeria's president launched a task force on air safety after two major crashes in 2005. "One of the most important things in choosing an airline is how safe it is," said Mr Pheege. "You don't want to fly out as a passenger and come back as cargo." Africa accounts for only 4% of global air traffic but 27% of all air crashes. Last year, 15 air accidents were recorded in Africa. AFCAC, a specialised agency of the African Union, will be following up on whether its recommendations are being adhered to. Mr Pheege said lack of transparency among many African states had resulted in safety concerns being ignored. The Nigerian presidential task force created to improve aircraft safety grounded Executive Airline Services, the third Nigerian carrier to be targeted under new safety rules. A spokesman for the company said the order related to administrative, rather than technical irregularities, and flights would soon resume. More than 200 people were killed in two air disasters in Nigeria within a month last year. Two airlines which had been ordered to stop flying have since had the restriction lifted. These include Sosoliso, the owner of a plane which crashed in Port Harcourt in December, killing 117 people. Aside from the Nigerian accidents, the biggest culprits in 2005 were Russian-built planes, Mr Pheege said. 

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BANKING

Foreign Reserves Top $20bn

SA's foreign reserves grew rapidly on the back of a strong rand and higher gold price in December, experiencing their biggest monthly increase in six months, the Reserve Bank said January 9. Although the value of reserves increased 3,7% from $19,9bn to $20,65bn, equal to 3,8 months' import cover, they are still considerably lower than the international standard of six months. Given this and the continued surge in the rand since then, it has gained 4% since the beginning of the year, the Bank is expected to keep building reserves at a steady pace, said analysts. "Gross reserves are now slightly above what may be perceived as an 'optimal' level of $20bn, although the import-cover ratio of 3,8 months is still relatively low by international standards. We could therefore see mild accumulation of reserves through 2006," Standard Bank economist Shireen Darmalingam said. The import-cover ratio is the extent to which gross reserves can cover average imports. With the gold price remaining above $500/oz, and commodity prices expected to remain strong this year, analysts expect the Bank's holdings of gold reserves to increase further this year. The Bank reported a higher market gold price of $514 at the end of last month, compared with $494,8 at the end of November. Gold reserves climbed to $2,05bn ($1,97bn). "With the gold price hovering above $500/oz in December, there was no doubt that the level of gold reserves would increase," Darmalingam said. The rand strengthened by as much as 16c against the dollar last month, allowing the Bank to buy $664m ($460m) of forex during the month. Forex reserves increased to $18,6bn last month. Net reserves, also known as the international liquidity position, rose to $17,2bn ($16,5bn). "The trade-weighted rand is now at its strongest level since early 2005, which means that the Bank should continue to be an active player in the market in January," JP Morgan economist Marisa Fassler said January 9. She said the size of reserve purchases in January would send an important message about the Bank's tolerance for a strong exchange rate.

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CONSTRUCTION

Waco Sells for R5,4bn

The market's hopes of seeing the largest JSE listing since Telkom's took place were dashed January 17 when industrial group Waco announced that it had been sold for R5,4bn. Private equity groups CCMP Capital Asia, JPMorgan Partners Global Fund and management bought the South African group in what was the largest foreign private equity leveraged buyout in SA to date, according to Waco. The group, which provides construction-related equipment and services, among other things, had been expected to raise up to R4,7bn in an initial public offering. The company said last year that it would list on the JSE, but the move drew wide interest from potential suitors whom Waco declined to name. Industrial conglomerate Bidvest and Citigroup's CVC International, however, are reliably believed to have been among those who submitted bids for Waco. Waco International CEO Royden Vice, one of the new shareholders, did not rule out a future listing in SA. He said that one of the reasons Waco had opted for the sale was that it offered a significant premium compared with what the company expected to raise through an initial public offering. Vice said the acquisition, CCMP Capital Asia's first in Africa, reflected confidence in the South African investment climate. CCMP is the largest new shareholder with 57%, followed by JPMorgan with 28% and management with 15%. Vice said the acquisition meant that the two private equity firms saw substantial growth potential in the company. Existing owner Ethos Private Equity led a consortium buyout of Waco five years ago with an enterprise value of R2,4bn, which was the largest pure private equity transaction in SA at the time. Vice said Waco, which generates most of its estimated R2,5bn-R3,5bn revenue from activities abroad, in countries such as Australia and the UK, would remain based in SA after the acquisition. The company's strategy, management and staff would remain unchanged, Vice said. Waco is expected to benefit from the anticipated growth in construction activities in SA as government steps up investment in infrastructure. In SA, Waco provides equipment and services used in construction and building maintenance. The industrial company has undergone major realignment and transformation since the takeover by Ethos. A programme aimed at overhauling Waco was introduced by a management team led by Vice, who was appointed in 2002. Ethos senior partner Danie Jordaan said Waco had produced "exceptional" revenue and earnings growth through an acquisition strategy. Recent acquisitions include a leading UK company called Interlink Support Services and a New Zealand scaffolding and forming business called Australasian Pacific. Waco recorded compound annual growth in earnings before interest, tax, depreciation and amortisation of 27,7% in the three years to June last year.

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FINANCIAL SERVICES

Skandia Bosses Throw in Towel As Defeat Looms

Skandia's directors, who were hostile to Old Mutual throughout the duration of its eight-month fight to get control of the Swedish life assurer appeared finally to throw in the towel January 19. This seems to signal the end of any meaningful resistance from the Skandia board, coming towards the end of a week in which Old Mutual said it already had 69,7% of Skandia's shares. After Old Mutual said that its takeover of Skandia had been approved by the UK's Financial Services Authority (FSA), Skandia issued a short statement yesterday saying it would call an extraordinary general meeting. Skandia spokesman Harry Vos said "the board came to the conclusion that now that the FSA has approved (the deal), it is time to prepare for the meeting". He said this was an unsolicited move on Skandia's part. Vos would not comment on whether this apparent acceptance of the new order, with Old Mutual as Skandia's majority shareholder, signified a softening of the earlier opposition to Old Mutual. Now that the UK regulator has approved the deal, it is likely Old Mutual will declare the offer closed at that point. Old Mutual spokeswoman Miranda Bellord said that Old Mutual was "pleased to see they have recognised a change of ownership". "But an extraordinary general meeting was always going to have to be called, and it was always up to their board to do so," she said. Skandia's resigned tone would seem to suggest its board is preparing to quit, an action which analysts believe would have been foisted on the board by Old Mutual in any event. Bellord would not comment on this possibility. "It's clear that it's been difficult but Old Mutual's sentiments (that it harbours no particular animosity to the Skandia board) have never really changed," she said. Skandia's Vos would also not comment on whether any members of the board had any intention of quitting. "I would think we have to wait for a final statement," he said "but the composition of the board will be an item on the agenda of that meeting and I cannot say if there will be anything else," he said. 

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FOOD & DRINK

SABMiller Joint Venture in Vietnam

Global brewer SABMiller has added another country to its rapidly expanding network, forming a R300m joint venture in Vietnam with the Vietnam Dairy Products Company (Vinamilk). SABMiller confirmed January 13 that it would plough $22,5m of its own cash into a joint venture with Vinamilk that would see it produce up to a million hectolitres of beer a year that could be sold through Vinamilk's 120000 outlets. While some analysts were surprised by the project in Vietnam, it follows SABMiller's efforts to expand in the fastest-growing beer market in the world, China, and its takeover of Colombian brewer Bavaria last year, indicating it has no intention of slackening its strategy of buying into high-growth emerging markets. SABMiller confirmed it was entering Vietnam which, although it is still selling far less beer than China's 250-million hectolitres a year, is still the second-fastest growing beer market, at 15-million hectolitres a year. "We will use Vinamilk's extensive distribution platform to roll out products and our initial investment will be used to build a greenfields brewery just outside Ho Chi Minh City," said SABMiller spokesman James Crampton. While this is a relatively small deal for SABMiller, a million hectolitres is less than 1% of the 175-million hectolitres that SABMiller is expected to produce globally with Bavaria under its wing, it is a strategically important move. One analyst, said that SABMiller had already missed out in "Indochinese" countries such as Vietnam, Cambodia and Thailand and this move would go some way to correct that imbalance. "Companies such as Heineken and, in recent times, Carlsberg have been strong in that region. SABMiller started late." Another analyst said that while SABMiller may be a relatively late mover compared with Heineken, this gave it exposure to a new area through an amount of money it would typically consider "pocket change". According to Vietnam's industry ministry, the beer industry in the country has grown at 8,3%, compounded, over the past three years and it expects its sales of 15-million hectolitres a year to balloon to about 25-million hectolitres by 2015. Vinamilk plans to list on the Ho Chi Minh City Securities Trading Centre, although Crampton denied SABMiller had any intention other than to form a joint venture with Vinamilk. The listing would make Vinamilk the largest listed company in the country, say news reports. These reports say the company's market capitalisation would be $421m, nearly that of the combined $480m value of the other 33 companies listed on Vietnam's emerging exchange. Even though SABMiller spent $7,8bn to get its hands on Bavaria last year, the Vietnam deal is a sign that the company plans to keep expanding in emerging markets, either through acquisitions or partnerships. Press speculation abounds in India that SABMiller will buy the Mohan family's interest in New Delhi-based Mohan Meakins brewing business. Although this would give SABMiller stronger leverage in the competitive Tamil Nadu area, insiders say the media speculation is premature and that while negotiations have been continuing, no deal has been struck. As it stands, SABMiller is already the second-largest brewer in India and has a 13% share of the Chinese market.

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MANUFACTURING

China To Cut Exports 

The South African clothing and textile industry has responded favourably to an announcement that China is to voluntarily reduce its clothing and textile exports to SA. A reduction in Chinese imports would help revive the domestic industry, said Aaron Searll, CEO of SA's biggest clothing and textile manufacturer, Seardell Investment Holdings, January 20. He said that clothing imports from China had risen 40% in the past nine months. "It cannot be allowed to continue like this, it is overwhelming," Searll said. China's ambassador to SA, Liu Guijin, said his country would limit export of garments and some textile items to SA. Searll said more clarification was required on the form the limitations would take, and whether they would mean a percentage cap on the volume of imports, as promoted by the World Trade Organisation (WTO). "The industry also needs to know how long is it to be enforced for and who will enforce it," he said. The import of high-quality textiles and clothing to the South African market by China has put increasing strain on the domestic manufacturing industry, leading to the demise of a number of companies, including KwaZulu-Natal's largest textile manufacturer, Whiteheads. The company, which closed its doors at the end of 2004, blamed cheap imports from India, China, Pakistan and Indonesia for a R200m loss in turnover in the last two years that it operated. Clothing company Rex Trueform said in its annual report last year that highly competitive trading conditions in the industry resulted in larger-than-expected losses in manufacturing, which in turn resulted in retrenchments at all levels. Despite the massive job losses, which Searll put at 60000 in the past four years, he said the curb in imports would benefit the sector. Executive director of the Textile Federation of SA, Brian Brink, said he was not aware of the exact terms of the Chinese offer. "I do not know what has been negotiated, although every little bit would help," he said. Brink said that the WTO agreement, in which members are allowed to limit Chinese textiles and clothing imports to 7,5% a year of the current level of imports until 2008 was one possibility. Brink said he doubted the Chinese would stick to the particular limit as it was not a binding figure. "I feel that it was a bit of a pre-emptive move by the Chinese as the announcement was made by them instead of SA." The trade and industry department set up a task team in April 2004 to investigate the industry's need for protection against Chinese imports.

Rand Threatens Manufacturing Recovery

The manufacturing sector showed further signs of recovery in December, but the strong rand is threatening its continued wellbeing, according to the latest Investec purchasing managers index (PMI). The rand strengthened to R6,30 to the dollar as last year drew to a close, and its rally has continued almost unabated since then. A strong rand deprives manufacturers of export revenue and gives them more competition in the form of cheaper imports. Stunted growth in the sector, the economy's second-largest, accounting for more than 16% of gross domestic product (GDP) would dent SA's overall economic growth prospects at a time when government is seeking to boost annual GDP growth to an average 6% between 2010 and 2014. The Investec PMI rose to 52,5 in December, ending a string of monthly declines that took it to 50 in November. A reading above 50 signifies expansion in the sector, while a number below 50 indicates that manufacturing output is shrinking. But Andre Roux, head of fixed income at Investec Asset Management, warned January 16 that despite the improvement, "currency strength continues to have a dampening effect on the growth in the manufacturing sector". This was reflected in the large decline in the PMI's price index, which dropped from 68,6 in November to 60,8 in December. "The buoyant growth and demand conditions experienced in the wider economy bode well for prospects in the (manufacturing) sector. However, sustained rand strength may limit the opportunities in this regard," Roux said. The sector continued to shed jobs in December, although at a slower pace than the previous month, with the seasonally adjusted employment index improving from 45 in November to 48,7 in December, he said. 

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MINING

Angloplat Earnings Up 65%

The higher rand prices of platinum group metals sold will help grow Anglo Platinum Corporation (Angloplat) headline earnings 60%-65% for the year to December compared with restated figures for the previous year, it said January 19. The 2004 headline earnings have been restated to 1120,6c a share following the adoption of International Financial Reporting Standards relating to share-based payments. The market downgraded earnings expectations for Angloplat after its Polokwane smelter accident in September, as the group warned this had cut its 2005 refined production forecast. As a result of strong platinum group metal prices towards the end of last year, analysts upgraded its forecasts again. The price of platinum started last year at $862/oz and ended it at $970/oz but it traded between $900 and $1000/oz in the last three months. Palladium, which started the year at $180/oz, traded as high as $295/oz in mid-December. Angloplat said the increase in the group's earnings a share would be even higher at between 77% and 82% than the rise in headline earnings because of capital gains associated with its Mototolo, Marikana and Elandsfontein transactions. In August Angloplat said that it and Xstrata would each pay half the costs of building a R1,35bn platinum mine at Mototolo in a pool and share agreement, similar to its existing agreements with Aquarius Platinum at the Marikana and Kroondal mines. The Marikana pool and share agreement was made in July. Last month Angloplat said it would sell some of its undeveloped platinum properties at Elandsfontein to Ngazana, a black consortium. Angloplat shares gained 1,8% or 802c to R450,90 on the JSE yesterday, more than double the 12-month low of R205. The platinum price rose 1,4% to $1036/oz while palladium gained 0,74% to $273,50/oz. Angloplat accounts for about half of SA's platinum output, and SA is the world's biggest producer of platinum. Angloplat would publish its annual results on February 13, the group said.

Gold Miners' Benefit From High Price 

The stronger rand gold price in the December quarter is expected to help South African gold producers. Gold Fields and Harmony, report pleasing cash profits in the forthcoming round of gold quarterlies. Sanlam Investment Management fund manager Stephen Roelofse said the average gold price in the December quarter was about R101652/kg, against R91751/kg in the September quarter. That would make a difference of about 11% in operating margins for South African gold companies, depending on their costs. A second analyst said cost increases in the December quarter should be subdued. The effect of the wage settlement agreed with the unions in July had entered the cost base in the September quarter, so December's wage costs would be similar to September's, though they would increase on a year-on-year comparison. The December quarter would also reflect higher production in the industry after a period of consolidation, he said. But Afrifocus Securities analyst Mark Madeyski said that as tonnages increased, the grade of the ore tended to drop, so it was difficult to increase gold output. Roelofse said increases in the cost of fuel, which would be expected to affect operations in countries such as Ghana, Tanzania and Australia, were less material in SA. They were likely to be evident in the overseas operations of companies such as Gold Fields and AngloGold Ashanti. Although costs were difficult to predict, South African miners had worked hard at cost containment and the benefits of those measures would still be evident for some time, Roelofse said. Madeyski said South African mines had been cutting costs aggressively for some time and there would come a point when it was difficult to make any further savings. Harmony CE Bernard Swanepoel said at the September quarterly presentation that management would try to cut costs to R68000/kg in the current financial year to June, from R85718/kg in September. Gold Fields CEO Ian Cockerill said in October that the company would be in a stronger position in the December quarter than it was in September due to a higher gold price and better cost controls. AngloGold Ashanti forecast in its September quarterly outlook that its fourth-quarter production would be 1,5-million ounces compared with 1,53-million ounces in the September quarter.

Mining Production Down

Platinum group metals production fell in the three months to November, dragging down total mining production figures, according to the latest data from Stats SA. Total mining production in the three months declined 3,8% from the previous three months. Production of the group that includes platinum, palladium, rhodium, ruthenium and iridium fell 13% in the quarter to November from the three months before. Coal production for the period declined 2%. Platinum metals and coal account for almost half of mining output. According to the latest Johnson Matthey interim review for the platinum industry, global demand for platinum is forecast to rise 2% to a new high of 6,71-million ounces last year, mainly because of robust purchases of platinum for use in vehicle catalysts. Supplies of platinum, however, would be only 6,59-million ounces, the report said. Platinum touched a near 26-year peak of $1022/oz, having risen from about $850/oz a year ago. Palladium, which was trading at about $190/oz a year ago, touched $295 last month and is currently at about $275/oz. TheBullionDesk, a UK precious metals information service, forecast in a report this week that platinum could reach a record high of $1250/oz this year and palladium could touch $480/oz. Analysts and industry sources said January 12 that the fall in local platinum production in the period to November could reflect a short-term lack of refined metal from Anglo Platinum as a result of a smelter shutdown. Angloplat accounted for half of SA's projected annual production of about 5,1-million ounces for last year. However, refined platinum production would pick up again in the first half of this year. The company said in an update on its Polokwane smelter shutdown in October that normal operations would resume in mid-December. It forecast refined platinum production for last year would fall to 2,45-million ounces from 2,6-million ounces. Stats SA figures show November's metals and minerals production fell 3,4% from November 2004, reflecting an 11,3% decline in gold production as well as of coal and platinum group metals. Gold production has been in decline for several years due to the closure and restructuring of unprofitable mines in response to the strength of the rand. In 2004, SA's gold production fell 9% to 342 tons, its lowest since 1931, and in the first half of last year it fell another 15,5%, according to Chamber of Mines figures. SA earned R12,5bn from metals and minerals sales in October, according to Stats SA, which was a 19,5% improvement on the corresponding month a year earlier, as prices of metals had risen. Sales of gold fell 10,6% to R2,1bn while sales of non-gold minerals rose 28,3% to R10,4bn. SA is the world's biggest producer of platinum and gold. According to the Chamber of Mines, the platinum industry was SA's single biggest export earner in 2004, accounting for about 8,1% of total exports.

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PETROCHEMICALS

Sasol Starts Work On R2bn Plant

Petrochemicals group Sasol said January 16 that construction of a R2bn 1-octene plant in Secunda, Mpumalanga, had started. Sasol operates two 1-octene plants with a combined capacity of about 100000 tons a year. The group said the new plant, scheduled to start production in the second half of next year, would double its octene output to 200000 tons a year, making the company one of the biggest producers of the chemical in the world. The chemical is used as an additive to polymetric formulations to enhance elasticity, flexibility, impact resistance and strength. The product is often used in conjunction with hexene and pentene in products such as plastic for wire coating, automotive interiors, raincoats and shopping bags. Sasol deputy CE Trevor Munday said the company had decided to build the facility because of growing global demand from plastic manufacturers for 1-octene. The plant would enable Sasol to capture a sizeable part of that market. Sasol spokesman Johann van Rheede said global 1-octene production grew 6%-8% a year on average. Current global consumption figures of 1-octene were not immediately available but former Sasol CE Pieter Cox was quoted two years ago as saying that consumption was approaching 500000 tons a year. Sasol has appointed German gas and engineering group Linde "to detail engineering, procurement and construction" of the facility. The new plant is the third 1-octene facility to be constructed by Linde. The group said the new plant would be the sixth Alpha Olefin plant that Linde would be erecting within Sasol's Secunda complex. "Linde and Sasol started their business and technology co-operation more than 50 years ago," said Aldo Belloni, a member of the Linde executive board responsible for gas and engineering. "Linde is very proud to be associated with this great South African enterprise," said Belloni. The octene plants are run by Sasol Olefins & Surfactants, the group's hydrocarbons division. The multibillion-rand investment comes shortly after Sasol's announcement that it would double capacity to produce methyl isobutyl ketone, a solvent used in tyres and pharmaceutical products. Sasol said at the time that the new plant would have a capacity of 30000 tons a year, increasing the group's total capacity of the solvent to about 60000 tons a year.

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TELECOMMUNICATIONS

Cellular Operator Shares Up 28% on Takeover Talks

One of Africa's largest cellular operators might be taken over by a larger international player, with Millicom saying January 19 that it is assessing offers to end its independence. Nasdaq and Stockholm-listed Millicom had a market capitalisation of $2,8bn January 18, but news of a potential takeover sent its shares soaring 28,8%, making calculations of its potential value tricky. The going rate for cellular take-overs could easily see bids of $4,5bn. Acquisitions last year were conducted at an average of $570 a subscriber, so Millicom's 7,9-million users would price it at $4,5bn. However, the cost a subscriber has leapt 11% since August, according to Merrill Lynch, which would price Millicom at a massive $5bn. Since that would be well above the $3,3bn paid last year for its larger rival Celtel, Dobek Pater of Africa Analysis expect bids of closer to $4bn. The speculation could be premature, as Millicom may not be sold at all, CEO Marc Beuls said. That seems unlikely, however, as it has received "a high number of unsolicited approaches". The board was happy with Millicom's strategy and its healthy cash pile of $600m was ample for its aggressive growth plans, but the board had a fiduciary duty to seriously assess the takeover bids, said Beuls. He would not name the potential suitors, nor say whether MTN was among them. Such a move would fit MTN's stated expansion policy, if the price a subscriber did not spiral too high. MTN came close to buying Celtel for $2,67bn, until its bid was dwarfed by the $3,3bn from Kuwaiti operator MTC. Beuls said Millicom regularly received propositions, but "the frequency of offers in the last couple of months and the seriousness of their intent has increased", he said. "We don't know whether it's going to lead to a transaction. We are doing very well, our growth rates are higher than our peers' and our profitability is excellent, but the board has to look at this seriously." Beuls would not speculate on the kind of premium bidders are likely to offer. "The numbers are very high these days, so clearly there is an appetite," he said. Telecoms companies in the developed markets had two problems -- no growth and too much cash, he said. "Companies seeing negative growth rates know they need to go to the emerging markets where there is high growth and profitability." Millicom runs networks in 16 countries in Africa, Asia and Latin America. In Africa, the company operates in Senegal, Sierra Leone, Ghana, Democratic Republic of Congo, Chad, Tanzania and Mauritius, clashing with Africa's major players MTN, Vodacom and Celtel. Its largest shareholder is Stockholm-listed Kinnivik with 38%.

Telkom Considers Expansion Into Botswana

Faced with tough competition from cellphone operators at home, fixed-line operator Telkom has added Botswana to a list of five African countries it considers ripe for investment in its bid to seek new sources of revenue. Telkom spokeswoman Lulu Letlape said January 23 that the company would focus on Botswana, Angola, Nigeria, Democratic Republic of Congo and Kenya. It is the first time the company has expressed an interest in investing in Botswana. Telkom has previously discussed only the other four countries. "We have appointed a person in the company who is looking at all these countries and is holding talks about any opportunities there," Letlape said. She said the company would consider investing in state-owned monopoly Botswana Telecommunications Corporation (BTC), which plans to privatise this year. "Privatisation of the incumbent is one of the ways we could enter Botswana, or maybe via a mobile (cellphone) company if one becomes available," Letlape said. Diamond-rich Botswana, which has a population of 1,8-million, currently has two cellphone operators with a market penetration of 30%. Fixed-line operator BTC has a market share of about 8%. The advent of cellphones in SA more than 10 years ago has proved strong competition. The fixed-line operator currently has about 4,7-million customers, down from 5,5-million in 2000. SA's three cellular operators: Vodacom, MTN and Cell C have taken market share from Telkom as people have swapped fixed-line phones for cellphones. SA currently has 25,8million cellphone users and analysts expect the number of users to rise to 32-million by 2009. Telkom, together with its 50% subsidiary Vodacom, said they also wanted to invest in the lucrative Nigerian market, where MTN already has operations. Analysts said Nigeria, with a population of about 120-million, had huge potential. "At present Nigeria is by far the most vibrant of the African telecommunications markets with opportunities for mobile operators, service providers, investors and equipment vendors," said Australian-based research and consultancy firm Paul Budde Communication. The group said fixed-line teledensity, the number of lines per 100 people, in Africa was about 3% while cellphone penetration had reached 8%. It said alternative technologies such as satellite, wireless and cellular were now making the task of connecting Africa far easier than it has been with traditional cable-based technologies. "This suggests that fixed-line access may become an outdated measure of a maturing telecommunications infrastructure and follow-on services like internet access are likely to focus on mobile handsets instead," the research group said in its 2005 report. The African Telecommunications Union said about 3-million people were on waiting lists for a fixed telephone line in Africa. The organisation, which promotes the development of information communications technology, said there was a demand to support an additional 60-million lines, particularly in remote areas.

OTHER NEWS

President Mbeki Pays Tribute to South African Tycoon

One of South Africa's best known business leaders and industrialists, Anton Rupert, has died aged 89. During the country's apartheid era he built up a business empire in tobacco, liquor and luxury goods, which eventually spread to 35 countries. He was listed among the 500 wealthiest people in the world by the Forbes List. Coming from a humble background in rural South Africa, he was also respected as a philanthropist who took an interest in the arts and wildlife. Anton Rupert's first business went bankrupt but he then built up a tobacco and industrial conglomerate called Rembrandt, which he had founded in 1947. Later he moved into the liquor industry and the luxury goods market. Although he was an influential Afrikaner, and was welcomed into nationalist organisations like the Broederbond, he remained critical of apartheid. However, he avoided open confrontation with the leaders of white South Africa. A recent biography has raised questions about whether the course of the country's history might have been different, had Anton Rupert chosen to enter politics rather than the business world. Nelson Mandela's spokeswoman, Zelda le Grange, said that with Anton Rupert's death, South Africa had lost "a giant of a man". President Thabo Mbeki said Dr Rupert had played a significant role in supporting and initiating the transformation of South African business. Mbeki described Dr Anton Rupert as having played a crucial role in transforming the country's private sector, especially the industrial and commercial sectors. He was a pioneer in the establishment of South Africa's footprint in the global financial and commercial world. "Not only will he be remembered for his business acumen, but also for his total devotion to nature and environmental conservation as shown by his immense contribution to the establishment of numerous Trans-frontier Parks. A true philanthropist," said President Mbeki.

Mandela to Be Patron of Africa Forum

A select club of former African heads of state has been established in Maputo, with former president Nelson Mandela as its patron. The veterans have formed the Africa Forum as an informal network to help strategise plans for the development of the continent. Its members also include former United Nations secretary general Boutros Boutros-Ghali of Egypt and former Organisation of African Unity (OAU) secretary-generals, William Mboumouma of Cameroon and Ahmed Salim Ahmed of Tanzania. "It is a group of elders. Elders do not reprimand, they advise. This is a forum aimed at networking and complementing work in the area of peacemaking," said Mr John Pesha, interim executive secretary of the Africa Forum. Mr Pesha is a former Tanzanian diplomat based in South Africa. Former Mozambican president Joaquim Chissano, who spearheaded the initiative, was elected chair, while former president of Benin, Nicophore Soglo, is his deputy. Mr Chissano said that the forum was an informal platform where former African leaders could map out strategies to assist the political, economic and social development of the continent. "After a reflection, we saw that it was necessary for our experience to contribute to the positive development of our continent," he said. In a press statement the veterans said they were encouraged by the emergence of democracy and a culture of peace in Africa. They were also pleased that more heads of state were relinquishing their power when their terms of office expired. Its brainstorming sessions will keep in mind the goals of the African Union, which replaced the OAU, and the New Partnership for lAfrica's Development (Nepad). The forum's first annual meeting will be held in mid-2006. Mr Pesha said an executive secretariat would also be established at that time. He said the forum would approach the South African government about the possibility of basing the secretariat's offices in South Africa. The forum has been established with the support of the Africa Institute of South Africa. Other former presidents who are members of the forum include Norbert Ratsirahonana of Madagascar, Carl Ossmann and Cassam Eteem of Mauritius, former Tanzanian presidents Benjamin Mkapa and Hassan Mwinyi, Henrique Rosa of Guinea-Bissau, Aristides Pereira and António Mascarenhas Monteiro of Cape Verde, Miguel Trovoada of São Tomé and Príncipe, Kenneth Kaunda of Zambia, Yakubu Gowon of Nigeria, Jerry Rawlings of Ghana, Quett Masire of Botswana, Pierre Buyoya of Burundi and Bakili Muluzi of Malawi.

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