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

Books on South Africa



Update No: 071 - (07/12/07)

African National Congress (ANC) President Thabo Mbeki and his lobbyists were humiliated November 25, as the majority of the ruling party's provinces and branch delegates said no to a third term as party leader and an overwhelming yes to Jacob Zuma. The leadership election will be conducted by secret ballot at the ANC's national conference December 16-20. The tide has clearly turned against Mbeki, but is it the beginning of the process that will remove him and his allies from power? Only time will tell, but the signs are ominous for Mbeki, and more than a little uncomfortable for the country. The ANC is paralysed by the succession debate and the buck must stop with the leader of the party. There should have been no succession battle in the first place, and Mbeki should have long given way to one of so many able leaders in the ANC. In further bad news for Mbeki Billy Masetlha, the spy boss Mbeki dismissed has been acquitted of violating the intelligence oversight law. Now the National Prosecuting Authority may finally prosecute national police commissioner and Mbeki ally Jackie Selebi for corruption.

Jacob Zuma won five of the party's provincial nominations. He won in KwaZulu-Natal, Mpumalanga, Northern Cape, Gauteng and Free State. President Thabo Mbeki, garnered four provinces -- Eastern Cape, North West, Western Cape and Limpopo. Other hopefuls, Tokyo Sexwale, Cyril Ramaphosa and Nkosazana Dlamini-Zuma, fell by the wayside, failing to get any provincial nominations. More than 2200 of the 3600 votes cast in the provincial general council meetings were in favour of Zuma, and about 1300 wanted Mbeki to be re-elected. In Eastern Cape and Limpopo, two of the ANC's top three strongest provinces in terms of voting delegates going to conference the election was a close contest and in the end Zuma lost by a small margin in provinces previously considered as Mbeki strongholds. In contrast, talk of Mbeki gaining ground in Zuma's key constituencies proved baseless. Of the ANC's top six strongest provinces, Zuma secured the overwhelming majority.

Zuma’s lead could force Mbeki to ponder his candidacy or pre-empt a negotiated settlement. But with the possibility of a corruption case hanging over Zuma's head and Mbeki moving from a weak position, both sides have bargaining power. Mbeki's failure to secure a victory in Eastern Cape is seen as a major weakness in his re-election campaign. Zuma's unexpectedly strong showing in Eastern Cape highlighted that ANC members where not voting only along ethnic lines. Zuma is Zulu and from KwaZulu-Natal. The largely Xhosa Eastern Cape was expected to back Mbeki, who is Xhosa. "Ethnic groups clearly don't matter as much as they have mattered previously in the ANC, or as much as we thought they mattered in the ANC," Steven Friedman, senior research associate at policy think-tank Idasa, said. 

Arts and Culture Minister Pallo Jordan has commented that "It is not desirable for one president to lead, especially in a young democracy like ours, for such a long time. Decade after decade, African politics have been bedevilled by political leaders who do not want to leave office, which is exactly what Mbeki wants to replicate here. Zuma's ridiculous statement that he would take a shower to protect himself from contracting HIV/AIDS pales in comparison to the deaths of millions because Mbeki and his government would not provide medicine that could have saved their lives. Even if we were to assume that Zuma solicited the R500000 bribe from the French arms company, this pales in comparison to the allegations that the president of our country is protecting from prosecution a police commissioner who is said to be a mobster.”

ANC Women's League Damage Mbeki's Position
President Mbeki's bid to retain control of the African National Congress (ANC) for a third term was dealt a crushing blow November 26 when, in a shock move, the ANC Women's League endorsed his rival, Jacob Zuma, to become the party's new leader. The women's league now joins the youth league and five provinces in their backing of the ANC deputy president to replace Mbeki. The league's 11th-hour decision was critical for Mbeki if he was to revive his faltering campaign against the momentum of Zuma's bid, which now appears near unstoppable as the clock ticks towards the ANC's elective conference in Polokwane December 16-20. The marathon 10-hour meeting of the women's league ended in a tightly contested vote, with Zuma securing 29 to Mbeki's 25 votes for the position of president. The Zuma list for the ANC's top six also emerged as the preferred candidates among league voters, which saw Foreign Affairs Minister Nkosazana Dlamini-Zuma losing out to Kgalema Motlanthe for the post of deputy president. Dlamini-Zuma could muster only 25 votes while Motlanthe racked up 27. The women's league also rejected Joel Netshitenzhe's bid for the position of ANC chairman as proposed by the Mbeki list and instead chose to endorse Dlamini-Zuma for the post in line with the Zuma list. For secretary-general, the league nominated South African Communist Party (SACP) chairman Gwede Mantashe over Defence Minister Mosiuoa Lekota, another Mbeki candidate. The league also backed former Mpumalanga premier Mathews Phosa as treasurer over Deputy President Phumzile Mlambo-Ngcuka. For the post of deputy secretary-general, National Assembly speaker Baleka Mbete beat Public Works Minister Thoko Didiza. Zuma's victory in the women's league is the clearest indication that the ANC grassroots have shown Mbeki the door. The women's league decision to back Zuma is a major setback for Mbeki on two levels. First, Mbeki is on record as saying that he would prefer to be succeeded by a woman and had hoped to pick his successor from among the league's ranks. Second, the league's about-turn also suggests that the president's championing of the gender issue has not yielded the political dividend he required when he was fighting the political battle of his life. A senior women's league national executive committee member said the meeting ended up going to the vote because the league was unable to reach consensus on the crucial presidential leadership race. Zuma's backers also expressed their determination to support their man irrespective of the possibility that he could face new charges from the National Prosecuting Authority (NPA). "If they charge Zuma, it will be a very costly political mistake. The NPA itself is discredited, given the manner in which the president removed Vusi Pikoli, as well as the NPA's conduct with regard to the entire Zuma matter. The ANC members will see it as nothing short of yet another attempt to prevent Zuma from becoming the ANC president," a source close to the Zuma camp said. The focus now shifts to whether Mbeki will decide to quit the race, given the mood within the ANC. Political analyst Steven Friedman, of policy think-tank Idasa, said it was clear the party wanted Zuma as president. "This must influence whether or not Mbeki will stand. The prospect of him losing must weigh heavily on him," he said.

Tutu Urges ANC to Reject Jacob Zuma
Nobel laureate Desmond Tutu reportedly made a thinly-veiled plea November 26 for the ruling ANC party not to elect Jacob Zuma as leader, urging it to reject anyone who would shame the country. "The ANC must not elect someone who the country will be ashamed of," Tutu told The Sowetan newspaper. "We want someone who the rest of us will not be ashamed of," added the Anglican archbishop who remains widely respected for his campaigning to topple the whites-only apartheid regime. Asked whom he was referring to, Tutu merely answered "undivile mfondini" (Xhosa for "you've heard me my friend"). However, his comments were interpreted as a clear reference to Zuma who is at the centre of a lengthy corruption inquiry which could still see him charged before the ANC holds a leadership conference December 16-20. Tutu last year branded Zuma as unfit to lead the country after the former deputy head of state, who is still deputy ANC president, admitted having had unprotected sex with an HIV family friend who is less than half his age. His admission came during the course of a rape trial, in which he was ultimately acquitted. Zuma is the now the frontrunner to succeed President Thabo Mbeki at next month's ANC conference after securing the backing of five of the nine provincial branches. Mbeki, who is trying to stave off the challenge by Zuma, sacked his rival as deputy head of state two years ago after Zuma's financial advisor was convicted of fraud.

Mbeki Or Zuma As Leader Will Be a 'Nightmare'
Key players in the ANC succession battle should sit down and talk ahead of the party's Polokwane conference because a victory by President Thabo Mbeki or his ANC deputy Jacob Zuma might prove disastrous. This is the opinion of leading academic and political commentator Xolela Mangcu, who led a discussion on leadership and the ANC's succession race at the Goedgedacht Forum outside Cape Town early November. Mangcu, executive chair of the Platform for Public Deliberation at Wits University, is a critic of Mbeki, and again labelled the president as autocratic. "The trouble with an Mbeki or a Zuma victory in Polokwane is that it may be difficult for both leaders to transcend their animosity," he said. Mangcu suggested that neither of the two top candidates would ever achieve "the kind of universal authority" of "compromiser" Nelson Mandela, whose detractors had never gone to the same lengths as those opposed to either an Mbeki or a Zuma presidency "It seems to me the only people who could have such transcendent leadership are Tokyo Sexwale and Cyril Ramaphosa," Mangcu said of the two outside horses in the race. However, the two businessmen were unlikely to be acceptable to the unionists. Cosatu general secretary and staunch Zuma supporter Zwelinzima Vavi's "frontal challenge to Mbeki, accusing him of destroying the tripartite alliance", was among a range of signals that awareness of Mbeki's leadership bungles had reached the point of no return, Mangcu said. "The genie is out of the bottle," he said, commenting on what he described as a lie being exposed, with its first signal being when the Treatment Action Campaign's Zackie Achmat successfully took on the government over HIV/Aids anti-retrovirals. "For example, just as there are attempts to gag the media, there are people such as Mandela speaking for media freedom; just as (Minister of Defence) Terror Lekota bumbles around trying to gag public discussion of the ANC leadership race, an influential ANC branch nominates Ramaphosa for the presidency of the ANC, and (former cabinet minister) Kader Asmal wastes no time in taking to the airwaves to explain the decision. "No sooner had the ANC branch nominated Ramaphosa than Minister of Arts and Culture Pallo Jordan called for a generational change in the leadership of the ANC, beyond Mbeki and Zuma. "And in the most public expression of the political double movement (exposure of Mbeki presidency), Sexwale says HIV causes Aids and would like to know which tyrant will tell him that is not so." The most sensible step would be for people like Zuma, Sexwale, Vavi, ANC secretary-general Kgalema Motlanthe, and ANC national executive committee member and tycoon Saki Macozoma to "all sit down to find a post-December solution". Mangcu added it was unlikely that Sexwale or Ramaphosa would prevail in the succession race - unless either or both Mbeki and Zuma pulled out. "I am afraid that should either (Mbeki or Zuma) prevail, we are headed for a long night before the nightmare is over. "An Mbeki victory would be disastrous for our democracy; a Zuma victory only slightly less so," Mangcu said.

Succession Race Paralysing ANC, Says Netshitenzhe
The African National Congress (ANC) presidential succession had so paralysed the party that it was unable to do anything except try to manage the political fallout from the race. Addressing the party's national executive committee (NEC) November 17, senior party thinker and NEC member Joel Netshitenzhe said: "Except during elections, the ANC's engagement with the mass terrain is woeful. This relates to issues such as workers' rights, consumer issues, hurdles faced by SMME s (small, medium and micro enterprises), anticrime and anticorruption campaigns and so on." The race for the party's presidency is dominated by the two frontrunners, President Thabo Mbeki and ANC deputy president Jacob Zuma. Netshitenzhe said in a political overview for the NEC, the ANC's highest decision-making body between conferences, that the divisions also cut across the tripartite alliance the ANC had with the Congress of South African Trade Unions (Cosatu) and the South African Communist Party (SACP). The ruling party's left-wing allies have long bemoaned the "demobilisation" of the ANC under Mbeki's leadership. Cosatu and the SACP claim the ANC's present leadership has neglected the party's core constituency -- the poor and working class -- in favour of the new black elite. Netshitenzhe, who is also the head of the presidential policy unit, said while the government has made progress over the past decade there were many challenges still to be addressed. These included the fact that "income inequality had worsened, and the share of workers' income as a proportion of national income has declined". "Problems of restructuring of the labour market persisted," he said. "Backlogs in service delivery are still a black clot. Large numbers of South Africans remain mired in poverty, HIV/AIDS is still exacting a devastating impact, and macroeconomic challenges such as high inflation and the current account deficit raise important questions about the capacity of the economy to grow at higher rates without occasioning serious imbalances."

The "scourge" of crime and corruption continued to "chip away" at the fabric of society and undermined safety, he said. These frank acknowledgements contrast with Mbeki's attack last week on the South African Institute of Race Relations for saying that "the masses of our people are now poorer than they were in 1996". Mbeki said the institute's claim was "another canard" in the making.

Global Investors Want Assurances on South Africa’s Future
Global investors are waiting for assurances that SA's prudent economic policies will stay in place after the African National Congress (ANC) chooses a new leader in December, says top US ratings agency Standard & Poor's. Politics would play a key role in ensuring the continuity of hefty capital inflows which had so far financed the growing deficit on SA's current account, its broadest measure of trade in goods and services, S&P said November 1. "Ultimately, what will count is the outcome of the succession debate and what it means for economic policies. That will impact on investors and markets," said Konrad Reuss, S&P's MD for SA and Sub-Saharan Africa. Reuss's remarks echoed those from rival agency Moody's, which said it would review SA's rating for a possible upgrade after the ANC conference, amid jitters over how the hotly contested leadership race would be resolved. Normally the elected ANC leader would go on to become the party's presidential candidate in elections set for 2009. Top ANC office bearers, including Mbeki's main rival, Jacob Zuma, have said repeatedly the party's economic policies will not change regardless of who is in charge. Nonetheless, the leadership conference is flashing on investors' radar screens.

Mbeki Knew Of Zuma Corruption Claims in 2001
President Thabo Mbeki knew about former National Prosecuting Authority (NPA) boss Bulelani Ngcuka's plans to inform the nation that the state had a "prima facie" case against former deputy president Jacob Zuma in 2003. This startling information is contained in the latest Mbeki biography titled Thabo Mbeki: The Dream Deferred by journalist Mark Gevisser. The information brings into question the separation of powers and the role of the executive in judicial matters. It also fuels Zuma's claim that the state's case against him was politically motivated, and could well boost the African National Congress (ANC) deputy president's chances in his battle with Mbeki for control of the party. In the book's introduction Gevisser says, "He (Mbeki) had been briefed about allegations against Zuma since at least 2001; in November 2002, he had declined to accept Zuma's offer of resignation." At the ANC's conference in Stellenbosch in December 2002, Mbeki defended his decision to keep Zuma as the deputy of the country, saying he would only act once investigations found substance to the allegations. Then in August 2003 -- after consulting with Mbeki -- Ngcuka issued a statement that although there was a "prima facie" case against Zuma, he would not be charged because a court case would be un-winnable. Gevisser also wrote that Mbeki had in fact asked Zuma to resign prior to Ngcuka going public, but that by this point Zuma's attitude had "hardened". Zuma's run-ins with the law first started when it was revealed he was being investigated in connection with corruption charges relating to his former financial adviser Schabir Shaik, for which the latter was eventually jailed for 15 years on charges of corruption and fraud. Gevisser says in his book that Zuma and Mbeki were perceived to be "close" but that the relationship soured. "In such an environment, a war between leaders is a blood feud rather than a power play or an ideological battle."

Mbeki Still an Aids Dissident, Says Book
In spite of the government's about-turn on HIV/AIDS and its admission that HIV causes AIDS, President Thabo Mbeki remains an "AIDS dissident" and regrets having been forced to withdraw from the "debate" on the disease. This emerges in Mark Gevisser's biography of Mbeki, which has just been published. While the "dissident" approach seemed to have been forced into silence when the government finally adopted its comprehensive plan to tackle HIV and AIDS in 2003, Gevisser says Mbeki spoke of his denialism as recently as June this year when he again questioned the link between HIV and AIDS. Gevisser spent more than 20 hours talking to Mbeki over the past eight years. He writes in Thabo Mbeki: The Dream Deferred, that the president admitted he was still an AIDS dissident, and regretted bowing to pressure from cabinet colleagues to withdraw from the debate. The book also says a presidential paper which was hand-delivered to the author by a "presidential driver" likened HIV scientists to Nazis. "When I asked him in 2007 how he felt about having to withdraw from the AIDS debate, he (Mbeki) told me it was 'very unfortunate' that his initiative had been 'drowned'." Amid intense civil society lobbying in SA, foreign disapproval, and judicial instruction, the government made an about-turn in 2003 in its HIV and AIDS strategy and began to roll out free AIDS drugs in public hospitals. Zackie Achmat, founder of the Treatment Action Campaign, said Mbeki's continued denialism was "deeply tragic" and "damaging". "The president is directly responsible for unnecessary deaths. He's showed continued arrogance. He continues to send out mixed signals," Achmat said. Gevisser writes that while Mbeki has never explicitly denied the link between HIV and AIDS, he was a "profound sceptic". Steven Friedman, research associate at the policy think tank Idasa, said he found Mbeki's continued denialism "absolutely plausible" and highlighted that the president had never retracted. "If you look at state of the nation speeches over the last few years, Mbeki has begrudgingly delivered a line or two on HIV/AIDS. This is also why he has not fired the health minister, because she carries his line." A copy of Gevisser's book was delivered to Mbeki last week, but presidential spokesman Mukoni Ratshitanga would not comment on its claims, but said Mbeki supported the state's AIDS policy.

Mbeki upbeat after Zimbabwe Talks
President Mbeki says he is "very confident" that mediation will produce a solution for Zimbabwe's political crisis. He was speaking after talks with President Robert Mugabe and opposition officials in the Zimbabwean capital. There has been a virtual news blackout around the South African-mediated talks but sources suggest they have agreed four of the five points on the agenda. The sticking point is the last issue - the political climate. Mr Mbeki stopped off in Harare on his way to the Commonwealth summit in the Ugandan capital, Kampala, to meet both sides. He told reporters he had visited "to see the president, and the leadership of the MDC [opposition Movement for Democratic Change], so we can reflect on where we are and to report to them as facilitator how the talks have gone." Mr Mbeki, who has been tasked by the Southern Africa Development Community with helping to find a solution to Zimbabwe's political crisis, said the mediated talks were "going well". Zimbabwe's opposition leader Morgan Tsvangirai has also gone to Kampala to lobby Commonwealth leaders on the Zimbabwe issue. MDC leader Mr Tsvangirai also said there had been notable progress. He said he was confident that the agenda set through the South Africa-led mediation would address the fundamental concerns around elections due next year. The BBC's Peter Greste in Johannesburg says the issue of the political climate is proving to be a much harder issue to resolve and the talks are now months behind schedule as a result. Our correspondent says it encompasses both the violent suppression of the MDC's political activities, and the sanctions that Mr Mugabe's government blames for creating the crisis in the first place. He says there is no guarantee that President Mbeki will be able to break this deadlock, but at least he will be able to go to the Commonwealth Heads of Government meeting demonstrating real effort, if nothing else. Zimbabwe withdrew from the Commonwealth in 2003 after it was suspended because of allegations of poll rigging. But Mr Tsvangirai told reporters in Kampala it was important for the body to continue engaging, to ensure Zimbabwe is rescued from its political and economic crisis

EU to Open its Market to Region
The European Union (EU) will open up its market on a duty-free basis for products from countries in the Eastern and Southern African (ESA) region from 1 January 2008. The Common Market for Eastern and Southern Africa (COMESA) Secretary-General Erastus Mwencha was addressing the media November 15, on the outcome of the just ended ESA-European Commission (EC) meeting in Brussels. Mr Mwencha said ESA countries would be able to export their products to Europe on a duty-free basis except for sugar and rice.

The ESA-EC negotiations had been based around six clusters namely, development, market access, fisheries, trade in services, trade-related issues and agriculture. He said the ESA would in the same period begin the process of liberalising its markets, without touching their tariffs, under a decade-long moratorium and a transitional period of up to 25 years. Under the agreement, the Least Development Countries (LCDs) would be allowed policy space and flexibility in opening their markets, he added. He said the meeting agreed on a development strategy on areas of joint infrastructure development, capacity building, institutional building, with detailed costing of some projects. Mr Mwencha said the meeting also agreed that there would be increased resources which would have benchmarks, which would determine whether ESA countries would continue with their liberalisation of the market or not. "In short, if ESA falls below the yardstick, then they do not have to liberalize their markets. This will ensure development," he said. The ESA ministerial meeting also agreed on the need to unite as a region in order to facilitate regional integration, which is the basis of sustainable development. "Ministers in particular stressed the fact that the most important aspect for ESA is for ESA to strengthen regional integration as a long-term measure. The ESA also stressed the fact development should be at the core of development," he said.

Mr Mwencha said the ESA would continue to negotiate on the other clusters, which were not agreed upon during the meeting. He said for preparatory activities before implementing these agreements fully, the region needed about 27 billion Euros. He added that the EU had promised to release two billion Euros every year, starting from the year 2010. Out of the 16 countries in the ESA, 12 fall in the LCD category. 

Mandelson Attacks South Africa and Nigeria Over EPAs
Africa's largest nations are trying to block the signing of the economic partnership agreements (EPAs) with the European Union (EU), Peter Mandelson, EU trade commissioner, claimed November 21. Speaking to members of the European Parliament, Mandelson strongly criticised the positions taken by Nigeria and South Africa in the EPA negotiations between the EU and nearly 80 African, Caribbean and Pacific (ACP) countries. He alleged that the larger African countries are preventing their counterparts in the regional EPA-defined groupings from signing deals by an end-of-year deadline. The EU has threatened to impose punitive tariffs on Europe-bound exports from about half of the ACP countries if they do not enter into EPAs by December 31. As the remaining 39 ACP participants are classified as least developed countries (LDCs), they qualify for a seven-year-old EU trade scheme, known as Everything-But-Arms, under which they would enjoy duty and quota-free access to the Union's markets for most of their goods. "If you go to West Africa, the regional group is dominated by Nigeria, which wouldn't touch an EPA with a barge pole," Mandelson said. "That's okay for West Africa if you are relatively rich like Nigeria. But what about Côte d'Ivoire and Ghana? They are not rich, nor are they LDCs. They need an EPA to avoid disruption to trade at the end of the year." Similarly, he argued that South Africa, which already has a trade agreement with the EU, "does not have as much at stake" as its neighbours. He raised the possibility that EPAs could be signed with other southern African countries, if South African president Thabo Mbeki's government rules one out. "Am I - because of South Africa's inability finally to commit -- to say there should be no EPA for southern Africa; that there should be a disruption of trade with Botswana, Lesotho, Namibia and Swaziland?" he asked. Mandelson's combative stance was condemned by anti-poverty activists, who are perturbed by indications that the EU is attempting to drive a wedge between African countries, putting pressure on them to conclude deals that would prevent them from cushioning their farmers and nascent industries from an influx of European goods. Karin Ulmer from Aprodev, an umbrella group for Protestant aid agencies, said it is "not fair" that the EU is trying to pull poor countries into an "unequal relationship". "Maybe it is not even the intention (to create divisions between ACP countries) but, de facto, that is what the European Commission is doing," she told IPS. Oxfam campaigner Luis Morago noted that Senegal's President Abdoulaye Wade recently commented on how EU-Africa relations are "out of order" because of differences on trade. This does not bode well for the summit between European and African heads of state and government, scheduled to take place in Lisbon, Portugal in December. "The EU-Africa summit is meant to herald the start of a new partnership," Morago said. "Most African countries are not convinced that what the EU has put on the table is worth signing. European and African leaders should take this opportunity to step back, rethink their approach and focus on creating a truly development-focused partnership."

African Economies Grow Faster, Steadier
Many African economies appear to be on a path of faster and steadier economic growth, according to the World Bank's Africa Development Indicators 2007. Speaking at the annual release of the continent's development indicators November 14, World Bank Country Director Ritva Reinikka said African economies' performance over 1995-2005 reverses the collapses over 1975-1985 and the stagnations witnessed over 1985-1995. "Average growth in the Sub-Saharan economies was 5.4 percent in 2005 and 2006. The consensus projection is 5.3 percent for 2007 and 5.4 percent for 2008. "Leading the way are the oil and mineral exporters thanks to high prices, but (also) 18 non-mineral economies, with more than a third of the Sub-Saharan African people, have also been doing well," said Ms Reinikka. Chief Economist at the World Bank for the Africa Region, John Page, in his presentation of the indicators explained that African economies could be divided into three groups. The groups can be divided as follows, namely the slow growth economies such as Zambia, Guinea and Zimbabwe; the diversified economies with Gross Domestic Product (GDP) growth of about 4 percent a year such as Mozambique, Rwanda, Uganda and Ghana; and finally the oil exporting economies such as Equatorial Guinea, Chad, Angola, Sudan and Nigeria. The theme of the development report questions whether Africa's steady growth could be attributed to good policies or luck. Mr Page said in his opinion it seemed to be a bit of both. Mr Page that despite Africa managing to grow in tandem with many of the worlds developed economies, the fact that the continent was a natural resource hub for the rest of the world made it increasingly vulnerable to outside shocks and changes in commodity prices. Crucial to the acceleration of growth on the continent is increasing private investment and Mr Page highlighted that improving the investment climate, bolstering infrastructure, spurring innovation, and building institutional capacity are therefore crucial. With regard to the cost of doing business in Africa, the World Bank Economist explained that Africa was still "a high cost, high risk place to do business as opposed to East Asia and the Pacific. "The good news is Africa can compete globally, but infrastructure creates expensive bottlenecks, and African economies just aren't competitive enough as the economies of South and East Asia." He concluded on a positive note by saying structural policy changes on the continent are improving growth forecasts, adding that is it good policies that will build the basis on which Africa can further grow.

EU-Africa summit Summit 'A Test'
AFRICAN Union (AU) commission chairman Alpha Oumar Konare said that the upcoming European Union (EU)-Africa summit would be a measure of the bloc's willingness to enter an "equitable and equal" partnership with the continent, regardless of Zimbabwean President Robert Mugabe. The prospect that Mugabe, widely accused of abusing human rights and suppressing political opposition, could attend an EU- Africa meeting in Lisbon in December has threatened to derail the gathering. Africa's insistence that Mugabe be invited was a matter of principle and not a sign of support for the Zimbabwean leader or his government, Konare said in his opening speech at the AU African Diaspora conference in Midrand November 16. "We will not let ourselves be bullied or pressurised regarding who (from Africa) should attend the summit or not. That is why we as Africans had insisted that everyone (including Mugabe) should be present. " Konare said the "strength" of European delegations sent to Lisbon would provide a "clear indication" of whether the EU was willing to enter an "equitable and equal" partnership with the continent. He said anything less than full participation would point at the bloc's willingness to perpetuate the colonial "slave trade economy" of the past.

Since British Prime Minister Gordon Brown confirmed he would not be attending the talks due to Mugabe's presence, observers said there was a strong chance that other EU countries would send "weakened" delegations. "We will assess (the EU's) commitment from the line-up of their delegations. If (delegations) are made up of high-ranking civil servants rather then leaders, then we know where we stand." Later Konare said that concentrating on Mugabe rather than on negotiating a fair and reciprocal EU-Africa partnership could derail the Southern African Development Community mediation in the Zimbabwe crisis, led by President Thabo Mbeki. During his talk, Konare turned from the podium to face Mbeki and, speaking in French, said there was an "urgent need to help our brothers in Zimbabwe to solve their problems". "Some of our European partners should look at the progress made by Mbeki's mediation. The ruling Zanu (PF) party and opposition Movement for Democratic Change (MDC) have established dialogue, which should be encouraged." Konare said crucial talks between MDC and Zanu (PF) could break down should Mugabe miss the Lisbon gathering under the weight of European displeasure. Konare said his comments did not mean that the AU member countries approved of Mugabe's destructive policies but that the principle of open attendance be upheld. "Each member of the AU has got its own opinion on Zimbabwe's disastrous internal policies but the principle agreed upon is that they should attend the EU summit." Konare said that seven years had been "wasted" since the last EU-Africa summit in Cairo because of the Zimbabwe issue, but that in the meantime strategic agreements had been signed between China and Africa. "We are negotiating similar agreements with Japan and India, and Russia is also looking at Africa as an opportunity. "So our European partners should look seriously at the December summit as an excellent opportunity to put things in motion (regarding an EU-Africa partnership)." The summit is intended to focus on areas requiring closer co-operation between Europe and Africa, notably trade, migration and an energy partnership. Mugabe, who sparked international outrage earlier this year when his police arrested and beat dozens of political opponents, became persona non grata in Europe after winning a 2002 election, described as rigged by international observers.

Corruption Allegations in Koni's Bid for Johncom Media
President Mbeki November 11 defended Koni Media Holdings' planned bid for Johncom's media assets amid widespread criticism that government insiders with links to the Presidency were trying to silence a critic of Mbeki's administration. Mbeki said there was nothing wrong with public servants owning shares in a public company. Critics have pointed out the close links some of Koni's shareholders have to Mbeki -- in particular Titus Mafolo, an adviser to Mbeki, foreign affairs department spokesman Ronnie Mamoepa, and former chief of state protocol, Billy Modise. Speaking in George after a meeting of his International Investment Council, Mbeki took a swipe at those who were speculating that the bid was a thinly veiled attempt by the government to gain control of the media company, and the Sunday Times in particular, telling them to check their facts. "Why do we create these scarecrows? Suddenly big headlines about something that doesn't exist -- it is unreal. It is not real, it doesn't exist, it is not anywhere, but we persist in creating these scarecrows. " He said Mafolo, Mamoepa and Modise owned just 1% of the company, and it was not illegal for public servants to own shares in public companies. He said those that did were bound to report on assets they owned. Koni Media Holdings is said to have offered R7bn for 100% of Johncom. There is speculation that Koni is in talks with the Public Investment Corporation (PIC) to raise cash for the acquisition -- rumours that PIC CE Brian Molefe has refused to confirm or deny. The news has been greeted with concern on many fronts. Last Friday the National Education, Health and Allied Workers' Union said it was "outraged" by reports of the attempted takeover of Johncom using "workers' savings". The South African National Editors' Forum (Sanef) expressed concern about political office-bearers and public servants acquiring interests in independent media. It questioned not only the Johncom bid, but the recent purchase of a Johncom stake by Tokyo Sexwale, an aspirant ANC presidential candidate, and "reported interest in other media assets by senior office-bearers of political parties". The bid by Koni Media Holdings takes place amid tensions between the government and SA's largest weekend newspaper, the Sunday Times. Sanef deputy chairman Henry Jeffreys said: "While Sanef recognises that there is nothing in law preventing such activity, we believe that the potential for direct political influence over the media is unhealthy for democracy.

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AUTOMOBILES

Renault to Manufacture in SA

RENAULT has had a tumultuous time with parts issues, slowing sales and the lady who had too much to drink and then tried to blame her airbag for crashing on the way home from a party. A few years ago Renault was one of the fastest-rising brands in SA and now it is looking to the introduction of a raft of new products to get back into profit. The company intends to launch 10 new models in the next three years, with three of them arriving next year. Renault SA is placing much emphasis on its value-for-money Sandero hatchback to boost volume and stop the financial woes. The Sandero is based on the budget-beating global car, the Logan, and is due to arrive in early 2009. The newcomer is to be made in SA by Renault's alliance partner, Nissan, at its Rosslyn plant -- the first new brand in many years to join the dwindling number of locally assembled vehicles. Renault has had a patchy history of contract assembly in SA, having been built at Car Distributors and Assemblers (now DaimlerChrysler) in East London, at Toyota SA's plant in Prospecton (Renault 5) and at the AAD facility at Blackheath, near Cape Town (Renault 9 and 11) in the '80s. Since then all Renaults have been imported as built-up units. Renault returned to SA in 1996 with the signing of an import contract with Imperial Car Imports (ICI), and in 2002, a joint-venture company, Renault SA, was established with Renault of France acquiring 51% of the ICI subsidiary. The fact that Renault will build the Logan, or a derivative of its cut-price car, in SA has been a fairly open secret for a while. The only confirmation that came from the media conference was that the Sandero would be built and sold in SA from 2009. Renault SA MD Jean-Jacques Le Goff said the Sandero would enable the company to double sales and market share in SA by 2011. This would allow the company to fulfil its objective of being the No 3 seller of passenger cars on the local market. Product-planning manager Sydney Sedi said the Sandero was well received at marketing clinics with target-market customers recently. The Logan sedan was launched by Renault in 2004 as its cut-price car for developing markets after the company had taken over the Romanian Dacia company in 1998. The so-called BO platform is based on that used for the current Renault Modus and Nissan Micra, while it was also the base of the previous-generation Renault Clio. The success of the Sandero on the local market, as well as the low-cost manufacturing concept and potential for export of Logan derivatives built in SA are likely to be watched with interest by all the other motor companies currently operating here -- as well as those still considering an entry to this market.

Interest Rates and Debt Burden Dampens Car Sales

High inflation and the cost to consumers of servicing record debts are aggravating the overall weakness in new car demand. The latest data show that total new vehicle sales improved somewhat in October after a sharp decline the month before. With the Reserve Bank having raised its repo rate 150 basis points to 10,5% since June in an effort to cool off consumer spending, new vehicle sales slipped 5,9% year on year to 54387 units in October. But this was a moderate decline compared with September. The National Association of Automobile Manufacturers (Naamsa) said November 23 that trading conditions, particularly in the new passenger car market, had deteriorated substantially in recent months, mainly because of interest rate increases. Total vehicle sales were helped by a strong recovery in sales of commercial vehicles. Sales of medium commercial vehicles grew 13,4% year on year last month, after dropping 21,8% in September, while sales of heavy commercial vehicles rose 28,2%, from 8% in September. Light commercial vehicles also fared better last month, but were still down 7,3% year on year, slightly better that the 11,4% decline recorded in September. Passenger vehicle sales also bounced back over the month, but sales remained below the levels reached last year. For the year to date, vehicle sales have fallen 3,2% compared to the same period last year, reflecting the effect of the Bank's tighter monetary stance and tight lending conditions. Vehicle exports rebounded to 17228 units in October, the highest number since November last year, after dropping sharply to 8680 units a month earlier. Exports of passenger vehicles improved last month, still down 2% on an annual basis, but were better than the massive drop of 48% recorded in September. In its latest quarterly review, Naamsa said the vehicle manufacturing industry was expected to remain under pressure for the next year. Nedbank economist Dennis Dykes said new car sales would remain under pressure in the months ahead as high household debt and stricter lending criteria continue to take effect. "Sales may also be affected by the normal seasonal factors during this last quarter of the year. "However, commercial vehicle sales should remain relatively resilient on the back of strong fixed capital spending," Dykes said. Although vehicle sales improved in October, the underlying trend remains down. Given high oil prices, rising food prices and rising domestic inflationary expectations, inflation is not only likely to remain above the Bank's target range of 3%-6%, but also likely to rise further. This probably implies another 50 basis point hike in December, after which slower domestic spending and credit demand are likely to permit a neutral stance. WesBank CEO Brian Riley said despite the challenging conditions in the new vehicle market over the past few months, certain segments of the bank's book had seen exceptional growth, in a direct contrast to industry expectations. "Strong growth in the black male market is contributing heavily to vehicle sales. "The percentage of black males financing cars through the bank has grown over 22,9% compared with last year, while the percentage for white males has dropped by a similar margin," Riley said.

Vehicle Exports Set to Top R60bn

Provisional National Association of Automobile Manufacturers of SA (Naamsa) figures show that vehicles with a value of R55bn were exported last year. That figure is set to rise to R60bn this year and projections suggest substantial growth next year. The association conducted an assessment of the effect of the Motor Industry Development Programme (MIDP) since its inception in 1995 - ostensibly to counter perceptions that the programme had been costly to the country and boosted the profits of a few multinational companies at the expense of the fiscus and South African consumers. Despite growing exports the industry, however, remains a net user of foreign exchange. The industry's trade deficit last year widened to R33,4bn, from the previous year's R27,7bn as imports grew to feed the strong demand for vehicles in the local market, while the relative strength of the currency temp-ered export growth. But Naamsa expects the deficit to narrow as exports gain momentum. Naamsa's figures show the industry and related sectors now employ 323900 people and last year contributed 7,53% to gross domestic product. Naamsa said that investment growth was substantial over the duration of the MIDP to date, with fixed investment in the vehicle assembly sector, for instance, growing to R6,2bn last year, compared with a modest R492m before the programme started. The marathon review of the MIDP to determine the structure the programme will take from 2012 onwards has been the cause of much acrimony between vehicle manufacturers and the trade and industry department. It appears, however, that the industry and the department have buried the hatchet as the department moved to improve communication on the process. The department has made firm commitments to unveil preliminary findings before the end of the year while the completed review would be released in the first half of next year. Naamsa executive director Nico Vermeulen said the industry's confidence in the review process had been restored. The MIDP is being reviewed by Anthony Black of the University of Cape Town, the original MIDP's author, and Justin Barnes, who heads consultancy B&M Analysts. He confirmed that the review team was closely scrutinising the Australian version of the MIDP - the Automotive Competitiveness and Investment Scheme (ACIS) - as it was an important model. ACIS evolved from an export-based incentive to a production allowance, to align the programme with World Trade Organisation (WTO) rules. The protection levels of that programme were also reduced drastically, but Black gave the reassurance that the MIDP would not take its cue on protection from ACIS with no threat of lower protection levels in the short to medium term. Ironically, it was a threat from Australia to challenge the MIDP at the WTO that prompted the review of the programme.

Nissan Diesel SA Increases Output

NISSAN Diesel SA is so confident that the recent growth in the local truck market will continue that it is currently investing R10,9m in expanding the production capacity at its Rosslyn facility outside of Pretoria. As a result, Nissan Diesel will be able to build up to 9000 trucks a year when the opportunity arises. "We sold about 3700 units last year and are targeting to get close to 5000 trucks this year and want to be in a position to be able to ramp up volumes at short notice if the market continues to expand," says Nissan Diesel SA's vice-president of operations, Rory Schulz, during a recent fact-finding trip to Japan with journalists from the South African transport and truck media. The self-funded investment will be used to expand the physical truck assembly building, as well as installing additional equipment, including a "chassis turn-over machine" to make assembly easier for the operators by having the chassis upside down during the early stages of the build process. Nissan Diesel SA, which is now owned 80% by Nissan Diesel Japan, and 20% by Japanese trading house Mitsui, is one of the biggest sellers of trucks locally and is intent on strengthening its position even further, especially with the benefit of the increased production capability. Schulz, who has been involved with all aspects of Nissan Diesel SA's truck operation over the past 18 years, says the changes to the plant will be completed during the year-end shutdown. He says the plant will continue to operate on a single assembly line basis, building trucks in batches of 20 medium commercials units and six heavy and extra-heavy models at a time. The company is also looking to expand its activities in Rosslyn into certain aspects of body building later in the year, mainly to ensure better quality. This will also cut the delivery time of completed trucks to customers, especially in the light of the current overload situation at many bodybuilders which has resulted from the growth in the South African truck market. Nissan Diesel has been selling trucks in SA for more than 45 years. Sales during this period exceed 60000 units and it is estimated that about two thirds of these trucks are still in operation. Nissan Diesel SA became a subsidiary of Nissan Diesel Japan in 2002 and the company expanded its business base when it was appointed as the SA's distributor of Nissan Forklifts last year, in addition to its growing range of medium, heavy and extra-heavy trucks.

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AVIATION

SAA Aims for 7.5 Percent Profit Margin


South African Airways (SAA) hopes to reach a 7.5 percent profit margin by March 2009, as a result of its restructuring process. The restructuring is aimed at renegotiating working conditions, cutting unprofitable routes and reorganising the whole business. SAA hopes to reduce its high operations cost base in order to grow revenue, after it lost more than R600 million outside Africa alone last year, Chief Executive Officer Khaya Ngqula told reporters November 8. "Voluntary severance package's have already been offered to cabin crew and currently we have about 900 applications which each division will seek to approve or disapproved due to scarce skills," Mr Ngqula said. Already 232 severance packages have been approved for manager positions. Mr Ngqula said despite this, SAA was committed to retaining scarce skills staff as they were putting in place measures to retain key staff. "We are looking at innovative ways to increase the business and we will make sure that our staff members are motivated, skilled, and given incentives as a way of investing on them. "We will use every resource at our disposal in retaining skilled people," Mr Ngqula said. SAA general manager for human resources Bhabhalaza Bulunga said by December this year the company would have the necessary staff it needed to operate. Finance Minister Trevor Manuel recently approved R744 million to assist SAA in dealing with the restructuring. Mr Bulunga updated reporters saying the deal was awaiting final approval. Due to these major changes, there will be no salary increases in this financial year for all staff members including top management, he added. SAA wants to save about R638 million by renegotiating certain working conditions that were implemented in the past and resulted in SAA's high cost base. There are 53 aircraft in operation. Mr Ngqula said: "Depending on our restructuring progress, we will begin to look at our own fleet plan and see what we can do in the future. SAA's acting Chief Financial Officer Clive Else announced that SAA has placed R136 million for the first six months of financial year 2007-2008 against the loss of R650 million in the first six months of the previous financial year. In September this year, the company announced its aim to ground the costly 747 - 400s in its fleet by the end of November and replace them with A380s. Negotiations are currently underway with a number of parties to either purchase or lease their aircrafts. It identified the Africa route network as a valuable contributor towards profitability and said it was a growing market. Other cost-cutting initiatives include the review and renegotiation of supplier contracts to ensure that SAA receives best services at the most competitive rates.

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BANKING

World Bank Arm to Take 10 Percent Stake in Wizzit


The International Finance Corporation (IFC), the investment arm of the World Bank, has agreed to buy a 10% stake in Wizzit Bank, a division of the South African Bank of Athens, IFC executive vice-president and CEO Lars Thunell said November 21. Wizzit, which is spearheading the use of cellphone banking among the previously unbanked, would use the funds to expand its services to people in rural areas in SA and other countries. "Helping the financial sector become more inclusive by extending bank services to the poor is an important part of IFC's strategy to strengthen Africa's private sector," Thunell said. "Wizzit's innovative technology and marketing strategy are already having a strong impact by helping create opportunity for more South Africans." The IFC would help Wizzit expand its operations, determine new markets for its services, and develop penetration strategies, including identifying local partners, he said. Wizzit CEO Brian Richardson said the "virtual" bank had increased its customer base more than 2000% since its launch in 2001. "Nearly 60% of South Africans do have mobile phones. The proliferation of cellular services has created an opportunity to provide social and financial services over mobile networks. Wizzit capitalises on this opportunity, employing nearly 2000 previously unemployed people -- known as Wizz kids -- who have the good local knowledge and contacts the company needs to market services directly to potential clients in neighbourhoods across the country." A number of countries in Africa, eastern Europe and Asia were keen for Wizzit to export the concept to their shores, where the unbanked would operate bank accounts using cellphones. Chairman Charles Rowlinson said access to financial services was "costly and limited" in Africa, particularly in rural areas.

Absa Claims Top BEE Rating

ABSA Group, SA's largest retail bank, said November 20 it had received a top rating for its empowerment credentials. Analysts said it was a calculated move to fend off a potentially bruising fight with the labour department as the government moved this week to prosecute companies flouting employment equity laws. Comair, which operates kulula.com and British Airways in SA, was on Monday hauled before the Labour Court, accused of flouting the legislation, but it denied the charges and said it would defend itself in court. The Employment Equity Act was passed to address discrimination related to work opportunities based on race, gender or disability, that could not be dealt with simply by repealing discriminatory laws. In terms of the act, employers must take steps to promote equal opportunity in the workplace and must submit reports and plans on how they are achieving this. Labour department spokeswoman Zolisa Sigabi warned that similar action would be taken against other companies not adhering to empowerment equity laws. The JSE's top 100 companies were being targeted to check compliance. Companies being investigated included Absa, Investec, Woolworths, Nedcor, Bidvest and its subsidiaries, Anglo Platinum, and Tiger Brands and its subsidiaries, she said. The probe was expected to be completed by the end of January. "The companies subjected for a review were not identified because they did anything wrong at that particular time, but the director-general deemed it necessary to review them to assess their compliance." Absa CEO Steve Booysen said the Financial Sector Charter Council, a body charged with monitoring the implementation of the financial sector charter, had awarded Absa an A rating for its empowerment credentials. The rating is the highest category awarded to financial institutions that achieve more than 56 overall scorecard points for their empowerment status. Absa scored more than 85 points for the year ending December last year, Booysen said. "The rating clearly demonstrates our commitment to the transformation process," he said. "It is also evidence of our compliance with the financial sector charter." But transformation activist and president of the Black Management Forum (BMF), Jimmy Manyi, said empowerment credentials of financial services companies were "laughable". "Absa has played the game by the rules of the financial sector charter but ... those targets are meaningless. I would have been happier if their scoring was based on the BEE (black economic empowerment) codes," he said. Manyi said the Employment Equity Commission, which he chairs, did not recognise the sector charter empowerment targets but those in the act. "The targets set in the charter are very low. They provide a false sense of comfort and that is why the BMF is advocating the scrapping of the sector charters, to replace them with codes." Peter Mageza, chairman of the Absa financial sector charter subcommittee, said the codes of good practice on BEE provided another opportunity for Absa to accelerate its empowerment and transformation drive. "Currently, the financial sector charter is being aligned with the codes of good practice. "We aim and hope to find common ground which will enable us to bring our empowerment status within the context of the codes."

Investec Takes R500m Knock on U.S. Subprime

INVESTEC became the first high-profile South African financial institution to announce hefty losses linked to the US subprime mortgage crisis and global credit crunch, November 15, saying it would write down £36m (about R500m) of US structured-credit investments in the six months to September. Absa group's parent company Barclays also said its investment arm, Barclays Capital, had taken a £1,3bn hit between July and end-October. Absa, however, said it had no exposure to the subprime market. FirstRand was exposed to the tune of $1,5m due to unsecured mortgage funding, but spokeswoman Sam Moss said the bank had sold its portfolio. This comes despite Reserve Bank Governor Tito Mboweni's assurances that the local banking sector was still safe from the fallout of a global credit squeeze sparked by problems in the US homeloan market. Investec MD Bernard Kantor said the group's exposure was limited to its UK operations. He expected no further write-downs due to the US subprime crisis. About £33m in assets of the South African bank and asset management company's £81m portfolio in the US was linked to the subprime market. "Total exposure to the US subprime market represents 0,3% of the group's loan portfolio. We have seen no reason to impair anything further at this stage." Investec is SA's fifth-largest bank by assets, after Standard, FirstRand, Absa and Nedbank. Kantor said that, despite the subprime woes, Investec's diverse and balanced revenue streams, geographic footprint and business mix enabled it to deliver continued growth, with half-year operating profit rising 23,8% to £254,3m from £205,3m a year earlier, while net income rose to £182,6m from £153,6m. "Despite the subprime exposure, which is small in the context of the group, the company's results were commendable compared to other banks in the UK that have reported losses," said Neville Chester, who helps manage the equivalent of $2bn at Coronation Fund Managers. Kantor said the group's financial and growth targets had been achieved, supported by strong performance from the majority of businesses, with SA and Australia delivering strong growth in operating profit before goodwill, nonoperating items and taxation of 38,7% and 61,4%, respectively, in the six months to September. Barclays' announcement November 15 comes after Citigroup, Merrill Lynch & Co and Morgan Stanley announced write-downs in the past month after Moody's downgraded $10,3bn of US collateralised debt obligations, most of them linked to US mortgages. Performance of Investec's UK operation remained flat, adversely affected by recent instability in the credit markets, he said. The key earnings drivers for the results (core loans and advances to customers) rose 31,5% to £11,8bn, while third-party assets under management grew 21,9% to £59,5bn. Investec's capital markets business, which provides loans and advisory services to companies, posted a 24% decline in operating profit to £43,2m because of the write-downs. Operating profit at its private clients business rose 10% to £100,1m, 13,5% at its asset management unit to £36,2m, and 45% at its investment banking division to £51,9m. "Market conditions in SA and Australia remain positive and we expect to deliver a good performance in these two geographies for the full year," CEO Stephen Koseff said. "Activities affected by current conditions in the UK credit markets are likely to be affected. "Investec continues to be well capitalised with strong risk management disciplines and established platforms for growth."

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ELECTRICITY

Eskom Awards Deals to Hitachi, Alstom


IN A key step towards the construction of Eskom's first new coal-fired power plant, the power utility has awarded contracts for the construction of the boiler and turbine of the Medupi power plant in Lephalale to Hitachi of Japan and France's Alstom, respectively. The contracts, with a combined value of R33,5bn -- R20,2bn for the boiler and R13,2bn for the turbine -- are the biggest in Eskom's history. Eskom's enterprises division MD, Brian Dames, said work on the projects had started, with work on site to start in early 2009. And Eskom is already negotiating with Alstom and Hitachi to provide turbines and boilers for its next coal-fired power station, near Emalahleni. This would optimise the delivery of the construction programme and standardise equipment, Dames said. In terms of the contract agreements, as much as half of the value of the contracts will be procured locally, in line with objectives in the Accelerated and Shared Growth Initiative, while the companies are committed to obtain as much of the required employment locally as possible. Dames estimated that at its peak the project would employ 9 000 people on site, most of whom would be sourced locally. The contracts also contain substantial skills-transfer agreements, which will see investment in developing local engineering, manufacturing and artisan skills capacities. The technology that would be used in the Medupi project included supercritical plant, which would be able to operate at higher temperature and pressure than previous boilers, Dames said. Klaus-Dieter Rennert, chief operating officer of Hitachi Power Europe, said at a signing ceremony at Eskom headquarters November 13 that this would reduce the coal and water input requirement 25%, resulting in more efficient resource utilisation, while a 25% reduction of emissions would make the plant more environmentally friendly. The 4800MW-plant is the first coal-fired power plant to be built by Eskom in 20 years and is part of the R150bn programme to increase power-generating capacity as Eskom strains to supply growing demand. Once completed, Medupi will be the biggest dry-cooled power station in the world.

U.S. Group Buys Country Nuclear Firm

United States based nuclear technology group Westinghouse Electric Company, a group company of Toshiba Corporation, has bought the South African firm IST Nuclear. Westinghouse opened its newly acquired South African operation November 5 under the name Westinghouse Electric South Africa. The value of the transaction has not been disclosed, reports Southafrica.info. IST Nuclear is a leading provider of services and systems for South Africa's Pebble Bed Modular Reactor (PBMR) project. "Westinghouse has long been a proponent of the PBMR, and this acquisition will allow us to become even more involved as PBMR moves toward commercialisation," Nick Liparulo, Vice-President of engineering services for Westinghouse, said in a statement. At the same time, Westinghouse views South Africa as a promising market for its particular brand of nuclear power plant, a third-generation pressurised water reactor system known as the AP1000. In September, state-owned power supplier Eskom said it had short-listed Westinghouse, along with French nuclear giant Areva, as potential builders of South Africa's second nuclear power plant. According to Engineering News, Eskom has set 30 June 2015 as the date by which it wants to have its first new nuclear reactor up and running by. The state supplier has indicated that it is looking to build as many as five new nuclear power stations by 2025. Rita Bowser, Westinghouse's regional Vice President for South Africa, said the IST Nuclear acquisition illustrated Westinghouse's commitment to the South African nuclear market. "The ability to work with a respected local company will allow Westinghouse to better serve this important market both now and in the future. "Clearly, we are even better positioned to help South Africa meet the critical demand for clean, safe and reliable energy in the coming decades," Mr Bower said. IST Nuclear was instrumental in the early development of the Pebble Bed Modular Reactor, working with Eskom and US-based investors including Westinghouse. More recently, IST Nuclear supplied a helium test facility for the PBMR. The company is also under contract to design key systems for a PBMR demonstration unit to be built at Koeberg, South Africa's only nuclear plant, by 2011. Westinghouse supplies nuclear plant products and technologies to utilities around the world. According to the company, its technology is the basis for approximately one-half of the world's operating nuclear plants, including 60 percent of those in the U.S.

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FOOD AND DRINK

Grolsch Accepts Sabmiller Bid


Dutch-based Koninklijke Grolsch's shareholders accepted SABMiller's € 816m takeover offer November 19. The purchase is in line with London-based SABMiller's intention to grow its share of the premium market in developing economies. The brewer, which produced 216-million hectolitres of beer last year, said the brand would be a key driver of growth in its premium segment, especially in emerging markets. Media relations head Nigel Fairbrass said that the premium segment was growing faster than others. SABMiller has received irrevocable undertakings from shareholders with 37% of the company. Management will recommend the offer once a firm intention is stated. Grolsch CE Ab Pasman said SABMiller's proposal offered the potential to unlock more value than Grolsch's existing strategy. SABMiller, which has guaranteed the staff employment terms, said it would seek to increase production at Grolsch's Enschede brewery. Grolsch, which would join the ranks of beers such as Pilsner Urquell, Miller Draft and Peroni, would add about 10% to SABMiller's premium-beer volumes. The iconic Grolsch Premium Pilsner accounts for more than 90% of the Dutch brewer's portfolio, which includes Grolsch Premium Weizen, Spring Bock, Autumn Bock and the Amsterdam brand. Grolsch and SABMiller reached conditional agreement on the deal, which will see shareholders receive € 48,25 a share, an 84,3% premium on the average closing price over the last month. Absa Asset Management Private Clients analyst Chris Gilmour said the premium was "cleverly constructed to ensure no other brewing companies make a counter bid". SABMiller CE Graham Mackay said Grolsch would be a "a powerful addition to its international brand portfolio", which was the fastest growing segment of the market. Through its operations in 60 countries on six continents, SABMiller said it had the scale to grow the brand and expand into new geographies. The brewer, which has recently been focusing on growing into emerging markets, would focus on growing the beer into the developing countries in which it had operations. "SABMiller sees significant potential across Africa and Latin America, where the premium segment is still in its infancy, and in the more developed markets of central and eastern Europe," the group said. Gilmour said Grolsch would "be in the super-premium category" and would augment SABMiller's range of premium beers "beautifully". In SA, where the company lost share in the premium market after Heineken revoked its licence to produce Amstel earlier this year, it saw a "key opportunity" that would give it a "particularly strong portfolio of highly differentiated premium brands in that market". Gilmour said the addition to the brewer's local portfolio would aid SAB in its market share battle after losing Amstel. "Grolsch has a loyal following in this country, and it will be interesting to see how it is priced here." He said it might be priced on a par with Amstel. About 80% of the Dutch brewer's volumes are from sales in the UK, the US, Canada, France, Australia and New Zealand through a network of alliances. SABMiller would retain its existing distribution agreements in the US, UK, Canada, Australia and certain smaller markets for now. In its financial year to March, SABMiller reported revenue of $18,6bn and pretax profit of $3bn, while 400-year-old Grolsch reported revenue of € 317,6m and net profit of € 19,2m. It has 15% of the Netherlands market. The companies expect the offering memorandum to be published in January, after which shareholders will vote. The offer would be subject to regulatory conditions.

Local Distiller Tops International Wine & Spirit Competition

Distell has been judged Distiller of the Year in the 2007 International Wine & Spirit Competition (IWSC) to come out ahead of some of the world's biggest names in spirits in the US, the UK and Europe. The IWSC is the largest spirits competition in the UK with close on 1,300 submissions made this year from 70 countries worldwide. Apart from a number of large-scale companies that own several global brands, Distell was pitted against many famous-name specialist producers, including a sizeable portion of the whisky fraternity, with over 340 whiskies entered from Scotland alone, according to competition director Frances Horder. Considered the most important spirits prize of the event, the V&S Distiller of the Year Trophy was presented to Distell by IWSC president, Gina Gallo at a gala event in Billingsgate, London November 6. The competition organisers praised the company for its "high quality range portfolio offering on spirits" and the "dedicated, resolute approach to the highest standards of distilling, blending and bottling". The judges whittled down the number of contenders for the trophy to a shortlist of 26 and finally settled on Distell, based on the outstanding results achieved by Mainstay, Amarula Cream and brandies from the Klipdrift, Van Ryn, Oude Meester, Richelieu and Nederburg distilleries. Ironically, Mainstay, an original South African cane spirit, won the trophy for the best vodka in the competition, outclassing Russian, Polish and Finish producers. Amarula, South Africa's biggest liquor brand on the international market, won the IWSC trophy for the best liqueur, while Distell's brandy portfolio came away with two gold and eight silver medals, as well as four best-of-class ratings. Horder said the entire spectrum of producers was considered for the trophy. "This is not an easy award to win and everyone who made it to the finals can be proud of their achievement." The company's Van Ryn's Collection Reserve 12 Year Old potstill brandy has twice been judged the IWSC Worldwide Best Brandy.

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HIV/AIDS

UN Slashes Global Aids Estimates


The United Nations (UN) sharply reduced its estimate of the number of people worldwide infected with the AIDS virus, from 39,5-million to 33,2-million November 20. The news is important because it is likely to result in revised estimates of the resources needed to prevent new cases and treat those already infected. The report did not contain country-specific details, which are expected to be released only in five or six months' time, but it says SA remained the worst-affected country. The report shows that there has been a decline in annual new infections in sub-Saharan Africa since 2001, falling from 2,2-million to 1,7-million. UNAIDS, the UN's joint agency on HIV/AIDS, attributed the drop to improvements in the quality of data supplied by countries and changes to its methodology for analysing these figures, rather than to any dramatic change in the effect of efforts to combat the disease. "The qualitative interpretation has not changed -- this remains the leading infectious disease challenge to global health," said Kevin de Kock, head of the World Health Organisation's HIV/AIDS department. The latest AIDS epidemic update from UNAIDS, released November 20, says 2,5-million people became infected with HIV this year, and 2,1-million people died from AIDS-related illnesses, 76% of them in sub-Saharan Africa. UNAIDS said it had lowered its estimates of the number of people needing anti-retroviral therapy, and determined that the epidemic was not growing as fast as previously thought. As a result, the resource requirements for 2010 were expected to be adjusted down about 5%, and those for 2015 10%, said the monitoring and evaluation director of UNAIDS, Paul de Lay. The figures had been revised downwards largely because of improved data supplied by India, which accounted for 50% of the decline in HIV cases, as well as better figures from Angola, Kenya, Mozambique, Nigeria and Zimbabwe, De Kock told reporters in a teleconference from Geneva. These countries together accounted for 70% of the decline in HIV cases. More countries had conducted population-based household surveys, which enabled better estimates for countries with similar epidemics that had not conducted these surveys. UNAIDS had also changed its mathematical models to reflect the latest knowledge about how HIV progressed; for example, the estimates of how long people survived after infection without treatment had been increased from nine to 11 years, he said. De Kock stressed that these kinds of changes were to be expected as experts learnt more about the disease, and developing countries improved their surveillance systems. He cautioned against comparing this year's report to that published last year, saying the latest report contained revised figures for the global HIV/AIDS burden as far back as 1990. UNAIDS executive director Peter Piot said: "Unquestionably, we are beginning to see a return on investment -- new HIV infections and mortality are declining and the prevalence of HIV levelling. "But with more than 6800 new infections and over 5700 deaths each day due to AIDS we must expand our efforts in order to significantly reduce the impact of AIDS worldwide," he said.

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INTERNATIONAL ECONOMIC RELATIONS

Too Many New Bilateral Accords Spoil Trade Broth


A trade expert has warned that the proliferation of bilateral trade deals by countries, in the absence of a comprehensive multilateral trade pact, is compounding the difficulties of doing business in the global arena. Rather than facilitating trade flows, different rules of origin, tariff phase-downs and regulations marking each unique bilateral deal were complicating matters for the private sector, said Mills Soko of the UCT Graduate School of Business and a research associate of the South African Institute of International Affairs.
"The global production system is fragmented and dispersed. If a country has several bilateral agreements it becomes a nightmare for supply chain management," he said at an institute roundtable on the relevance of the World Trade Organisation (WTO) November 28. Countries are opting increasingly for bilateral free trade agreements as the WTO process to deliver a multilateral trade deal falters. SA is pursuing preferential trade deals with Latin American trade bloc Mercosur and India, and is exploring a similar deal with China. In the face of a seemingly insurmountable challenge to cater for all the divergent interests of its 150 members, the WTO has become the latest in a line of prominent institutions, such as the World Bank and the International Monetary Fund (IMF), whose role and relevance are questioned. The IMF and World Bank have recently been heavily criticised for their failure to acknowledge the importance of fast-emerging economies, such as India and China, in their structures. Soko, also a member of the Warwick commission investigating reform options for the WTO, echoed such concerns in relation to that institution. The rising leadership of developing countries needed to be balanced with the role of traditional leaders, but there was increasing protectionism from developed states, threatened by the rise of the new economic powers. "There is an instinct to close up," said Soko. The traditional power of economies such as the European Union (EU) and the US ensured that the WTO agenda was essentially set by a "clique of countries," compromising the legitimacy of the WTO process for all its members, he said.
Soko said the role of the WTO could be bettered by creating space for improving the management of agenda-setting and decision-making, as well as defining more strongly the relationship between trade and development.

Cuba Welcomes Country Support to End Embargo

A top Cuban diplomat has extended her country's gratitude to South Africa for its contributions and support towards ending the long-standing embargo against the island nation by the United States. "I would also like to reiterate Cuba's gratitude to the government of South Africa for its support to the draft presented by Cuba on the need to put an end to the economic, financial and commercial blockade on our country by the government of the United States," said Cuba's Foreign Minister Martha Lomas Morales, at the 5th SA-Cuba Joint Bi-national Commission (JBC), November 8. The minister said her country counted on support from South Africa and other African states in helping them reach an end to the U.S. embargo, in place since 1961, following the unsuccessful Bay of Pigs invasion. "We would particularly like to thank the government of South Africa," Minister Morales said, at the JBC, which she co-chaired with Minister Nkosazana Dlamini-Zuma. "Dear Minister, allow me to provide you with some information about our national situation," said Minister Morales. "The Cuban economy is still undermined by the limitations that are a result of more than 48 years of a very strong financial, economic and commercial blockade imposed on our country by the government of the United States." The Cuban minister explained that, the goals for 2007 are based on a flexible plan capable of adapting to the changeable circumstances imposed by the international economy and that demand continuous transformations on Cuba's part. Co-operation between the nations extends beyond the political realm, explained Minister Morales. According to figures she supplied, 347 young South Africans have studied and graduated in Cuba since 1961. "There are currently 181 students studying in Cuba, two in higher education, seven in the National Institute of Sports and Physical Education and Recreation and 171 in the Health Sector as doctors and one in the Ministry of Education." For her part, Minister Dlamini Zuma explained that in the seven years of the JBC's existence, the two countries have had very exciting programmes of co-operation, some of which are going very well and performing steadily. "This JBC has become amongst the biggest we have with 18 government departments participating over the past seven years," said Minister Dlamini Zuma. "We are very happy with this especially because one of the anchors of this programme is the Human Resource Development (HRD) programme with which Cuba is assisting us. Of course, HRD is one of our main priorities over this period in our development." The South African minister expressed the government's hope that co-operation in the communications field would take root. "We are aware that our Deputy Minister of Communications visited Cuba but we need to have a proper follow up of that visit and I am told that there are exciting projects in the pipeline but we need to take them out of the pipeline, since they have been in the pipeline for a while," Dr Dlamini Zuma said. "And off course, the SABC and Cuban Television co-operation is also an important project." This minister also emphasised the importance of co-operation in science and technology. "Because science and technology is important not only for industry but for health, vaccines, for all manner of areas that will enhance our co-operation. "It will be in areas of climate change. We will be happy to learn from your experiences and to share whatever experiences South Africa has." Dr Dlamini Zuma said government was satisfied with the two countries' joint work in diverse areas such as the auxiliary social worker programme, community development workers, and youth development.

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MANUFACTURING

Strong Rand and Motor Industry Strike Cut Factory Output


Manufacturing fell in September for the first time in three-and-a-half years -- knocked mainly by a strike in the motor industry, but also by a slowdown in consumer demand blamed on rising interest rates. Factory output, which accounts for more than 16% of the economy, fell 1,4% in the year to September after a rise of 5,2% in August, marking the first annual contraction since February 2004. A rebound is expected for October, but analysts said the outlook for the economy's second-biggest sector had deteriorated due to gains in the rand, which both erode the competitiveness of SA's exports and make imports more affordable. "The manufacturing sector remains plagued by relative rand strength, slowing household demand, high production costs and an easing in global manufacturing conditions," Standard Bank economist Danelee van Dyk said. She singled out the effect of gains in the rand, which rallied 3,8% last month against a trade-weighted basket of currencies, in which the euro carried most of the clout. This is a more significant measure of the rand's value than its level against the dollar, which has dived against most currencies this year. "The rand's strength has heightened import substitution by retailers and wholesalers, negatively affecting the sector's growth outlook for the rest of the year," she said. In a separate report November 8, the Bureau for Economic Research said that for the first time in four years, there was clear evidence of a slowdown in SA's economic growth, which reached 5% over each of the past three years -- a 25-year peak. Growth was still likely to amount to 5% this year, but would moderate close to 4,5% next year, before gathering momentum in 2009. It said this forecast was in line with estimates from the treasury in its medium-term budget policy statement issued last week. But the Reserve Bank is unlikely to put much weight on data showing that growth in retail sales, credit and manufacturing are all moderating when it makes its decision on interest rates next month. With inflation set to climb further above its 3%-6% target and remain above the upper limit until the middle of next year, there is still a good chance the Bank will hike lending rates again after raising them by 3,5 percentage points since June last year. "For monetary policy, the Bank is likely to look past the data with its focus largely on the inflation target ... a not-so-comforting outlook," Absa Capital said. Manufacturing fell a seasonally adjusted 4,9% in September, after rising a meagre 0,9% in August, yesterday's Statistics SA data showed. Production in motor vehicle components dived 30% in September due to a three-week strike, which also hit car production. But output in nine out of 10 industries slowed, suggesting the trend was broad-based. Even though this month's numbers are distorted by the strike, the underlying trend appears to be softer, albeit moderately so," Nedbank economist Nicky Weimar said. The data showed that in the third quarter of this year, manufacturing fell 0,6% compared with the second quarter -- the first quarterly decline since 2003, when the sector mired in a recession. "For the economy to return to 5% growth, the manufacturing sector must once again start to pull its weight. The rate of expansion will not create the jobs required by the economy to increase its overall welfare," said Efficient Research economist Nico Kelder.

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MINING

Kalagadi and Mittal in R4,2bn Venture


Empowerment mining company Kalagadi Manganese has signed a strategic equity partnership with steel giant ArcelorMittal for the development of a manganese mining and beneficiation project in Northern Cape at a cost of R4,2bn. Kalagadi Manganese is 80% owned by empowerment company Kalahari Resources, with state-owned development financier the Industrial Development Corporation holding the balance. The joint venture project will see the development of a mine and sinter plant at Hotazel in Northern Cape, which will produce 2,4-million tons of sinter product a year, while a ferromanganese alloy production facility will be built in the Coega Industrial Development Zone outside Port Elizabeth with an initial annual production capacity of 320000 tons, eventually to be ramped up to double that output. Kalagadi Manganese secured the agreement on extremely favourable terms, which include the steel giant financing much of the project, providing business and technical assistance and having agreed to take up half of the sinter plant's output at market-related prices. Kalagadi has also signed an agreement with Eskom in terms of the developmental electricity pricing programmes, which means it will obtain power at a favourable price. It was finalising its memorandum of understanding with the Coega Development Corporation November 20. According to Kalagadi Manganese chairman Daphne Mashile-Nkosi, the sinking of the shaft and construction of the mine would commence in March next year while construction of the smelter at Coega would start at the end of next year and take 18 months to complete. At R2bn, the smelter will take up the bulk of the development costs while R497m would be spent to develop the mine and mine infrastructure. Power and rail would respectively take up R300m and R182m of the development costs. The project would be financed through a combination of debt and equity, with the debt:equity ratio set at 35%-65%, Mashile-Nkosi said. ArcelorMittal will come to the party with $222m. "The deal will allow us to come on stream very quickly. With ArcelorMittal's contribution we will be able to go to any bank (to raise debt). With this being a greenfields project, to attract such a large company as investor is very exciting," she said. The parties had also signed a business assistance agreement, in terms of which the steel group would assist with the business and technical aspects of the project. In terms of an offtake agreement, ArcelorMittal will take up a minimum of 50% of production at market-related prices. With ferromanganese prices having reached highs of $1750 a ton, Mashile-Nkosi said potential customers for the rest of its output were "already knocking on our doors". According to ArcelorMittal spokesman Mark Mann, the 2,4-million tons of production volume was enough to supply half of the ArcelorMittal group's need, but that it had yet to decide if it would take up more product. Managanese is used in the steel-making process to strengthen steel and to remove impurities such as oxygen and sulphur. The bulk of manganese is used in manganese ferroalloys and manganese metal in the production of iron and steel, while manganese metal is also used in the production of nonferrous products such as aluminium alloys. The mine and smelter will employ 1300 workers once operational while 800 people will be employed during the construction phase. The project overlies the Kalagadi Manganese Basin, which contains 80% of the world's known manganese, estimated at 12-billion tons.

Uranium One Goes From Profit to Loss

URANIUM miner and developer Uranium One turned from profit to loss in the September quarter as sales of uranium to a customer dropped sharply. But president and CEO Neal Froneman said in a conference call the group had only one legacy contract with this much flexibility, and new contracts were being signed which would offset this. The company, which has one producing mine in Kazakhstan and is developing others in SA, Australia and Kazakhstan, sold 70000lbs of uranium in the September quarter compared with 99200lbs in the three months to October last year and 244200 in the June quarter. It produced 463000lbs of uranium from 513000 in the third quarter last year. But the steep increase in uranium prices over the past year helped grow revenue to $8,1m ($4,2m). The average uranium price realised was $115/lb, compared with $42/lb a year ago. After higher expenses, a net loss of $17,3m was made against a previous profit of $25,9m. The main test for Uranium One, following an aggressive expansion strategy over the past two years, will be the delivery of projects as promised. Production at the Akdala mine in Kazakhstan was ahead of schedule at 1,99-million pounds for the nine-month period, management said, and the mine would not be affected by the temporary sulphuric acid shortage in Kazakhstan. Its other two projects in the country, South Inkai and Kharasan, could be delayed by the sulphuric acid problem which could also make its initial production lower than expected.
In SA, first commercial production from the Dominion Reefs mine near Klerksdorp was late, but the company expects the mine will produce 2-million pounds next year.

First Uranium Profit Up On Currency Gains

Gold and uranium producer First Uranium Corporation, whose main shareholder is Simmer & Jack, moved from loss to profit in the past six months as it started production at Ezulwini and Buffelsfontein, the miner said November 12. The company, which is listed on the Toronto and Johannesburg stock exchanges, earned $0,07 per share for the six months to September compared with a loss of $0,02 in the same period last year, when it was in start-up phase. It reported its first revenue of $8,4m for the six-month period, derived from 10124oz of gold processed through the Mine Waste Solutions plant at Buffelsfontein, which it acquired in June, together with three gold and uranium tailings dams. Although it made an operating loss, the bottom line was boosted by foreign exchange translation gains and interest earned. First Uranium has also begun hoisting material at its Ezulwini mine. Since the end of the quarter, it has reached an agreement with a third party to treat the ore mined at Ezulwini until it completes its own gold processing plant in April. In the current quarter, the company expects to increase mining at Ezulwini to produce 5500oz of gold and to produce a further 9600oz of gold at Buffelsfontein. It will also upgrade the capacity of the processing plant at Buffelsfontein to 630000 tons a month from 500000 tons. By June next year First Uranium expects to be able to process uranium at Ezulwini, and by November next year to process uranium at Buffelsfontein. It has agreed with the Nuclear Fuels Corporation of SA to calcine the yellowcake it produces into U308 and to buy its uranium production for 12 months from January at a rate based on spot prices. The spot price of uranium is about $90/lb, although it went as high as $136/lb this year. Most longstanding uranium producers are supplying long-term contracts at less than $20/lb.

Lonmin Expects to Boost Its Platinum Sales 13 Percent

Platinum miner Lonmin expects to sell about 900 000oz of platinum in its current financial year, a 13% increase on the past year when it was hit by processing and labour problems. It will spend $400m-$450m on capital projects this year, up from $276m in the year to September, to complete shafts at Marikana, continue extending its Limpopo mine to the east and planning a mine at Akanani. By 2012 Lonmin expects to be able to produce about 1,2-million ounces of platinum from its new mechanised shafts at Marikana and expansion at Limpopo. It has completed a study on expanding Limpopo, but is now undertaking further work on the possibility of building an even larger mine, including upgrading the concentrator and building another on the eastern side. By end-December a study on the joint Pandora venture, a conventional, standalone mine, should be completed. This could see Lonmin, focusing on mechanised mining, exit the project. Lonmin revenue rose to $1,9bn, or 4,6% more than in the previous year, driven mainly by higher prices. It realised a 23% higher price for its basket of platinum group metals at $1196/oz. Production was below forecast because of a longer Christmas break, industrial action at Marikana and a leak at its number one furnace, which took months to rebuild. The Merensky furnace was re-commissioned to reduce reliance on the number one furnace, and the process division got new management. CE Brad Mills said it was impossible to identify either technical issues or human error as a single reason for the accident, but the structure was weakened by previous incidents. Total operating costs after base metals credits were likely to rise 15% next year, versus a 29,7% increase previously to R3434/oz, due mainly to lower volumes. Underlying earnings fell 5,2% to $295,9c per share. The final dividend was 9% up at 90c per share, bringing the total for the year to 115c ( 100c).

Jubilee Platinum to Raise £11m for Feasibility Study

Platinum explorer Jubilee Platinum -- which is quoted on London's AIM and listed on the JSE -- will place 13-million shares to raise £11m (about R150m) to fund its bankable feasibility study into the Tjatje project, it said November 7.
The Tjatje project is a potential platinum mine on the eastern limb of the Bushveld complex near Implats' Marula mine and Angloplat's developing Twickenham project. Jubilee holds 49%, with an option to increase its stake to 63%. According to a recently completed scoping study, it could be economically feasible to build a mine at Tjatje at a cost of $470m (about R3bn) to mine 200 000 tons of ore a month at a grade of 5g a ton of platinum group metals, with nickel and copper byproducts. A bankable feasibility study is the next step to increase the level of confidence on whether the mine would be viable. Jubilee expects to start the study next year and be able to start production from the mine in 2011. The shares will be placed with institutions at a price of R12,50 on the JSE and 89p on AIM -- which is a 4% discount to the 30-day weighted average share price on AIM. A company spokesman said 4,35-million shares would be placed on the JSE. According to a recent research note from Growth Equities and Company Research, the Tjatje project could be sold to Angloplat or Implats or would become part of a production-sharing agreement with one of those companies.

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TELECOMMUNICATIONS

Telkom Hit Hard After Vodafone, MTN Deals Flop


TELKOM's plans to reinvent itself have been destroyed as talks to sell assets to Vodafone and MTN collapsed November 28. The news was partly a surprise and partly no surprise at all, as many analysts expected a proposed deal with Vodafone to proceed, but a more nebulous deal with MTN to fail. However, Telkom disclosed that the two deals had been intertwined so axing one instantly killed the other. Telkom shares took a savage 11% hit, at one stage shedding almost R18 to trade at R143,50, knocking its market cap to about R76,5bn, down R9bn on the day. MTN rose 7,65% to R129,50, with buyers relieved that it no longer risked being tied up in months of business-battering competition authority hearings. Telkom aimed to sell part of its 50% stake in Vodacom, worth about R75bn, to the UK's Vodafone and publicly list some remaining shares. It seemed a clear-cut move, with only the price to resolve. Yet it apparently hinged on a separate plan for MTN to buy "certain or all of Telkom's fixed-line businesses", which collapsed after the strategic, operational and regulatory aspects were examined. Earlier in November Vodacom CEO Alan Knott-Craig described the deals as "very complicated". Of the MTN deal, he said: "I wouldn't be surprised if nothing ends up happening. I think almost every company in this country is going to go to the competition board." Telkom said the MTN deal also failed because anticipated costs did not match benefits. That confirmed market doubts about how MTN would gain by absorbing Telkom's infrastructure, especially as MTN was already laying cables of its own. The news does not, however, hang up on Telkom's much-needed restructuring. Its results for the six months to September showed a 19% dive in profit for fixed-line voice calls, emphasising the need to offer combined fixed and mobile voice and data services. Telkom said it would continue to pursue its options to offer converged services. Vodafone also confirmed it was still interested in taking control of Vodacom to end the unworkable ménage-â-trois. The talks had not ended because of problems between Vodafone and Telkom, but because of difficulties between Telkom and MTN, it said. Kaplan Equity Analysts MD Irnest Kaplan expected Vodafone and Telkom to revive the share-sale talks. But he was pleased MTN would not attempt to buy anything from Telkom. MTN was interested in Telkom's national backbone, but Telkom probably wanted to foist much more onto MTN, including 30000 staff. "MTN's shares are labelled internationally as an awesome high-growth operation of choice in Africa and the Middle East. If it bolted on Telkom it would change its whole investment profile," Kaplan said. "It's very challenging now for Telkom with a lot of uncertainty. We don't know if the Vodafone deal will be resurrected and Telkom has a lot of management posts to fill." Telkom also needed robust strategies to defend its turf against rivals such as Neotel and Internet Solutions, he said.

Vodacom Finally Ready for BEE Deal of R7,5bn

VODACOM is finally ready to strike its R7,5bn empowerment deal, despite uncertainty about its future ownership. The lack of black shareholders is inhibiting the company so much that its board has stopped procrastinating after delaying progress for five months. CEO Alan Knott-Craig said an empowerment deal was not something to do for fun, but for good commercial reasons. "We just can't delay it any longer. The commercial imperative was more important than any other activity." In the months ahead Vodacom's parent company, Telkom, is expected to sell up to 20% of the business to Vodafone, the other joint owner, while the remaining 30% may be listed on the JSE. Knott-Craig said potential black partners had already been ranked and three groups would take a stake -- its own staff, a broad-based black group and a strategic partner. "We have to get into the next stage of finding out if they are actually the right selection," he said. They are believed to include a group led by Nkenke Kekana, a former head of Parliament's communications portfolio committee. Cash will change hands as those groups pay for their shares in some form, but much of the negotiation will involve finding a way to finance the deals to make the shares affordable. Vodacom has settled on a sale worth R7,5bn as the government counts a company as black equity-compliant at that level. Knott-Craig would not say what percentage of its shares R7,5bn would buy, and assessing the value of Vodacom's arm in SA in isolation is difficult. Analysts have pegged the price for Vodacom as a whole at about R150bn. In the past six months its operation in SA generated R5,4bn of its R5,7bn operating profit, making it by far the largest and most expensive part of the enterprise. Knott-Craig said the share-trading deal between Vodafone and Telkom was complicated, not least because the government was a 38% Telkom stakeholder, so politics will override purely commercial decisions. Knott-Craig is also not convinced listing Vodacom is a good move, as it does not need extra cash or a higher profile. The only benefit would be to let the black shareholders realise some value by selling their shares on the open market. Knott-Craig was speaking after presentation of Vodacom's interim results, which showed continued phenomenal growth. Revenue rose 17,2% to R22,8bn and net profit rose 17,5% to R3,7bn for the six months to September 30. The profit margin slipped 0,5% to 33,3% but it lifted its dividend by 10% to pay R2,75bn to shareholders. Customer numbers jumped 22,6% to 31,6-million. Vodacom has easily maintained its dominance over MTN in SA, despite wiping 2,9-million names off its list -- subscribers inactive for 13 months. The average monthly spending of customers has fallen 4% to R119 each as the less affluent join. Knott-Craig sees the answer to that as converged services of broadband internet access, music, TV and mobile video. At present, 1,2-million people use its mobile internet website, 265000 connect their personal computers and laptops to the internet over its cellular network and 35000 people watch its mobile TV channels.

Sea Cable Venture Lands Big Investors

An undersea cable promising cheap bandwidth for Africa finally named its backers, November 13, signing up enough well-connected local investors to guarantee its landing rights in SA. Investment heavyweight Venfin is sinking $75m into the project, taking a 25% stake in the 15000km cable linking SA to India and Europe. Cyril Ramaphosa's black investment house Shanduka is taking 12,5%, worth $37,5m. Another 12,5% goes to Convergence Partners, a group of black investors led by Andile Ngcaba, the chairman of Dimension Data Africa and a former director-general of the communications department. Nedbank Capital and Investec will provide financing for the $650m project. SA's second network operator, Neotel, is pumping in a far more modest R20m, and using its telecoms licence to guarantee that the cable can dock in SA. The local ownership is sufficient to ensure that Seacom meets controversial new conditions being drawn up by Communications Minister Ivy Matsepe-Casaburri, dictating who can land a cable in SA. The minister is insisting that any cable must be majority owned by African investors to come ashore. South Africans hold 50% of Seacom, and that rises to 75% African ownership thanks to 25% held by the Aga Khan Fund for Economic Development's Industrial Promotion Services, a development agency based in Kenya. The remaining 25% lies with New York's Herakles Telecom, a development group that has invested $4bn in Africa. Neotel is investing only in the local landing station, but its licence to operate in SA conferred on it the right to land a cable, said MD Ajay Pandey. "Our understanding is that the country needs international capacity, and the way international cable landing protocols have been defined means we have the opportunity here." Venfin CEO Jannie Durand said Neotel's licence to land a cable in SA meant everything had been done "legally and correctly". Venfin was backing Seacom for two reasons, he said: "We are hopefully going to make a lot of money out of it and SA needs more bandwidth. We want to bring SA affordable bandwidth to the rest of the world." Although the cable will cost $650m, it would be partly funded by loans as well as equity, allowing Venfin to take 25% for less than the book value of the project, Durand said. Pandey believes Seacom will be the only new telecoms cable completed in time to give SA enough international bandwidth to successfully broadcast the 2010 World Cup. The consortium has already invested more than $10m in a marine survey and engineering of the cable. The actual production of the fibreoptic cable and undersea facilities has now begun. Seacom will connect Mtunzini in SA to Mumbai in India and Marseilles in France via Mozambique, Madagascar, Kenya and Tanzania by June 2009. Terrestrial links will be built to take its bandwidth to numerous other inland countries. Its capacity of 1,28 terabytes per second is 10 times the capacity on the existing Sat-3 cable around Africa's west coast. The consortium has promised that it will charge other voice and data carriers significantly less for its bandwidth than they pay to use Sat-3 or satellite services, which should trigger a massive decrease in the cost of phone calls, internet access and data transmissions for African consumers and businesses. "Improved access for business and individuals in Africa to communications, broadband services and new technology offerings can improve lives and help grow the economies of our countries," said Ngcaba, the chairman of Convergence Partners. "The linking of southern and east Africa with India and Europe is crucial for enhancing development and trade between these key regions."

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