FREE GEOPOLITICAL NEWSLETTER

Albania  

For current reports go to EASY FINDER

SOUTH AFRICA


  
  

 

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

Books on South Africa



Update No: 078 - (7/07/08)

South Africa's Thabo Mbeki held talks in Harare July 4, with Zimbabwe's President Robert Mugabe and members of a breakaway opposition faction. Mr Mbeki has been the chief regional negotiator on the Zimbabwe crisis, and has been trying to persuade Mr Mugabe to form a government of national unity. However, Morgan Tsvangirai, leader of the main opposition party, the Movement for Democratic Change (MDC), declined to meet Mr Mbeki. Robert Mugabe has said the opposition must accept him as leader before any talks on ending the country's political crisis. "I am the president. Everybody has to accept that if they want dialogue," he told thousands of cheering supporters. Robert Mugabe's election victory in Zimbabwe was never in doubt. After losing the popular vote to opposition leader Morgan Tsvangirai back in March, he was standing in a one-man race conducted in an atmosphere of fear and foreboding. Mr Tsvangirai had pulled out of the presidential run-off, saying he could not ask supporters to cast ballots "when that vote would cost them their lives". But his name remained on the ballot. Tens of thousands of Zimbabweans dared to place a cross by his name, knowing that retribution could follow. A significant number of others spoiled their ballots in protest at being forced to vote. The MDC says 5,000 of its members are still missing and that more than 100 of its supporters have been murdered in continuing post-poll intimidation. 

A spokesman for Zimbabwean President Robert Mugabe rejected Western criticism of the country's disputed presidential run-off election. A small group of African states has joined the European Union, the US and other Western nations in criticising the way the election was run. At an African Union summit in Egypt, George Charamba said the West had no basis to speak about the situation - and can "go hang a thousand times". Zanu-PF's Robert Mugabe said he had won the vote, boycotted by the opposition. The opposition MDC said the June 27 one-man election had killed off any prospect of a negotiated settlement. Tendai Biti, the Movement for Democratic Change's secretary-general who faces treason charges in Zimbabwe, said the country's "sham election" "totally and completely exterminated any prospect of a negotiated settlement". He denied any negotiations were going on between the two parties, or that an agreement was in the offing. Zimbabwe's ruling party also rejected criticism of its leadership by former South African President Nelson Mandela ahead of the election. Mr Mandela said Zimbabwe was suffering a failure of leadership. A ruling Zanu-PF official described Mr Mandela's comments as unacceptable and unfortunate for a man of his stature. 

South Africa's main labour union the Confederation of South African Trade Unions (COSATU) held a demonstration at the Beitbridge border post July 4 protesting against Robert Mugabe's regime. Spokesman Jan Tsiane urged continental bodies to intervene in the crisis and help restore democracy in the wake of Mugabe's one-man election. No incidents were reported during the protests except the arrest of one man who was later released. COSATU said their federation was opposed to the formation of a government of national unity adding that a transitional authority was the best way forward. Such an authority would be formed using proportional results from the March 29 poll and this body would organise fresh elections that reflect the will of the people. 

An inter-agency United Nations team is helping the South African Government respond to May's wave of xenophobic attacks in South Africa, that killed some 60 people and left tens of thousands of foreigners homeless. The UN High Commissioner for Refugees (UNHCR) has established a telephone hotline for refugees and asylum-seekers and is also assisting the Government with efforts to register displaced people in Gauteng province, scene of much of the recent violence. The UN Children's Fund (UNICEF) is helping with nutrition, education and child protection efforts and has also provided basic recreational materials for school students. The inter-agency team is also leading training for officials in Cape Town and elsewhere on disaster response and applying humanitarian principles. Officials across the UN have spoken out against the xenophobic violence in South Africa, which is home to more than 128,000 registered refugees and asylum-seekers.

African National Congress (ANC) president Jacob Zuma has thrown an isolated President Thabo Mbeki a lifeline, endorsing Mbeki's presidency until the end of his term next year, saying there were no rival "camps" in the ANC. Their show of unity came in a lengthy joint letter to City Press newspaper June 8, and follows a report in the paper that said Mbeki's followers had mounted a "fight-back" campaign against Zuma. "Neither of us holds opposing political positions. Neither of us is involved in a struggle to build a personal support base in the ANC ... there is no Zuma camp in the ANC. There is no Mbeki camp in the ANC," the letter reads. The letter comes amid calls from among the ANC's leftist allies for Mbeki to step down, saying he is unable to govern effectively or provide the leadership required. The high-profile unity attempt faces a hard sell among senior ANC members. They said it would amount to an "empty declaration" unless backed up by "practical and genuine" steps to address underlying divisions in the ruling party.

AU treads softly on Zimbabwe
The African Union (AU) summit in Egypt was dominated by the problems of Zimbabwe. Coming just three days after the country's highly controversial second-round vote, this was Robert Mugabe's first international appearance since being re-elected president. In the old days of the Organisation of African Unity, the continental body could quite reasonably have been described as a dictators' club. There were always one or two honourable exceptions - Senegal for instance, and Botswana. Yet otherwise, between the military coup plotters and the presidents-for-life, the majority of those attending summits would have been in no position to criticise any of their colleagues for lack of democracy. But things are changing. The old democracies - those honourable exceptions of the past - are still there, and they have now been joined by countries like Sierra Leone and Liberia, which have emerged as democracies despite devastating civil wars. Sierra Leoneans recently voted out the ruling party candidate, and Liberia's elections produced a run-off between a woman and a football star. This was far more representative of Africa's young population and powerful women than the middle-aged men who still fill the hall at African Union summits. Even Nigeria, where elections have often been far from perfect, enjoys lively political debate and rampant freedom of speech. These were the countries which, from their own position of strength, led the criticism of Robert Mugabe in Sharm el-Sheikh. In public, most of his colleagues simply ignored him, but behind closed doors he was obliged to sit and listen to trenchant criticism of the way he had been returned to power. Possibly the strongest came from Zimbabwe's neighbour, Botswana. Its vice-president, Mompati Merafhe, said Botswana did not believe the elections reflected the will of the Zimbabwean people or conferred legitimacy on President Mugabe's government. Representatives of the present Zimbabwean government should be excluded from African Union meetings, he argued. Delegates who attended the closed debate said that Mr Mugabe was given the chance to respond to the criticisms, which he did at considerable length. 

He must have been persuasive, since the resolution which emerged at the end of the session was as favourable as he could have wished. It expressed concern about the criticism by observer groups of the conduct of the elections, but did not pronounce them illegitimate. It made no mention of any sanctions against Mr Mugabe's government, only encouraging the parties to honour their commitment to participate in dialogue, and supporting the call for a government of national unity. It also warmly endorsed the role of intermediary held by South African President Thabo Mbeki, who the more hawkish delegates considered either ineffectual, or far too close to Mr Mugabe. The African Union proceeds by consensus, not majority vote, and there was clearly no consensus for any kind of sanctions. Even so, it was a weak resolution. It was also one whose proposals depend utterly on the goodwill of the contending parties. And not everyone felt they could rely on that. The Liberian President, Ellen Johnson Sirleaf, said she thought it was the view of many in the room that President Mugabe's government would have what she called "insurmountable difficulties" in leading efforts to put into effect the solutions proposed in the resolution. 

Botswana Urges Africa Not To Recognise Zimbabwe Election Result
Botswana has taken the toughest stance against Mr Mugabe and urged Zimbabwe's neighbours not to recognise the election result. The comments came as the opposition Movement for Democratic Change (MDC) accused the government of trying to wipe out the parliamentary majority that it won in March. The party holds a majority of 10 seats in the 210-seat parliament. But at least 10 of its newly elected MPs are either in prison or wanted by the police on a range of charges. The MDC said another of its MPs had been abducted, while 53 are fighting court challenges to their electoral victories. Botswana's Foreign Minister Phandu Sekelemani said Zimbabwe should not be able to take part in meetings of the Southern African Development Community (Sadc) "until such time that they demonstrate their commitment to strictly adhere to the organisation's principles". But Mr Mugabe appeared to rebuff such African criticism. "If there are some who may want to fight us, they should think twice," he said. "We don't intend to fight any neighbours. We are a peaceful country, but if there is a... neighbouring country that is itching for a fight, then let them try it." He also dismissed any threats from British companies to stop doing business with Zimbabwe. "The British are threatening to withdraw their companies. We say the sooner you do it, the better," Mr Mugabe said, raising cheers from the crowd. The European Union said July 4 that it would only accept a result that respected Zimbabwe's first round on March 29, when official results gave Mr Tsvangirai more votes than Mr Mugabe - but not enough to avoid a run-off. A statement from the EU's French presidency said any settlement should be followed by a brief transition period, then fresh elections.

Mugabe crisis 'infecting' Africa 
The crisis in Zimbabwe is "infecting the whole of southern Africa", UK Foreign Secretary David Miliband has said after visiting refugees. On a visit to Johannesburg, he said victims of political repression were fleeing there in their thousands. He said it was now "imperative" there was a new government in Zimbabwe. Zimbabwe's Robert Mugabe was declared the winner of a one-candidate run-off election, amid reports of the violent intimidation of his opponents. After meeting some of the 2,000 refugees who have taken refuge in the Central Methodist Church in downtown Johannesburg, Mr Miliband said: "This is now a crisis infecting the whole of southern Africa and one that is a man-made tragedy from the top of the Zimbabwean regime." He said: "No-one who meets the people here could do anything other than redouble their efforts to secure international consensus that the Mugabe regime is not a legitimate representation of the will of the people of Zimbabwe." He said the international community had to "rally behind" tough United Nations Security Council resolutions in July to target individuals within the Mugabe regime. And he said it was "imperative" that a government was formed that respected the result of the first presidential result on March 29, when official results gave opposition leader Morgan Tsvangirai more votes than Mr Mugabe - but not enough to avoid a run-off. Mr Tsvangirai later pulled out of the presidential run-off, citing violence in the campaign. His MDC party says 5,000 of its members are still missing. Mr Miliband said a large number of orphans were among the growing number of Zimbabweans arriving in Johannesburg - adding he had seen the "human face" of the catastrophe in Zimbabwe. "At the heart of President Mugabe's rhetoric is the idea that this is a fight between Zimbabwe and Britain, it's not. "It's a fight between two different visions for the future of Zimbabwe, one of which has the support of the Zimbabwean people as expressed on March 29 and the other of which is held together by a small clique that holds power on the basis of violence and intimidation. I've seen the scars and the consequences of that violence and intimidation today." July 5, 

UN Warns Global Food Crisis Will Push 100m People Into Poverty
The United Nations (UN) has warned that the current global food crisis, compounded by a hike in fuel prices and climate change, will push more than 100 million people into poverty. United Nations Deputy Secretary-General Asha Rose-Migiro said June 30 at the official opening of the 11th AU Heads of State and Government Summit that this development risked reversing the positive steps made towards achieving the Millennium Development Goals (MDGs). Dr Migiro, however, noted that many African countries had made tremendous progress towards the achievement of the MDGs. She said well designed and properly financed programmes had helped reduce child mortality, improve water and sanitation and expanded primary education in some African countries. "There are numerous other examples that prove that the ambitious MDGs can be achieved. "The careful plans crafted by African governments need to be backed by adequate and predicable donor financing," Dr Migiro said. She, however, noted that donors had not yet delivered on their pledges made three years ago at the annual summit of the Group of Eight (G8) most developed nations at Gleneagles, Scotland, to support African countries meet the MDGs. She said inadequate donor financing and other constraints had made it difficult for African countries to reach some of the MDGs. Support for Africa was not only a moral imperative but was also critical for global peace and security, she added. Dr Migiro also urged African leaders to stand by the people of Zimbabwe who were facing an extremely grave crisis. She said what was happening in Zimbabwe was the single greatest challenge to regional stability in southern Africa not only because of its humanitarian and security consequences but because of the dangerous political precedents it had set. The climate in which the June 27 run-off presidential elections in Zimbabwe took place was not conducive to free and fair elections because of the violence and intimidation that prevailed, she said. She regretted that the run-off went ahead despite concerns raised by the international community including the UN Security Council. She urged regional leaders to mobilise support for a negotiated solution because only dialogue between concerned parties in Zimbabwe, supported by the AU and other regional actors, could restore peace and stability in that country.

US Lifts Stigma Against ANC : the message finally got through!
President Bush July 1 signed into law a measure by House Foreign Affairs Committee Chairman Howard L. Berman (D-CA) that will eliminate a government-imposed stigma against association with the African National Congress of South Africa. Now the United States will remove from its databases any notation characterising the ANC and its leaders -- including Nobel Laureate and former South African President Nelson Mandela -- as terrorists. “For many years under the old Apartheid regime, injustice heaped upon injustice as the world watched, and even complied,” said Berman, who is leading a Congressional delegation to South Africa. “Today the United States finally has removed from its legal code a vestige of that time of collective insults against human dignity. The label of ‘terrorist’ will no longer be affixed to associates of the ANC -- among them one of the world’s great heroes, Nelson Mandela. Our country stands with those who struggled to bring the reprehensible system of Apartheid to an end.” For decades the ANC resisted Apartheid and advocated the rights of black South Africans – first through non-violence and community activism, and then through the actions of its military wing. The South African government banned the ANC in 1960, and the United States denied entry to ANC members based on the group’s activities. With the end of Apartheid in 1990, the ANC grew to become the leading political party; it continues to lead South Africa in a multiracial, multiparty democracy. Under the new law, ANC membership or associated activities alone will no longer trigger additional investigation into an individual’s application for a visa to the United States. Congress passed the final version of Berman’s legislation (H.R. 5690) on June 26. House co-sponsors included Judiciary Committee Chairman John Conyers (D-MI), Homeland Security Committee Chairman Bennie G. Thompson (D-MS), Africa Subcommittee Chairman Donald Payne (D-NJ), and Foreign Affairs Committee members Barbara Lee (D-CA) and Sheila Jackson-Lee (D-TX), and Oversight and Government Reform Committee member Peter Welch (D-VT).

Tutu Lashes Out At Mbeki for 'Quiet Diplomacy' Policy
Nobel laureate Archbishop Desmond Tutu lashed out at South African President Thabo Mbeki, accusing him of being obviously reluctant to quell the situation in Zimbabwe prior to the election. Tutu was speaking during an interview with news service, ‘Al Jazeera’ June 15. He said Zimbabweans "are not happy with the way Mbeki has handled the crisis," and that Mbeki, "chose to remain silent even when Zimbabwe's crisis was at fever pitch". Mbeki has been widely criticised for his on-going policy of 'quiet diplomacy,' as well as his apparent support for Robert Mugabe. The South African president has also in the past actively distanced himself from the crisis, and only publicly condemned ongoing violence there for the first time last week. In Sunday's interview, Tutu said Mbeki could have used his power as the current mediator of the crisis by warning Mugabe against dictatorial acts. The elderly but much respected laureate said he will ask former United Nations Secretary General Kofi Annan to mediate the same way he conducted mediation during the Kenyan post-election violence. Tutu said Annan is trusted better than anyone else in the world to fill the role as mediator because of his efforts on Kenya and, "the world can trust him to do the same in Zimbabwe". Tutu added that Mugabe "should consider a dignified exit from power," and that his retirement will save many people a great deal of suffering.

Allies Turn Up Heat on Zuma Trial
As African National Congress (ANC) president Jacob Zuma continues his charm offensive aimed at business and minorities ahead of next year's election, his foot soldiers in the tripartite alliance are trying to put forward a cogent argument why his corruption trial - due to start in August - should be scrapped. Efforts to mobilise support for Zuma - who has to answer charges including corruption and racketeering - have moved into high gear, with the tripartite alliance secretariat driving the solidarity campaign. Zuma's supporters say they want the charges dropped because of what they call the systematic abuse of state organs by Zuma's political opponents and the denial of Zuma's constitutional right to a fair trial. The ANC's national bodies have yet to comment on the call that Zuma's trial be scrapped. But calls for the case to be dropped were growing as ANC provincial organs and its leftist allies have started to rally around Zuma ahead of his trial. The ANC's KwaZulu-Natal conference resolved that charges against Zuma had to be withdrawn. Earlier, the ANC Youth League went public over its plans to seek legal opinion on how to get the charges against Zuma dropped. The league has said that conditions for a fair trial for Zuma do not exist. South African Communist Party (SACP) secretary-general Blade Nzimande confirmed yesterday that support for Zuma during his trial was on the agenda of the tripartite alliance secretariat. "We are united on this issue and it has to be finalised soon. We are going to embark on a massive mobilisation effort with our people to explain why we believe that Jacob Zuma's right to a fair trial has been compromised," he said. Nzimande said the state's eight-year probe of Zuma had been riddled with abuse. He said analysts who criticised the call for charges against Zuma to be dropped were disingenuous. "They were all silent when some state organs abused their powers against the ANC president as the public protector found when he said that the National Prosecuting Authority under Bulelani Ngcuka had abused his position, a view shared by the findings of the Khampepe commission," Nzimande said. "These analysts were also silent over Parliament's inaction following the recommendations of the public protector. But the most serious is their silence on the Special Browse Mole report that effectively said that Zuma was involved in plotting to overthrow the government while in cahoots with some African leaders," he said. While the state said that "rogue" spies were responsible for peddling the information and that they were to be arrested, nothing has come of this, Nzimande said. 

Centre for Policy Studies political analyst Aubrey Matshiqi said there were two ways of interpreting the call for the charges to be scrapped: "It seeks to reinforce the idea that Zuma is a victim of political conspiracy and a victim of manipulation on the part of state institutions, thus the message that Zuma cannot get a fair trial." Another possibility was that desperation had set in among the Zuma coalition. "If this is the case, what has set off this desperation? Does it mean they are privy to information that Zuma's legal woes may be worse, and because of this they are trying to mobilise support to either prevent the trial from proceeding, or mobilising against a conviction?" Matshiqi said the ANC could divide further as factions differed about how best to provide support for Zuma.

Presidential Council Discusses Recent Violence
The recent attacks on people from other countries among other issues topped the agenda at the Presidential Co-ordination Council meeting June13. The meeting, attended by President Thabo Mbeki and Deputy President Pumzile Mlambo-Ngcuka, among others, seek to discuss progress reports on the 15 year review and the way forward. According to the Office of the Presidency, the meeting noted that a total of 62 people had lost their lives and 21 of those were South African citizens. A total of 1300 incidents of violence were reported and more than a thousand people were arrested. The government announced June 12 that it was considering declaring a national day of healing to enable the nation to pay its respects to all those who lost their lives during the recent attacks on people from other countries. "The proposal for the declaration of a national day of mourning, healing and introspection, to allow the nation to pay its respect for those who lost their lives during the violence has been endorsed," said Government spokesperson Themba Maseko June 13. Mr Maseko said the Inter-Ministerial Task Team on attacks on people from other countries was mandated to develop a proposal and a national day of mourning for those who lost their lives will be observed on the June 24. "This will not be a public holiday, but a day on which the public will be expected to pay its respect, to those who lost their lives during the violence," he said. He added that a national memorial tribute event will be held in Pretoria with details to be announced by the Inter -Ministerial task Team later. June 11 marked a month since the attacks on people from other countries broke out in Alexandra in Johannesburg. The attacks spread to other informal settlements around the country, forcing thousands of people to flee their homes and seek refuge at police stations Other issues discussed at the Presidential Co-ordination Council were the War on Poverty campaign, the Thusong Service Centres and expenditure trends. The War on Poverty campaign as announced by the President and Deputy President in parliament has also been endorsed. Mr Maseko further said the report on the expenditure trends, provincial audit outcomes were noted and it was agreed that provinces should gazette budget allocations to provinces and municipalities.

Xenophobic Violence – Relocation Issues
While the South African government focuses its efforts on the controversial relocation of thousands of migrants displaced by xenophobic violence to temporary shelters, it is becoming increasingly clear that the next step in the plan - reintegration into South African communities - will be hard to sell to immigrants and communities alike. On June 1, three weeks after the first attacks, authorities in Gauteng, South Africa's richest province and epicentre of the violence, started removing displaced foreign nationals from makeshift shelters at police and fire stations, churches and communal buildings that had initially provided safety. But the relocation sites soon came under fire from planners, civil society and UN agencies, which all suggested that basic humanitarian standards were far from being met. Now the government has said the camps are merely a temporary solution, and "the target is that by the end of two months, the temporary shelters will be shut down and the people will have returned to their communities, or will have voluntarily decided to repatriate," Thabo Masebe, a spokesman for the Gauteng Provincial Government, told IRIN. "There are no efforts or attempts to prolong the foreign nationals' stay at those places," Gauteng Premier Mbhazima Shilowa told a media briefing June 3. "The provincial government will meet with all municipalities ... to chart a way in which we would reintegrate those displaced by the xenophobic attacks." The target is that by the end of two months, the temporary shelters will be shut down and the people will have returned to their communities, or will have voluntarily decided to repatriate Jody Kollapen, Chairman of the South African Human Rights Commission (SAHRC) said keeping people in camp-like settings would clearly segregate the residents as "non-South African", increasing their vulnerability and isolation. "Having people leave the country sends a very dangerous message," and communities might interpret repatriation as a sign of success, an indication that violence was a sure way of driving people out for good, Kollapen said. But observers say the reality of reintegrating migrants displaced by violence will present substantial challenges: the migrants' fear and mistrust of the communities that so violently shunned them, the continued frustration of host communities over their own socio-economic problems, and the lack of a concrete plan. According to a June 4 statement released by the Gauteng provincial government, the plan is to be led by a national Inter-Ministerial Committee (IMC) on xenophobic attacks. The aims of the government's plan are: "Ending the violence and stabilising the situation in affected areas, attending to the humanitarian relief and providing for the basic needs of the displaced persons, and the creation of necessary conditions for the reintegration of displaced persons back into their communities." At the height of the violence the army was brought in to assist an overstretched police force and since then, according to the statement, "the situation has calmed down considerably" and "this is no doubt due to the increased visibility of the police and the support of other law enforcement agencies". No recent incidents have been reported. Meanwhile, the government has been slammed for providing late and inappropriate relief, and at least one relocation site has been scrapped due to security and structural concerns. Shilowa said the government was now doing everything in its power to ensure that the temporary shelters met international standards for humanitarian assistance. The final step of re-absorbing victims into society is to be accomplished by means of education and community co-operation. "The government's role is to lay the groundwork for the conditions for return," said Masebe. "What we will do is to talk to the communities and help them to create the conditions for returning them [displaced people]. We will tell these communities to allow them to return and to not attack these people." "We are quite concerned about the way the reintegration will take place," said Monica Bandeira, a senior researcher at the Trauma and Transition Programme of the Council for the Study of Violence and Reconciliation (CSVR). "When you talk about reintegration, it's a complex process. There's the community, which also includes the people who have perpetrated the violence; and then there are the victims, who have lost most of their possessions and fear for their safety," Bandeira said. Adane Ghebremeskei, manager of the Peace-building Programme at CSVR, is working towards co-ordinating dialogue sessions between community leaders and migrant representatives. "We want to get first-hand information, and then go to the immigrant communities and get the issues from their side and learn about how it escalated, in order to find if there is common ground. You need a lot of groundwork, consultations; I don't think it's overnight work. The government cannot do this alone," Ghebremeskei said. The biggest challenge, Kollapen said, would be establishing acceptance within communities. "At the heart of successful integration is building trust - that will take a lot of communication." He expected civil society, churches and trade unions to play pivotal roles. And on the other hand, "We need to deal with the fears of those affected by the violence." "Without offering justification for the violence," Kollapen said, the socio-economic hardships of host communities would need to be addressed urgently. Many communities, characterised by high unemployment and seemingly last in line for much needed basic service upgrades and housing development, had long felt "neglected and marginalised", and reacted by blaming foreigners for stealing jobs, high crime rates, and general deprivation. "This was a significant wake-up call - the government is now acutely aware of this." Recent years had seen numerous protests calling for government to address the plight of the poor in these areas, he said. Any form of reintegration would only be successful if the needs of host communities and returning immigrants were addressed in tandem. "We must be mindful that humanitarian assistance is ... also demonstrated to South Africans, who also live in dire conditions," Kollapen said. At the muddy camp for displaced migrants, north of the capital, Pretoria, foreign nationals were uniform in their distrust of returning to South African communities. Mukadi Roger, from the Democratic Republic of Congo, was watching television at a friend's house when the xenophobic attacks started. He said a bullet came through the window of the house and both men ran and never returned. He said reintegrating into South Africa was not realistic. "The hostility is still there, but they won't say it openly right now. The same people are still there; you want me to go back there? No. They won't miss the second time." He pointed out that the attacks had spread throughout the country, so there was no area where he would feel safe. "People are only staying here in these conditions because of fear," said Idi Kubwima, a Burundian. "But people fled [violence in] their countries to come here and now it's the same [here]," he said. "I lost my home and family in Sudan and I came here for protection," Mohammed Ahmad told IRIN. "For most of the people here [in the camp], there is no place to go back home." Starting over, especially under hostile conditions, and the practical problems caused by having lost everything, were recurring issues. Joyce Tlou, coordinator of the SAHRC's non-nationals programme, said after various community-level talks held by the SAHRC that many communities were "quite adamant that they will not be accepting foreign nationals back into their midst". "There is clearly a latent resentment towards the use of violence," Kollapen said, "but people did tend to associate themselves with the idea that their community needed to get rid of foreigners."

South Africa extends police chief contract
The South African government has extended the contract of suspended police commissioner Jackie Selebi. The decision came as a Johannesburg court ordered Mr Selebi to stand trial on corruption charges next year. He has denied the charges. A government spokesman said Mr Selebi's contract would be extended for a year, pending the trial's result. Mr Selebi is a close ally of President Thabo Mbeki, who has been accused of trying to protect him. In February, Mr Selebi was provisionally charged with corruption, accepting bribes worth 1.2m rand ($160,000, £80,000), and defeating the course of justice. Judicial officials said after a hearing June 26 that they expected the commissioner's trial to start in April 2009. Mr Selebi was placed on leave and forced to resign as head of Interpol earlier this year after authorities announced that he would be charged. Government spokesman Themba Maseko said he would remain on leave during the court case. "This decision was based on the need to allow due process to be concluded before a final decision could be taken on the future of his employment contract with the state," he said. At the heart of the allegations is Mr Selebi's relationship with convicted drug smuggler, Glen Agliotti, who is also being charged with the murder of a prominent mining magnate. South Africa's National Prosecuting Authority (NPA) has alleged that Agliotti paid bribes and gifts to the police commissioner in exchange for turning a blind eye to drugs trafficking. Mr Selebi has denied allegations of links to organised crime. Last year, Mr Mbeki suspended NPA chief prosecutor Vusi Pikoli after he issued a warrant for the arrest of Mr Selebi, a senior member of the ruling African National Congress. 

UN Completes Report on Country's Efforts Against Terrorism
A United Nation's report, which follows a visit to South Africa to assess the country's legislation and national systems to implement anti-terror obligations, has been cited as positive. The UN's Counter Terrorism Executive Directorate (CTED) concluded an eight-day visit June 9. It was aimed at assessing the country's legislation, enforcement capacity and national systems to implement anti-terror obligations. Foreign Affairs Chief Director for UN Political Affairs, Xolisa Mabhongo told a press briefing that he could not discuss the full contents of the report as is was still to be submitted to the UN Security Council for discussion. However, he said, the delegation had noted South Africa was party to 13 universal conventions on terrorism, has national legislation in place and has a proven capacity to prosecute offenders as demonstrated by specific cases discussed during the visit. "This shows that our government is committed to improving anti-terrorism mechanisms and looking at joining hands with other multi-national groups in the fight against terrorism in the region," said Mr Mabhongo. The delegation was of the view that while the South African authorities exercise vigilance with respect to any potential acts of intolerance and incitement to violence, they are steadfast in their commitment to the constitutional right to freedom of expression. "The delegation noted the concerted effort made by government to maintain dialogue with and understand the concerns of many different religions and ethic groups in the country," said Mr Mabhongo. He added that the South African government is committed to continuously improving its anti-terrorism systems and therefore welcomes the positive contribution made by the CTED delegation. "We look forward to continuing its dialogue with CTED and the other multilateral bodies, in line with its policy that international threats such as terrorism are best dealt with collectively in multilateral fora and in particular at the United Nations." He said the delegations noted the political, social and historical context in which terrorism is addressed in South Africa and in particular the country's strong commitment to human rights and to addressing all forms of crime, including terrorism, within the framework of national and international law. South Africa was recognised as the first country to agree to the inclusion of a human rights expert on a CTED delegation. The delegation held discussions with 21 national departments and other bodies that work to counter the threat posed by terrorism and other forms of crime. It also conducted site visits to OR Tambo International Airport, Durban sea port and the Beitbridge land border with Zimbabwe. Visits were made to the offices of the South African Police Service, the National Coordinating Bureau of Interpol, the National Prosecuting Authority, the Department of Social Development, the Financial Intelligence Centre and the Human Rights Commission. In May this year Deputy Director General in the Department of Foreign Affairs Ambassador George Nene said South Africa was up to date with its reporting requirements to the UN Security Council with regards to anti-terrorism. "South Africa adheres to a multilateral approach to addressing the issue of terrorism and, in this context, is committed to cooperating with the United Nations delegation," he said at the time. Since the terrorist attacks on the World Trade Centre in the United States on 11 September 2001, the Security Council has unanimously adopted a resolution that all governments criminalise assistance for terrorist activities, deny financial support and safe havens to terrorists, and share information about groups planning terrorist attacks. The 15-member CTED was established to monitor implementation of this resolution and ultimately aims to increase the ability of governments to fight terrorism. The committee has already visited several other countries including Nigeria, India and Indonesia.

Interest Rate Up By 0.5 Percent
Despite economists and analysts across the board forecasting a 100 basis point increase, Reserve Bank Governor Tito Mboweni June 12 raised the repo rate by 50 basis points. "In light of further deterioration in the inflation outlook, but mindful that the economy is responding to a less accommodative monetary policy stance, the Monetary Policy Committee [MPC] has decided that at this stage further tightening of the monetary policy is warranted. “Accordingly, the repurchase rate will be increased by 50 basis points to 12 percent per annum with effect from June 13 2008," said the governor. The outlook for inflation remains bleak in an environment of sustained increases in international oil and food prices. Internationally, countries are experiencing increased inflationary pressures amid slowing global economic growth and rising commodity prices. "Domestically, price increases have become more broad-based, and inflation expectations have deteriorated further." Adding to the inflation uncertainty is the impending judgement next week by the National Energy Regulator of South Africa on the proposed electricity price increases. "Consumer Price Index excluding interest on mortgage costs [CPIX] inflation is now expected to peak at around 12 percent in the third quarter of 2008 and will return to within the inflation target range by the third quarter of 2010," said the governor. The bank's previous CPIX forecast was a peak of 9.3 percent, but CPIX for April 2008 came in at 10.4 percent, compared to 10.1 percent the previous month. Sustained food and petrol price pressures were primarily but not only responsible for this trend, he said. Petrol has increased by some 30.5 percent year-on-year (y/y), whilst food prices have also risen by 15.9 percent. "Together these two categories account for over half of the increase in CPIX," he said. There were calls for food and petrol to be removed from the CPIX basket of goods, or for the basket of goods to be weighted differently. Mr Mboweni, however, said even if food and petrol were removed from CPIX, inflation would measure 6.1 percent, still above the 3-6 percent target band set by the bank. "There has been no respite from the acceleration in the international oil prices which has continued to surprise on the upside. "In recent days North Sea Brent crude oil prices reached levels of almost $140 per barrel, compared to $107 per barrel at the time of the previous MPC meeting," he said. Answering questions, the governor said while the effects of rising interest rates were not meant to "punish" anyone, people should not lose focus of the primary mandate of the Reserve Bank, which is to bring inflation back to within the target band.

Rising Food, Fuel Prices Lift Inflation to 10,9 Percent
Inflation rocketed to a 5½-year peak in May, beating forecasts and backing the view that the Reserve Bank will raise interest rates again this year to tame rampant price rises. Target CPIX inflation rose 10,9% year on year, up from 10,4% in April and its highest since November 2002, driven once again by the soaring costs of food and fuel. Headline consumer prices - a more comprehensive measure of the cost of living - rose 11,7%, up from 11,1% and above market forecasts for an 11,4% rise, official data showed June 25. The rand firmed 1,3% to R7,88 to the dollar after the news, which traders said sealed the case for a half-percentage point rise in lending rates at the Bank's August policy meeting. "Everyone is now back in the swing of expecting more rate hikes," said Citigroup senior dealer Julian Wilson. Higher interest rates boost the rand's "carry trade" yield appeal. With no sign of a letup in the main inflation culprits, and new electricity price hikes about to take effect, yesterday's official figures suggest CPIX will climb beyond the 12% peak predicted by the Bank earlier in June. They also showed price pressures had affected most of the goods and services monitored by Statistics SA in a trend set to bolster inflation expectations and higher pay increases. The figures did "not bode well for the inflation trajectory", said Standard Bank economist Danelee van Dyk. Eskom tariff increases would put CPIX in the "13%-14% playing field" later this year. They would also help keep inflation above its 3%-6% official target range for longer after a breach which had already lasted 14 months. "At this rate, CPIX inflation is unlikely to return to within the target band in 2010, which makes further monetary policy adjustment definite," she said. Food prices delivered the worst shock, about 17% higher than those of May last year and accounting for nearly half the overall increase. That is bad news for poor people, who spend half their money on food. Inflation for the lowest-income earners jumped 18,5%, above a 16,3% rise for the top-income group. Transport prices were the next big offender, rising 16,7% year on year after a 6,2% fuel price rise during the month. Fuel prices rose another 5,2% this month. Further hikes are in store for next month after global oil prices scaled new peaks. Efficient Research economist Doret Els said prices rose more than 6% in 12 of the 17 categories in the consumer price indices, showing inflation pressure "building on a broad front". Markets have priced in only one other half-percentage point hike in lending rates this year, which will boost prime lending rates set by banks to 16%. That would take the cumulative rise since June 2006 to 5,5 percentage points. This has begun to curb economic growth, a trend the Bank flagged as a concern. Some economists expect two more rate hikes this year, given the price pressures. Ashok Bundia, economist at Goldman Sachs, said: "We remain comfortable with our forecast that the (Bank's monetary policy committee) will continue to hike its policy rate by a cumulative percentage point before the year-end." Most emerging market countries that target inflation have failed to meet their goals this year. A rising number - including Brazil, India and Turkey - have raised rates.

Electricity Price Hike 'Will Hit Economy'
Inflation could exceed previous forecasts and lead to even more interest rate hikes after the National Energy Regulator (Nersa) approved a double-digit electricity tariff increase, economists say. The 13.3% increase granted yesterday adds to the 14.2% Nersa approved earlier this year. That is much smaller than the 53% Eskom had requested to fund infrastructure projects, but still far from desirable for an economy facing a tide of inflationary pressures. Making matters worse is the fact that Nersa said the cost of electricity may rise by 20% to 25% for the next three years. Economists said although the tariff hike was below what many had anticipated, the inflation horizon was nevertheless grimmer than before, which could mean that interest rates will keep climbing for longer. The market had hoped that the Reserve Bank may halt its monetary tightening cycle soon, especially after it raised rates by a smaller-than-expected margin last week. Russell Lamberti, an economist at Econometrix Treasury Management, said he now expected CPIX inflation to peak at 12.5% to 12.7 % around August this year - not 12% as the Reserve Bank had forecast. "An electricity tariff of this magnitude this year will certainly feed through strongly into inflation and quite possibly result in another 50 basis points in interest rate hikes that we might not otherwise have had," Lamberti said. Wayward inflation has led the Reserve Bank to raise interest rates by 500 basis points to 12% since June 2006. CPIX inflation - which the bank uses as a benchmark for monetary policy - has hovered outside the 3%-6% target since April last year, driven by record oil and food prices. CPIX reached 10.4% in April - the highest in almost five-and-a-half years. Reserve Bank governor Tito Mboweni said last week that any electricity price increase above 6% could further fan inflation. Noelani King Conradie of NKC Independent Economists said Nersa's decision was a reprieve for consumers, but an inflation-heavy few years could lie ahead. "Certainly from consumers' perspective, the fact that they've given a smaller increase this year would be positive in terms of disposable income. But from an inflation perspective, it's better to have it all at once because then it works out of the system in 12 months," Conradie said. "The fact that it is now roughly 25% per year means for the next three years we're sitting with high inflation Now your inflation will probably be elevated." Businesses are already feeling the strain. The South African Chamber of Commerce and Industry (SACCI) said yesterday that trade conditions had worsened in May due to the current inflation and interest rate environment and it predicted that they would continue to do so over the next six months.

Fitch Revises Outlook for Country to 'Stable'
Global rating agency Fitch has revised the outlook on its credit rating for SA to stable from positive, citing rising inflation, political uncertainties and a widening deficit on the country's current account -- the broadest measure of trade in goods and services. The step means that while SA's economic fundamentals are still seen as sound, the country is no longer in line for a possible upgrade to its BBB+ investment grade rating, which would have encouraged foreign investment. "It could have been worse, but I think one has to be careful," said Brait economist Colen Garrow. "This could be a signal for foreigners to lighten their holdings of South African bonds and equities." Foreigners have sold a net R9,2bn of local shares so far this year, fuelling concern about the funding of SA's current account deficit, which widened to about 9% of gross domestic product in the first quarter of this year. That was its highest ratio since 1982, according to the Reserve Bank. The widening shortfall will put more pressure on the weaker rand, which is stoking inflation, and might boost borrowing by private and public sector corporations -- forcing the country's external debt ratios to deteriorate. "Financing of the current account deficit remains a risk to the macroeconomic outlook," said Fitch sovereign director Veronica Kalema. Electricity supply constraints and infrastructure bottlenecks would curb economic growth, already restrained by higher interest rates, she said. Kalema highlighted the Reserve Bank's latest forecast that inflation would not return to its 3%-6% target range until the third quarter of 2010. "This means that interest rates will need to remain higher for longer than previously expected in order to anchor inflation expectations ... with adverse implications for growth," she said.

Bullish Forecast for Mergers and Acquisitions
Merger and acquisition activity (M&A) is on the rise again in SA after a subdued start in the first quarter of the year. "We're predicting an upturn," said Morne van der Merwe, a director in the mergers and acquisitions practice at Werksmans Attorneys June 18. This bullish outlook contrasts with the general gloom globally on the M&A front. Van der Merwe said his forecast was not based on wishful thinking. The firm is involved in most of the big deals that have started in the financial, mining and telecommunications sectors lately. The firm was sensing an upturn was on the way, he said. It was understandable that the first quarter was quiet because of factors such as the power crisis, subprime crisis, interest rates and political instability, he said. "But, I think the dust is settling and the deals are starting to come through now." He said that most of the large law firms were involved in mega-deals rather than mid-market deals. The mega-deals that the firm was involved in were worth billions of rands. On the other hand, mid-market transactions were worth only hundreds of millions of rands. The MTN and Reliance Communications negotiations, a deal reported to be worth about R30bn, is an example of a large deal the firm has been involved in. Other transactions include Mvela's bid for Telkom and Standard Bank's proposed buyout of Liberty Holdings. Last year, the firm was involved in M&A transactions such as advising Edgars Consolidated Stores on its acquisition by Bain, worth R25,5bn. It also advised Western Areas on its takeover by Gold Fields, worth R8,5bn. The main focus of M&A for the rest of the year is expected to be on "trade and paper" deals, Van der Merwe said. "We're probably going to see fewer private equity transactions and leveraged buyouts and more transactions involving the acquisition of companies for strategic reasons such as organic growth or market consolidation. "I think we will also see more paper deals; in other words, shares issued in the acquiring company to the target firm or stakeholder as remuneration for the acquisition, because of the high cost of capital at the moment," Van der Merwe said.

Nobel Winner Warns Country On Jobs, Growth
High unemployment is the biggest obstacle to SA reaching gross domestic product (GDP) growth of 6% and more, says Michael Spence, a winner of the Nobel Prize in economics and professor emeritus of management at Stanford University. With the treasury expecting GDP to come in at 4% this year, and many economists forecasting 3%-4%, the growth of the local economy has become a burning issue. The keys to growth that Spence identified were not only related to economic policy. Leadership, governance and state efficiency were crucial. "Leadership intent must be to make virtually everyone in a country better off," Spence said at the Gordon Institute of Business Science yesterday. If governments were seen to be enriching themselves or acting in the interests of a sub- group of society "the response to that almost always derails the growth process", he said. Spence was presenting some of the findings of the Commission on Growth and Development which brought together experts from several countries, including Finance Minister Trevor Manuel, to look at how high growth economies (those that had achieved 7% growth or more for the past 25 years or longer) developed and maintained their trajectories. The commission identified 13 high growth countries, including Botswana, Brazil, Indonesia, Japan, Malaysia and Malta, but not SA. Engaging with the global economy, macroeconomic stability, high levels of savings and investment, market incentives, health and education, flexible labour markets, and the protection of people from income inequality were some of the other characteristics of high growth countries. Chris Hart, economist at Investment Solutions, said the approach to growth had to be holistic -- SA could not afford to pick and choose from the characteristics that Spence had identified. He said that although the government was able to take a long- term view on the economy, it was squandering growth opportunities "through ideological battles". One such battle was over labour policies, with the domestic market being criticised for its inflexibility. "People need to be protected on income, retraining and access to basic services," Spence said. "There are two ways to protect them. Either protect the company they work for, or enhance their job mobility." One of the problems with globalisation was that in any country certain sectors would never be able to compete. But Spence said an economy going for high growth had to try to keep job creation running ahead of job destruction so that if one sector, such as textiles, was faltering, another that could pick up the labour surplus. Education and skills development had to go together with job creation and, Spence said, growth strategies also had to focus on the distribution of benefits or they would fail. People were not happy when wage differentials rose, although they were rising everywhere, particularly in SA. "People care the most about equality of opportunities. Systematic exclusion will bring the high probability that something will go wrong," he said.

EU Welcomes Closer UN-AU Security Council Relations
The South Africa - European Union (EU) Troika meeting has noted the strengthening of relations between the United Nations (UN) and regional bodies. "Both sides emphasised the importance of strengthening the relationship between the UN Security Council [UNSC] and regional organisations, in particular the African Union [AU], in terms of Chapter VIII of the UN Charter," the Department of Foreign Affairs said on June 3. The convening of a high-level Security Council meeting on April 16 2008, under South Africa's Presidency, to discuss this theme and specific African conflict situations was noted as an important contribution in this regard. "Both sides welcomed the unanimous adoption of Security Council resolution 1809 [2008] [which reaffirms all the UN's previous resolutions and presidential statements on the co-operation between them and regional organisations]," the department said. The Troika meeting took place within the framework of the SA-EU Strategic Partnership and was co-chaired by Foreign Minister Dr Nkosazana Dlamini Zuma and her Slovenian counterpart Dimitrij Rupel. The department highlighted that ministers welcomed and discussed areas of co-operation being developed under the Joint Action Plan, including peace and security co-operation, environment, science and technology, customs, energy, migration as well as transport. Both sides welcomed the progress made in the existing co-operation and policy dialogues and agreed that new areas for structured dialogues would be formalised during the first SA-EU Summit in Bordeaux, France, July 25 2008. With regard to various conflict situations across the continent, ministers from both South Africa and the EU condemned the recent flare up of fighting in Sudan and reiterated the importance of enforcing the Comprehensive Peace Agreement. Also, both sides called for the speedy deployment of the AU-UN Hybrid peacekeeping force to Darfur in light of the recent violence. The peaceful manner in which the people of Zimbabwe conducted the March 29 2008 election was commended and both indicated their hope for a peaceful and uncontested presidential run-off election scheduled for 27 June 2008. "... both sides underlined the importance of continued monitoring of the elections by African institutions and civil society organisations. "Ministers expressed concern about the socio-economic and humanitarian conditions [in Zimbabwe]," said the department.

Country Gets Poor WEF World Trade Rating
South Africa ranked an unimpressive 59th out of 118 countries in the World Economic Forum's (WEF's) Global Enabling Trade Index 2008, a report which assesses factors impeding international trade. High levels of crime and violence, the negative effect of rules on foreign direct investment and the difficulty of hiring foreign skills were some of the key factors hampering trade in SA, the report found. The release of the WEF report comes as an international panel, the Harvard Group, advising the government on growth prospects, recommended SA take a more liberal approach to trade and focus its efforts on growing exports to boost employment. Published for the first time, the report gives a cross-country analysis of measures facilitating trade. It ranks Hong Kong and Singapore as the top two economies enabling trade, followed by Sweden, Norway. Canada, Denmark, Finland, Germany, Switzerland and New Zealand in the top 10. The US was 14th. Many factors weighed down SA's performance, resulting in the disappointing ranking. The index divides the enablers into four broad "issue areas" -- market access, border administration, transport and communications infrastructure, and the business environment. While the authors laud SA for the strength of its transport and communications infrastructure, they found the country lacking in several sub-indicators of the categories of market access and the business environment. These are to a large extent areas that could be improved through policy changes. SA also performed dismally in important areas such as physical security. In the sub- category for the business cost of crime and violence, for example, it ranked 113th out of 118. In the market access cate-gory, the report rates both SA's tariff and nontariff barriers to trade as competitive disadvantages. On the efficiency of import-export procedures, SA had competitive disadvantages for the time it takes to import, the documentation needed to import and the cost to import . In the regulatory environment category, SA had poor scores for the ease of hiring foreign skills ; openness to bilateral air service agreements ; and the effect on business of rules on foreign direct investment.

Africa: Continent's Progress, Challenges Discussed at WEF
Five African leaders have welcomed the progress that their countries have made in recent years at the opening plenary session of the 18th World Economic Forum (WEF) on Africa. They conceded, however, that challenges still persist such as food security, the management of resources, political development and sustainable growth. "Africa is evolving very well in the correct direction," said President Thabo Mbeki, speaking at the opening plenary session June 4. The continent will continue to experience high economic growth, Mr Mbeki said, adding that regional integration will deepen. It is important to manage the resources and the wealth these countries generate so they produce the advances we need, he said. Burundian President Pierre Nkurunziza highlighted that political stability was critical. "You can have many mineral resources, but if you have no peace, there is no way to develop your country." Klaus Schwab, Founder and Executive Chairman of the World Economic Forum, told delegates the opportunities, threats and challenges Africans face require strong partnerships among government, business and civil society. Ghanaian President John Kufuor said: "There really has been progress in addressing the issue of peace and stability and democratisation. This process is irreversible. "Africa needs more cooperation through the African Union [AU] to organise and coordinate how Africa relates with the rest of the world." Mr Kufuor warned that unless leaders see beyond the divides that the colonial system left behind, they were likely to move one step forward and two steps backwards. The new Prime Minister of Kenya, Orange Democratic Movement leader Raila Odinga agreed with Mr Kufuor. "The post-election communal strife in his country that led to the creation of a coalition government underscores how tribalism remains a problem." Mr Odinga called for leaders to speak plainly and openly about the continent's shortcomings, adding that leaders must mean what they say when they talk about African development. Malawian President Bingu Wa Mutharika indicated there was a need to change the mindset from 'afro-pessimism' to 'afro-optimism'. Africa, Mr Wa Mutharika maintained, is probably the richest continent in the world but the people are the poorest. "Let us recognise that we have all the wealth to enable us to transform our continent and people from poverty to prosperity." Africa, for example, could develop the capacity to produce the food needed to address the emerging global food shortage. The continent must find its role in the global village, Mutharika added. More than 800 participants from 50 countries participate in the three-day World Economic Forum on Africa.

« Top

AUTOMOBILES

VW SA Awarded R12bn Filter Contract

The South African automotive industry is proving its mettle globally after Volkswagen SA announced June 17 that it had been awarded a R12bn contract to supply the Volkswagen Group with diesel particulate filters for the next five years. A diesel particulate filter removes diesel particulate matter or soot from the exhaust gas of a diesel engine. MD David Powels said the deal was one of the biggest export contracts for a single part ever awarded to the company. "It is a coup for the South African automotive component manufacturing industry," he said. Volkswagen SA would embark on a partnership with local catalytic converter and exhaust systems manufacturer Ebersp ä cher SA to share the production volume. Production is expected to start in November. Together, Volkswagen SA and Ebersp ä cher SA will invest about R55m in tooling and equipment to manufacture the parts. The investment in the national supplier base would be about R26m, with 80% of these suppliers based in the Nelson Mandela Bay region. The new contract is expected to generate more than 100 jobs in Eastern Cape. Intensive training of operators and quality personnel would be undertaken to ensure that the very tough international standards on the filters were met. "The skills transfer opportunities from this contract are significant," Powels said. He said Volkswagen SA and Ebersp ä cher SA were at the forefront of manufacturing diesel particulate filters, having secured access to the most modern manufacturing method, known as calibrated stuffing, which encompasses laser measuring and sizing technologies. "This is the benchmark in the Volkswagen Group and will benefit the South African catalytic converter industry as a whole," Powels said. The parts would be shipped to the Volkswagen Group's Kassel plant in Germany, where they will be completed and sent to various user plants in the Volkswagen Group's global network. "The decision to award the contract to Volkswagen SA proves emphatically that SA can be globally competitive in terms of pricing and technology, even when measured against the best global players in the diesel particulate filters industry," Volkswagen SA purchasing division head Karlheinz Hell said. Ebersp ächer SA MD Henry Eksteen said the project was unique in its approach of co-operation and the use of two companies' manufacturing capabilities. "This type of parallel project, we believe, will become the benchmark for the future, where an original equipment manufacturer can join forces with a specific technology partner to optimise processes and, thereby, be able to gain access to global business for their region and country," Eksteen said. "The diesel particulate filters technology is a rapidly advancing field of expertise and as global emission standards become more stringent, we will continue to be at the forefront as a provider of innovative exhaust gas treatment solutions with our global research and development teams, " Eksteen said.

Vehicle Sales Decline is Most in Nine Years
Vehicle sales dropped 23,4% in May compared with the same period last year, the biggest drop in more than nine years. This has happened amid continued sharp price increases on necessities and the cumulative 450-basis-point rise in interest rates, placing significant pressure on household finances. Data released June 3 by the National Association of Automobile Manufacturers of SA showed that new vehicle sales dropped for the 14th consecutive month, by 12095 to 39533 units compared with the 51628 vehicles sold during the same month last year. The industry body attributed the depressed sales in May to a large number of public holidays in the first week of the month, price rises across a broad range of products, and social turmoil resulting from attacks on foreigners. "Demand for credit purchases has simply dried up, and there are growing signs of severe stress, with anecdotal reports of sharp increases in arrears, defaults and repossessions," Nedbank chief economist Dennis Dykes said. "Until recently, trading conditions in the commercial market have been relatively robust, supported by strong growth in infrastructure investment and the resultant boom in construction activity." However, Dykes said sales of medium and heavy commercial vehicles dropped sharply last month, perhaps suggesting that the stress in consumer markets was starting to affect the performance and expansion plans of many traders and producers. New light commercial vehicles, bakkies and minibuses dropped 17,2% to 13992 units, while light commercial vehicles sales contracted 19% to 3484 units. The medium and heavy truck segments also came under pressure, dropping 33,7%. Medium commercial heavy trucks and buses gained 7%. The good news in the gloomy picture is that on the new vehicle export side, the industry has continued to perform well and export sales were supporting the operations of vehicle and component producers. The industry exported 23201 vehicles, a rise of 56,6% compared to the same month last year. In the first five months of the year on average, the volume of vehicle exports was up 47,9% annually. "The weakness in new vehicle sales should in our view strengthen the case for the Reserve Bank that the economy is increasingly responding to higher rates," Citigroup economist Jean-Francois Mercier said. "In time, we expect that this will also mitigate inflation pressures. However, prices of manufactured goods (such as cars) are already rising at a moderate pace, and the key sources of inflation at present (food, oil, public tariffs and taxes, and some private sector fees) are not as directly responsive to weaker consumer demand as prices of goods." Mercier said it was unlikely that the Bank would take much comfort from the vehicle data when projecting inflation in the quarters ahead.

Car Dealers Face Crunch As Sales Nosedive
Economic pressures, particularly higher interest rates, have been blamed for the closure of many car dealerships across the country. Two leading car dealerships, Combined Motor Holdings (CMH) and the McCarthy Group, have each closed five of their branches as a result of dwindling sales and some analysts predict that the smaller players in the Western Cape could be next. Brand Pretorius, chief executive at McCarthy, said selling up was an "absolute last resort". He said branches in Gauteng and KwaZulu-Natal had been mostly affected. "Our Cape Town dealerships are still intact," he said. Pretorius said it was difficult to predict when the market was going to turn and expressed concern on their sales of new passenger vehicles, which plummeted by 28,7 percent in May. "But we can categorically assure that we are doing everything possible. Multi-franchising and trying to assist with alternative employment opportunities, to prevent the closing of dealerships." On the McCarthy website, Pretorius said: "Car sales were at their lowest level since December 2004 when 24 580 units were sold. The last time sales for a May month were lower than the 2008 total, occurred in May 2004." He said they had cut the number of their branches country-wide from 130 to 125. CMH financial director Stuart Jackson said they too had been forced to close five of their branches, although their Western Cape dealerships had not had not been affected. He said increasing interest rates was the main contributing factor as people prioritised paying their bonds before buying vehicles. Cadiz African Harvest economist Adenaan Hardien said the losses among dealerships would be felt country-wide. "The Western Cape is struggling like any of the other provinces," he said, adding that things had been tough, but it would take some time for many dealerships to get the point where they would "actually close". "They can usually tolerate the pain for quite some time. But for the second-hand car market, the pain is usually a bit worse," he added. Nico Vermeulen, director of the National Association of Automobile Manufacturers of South Africa (Naamsa), said the domestic new vehicle market was currently under severe pressure because of the high interest rate environment and the slowdown in the economy. But, said Vermeulen, vehicle manufacturing plants continued to operate at high levels of capacity due to export demands. "This also benefits the component producing industry, which supplies components to the vehicle manufacturers for production of motor vehicles for export, in addition to production for the domestic market." He said the pressure was principally at the retail and distributive side of the industry. Vermeulen said the decline in sales had been pretty much across the board and that relief for the domestic dealers and distributors was only likely to materialise when interest rates started to move down and the economy started to pick up. "Naamsa anticipates that this will only happen during the second half of 2009." Last week the Mail and Guardian reported that about 50 vehicle dealerships across the country had shut up shop since the beginning of the year because of plummeting sales. But June 12 Vermeulen said he suspected that this number might be higher than 50. The association said 12 095 fewer vehicles were sold in May compared to the same period last year. The automotive industry is the country's second-largest industrial employer and contributes 8 percent of the country's GDP.

« Top

BANKING

National Treasury Welcomes Banking Report

The South African National Treasury has welcomed the recommendations of the Executive Overview of the Banking Enquiry Report by the Competition Commission which was released June 25. In a statement the treasury said the report was the first step towards achieving greater competition in the retail banking sector. "The report is well positioned to inform a policy debate that promotes the objectives of providing accessible, affordable and good quality banking services to all South Africans. "The primary objective of protecting consumers and promoting growth through ensuring financial system stability still remains key. "Importantly, it must be recognised that the report in itself does not constitute this debate, but initiates such debate," said the National Treasury in a statement. The Competitions Commissions Banking Enquiry report found that bank charges in South Africa were higher than they would be at competitive levels. The market structure, because of current information asymmetries and product complexities, means that the banks have the ability to abuse their market power, the inquiry found. An independent panel was appointed by the Competition Commission last year to question lenders on how they set bank charges and to find ways of making fees simpler and more transparent. Standard, Absa, FirstRand Ltd's First National Bank and Nedbank Group Ltd together control more than 90 percent of the South African banking market. Transactional fee income represented a third of the banks' total income, or R34.5 billion, in 2006, the inquiry noted after its 22 month probe, which included 21 days of public hearings and 101 stakeholder meetings. The enquiry panel has made 28 recommendations aimed at addressing concerns raised by consumers, small and prospective banks and non-bank stakeholders, covering five key areas. The areas where of the penalty fees; automatic teller machine (ATM) fees; access to the national payment system; payment cards and interchange fees; and products and pricing. It observed that penalty fees for rejected debit orders were too high, contributed to the "vicious cycle of consumer indebtedness" and were levied disproportionately onto lower-income customers. "Penalty fees on rejected debit orders contribute significantly to the earnings of the banks and are much higher than the cost associated with processing the transaction. "Additionally, customers are penalised for rejected debit orders by the service provider with whom they have a contract. The inquiry believes it is not the remit of the banks to further penalise their customers." It recommended a cap of R5 per rejected debit order, which should be more than adequate to cover processing costs. It also suggested that banks make it easier for customers to cancel debit order instructions directly at their banks. It further advocated the implementation of a direct-charging model, offering full disclosure and transparency at the start of the transaction to allow for more price competition in the provision of ATM services. With regards to the national payment system, the panel advised that opening access for non-banks and developing an appropriate regulatory scheme would increase competition in the provision of banking services. "This issue was the focus of nine of the panel's recommendations and will require legislative amendment," it noted. On payment cards and interchange fees, the inquiry found there was potential abuse in the method by which interbank fees were set. It recommended that interbank fee setting be subject to an independent, objective and transparent regulatory process and that certain rules established by MasterCard and Visa be abolished. On products and pricing, the inquiry established that bundling, packaging and pricing made choices difficult for customers and weakened price competition. "The complexity of products and prices, inadequate transparency and disclosure and the costs associated with switching - combined with the reluctance of banks to price compete - creates customer inertia which enforces the banks' market power." It also advised standardising terminology and creating a switching code and other measures aimed at improving comparability such as a banking fee calculator and marketing generic customer profiles, and setting up a central Financial Intelligence Centre Act (Fica) repository. The panel's recommendations will be sent to the Department of Trade and Industry, the National Treasury and the South African Reserve Bank, so that laws can be changed to implement the proposals. Meanwhile, the South African Reserve Bank said it would consider implementing some of the recommendations. In a statement the Reserve Bank said it would study the executive summary of the Banking Enquiry Report, which was released June 25, as well as the full report when it became public. "Subsequent to such comprehensive review and analysis, and after consulting all relevant stakeholders, the Bank, through its normal processes, will initiate any course of action it may deem appropriate in the light of its conclusions," the Reserve Bank said.

« Top

FOOD AND DRINK

Diageo Sees Future in Up-Market Drinks

Spirits company Diageo is set on growing its share of the alcoholic beverage market in South Africa and aims to benefit from a continuing trend towards premium products. The London-based company has a portfolio of alcohol brands across spirits, wine and beer categories including Smirnoff, Johnnie Walker, Captain Morgan, Baileys, J&B, José Cuervo, Tanqueray, Guinness, Crown Royal, Beaulieu Vineyard and Sterling Vineyards wines, and Bushmills Irish whiskey. Diageo, in conjunction with partner Heineken, recently announced a roughly R4,7bn investment in SA that would include the construction of a 3-million-hectolitre brewery in Gauteng. The brewery is expected to ensure local supply and remove the need to import beer, as well as giving the company a greater distribution footprint. Chris Gilmour, an analyst with Absa Asset Management Private Clients, said the group had doubled its share in the past year as a result of gaining the Amstel brand. It now accounted for almost 2-million hectolitres. "With the new brewery, brandhouse is looking to increase its market share by a third." Gilmour said the group would benefit from cost savings and efficiencies. Brandhouse had 6,7% of the beer market, while competitor South African Breweries had about 90%. The company aimed to benefit from a move towards premium products and had increased the investment in some of its global brands such as Smirnoff Red, Tanqueray, Baileys and Jose Cuervo. The group expects to grow its market share through its joint- venture marketing and distribution company, brandhouse. Priscilla Singh, corporate and brand public relations manager, said brandhouse would continue to distribute Diageo's spirit portfolio, as well as products produced by Namibian Breweries, Heineken and Diageo. It has also invested in the fast-growing ready-to-drink sector. Its latest innovation is Foundry Premium Cider. In the spirits sector, Diageo has innovated at various levels and John Harrod, corporate relations director of Diageo Africa, said scotch was an important market for growth.

McDonald's Has Plans to Expand
Fast food group McDonald's, one of the largest landowners in the world, is set on expanding aggressively in SA. Executive director Greg Solomon said the local operation aimed to expand outlets by 15%-25% a year for the next few years. By the end of the year the company, which opened its 112th restaurant June 13, in Polokwane, will have 125 outlets. McDonald's opened its first South African outlet in November 1995 on Beyers Naude Drive in Blackheath. Solomon said the expansion targets were sustainable and set with a long-term view. Despite the price tag of about R4m, franchised restaurants were in demand and the group had a number of sites being researched, as well as "more applicants than we can absorb into the system". Solomon said the group was cash generative and in a good financial and operational position. Of the R4m invested by a franchisee, a third must be unencumbered cash, while the rest of the investment can be geared. Of the 111 South African restaurants, just over 60% were under franchise, while the rest were owned by the company. Solomon said applicants for franchises, over half of which are owned by blacks, ranged from young entrepreneurs to bankers. Franchisees went through a selection process and then received six to nine months of training before becoming owner-operators, said Solomon. McDonald's, which sourced the bulk of its products locally, was also converting its outlets to an on-demand format. The "Made for You" concept meant that orders should take under a minute to be prepared but were no longer pre- prepared. This allowed the group to have a more flexible menu and would allow for future innovation. About 40% of the outlets were already operating under the new system. The rest would be converted but the investment paid off in 12-18 months, said Solomon, as wastage was reduced.

« Top

INTERNATIONAL ECONOMIC RELATIONS

Trade Accord Boosts Latin America Ties

While acrimony persists over trade talks with the European Union (EU), the Southern African Customs Union (Sacu) has had a breakthrough with bilateral negotiations with the Latin American trade bloc Mercosur. After nearly three years of negotiations, Sacu has finally concluded a preferential trade pact with Mercosur, which comprises Argentina, Brazil, Paraguay and Uruguay. The deal is an extension of the original trade deal between Sacu and Mercosur concluded in 2004, which drew criticism for its low level of ambition. Speaking after a Sacu council meeting in Midrand June 27, SA's chief trade negotiator, Xavier Carim, said all technical negotiations had been concluded on the deal, which includes 2000 product lines. The agreement would now be submitted to the national authorities to ensure compliance with national laws, after which a date would be decided for ministerial signature and ratification. But a hefty portion of goods manufactured in the two trade regions will still face tariff barriers upon entry, notably automotive products, which remain heavily protected in SA and which were excluded from liberalisation because this could undermine the Motor Industrial Development Programme. New-generation issues such as services and investment were also not included. Carim said, however, that the agreement included a provision for the future broadening of the deal, should the parties wish to pursue that. The deal is expected to be in force before the end of the year. In the meantime, negotiations on the economic partnership agreement (EPA) will resume. The parties will meet in Gaborone from July 1, where the concerns of some Sacu members are expected to be discussed. SA and Namibia balked at initialling the interim EPA over the EU's demand for most-favoured nation (MFN) treatment (which would see preferences given to other countries in future free trade agreements automatically extended to the EU), the restriction of export taxes, infant industry protection concerns and some legal and administrative issues. Carim said the European Commission (EC) had agreed that the integrity of Sacu needed to be respected and had indicated that it was ready to accept a single tariff offer from Sacu. This could see SA included in the market access side of the interim EPA initialled at the end of last year without SA. Moreover, the EC has relinquished the July 1 deadline for the interim EPA to be signed. With the timeline for the formalisation of the interim EPA now more flexible, Namibia's and SA's concerns could be addressed and Sacu could cement a more common approach, Carim said. Sacu has also concluded a trade, investment and co-operation agreement with the US. While the agreement did not include an opening-up of trade, Carim said its significance was an agreement to identify technical barriers in areas such as sanitary and phytosanitary products, to facilitate trade.

Commodities Drive Exports to Thailand
South African exports to Thailand grew 58% last year to $603m, while imports rose 30% to $1,4bn, Thai customs department figures show. Speaking at the eighth annual Thailand Exhibition in Johannesburg, the commercial affairs minister at the Thai royal embassy, Somder Susomboon, said he hoped the exhibition would encourage further trade between Thai suppliers and local businesses. "SA has for several years been Thailand's foremost trading partner in Africa, while Thailand continues to rank as SA's top trading partner in the Asean (Association of Southeast Asian Nations) region," he said. Africa accounts for 3% of Thailand's total exports, which Susomboon hoped would increase to 3,6%. SA's top exports to Thailand are steel and iron (worth $144,35m last year), precious stones and metals ($59,6m), aluminium ($36,4m), wood pulp ($32m) and organic chemicals ($14,2m). Last year, Thailand's rice exports to SA were worth $131,4m and vehicles and parts worth $203m. More than $84,8m worth of rice was exported to SA in the first four months of this year and exports of vehicles and parts over the same period were worth $100m. "We want Thailand to be the Detroit of Asia," Susomboon said. However, it is facing fierce competition from other Asian countries, something Susomboon hopes to get around by offering better-quality products. The Thailand Exhibition is a favourite among importers, traders and entrepreneurs looking for trade opportunities. Harry Pottas, MD of Siam Wooden Products, which has been importing Thai products for four years, said: "In terms of pricing, Thailand is not cheap but it offers good quality products." He said SA's consumers were beginning to trust Thai brands over products from other Asian countries.

Nigeria And South Africa Move Closer
President Thabo Mbeki and Nigerian President Umaru Yar'Adua raised the bar of optimism over business co-operation between their countries at an SA-Nigeria Business Forum June 3 declaring the two economies "open for investment". Mbeki said the partnership between the two countries signalled the possibility and the challenge to be "part of a historically important process of leading the entire continent in terms of reconstruction and renewal". Yar'Adua said economic reforms in Nigeria would create an environment ripe for investment, which could see Nigeria reach double-digit growth targets in the next three years. He would be overseeing moves towards a strategic economic partnership. "What's good for business is good for Nigeria." Nigerian National Planning Minister Sanusi Daggash said the scale of investment required between now and 2012, public and private, stood at an unprecedented $100bn in four key sectors. These were power ($20bn-$25bn), railways ($10bn), roads ($15bn) and oil and gas (more than $60bn). He said that to achieve this the Nigerian government was providing huge incentives to attract and maximise these investments through generous tax relief, concessions and the development of export processing zones. Daggash said the reform of the country's banking sector to counter corruption, promote fiscal responsibility and ensure the rule of law provided foreign banks with an opportunity to invest. Key sectors where there were "windows of opportunity" for South African investors particularly, included agriculture, telecoms, energy production and mining, with Nigeria having at least 33 solid minerals at more than 450 locations, the exploitation of which had so far been "haphazard". Daggash said the oil and gas sector in particular provided an "immense opportunity" for those involved in the industry. He said government reforms of the Nigerian oil and gas sector would see the sector divided into five separate independent commercially driven enterprises to make it internationally competitive. Key elements of securitisation, tariffs and offtakes had all been addressed. Daggash said opening up the oil and gas industry would create "a large vacuum" at the midstream level which investors "should look into", adding that tourism too was "fertile ground" for investment in Nigeria. SA's Trade and Industry Minister Mandisi Mpahlwa said the country's "engagement in trade and service facilitation" with Nigeria would be "buzzing with promotional activities" during the coming year with the hosting of the Nigerian-South African Business Investment Forum in July, and a similar event taking place in Lagos in November. He said his department would also pave the way for an outward investment mission from SA to explore trade opportunities in the oil and gas services sector in Nigeria. SA would continue to invest in Nigeria, and he was "optimistic" about Africa "and the success that Nigeria is achieving simply increases our optimism", said Mpahlwa.

Country to Boost Economic Ties With Spain
Economic ties between South Africa and Spain are being given a boost with Foreign Affairs Minister Nkosazana Dlamini Zuma meeting her Spanish counterpart for a four-day visit, from June 4. According to the Department of Foreign Affairs the minister's visit with Spanish Foreign Affairs Minister and Co-operation Miguel Angel Moratinos will focus on strengthening bilateral political, investment and trade relations. It will also further promote the dynamic economic relations between the two counties. Spain is South Africa's seventh largest export destination globally and to date, total trade between South Africa and Spain has increased from R11 billion in 2004 to R19 billion in 2007. Ministers Dlamini Zuma and Moratinos are expected to consider enhanced Spanish engagement with Africa through focused support for conflict resolution on the African continent. "Promotion of social and economic developments including support for the Africa Union, socio-economic programmes, NEPAD [New Partnership for Africa's Development] will be discussed," the department said. Discussions will also look at South Africa's participation in the Zaragoza World Expo which will be held from June to September 2008. It will further focus on increased co-operation in the multilateral context, inter alia, the comprehensive reform of United Nation Institutions and United Nations Security Council issues. During her visit, Ms Dlamini Zuma will interact with a number of Spanish companies who have shown a strong interest in investing in South Africa.

Political, Economic, Security Issues Dominates Country-Cuba Forum
The status of bilateral political and multilateral relations ranging from economic and security issues have dominated the 6th Session of the South Africa-Cuba Consultative Forum. "We hope that we will discuss more recent crises [such as] fuel, food security and climate changes and more importantly to use this opportunity to discuss African crises and post conflict resolutions," said Deputy Foreign Affairs Minister Aziz Pahad, while welcoming his Cuban counterpart, Bruno Rodriguez. Addressing delegates during the 6th Session of the South Africa-Cuba Consultative Forum in Pretoria June 20, Mr Pahad said the Palestinian-Israeli issue, Iraq, Afghanistan and the Iran issues will be dealt with accordingly. The deputy minister said he was happy that Mr Rodriguez visited the country for the first time. "In hope that your first visit will be an experience that you will be able to enjoy, both to see our country and to participate in what we regard as important discussions. "We have always found our discussions invaluable, and especially now that you are chairing the Non-Aligned Movement as you have handled your chairpersonship so excellently," said Deputy Minister Pahad. First Deputy Minister Rodriguez expressed his appreciation for South Africa's permanent support it had given to Cuba for many years. "We feel gratitude to the South African people and government as we share various points of view on many issues on the international agenda and, at the same time, sharing many challenges. "I feel happy about the level of confidence in international positions between South Africa and Cuba by the excellent level of bilateral relations," Mr Rodriguez. The session of the Consultative Forum will also tackle issues of global governance including the comprehensive reform of the United Nations and South Africa's tenure as a non-permanent member of the United Nations Security Council.

South Africa and Nordic Countries Solidify Developmental Agenda
Co-operation on the continent has been intensified with the signing of a Declaration of Intent by Deputy Foreign Minister Aziz Pahad and the ambassadors of five Nordic countries on June 9. "The Nordic countries already play the greatest role in terms of development on the African continent and are also the greatest contributors bilaterally to the United Nations, the European Union as well as development funding for Africa. "All Nordic countries contribute about 0.5 percent of their Gross Domestic Product to the development of Africa," said Mr Pahad, speaking at the signing ceremony at the Union Buildings. The Nordic countries - comprising Norway, Denmark, Sweden, Finland and Iceland - have always based their development agenda on Africa's actual needs. "You [as the Nordic countries] have never employed the one size shoe fits all approach with Africa and have worked with countries individually to assess what is necessary. "We think the Declaration of Intent will help us deal with the issue of development in Africa and provides a framework for co-operation based on five principles. "These principles include ownership, alignment, harmonisation, management for results, and mutual accountability," the minister said. The declaration involves South Africa and the Nordic countries working together with a third country to further development within that third country. While the declaration is a first for South Africa, other instances of similar initiatives include the Swedish and South African Police Services working together with the Rwandan national police since 2005 to improve its efficiency and service. The declaration will be based primarily on the ideal of conflict prevention, promotion of good governance, human rights, and post-conflict reconstruction. "We will be working together to help individual countries achieve the Millennium Development Goals [MDGs], "I believe that this is a very important new development which will mean that in future, in relation to Africa we will work together with the Nordic ... and work in partnership to deal with Africa's challenges, either bilaterally or through the sub-regional and regional organisations," concluded the minister. Finland's Ambassador to South Africa, and Dean of the Nordic countries, Heikki Tuunanen said: "South Africa has a very important role to play on the continent in terms of conflict prevention, post-conflict reconstruction and the development of Africa. "This is a great initiative and I'm sure it will be followed by many other successful initiatives." The Nordic countries are already involved extensively in Africa and are active in Burundi, Rwanda, the Democratic Republic of Congo, and Sudan.

« Top

MANUFACTURING

Manufacturing Output Rises 9,8 Percent
Manufacturing production surged 9,8% in April - well above forecasts and the biggest gain in six years - but the figures were distorted by a higher number of working days during the month. Output from the sector, the economy's second-biggest, fell 1,0% in March, mainly due to the timing of the Easter holidays this year, which curbed output. An industry survey showed that manufacturing activity was likely to have slowed again in May, restrained by the lagged effect of previous interest rate hikes on consumer demand. This was seen as likely to offset any boost to manufacturing exports from the rand's slide this week to a two-and-a-half- month low at about R8 to the dollar. The unit has depreciated 17% against a trade-weighted basket of currencies so far this year, in a trend that should boost the global competitiveness of local exports. "Rising domestic inflation and the high import density of production are eroding the manufacturing sector's lifeline," said Standard Bank economist Danelee van Dyk. "Further adjustment in monetary policy will continue as a drag on production well into next year," she said. Higher interest rates have raised debt costs and curbed consumer spending -- the economy's main growth engine -- without taming inflation, which rose by 10,4% in April. In the first four months of this year, manufacturing output climbed 3,3% versus the same period last year, Stats SA said. This was still below the 5,8% annual rise in the first four months of last year. After seasonal adjustments, manufacturing output rose 7,5% in the month. The biggest contribution to the annual rise came from the petroleum and chemicals sector, while consumer goods - food and beverages along with motor vehicles - also buoyed activity.

« Top

MINING

Mining Production Dips By 9 Percent


South Africa's total mining production for the three months ending April 2008 decreased by 9 percent compared with the same period in 2007, Statistics South Africa (StatsSA) reported June 19. The actual total mining production for April 2008 decreased by 2 percent compared with April 2007, said Stats SA. The total mining production for the three months ended April 2008, after seasonal adjustment, decreased by 4.1 percent compared with the previous three months. This was due to a decrease of 5.5 percent in the production of gold and a decrease of 3.9 percent in the production of non-gold minerals. The major contributors to the decrease of 4.1 percent were platinum group metals (PGMs), diamonds and gold, according to the statement released on Thursday. Coal, however, contributed positively to the 4.1 percent decrease with sales increasing 1.3 percentage points. Gold production, one of the biggest drivers of the South African economy, decreased by 10.1 percent in April 2008 compared to the corresponding previous year. With regard to mineral sales as at the end of March 2008, the total seasonally adjusted value of mineral sales at current first quarter of 2008 reflected an increase of 13.5 percent compared with the previous quarter. The increase of 13.5 percent, or about R8 million, can be attributed to increases of 14.3 percent in the sale of non-gold minerals and 9 percent in the sale of gold. The actual total value of mineral sales at current prices for the first quarter of 2008 increased by 21.1 percent compared with the first quarter of 2007. The major contributors to the increase of 21.1 percent year-on-year [y/y] in the actual value of mineral sales were PGMs, coal, manganese ore, other non-metallic minerals, and iron ore.

BHP Billiton to Spend Millions in Country
Global resources group BHP Billiton plans to spend $56m to expand capacity at its two South African manganese mines to take advantage of strong demand for the high-grade ore they produce. BHP Billiton manganese division president Peter Beaven told a conference call on the group's steel-making materials businesses June 24 that it would spend $37m on adding 700000 tons of manganese ore production a year at the Wessels underground mine by 2012. Another $19m would be spent on increasing capacity at the Mamatwan opencast mine by a million tons a year by 2010. Wessels and Mamatwan are both near Hotazel in Northern Cape. The group has also begun increasing capacity at its Gemco manganese mine in Australia by 700000 tons a year at a cost of $110m. BHP Billiton owns 60% of Samancor Manganese, the owner of manganese mines and manganese alloy smelters. Anglo American holds 40%. The group has also upgraded the manganese resource at Samancor Manganese by 82% to 473-million tons, partly because drilling at the Wessels and Mamatwan mines has uncovered new deposits, and partly because of an agreement signed late last year with Ntsimbintle Mining, a black empowerment company. Ntsimbintle Mining owns prospecting rights on ground contiguous to Wessels and Mamatwan, which it has agreed to sell to Hotazel Mining in return for a 9% share. The transaction is still waiting for regulatory approval. Apart from projects around existing mines, BHP Billiton is exploring for manganese in Gabon and the Northern Territory in Australia, Beaven said. Manganese is used in steel making to remove oxygen and sulphur and provide hardness to the finished product. There is no practical substitute. About 7kg of manganese is used to make a ton of steel, compared with about 1600kg of iron ore and 600kg of metallurgical coal. Between 2001 and 2008 the price of manganese rose 486%, reflecting growth in steel demand from China and India. Although China has substantial manganese ore deposits, they are low grade, and its demand for high-grade ore has now exceeded seaborne capacity. This has resulted in a fairer price for high-grade ore, Beaven said. BHP Billiton was the largest producer of manganese ore globally, with a 22% share of the global market and a 35% share of the seaborne market. All the group's manganese mines were producing at record levels and there were significant growth opportunities, he said.

U.S. Gold Miner to List in Country
Eastern Goldfields, the US-based company that has just bought Barbrook gold mine in Mpumalanga from Caledonia Mining for R70m in cash, planned to raise about R250m through a listing on the JSE in the second week of September, financial manager Derrick Short confirmed June 9. Short said the funds would be used to complete development of the company's Lily underground gold mine, to fund strategic acquisitions and explore existing assets. The company said recently that the latest developments in capital markets suggested the JSE offered better prospects for a capital raising than its original intention to list on London's AIM. Barbrook Mine has been on care and maintenance, which means it was not producing but could be restarted, since November 2006. The mine had been struggling to make profits. Eastern Goldfields has conducted a due diligence on the mine and said it looked promising, with potential to improve gold recoveries. The acquisition brings the company's resource base to an estimated 4,2-million ounces of gold. Eastern Goldfields has three South African subsidiaries: Makonjwaan Imperial Mining Company; Eastern Goldfields Exploration; and Centurion Mining Company. Its empowerment partners, owning 26%, are Lomshiyo Investments, headed by Kuseni Dlamini. Dlamini, recently appointed head of Anglo American's local operations, is a nonexecutive director of Eastern Goldfields SA. Eastern Goldfields' president is Michael McChesney, who was CEO of gold miner Simmer & Jack until 2004. Eastern Goldfields' open-pit Lily Mine and nearby Makonjwaan Metallurgical Plant, also in Mpumalanga, had been operating profitably under the present management since 2000, it said. Lily Mine has at least 1-million ounces of gold in resources and 208 000oz in reserves, which have a greater certainty of being mined economically than resources. Lily is being extended into an underground mine at an estimated cost of $70m, with first production later this year. Management plans to refurbish the processing plant at Barbrook, 7km away, instead of building a new plant at Lily. Eastern Goldfields was in discussions with the liquidators of African Pioneer Mining on the possible acquisition of the Agnes gold mine, Short confirmed. Agnes is near Eastern Goldfields' other mines. Management said Eastern Goldfields planned acquisitions in the next few years to increase production to 100 000oz of gold a year. The company hoped to conclude financing arrangements by the third quarter of this year and has already raised $4m in interim funding through a convertible bond, the terms of which provide for no interest to be payable if Eastern Goldfields lists on the JSE before September 28. Eastern Goldfields trades on Nasdaq at about $5,25 a share.

« Top

TELECOMMUNICATIONS

Tata to Increase Stake in Neotel to 56 Percent
Second national network operator Neotel will soon be 56% Indian-owned, with Eskom and Transnet selling their 30% stake to Bombay-listed Tata Communications. Tata already owns 26% of Neotel, which it bought after a lengthy process to find an international telecoms player to supply the skills and cash needed to compete with Telkom. Tata said June 24 it had entered into an agreement with the state-owned enterprises to acquire their combined 30%. The potential value of the deal was not disclosed in the notice issued on the Bombay Stock Exchange. One insider said the move should speed up Neotel's decision making and hone its operational abilities by streamlining its ownership. Neotel has been dogged by unwieldy shareholding from the start, after a farcical process to cobble together a variety of interests and still find credible investors to buy into the business. Allowing Tata to take a bigger stake could also give Neotel access to more cash more quickly than if it had to rely on state-owned entities to contribute to its planned infrastructure investment of R11bn. The source said it was important to get the state-owned enterprises out of Neotel. "We need to reorganise the shares because it's cumbersome," he said. "We need a situation where the business has a minimal number of shareholders and we need to isolate the business from politics." Neotel had not been plagued by political pressure arising from government involvement, but there were internal politics between the different entities, he said. The exit of Eskom and Transnet had been on the cards for about six months, and Neotel's customers should notice a difference once they were out, the source said. "The business will be much smoother because it will improve the decision making process by far." Executives from Tata Communications are expected in SA this week to finalise the buyout details. Eskom and Transnet were each granted a 15% stake in Neotel in November 2001, contributing their telecoms assets to form the basis of the new operator. They were joined by the black empowerment group Nexus with 19%. Stakes of 12,5% each were awarded to CommuniTel and Two Telecom Consortium after a controversial bidding process that attracted local entrepreneurs eager for a slice of the potentially lucrative action. The six-way structure was acrimonious from the start, with Nexus taking legal action and applying for a judicial review when Two Consortium and CommuniTel were awarded shares, despite their bids initially being rejected as substandard. After protracted negotiations the legal action was withdrawn and the parties finally managed to launch their operations, several years after the target date. Yesterday's announcement from Tata said the deal to buy out Eskom and Transnet was subject to certain conditions that may take up to 180 days to be fulfilled. Once the deal was concluded Tata would own its 56% stake through Tata Communications and Tata Africa, it said. Tata Communications runs a world-class telecoms network and has offices in more than 40 countries. Its investment in Neotel gives it a strong anchor on which to build an African footprint, it said. Operating a telecoms business is not a core activity for either Eskom or Transnet. Transnet has been pursuing a turnaround strategy by shedding its noncore activities, and in November it sold its telecoms arm Transtel to Neotel for R230m.

Virgin Mobile Wants Rules Changed to Help Small Players
Cellular operator Virgin Mobile is lobbying for regulatory changes that would help to grow its business and encourage new players to enter the market. SA's smallest cellular operator celebrates its second anniversary June 24 with 495000 customers -- up from just 100000 after its first year. There are about 44,5-million SIM cards in SA, giving Virgin Mobile 1,1% of the market. It expects a profit in 2010 or 2011. CEO Peter Boyd said he was happy with its growth so far, but legislative changes would open up the market, cut the cost of calls, and make it easier for smaller players to grow. Virgin Mobile runs as a virtual mobile network operator, using Cell C's network as its backbone and reselling airtime under its own brand. Technically that is illegal in SA, as operators must hold a network licence of their own, so Virgin Mobile had to be a joint venture owned by both Virgin and Cell C, which holds a licence. In almost every other country virtual operators are perfectly legal, and 185 are active in Europe and Russia. That had invigorated those markets and given consumers more choice and lower prices, Boyd said. Yet Virgin Mobile is the sole virtual operator in Africa, where the population of 800-million needed cheaper communications, Boyd said. Since virtual operators piggyback on existing networks, their cost of entry is cheaper. The host network benefits by selling spare capacity to the newcomers, giving it a new source of income. Boyd would like to see companies such as Discovery Health or Kulula airline become virtual operators. "Other companies could do the same as us if they found a network that wanted to provide them with wholesale minutes." Boyd hopes the Independent Communications Authority of SA (Icasa) will force down the interconnection fees that operators pay each other when a call made on one network goes to a user on another. Since Virgin Mobile has so few customers, 99% of its traffic goes to users with MTN, Vodacom or Cell C, racking up high interconnection fees. Although the fees are passed on to consumers, Boyd said small players were disadvantaged as they had to hand over much potential profit to bigger rivals. Icasa first debated intervention in 2005, but was thwarted by changing legislation. Last year it held public hearings into the fees, which have risen 600% in recent years.

Vodacom-Telkom Split 'Now Inevitable'
A long-overdue split between Vodacom and its parent company Telkom is now inevitable, with the CEOs of both companies clamouring for freedom. Telkom CEO Reuben September and Vodacom CEO Alan Knott-Craig told analysts June 9 that the cellular operator's dual ownership by Telkom and the UK's Vodafone was bedevilling all three. Although September did not give further details of a proposal to sell part of Telkom's stake to Vodafone, he is in favour of shedding the business as quickly as possible. Departing from his usual noncommittal stance, September said: "The shareholders' agreement doesn't put Telkom in a position where it can grow its business. The two businesses are increasingly competing against each other. The value of Telkom needs to be totally liberated." If Telkom were free to partner with any mobile operator or to build its own wireless network, it could offer a full range of services in its own right, without the "unnatural impediment" of being shackled to Vodacom. "Telkom could come into its own if it would participate in the market fully as a stand-alone entity," September said. Until now, only Knott-Craig has objected to the constraining relationship. Yesterday he was even more critical than usual, enjoying the freedom to be particularly outspoken after announcing plans to resign as CEO in September. "The way our shareholding is structured isn't helping anybody. It's not helping Vodacom, it's not helping Vodafone and it's not helping Telkom," he said. "Something has to give. If you want to unlock the potential these companies have you have to shake things up." Vodacom was prohibited from acquiring companies in SA to expand its services because Telkom was its owner, and the competition authorities frowned on the expansion of such dominant players, he said. Nor could it make acquisitions in other African countries, as Vodafone wanted those countries open for its own expansion. Attempted acquisitions had been unsuccessful because its shareholders had their own aspirations, Knott-Craig said. Vodafone has bid R18,75bn for 12,5% of Vodacom's shares, on condition that Telkom takes itself out of the picture by distributing the remaining 37,5% to its shareholders. At the same time a consortium led by Mvelaphanda has offered a reported R90bn for Telkom's other assets: a huge national network infrastructure and operations in Nigeria and Kenya. Analysts describe Mvelaphanda's bid of R90bn for the fixed line assets as under-priced. September agreed that price could be a stumbling block for the proposed deal. "A premium has to be put in its true value," he said. Although Vodafone is the party preventing Vodacom's foreign expansion, Knott-Craig thinks that restriction would be scrapped once it took control. Vodafone would probably bow to Vodacom's experience and let it handle the African portfolio, he said. "It's likely Vodafone will use Vodacom as its management vehicle in Africa and that will be great for Vodacom." Dual ownership has also impeded empowerment. Vodacom intends to place shares worth R7,5bn with black investors and the public. Neither Telkom nor Vodafone has been keen to relinquish any shares because of the deadlock between them. "At the moment we can't do anything because anybody who gives up even a fraction gives up control," Knott-Craig said. "Once the deadlock of 50-50 ownership is unlocked it becomes possible to do lots of things."

Vodacom Faces Court Move From BEE Loser
A black consortium that failed to survive the first round of short-listing for part of Vodacom's R7,5bn empowerment deal is taking the cellular operator to court in a bid to halt the process. The Tiger consortium will seek an urgent interdict in the high court May 30, with Vodacom preparing to defend the action so its long-awaited transformation can continue. Vodacom spokeswoman Dot Field said the company would defend the action, but she did not clarify the nature of Tiger's objection or Vodacom's defence. Tiger apparently includes attorney Mafika Sihlali, a former legal head of the SABC who left the company last year after an audit highlighted irregular spending of R1,8m. It also includes Lester Peteni, chairman of Nulane Investments, which holds 31% in Huawei Technologies SA. Other members include thousands of entrepreneurs who run Vodacom's community service telephones, its Vodashop and Vodacom4U franchises. It also represents some of the black staff. Nobody from Tiger could be reached June 4, but spokesman Jacobus van Schalkwyk has previously said its members felt they had been overlooked in the selection process and had voted to take the fight up a gear. Tiger was among 60 bidders for shares allocated to strategic partners who could add value to the business. The strategic partners will take 45% of the empowerment shares, Vodacom's staff will take 25%, and 30% will be sold to black citizens and black business partners. Tiger failed to impress the adjudicators, and was quickly eliminated. "They didn't even make it through the first round, and I have no idea what game they are playing," a source said. Vodacom named Thebe Investment and Royal Bafokeng as empowerment partners. The Communication Workers Union (CWU) is not involved with Tiger, though a few of its members belong to both organisations. The CWU was also unhappy with parts of the empowerment process, said its president, Joe Chauke. The union objected to Vodacom suspending two employees who are in Tiger because they were involved in the legal action against the company. Its other gripes include the fact that staff must be with Vodacom for at least seven years to receive any shares, and that a minimum investment of R2500 is required for any citizen buying its shares. A member of another failed bidding consortium said Tiger had originally asked to be part of his group. His members would have happily worked with the entrepreneurs who ran cellphone booths, he said, but did not want to work with some of Tiger's more prominent members. He said Tiger bore a grudge partly because all staff would receive shares set aside for employees, while Tiger thought only blacks should benefit. "Their core issue is whether empowerment should benefit all employees or just black employees. The bottom line is they have absolutely nothing to lose," he said.

Delta Opens Johannesburg Office
The largest telecoms advisory and investment firm in the Middle East has opened an office in Johannesburg as the first step in its planned African expansion. Delta Partners said the increased acquisitive interest that foreign operators were taking in African network operators was a signal of further consolidation in the market in the near future. That should create plenty of business for an advisory firm based in the region, the company believes. The firm is also assessing whether it should create an $80m equity fund to support telecoms operators looking to expand in sub-Saharan African and needing the cash and industry expertise to help them do so. That would be set up within a year if the company decides to go ahead. The South African office will be run by Delta's managing partner, Kristoff Puelinckx, and will initially house about 10 staff, which could double within a year. Puelinckx said the merger and acquisition interest being shown in MTN, firstly by India's Bharti Airtel and now by Reliance Communications, showed the strong desire of foreign players to maintain their growth momentum by expanding into the high-growth African markets. Similar moves in various countries have also been made or assessed by, among others, Deutsche Telecom, the UK's Vodafone and Dubai's Etisalat. "Africa is now at a telecoms crossroad," Puelinckx said. "On the mobile side, the growth so far has come from serving the high- to middle-income segments of the population. No more than a handful of operators in the region have experimented with new and innovative business models to improve the economics of serving the very vast low-income segment of the population." The challenges now were to start serving the virtually untouched segments of society that had very little money to spend on cellular services, and to meet the demand for broadband internet access. An even greater challenge was to do both those things profitably, Puelinckx said.

« Top

TOURISM

Dubai World Plans to Expand


Dubai World Africa will use part of the $1bn earmarked for African investments on major projects in SA, including development of a 30,000ha game reserve in Mpumalanga that the company intends to have listed as a World Heritage site. In March, the company, which is the investment arm of the Dubai government, acquired a major shareholding in three wildlife reserves -- Shamwari Game Reserve in Eastern Cape, Sanbona Wildlife Reserve in Western Cape and Jock Safari Lodge in the Kruger National Park -- for an undisclosed amount. Chairman Sultan Ahmed Bin Sulayem said June 5 that it would build more luxury lodges in these areas as well as a five-star hotel and 60 private apartments at Pearl Valley Golf Estate in the Cape winelands. Dubai World was also expanding the Victoria & Alfred Waterfront in Cape Town, which was 55% complete, and would double the space available for prospective hotel, leisure and retail tenants. The site has seven top-end hotels and a new five-star hotel is being built by Sol Kerzner's company One & Only. Sulayem was reluctant to disclose the amounts his company would spend in SA, but said the money would come from the $1bn fund earmarked for projects in Africa over the next five years, in addition to the $4bn already committed. "Our projects for the V&A Waterfront expansion (as well as the) Pearl Valley hotel and apartments and Shamwari lodges are in the planning stages," the sultan said. Site-enabling works for the next phase of the Waterfront expansion would start before the end of this year. "Dubai World Africa's strategic investment in SA will realise the vision of creating an extraordinary big five reserve in the Barberton area of Mpumalanga, served by a luxury five-star lodge and the highest quality facilities," he said. "Our vision is for Nkomazi game reserve to become the leading conservation initiative in southern Africa." Game fencing would be erected around the property and a detailed wildlife management plan would be drawn up with the ultimate aim of making the reserve a World Heritage site. The company would open a 24-bed luxury tented camp at the game reserve in November. The development would also include seven secluded five-star boutique hotels and lodges with a total of 120 beds, a 36-hole championship golf course, a residential estate, 25 luxury private residences and 425 "eco residences". Projects outside SA include a $70m five-star hotel in the Comoros, and a $250m hotel in Djibouti.

« Top

 

CUSTOMISED REPORTS

Our analysts and editorial staff have many years experience in analysing and reporting events in these nations. This knowledge is available in the form of geopolitical and/or economic country reports on any individual or grouping of countries. Such reports may be bespoke to the specification of clients or by access to one of our existing specialised

« Top

« Back

 


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