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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)

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Update No: 077 - (01/06/08)

DISASTER STORY
South Africa's Western Cape is to ask for parts of the province to be declared a disaster zone May 29 in the wake of recent anti-foreigner violence. The provincial government also asked for United Nations (UN) help in dealing with the crisis. UN and Red Cross figures suggest up to 80,000 foreigners fled the attacks which began earlier in May, with 33,000 fleeing to neighbouring nations. The government has said it is working to provide shelters of a limited size, rather than larger, more permanent refugee camps, to lessen health and security risks. The UN has said it is already helping South Africa plan relief efforts, conducting surveys of the conditions in the police stations and municipal halls in which the displaced people are living. Meanwhile, foreigners are continuing to flee the country. The Red Cross says that around 33,000 have fled South Africa to neighbouring countries. The Gauteng and Western Cape provincial governments are working quickly to locate appropriate sites for the temporary shelters, according to a statement by the government.

Thousands of South Africans took to the streets May 24, condemning the violent attacks on foreign nationals. With placards comparing the attacks to apartheid, the crowd marched in Johannesburg demanding an end to the violence. More than 50 have been killed and more than 650 injured in the attacks, according to officials. Nigeria says it will press for compensation from the South African government for its citizens who were victims of the violence. Many of the displaced and are now seeking refuge in churches, city council premises, and police stations. South African troops were deployed for the first time in an effort to stop the violence. This is the first time soldiers have been used to stamp out unrest in South Africa since the 1994 end of apartheid. As Africans celebrated Africa Day around the world on May 25 President Thabo Mbeki said South Africans had to celebrate the day with their heads "bowed in shame". He was addressing the nation in a broadcast after two weeks of violence. "Never since the birth of our democracy have we witnessed such callousness," said Mbeki. The violence was an "absolute disgrace" and contrary to the values of most South Africans. 

The attacks started in the poor Johannesburg settlement of Alexandra, one of the so-called townships established to house black, mixed race and Indian people during years of racial segregation in the country. Within a week, the violence had spread beyond South Africa's economic capital to the provinces of KwaZulu-Natal in the south-east, and Mpumalanga in the north-east. There has been widespread condemnation of the attacks, variously blamed on poverty, unemployment, and rising prices for food and fuel. Migrants are often accused of taking jobs away from South Africans, and of involvement in the extensive crime that continues to plague the country. As many as five million foreigners reportedly live in South Africa, which has a population of almost 50 million. Most of the migrants are believed to be from neighbouring Zimbabwe, where political and economic turmoil has prompted an exodus of nationals. 

Criticism of President Thabo Mbeki has come from across the political spectrum, including his own party, for government's slow response to a growing humanitarian crisis. Weeks after the attacks began, and days after the army was called in to assist the police, he appeared on national television to condemn the violence. He then left for Japan. The void left by government's response is being filled by the public's generosity. Many South Africans have been appalled and ashamed by the killings, looting, burning and rape of foreign nationals. It remains to be seen whether the situation can be contained or is part of a far greater malaise at a time of political instability and economic difficulty. For many of the poor and unemployed the time of patience with the government could be running out. The Treatment Action Campaign (TAC), an AIDS activist organisation, said it is serving as a command centre for the multi-organisational relief effort in Cape Town. "We have basically stepped in and fulfilled the role of the state over the last three days, and the state has utterly failed in its duty, particularly at the provincial and national level.” 

The rand slid sharply against major currencies May 20 as photographs of the xenophobic violence hit the front pages of leading international newspapers, tarnishing South Africa's image in the eyes of foreign investors. A downturn in global appetite for risk played a role in the currency’s slide of 1,7% to the dollar and 2,6% to the euro, which erased much of its gains of the past two sessions. Those gains were in step with other emerging-market currencies. Traders said stark images of violence on the front pages of the Financial Times, Guardian and New York Times, prompted a kneejerk retreat in the rand. The violence will not change South Africa's economic fundamentals, but there is concern about its effect on tourism, which accounts for 8% of the economy and more than a million jobs. Lehman Brothers emerging markets analyst Peter Attard Montalto said the attacks also compounded concern about South Africa's ability to host the 2010 Soccer World Cup. "South Africa's success has been partly due to immigrants from surrounding countries," he said. 

An astonishing administrative oversight by the National Prosecuting Authority (NPA) could further delay the troubled prosecution of African National Congress (ANC) president Jacob Zuma, raising the prospect that South Africa's next president could be sworn in early next year while still facing criminal charges. The administrative lapse came to light May 12 when it emerged that the NPA - which has faced a torrent of criticism over its handling of the now seven-year-long Zuma probe - apparently failed to consult KwaZulu-Natal Judge President Vuka Tshabalala over a date for the trial. It has said publicly, however, that the trial would commence in August. Now its plans to bring Zuma before court again appear to have gone awry. Political analyst Aubrey Matshiqi said while the case against Zuma will not change his political fortunes, or affect his chances of replacing President Thabo Mbeki, because it will not be concluded before next year when South Africa goes to the polls. The ANC has to weigh its options as to Zuma's suitability for public office. "If he is constantly in court, it could cause instability and some paralysis at a time when the government is supposed to be speeding up delivery. It could also dent the image of the country," he said. However, South Africa does not have direct presidential elections, which allows the ANC to take the risk of having Zuma as a candidate. Under a different political system the ANC would be much more sensitive to public and media opinion Matshiqi said. " At the moment Mbeki is so unpopular, he makes Zuma look good as an alternative. Mbeki's failure has made Zuma look good.

A South African Cabinet minister has called on Zimbabwe's ruling Zimbabwe African National Union Patriotic Front (Zanu PF) party to "surrender power" to the Movement for Democratic Change (MDC) May 18. Arts and culture minister Pallo Jordan said Zanu PF had "only itself to blame" if it had lost the confidence of Zimbabweans to the degree that it could win elections only by intimidating people or rigging polls. "Any attempt by ZANU (PF) to cling to power through overt or covert violence will only compound its problems by stripping it even further of the legitimacy it won by leading the Zimbabwean people in their struggle for independence, freedom and democracy," he added. Jordan's comments were made in an article published on the website of the ruling ANC, and marked as having been written in his personal capacity. The son of prominent South African researchers and writers, Jordan studied in Britain and the United States while in exile and has a longstanding reputation as an independent-minded ANC leader. He says: "The questions we should be asking are: What has gone so radically wrong that the movement and the leaders who brought democracy to Zimbabwe today appear to be its ferocious violators. What has gone so wrong that they appear to be most fearful of it?"

Refugees or Ready for Re-Integration 
A spokesman for the UNHCR said very few of the displaced foreigners fit the formal definition of "refugee". Nevertheless, the government is coming under considerable pressure to organise better accommodation than the makeshift camps currently housing most of the displaced people. Correspondents say it has made it clear that any option, which isolates rather than integrates foreigners into the community would be contrary to its policy. The majority of foreign nationals, estimated to number between one million and ten million in South Africa, are classed as economic migrants, drawn to the country by the promise of work and opportunities that are not always available in their countries of origin. The talk of establishing "refugee camps" is creating unease among the displaced. Most of those sheltering at Cape Town's Caledon Square police station are from Somalia, Zimbabwe, DRC and Burundi; they told IRIN they would not voluntarily go to any of the camps established by the city, because it would be "like going to jail". However, others are sceptical about planned re-integration, and want refugee status, asking for assistance from the UN rather than the South African government. Many claim the government is too weak and they need financial assistance having lost everything they own. "Many people had their own businesses," said Mohammed Dahir, a Somali who has been in South Africa for 11 years. "Some had businesses worth more than R400,000 (US$53,000) and now they have nothing, not even clothes. How are people going to survive? The people who have been hurting us are still there."

Xenophobic Attacks Hurt SA's Image Abroad
International observers who took the AIDS policy fiasco, the African National Congress (ANC) succession turmoil, the Scorpions saga, and the Eskom debacle more or less in their stride are finding the xenophobic violence to be one crisis too many. Suddenly the smell of the apartheid years is in the air. The Times in the UK May 20 drew a chilling parallel under the headline "The Shame of Thabo Mbeki", when it claimed that "harrowing images of a still unidentified burning man recall the nadir of the apartheid era, when black-on-black violence terrorised the townships and suspected collaborators were set alight with petrol-filled tyres". It has been two long decades since violent insurrection swept the country and Winnie Mandela declared that "together, hand in hand, with that stick of matches, with our necklace, we shall liberate this country". Today a new generation of young men, many of them not yet born when Winnie Mandela made her declaration, are marching once again to enforce purification by fire upon outsiders. The intensity of the terror is made worse by the inaccessibility of the fierce moral logic that must lie behind the violence. Many ordinary citizens have become quiet but determined apologists for what outsiders see as inexplicable attacks upon refugees and economic migrants. Second, observers inevitably fear this is the beginning of something wider and still more frightening. The ruling party's recent ructions, and the government's policy misjudgements, can be explained using the conventional languages of reason and interest. By contrast there is no satisfactory way of understanding what has caused the lethal mayhem that began in Gauteng. Fears of an unfolding ethnic dimension to the violence have meanwhile been fuelled by reports of young men from predominantly Zulu-speaking hostels roaming the streets singing Umshini wam', seeking out people with dark complexions, and taunting Tsongas, Shangaans and foreigners alike. It is easy to imagine that the terrible victimisation of Zimbabweans and Mozambicans, if allowed to continue, may become a crusade against Shangaan, Shona or Venda people wherever they live as small minorities. Third, there has been a devastating lack of political leadership. The London Times chose the obvious target when it observed that, "in the twilight of his power, Mr Mbeki has shown himself almost as detached from reality as Mr Mugabe". But it would appear that leaders of all kinds view the xenophobic rage as a natural force too powerful to be contained. Their reticence recalls the 1980s, when the exiled ANC leadership equivocated over responses to localised insurrections that were beyond the liberation movement's control. As events have moved with startling speed and ferocity, the limitations of the South African Police Service as an instrument of public control have also been devastatingly confirmed. The police are widely and understandably distrusted by refugees. The gulf between them widened earlier this year after a heavy-handed police raid at Johannesburg's Central Methodist Church was widely perceived as a tacit endorsement of claims that the refugee community is a hotbed of criminality. For the international media, the recent violence has provided an excuse to resurrect older models of SA's overall trajectory and ultimate destination. For the New York Times, SA is once again a powder keg of frustrated hopes and disappointed expectations. "The attacks on African migrants have increased political instability at a time of power shortages and disaffection over Mbeki's pro-business policies. Soaring food and fuel prices helped push tensions to breaking point." The Financial Times, for its part, claims that violence against vulnerable foreigners can be used to diagnose more profound pathologies within a society. "In the 14 years since the dawn of black majority rule," the paper observes, "inhabitants of SA's townships have exhibited immense patience. The escalating violence against immigrants around Johannesburg should serve as a warning to SA's rulers that this patience has an end." Jacob Zuma has impressed international analysts by recognising that investor-friendly policies must be accompanied by a strategy to ameliorate the suffering of the poor. He has yet to explain how this will be done in practice. Until he makes some attempt to do so, confidence in SA's future will remain shaken. In its most gloomy analysis of the future of SA in many years, the Financial Times has observed that "scenes so reminiscent of township violence in the 1980s could yet see South Africans turning on one another".

ANC Calls for Peace and Tolerance in Townships
Amid fears that the xenophobic violence which has claimed at least 50 lives could develop into an intra-ethnic conflict that could engulf the whole country, African National Congress (ANC) heavyweights fanned out across Gauteng May 25 to stem the tide of violence and restore stability in affected communities. ANC president Jacob Zuma led the party's appeal in townships and informal settlements when he spoke to about 8000 people in Bakerton, an informal settlement outside Springs and a scene of unrest. Among those deployed to the townships were Deputy President Phumzile Mlambo- Ncguka, businessman Cyril Ramaphosa, ANC secretary-general Gwede Mantashe and South African Communist Party boss Blade Nzimande. Communities responded positively to Zuma's message of tolerance, but criticised the government's failure to deliver services to the poor. Zuma said "peace and tolerance" should precede any discussion over unhappiness about the government's tardy service delivery. He managed to contain his restive audience, winning them over with a promise to return. However, angry community members told the ANC leaders that while they would vote for the party, their continued support could not be taken for granted. The ANC leaders condemned the violence against foreigners, saying communities should not take the law into their own hands. Though Gauteng was worst hit, the violence against foreigners spread to other provinces such as KwaZulu- Natal and Western Cape. Analysts say the violence could soon see members of different ethnic groups turn on each other. This concern was shared by Nzimande, who went to Etwatwa on the East Rand. "This violence is designed to start an intra-ethnic conflict," he said. The ANC's message was for everyone to work with the police. Nzimande said they urged foreign nationals not to form patrols exclusively made up of foreigners for fear that it could spark revenge and counterattacks. ANC deputy secretary-general Thandi Modise told residents that they should form street committees and organise themselves so that they could lobby the government. The ANC's initiative came after the government, especially the country's intelligence agencies, came under fire from the ruling party and the opposition for failing to act to prevent the carnage. "The ANC's message to its structures is that it must work with anybody to contain this violence. This violence should not morph from xenophobia into broader ethnic cleansing, " ANC secretary-general Gwede Mantashe said. He was speaking at ANC branches in Soweto as part of the campaign to stop the violence. In Soweto, local ANC leaders vowed to "defend" the community from attacks and have set up anti-xenophobia committees in order to galvanise people into action. "No one in this area will be evicted," ANC member Stewart Ngwenya said. "From Cape to Cairo we are all Africans. Zulus, Shangaans, Xhosa s, Venda s. We are going to defend each other," he said.

The ANC's Many Failures Led to This Crisis
The brutal attacks on foreign refugees, which have brought shame on South Africa, are the direct result of the interaction of two failed government policies - one caused by the old African National Congress (ANC) leadership and the other, at least partially, by the new. The first is the failure over eight years to develop a foreign policy to prevent the implosion of neighbouring Zimbabwe, and of dealing with its inevitable consequences as millions of destitute refugees have poured into SA. For that, Thabo Mbeki's administration, particularly the president himself, must take full blame. The other is the failure over the past 10 years of unprecedented economic growth to ensure that more was done to reduce unemployment and to close the wealth gap, so that we did not develop such a tinderbox of disadvantaged groups struggling to survive on the margins of our big cities. The very areas where the refugees land up to intensify competition for the meagre opportunities available. It should always have been obvious that when the rapid increase in the influx of desperate Zimbabweans hit that tinderbox, there would be an explosion. But if Mbeki is to blame for the uncontrolled influx, responsibility for the stubborn perpetuation of this large pool of unemployed South Africans rests largely with the new leadership of the ANC - particularly its Congress of South African Trade Union (Cosatu) members. They claim the Polokwane conference elected them in December as "champions of the poor". Sadly, they are not. As ANC president Jacob Zuma noted in an interview with the Financial Mail in February, there are no champions of the poor in our politics. The trade unionists, as he pointed out, are part of the so-called first economy, not the second, and "the second economy is in fact neglected by all of us". Cosatu's commitment is to protect its members, workers with jobs, and part of that protection involves preventing them from being undercut by cheap labour drawn from that large pool of unskilled, unemployed and mostly young people. The tinderbox. On the issue of Zimbabwe, it beggars understanding that the president of a regional superpower should stick to the same policy on the region's most serious crisis for eight years, when it is clearly not yielding results. One can understand why Mbeki adopted his strategy of "quiet diplomacy" initially. Mugabe is a proud and stubborn man and any public criticism of him would have deepened his stubbornness and provoked a denunciation of Mbeki as a tool of the imperialists. That would have been personally painful for Mbeki and damaging to his larger ambition to lead a continent-wide African renaissance. Better, therefore, to try to win Mugabe's confidence in the hope of being able to influence him to either reform or retire. Fair enough. But there comes a time, surely, when it becomes obvious a chosen strategy is not working and should be changed. That time should have arrived when Mbeki became aware, as we now know he did, that Mugabe had rigged both the 2002 and 2005 presidential elections. What should Mbeki have done? He should have lobbied his Southern African Development Community (SADC) partners to make a joint demarche to Mugabe, warning him that if he again failed to hold an election that was not clearly free and fair in terms of the SADC's own guidelines, they would not recognise the outcome. They would then regard his regime as illegitimate and suspend Zimbabwe's membership of the community. That, I believe, would have given him pause, and in doing so could conceivably have produced a reasonably free election, resulting in regime change and an end to the crisis. Instead, Zimbabwe now faces the uncertain prospect of another rigged election, possibly a military coup, or maybe even civil war. And more floods of refugees into SA. 

Why did Mbeki not take a tougher line? Jeremy Cronin, deputy secretary-general of the South African Communist Party (SACP), has offered an explanation. He suggests Mbeki believes national liberation movements in the region should close ranks to prevent imperialist powers from using local political agents to reassert hegemony over a former colony, and eventually over the whole region. It sounds preposterous, but it rings true of a man who has shown signs of such political paranoia. Moreover, Mbeki finds the prospect of a national liberation movement being ousted from power by a new political party that arose from Zimbabwe's trade union movement too close to home for comfort. As for the flood of illegal immigrants, they should have been classified as refugees at an early stage, accommodated in proper refugee camps, and United Nations aid sought to help care for them. That would have avoided their inflammable contact with South Africa’s unemployed masses. But such official classification would have reflected badly on Mugabe, and Mbeki could not bring himself to do it. On the issue of local unemployed, Zuma's observations are obviously pertinent but they are also explosive. They have been raised before, most notably by Deputy Finance Minister Jabu Moleketi, who suggested the introduction of a dual labour market at an ANC national general council meeting in 2005. Noting that young people are by far the largest group in the ranks of the unemployed (they are also the largest group involved in the attacks on foreigners), Moleketi suggested this was because employers were reluctant to hire youths seeking jobs for the first time because they feared the labour laws would make it difficult to dismiss those who proved unsatisfactory. To remedy this, Moleketi proposed amending the labour laws to make it easier for employers to hire such first-time workers more cheaply and fire the nonperformers more easily. This provoked a storm, for the labour legislation is holy writ for the unions and the SACP. To propose any amendment is heresy. The Cosatu leaders dumped on Zuma, too, forcing him to backtrack on his Financial Mail interview with a wimpish statement that he was prepared "to lay down his blood" for the workers. None of which invalidates the truth of what Zuma said in that interview. The high bar to entry in the job market, combined with a deplorable education system, is condemning a large section of young people to lives of unemployment. The social dangers are alarming. The attacks on foreign refugees could be just the tip of an iceberg of future unrest. It is hard to believe a way can't be found to allow a special entry wage for young people without endangering general worker security. As things stand, SA's economic development is trapped between the low-skilled labour market of Asia and the high-skilled labour market of the developed countries. As we lose skilled people through emigration and can't compete at the lower end of the market, we are losing out at both ends. The new ANC leaders have pledged themselves to champion the poor. For the sake of the country and of their own political futures, they had better live up to that pledge by finding a way to remove this barrier to youth employment. For the biggest single lesson of Polokwane was that if you don't deliver on your promises, you will be thrown out.

Mbeki Africa Day Speech - No Changes in Immigration Policy 
In his Africa Day speech President Mbeki cited John Dube, Thomas Nkobe, Joe Slovo and Ruth First as examples of true Africans, many of whom came from immigrant families. Mbeki's message of tolerance and African solidarity came amid mounting calls for his resignation. The Sunday Times May 25 called on Mbeki to step down "in the interest of his country". Immigration policy will be discussed at meetings of the top brass of the African National Congress's (ANC's) leftist allies, the Congress of South African Trade Unions and the South African Communist Party. Condemning violence and destruction of homes and property, Mbeki said the government would stick to its policy of integrating foreign nationals rather than confining them to special camps. He promised tough action against perpetrators of violence. Nobody, however legitimate their grievances, would be allowed to take them out on those who were "vulnerable". He blamed the barbarity of the past two weeks on "a few criminals". "Nobody should doubt the state's capacity to deal with such criminals," Mbeki said. State security agencies have come under attack for not warning the government of the planned attacks on foreigners. Mbeki offered no explanation for the attacks, or solutions. He said the government had set up an interdepartmental task team to investigate and make recommendations. Migration was a global phenomenon. SA had to learn from the experiences of other countries to avoid "mismanaging" it. Analysts have long warned that the government's refusal to review its immigration policy and its stance on refugees would result in a backlash. Mbeki commended "patriots" and other civic-minded people who had come forward to assist with the humanitarian crises. He emphasised that civic education was not only the government's responsibility. "This is a time for unity, it's a time to speak with one voice." Mbeki committed SA to work with its neighbours, saying the country's progress was tied to advancements in other African countries.

Unicef Aids Victims of Xenophobic Violence
After the violent attacks on foreign nationals, migrant workers, refugees and asylum seekers living in some of the country's informal settlements, the United Nations Children's Fund (UNICEF) is helping the hardest-hit cities of Johannesburg, Ekhuruleni and Tshwane to provide emergency relief supplies to vulnerable women and children. UNICEF has supplied adult hygiene kits, food, clothing and blankets for victims of the violence, most of whom fled their homes with few or no possessions. The aim is to ensure that babies, young children and mothers are adequately clothed, safely and appropriately fed and that basic hygiene is maintained. Exact figures vary, but at least 17,000 people have been displaced in Gauteng Province alone, among them a minimum of 6,000 children and women. Western Cape and KwaZulu Natal Provinces are also reporting large numbers of displaced people. UNICEF says the need for shelter has become more acute with temperatures plummeting to 5 degrees Celsius in Johannesburg and 10 degrees in the capital city of Tshwane, as South Africa heads into its winter season. Since many sites for displaced people are reporting shortages of supplies, the agency has committed to assist with fortified cereals for young children. UNICEF will also help its partners organize play groups and establish on-site crèches to provide traumatized children with a sense of stability in the midst of the current disruption. Among the supplies delivered by UNICEF to the South African Red Cross and the City of Johannesburg Migration Desk are long-sleeve T-shirts for children, blankets, tins of powdered milk and infant-feeding cups.

Safety Sites for Displaced in Cape Town
In days of xenophobic violence in Cape Town more than 10,000 people had been displaced, necessitating the creation of five "safety sites" to take care of the foreigners' safety, Democratic Alliance leader and city mayor Helen Zille said yesterday. The violence erupted May 22, after a community meeting organised by the African National Congress went horribly wrong and triggered an orgy of looting. Addressing a news conference, Zille said the city, in partnership with welfare agencies, was providing food, shelter and aid to 8700 of the refugees; 1300 more were being sheltered by churches. "The first priority is to secure the safety of all people who have been threatened or displaced. Recognising the extensive need, the City of Cape Town's disaster management centre has allocated five temporary secure areas or safety sites where displaced people can receive basic accommodation and support, with law enforcement officers present to ensure that they are safe. "We are moving them into our main safety sites so that they can be registered and properly protected. We cannot provide adequate support and security to venues dispersed across the city." She urged refugees receiving support from the city to cooperate with officials during the process of moving them from halls to safe areas. The five safety sites are: Silverstroom near Atlantis, Soetwater near Ocean View ( full), Harmony Park in Strand, Youngsfield military base in Ottery ( full), and Blue Waters in Strandfontein. "We are grateful to (Defence) Minister (Mosiuoa) Lekota for making this venue (Youngsfield) available, and he agreed to make capacity for about 600 available at the navy base in Simon's Town. "To meet people's needs and manage the situation, the government needs to register those displaced. This will enable them to plan their futures, make travel arrangements if necessary and inform the governments of the DRC (Democratic Republic of Congo), Zimbabwe, Mozambique and Burundi of their citizens' plight," Zille said. Many people might seek to return to their home countries, she said. To speed up the process, "we urge the home affairs department and United Nations High Commission on Refugees to mobilise their staff and procure further contract staff to register refugees urgently". Zille thanked Capetonians who had volunteered their services and resources in the crisis.

Economic Growth Hits Six Year Low of 2.1 Percent 
South Africa saw its economic growth slow sharply in the first three months of this year, marking a six-year low, according to official figures. The economy grew 2.1% in the first quarter on an annual basis, from 5.3% in the final quarter of 2007. This is the lowest growth since the third quarter of 2001, when the seasonally adjusted real GDP was 1.1 percent. Figures released by Statistics South Africa (Stats SA) May 27 showed that the increase is the lowest compared to the first, second, third and fourth quarters for 2007 that were reported at 5.1 percent, 4.4 percent, 4.8 percent and 5.3 percent respectively. But the disappointing news is unlikely to convince the Reserve Bank not to increase interest rates at its policy meeting in June, because of soaring inflation. "While weakness in the economy will count for a bit, it is the inflation fears that are overriding," said Razia Khan, Standard Chartered's research head for Africa. "We still believe that rates will be hiked by 50 basis points in June, and that may not be it. The worse-than-forecast slowdown is blamed largely on power cuts affecting the mining industry. The mining industry saw its output drop 22.1% in the first three months of 2008 to its lowest level in four decades. "There is definitely a slowdown in the economy," said Joe de Beer, executive manager of national accounts at Stats SA. "The two industries that constrained growth were mining and quarrying and manufacturing," he said. While manufacturing grew by 8.2% in the last quarter of 2007, in the first quarter of this year it slipped by 1%. Analysts said the latest wave of anti-immigrant violence had no clear impact on the economy to date, but their effects may yet be felt. "Those attacks have made the tourism industry nervous," said the BBC's Caroline Hawley in Johannesburg. "Large mining companies are also concerned because they rely on migrant labour," she added. Economists said the growth outlook for the year would depend on how well the power crisis was dealt with. The electricity, gas and water sector contracted 6,2% in the first quarter, reflecting the inability of power utility Eskom to meet rising demand. The growth prospects for mining and other major industries were likely to remain "constrained" by power limitations during the rest of the year. This was worrying as mining accounted for more than half of SA's exports.

Double Rate Hike Looms as Inflation Hits 10.4%
Reserve Bank Governor Tito Mboweni has warned that interest rates may rise by up to two percentage points at the Bank’s policy meeting in June, after news May 28 that inflation had accelerated to a new five-year peak last month. “Two hundred basis points is possible ... we need to move very strongly now,” he told Bloomberg after speaking at the Gordon Institute of Business Science. “Drastic situations require drastic measures,” he said. The Bank has not raised interest rates by two percentage points in one go since 1998. Official data earlier in the day showed that the annual rise in the CPIX inflation gauge — which is what drives monetary policy — surged 10,4% last month, above 10,1% in March and forecasts for a dip to 10%. That was its fastest pace since December 2002, and marked the 13th month in a row that CPIX, which excludes mortgage costs, has breached its 3%-6% official target range. “You don’t have to be a genius to tell that interest rates have to tighten ... with CPIX at 10,4%, drastic measures are required,” Mboweni said. “Pain is coming ... what’s on the horizon is not that nice.” Mboweni’s tone appeared to be flippant, but he told the seminar he had “tested” the idea of a 200-basis-point hike with his colleagues. Mboweni told Bloomberg later that he did not think other members of the Bank’s monetary policy committee were very far away from his thinking. Statistics SA data showed that the headline consumer price index, the broadest inflation measure, quickened to 11,1% from 10,6% in March — exceeding forecasts for a 10,7% rise. “It’s more terrible news,” said Absa Capital research head Jeff Gable. “There is now a 75% chance that interest rates will rise in August as well as June.” Mboweni had already acknowledged that South Africa's inflation outlook is bleak, stating "We have taken steps in the past [to deal with demand side inflationary shocks], and the possibility of us taking further steps cannot be ruled out," said Mr Mboweni, May 22. Speaking at a conference themed "Challenges to economic growth in South Africa" hosted by the Stellenbosch-based Bureau for Economic Research (BER), the governor said things are likely to get worse before they get better. Mr Mboweni said it looked like the Bank's monetary policy was under greater scrutiny than it might have been before, and that monetary policy was facing a severe challenge that the country hasn't seen since the adoption of inflation targeting in 2000. "Of great concern to us is the inflation expectation for South Africa. "We have now observed the biggest jump in inflation expectation since 2000, and this together with rising fuel and food prices does not bode well for the inflation outlook. "Many have called the Reserve Bank's monetary policy excessive, too strict and insensitive to the plight of the poor, and that monetary policy, it would seem, has been rendered ineffective in the face of demand side shocks. 

Apartheid Victims to Sue Multinationals
The US Supreme Court has cleared the way for a lawsuit against major international companies accused of aiding South Africa's apartheid system. The court issued an order in Washington, DC, May 12 affirming a decision by a lower court, the effect of which is to allow the case to go ahead. The court said it could not intervene over the case because of a potential conflict of interests. Four of the nine justices had ties to the firms involved and could not rule on the case, it said. By law, at least six justices must sit in order for the Supreme Court to hear a case. As a result, the court could only uphold a lower court ruling allowing a lawsuit to go ahead against firms accused of aiding South Africa's apartheid system. Apartheid was a policy which enforced a separation of the nation's races from the 1940s until the early 1990s. The victims are seeking damages reported to be worth more than $400bn (£205bn). Among the corporations accused in the lawsuit are oil firms BP and Exxon Mobil, banks including Citigroup and Deutsche Bank and multinationals like General Motors and Ford. The plaintiffs bringing the lawsuit argue that the corporations violated international law by assisting South Africa's former apartheid government. An appeals court in New York ruled last year that the lawsuit, being brought under a US law which allows foreigners to sue in US courts over breaches of international law, could proceed. The Bush administration, the current South African government and business groups had sought the intervention of the Supreme Court. They argue that the legal action is damaging to international relations and may threaten South Africa's economic development. However, the court's hands were tied by federal laws requiring at least six of the nine justices to hear any case. Chief Justice John Roberts and Justices Stephen Breyer and Samuel Alito all had to sit out because they had financial interests in some of the companies concerned. According to the Associated Press news agency, Mr Roberts owns stock in Hewlett Packard, Mr Alito has shares in Exxon Mobil and Mr Breyer has stock in Colgate-Palmolive, Bank of America, IBM and Nestle. Justice Anthony Kennedy sat out the case because his son works for Credit Suisse, another company concerned. Victims of apartheid who are suing 23 leading multinational corporations in American courts on the grounds that the companies collaborated with the policy have named the defendants in the case as: Barclay National Bank Ltd., British Petroleum, PLC, Chevrontexaco Corporation, Chevrontexaco Global Energy, Inc., Citigroup, Inc., Commerzbank, Credit Suisse Group, Daimlerchrysler AG, Deutsche Bank AG, Dresdner Bank AG, Exxonmobil Corporation, Ford Motor Company, Fujitsu, Ltd., General Motors Corporations, International Business Machines Corp., J.P. Morgan Chase, Shell Oil Company, UBS AG, AEG Daimler-Benz Industrie, Fluor Corporation, Rheinmetall Group AG, Rio Tinto Group and Total-Fina-Elf.

ANC Bulldozes Scorpians
The long-awaited full report of the Khampepe commission of inquiry into the Directorate of Special Operations (better known as the Scorpions) is finally available to the public in black and white -- all 144 pages of it. Not that this is of much consequence, since the controversial unit has become so mired in politics and evokes such strong emotions that its detractors are not about to let the facts get in the way of their spin this late in the game. It is abundantly clear that the African National Congress (ANC) and its allies, which have led a relentless campaign to dissolve the Scorpions and set up a new unit under the control of the police, would have continued on the same course no matter what the report had said. The conventional wisdom in the organisation is that the Scorpions' prosecution of struggle heroes such as Tony Yengeni and Jacob Zuma proves the unit has been taken over by its enemies. The gist of ANC secretary- general Gwede Mantashe's response was that Judge Sisi Khampepe "raises the same concerns we are raising", implying that they are essentially on the same page. And in President Thabo Mbeki's absence, the director-general in the Presidency, Rev Frank Chikane, appeared intent on defending his boss's inexplicable failure to release the report when it might still have had some influence on the debate, rather than standing up to the ANC steamroller. For the record, the full report adds little other than detail to the summary of Khampepe's recommendations that was released shortly after the commission finished its work two years ago. This recognised that there were problems with reporting lines and who took responsibility, and in the way the Scorpions operated. Crucially, however, it concluded that there was nothing unconstitutional about the unit being independent of the police and falling under the National Prosecuting Authority. Other than recommending firm action by the executive to ensure the two competing law enforcement agencies pulled in the same direction in future, and that political oversight over the Scorpions' investigative function be transferred to the safety and security ministry to facilitate the co-ordination of such activities, Khampepe essentially endorsed the reasons the unit was set up in the first place as well as the key elements that make it effective. None of the "concerns" the ANC is so happy to share with Khampepe is insurmountable within the existing structure, and that is one of the areas where Mbeki has again failed the country through his inaction. If the government has "dealt" with all of Khampepe's recommendations, as Chikane insists, this action has been so low-key as to be undetectable. Certainly, it has been too weak to constitute any sort of effective defence against the ANC's ruthlessly expedient body blows. Chikane asks that the voting public judge whatever unit is intended to replace the Scorpions on whether it weakens or strengthens the capacity of the state to fight crime. But by then it will be too late. Mbeki may have capitulated to the ANC, but that does not mean the opposition and civil society must too. The destruction of the Scorpions should be resisted by freedom-loving South Africans using all means still available to them, including the courts and the public participation process the proposed enabling legislation will have to go through.

Leftward Leap if ANC Allies Get Their Way
The tripartite alliance summit has made a raft of economic proposals which, if implemented, could signal a major shift to the left when President Thabo Mbeki steps down next year. The decision of the summit to make the African National Congress-led alliance the "strategic centre" suggests much greater influence of the ANC's leftist allies on economic policy and choosing who is deployed to public office. This is evident in decisions taken including to look at inflation targeting again, to allow Parliament to amend money bills, to remove VAT on a wide range of basic foods, and to have a moratorium on privatisation and outsourcing of public-sector utilities. The proposed changes come amid the growing influence of the ANC's left allies in the alliance since the election of Jacob Zuma as ANC president in December. The influence of the left in the alliance will now also extend to the provinces. "Capacity needs to developed to achieve this object," ANC secretary-general Gwede Mantashe said. The allies will also participate in the drafting of the ANC's election manifesto and monitor implementation. Mbeki survived a South African Communist Party (SACP) push at the summit to have him removed as president of SA, with the alliance instead opting for a compromise governance summit between itself and the state. The meeting, set for June or July, is yet another attempt to get Mbeki's government to begin implementing policy changes ushered in with Zuma's victory. The alliance will attempt to use the summit to bind Mbeki for what remains of his term in office. Mbeki has so far resisted appointing ANC deputy president Kgalema Motlanthe to the cabinet as a way of managing the transition between his administration and the ANC's new crop of leaders. The first indication of the government's preparedness to take the ANC's proposals on board will be Finance Minister Trevor Manuel's medium-term budget expenditure framework in October. The current budget is a reflection of the government's economic policy under Mbeki as ANC president. Should the alliance manage to get its proposal on money bills accepted, Manuel could face resistance from ANC MPs in the National Assembly when he faces Parliament in October. Speaking after the summit, Mantashe said inflation targeting should not be used as a "blunt instrument" and the alliance called "for urgent national reflection on the appropriateness of inflation targeting as well as the ranges chosen as policy for SA given its developmental challenges". His comments come on the eve of a possible emergency monetary policy meeting to respond to the deteriorating inflation outlook, which could lead to more aggressive interest rate hikes. 

Erwin Quit Shock - No Fallout With Manuel
Public Enterprises Minister Alec Erwin said May 18 he would retire after the elections next year, becoming the first high-profile member of the state's economics management team to indicate he will not be serving under a post-President Thabo Mbeki government. Erwin's spokeswoman, Vimla Maistry, confirmed he would step down. "The minister would like to confirm that he would not be serving another term. His decision was taken long before the change in African National Congress leadership," she said. Erwin is seen as a member of Mbeki's inner circle. His departure will raise a question mark over the future of other leading members of the economics "dream team", especially Finance Minister Trevor Manuel. His decision comes after a report in the Sunday Times of a clash between him and Manuel over a proposed funding model for state-owned enterprises. In his budget vote speech in Parliament, Erwin sketched an ambitious programme for state-owned enterprises in the future, and suggested their funding be dealt with separately from established treasury practice for funding state-owned enterprises. According to the Sunday Times, Manuel had rejected Erwin's funding idea, leading to a rift between the two men. Erwin has dismissed the report, saying there was consensus within the government over how state-owned companies should be run. Presidential spokesman Mukoni Ratshitanga, when asked last night about Erwin's decision, said: "Why should the president be aware of somebody's personal position? It is not of importance to us. "Will this president be making cabinet appointments next year? If you view it that way, we have got to conclude that you want to invent scarecrows." Erwin has been one of the key architects of the government's economic policies, serving in deputy and cabinet posts since 1994.

Erwin Failed to Learn From Mistakes
If it wasn't so misguided there'd be something almost touching about Alec Erwin's vision for a vastly expanded state-owned industrial empire. It would, he says, thrive on massive infrastructure spending by the state in the next two decades. In government, Erwin was the architect of the developmental state. More than any other minister, he persuaded President Thabo Mbeki to abandon privatisation. It was he who stands up to the treasury to fight for funds for SAA or Denel or, indeed, Eskom. It's been Erwin's dream that has kept Coega ticking over. Backed always by Mbeki, his big idea is that if the state puts in place big industrial projects then private enterprise will inevitably sprout up around them, supplying services and goods. It's not an unrecognisable model. But Erwin has not learnt from his mistakes. Neither has the African National Congress he represents. It also commits the regular error of trying to give people what it thinks they need, rather than asking them what they want and giving them that. Erwin does the same thing on an industrial scale and if his new "vision" is any guide, that scale is about to grow exponentially. Coega is a case. It languishes, dusty and still largely empty, because it is an industrial imposition on an area that can't support it. Eskom, whose generating monopoly Er-win rescued, has just proven to the nation that he made a poor call. Part of the problem is that Erwin looks to developmental success stories to make his case and they tend to be the Asian tigers. But they had something to start with that we don't have even now -- great education systems and virtually unlimited supplies of skills. But who will run his new industrial kingdom? Even now, with just a limited number of companies, the state struggles to find solid leadership for them. Erwin, as always, has an answer. First, he has argued louder than any other minister that affirmative action cannot continue indefinitely. And May 14 in Parliament he began to argue for state enterprises to be more liberally regulated insofar as their finances were concerned. In other words, his state enterprises would not always have to seek out black managers and they would not have to go cap in hand to the treasury when they ran out of money. They would be as dynamic as private sector companies! We wish the minister well but it is frightening that this new vision could have become the legacy the Mbeki administration leaves to a Zuma government. The thinking would certainly suit it. But a hugely ambitious developmental economic model without the skills to run it and in the hands of a left of centre government is just about the worst thing we can imagine for this economy. 

US Congress Moves to Erase 'Terrorist' Label from the ANC
The United States House of Representatives passed legislation May 8 to erase from government records the designation of South Africa's ruling African National Congress (ANC) and its leaders as terrorists. The legislation, which enjoys bipartisan backing and is supported by the State Department now heads to the U.S. Senate, where it is expected to win easy passage. The ANC led a decades-long struggle against apartheid in South Africa. During the 1980s, the ANC was included on the Reagan administration's list of "terrorist" organisations, which led to travel restrictions on visits to the United States. As a result, a special waiver is still required each time a U.S. visa is issued to any ANC member and several ANC applications have been rejected. "This is a country with which we now have excellent relations, South Africa," U.S. Secretary of State Condoleezza Rice said in recent Congressional testimony. "It's frankly a rather embarrassing matter that I still have to waive in my own counterpart, the foreign minister of South Africa, not to mention the great leader Nelson Mandela," she said, referring to South Africa's former president who remains on the United States government terrorism watch list. The bill's sponsor, House Foreign Affairs Chairperson Howard L. Berman (Democrat-California), welcome today's House action. "Despite recognizing two decades ago that America's place was on the side of those oppressed by apartheid, Congress has never resolved the inconsistency in our immigration code that treats many of those who actively opposed Apartheid in South Africa as terrorists and criminals," Berman said. John Kerry (Democrat-Massachusetts) May 6 introduced parallel legislation in the U.S. Senate. In a press statement, Kerry called the notation "deplorable" and said that "no bureaucratic snafu can excuse this international embarrassment." Supporters hope that the bill will be signed into law before Mandela's 90th birthday on July 18.

Africa: Continental Economic Outlook Report Launched
Strong growth in Africa's gross domestic product is expected to continue in 2008 and 2009, according to Louis Kasekende, the chief economist at the African Development Bank (ADB). He was speaking in Maputo at the launch May 11 of the seventh edition of the "African Economic Outlook", a report on the health of the continent's economy compiled by the ADB, the United Nations Economic Commission for Africa (ECA), and the Organisation for Economic Co-operation and Development (OECD). Kasekende put Africa's overall growth rate at 5.7 per cent in 2007, and predicted that it would rise to 5.9 per cent this year, a rate that would remain steady in 2009. It was particularly encouraging that growth in 31 African countries is expected to be higher than five percent this year, compared with 25 countries where GDP grew by more than five per cent in 2007. Last year, 13 countries had growth rates of between three and five per cent, and in 2008 that figure is predicted to reach 16. In a masterpiece of understatement, the report remarks that some countries "continue to face serious problems, including the humanitarian catastrophe in the Darfur region of Sudan, economic collapse in Zimbabwe, conflicts and political unrest in Chad, Kenya and Somalia, which are likely to dampen their growth prospects". Kasekende noted that rises in the price of oil and other commodities have brought "windfall gains" to those African countries who are net exporters of these goods, while net importers "have suffered". Indeed the report originally took a complacent attitude to oil prices. The assumptions on which its forecasts are based included a prediction that oil prices would stabilise at around 90 US dollars a barrel. This assumption was so out of line with reality that an Addendum to the report had to be hastily published admitting that its assumptions were "plausible but optimistic" and "subject to significant downside risk". The most ominous such risk is the soaring price of oil and grain, leading to "increased inflationary pressure, which is threatening fiscal stability and worsening the balance of payments in food importing countries". Bad news for consumers might be good news for African food producers - but the Addendum warns that "for persistently higher commodity prices to translate into increased output and contribute to GDP growth, agricultural reforms need to be accelerated". Could Africa also suffer from the "sub-prime crisis" in the United States (the euphemism economists use for the deranged lending polices which have wrecked the US housing market, and whose effects are rippling through the international finance system)? Here the report's authors claim that Africa "appears to have been largely cushioned from the first round effects of the financial market turbulence due to the limited integration of African economies in the global financial markets". Furthermore, Africa was now less vulnerable to a banking liquidity squeeze, because debt levels have fallen sharply, and most countries now have their exchange rates "set at more realistic levels". Barfour Osei, the ADB's Chief Research Economist, pointed out that when the continent's forecast growth is broken down by region, the southern African growth rate is likely to decline in 2008, when compared with 2007. This is largely because of an expected slowdown in the South African and Angolan growth rates. (Angola has been growing at an average of 11.8 per cent a year between 2000 and 2007, and so a slowdown is hardly surprising). The Mozambican growth rate (7.2 per cent in 2007) is expected to hold steady. An obvious cleavage is between net oil exporters and net oil importers. The oil exporters had an average growth rate of 6.4 per cent in 2007, expected to rise to 6.8 per cent in 2008. The average growth rate for the net importers, however, is predicted at five per cent. The problem with the oil exporters is that their economies tend to be excessively dependent on oil - the ten least diversified economies in Africa in 2007 were all oil exporters. Osei noted that Africa had seen record foreign direct investment of 836 billion US dollars in 2007. But while investment has risen sharply, foreign aid has not, despite all the promises made at successive summits of the G8 group of most industrialised nations. Osei pointed out that since 2004 some 70 per cent of the rise in aid to Africa has been either humanitarian aid or debt relief. Development aid has not risen in line with the speeches made by western leaders.

Security Council Presidency Ends with Criticism of UK and USA
South Africa wrapped up its United Nations Security Council Presidency May 2 and criticised Britain and United States of seeking to embarrass them and overshadow their presidency with the Zimbabwean presidential electoral crisis. South Africa said London and Washington were trying to undermine mediation efforts currently underway in Zimbabwe. The highlight of South Africa's presidency was the historic Summit of Heads of State, which produced a binding resolution cementing a close relationship between the African Union and the UN on peacekeeping and conflict resolution in Africa. Dumisani Kumalo, the Permanent Representative of South Africa to the UN, said: "(We) also share the concerns of the Zimbabwean government, that the UN Secretary General should be neutral in his handling of the political problems in that country." Britain responded saying they did not seek to embarrass South Africa. Russ Dixon, a spokesperson for the British high commission in Pretoria, said that Britain had called for Zimbabwe to be discussed by the Security Council in March 2007 and again now, because realities on the ground in Zimbabwe warranted a discussion. He did not say why he had called for the inclusion in 2007. He said: "As it happened last year, I'm sure you are aware that Britain has always tried to make sure that the issue of Zimbabwe comes to the Security Council in this form, as a briefing during our presidency. In March 2007 Britain had raised Zimbabwe at the Security Council because of police raids on the opposition Movement for Democratic Change headquarters and the arrests and beating of opposition leaders, including Morgan Tsvangirai, Dixon said. In April, Britain raised Zimbabwe again because of the authorities' failure to release the presidential election results. Britain now assumes the presidency of the Security Council, amid suffering a humiliating local council election defeat, the worst in 60 years. Zimbabwe will certainly not be featuring much on the UN agenda as results of the presidential poll have finally been released reflecting the need for a run-off election. Tsvangirai and the MDC party have previously said they see no need for a run-off.

Slowdown in Country's Mergers and Acquisitions
The value of mergers and acquisitions in SA fell 31% to $5,9bn last year from $8,6bn in 2006. But 2006's figure was inflated by a single deal -- the $4,8bn unbundling of Kumba Iron Ore. In Ernst & Young's latest publication 2007: The Year of the Hunters and the Hunted on current and future merger and acquisition activity in the mining sector. It said SA's top three deals last year were French company CFMM Développement's $2bn purchase of Uramin, Impala Platinum's $1,4bn deal with Royal Bafokeng Holdings and Xstrata's $996m buyout of Eland Platinum. Several significant transactions in SA last year saw major mining companies acquiring juniors that had quantified mineral resources. Black economic empowerment has also had a big effect on the local mining sector. In 2006 empowerment deals were worth R24bn, the second consecutive year that mining made the biggest value contribution to empowerment. Over the past 11 years, R91bn of empowerment deals have been concluded in the sector. The global value of mergers and acquisitions in the mining sector last year was $211bn, five times greater than in 2000, but still slightly lower than the $251bn seen in 2006. There were 903 deals last year, of which a mere 34, or 3,8%, were in Africa. Most of the deals took place in North America and Asia-Pacific. Ernst & Young director of transaction advisory services Sean McPhee said the main issues for Africa were political instability and lack of infrastructure. The biggest deals globally involved developed properties. But as Africa opened up and properties moved up the value curve, more funds would flow into the region. Activity has been driven by high commodity prices, securing access to resources, economies of scale and rising demand from emerging economies. Ernst & Young said resource prices were returning to sustainable levels after a long period of depressed prices and it believed there remained potential for further significant growth in demand for commodities. Ernst & Young said cross-border transactions had increased since 2003, as companies recognised they could not achieve success by focusing only on developed countries. But at the same time there was increasing intervention by governments to ensure the security of their resources. "The unilateral imposition of unexpected taxes or the compulsory renegotiation of mining licences have one overarching effect: they deter any further investment in that country's natural resource sector," Ernst & Young warned. McPhee said that mining investments required large sums of money and it was a long time before returns were realised. Certainty over those investments was paramount and any uncertainty would alter the valuation of the investments.

Stats Show Millions More HIV Positive
Shocking new Aids statistics reveal that 2 million more South Africans are infected with HIV than the most recent government estimates show. According to statistics released by the Development Bank of South Africa (DBSA), more than 7,6 million South Africans are HIV-positive - 2,2 million more than the department of health's figures for 2007 state. Of these, about 6,1 million are the economically active people between the ages of 20 and 64, who could contribute to the country's economy. What makes these statistics more alarming is the fact that the data on which they are based are probably more reliable than the department of health's because they were collected at grassroots level and not based on estimates.
The DBSA's 2007/2008 statistics state that:
· 7,6 million South Africans are HIV-positive;
· more than 27 percent of men and women aged between 20 and 64 are HIV positive;
· more than 92 000 babies have been infected, either perinatally or through mother's milk, in the past year;
· the total number of Aids sick by mid-2007 was 1 287 844;
· nearly 722 000 people have died of Aids-related diseases in the past year, bringing the total number of such deaths since 2003 to more than 3,7 million;
· in 2003, the accumulated total Aids-related deaths stood at just under 1 million; and
· 1,2 million of the country's 1,49 million orphans have lost their parents to Aids and this number is expected to increase by more than 336 000 this year alone.
In contrast, the department of health stated last year that there were 5,4 million HIV-positive people in South Africa in 2006. And the Actuarial Society of South Africa (ASSA) estimated in its statistical summary for 2000 to 2015 that there would be 5,6 million HIV-positive people in the country this year. The ASSA had also estimated that there would be 370 000 Aids deaths in 2008. UNAids stated in its 2006 Global Report that 18,8 percent of the population of South Africa was infected, and that 320 000 people died of Aids-related deaths in the country during 2005. The latest DBSA information on one of the biggest killers in South Africa was collected from clinics, local municipalities, development planners, morgues and funeral homes. Updated annually, the figures are used by the bank to determine funding for municipal projects, such as the upgrading of infrastructure. Mark Heywood, the director of the Aids Law Project at the University of the Witwatersrand, said the new data, although untested, reflected the fact that the Aids pandemic remained a massive challenge for the country. "If these figures are accurate, the number of people dying is increasing and the number of people who should be receiving anti-retrovirals, and are not, is increasing," said Heywood. "The social cost of this is going to be enormous. We are not doing enough as a country and there is a danger that we are becoming complacent because there are now institutions such as the National Aids Council, as well as the fact that the government's approach to HIV and Aids has changed." The DBSA figures show that South Africa, a country with one of the highest HIV and Aids rates in the world, is reaching the peak of HIV infections and that intervention programmes are beginning to show some success. Johan Calitz, a senior demographer at the DBSA, attributed the decrease in infections in some regions to the success of nutrition schemes run by NGOs, other non-governmental intervention programmes and the government's roll-out of antiretroviral drugs. He said the number of infections was expected to "level out" by 2010, but that the death rate would continue to accelerate in the foreseeable future. "I think it will drop from 2010, and that from 2014 the population will begin to stabilise," he said, adding that this was on the condition that rates of immigration did not increase. Although the birthrate is declining nationally, and in particular in Gauteng, there is an increase in the total number of HIV-infected babies being born. Prevalence rates at antenatal clinics have increased to 31,67 percent - up 2 percent from last year. The good news is that the number of new infections in KwaZulu-Natal - the province worst affected by the pandemic - have dropped dramatically among adults aged between 20 and 59, despite the dramatic increase in the number of its Aids orphans. Of concern, Calitz said, was the very high percentage of economically active people between the ages of 20 and 64 who were HIV positive - more than 3,5 million women and more than 3,4 million men. In Gauteng, there has been a marked decline in children under the age of four, down about 21000 since 2003. Yet, there are about 2000 more children under the age of four with HIV. Some of the highest rates of infection now appear to be among men over 50 and women over 40, with the rate among those adults of child-bearing age apparently slowing down due to illness and death.

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AUTOMOBILES

Volkswagen SA Aims for Record Export Volumes

VOLKSWAGEN SA will grow its export volumes to new records this year after it was awarded a contract for 10260 fifth-generation Jettas, the company said May 8. Volkswagen SA MD David Powels said the company planned to export more than 40000 vehicles this year. This included the new export order for Jettas which would be sold in countries including Australia, New Zealand, Japan, UK and Ireland. "The Volkswagen worldwide group posted record sales last year which continued in the first quarter this year, placing the group's worldwide production facilities under capacity pressure. As a result, Volkswagen SA has been given the opportunity to build fifth-generation Jettas for these key right- hand drive markets," he said. The additional order came on top of a plan to export 21000 fifth-generation Golfs and 8800 Polos this year to countries in the Asia Pacific region, with most of the cars going to Japan. The exports were a chance for Volkswagen SA to show its parent and clients in many other countries that the Uitenhage plant was capable of producing world-class vehicles, Powels said. The exports were also welcome as domestic sales volumes were under pressure from macroeconomic factors. He said Volkswagen SA -- a wholly owned arm of Volkswagen in Germany -- expected to build about 10000 vehicles this year, with 40% exported. By the end of April, about 100000 fifth-generation Jettas would have been exported to Asia Pacific countries and about 350000 vehicles would have been exported by the company to various markets worldwide. The National Association of Automobile Manufacturers of SA (Naamsa) said the domestic vehicle manufacturing industry was expected to export 285000-300000 vehicles this year, well up on about 171000 last year. Naamsa executive director Nico Vermeulen said SA's automotive policy regime had confirmed its value at a time when domestic vehicle sales were under severe pressure. Powels said Volkswagen SA had optimised its vehicle, engine and component exports under the Motor Industry Development Programme and exports would be at the core of strategy. 

Vehicle Sales Slow as Higher Interest Rates Bite
Tough economic conditions are adding salt to an already wounded vehicle sales market battling to deal with the effects of higher interest rates. National Association of Automobile Manufacturers of SA (Naamsa) figures released May 6 showed that interest rates, which have gone up six times since 2006, continued to result in vehicle sales falling at an annual 2,8% to 42359 units in April from 43563 in the same month last year. "We remain pessimistic about the outlook for the car market this year and next year, as conditions continue to worsen on the consumer landscape," Standard Bank economist Danelee van Dyk said. The economic factors involved are rising energy, food and fuel costs and negative consumer sentiment and business confidence. Van Dyk said given that a further interest rate hike was on the cards for June, a visible turnaround in car sales was only expected by 2010. "While it is anticipated that growth in consumer debt will have eased further by next year, as debt accumulation will be stymied by the higher financing burden, and inflation will have moderated, consumers will still be hung-over from the current confluence of negative conditions eroding disposable income." The rand's weakness, the cost of importing material and parts and the increasing production costs are adding to manufacturers' woes. However, there is a flickering light at the end of the tunnel with strong investment sentiment and infrastructural spending, boosting sales of vehicles in the medium and heavy truck segments of the industry. The commercial vehicle market has maintained its upward momentum and April’s sales were 1307 units and 2120 units, for the medium and heavy truck segments respectively. The market had also recorded an improvement of 198 units, or 17,9%, in the case of medium commercial vehicles, and 547 units, or 34,8%, in the case of heavy trucks and buses -- compared to the corresponding month last year. During April the industry exported 22550 new vehicles, representing an improvement of 9307 vehicles, or 70,2%, compared to the 13243 vehicles exported during the same month last year. The industry body said that for the first four months of this year, export sales reflected an impressive year-on-year improvement of 45,5%. However, Naamsa projected dim prospects for the remainder of this year, saying that the new domestic car and light commercial vehicle sectors were expected to remain under pressure as a result of tight monetary conditions, rising inflationary pressures, high levels of household debt and a further modest slowdown in economic activity levels.

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ELECTRICITY

Summit Agrees to Hike Electricity Prices Over Five Years
Following the National Stakeholder Summit on Electricity May 13 all relevant stakeholders have recommended that any increase in electricity prices would occur gradually over a five year period. Speaking after the deliberations of the summit at the Sandton Convention Centre, Nedlac Director Herbert Mkhize said the recommendations taken by the summit have been accepted by all the relevant stakeholders. "As this is the first summit of its kind ever, I am thrilled by the way all the affected representatives have come to this conclusion ... on the deliberations, we had to consider those who are disadvantaged," said Mr Mkhize. Government, labour, community forums among others were represented at the summit. Eskom and municipalities were told to protect the poor from the impact of the increases and that any increases should be "poor-sensitive". It has also emerged [at the summit] that the tariff increases would not be introduced in one massive hike, but would be phased in over five years to reduce its negative impact. Minerals and Energy Deputy Director-General Nelly Magubane said all the stakeholders should make sure that all the agreed recommendations are put together and form part of Eskom's revised application. "We now need to look at different mechanisms and other fighting instruments together with Eskom to see how we can achieve recommendations of the proposal," said Ms Magubane. Eskom's Chief Executive Officer (CEO) Jacob Maroga said the summit needed to be recognised as a deep extra-ordinary scenario. "As this is the first time to meet on the issue of this nature, we need to recognise the seriousness of the energy crisis and see how solutions can be plugged in to what we already have in the pipeline," said Mr Maroga. He said after submitting the revised proposal to the National Energy Regulator of South Africa (NERSA), all the achievements and combination of factors will determine the financial sustainability of Eskom. "With all these efforts, we want to make the industry reliable and sustainable as we need to be in a stable and viable environment for a long time," the CEO said. Eskom would re-submit its application to the energy regulator on the proposed tariff hikes. The summit delegates determined that government should pump more money into Eskom to maintain its financial health and credit rating. The summit has appointed individuals such as Public Enterprises Minister Alec Erwin, Cosatu General Secretary Zwelinzima Vavi, and African National Congress Secretary General Gwede Mantashe among others to meet urgently and agree on the appropriate tariff increases to be spread over five years. 

Electricity Exports On the Up Despite Power Crisis
South Africa’s electricity exports increased 6,1% in the three months to March this year, compared with the same period last year, according to Statistics SA.
Eskom, which generates 95% of the electricity produced in SA, has come under fire for continuing to export electricity at a time when the country is faced with unprecedented power shortages. To make matters worse, electricity imports in the first three months of this year were down 22,4%, compared with the same period last year. Statistics SA said power consumption in March fell 3,2%, compared with last year. The estimated volume of electricity consumed in the three months to March was down 0,9%, compared with last year. The decreases were below the 10% savings that Eskom wants taken out of the national grid. Electricity production in March this year fell by 2%, compared with the same period last year. Eskom reported a decrease in production of 2,4%. In the three months to March, electricity production was up by 0,5%, compared with last year. The eThekwini Metropolitan Municipality said May 7 that its consumers had not saved enough power during the scheduled load shedding, which Eskom recently suspended. The municipality's head of electricity, Sandile Maphumulo, said they were on standby in the event of Eskom's requiring emergency load shedding. "The suspension of load shedding does not mean that we are off the hook. We need to reduce by 10%. Durban is still not saving enough," said Maphumulo . Other municipalities said this week they were still calculating the savings achieved during load shedding. A task team, set up in April to "fast-track interventions to reduce electricity consumption by the required 10%", and that includes Eskom senior executives and municipal officials, met May 6. The contents and outcome of the discussions are yet to be made public. This follows Eskom's decision to suspend load shedding, saying it had seen an improvement in municipal savings. The utility said it would resume the practice should the grid come under "unexpected" pressure.

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FOOD AND DRINK

Sabmiller Buys 99 Percent of Brewer in Ukraine
SABMiller has bought Ukrainian brewer CJSC Sarmat for an undisclosed amount, as part of group strategy to expand into emerging markets. SABMiller Europe MD Alan Clark said the acquisition of a 99,84% interest in the Ukrainian company -- representing a gross asset value of about $130m -- marked the brewer's entrance into the "fast-growing and attractive Ukrainian market". The brewer said Sarmat was one of the largest brewers in the Ukraine and on completion of the deal SABMiller would operate a brewery in Donetsk with an annual production capacity of 2,9-million hectolitres, producing the Sarmat, Dnipro and Drive Max brands. It has 7% market share. The Ukrainian market showed a four-year growth rate of 14% a year until 2006 and the medium-term forecast indicates growth is expected to be higher than any other major central and eastern European market. In 2005, Sarmat had 13,2% of the Ukrainian market, with four breweries and 30 beers, including light, non-alcoholic brands. Exports to Russia, Moldova, Belarus, Estonia, Israel, Germany and Ecuador accounted for 10% of sales. Clark said while Ukraine's beer market had had "exceptional" expansion in recent years, it was still behind other central and eastern European countries in terms of per capita beer consumption. Absa Asset Management Private Clients analyst Chris Gilmour said that while the deal was relatively small, it gave the brewer a foothold in a growing market. Low consumption levels meant there was room for growth and SABMiller had successful operations in the region, which could allow it to benefit from synergies. However, based on the apparent price for a hectolitre, the company had paid a premium, he said. Sarmat is owned by System Capital Management, a diversified holding company that manages a number of interests in the Ukrainian market. The deal is subject to competition authorities' approval.

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INFORMATION TECHNOLOGY

Datatec Revenue Rises to $4bn for the First Time

DATATEC has passed the $4bn milestone in annual revenue, and aims to reach $5bn in this financial year. CEO Jens Montanana said May 14 Datatec (DTC) could grow 25% again this year, chiefly by bulking up the operations it already has, with acquisitions playing only a minor role. Most growth will come from emerging markets in South America, Asia, India and Africa, where the demand for technology is untapped compared with first world regions. Possibly less ambitious is a target of hitting a profit margin of 4% in the medium term, which may prove conservative as Datatec continues to pare its operating costs and gains more economies of scale. Its profit margin remained static at 3,8% in the past year. "The upside in our business isn't bolting on acquisitions, it's getting the regional balance right and getting these areas to mirror our operating profits and efficiencies," Montanana said. "If we can do that our margins may grow to 4% or 5%." The $4bn revenue for the year to February was up 27%, while a net profit of $80m was up from $62m. Headline earnings per share rose from $0,40 to $0,45 and shareholders will receive a cash distribution of $0,12. Montanana said it had been "a pretty robust year" underpinned by tight cost controls and better productivity. For the first time Datatec earned less than half its revenue in the US, which contributed 42%. "The increasing globalisation of our business is helping us spread our bets more evenly across major geographies," Montanana said. European operations still had room to become more efficient, which would nudge up the profit margin. Its largest division is the technology supplier Westcon, which contributed almost $3bn of revenue. Its gross margin topped 10%, a level last seen in 2001, thanks to a better product mix, selling more high-margin data security products and making some acquisitions in Europe. Softness in the US economy prompted its Logicalis division to pare its annual running costs by $3m last year, fuelling a 300% boost in performance for the second half in the US. Last month Logicalis in Brazil completed a $77,2m merger with Promon to become a market leader in six countries, with plans to expand further. Frost & Sullivan analyst Spiwe Chireka said the Latin America move brought exciting potential, especially since a slowdown in the US was increasing the importance of ventures in other regions. Datatec's recent acquisition of an African technology distributor had taken it into eight more countries, including the highly lucrative markets of Ghana and Nigeria. It was now positioned to take advantage of the high growth in Africa's untapped hi-tech markets, Chireka said. Datatec had bought itself a reasonable footprint in Africa, Montanana said, and operations in Africa and the Middle East had grown their revenue from $100m to $250m over two years. Datatec would now work to make those operations more profitable. Expansion into emerging countries was often triggered by working with large telecoms customers such as MTN, because they expected their suppliers to grow with them.

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INSURANCE

Old Mutual Agrees to Healthcare Merger

Old Mutual and Lethimvula Investments have agreed to merge their healthcare businesses to form SA's largest medical insurance administrator. Old Mutual SA (Omsa) MD, Paul Hanratty, said the new entity would insure about 2,3-million health insurance policies, ahead of Discovery Health, which covers 2,05-million lives. Lethimvula and Old Mutual had signed an agreement and were preparing to study each other's books before moving to final negotiations. The process could be completed by the third quarter of this year. The deal is subject to Competition Commission and regulatory approvals, Hanratty said. Lethimvula owns Medscheme, SA's second-largest medical insurance administrator after Discovery Holdings' Discovery Health. The deal was aimed at combining the administration and managed care businesses of Old Mutual Healthcare, Medscheme and Rowan Angel, Hanratty said. "The intention of the parties is that Lethimvula will receive the majority shareholding in the administration company in exchange for the transfer of its respective administration and managed-care businesses into the company. "Omsa will retain a minority shareholding in the company," he said without divulging the quantum of the stakes. "We believe the challenges of providing affordable and high- quality medical scheme administration are best met by a company with sufficient critical mass, advanced IT processes and high-quality management. "We see this potential deal as meeting our strategic objective of delivering the best quality, value-for-money offering to market," Hanratty said.

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INTERNATIONAL ECONOMIC RELATIONS

Indian Companies 'Keen to Invest in South Africa'

Indian investment in SA is expected to soar despite bureaucratic and tax challenges, says a study released by PricewaterhouseCoopers May 27. Indian companies with operations in SA were already surveyed, as were South African companies interested in investing in India. India respondents felt crime, health and safety issues, and perceived high corporate and individual tax rates were the biggest challenges to setting up operations in SA. For South African companies moving into India, that country is seen as a highly rewarding investment opportunity, but the social and cultural issues related to doing business there are problematic. The report was from PricewaterhouseCoopers' India-Africa Desk, which was set up to serve a growing need among investors looking at India and SA as viable destinations. Troopti Naik, PricewaterhouseCoopers India-SA leader, said India was now the world's 12th largest economy and third largest in terms of purchasing power parity. In the 2006- 07 financial year, India's gross domestic profit grew at an estimated 9,4%, after growth of 9% in the previous year. For inbound companies (from India coming to SA), the report indicates the Eskom energy crisis and obtaining work permits are significant challenges. Many companies felt the personal tax rate was too high compared with benefits. Respondents found South African exchange controls to be cumbersome and 66% used services of auditing firms in seeking advice on investment in SA.

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MANUFACTURING

Surprise Fall in Output Sparks Fear of Factory Recession
Manufacturing output fell unexpectedly in March, contracting 1,1% versus the same month last year and reviving fears of a recession in the economy's second-biggest sector, official figures showed May 8. The fall followed an annual rise of 3,9% in February and marked the first slump in output since September last year, when output was knocked by strikes in the vehicle industry. Production fell 4% during the month after seasonal adjustments, and declined 0,5% in the first quarter of this year compared to the previous quarter, Statistics SA said. "This doesn't bode well for economic growth prospects for the first quarter of this year," Standard Bank economist Danelee van Dyk said. "Should this performance persist in the second quarter, the manufacturing sector will be in a technical recession." So far this year, output from manufacturing, which accounts for about 16% of the economy, has proved resilient to power outages and slowing demand, eroded by rising interest rates. Consensus forecasts had predicted the sector would expand by an annual rate of 3% in March. But the decline was in line with a sharp fall in the Investec purchasing managers' index (PMI) for the month, which hit a five-year low well below the crucial 50 level, pointing to a contraction in output. Normally a reliable health gauge for the sector, the PMI index rebounded strongly in April, suggesting activity will recover, but at a modest pace. "The manufacturing sector outlook remains poor in the face of slower consumer spending, higher interest rates, a weaker US economy, and Eskom power rationing," Nedbank economist Johannes Khosa said. "Combined with the decline in other indicators such as vehicle sales and retail sales, this points to an economy losing momentum," he said. Economists believe overall growth will slow to nearly 3% this year from 5,1% last year -- well below official forecasts of 4,0%. Initially, a rebound was anticipated next year, but more increases in domestic interest rates and a global slowdown are prompting many analysts to revise those estimates lower. "Today's output data are unlikely to meaningfully alter perceptions of a gradual slowdown in the economy -- albeit one not large enough to stop the Reserve Bank from hiking interest rates further," Citigroup economist Jean-Francois Mercier said. The March plunge probably overstated weakness in output as the February leap year and the timing of Easter in March had introduced higher volatility than usual, he said. Falls in output of motor vehicles and other transport equipment along with metal products, machinery, and glass were the main culprits behind the annual decline in the data. During the month itself, all categories recorded declines.

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MEDIA

Sanef Concerned Over SABC Developments

The South African National Editors' Forum (SANEF) expressed its concerns May 9 about the "bizarre" situation that has been happening at the SABC saying that "the top level disciplinary issues and staff departures are likely to have a highly disruptive effect on the conduct of the broadcaster's operations". According to the statement, SANEF believes that the selection of board members should be reviewed to avoid party political influences and ensure greater civil society participation: "Another factor that needs to be reconsidered is the political "deployment" of executives to the SABC. "SANEF hopes that the issues will be speedily resolved so that the broadcaster, which communicates to the biggest media audience in the country, will be able to return to the role of public broadcaster as per its mandate." Early in May, head of news and current affairs programmes Snuki Zikalala was suspended, pending an inquiry into his conduct by group CEO Dali Mpofu, who in turn was suspended a day later by the SABC board, pending an inquiry into his alleged refusal to implement decisions of the board. The board itself, only a few days earlier, was told by the parliamentary portfolio committee on communications that the committee had lost confidence in it, indicating that the appointment of its members is likely to be reviewed, if not ended, by Parliament soon.

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MINING

Hundreds of Miners Want to Return to Mozambique 

Hundreds of Mozambicans working at the East Rand Proprietary Mine (ERPM), at Boksburg, just outside Johannesburg, say they want to return to Mozambique until the current anti-foreigner violence has died down. According to a May 23 press release from the Mozambican Labour Ministry, 708 Mozambican miners work at EPRM. Since coming under threat, they have been protected by the South African police at a camp belong to the mining company. A delegation from the Mozambican High Commission and the Labour Ministry Office in South Africa met with the mine management to discuss arrangements for the possible repatriation of these workers. A second mine employing Mozambicans, the J.C. Gold Mine at Primrose, also near Johannesburg, came under attack May 18. It has closed down its operations and sent its foreign workers, including 190 Mozambicans, on leave. The Labour Ministry says that in all the other mines where Mozambicans work there have so far been no incidents. In most mining companies the work force is secure, living in camps that are protected by the companies' own security forces as well as by the police, and where unauthorised people would find it difficult to enter. There are about 50,000 Mozambicans currently working in the South African mining industry.

BHP Billiton Ends Petra Partnership
Global resources group BHP Billiton has pulled out of its two diamond exploration joint ventures with Petra Diamonds in Angola, Petra said May 13. "Our joint venture with BHP Billiton has been rewarding, but we now have the opportunity to progress exploration at Alto Cuilo and Luangue in a way that is more oriented to Petra's approach to mining," Petra chairman Adonis Pouroulis said. Petra's "enthusiasm and belief in Alto Cuilo and Luangue is as strong as ever". London-based investment house Fairfax said Petra was large and strong enough to push projects ahead on its own. "Petra may now accelerate progress at the giant Alto Cuilo and Luangue projects unfettered by their former partner's more conservative working practices," it said. Asked whether Billiton's withdrawal indicated the deposits were commercially unattractive, Fairfax analyst John Meyer said it was more likely that Billiton was looking at bigger projects, such as the Olympic Dam in Australia, and so far had found nothing of sufficient scale in the diamond sector to interest them. Meyer said diamond prices had not moved up in the same way as that of copper, aluminium or iron ore. He said he would not be surprised if Billiton planned to exit the diamond business altogether, including its projects in Canada. But a Billiton spokesman said that diamonds remained a key part of the group's portfolio. The decision to withdraw from the two Angolan joint ventures with Petra was made for "commercial reasons" and the group was proceeding with a number of other joint venture diamond exploration projects in Angola. By the end of March Billiton had earned 75% of the Alto Cuilo project and 25% of Luangue and the two parties were determining the final terms of the hand-over, Petra said. Petra now owns an effective 41,2% of Alto Cuilo, with Angolan state diamond company Endiama holding 51%. In Luangue Petra's interest is 39%. Petra said at Alto Cuilo, $10m would be spent from internal cash resources to advance work on the project to the end of this year, while at Luangue, $12m would be spent up to the end of next April. It planned to revise its exploration strategy at Alto Cuilo, moving away from searching for kimberlite pipes and instead exploring the shallower deposits around the crater rim, where it believed there was potential for a world-class diamond deposit, similar to De Beers' Williamson mine in Tanzania.

Harmony to Make Most of Gold Boom
Harmony Gold Mining was considering ways of extending the lives of its high-cost mines around Virginia in Free State, because they contained substantial reserves that could be profitable at current gold prices, CEO Graham Briggs said May 8. Harmony realised an average gold price of R225541/kg in the March quarter, when the price ranged as high as R250000 and as low as R185000/kg. Briggs said Harmony management was bullish about the gold price but for long-term planning assumed a price of R180000/kg. In view of the price volatility, Harmony would invest in its short-life mines in Free State where it could quickly derive profits at grades of 3,5g /ton-4g/ton. It would not sink new shafts. The group is also evaluating the potential of three deposits in the Evander basin, where drilling has shown relatively shallow ore bodies at Evander South and Poplar. Together with the deeper Rolspruit deposit, these ore bodies contain an estimated reserve of over 12-million ounces of gold. Harmony also planned to accelerate its gold surface projects. Briggs said Project Phoenix in Free State, which extracts gold from tailings (the residue of historic mining), was producing gold at R90000/kg and processing about 500000 tons of tailings a month, which could be increased to 1-million tons a month. As Harmony had about a billion tons of slimes dams in Free State, there was a lot more potential for surface projects, he said. Harmony is investigating the potential of uranium contained in tailings at its Phakisa, Tshepong and Msimong mines. Once the size of the asset was understood, Harmony could inject it into its recently created 40%-held subsidiary, Rand Uranium. Such a move was not inevitable, Briggs said, but Harmony had an interest in ensuring Rand Uranium was successful. In the March quarter the group's production from continuing operations fell to 10347kg, from 12403kg in the December quarter, reflecting lower tons milled due to the 10-day Christmas break and power shortages. All Harmony's production is now generated in SA because it has sold its Australian mines. It is building a mine at Hidden Valley in Papua New Guinea in which it recently announced it had partnered with Newcrest Mining. In SA, it has also sold its Orkney operations to Pamodzi Gold and 60% of its Randfontein uranium deposits to Rand Uranium. The money from these disposals could be used to repay about R2bn of short-term debt owed to Nedbank, acting financial director Frank Abbott said. Cash operating profits almost doubled to R828m in March from R450m in the previous quarter, mainly because of the higher gold price and lower working costs after restructuring undertaken in the past six months. Harmony has ceased continuous operations -- working 24-hours a day, seven days a week -- at three of its operations. In the March quarter it retrenched 1421 staff.

New Bushveld Mine Feasible
Global gold producer Barrick Gold had completed a feasibility study on the Sedibelo platinum project on the western limb of the Bushveld complex which suggested that a mine costing $700m with a 16-year life would be economically attractive, it said early May. It has earned a 10% stake in the project by completing the study, and could earn another 40% if a decision were taken to build a mine. The remainder of the property is owned by the Bakgatla ba Kgafela tribe. Barrick has no other projects in SA and no other platinum projects anywhere in the world, which makes it seem unlikely it would want to proceed with this development. Spokesman Vincent Borg said the group was defining its options now and he could not speculate on what those options were. "We may proceed or consider alternatives," he said on Wednesday. One of Sedibelo's closest neighbours is Toronto Stock Exchange- and AIM-listed Platmin, which is constructing the Pilanesberg Platinum Mine, to start producing early next year. Asked if Platmin would be interested in taking on the Sedibelo project, CEO Ian Watson said Platmin had approached Barrick Gold as there were clear synergies between the two companies' properties, but no talks were under way about buying Sedibelo. Platmin had also talked to the Bakgatla ba Kgafela from time to time about opportunities. Barrick said Sedibelo could produce about 240000oz of platinum, palladium, rhodium and gold a year from an open-pit operation for its first five years at a cash cost of about $700/oz, which compares with the current basket price of about $2100/oz. After year five, underground operations could be ramped up to increase annual output to about 290000oz a year for about 10 years at a cost of about $600/oz. Barrick Gold inherited the Sedibelo project when it took over Placer Dome a year ago. Elsewhere in Africa it has three operating mines and two exploration projects in Tanzania.

Lower Uranium Price Fails to Deter Miners
New uranium investments and expansions were being announced as fast as ever, despite the recent slump in uranium companies' stock on a falling uranium price. Although investors are not taking a long-term view, uranium company management teams are planning for the next decade. Until this year, uranium prices had soared for six successive years on expectations of a shortage. Russian armament stockpiles were sold down and there had been little past investment in new uranium mines, while demand for alternative energy sources rose on global growth and high oil prices. Early May the uranium price reported by TradeTech dropped to $65/lb, half the peak of $138/lb seen a year ago. London-based securities house Fairfax said market participants were reluctant to conclude deals as a surplus was expected next year. But it warned that supply disruptions could easily reverse this outlook. Bloomberg reported that investment house Macquarie was forecasting an average price of $65,10/lb this year and $60/lb next year, which was a reduction from its previous forecast of $89,90/lb this year and $82,50/lb next year. Macquarie said after a uranium surplus this year and next year, there would be a "gradual but significant tightening in the market" by 2012 as uranium would be ordered for new nuclear reactors being commissioned between 2013 and 2016. Investec Asset Management said in a presentation on the outlook for commodities that it was positive on uranium in the long term because of the role nuclear energy would play in demand and potential supply shortages, but in the short term it believed the market had become overheated. Uranium companies are scrambling to bring new projects on stream to meet future demand but have been hit by implementation problems ranging from flooding at Cameco's Cigar Lake project to shortages of sulphuric acid at Uranium One's Kazakhstan mines and technical issues at its Dominion Mine in SA, as well as permit delays in various countries. Brinkley Mining announced it had been awarded a licence to prospect for uranium and other minerals over a 5000km area in southern Sudan, but it said it would limit expenditure until Sudan had a clear mining law. In a separate announcement, AIM-listed Kalahari Minerals said it had raised its stake in its Namibian investment, Extract Resources, which is drilling the Rossing South prospect for uranium, after Extract said drilling was confirming a large mineralised system in the area. Bloomberg also reported that Russian state-owned mining company Uranium Holding ARMZ would treble output to 10 300 tons of uranium a year at a cost of $8,6bn with assistance from Russian billionaire Oleg Deripaska, Canada's Cameco Corporation and Japan's Mitsui . Reuters reported AngloGold Ashanti's uranium production was expected to rise more than 60% by 2012 compared with last year.

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MINERALS AND METALS

Price of Steel Set to Rise Another 5 Percent

Another 5% hike in steel prices is on the cards, bringing total steel price increases for the year to date to a whopping 65%. The unprecedented rises will further fuel inflation and put the squeeze on consumers. ArcelorMittal SA said that the price of flat steel products is set to rise by about 5% - the fifth increase this year - in line with rising international prices, soaring input costs and a weaker exchange rate. The price of long steel products will remain unchanged. The latest increase will bring the average cost of flat steel to $950 a ton, but this was still low compared with international steel prices, Mittal spokesman Tami Didiza said. Steel in Asia cost about $970 a ton, in Europe a ton fetched just more than $1000 and in America it cost $1080 a ton, he said. The benchmark price for western Europe hot-rolled coil had gained about 32% this year to $930 a ton by the end of March, according to Metal Bulletin data as quoted by Bloomberg. Mittal will increase steel prices by 20% -22% in May, following price increases of between 9% and 18% every month since the beginning of the year. The price increases were spurred by rising raw material costs. Mittal has a big advantage over other steel producers because it pays cost plus 3% for iron ore, the biggest input into steel production, in terms of an evergreen agreement with Kumba Iron Ore. But Didiza said Mittal took this into account in the calculation of price increases. Since the Competition Tribunal ruled against the steel giant in an excessive-pricing case last year, Mittal's price increases have consistently been met by outrage. Mittal, which insists it has departed from the notorious import parity pricing model and has adopted a pricing model in which it compares its own prices with a basket of prices in comparable markets internationally, said even with the string of price increases, its steel was among the cheapest in a basket of prices. The basket includes Korea, Germany, China, Russia, Taiwan, Brazil and the US, but also takes into account the direction of market movements and exchange rate volatility.

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PETROCHEMICALS

Oil At $130 Propels Sasol, Oando to New Highs

PETROCHEMICALS group Sasol and Nigerian-based crude oil and petroleum products carrier Oando, the two oil and gas stocks on the JSE, reached new highs May 21, following a trend by the international crude oil price which reached the $130-a-barrel mark for the first time in history. The consistent rise in the price of oil is likely to further boost the bottom line of the companies. Sasol and Oando share prices reached new highs of R510,79 and R18,50, respectively. Sasol earlier in May announced that it expected its earnings per share to rise by up to 50% and attributed the expected increase to, among others, the increase in crude oil prices and the weakening rand. Highlighting Sasol's sensitivity to movements of crude oil price, its chief financial officer, Christine Ramon, earlier this year said a $1-a-barrel rise in the oil price increased Sasol's earnings before interest and tax by about R300m, assuming an exchange rate of R7,15 to the dollar. The soaring oil prices put on the spotlight Sasol's hedging policy. It comes as the company mulls over whether or not to hedge part of next year's production. Sasol last year entered into hedging transactions for about 30% of its synfuels production, with average floor and ceiling price of $62,40 and $76,80 a barrel, it said. In her presentation following the interim results, Ramon said the company expected a long-term crude price "in mid-$80s". 

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TELECOMMUNICATIONS

Cell Users May Applaud Bharti Buy

MTN is a prized South African company whose largely black management have driven growth at an amazing clip, so there may be a bit of nationalistic disappointment if it falls into the hands of India's largest cellphone company, Bharti Airtel. Perhaps this general atmosphere of national pride has encouraged the view that Bharti has little to offer MTN. In a sense, the talks about a bid even strike one as a bit cheeky since Bharti's profitability is lower and it is only larger in market capital partly due to India's pumped-up stock exchange, which is where foreign ownership is limited. The argument that a merger has little to offer MTN is founded on the notion that their markets are not contiguous and that measuring the cost of equipment, such as base stations, suggests that both are already getting close to premium discounts. Hence there is little to be gained from economies of scale or geography. But it is worth taking a closer look because it may be that Bharti does have something to offer, something that MTN's customers might like -- it charges less. Bharti operates in a tougher environment where cellphone rates are generally lower and competition is much higher. Consequently, there is an argument that the Indian model could help MTN. MTN's penetration is generally pretty high, above 30% in most markets. But its average use per subscriber is low by comparison. In SA, it is about 106 minutes, 52 minutes in Nigeria and 92 minutes in Iran. The comparison with Bharti's subscriber base is staggering. Bharti has a usage rate of 507 minutes per subscriber. As a result, some Indian analysts suggest that MTN's capex intensity is nowhere near as high or as consistent as Bharti's. So corporate nationalists might frown on a buyout of MTN, but customers could have a different opinion.

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