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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: 095 - (01/07/10)

The biggest sporting event in African history
The historic 2010 FIFA World Cup finally got underway at Soccer City June 11. The biggest, and most expensive, sporting tournament to be held on African soil moved from the boardroom events that have given it is shape to the 94,000-seater Soccer City Stadium in Johannesburg. News that former President Nelson Mandela would not be attending the opening ceremony, following the tragic death of his grand daughter Zenani in a tragic car crash as she travelled home from a World Cup bash on the eve of the opening ceremony, did not dilute the magical feeling both inside and outside the giant stadium. The Nelson Mandela Foundation said in a statement that it would be inappropriate for Madiba to attend the opening ceremony in the wake of the family bereavement. Unfortunately, by the time that the official opening ceremony ended, the stadium wasn't yet full to capacity as thousands of fans found themselves trapped in the nightmare of traffic jams that clogged the city.

Ghana has reached the quarter-finals of the FIFA World Cup. It proved a bridge too far for South Africa but they swaggered off the World Cup stage with pride restored after beating France 2-1 at the Free State Stadium on June 22 in their final group match. The home side were able to take advantage of a dispirited effort from the 1998 world champions, whose morale had been sapped by a player strike, a split camp and the sending home of star striker Nicolas Anelka. South Africa leave the World Cup with a morale-booster but also the ignominy of being the first host side eliminated at the opening stage. Ghana became only the third African side to reach the quarter-final stage at a World Cup after Asamoah Gyan smashed home an extra-time winner to knock out the USA June 26. The Black Stars, the only remaining African team in the tournament, have emulated Cameroon in 1990 and Senegal in 2002, and will play Uruguay at Soccer City July 2. Ghana defeated the USA 2-1 in extra-time.

The CEO of the World Cup Local Organising Committee, Danny Jordaan evaluated the tournament after 32 of the 64 matches had been completed, Jordaan said the World Cup had been a wonderful "success story." Jordaan acknowledged that there had been problems with transport during the initial stages of the World Cup and a number of empty seats at some of the stadia but added that these issues had since been addressed. There was a preference among South Africans to use their cars instead of public transport and this had added to the congestion on the roads before the matches, making it difficult for fans to arrive at the games on time. While this was a problem at the start of the tournament, Jordaan said since then a transport task team had been set up and traffic was now moving significantly better since the opening match.

Foreign visitors continue to arrive in South Africa for the World Cup, with the Department of Home Affairs reporting June 25 that 744,000 people had arrived in the country in the first 24 days of June. This is an impressive increase from the 682,000 foreign arrivals recorded by the end of June 21 and significantly higher than the 541,000 recorded at the same time last year. However, Gillian Saunders, principal of Grant Thornton Strategic Solutions, said it was still too early to quantify how many visitors were in the country specifically for the World Cup. "At this stage the figures don't give a clear picture and we need time to analyse the numbers before we can say who came specifically for the tournament," said Ms Saunders. Home affairs data in the first 21 days of June show that only 56,000 visitors could clearly be identified as being in the country for the World Cup, as they either had a World Cup visa or a match ticket. But both Ms Saunders and home affairs spokesman Ronnie Mamoepa stressed that many more fans had probably come into South Africa for the World Cup.

Industrial problems never far away
The main union at South Africa's monopoly power supplier said June 30 it's ready to strike after rejecting the company's wage offer, a decision that could disrupt the World Cup. The announcement of a strike by the National Union of Mineworkers, which says it represents 20,000 of the 30,000 Eskom workers, comes as the World Cup enters its quarter-finals. The NUM said the strike will start early July but it did not say which day. Trade unions wield strong influence in South Africa since many are affiliated with the powerful Congress of South African Trade Unions, an ally of the governing ANC party. The smaller Solidarity union said it has revised its demands and has given Eskom until July 5 to consider the new proposals. A third union says it was still discussing its position regarding the possible strike. The unions demand 9 percent wage increase. They have rejected Eskom's offer of 8.5 percent and 1,000 rand ($130) housing allowance for the lowest wage earners. Solidarity's general secretary, Flip Buys said the union's revised version calls on Eskom to give employees the option of striking. Presently, the employees are forbidden from striking because Eskom is classified as an essential service. A strike could mean power failures during the World Cup, but all the stadiums have generators. South Africa experienced nationwide power blackouts in 2008 after Eskom management failed to budget for the renewal of its ailing infrastructure and maintenance. Eskom described the unions' demands as "unaffordable." It said the demands would cost the company around a billion rand ($130 million).

Striking workers at the OR Tambo International Airport dispersed after holding a protest June 30. Airports Company South Africa said the protest action at the airport was fuelled by disgruntled former employees spreading false information. More than 100 workers from the cleaning, retail, airline and security sectors protested at the airport. They were demanding World Cup bonuses to be paid to them and also wanted higher salaries. Airport workers who demonstrated on one of the roads leading to the main terminal building were adamant they want their World Cup bonuses. Leaders of the South African Aviation and Allied Workers Union were even accusing top airport officials of pocketing the cash. However, Acsa said it had received no payout from FIFA for bonuses, adding former security employees heading the newly formed union were spreading false information to current workers and inciting illegal protests. The company said it did not recognise the union and operations at the airport were not affected at all. Police closely monitored the crowd and threatened to arrest them should picketing continue near the main terminal building. The union’s Peter Mlaba said strike action would continue in the coming days unless their demands are met. “We are willing to reconsider if ACSA comes to the party as a landlord or the government because remember that the government actually own 74% of shareholding,” he said.

With the security success of the opening ceremony and high profile matches behind them, police are now preparing for the last major test of the 2010 FIFA World Cup the final match and closing ceremony. Police Commissioner General Bheki Cele said a number of Heads-of-State and "eminent people" were expected to arrive in South Africa for the all-important final on July 11. "A special committee has been set up look after that day," Cele added, saying he was confident that police would be adequately prepared to ensure the safety of the dignitaries. Cele told media on June 29 that most of the offences reported to police during the World Cup were cases of theft. A total of 316 people - 207 South Africans and 109 foreign nationals - had been arrested since the beginning of the tournament. The commissioner said 90 percent of the arrests had been in connection with theft. He also confirmed that there was a burglary at FIFA's offices in Johannesburg where several World Cup Trophy replicas and soccer jerseys were taken. Twenty-nine cases of unauthorised ticket sales had been reported to police and 33 people had been arrested in these cases. This included 14 South Africans and 19 foreigners.

World Cup 'Turning Point' for Country
As the 2010 FIFA World Cup unfolds in South Africa, the international community is not only watching the action on the pitch; they are also witnessing a South Africa that is continuing to emerge as a competitive 21st century economy, says consulting firm Deloitte. According to the Deloitte report "2010 FIFA World Cup: A Turning Point for South Africa", South Africa is reaping the rewards of hosting the Cup, including infrastructure improvements, an economic boost, and an increase in national pride, reports SouthAfrica.info. "South Africa has been likened to a mix of the developed and developing world," Deloitte Southern Africa public sector industry leader Lwazi Bam said in a statement. "On the one hand, a strong technological and economic base put it on par with the well-developed nations of the world. On the other, infrastructure shortfalls have contributed to keeping it from realising its full economic potential. This major global event is a catalyst for much-needed infrastructure improvements," said Bam. The need to move tens of thousands of fans, teams, and accompanying support personnel rapidly from one place to another prioritised the strengthening of South Africa's transportation system. The country completed much of the first section of its new high-speed Gautrain passenger railway and added bus lines. Highways were upgraded, and the city of Durban was able to finish the country's first new greenfield airport in five decades. These infrastructure projects had increased employment opportunities and provided workers long-term skills and training,

World Cup to Earn Country R150 Billion
World Cup tourism will inject 15 billion rand into South Africa's economy this year alone, the country's Finance minister has said. Pravin Jamnadas Gordhan said while it had been predicted that 0.5 percentage points would be added to the country's economic growth this year, the figure went lower when Fifa confirmed that around 350,000 World Cup tourists would come down from the initial forecast of 400,000. "The National Treasury estimates that tourists will contribute about 15 billion rand to our economy through spending in hotels, meals, transport and so on," the minister said. "This money will circulate throughout the economy, spreading benefits much wider than just the hospitality and transport industries." There are huge gains to Africa's largest economy for hosting the football showcase with Gordhan, in figures released to financial information resource Bloomberg, saying the positive effects of the tournament would be felt outside South African borders. The World Cup host nation spent a third of Kenya's annual budget -- about 30 billion rand -- on the World Cup alone, upgrading transport and communications, building six new stadiums and upgrading four others. "The 11.7 billion rand investment in 10 world class stadiums alone created 66,000 new construction jobs, generating 7.4 billion rand in wages, with 2.2 billion rand going to low income households and, therefore, contributing to a reduction in poverty," the minister reports. The South African Government spent 13 billion rand to upgrade the transport and telecommunication network, with 1.5 billion rand going into broadcast technology, most significantly an expansion of broadband internet access. Security services also received a major shot in the arm, with 1.3 billion rand going towards the war against crime.

Apartheid-Era Documents Shed Light on Israel's Worst-Kept Secret
A U.S. author is standing by claims that Israel offered to sell nuclear warheads to South Africa during the apartheid regime, despite denials by Israel's then-defence minister, now-president Shimon Peres, that the accusation has "no basis in reality". Published in May, Sasha Polakow-Suransky's "The Unspoken Alliance: Israel's Secret Relationship with Apartheid South Africa", presents first-hand evidence of the nuclear warhead offer from Peres to South Africa's defence minister P. W. Botha in 1975. Botha served as prime minister and was the first executive state president of South Africa from 1984 to 1989. Suranksy, the senior editor of Foreign Affairs, combed through more than 7,000 pages of formerly secret documents from the South African government archive after filing the South African equivalent of a Freedom of Information Act (FOIA), a Promotion of Access to Information Act. The Israeli government attempted to block release of the documents to Suransky but was unsuccessful. The substance of Suranksy's claim is drawn from the minutes of a top-secret meeting between Peres and Botha on March 31, 1975. Israel has never admitted to possessing nuclear weapons, although it is widely believed to have a substantial arsenal. The uncovered documents provide the earliest supporting evidence that the country is nuclear-armed.

The two countries' military technology collaboration is well documented over several decades - "almost until the eve of Mandela's inauguration", according to Suransky. He asserts that co-operation continued despite Israel's public statements denouncing the apartheid regime. In fact, comparisons between South Africa's apartheid government and current Israeli relations with its Palestinian inhabitants have been gaining momentum in recent years and will no doubt be exacerbated by the widely- criticised flotilla incident that occurred on May 31. Former U.S. President Jimmy Carter's 2007 book, "Peace: Not Apartheid", sparked the debate comparing the states, and was met with vehement condemnation by pro-Israel supporters. Suranksy draws this comparison as well, noting similarities in resettlement initiatives, redefined citizenship policies, and the creation of slum conditions. Most relevant, though, is his comment on the future implications of the disproportionate population increase of Palestinians in Israel. Eventually, if growth continues at its current rate, Palestinians will become the majority group in Israel and Jews the minority. As was the case in apartheid South Africa, the minority will rule the majority. Suranksy characterises his comparison between the governments as "inexact", but asserts "there are similarities". "Israeli officials should take this as a warning," he says, "rather than a threat."


Tragedy Hits Mandelas on Eve of World Cup
Nelson Mandela's family was struck by tragedy on the eve of the opening of the 2010 World Cup soccer tournament, forcing him to withdraw from the opening ceremony. The Nelson Mandela Foundation announced that Mandela had learned on June 11 that his great-granddaughter, 13-year-old Zenani Mandela, had been killed in a car accident on the previous night. "It would therefore be inappropriate for him to personally attend the... opening celebrations," the foundation said. "We are sure that South Africans and people all over the world will stand in solidarity with Mr. Mandela and his family in the aftermath of this tragedy... Madiba will be there with you in spirit today." The South African Press Association reported that the accident occurred after Zenani had returned from the World Cup kickoff concert June 10. It quoted police as saying that the driver of the car was arrested and would appear in court on charges of drunken driving and culpable homicide. Zenani was the grandchild of Zindzi Mandela, one of two daughters of Nelson Mandela and his former wife, Winnie Madikizela-Mandela. There was uncertainty in the days leading up to the opening of the tournament over whether Mandela, 91, would attend. His personal role in the campaign to win the right to stage the World Cup is widely accepted among South Africans as being instrumental to its success. However, the former president has withdrawn from public life and rarely makes public appearances. The foundation and the ruling African National Congress clashed ahead of last year's elections when the party flew Mandela to an election rally to support President Jacob Zuma, allegedly without sufficient advance planning for medical emergencies.

Zuma Calls for G-20 to Initiate IMF Reforms
President Jacob Zuma has reiterated South Africa's long-held view and called for international financial institutions to be overhauled to give developing economies a greater say. Addressing a session of the Group of 20 (G-20) in Toronto June 27, Mr Zuma said it was time for the group's leaders to take the initiative with regard to the reform of the International Monetary Fund (IMF). "Our reform of the World Bank shows that the slow movement on IMF reform is not necessary. "As leaders, we need to demonstrate political will by ensuring that the necessary compromises are reached for us to deliver on our Pittsburgh commitments." Traditionally, developing countries complain about how global financial institutions are dominated by developed economies, and SA is no exception. Moreover, in SA, the ruling party's leftist allies are critics of the economic policy advice offered by the IMF and World Bank, which these organisations claim is often aimed at cutting social spending, which in turn negatively affects development objectives in SA. Mr Zuma said failure to move regarding the IMF and other urgent reforms of the institutions endangered the "goodwill" earned through the effective action of the institutions in response to the global financial crisis. Mr Zuma said the IMF was a quota-based institution and that quotas determined the amount of resources that could be made available by the IMF. "Our strongly held view is that quotas must shift to developing economies as their need for the IMF resources is higher. The shift must essentially be from developed countries to developing countries. We must ensure that no emerging and low-income countries lose quotas as a result of these reforms," he said.

Country Sold R13 Billion of Arms to Non-Qualifying Countries
South Africa has sold R13 billion in arms to countries blacklisted by the arms act, NGO Ceasefire claims. Ceasefire has compiled a database containing information on South Africa's arms exports to other countries and released its findings to the media June 29. "Arms are not potatoes, we need transparency to foster confidence in the countries that we trade with," says Rob Thomson of Ceasefire. Thomson reported that the National Conventional Arms Committee hasn't strictly adhered to the requirement of the arms act. For each criterion in the act there have been at least 6 recipient countries that failed to meet the requirements. South Africa has sold arms in excess of R13bn to these countries. "There are 58 countries that we have sold arms to in the last 10 years that we shouldn't have sold arms to," says Thomson. This serves as a threat to South Africa's international relations. It also fuels human rights abuses and conflict issues in these countries, such as Columbia, Algeria and the United Arab Emirates. In terms of administration, Thomson says, "The return to the UN register of arms transfers are incomplete because of commercial interests and bias so there are huge problems of transparency and the act supports and fosters transparency." He says the sales are obscured by the National Conventional Arms Committee. "They label documents secret, they report blandly as if there are no issues, there's no policy requirements. They give minimum info required in some instances they don't even give the info that is required in terms of the act."

Public Service Unions Are Set to Strike over Salaries
The Public Servants Association (PSA) announced June 30 that it would strike after the Soccer World Cup for pay hikes. Talks with a conciliator to resolve the dispute ended with a certificate being issued by the conciliator which said that the disputes remained unresolved. The PSA and other public service unions have been demanding an 8,6% general salary increase and R1000 for a monthly housing allowance. The government has been offering a 6,5% increase and a maximum of R620 for housing. PSA Deputy GM Manie de Clercq said "All Public Service unions have on June 9 2010 followed the initiative taken by the PSA (Public Servants Association of South Africa) on May 20 2010, in also declaring a dispute with the State as employer over lack of progress in Public Service wage negotiations". He said the 210,000-member strong PSA was excluded from proceedings in the bargaining council (PSCBC) after declaring the dispute. With the declaration of the further disputes, all parties were involved in the subsequent dispute resolution processes which took place under the auspices of the PSCBC. "The PSCBC consolidated the Union's disputes as they were essentially the same," Mr De Clercq said. The employer's final offer on June 9 2010 during the conciliation process remained unchanged at 6,5% across-the-board from July 1 2010 plus housing allowance of R620 per month. "The PSA and the other unions therefore did not have any other reasonable option, but to request the conciliator to issue the certificate," Mr De Clercq said. The unions will meet July 2 to discuss particulars of the strike including its exact starting date. Labour analyst Tony Healy was worried about the impact of the wage rises on the government's wage bill if the union and employer settled at a "high wage increase like 8,6%." "This could bite the workers next year as the government will struggle to pay them this much or any more next year," Mr Healy said.

Fragile Recovery - Nation Continues to Be Stuck in Economic Catch-22
South Africa has survived the recession. But is no closer to getting the kind of growth it needs than it was before. That is essentially the message that emerges from the numbers in the Reserve Bank's latest quarterly bulletin. The bulletin contains ample evidence that the economy was in recovery mode in the first quarter. But it was led largely by a revival in consumption spending. It was not the investment and export led growth that has the best chance of putting SA on a more sustainable, job-creating trajectory of economic growth. And even this early in what is still, arguably, a relatively anaemic recovery, the danger signs are already emerging. The current account deficit has jumped and the "hot money" is flowing in to finance it, money that could just as quickly flow out again if investors decide somewhere else looks more interesting. Not that consumption isn't important. Consumer spending accounts for over 60% of SA's economic activity and the recovery can't gain pace without that impetus from households. Last year, consumer spending fell 3%, turning slightly positive only in the fourth quarter. With the economy shedding jobs and households reluctant to incur fresh debt, the impetus simply wasn't there. The first quarter saw a much stronger revival, with consumer spending growing at an annualised 5,7%. Much of the support for that came from a turnaround in household disposable incomes, which shrank last year but rose 5,1% in the first quarter. That's good and bad news: new jobs weren't being created, so those with jobs won pay increases above inflation - in the case of the public sector, of double the inflation rate. Government came to the consumption party with general government spending expanding at 7,3% in the first quarter, thanks to more money for public servants and services, and also to higher spending on military goods. SA has been fortunate to have created the fiscal space that allowed the government to stimulate the economy and prevent it going deeper into recession. That it did last year - and the effects continued this year. But this kind of government spending can't rise forever, and with plans to cut the fiscal deficit over the next few years, it's clear this source of stimulus has a limited life span. The trouble is that other sources aren't much in evidence. Private sector investment was down 7% last year and it has continued to decline this year. It is unlikely to pick up again as long as firms have plenty of spare capacity, and as long as global economic prospects remain uncertain.

The government itself was supposed to step in with investment spending on social and economic infrastructure that would improve public services, raise the economy's potential for growth in the longer term, and provide a boost in the short term. But there is not much evidence of that in the Reserve Bank figures, which show "general government" capital spending fell at a rapid 8% in the first quarter. The only source of growth in investment spending was the state-owned entities, but even their sterling efforts were not enough to counter the declines in the private sector and in government.

Then there is the export picture. In theory, this should be looking good. Global economic growth is holding up, commodity prices are strong, and SA's terms of trade with the rest of the world have improved. But in practice, SA's exports in the first quarter were not impressive. Volumes contracted after rising last year. Export volumes are still 23% below their 2008 peak. Meanwhile import volumes have jumped and so the deficit on the current account of the balance of payments has ballooned to 4,6% in the first quarter, from 2,9% in the previous quarter. Once again, it was more than covered by strong inflows of foreign funding. But again, most of it was in portfolio investments, in bonds and equities, with a further big chunk in "unrecorded" transactions, all of which can be volatile. All of those inflows have the effect of boosting the rand, making exports more un-competitive. South Africa continues to be stuck in an economic catch-22. And though the first quarter's 4,6% economic growth rate was confidence-boosting, it is still a long way from getting the right kind of growth.


Cosatu Warns of Alliance Split Over Vavi
The Congress of South African Trade Unions (Cosatu) warned June 1 that if the African National Congress (ANC) proceeded with disciplinary action against Cosatu general secretary Zwelinzima Vavi the move could trigger the end of the tripartite alliance. In its strongest criticism yet of the ANC led by President Jacob Zuma, Cosatu averred that certain ANC leaders who viewed Mr Vavi as a potential threat in the party's leadership race, wanted to malign him ahead of the ANC's elective conference in 2012. This had prompted the attempt to discipline him. The planned action against Mr Vavi follows his strongly criticising the government's performance in general, and that of Communications Minister Siphiwe Nyanda and Co-operative Governance Minister Sicelo Shiceka in particular. He is accused of contravening a decision of the party's national executive committee not to attack alliance leaders in public. But the ANC had no jurisdiction over Cosatu, which Mr Vavi was representing when he issued his criticism.

Mr Vavi said the move was an attempt to "silence" him after he raised the alarm over impropriety in the state. "I will continue to speak out against corruption, I will never stop." Cosatu spokesman Patrick Craven said: "It is clearly a misguided and mischievous attempt to smear the general secretary, possibly motivated by fear that he might be taking a position of leadership in the ANC in 2012. It seeks to suggest that he is some kind of trouble-maker, comparable with the president of the ANC Youth League, which is totally groundless." Cosatu said the ANC's planned censure was "unprecedented" in the history of the alliance and amounted to efforts to silence Cosatu leaders who spoke out against corruption. "Zwelinzima Vavi speaks as the voice of the workers and the poor, fully mandated by the Cosatu membership, and will never be silenced by threats of disciplinary charges." The National Union of Mineworkers, Cosatu's most powerful affiliate, also warned the ANC, saying any attempt to sanction Mr Vavi would be met with stiff resistance.

News of the planned censure also triggered condemnation from the South African Communist Party (SACP), the other member of the ruling alliance. "There is a small grouping in the ANC that is in a hurry to gain power, and alliance leaders stand in the way of their get-rich-quick scheme," SACP spokesman Malesela Maleka said. The SACP said efforts to weaken the alliance would be resisted. Yesterday Cosatu accused some ANC leaders of sneaking in the decision to sanction Mr Vavi when the party's national working committee met for its weekly gathering at Luthuli House, and also of leaking the story to the media. "Our suspicion is that this decision was pushed through by representatives of a tendency within the ANC leadership who are hell-bent on their agenda of self-enrichment and crass materialism. We suspect it was taken at the end of a meeting from which many members had already left," Mr Craven said. Alliance leaders said they believe the efforts against Mr Vavi were orchestrated by a faction aligned to ANC Youth League president Julius Malema, who escaped expulsion from the party last month in exchange for a plea bargain. But the league's spokesman, Floyd Shivambu, told Business Day yesterday the league was not aware of any planned disciplinary action against Mr Vavi. "If it is a decision of the ANC, then we will respect it, the way we do all decisions by the ANC," Mr Shivambu said. It is understood that Mr Malema's supporters want to place ANC secretary-general Gwede Mantashe in an untenable position by forcing him to take action against a fellow leftist. By doing so, they want to demonstrate that Mr Mantashe is "conflicted" in his position, as he is also chairman of the SACP and a former trade unionist. The league wants to oust Mr Mantashe and replace him with Deputy Police Minister Fikile Mbalula. "No leader of Cosatu can or will ever be disciplined by another organisation for doing the federation's work on behalf of its 2-million members," Cosatu said.


World Cup Competition – The Informal Economy Fights its Corner
Off the pitch, the FIFA World Cup has seen a tense standoff between South Africa's formal and informal economies as they compete for their share of the spinoffs, but declaring a winner may be hard. Cities like Cape Town and Johannesburg have struggled to balance the concerns of street traders, whose livelihoods depend on selling sweets, foodstuff and other goods at transportation hubs and intersections, with the demands of hosting the international competition. As early as 2008, city officials started relocating traders away from traditional vending areas that would be near stadiums and fan parks; the traders mobilised in response, with varying success. South Africa's official unemployment rate is around 25 percent but independent economists have put it as high as 40 percent, so the informal sector has been a refuge for those unable to get a steady job. The Human Sciences Research Council has estimated that the informal economy accounts for about 7 percent of gross domestic product. In Soweto, Johannesburg, the Soccer City Traders Association had been supplying food to construction workers at the flagship stadium since work began there. When the association received an eviction notice in February 2010, it banded together with 33 other similar organizations in Gauteng Province and marched on FIFA's Local Organizing Committee (LOC) headquarters. "You feel like they are taking away your job," said Soccer City Traders Association vice-chair Cecilia Dube, a widowed mother of four who also supports her sister's children and elderly parents. "This is the only way I am getting bread on my table." She said that the informal sector has provided economic opportunities that the formal sector has not, including better wages and independence.

According to the International Labour Office, about 70 percent of South Africa's informal traders are women. Dube said their luck changed just five days before the World Cup started on 11 June, when the City of Johannesburg told selected traders they had been allocated space in the stadium precincts, at FIFA-branded fan fests, and public viewing areas. "Informal traders have been trained and accredited by the City's Department of Economic Development, and these are the traders who are trading in the designated areas," said Sibongile Mazibuko, head of the City of Johannesburg's 2010 department. She said these traders were largely those who had worked in the vicinity of stadiums during construction or renovation. FIFA regulations stipulate exclusion zones, which mean traders have to be located further afield from the stadiums and teaming crowds. Dube said accredited traders were rotating among the city's various venues, in line with the schedule, and although she was happy with the city's decision and schedule, competing with the stands set up by formal fast-food restaurants at the venues was a challenge. The City of Cape Town also made a last-minute play to accommodate some of its informal traders, moving most of those who traded on the Grande Parade - now a fan fest - to an adjacent site. Rosheda Muller, Chairperson of the Grand Parade United Traders Association, told IRIN: "They engaged us rather late, but the city did engage us in good faith here, and the alternate site is adjacent to the fan fest so we're happy with that."

The Numbers Don't Add Up
A figure that's been circulating is that 456,000 foreign tourists had already arrived for the World Cup. If true, the figure, reportedly from Home Affairs, would imply that the World Cup was exceeding the wildest expectations. As it turns out, the real number is a lot more modest. Home Affairs revealed June 22 that about 141,252 more foreign tourists arrived in the first three weeks of June than in the same period last year, an increase of 23%. Many of those visitors, according to the department, "have not entered with Match certificates or Match vouchers" - in other words, they haven't arrived with tickets or packages acquired via the official route. Indeed, only about 56,000 were ticket holders.

That seems quite low, but could mean anything. Ticketless tourists may be coming just to go to the fan parks and hang out at the bars. Some may have got South African friends and relations to buy their tickets for them, or they may be buying on a burgeoning secondary market. Fifa experts such as those at Grant Thornton, estimated a couple of months ago that the World Cup would bring in 240,000 to 360,000 foreign visitors. The Home Affairs numbers suggest we are on track for that and more - more than enough to make for an eminently successful tournament. More important, though, is that many of these are the kind of tourists SA has never seen before. They're not the conventional high-end game park and Cape visitors but the backpackers, the adventurers and the devoted soccer fans. Many are young; many are from places, such as South America, from which SA hasn't traditionally sourced tourists. And, as one can easily tell from the number of foreign accents heard in Joburg, most are basing themselves in Gauteng, not traditionally a big tourist centre. It's all good for SA's tourism industry. We just have to carry on working to make sure that they have a good time.

Shock Fall in Exports Puts Deficit Under Pressure
South Africa's deficit on the current account, its broadest measure of trade in goods and services, widened more than expected in the first quarter of this year, putting pressure on the rand. The shortfall ballooned to 4,6% of gross domestic product (GDP) from a 4-1/2 year low of 2,9% in the previous quarter, the Reserve Bank said in its quarterly bulletin. Consensus forecasts from Reuters had predicted a 3,6% deficit.

"This was a big surprise," said Razia Khan, Standard Chartered's regional research head for Africa. "The deterioration in the current account deficit even at a time of weak growth is a concern." The rand slid by nearly 2% to R7,67/ after the data, which highlights SA's dependence on foreign capital inflows to purchase local shares and bonds. But traders said its slide was triggered by pressure on commodity-linked currencies in general, and the unit had clawed back most of its losses to trade at R7,58/ by the end of the day. SA's exports fell both in value and volume terms, while imports increased on both counts. In a rare acknowledgement, the Bank said strength in the rand was probably weighing on the competitiveness of local exports. Weaker economic conditions in some countries in Europe - a key trade partner for SA - would have curbed exports, it said. Around a third of SA's exports go to European countries. "An appreciation in the real effective exchange rate of the rand probably also inhibited the international competitiveness of SA producers," the Bank said.

The currency has rallied by more than 4% against a trade-weighted basket of currencies so far this year, according to data from Bloomberg. It has notched up gains of nearly 13% against the euro and 4,6% versus the pound. The value of exports fell by 1,9% in the first quarter of this year as volumes shrank by 3,3% - the first decline in three quarters, the Bank's bulletin showed. In contrast, import volumes rose by 2,7% in the first quarter, reflecting a surge in demand prompted by faster growth. "The (current account) deficit was bigger than expected and it's going to continue to widen because our import intensity has increased due to the economic recovery," said Carmen Nel, Rand Merchant Bank economist. "That could potentially be a risk to the currency in the medium to long term, even though (global) risk appetite remains a dominant factor in the short term." In value terms, the deficit climbed to R116 bn in the first quarter of this year from 71,4 bn in the previous quarter. Most of the figures in the bulletin are seasonally adjusted and annualised. Treasury has forecast that SA's current account shortfall will widen to 4,9% of GDP this year from 4% last year. If that is the case, it would not be too much of a problem, given that the deficit would still be much smaller than levels of more than 7% of GDP seen in both 2007 and 2008. Several other countries have bigger shortfalls this year. The Bank said SA's deficit was financed easily in the first quarter. Foreigners bought R44,1bn of stocks and bonds in that period, up from R41,2 bn in the fourth quarter of last year. But Stanlib economist Kevin Lings said that exports are likely to continue to struggle this year, given the strength in the rand and the sluggish global recovery. SA's trade balance swung from a surplus of R24,9bn in the fourth quarter of last year to a deficit of R12,9bn in the first quarter. Dividend outflows - which are included in the deficit - also rose as company earnings picked up. This trend was "likely to continue as the economy and corporate earnings improve," Lings said. But the services portion of the current account should benefit from a strong pickup in tourism this year, sparked by the Soccer World Cup.

South Africa Urged to Curtail State Spending to Weaken the Rand
South Africa must cut its budget deficit faster than it is planning to do, to create space for lower interest rates, if it wanted a more competitive rand and faster economic growth. That was the advice June 24 from Chile's former finance minister, Andres Velasco, and Harvard professor Ricardo Hausmann, who led the "Harvard panel" that advised the government on economic policy. The government is planning to cut the fiscal deficit to 4%, from the current 6,7%, by 2013 but Prof Hausmann says it must cut it faster if it wants lower interest rates and a cheaper rand. Cutting the fiscal deficit faster will create the space for the Reserve Bank to cut interest rates, helping to drive faster economic growth and a weaker rand. SA's economic recovery was "lacklustre", he said. "You can do better." But the World Cup had shown what SA was capable of. "So many things have to go well for it to turn out well and you managed this daunting task." SA's recovery was mild compared to the growth rates seen in Latin America or east Asia, yet the current account deficit was already rising. Though it was tempting to expand government spending in the face of unemployment, this would make the current account deficit worse. "So one strategy in the mix is to run tighter fiscal policy and looser monetary policy," Prof Hausmann said. "We argue that the volatility of the rand is related to the volatility of fiscal policy." It was not just a question of stabilising the deficit but of managing fiscal policy so that it did not contribute to economic cycles or to the volatility of the rand. MIT professor Robert Rigobon, who was also a member of the Harvard panel, recommends that SA consider a tax on "hot money" capital flows, levied when these investments mature.

Prof Rigobon said the problem of volatile capital flows taking advantage of the "carry trade" - where investors borrow cheap money in Europe or the US and put it on deposit in SA and other emerging markets to take advantage of higher interest rates - was likely to get worse as high-growth emerging markets started raising interest rates while Europe and the US kept theirs close to zero. Mr Velasco, who is credited with implementing market-friendly policies that enabled Chile to keep its exchange rate competitive despite soaring copper prices and big capital inflows, has been taking plenty of questions during his visit to SA on what should be done to weaken the rand. His answer is tighter fiscal policy. He said there were lessons from Chile that could be useful to SA. Latin America has been the world champion on fiscal deficits and financial instability and historically was a continent of boom and bust linked to commodity cycles. Chile's government decided to put an end to that and from 2000 it put in place a fiscal rule that required the government to target a fiscal surplus of 1%, increasing the surplus when income exceeded the long-term trend and cutting it when income was below trend. That meant that when copper prices went sky high in 2007, the fiscal surplus went to a peak of 8% of gross domestic product (GDP), but when the financial crisis came, Chile could put in place one of the world's largest stimulus packages, running a fiscal deficit of 4,5%. The huge fiscal surpluses during the years of the commodities boom allowed the government to amass 42bn of savings, equivalent to about one fifth of GDP, most of which it held in dollars abroad. That prevented the peso appreciating as the copper price soared, and where previously Chile's currency had been extremely volatile, over the past decade the real effective exchange rate has been stable. Mr Velasco's government was lauded when the global crisis came.

World Cup Projects' End Fuels Sharp Fall in Jobs
The completion of construction and infrastructure-related projects connected with the World Cup has worsened the fall in employment between April and May, according to the Adcorp employment index issued June 22. Although employment decreased across all job types, the steepest decline was in the highly cyclical construction (10,2%) and trade (9,2%) sectors. Statistics SA also issued data disclosing that employment in the formal non-agricultural business sector decreased between the quarters ending in December last year and March this year. The Adcorp report showed that employment dropped sharply between April and May, representing an annualised decline of 6,2%. Job losses were felt among permanent and full-time staff (7,2%), continuing a trend since 2001. The Adcorp index is considered to be SA's most accurate barometer of employment trends. Richard Pike, CEO of Adcorp, said yesterday the decline in the construction and trade sectors reflected the maturity of public infrastructure projects and the continued weakness in consumer spending. "We have seen employment fall across all job types and particularly among low-skilled and semi-skilled workers, who are typically employed in the construction and trade sectors," said Mr Pike. A notable trend in June's report was also the number of South Africans who were returning from abroad. High unemployment in the world's major English-speaking countries, such as the US, the UK, Australia and Canada, was considered to be the major factor. New Zealand, for example, lost 9,1-million jobs during the recent recession. A secondary factor was the "homecoming revolution", fuelled by disillusionment in emigrants' foreign experiences. Finance (28%), medical (16%), academic or teaching (13%) and legal (9%) were the sectors with the highest proportion of professionals returning to SA. About 39 000 South African job-seekers returned from foreign countries over the past year, representing about 13,7% of those who had left the country to find work since 1990. On account of SA's skills shortage, unemployment for highly skilled professionals was just 1,4%. Further, the number of professionals returning to the country was likely to rise to 120000 as foreign short-term work contracts expired. The Adcorp index showed an increase in employment in March in the manufacturing sector. At that stage, employment in the construction sector had already dropped 8 %, reflecting the completion of World Cup-related construction projects.

Gordhan Moots 'New Thinking' On Jobs, Growth
SA would need to make tough choices if it wants to restructure its economy in response to changing patterns of global growth, Finance Minister Pravin Gordhan said June 23 on his way to the Group of 20 (G-20) leaders' summit in Toronto. His comments are likely to have implications for the kind of macro- and microeconomic policies the government is looking at as it seeks to devise a new, more labour-absorbing growth path for SA's economy. "Europe is our major trading partner, and part of the restructuring we need is to look for trading partners elsewhere in the world where demand is higher," he said. "But as South Africans we must also produce things that the world has a need for." He declined to prescribe which markets, or products, SA should target. But he said if SA stuck to its traditional ways of doing things it would not be able to create enough jobs and would not get enough growth. The Treasury presented some proposals on a new growth path in the budget review in February. The Department of Economic Development is also working on a new growth strategy. The Cabinet is expected to discuss options for a new economic growth path at its lekgotla in July. SA's efforts come, however, in the context of a global initiative by the G-20 to devise a new framework for strong, sustainable and balanced growth. The summit is to consider a "basket of policy options" developed by the G-20 finance ministers and central bankers who met in Korea earlier in June. A key issue for the summit, Mr Gordhan said, was how to get the world growing at a faster rate, but it was important that it did not just have growth for its own sake: the new growth model had to put job creation and poverty eradication at the centre. The G-20 would consider work by World Bank chief economist Justin Lin, who speaks of "multiple growth poles" for the world economy. While the world's economy had bottomed out and there was healthy growth from the large emerging markets, employment was still lagging. In SA, Mr Gordhan said employment numbers from Statistics SA were "depressing, to say the least". "South Africans in the labour movement, business and government will need to work hard and long to ensure that the level of job creation in SA improves phenomenally," he said.

In the context of a new global growth framework, SA had to have a conversation about how to reposition itself so that it could be more competitive, reach out to more markets and find new niche areas. Mr Gordhan said the energy and passion of hosting the World Cup should be applied to "scoring economic goals more efficiently". One of the big debates at the summit will be how fast Europe and the US should withdraw the fiscal stimulus packages they put in place to stave off recession in the wake of the financial crisis. Co-ordinated action by the G-20 was credited with having done much to minimise the effect of the crisis. But the US is now at odds with countries such as Germany over how fast fiscal consolidation should happen. SA supports fiscal consolidation, but wants any policy steps to be "growth friendly" - given that export demand from rich countries is crucial to SA and other developing countries.

Jobs Are Still Being Lost Despite Recovery
The formal non-farm sector shed 79,000 jobs in the first quarter of this year, adding to concern about the slow pace of job creation as the economy recovers from recession, official data showed June 22. The figures from Statistics SA showed that employment dipped 1% from the previous quarter, and fell a steeper 2,2% versus the year-earlier quarter. The retail sector was hardest hit, shedding 40,000 jobs, while employment grew in manufacturing, mining and social services. The World Cup is likely to boost job creation in the second quarter, albeit temporarily. "We are confident that the employment numbers will grow," President Jacob Zuma told Reuters June 22. He also sees the sports event boosting growth this year. But the Congress of South African Trade Unions (Cosatu) was angered by the employment and earnings survey, pointing out that job losses took place even though economic growth quickened to 4,6% during the quarter. "These grim figures confirm Cosatu's view that SA is in the midst of a profound economic crisis," it said. The Stats SA report on formal sector jobs paints a less dismal picture than its broader Labour Force Survey for the same period, which also covers informal and agricultural employment. That survey showed the jobless rate climbed to 25,2% from 24,3% in the final quarter of last year, with employment down by 171000. It estimated losses in the formal sector at 140000. But the message from the data was still sobering. "Overall, the employment situation in SA remains extremely troubling and in a perpetual state of crisis," Stanlib economist Kevin Lings said. Gross earnings in the formal sector fell 4,6% from the previous quarter. Compared with the first quarter of last year, they soared 11,7% - despite the economy shedding more than 800,000 jobs in that time. That is worrying as it limits the scope for job creation and adds to pressure on inflation, bringing forward the timing of inevitable hikes in interest rates.

Consumer Spending Up in First Quarter
Consumer spending rose at its fastest pace in more than two years during the first quarter of this year, while investment picked up for the first time in a year, official data showed June 24. The recovery in the economy's main engine gathered good momentum at the start of the year, with disposable income also rising sharply, the Reserve Bank's June quarterly bulletin showed. Its data may dampen speculation that the Bank will cut interest rates again to boost demand and halt job- shedding, which carried on in the first quarter despite faster growth. "A number of years of sustained strong growth is needed to address the country's unemployment predicament," said Monde Mnyande, the Reserve Bank's chief economist. But he said: "One has to call serious attention to the fact that an environment of financial stability and low inflation is fundamental to ... real progress with growth and employment." Mr Mnyande was speaking at the release of the bulletin. It showed consumer spending leaped by 5,7% in the first quarter of this year, up from 1,6% in the final quarter of last year, when it rose for the first time since mid-2008. That was driven by double-digit increases in purchases of both durable and non-durable goods. Disposable income also climbed, by 5,1%, up from 2,3% in the previous quarter. Both of these key indicators suggest that consumers are better off than previously thought. At the same time, the economy's main investment measure -- gross fixed capital formation -- edged up 0,2%, the first increase in a year. But the rise was still meagre, with a sharp fall in state investment more than offsetting a strong rise from state corporations, while private business continued to cut back. Overall domestic spending surged by 12,1% versus 4,9% in the previous quarter, buoyed by both consumption and slower depletion of inventories. The figures are seasonally adjusted and annualised. Mr Mnyande said that although the data in the bulletin "confirms" the economic recovery, it remains vulnerable to "possible adverse global economic developments". He was referring to fallout from Europe's sovereign debt crisis. He said the effects of heavy job losses and high electricity prices could still "constrain spending by households and disposable income". Household debt dipped to 78,4% of disposable income from 79,9% in the previous quarter, but remains uncomfortably near record peaks. Investec said there were "early indications that economic growth slowed in the second quarter", and it still expects a rate cut in July.

Decline in Exports to EU 'Shows Need for SA to Diversify'
The devaluation of the euro and the continued sluggish demand for goods in Europe, one of SA's largest export markets, had apparently made conditions tough for local exporters of manufactured goods to the region, Trade and Industry Minister Rob Davies said mid-June. The difficulties highlighted both the need for SA to diversify its trade relations and the problems caused by the relative strengthening of the rand, which has undermined a key pillar of the government's industrial policy action plan, namely a stable and competitive currency. This is regarded as a major instrument of industrial development and export promotion. Mr Davies's comments come in the wake of those made by Finance Minister Pravin Gordhan in May when he warned the fiscal debt problems of Organisation for Economic Co-operation and Development countries could spill over into another crisis and lead to a second wave of trade and employment cutbacks. However, Mr Davies cautioned against too much pessimism in a written reply to a parliamentary question by Democratic Alliance MP Pierre Rabie, saying that if Europe's debt crisis was limited to Greece, Ireland, Spain, Portugal and Italy, as expected, the effect on SA's exports would be minimal when compared to the credit crisis of 18 months ago. The department had been working on diversifying the export markets within the European Union (EU), with special focus on Eastern European economies as these were expected to survive the crisis, he said. "Since the onset of the EU debt crisis this year, the euro has devalued by 18% against the US dollar and 14% against the South African rand. "Anecdotal information provided to us by exporters of manufactured goods into the EU suggests that the combination of continued depressed demand and the devaluation of the euro have made trading conditions more difficult. The department continues to monitor the situation but we are of the view that recent developments highlight the imperative for us to seek more diversification in our trading relations ," he said. Mr Davies said that total South African exports to Europe last year amounted to 10,6bn, representing 18% of all exports. Of these, 7,2bn were manufactured goods, or 16% of SA's total manufacturing exports. This export figure declined last year from a record high of 11,6bn in 2008. "The countries expected to be affected most by the euro-zone debt crisis are Greece, Ireland, Spain, Portugal and Italy. Combined, these countries constitute about 19% of SA's exports of manufactured products to the euro zone."

Business Confidence Takes a Dive
Business confidence fell unexpectedly in the second quarter of this year, led by a plunge in retail trade and the vehicle industry and suggesting that economic growth has slowed, a leading survey showed June 7. A quarterly index compiled by the Bureau for Economic Research (BER) and Rand Merchant Bank (RMB) slipped by seven points to 36 during that period, taking it well below the neutral level of 50. While the fall was described by RMB as "sobering", it said the drop should be put into the context of a sharp rise in the business confidence index (BCI) during the first quarter of this year. "While the recovery is not yet deeply grounded or widespread, it would be wrong to take the seven point decline ... as indicative of a prospective slump in real output," said Ettiene le Roux, RMB chief economist. "Indeed in many sectors, growth in real activity indicators .... remained virtually unchanged relative to first quarter levels, pointing to another decent, albeit somewhat weaker growth performance in the second quarter of 2010". Growth in SA's economy accelerated to 4,6% in the first quarter of this year from 3,2% in the final quarter of last year, taking it further out of last year's recession, the first in 17 years. But consumer demand, the main growth engine, is still weak and a breakdown of the BCI highlighted the problem. Retail confidence fell by 13 points to 38 during the second quarter, led by falls in durable and semi-durable goods. Confidence in new vehicle trade tumbled from 60 to a neutral level of 49 during the period, as dealers became sceptical that strong growth in sales would last. There was no relief to the economy's two "laggards", RMB said. Confidence in the building sector fell from 26 to 20 while the mood in manufacturing dipped slilghtly to 27 from 28. Both building contractors and manufacturers cited "insufficient domestic demand" as the biggest constraint. But more ominously, weaker export demand also weighed on certain manufacturers, RMB said.
 

 

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